United States District Court, W.D. Missouri, Central Division
OPINION AND ORDER
C. WIMES JUDGE.
the Court are Plaintiff's Motion for Summary Judgment
(Doc. #38) and Defendants' Motion for Summary Judgment
(Doc. #41). The Court, being duly advised of the premises,
grants Plaintiff's motion and denies Defendant's
the Missouri Hospital Association (“the MHA”)
seeks declaratory relief under the Administrative Procedure
Act, 5 U.S.C. § 553, against Defendants the Secretary of
the United States Department of Health and Human Services,
the Administrator for Medicare & Medicaid Services, and
the Centers for Medicare and Medicaid Services
(“CMS”), relating to Defendants' calculation
of the hospital-specific limit of the Medicaid
Disproportionate-Share Hospital program (“DSH”),
42 U.S.C. § 1396, et seq.
alleges five claims against Defendants, as follows: (I)
Defendants' online responses to Frequently Asked
Questions 33 and 34 (“the FAQs”) violate 5 U.S.C.
§ 706(2)(D) for failure to follow legally required
procedures; (II) the policies reflected in the FAQs violate 5
U.S.C. § 706(2)(C) because they are in excess of
Defendants statutory authority; (III) the policies reflected
in the FAQs violate 5 U.S.C. § 706(2)(A) because they
are inconsistent with the unambiguous language of 42 U.S.C.
§ 1396r-4; (IV) the 2017 version 42 C.F.R. §
447.229 (“the Final Rule”) violates 5 U.S.C.
§ 706(2)(C) because the regulation is in excess of
Defendants' statutory authority; and (V) declaratory
relief pursuant to 28 U.S.C. § 2201. (Doc. #3).
the MHA also sought to preliminarily enjoin Defendants from
enforcing, applying, or implementing the FAQs and the Final
Rule. Thereafter, the parties agreed the motion for
preliminary injunction should be stayed, pending resolution
of cross-motions for summary judgment. The parties'
competing motions for summary judgment were fully briefed on
September 8, 2017.
October 3, 2017, the parties appeared for oral argument on
their respective motions. The MHA appeared through counsel,
Barbara D.A. Eyman and Robert Ryan Harding. Defendants
appeared through counsel, Kristina Wolfe and Matthew N.
1965, Congress established the Medicaid Act, 42 U.S.C. §
1396, et seq., to provide federal government
financial support to state governments funding medical care
for low-income families, the elderly, and persons with
participation in Medicaid is optional. If a state elects to
participate, however, it is bound to comply with the Medicaid
Act and regulations promulgated by the Secretary of the
Department of Health and Human Services.
state participating in Medicaid administers its own program
under a plan that is subject to prior approval by the
Department of Health and Human Services' Centers for
Medicare & Medicaid Services (“CMS”). After
the state's plan is approved by CMS, the federal
government reimburses part of the cost incurred by the state
in providing medical treatment to Medicaid-eligible patients.
This general partial federal reimbursement is referred to as
federal financial participation (“FFP”).
1981, Congress amended the Medicaid Act to include the DSH
program, 42 U.S.C. § 1396r-4. Under the DSH program,
hospitals providing medical care to a “disproportionate
share” of Medicaid-eligible individuals could be
reimbursed for treatment costs in addition to their FFP.
states have discretion to determine how to implement the DSH
program provisions, Congress has set forth certain statutory
limitations. For example, 42 U.S.C. §§ 1396r-4(f)
establishes, on a state-by-state basis, the annual maximum
amount of DSH program funding that a particular state may
receive. A state's specific limit equates to a finite
pool of federal DSH program funds within the state, which is
allocated among all hospitals within the state that are
eligible for DSH program funds. Eligibility for DSH program
funds are determined by the state's Medicaid plan,
subject to broad federal requirements.
42 U.S.C. § 1396r-4(g)(1)(A) sets forth the annual
maximum amount of DSH program funding that a particular
hospital may receive. This hospital-specific limit
(“HSL”) calculation, established by Congress,
provides that DSH funds going to a certain hospital may not
the costs incurred during the year of furnishing hospital
services (as determined by the Secretary and net of payments
under [the Medicaid Act Chap. 7, Subchapter XIX], other than
under this section, and by uninsured patients) by the
hospitals to individuals who either are eligible for medical
assistance under the State [Medicaid] plan or have no health
insurance (or other source of third party coverage) for
services provided during the year.
42 U.S.C. § 1396r-4(g)(1)(A).
2003, Congress enacted auditing and reporting requirements
for DSH program participants. These added conditions are as
(j) Annual reports and other requirements regarding payment
adjustments With respect to fiscal year 2004 and each fiscal
year thereafter, the Secretary shall require a State, as a
condition of receiving a payment under section 1396b(a)(1) of
this title with respect to a payment adjustment made under
this section, to do the following:
State shall submit an annual report that includes the
(A) An identification of each disproportionate share hospital
that received a payment adjustment under this section for the
preceding fiscal year and the amount of the payment
adjustment made to such hospital for the preceding fiscal
(B) Such other information as the Secretary determines
necessary to ensure the appropriateness of the payment
adjustments made under this section for the preceding fiscal
Independent certified audit
State shall annually submit to the Secretary an independent
certified audit that verifies each of the following:
(A) The extent to which hospitals in the State have reduced
their uncompensated care costs to reflect the total amount of
claimed expenditures made under this section.
(B) Payments under this section to hospitals that comply with
the requirements of subsection (g) of this section.
(C) Only the uncompensated care costs of providing inpatient
hospital and outpatient hospital services to individuals
described in paragraph (1)(A) of such subsection are included
in the calculation of the hospital-specific limits under such
(D) The State included all payments under this subchapter,
including supplemental payments, in the calculation of such
(E) The State has separately documented and retained a record
of all of its costs under this subchapter, claimed
expenditures under this subchapter, uninsured costs in
determining payment adjustments under this section, and any
payments made on behalf of the uninsured from payment
adjustments under this section.
42 U.S.C. § 1396r-4(j)(1)-(2).
2008, CMS issued a rule “set[ting] forth the data
elements necessary to comply with the requirements of Section
1923(j) of the Social Security Act (Act) related to auditing
and reporting of disproportionate share hospital payments
under State Medicaid programs.” Medicaid Program;
Disproportionate Share Hospital Payments, 73 Fed. Reg. 77904,
77904 (Dec. 19, 2008). This “2008 Rule” states:
§ 447.299 Reporting requirements.
[. . . .]
(c) Beginning with each State's Medicaid State plan rate
year 2005, for each Medicaid State plan rate year, the State
must submit to CMS, at the same time as it submits the
completed audit required under § 455.204, the following
information for each DSH hospital to which the State made a
DSH payment in order to permit verification of the
appropriateness of such payments:
[ . . . .]
(9) Total Medicaid IP/OP Payments. Provide the total sum of
items identified in § 447.299(c)(6), (7) and
(10) Total Costs of Care for Medicaid IP/OP Services. The
total annual costs incurred by each hospital for furnishing
inpatient hospital and outpatient hospital services to
Medicaid eligible individuals. [. . . .]
(11) Total Medicaid Uncompensated Care. The total amount of
uncompensated care attributable to Medicaid inpatient and
outpatient services. The amount should be the result of
subtracting the amount identified in § 447.299(c)(9)
from the amount identified in § 447.299(c)(10). The
uncompensated care costs of providing Medicaid physician
services cannot be included in this amount.
(12) Uninsured IP/OP revenue. Total annual payments received
by the hospital by or on behalf of individuals with no source
of third party coverage for inpatient and outpatient hospital
services they receive. This amount does not include payments
made by a State or units of local government, for services
furnished to indigent patients.
(13) Total Applicable Section 1011 Payments. Federal Section
1011 payments for uncompensated inpatient and outpatient
hospital services provided to Section 1011 eligible aliens
with no source of third party coverage for the ...