Empire Health Foundation v. Azar, No. 18-35845 (9th Cir. 2020)
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Empire challenged HHS's 2005 Rule interpreting a Medicare regulation under the Administrative Procedure Act (APA), as part of its appeal of HHS's calculation of its 2008 reimbursement. The 2005 Rule removed the word "covered" from 42 C.F.R. 412.106(b)(2)(i), effectively amending HHS's interpretation of "entitled to [Medicare]" in 42 U.S.C. 1395ww(d)(5)(F)(vi), a subsection of the Medicare Act, 42 U.S.C. 1395 et seq. The district court granted partial summary judgment for Empire, ruling that, while the 2005 Rule was substantively valid, it should be vacated because the rulemaking process leading to its adoption failed to meet the APA’s procedural requirements.
The Ninth Circuit affirmed the district court's grant of summary judgment and vacatur of the 2005 Rule on different grounds. The panel held that the 2005 Rule's rulemaking process, while not perfect, satisfied the APA's notice-and-comment requirements. However, the panel held that the 2005 Rule is substantively invalid and must be vacated, because it directly conflicts with the panel's interpretation of 42 U.S.C. 1395ww(d)(5)(F)(vi) in Legacy Emanuel Hospital and Health Center v. Shalala, 97 F.3d 1261, 1265–66 (9th Cir. 1996). Legacy Emanuel interpreted the meaning of "entitled to [Medicare]" as unambiguous and thus the 2005 Rule's conflicting construction cannot stand. The panel remanded for further proceedings.
Court Description: Medicare / Rulemaking. The panel affirmed, on different grounds, the district court’s order granting partial summary judgment for Empire Health Foundation and vacating the 2005 Rule promulgated by the Secretary of the Health and Human Services (“HHS”), interpreting a Medicare regulation. The 2005 Rule removed the word “covered” from 42 C.F.R. § 412.106(b)(2)(i), effectively amending HHS’s interpretation of “entitled to [Medicare]” in 42 U.S.C. § 1395ww(d)(5)(F)(vi), a subsection of the Medicare Act, 42 U.S.C. §1395 et. seq. The Rule concerns HHS’s annual calculation of the disproportionate share hospital adjustment (DSH Adjustment), which increases a hospital’s annual Medicare inpatient services reimbursement based on the approximate number of low-income patients the hospital serves. * The Honorable John R. Tunheim, United States Chief District Judge for the District of Minnesota, sitting by designation. EMPIRE HEALTH FOUND. V. AZAR 3 Empire challenged the 2005 Rule as part of its appeal of HHS’s calculation of its 2008 reimbursement. The district court held that the 2005 Rule was substantively valid, but it should be vacated because the rulemaking process failed to meet the Administrative Procedure Act (“APA”)’s procedural requirements. The panel held that the 2005 Rule’s rulemaking process, while not perfect, satisfied the APA’s notice-and-comment requirements. The panel reversed the district court’s contrary conclusion. The panel also held, however, that the 2005 Rule was substantively invalid, and must be vacated, because it directly conflicted with the court’s interpretation of 42 U.S.C. § 1395ww(d)(5)(F)(vi) in Legacy Emanuel Hospital and Health Center v. Shalala, 97 F.3d 1261, 1265- 66 (9th Cir. 1996). Because Legacy Emmanuel interpreted the meaning of “entitled to [Medicare]” in 42 U.S.C § 1395ww(d)(5)(F)(vi) to be unambiguous, the 2005 Rule’s conflicting construction cannot stand. Thus, the panel affirmed, on different grounds, the district court’s summary judgment in favor of Empire. The panel affirmed the district court’s order vacating the 2005 Rule. The panel reinstated the prior version of 42 C.F.R. § 412.106(b)(2)(i), which embraced only “covered” patient days. The panel remanded to the district court with instructions to further remand to the Provider Reimbursement Review Board to decide the remaining issues in the case. 4 EMPIRE HEALTH FOUND. V. AZAR
The court issued a subsequent related opinion or order on December 5, 2022.
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