Children's Health Care v. Centers for Medicare and Medicaid Services, No. 17-2896 (8th Cir. 2018)
Annotate this CaseThe Eighth Circuit affirmed the district court's partial grant of summary judgment for Children's Hospitals and decision to vacate a Medicaid policy, Frequently Asked Question 33, which explained how to calculate a hospital's uncompensated medical care costs. The court held that by imposing new reporting requirements for private insurance payments, Question 33 expanded the footprint of 42 C.F.R. 447.299 and thus constituted a substantive change in the regulation. The court explained that section 447.299 has specific language explicitly stating what payments must be deducted from each hospital's "total cost of care," and the Secretary's own definition of "uncompensated care costs" did not include private insurance payments. The court declined to read substantive changes into the regulation under the guise of interpretation. Furthermore, the court joined the First and Fourth Circuits in concluding that Question 33 was a legislative rule that was not adopted in accordance with the procedure required by law and thus must be set aside, notwithstanding the Secretary's policy arguments to the contrary.
Court Description: Wollman, Author, with Arnold and Kelly. Circuit Judges] Civil Case - Administrative Procedure Act. Hospitals which receive Disproportionate Share Hospital payments, challenged the Secretary's Question 33 in 42 C.F.R. sec. 447.299, which included private insurance payments when calculating "uncompensated care costs," as an unauthorized legislative rule subject to notice and comment procedures. Whether Question 33 is a legislative rule or an interpretive rule is subject to de novo review. We join the First and Fourth Circuit Courts of Appeals in concluding Question 33 is a legislative rule subject to notice and comment procedures, not an interpretive rule, as the imposition of new reporting requirements for private insurance payments expanded the rule and constituted a substantive change in the regulation. Thus, we affirm the district court's determination that the Secretary was without authority to adopt the rule as an interpretive rule. [ August 17, 2018
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