Summary
holding that court had jurisdiction under 42 U.S.C. § 405(g) over Medicare beneficiaries' class action challenging Secretary's interpretation of coverage regulation, and thus mandamus jurisdiction was unnecessary and federal question jurisdiction was barred
Summary of this case from Ryan v. BurwellOpinion
CIVIL ACTION NO. 3:04-cv-1988 (JCH).
September 1, 2006
RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT [Doc. Nos. 55 59] AND DEFENDANT'S MOTION TO STRIKE PLAINTIFF'S STATEMENT OF MATERIAL FACTS [Doc. No. 72]
I. INTRODUCTION
The named plaintiffs were Medicare beneficiaries who were denied coverage for stays in skilled nursing facilities ("SNFs"). Medicare, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., provides coverage for such stays. However, it does so only where services are "furnished an individual after transfer from a hospital in which he was an inpatient for not less than 3 consecutive days before his discharge from the hospital in connection with such transfer." 42 U.S.C. § 1395x(i). The named plaintiffs were initially denied coverage on the basis that they had not spent three or more days as hospital "inpatients" prior to transfer to the SNFs.
One of the lead plaintiffs, Marion Landers, recently passed away, and her Estate has been substituted as a party plaintiff.
The plaintiffs challenge the interpretation of the three-day qualifying stay requirement that has been advanced and applied by the Secretary of the Department of Health and Human Services ("Secretary"). The plaintiffs claim that the Secretary failed to include time spent in the emergency room, or on observation status, in his calculation of the time spent in a hospital, contrary to applicable statutes, regulations, and the Equal Protection clause of the United States Constitution.
This court has certified a class pursuant to Rules 23(a) and (b)(2) of the Federal Rules of Civil Procedure, with named plaintiffs Marion Landers, Marion A. Dixon, and Muriel Grigley as the class representatives and the class defined as follows:
All Medicare beneficiaries who (1) have been or will be in a hospital for at least three consecutive days prior to discharge from the hospital; (2) were or will be in the emergency room and/or in observation status for some portion of those days in the hospital; (3) were or will be admitted formally as an inpatient for at least one of those days; (4) after a claim has been or will be filed on their behalf, have been or will be denied Medicare coverage for skilled nursing facility care because of spending less than three days as a formally admitted inpatient; and (5) have or will have a claim pending for the Medicare coverage so denied at some level of the administrative process, or have filed or could timely file for review at either the next level of the administrative process or in federal district court, within sixty (60) days prior to the date of the filing of this complaint.Landers v. Leavitt, 232 F.R.D. 42, 48-49 (D.Conn. 2005).
Both the plaintiffs and the Secretary have moved for summary judgment. The Secretary also moves to strike the plaintiffs' Local Rule 56(a)1 Statement of Facts and the declarations the plaintiffs submitted in support of their motion for summary judgment. See Def.'s Mot to Strike [Doc. No. 72].
The American Health Care Association and the American Medical Directors Association have also filed an amicus curiae brief urging the court to rule in favor of the plaintiffs. [Doc. No. 71].
II. STANDARD OF REVIEW
In a motion for summary judgment, the burden lies on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); SCS Communications, Inc. v. Herrick Co., 360 F.3d 329, 338 (2d Cir. 2004). The moving party may satisfy this burden "by showing — that is pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (per curiam) (internal quotation marks and citations omitted); accord Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). The parties in the present action agree that summary judgment is appropriate, but dispute the legal conclusion that the court should reach.
III. FACTS
The facts surrounding the hospitalizations of the named plaintiffs are summarized in this court's ruling on the motion for class certification. 232 F.R.D. at 44-45. The three lead plaintiffs in this case all received treatment from hospitals for at least three days before being transferred to skilled nursing facilities ("SNFs"). All spent some of this time in the emergency room or on "observation" status, before being formally admitted to the hospital as inpatients. All spent less than three days in formal inpatient status. The Center for Medicare Medicaid Services ("CMS") initially denied coverage to all of the lead defendants for the SNF stays that followed their hospitalizations.
Two of the lead plaintiffs, Marion Dixon ("Dixon") and Muriel Grigley ("Grigley"), eventually obtained favorable decisions from administrative law judges ("ALJs") with respect to their claims for SNF coverage. However, this court has previously held that those favorable decisions did not moot their claims for purposes of this class action. 232 F.R.D. at 46-47.
IV. DISCUSSION
A. Motion to Strike
The Secretary has moved to strike the plaintiffs' Local Rule 56(a)1 statement of facts and the declarations that the plaintiffs submitted in support of their motion for summary judgment. [Doc. No. 72]. He argues that the scope of the court's review of administrative action is limited to the administrative record.
In order to resolve this motion, the court must first articulate the basis for its jurisdiction. The plaintiffs assert in their Complaint that this court has jurisdiction pursuant to the federal question statute, 28 U.S.C. § 1331, the mandamus statute, id. at § 1361, and the applicable judicial review provisions in the Social Security Act, 42 U.S.C. § 1395ff(b) 405(g). However, mandamus relief is not available in this action because the plaintiffs have an alternate and adequate avenue for relief in the judicial review provided by the Social Security Act and the Medicare Act. See Aref v. United States, 452 F.3d 202, 206 (2d Cir. 2006) (internal citation and quotation marks omitted) ("Mandamus is an extraordinary remedy, available only in extraordinary circumstances, and will be granted only if petitioner shows (1) the presence of a novel and significant question of law; (2) the inadequacy of other available remedies; and (3) the presence of a legal issue whose resolution will aid in the administration of justice."). Although section 405(h) does not bar mandamus relief "under circumstances where the writ properly would issue," City of New York v. Heckler, 742 F.2d 729, 739 (2d Cir. 1984), the present case does not present an appropriate circumstance for mandamus jurisdiction. The parties do not appear to dispute that section 405(g) applies to all class members, and so the court does not find it necessary to make use of the mandamus statute as an alternate source of jurisdiction.Cf. Heckler, 742 F.3d at 739.
This section permits judicial review of Medicare determinations:
Reconsideration of Initial Determination. Subject to subparagraph (D) [time limits], any individual dissatisfied with any initial determination under subsection (a)(1) shall be entitled to reconsideration of the determination, and, subject to subparagraphs (D) and (E) [amount in controversy requirement], a hearing thereon by the Secretary to the same extent as is provided in section 405(b) of this title and, subject to paragraph (2) [expedited access to judicial review], to judicial review of the Secretary's final decision after such hearing as is provided in section 405(g) of this title.42 U.S.C. § 1395ff(b)(1)(A).
This section reads,
Judicial review. Any individual, after any final decision of the Commissioner of Social Security made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the Commissioner of Social Security may allow. Such action shall be brought in the district court of the United States for the judicial district in which the plaintiff resides, or has his principal place of business, or, if he does not reside or have his principal place of business within any such judicial district, in the District Court of the United States for the District of Columbia [United States District Court for the District of Columbia]. As part of the Commissioner's answer the Commissioner of Social Security shall file a certified copy of the transcript of the record including the evidence upon which the findings and decision complained of are based. The court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner of Social Security, with or without remanding the cause for a rehearing. The findings of the Commissioner of Social Security as to any fact, if supported by substantial evidence, shall be conclusive, and where a claim has been denied by the Commissioner of Social Security or a decision is rendered under subsection (b) hereof which is adverse to an individual who was a party to the hearing before the Commissioner of Social Security, because of failure of the claimant or such individual to submit proof in conformity with any regulation prescribed under subsection (a) hereof, the court shall review only the question of conformity with such regulations and the validity of such regulations. The court may, on motion of the Commissioner of Social Security made for good cause shown before the Commissioner files the Commissioner's answer, remand the case to the Commissioner of Social Security for further action by the Commissioner of Social Security, and it may at any time order additional evidence to be taken before the Commissioner of Social Security, but only upon a showing that there is new evidence which is material and that there is good cause for the failure to incorporate such evidence into the record in a prior proceeding; and the Commissioner of Social Security shall, after the case is remanded, and after hearing such additional evidence if so ordered, modify or affirm the Commissioner's findings of fact or the Commissioner's decision, or both, and shall file with the court any such additional and modified findings of fact and decision, and, in any case in which the Commissioner has not made a decision fully favorable to the individual, a transcript of the additional record and testimony upon which the Commissioner's action in modifying or affirming was based. Such additional or modified findings of fact and decision shall be reviewable only to the extent provided for review of the original findings of fact and decision. The judgment of the court shall be final except that it shall be subject to review in the same manner as a judgment in other civil actions. Any action instituted in accordance with this subsection shall survive notwithstanding any change in the person occupying the office of Commissioner of Social Security or any vacancy in such office.42 U.S.C. § 405(g).
Additionally, as this court recognized in its ruling on class certification," Section 405(h) precludes federal-question jurisdiction in an action challenging denial of claimed benefits. The only avenue for judicial relief is 42 U.S.C. § 405(g). . . ."Landers v. Leavitt, 232 F.R.D. 42, 45 (D.Conn. 2005) (quotingMathews v. Eldrige, 424 U.S. 319, 327 (1976)); see Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 10 (2000) (holding that § 405(h) "plainly bars § 1331 review" in cases in which an individual who has been denied a Medicare or Social Security benefit challenges the lawfulness of such denial, "irrespective of whether the individual challenges the agency's denial on evidentiary, rule-related, statutory, constitutional, or other legal grounds."). Therefore, the jurisdiction for this case lies under the Social Security Act and Medicare Act judicial review provisions only.
Because this case is proceeding under the judicial review provisions of the Social Security Act, incorporated by reference in the Medicare Act, the court's review of facts is limited to the administrative record. See Mathews v. Weber, 423 U.S. 261, 263, 270 (1976) (holding that, under 42 U.S.C. § 405(g), the "court may consider only the pleadings and administrative record" and "neither party may put any additional evidence before the district court"). The plaintiffs' arguments do not persuade the court otherwise. The cases cited by the plaintiffs, Bowen v. City of New York, 476 U.S. 467, 484-85 (1986), State of New York v. Sullivan, 906 F.2d 910, 918 (2d Cir. 1990), and City of New York v. Heckler, 742 F.2d 729, 736-37 (2d Cir. 1983), aff'd, 476 U.S. 467 (1986), all dealt with waiver of the administrative exhaustion requirement, and not whether courts could consider materials outside the administrative record. Neither Bowen, nor Sullivan, nor Heckler suggest that, where exhaustion is waived, the court should consider facts outside the administrative record. Indeed, the instant challenge is presented as a purely legal challenge to the Secretary's policy, and does not require factual determinations with respect to individual plaintiffs that would require resort to evidence outside the administrative record. See Plfs.' Mem. Opp. Def.'s Mot. to Strike at 3 [Doc. No. 74] ("The instant case . . . cannot be resolved based on the administrative record because the individual plaintiff's record below has little bearing on the policy challenge, except to demonstrate how the policy is applied in a typical scenario.").
Although the Third Circuit has held that, "Section 405(g) permits consideration of additional evidence on a showing of `good cause for the failure to incorporate such evidence into the [agency] record,'" Hummel v. Heckler, 736 F.2d 91, 95 (3d Cir. 1984) (quoting 42 U.S.C. § 405(g)), cited in Plf.'s Mem. Opp. Def.'s Mot. to Strike at 3 [Doc. No. 74], Hummel, unlike the present case, involved a challenge to the fairness of administrative proceedings. Moreover, the instant plaintiffs have not shown good cause. Finally, the plaintiffs' citation toHill v. Sullivan, 125 F.R.D. 86, 87-88 (S.D.N.Y. 1989), does not support their position because Hill did not rule on the admissibility of evidence outside the administrative record.
The plaintiffs argue further that this court's denial of the Secretary's motion for a protective order to avoid discovery [Doc. No. 40] necessarily implies that this court found that facts outside the administrative record were admissible. However, that order, issued without written opinion, did not make a finding as to the ultimate admissibility of the discovery materials that the plaintiffs sought, nor whether the administrative record before the court was complete. Cf., e.g.,Dopico v. Goldschmidt, 687 F.2d 644, 654 (holding that, where there was no formal administrative proceeding, a factual dispute as to the completeness of the administrative record precluded summary judgment prior to discovery).
At the present time, the court finds that none of the declarations that the plaintiffs have submitted need be considered in order to complete the administrative record. For the foregoing reasons, the court strikes the declarations that the plaintiffs have submitted that are outside the administrative record and strikes those portions of the plaintiffs' Local Rule 56(a)1 Statement of Facts that rely on those declarations.
The court notes, as well, that the facts contained in the outside materials the plaintiffs urge it to consider would not significantly aid the court ruling on the instant question of statutory interpretation. The facts concerning the individual plaintiffs, as the plaintiff recognizes, serve merely to illustrate the legal issues before the court. See Plfs.' Mem. Opp. Def.'s Mot. to Strike at 3 [Doc. No. 74]. Although the plaintiffs argued at oral argument that the court should consider facts outside the administrative record for purposes of understanding the development of the Secretary's interpretation of the term inpatient, the court's ruling on the motion to strike does not prevent it from considering the Secretary's interpretive documents, nor the relevant Federal Register sections, regulations, or statutes. Counsel for the Secretary conceded at oral argument that granting the motion to strike would not prevent the court from considering the November 26, 2003 CMS memorandum, which discussed the confusion caused by the Secretary's interpretation of the term inpatient as excluding observation status. Deford Decl., Ex. C [Doc. No. 58-3].
B. Cross Motions for Summary Judgment
1. The Secretary's Statutory Interpretation
The Medicare Act, Title XVIII of the Social Security Act, mandates that Medicare cover post-hospital extended care services at SNFs for a beneficiary who was transferred to an SNF "from a hospital in which he was an inpatient for not less than 3 consecutive days before his discharge from the hospital in connection with such transfer." 42 U.S.C. § 1395x; see also 42 C.F.R. § 409.30(a)(1) (requiring that beneficiary was "hospitalized . . . for medically necessary inpatient hospital or inpatient CAH care, for at least 3 consecutive calendar days, not counting the date of discharge," prior to SNF admission); id. at § 409.10(a) ("(a) Subject to the conditions, limitations, and exceptions set forth in this subpart, the term "inpatient hospital or inpatient CAH services" means the following services furnished to an inpatient of a participating hospital or of a participating CAH . . ."). Neither the statute nor the implementing regulations discuss "observation" status.
The plaintiffs challenge the Secretary's interpretation of the statutory term "inpatient" as requiring that a patient has been formally admitted to a hospital, and classified by the hospital, as an inpatient, rather than considering the types of medical services the patient has received. The challenged interpretation is set forth in the Medicare Benefit Policy Manual (CMS Pub. 100-2), ch. 1, § 10:
An inpatient is a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. Generally, a patient is considered an inpatient if formally admitted as an inpatient with the expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight.
The physician or other practitioner responsible for a patient's care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. Physicians should use a 24-hour period as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis. However, the decision to admit a patient is a complex medical judgment which can be made only after the physician has considered a number of factors, including the patient's medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital's by-laws and admissions policies, and the relative appropriateness of treatment in each setting. Factors to be considered when making the decision to admit include such things as:
• The severity of the signs and symptoms exhibited by the patient;
• The medical predictability of something adverse happening to the patient;
• The need for diagnostic studies that appropriately are outpatient services (i.e., their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more) to assist in assessing whether the patient should be admitted; and
• The availability of diagnostic procedures at the time when and at the location where the patient presents. . . .
Deford Decl., Ex. E [Doc. No. 58-4]; see also id. at ch. 6, § 20.1 (defining "outpatient"), § 70.4.A ("Observation services are those services furnished by a hospital on the hospital's premises, including use of a bed and periodic monitoring by a hospital's nursing or other staff which are reasonable and necessary to evaluate an outpatient's condition or determine the need for possible admission to the hospital as an inpatient. . . ."); ch. 8 § 20-20.1 (stating that coverage for post-hospital extended care services requires that the beneficiary was a hospital "inpatient" for three consecutive days and that the "day of admission" is counted as an inpatient day); Medicare Claims Processing Manual (CMS Pub. 100-4), ch. 4, § 290.1 (repeating definition of "observation services" and stating that such services usually do not exceed one day, sometimes may span two days, and "only in rare and exceptional cases" span more than two days). CMS has also issued a memorandum stating that the Office of the Inspector General had determined that days spent in "observation" status were not appropriately counted toward the three-day "inpatient" requirement for establishing SNF eligibility. CMS Memorandum (11/26/03), Deford Decl., Ex. C [Doc. No. 58-3].
This memorandum also stated that SNFs and medicare beneficiaries who had previously counted observation days toward the three-day inpatient requirement, and thereby received medicare payments for SNF care, were not at fault for doing so and should not be forced to return those payments.
Although the ALJ who denied Landers' claim for SNF benefits did not specifically cite to this manual, the parties do not dispute that the requirement, that an individual be "formally admitted" to the hospital as an inpatient in order to be considered an inpatient for purposes of determining whether he or she has met the three-day hospitalization requirement for SNF coverage, reflects a longstanding CMS interpretation of the statutory requirement that an individual have been a hospital inpatient for three consecutive days before transfer to an SNF, rather than an individual error by the ALJ. Aside from their challenge to the Secretary's interpretation of the term "inpatient," the plaintiffs do not challenge any of the ALJ's legal conclusions, and they do not challenge any of the ALJ's findings of fact. Therefore, the court focuses its review on the Secretary's interpretation, as set forth in CMS manuals, of the term inpatient, rather than on the reasoning of the individual ALJ who heard Ms. Landers' case.
2. Potential Statutory Violation
a. Ambiguity of Statute. The statute is ambiguous as to whether the term "inpatient" encompasses patients who have not been formally admitted but are receiving services similar to those given to inpatients. The statute does not explicitly define "inpatient," and the definition of this term is not clear from its context.
The amici argue that the statute unambiguously requires that the term "inpatient" include patients in the emergency room and patients on "observation" status who are later admitted as "inpatients" because the Medicare Act specifies that certain costs preceding admission be treated as inpatient services. See 42 U.S.C. 1395ww(a)(4) ("For purposes of this section, the term `operating costs of inpatient hospital services' includes . . . the costs of all services for which payment may be made under this subchapter that are provided by the hospital . . . to the patient during the 3 days . . . immediately preceding the date of the patient's admission if such services are diagnostic services (including clinical diagnostic laboratory tests) or are other services related to the admission (as defined by the Secretary). . . .") However, the fact that Congress included this exception does not necessarily support a conclusion that Congress intended that a patient be considered an inpatient prior to formal admission. It could also suggest that inpatient status begins with formal admission, because otherwise Congress would not have needed to spell out this exception for services rendered prior to admission. Therefore, the statute is ambiguous, and the court must next consider the appropriate level of deference to be afforded the agency's interpretation.
b. Type of Deference. The Secretary claims that his interpretation of the statutory term inpatient is entitled to the heightened level of deference described in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron, courts will defer to an agency interpretation of an ambiguous statute, so long as the interpretation is based on a permissible construction of the statute. Id. at 842-43. Chevron deference applies to agency interpretations announced in "valid regulations issued through notice and comment or adjudication or in another format authorized by Congress for use in issuing `legislative' rules." Cmty. Health Ctr. v. Wilson-Coker, 311 F.3d 132, 138 (2d Cir. 2002) (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984) and United States v. Mead Corp., 533 U.S. 218, 231-32 (2001)). Such authorization may be implied or explicit. Mead, 533 U.S. at 229. The Second Circuit has also held that "[l]ess formal interpretations" than either formal rulemaking or adjudication or "legislative" rules issued in other formats that Congress has permitted
may also be entitled to mandatory deference, depending upon to what extent the underlying statute suffers from exposed gaps in its policies, especially if the statute itself is very complex, as well as on the agency's expertise in making such policy decisions, the importance of the agency's decisions to the administration of the statute, and the degree of consideration the agency has given the relevant issues over time.Cmty. Health Ctr., 311 F.3d at 138 (citing Barnhart v. Walton, 535 U.S. 212, 222 (2002)).
Where Chevron deference is not appropriate, respect may still be due the agency interpretation under Skidmore v. Swift Co., 323 U.S. 134 (1944). Under Skidmore, the weight to be accorded an agency's interpretation "will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control." 323 U.S. at 140; see De la Mota v. U.S. Dep't of Educ., 412 F.3d 71, 80 (2d Cir. 2005) (quoting Skidmore, 323 U.S. at 140) (describing factors as "`thoroughness,' `validity,' consistency,' and `power to persuade.'"); Cmty. Health Ctr., 311 F.3d at 138 (citing Mead, 533 U.S. at 234-35) (holding that the degree of deference depends upon "the agency's expertise, the care it took in reaching its conclusions, the formality with which it promulgates its interpretations, the consistency of its views over them, and the ultimate persuasiveness of its arguments").
The Secretary argues that the interpretation at issue in this case is entitled to Chevron deference because it was first announced in a regulation. An earlier version of the current three-day inpatient stay regulation, promulgated in 1966, did mention "admission." It stated, "The 3-consecutive-day hospital inpatient requirement is a period of 3 consecutive calendar days beginning with the calendar day of admission even if less than a 24-hour day, and ending with the day before the calendar day of discharge." 42 C.F.R. § 405.120(c) (1966), published in 31 F.R. 10, 118-19 (July 27, 1966). However, as the Secretary concedes, this rule was not subject to notice and comment, because it was promulgated before the Secretary became subject to the APA. See Def.'s Mem. Supp. Def.'s Mot. Summ. J. at 15 n. 6 [Doc. No. 59-2]. In 1983, the Secretary amended the regulation to remove the reference to admission, without comment on this deletion. See 42 C.F.R. § 409.30(a)(1) (2006); published in 48 F.R. 12,526, 12,544 (1983).
Therefore, the fact that the 1966 regulation referred to admission shows merely consistency of interpretation, which is relevant only with respect to determining the level of deference under Skidmore. See King Pharms., Inc. v. Teva Pharms. USA, 409 F.Supp. 2d 609, 615-16 (D.N.J. 2006) ("The relevance of Regulation § 1.775(a) to the Court's determination is not any persuasive value of the PTO's interpretation of the statute as such, but rather that the PTO has for nearly twenty years maintained the position that terminally disclaimed patent may obtain a patent term extension under § 156, and, despite several amendments to § 156 in the intervening years, Congress has never acted to change the PTO's interpretation or the pertinent language of § 156"). It does not establish that the Secretary's interpretation is entitled to Chevron deference.
As discussed above, the Secretary's interpretation of the term "inpatient" as requiring formal inpatient admission is currently contained in the CMS Medicare Benefit Policy Manual (CMS Pub. 100-2), ch. 1, § 10, and the definition of "observation" is also in the Medicare Claims Processing Manual (CMS Pub. 100-4), ch. 3, § 40.3. The Secretary has delegated his rulemaking authority under the Medicaid statutes to the Centers for Medicare Medicaid Services ("CMS"). Morenz v. Wilson-Coker, 415 F.3d 230, 235 (2d Cir. 2005). The Second Circuit has held that "`even relatively informal' CMS interpretations warrant `respectful consideration due to the complexity of the [Medicaid] statute and the considerable expertise of the administering agency.'" Id. (quoting Cmty. Health Ctr., 311 F.3d at 138) (brackets in original). It has held that the State Medicaid Manual is the type of "`informal interpretation ' that warrants `some significant measure of deference.'" Id. (quoting Rabin v. Wilson-Coker, 362 F.3d 190, 197 (2d Cir. 2004) (brackets in original). It also held, in a case involving a CMS interpretation of the Medicaid statute, that, "where a highly expert agency administers a large and complex regulatory scheme in cooperation with many other institutional actors, the various possible standards for deference begin to converge." Cmty. Health Ctr., 311 F.3d at 138. The Second Circuit found appropriate "some significant measure of deference to CMS's interpretation of the statute," but held that it "need not decide the exact molecular weight of the deference [it] accord[s] to CMS's position." Id. at 137-38 (discussing deference appropriate for interpretation in a CMS manual).
Because the court concludes that the Secretary's interpretation is correct even if it applies Skidmore respect, the court need not definitively resolve the question of whether the Medicare Benefit Policy Manual is subject to the more deferential Chevron standard. For purposes of this ruling, it assumes that Skidmore respect, and not Chevron deference, applies.
The court does, however, note that the manuals at issues are not legislative in nature, because the Medicare Act explicitly prohibits the Secretary from making legislative rules not promulgated as regulations:
(1) The Secretary shall prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter. When used in this subchapter, the term "regulations" means, unless the context otherwise requires, regulations prescribed by the Secretary.
(2) No rule, requirement, or other statement of policy (other than a national coverage determination) that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under this subchapter shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1).42 U.S.C. § 1395hh(a)(1) (2).
c. Skidmore Factors. The court has already noted CMS's considerable expertise in interpreting the Medicare statute. See Rabin, 362 F.3d at 198. It now turns to the Skidmore factors as listed in De la Mota. 412 F.3d at 80.
i. Thoroughness of Consideration. First, although the Secretary has not presented much specific information about the thoroughness of CMS's consideration of the inpatient definition, its inclusion in CMS manuals suggests that it was more thoroughly considered than a more informal interpretation by agency staff, such as that in De la Mota, 412 F.3d at 80, although not as thoroughly considered as an interpretation in a notice and comment regulation. CMS's recent call for comments on the issue, see 70 F.R. 29,098-29,100 (May 19, 2005), also suggests thorough agency consideration of this issue in light of changing hospital practices, even though CMS has not subsequently amended its regulations to add any definition of "inpatient" for purposes of the three-day rule. Thus, the court concludes that the agency has given fairly, but not the most, through consideration to this interpretation.
ii. Validity of Reasoning. The Second Circuit has held that the "validity" element of the Skidmore analysis asks "whether an agency pronouncement is well-reasoned, substantiated, and logical." De la Mota, 412 F.3d at 80. The court will touch on some issues related to validity in its discussion of persuasiveness, see Part IV.B.2.c.iv, infra, but, as a preliminary matter, it finds that CMS's definition of "inpatient" is well-reasoned, substantiated, and logical. As set forth in the Medicare Benefit Policy Manual, CMS's inpatient definition explicitly leaves the decision of when to admit a patient as an inpatient to the medical judgment of the physician or other practitioner responsible for the patient's hospital care. Therefore, although situations will arise in which hospitals do not follow the Manual's instructions and wrongly delay admission for non-medical reasons, the requirement of admission itself may be seen as an administratively feasible way of determining which beneficiaries are likely to need treatment in the hospital itself for a period of twenty-four hours or more. This is consistent with the general purpose of the Medicare program, "to provide affordable medical insurance for the aged and disabled," Furlong v. Shalala, 156 F.3d 384, 392 (2d Cir. 1998). First, it permits the program to operate by limiting costs. In addition, patients whom medical service providers adjudge to require care in the hospital for at least twenty-four hours, and then actually spend three days in the hospital, could reasonably be expected to have more serious health problems, and thus a greater need for post-hospital SNF care, than patients whom medical service providers adjudge as not requiring such extended care in the hospital.
iii. Consistency of Interpretation. As the plaintiffs admit, the interpretation at issue has been very consistent over time. The court will address below the plaintiffs' contention that changing hospital practices should have persuaded the Secretary to alter his interpretation. See Part IV.B.2.c.iv., infra.
iv. Power to Persuade and Lawfulness of the Secretary's Interpretation. The Secretary argues that he has validly interpreted Congress' use of the word "impatient" in the three-day hospital stay rule as referring to individuals whom hospitals have formally admitted as inpatients. The governing statute does not mandate either the interpretation advanced by the plaintiffs or by the Secretary. However, the court finds the Secretary's interpretation has the power to persuade, because it requires the inpatient admission decision to be based on medical factors, and because Congress has not amended the three-day rule over time, even as hospitals have begun to designate overnight patients as being on "observation" status before deciding whether to formally admit them as "inpatients."
The plaintiffs argue, first, that the statute's definition of "inpatient hospital services," 42 U.S.C. § 1395x(b), which lists particular types of services, shows that Congress intended the term "inpatient" to be defined with reference to the services that the hospital provides to a patient, rather than whether the hospital has formally admitted the patient. The court disagrees. As the Secretary argues, the Medicare Act explicitly limits "inpatient hospital services" to those "items and services provided to an inpatient of a hospital." Id. Because Congress used the term "inpatient" to define "inpatient hospital services," the definition of the latter term does not shed light on the meaning of the former.
The plaintiffs also argue that hospitals' policies regarding inpatient admissions have changed since the drafting of the Medicare Act and since the Secretary began requiring formal admission to recognize inpatient status. They argue that hospitals have increasingly kept patients in the emergency room or placed them on "observation status" before admitting them as inpatients. In comments accompanying proposed regulations and a call for comments, the Secretary recognized that the concept of "observation status" was not envisioned at the time Congress first created the three-day inpatient requirement, and that, "over time, practice and treatment of observation time may have changed." 70 F.R. 29,070, 29,099 (May 19, 2005). Changing hospital policies may sometimes result in situations that confuse beneficiaries and prevent them from receiving Medicare coverage for SNF stays, even if they have spent three days spent in the hospital. For example, a patient may remain in the same hospital bed for three full days, receiving the same, continuous treatment, yet fail to meet the three-day requirement because he was on "observation status" for the first day and was not formally admitted as an "inpatient" until the second day. Or, as was the case for Ms. Landers, a patient who began receiving treatment in the emergency room and continued receiving treatment after inpatient admission, would not have the emergency room treatment counted toward the three-day hospital inpatient requirement for SNF coverage.
This notice states, "We are aware that over time, practice and treatment of observation time may have changed; thus, the effect of not counting this observation time under the existing policy ultimately might be to restrict SNF coverage to a narrower segment of the beneficiary population than the Congress originally intended." 70 F.R. 29,099.
If hospital admissions policies have changed drastically since Congress created the three-day hospital inpatient requirement, such changes may persuade Congress to amend that requirement to include observation status and possibly emergency room care. As of this writing, however, Congress has not passed such an amendment. This court cannot say that the Secretary's interpretation of this statute is unpersuasive in light of the language Congress used and the fact that Congress has not acted to change the Secretary's long-standing interpretation.
Next, the plaintiffs and amici argue that the Secretary's interpretation contravenes Congressional intent. As a preliminary matter, without addressing the weight it would give to any particular legislative history, the court notes that neither party, nor amici, has drawn its attention to any legislative history concerning Congress' intended definition for the word "inpatient." Amici do cite a Federal Register notice regarding a proposed rule, in which the Secretary stated that the SNF benefit was intended to cover "those beneficiaries requiring a short-term, fairly intensive stay in a SNF as a continuation of an acute hospital stay of several days." 70 F.R. 29,070, 29,099 (May 19, 2005). In the cited notice, CMS recognized the potential unfairness created by its longstanding interpretation and the aforementioned changes in hospital admission practices. However, even if the court were to defer to the agency in divining Congressional intent, the agency's failure to change its interpretation of the term "inpatient" following the 2005 proposed rule shows that it has not concluded that such an interpretation requires it to disregard formal patient designations in favor of the inpatient definition urged by the plaintiffs and amici.
Next, amici argue that the general purpose of the Medicare Act is "to provide affordable medical insurance for the aged and disabled," Furlong, 156 F.3d at 392, and that the Social Security Act is to be "liberally construed and applied," Rosenberg v. Richardson, 538 F.2d 487, 490 (2d Cir. 1976); see Mayburg v. Secy. of Health Human Svcs., 740 F.2d 100, 103 (1st Cir. 1984). Although the plaintiffs do urge a more liberal construction than that of the Secretary, the court has found that the Medicare Benefit Policy Manual's definition of "inpatient" serves the general purposes of the Medicare Act because it ties inpatient admission to medical factors.
Although courts often look to dictionaries when defining ambiguous statutory terms, see Smith v. United States, 508 U.S. 223, 228-29 (1993), both the plaintiffs and defendant could find dictionary definitions that would support their preferred statutory interpretations. Compare Webster's Third New International Dictionary Unabridged (2002), available at www.mwu.eb.com ("a patient in a hospital or infirmary who receives lodging and food as well as treatment — distinguished from outpatient") with The American Heritage Dictionary of the American Language (4th ed. 2000), available at www.bartleby.com ("A patient who is admitted to a hospital or clinic for treatment that requires at least one overnight stay."). These definitions offer little guidance in resolving whether the common meaning of the word impatient implies formal admission or not.
Next, the fact that the Medicare Act specifies that certain costs preceding admission be treated as inpatient services in the context of determining coverage for hospitalization, 42 U.S.C. 1395ww(a)(4), and that the Secretary has included this exception in regulations, 42 C.F.R. § 412.2(c)(5), and the Medicare Claims Processing Manual, ch. 3, § 40.3, does not persuade to this court that Congress necessarily intended patients to be considered inpatients prior to formal admission. The rule in section 1395ww(a)(4) would not be inconsistent with a default rule that inpatient hospital services, which are limited to services rendered to inpatients, see 42 U.S.C. § 1395x(b), do not begin prior to admission. Congress reasonably could have intended to cover the types of hospital services described in section 1395ww(a)(4) while still denying coverage of SNF costs where an individual was not on formal inpatient status for at least three days before transfer to an SNF. In section 1395ww(a)(4), Congress explicitly recognized that some pre-admission hospital services are bundled together with post-admission services under the term "operating costs of inpatient hospital services" for hospital billing purposes, but it did not discuss the meaning of "inpatient" as it refers to a plaintiff's status. Nothing in the text of section 1395ww(a)(4) suggests that it is intended to define the term "inpatient" for purposes of other sections of the statute. In fact, section 1395ww(a)(4) begins with the phrase, "For purposes of this section. . . ." Indeed, to the extent Congress found it necessary to amend the law in order for services rendered to patients at a time they were not yet admitted as "inpatients" to be treated as inpatient services for billing purposes, it suggests that the Secretary's interpretation of "inpatient" is correct. Therefore, the court finds that the plaintiffs' reliance on section 1395ww(a)(4) is misplaced.
The plaintiffs also urge the court to consider a group of circuit court rulings prohibiting the Secretary from treating an SNF resident, who receives solely custodial care, but no medical care, as an "inpatient of a skilled nursing facility." E.g.,Mayburg v. Sec'y of Health Human Svcs., 740 F.2d 100 (1st Cir. 1984); Levi v. Heckler, 736 F.2d 848 (2d Cir. 1984). In these cases, designating individual beneficiaries as inpatients of skilled nursing facilities disadvantaged them, because it permitted the Secretary to treat the entire period of time that the beneficiaries were in the SNF, combined with adjacent hospitalizations, as one continuous "spell of illness." Mayburg, 740 F.2d at 102; Levi, 736 F.2d at 848-49. Medicare covered only up to 150 days of hospital services for each "spell of illness."Mayburg, 740 F.2d at 102 (quoting 42 U.S.C. § 1395d(a)); Levi, 736 F.2d at 849 (quoting 42 U.S.C. § 1395d(a)(1)).
The Second Circuit held that to allow Medicare eligibility to turn on those factors that determined whether the family of a beneficiary needing only custodial care was able to look after the beneficiary at home rather than sending him or her to an SNF — that is, on the existence, size, financial means, and health of a beneficiary's family — "is not only illogical but also contrary to the spirit of the Social Security Act." Levi, 736 F.2d at 849. Both the First and Second Circuits held that an individual could be treated as an inpatient only if receiving medical treatment. Mayburg, 740 F.2d at 103; Levi, 736 F.2d. Although these cases interpret language somewhat similar to that at issue in the instant case, they raise issues different from those presently before the court. While it is true that the formal inpatient designation is often beyond a patient's control, the Secretary's inpatient definition requires that the admission decision be based on medical factors. Moreover, nothing in these cases suggests that every patient receiving treatment from a hospital is an inpatient. They do not provide guidance on how to distinguish between inpatients and other types of patients in the context of this case.
Similarly, the fact that the Secretary at one time counted the day of discharge as a day of care for purposes of applying the three-day rule to patients transferred from Rural Primary Care Hospitals ("RPCHs") does not prevent the Secretary from interpreting the term "inpatient" to require formal admission. Until 1997, the Medicare Act required RPCHs to limit average inpatient stays to 72 hours. 42 U.S.C. § 1395i-4(f)(4) (1994) (amended 1997). To avoid denying SNF coverage to most individuals who were transferred to SNFs from RPCHs, the Secretary changed the way of calculating inpatient days for beneficiaries in this particular situation. See 58 F.R. 30,630, 30,634-36 (May 26, 1993). However, this exception says nothing about whether a patient not formally admitted could be considered an inpatient. For similar reasons, the fact that the Secretary chose to waive entirely the three day rule for participants in the Medicare + Choice program, see 42 C.F.R. § 409.30(b)(2)(ii), added by 68 F.R. 50,840, 50,854 (Aug. 22, 2003), also does not persuade the court to overturn the Secretary's interpretation of the term "inpatient." Even if, as the plaintiffs argue, these examples show that the Secretary can effectively alter the meaning of inpatient in certain situations, they do not establish that he has to do so with respect to individuals who received care in an emergency room or on "observation" status before being admitted as inpatients.
The Secretary terminated this exception after Congress repealed the 72-hour stay limit for RPCHs and changed their name to critical access hospitals ("CAHs"). See 62 F.R. 45,966, 46,008, 46,025 (Aug. 29, 1997).
Although the number of days of inpatient status, by any definition of "inpatient," is arguably a crude measure of the acuteness of a patient's condition or how great the need for SNF treatment is, the plaintiffs do not challenge the three-day rule itself. The plaintiffs challenge only the Secretary's failure to treat time spent receiving care in emergency rooms or on observation status, preceding formal inpatient admission, as inpatient status. Therefore, any argument that the three-day hospitalization requirement itself is irrational and/or unfair,see, e.g., Br. of Am. Health Care Ass'n Am. Med. Dirs. Ass'n as Amicus Curiae Supp. Plfs.' Mot. Summ. J. at 15-16 [Doc. No. 71], is not relevant to the issue before the court. The court does not take lightly the plaintiffs' concern that the Secretary's current interpretation of "inpatient" has created confusion among those trying to determine whether SNF care is covered or that changes in medical care have altered the circumstances under which that rule is applied. However, the plaintiffs, in effect, ask the court to make a policy judgment that is not within its purview.
In light of the considerations above, the court finds the Secretary's arguments in support of his interpretation sufficiently persuasive to warrant respect under Skidmore. Although the court does not hold that the plaintiffs' proposed interpretation of the statute would be unwise, it does accordSkidmore respect to the Secretary's interpretation, finds it persuasive, and upholds the Secretary's interpretation.
C. Regulatory Violation
The plaintiffs also argue that the Secretary's interpretation of the term "inpatient" violates his own regulations. The regulation at issue mirrors the statute above in limiting SNF coverage to those SNF stays following transfer from a hospital at which he or she was an inpatient for at least three days. See 42 C.F.R. § 409.30(a)(1) (requiring that beneficiary was "hospitalized . . . for medically necessary inpatient hospital or inpatient CAH care, for at least 3 consecutive calendar days, not counting the date of discharge," prior to SNF admission); id. at § 409.10(a) ("(a) Subject to the conditions, limitations, and exceptions set forth in this subpart, the term "inpatient hospital or inpatient CAH services" means the following services furnished to an inpatient of a participating hospital or of a participating CAH . . .") (emphasis added).
This regulation, like the statute, is ambiguous because it fails to define "inpatient." In such cases, the court defers to the agency's interpretation of its own regulation, unless the interpretation is "plainly erroneous or inconsistent with the regulation." Auer v. Robbins, 519 U.S. 452, 461 (1997). Here, the agency interprets inpatient status as requiring formal admission. For the reasons discussed in relation to the statute, above, this interpretation is not erroneous and not inconsistent with the regulation. The court defers to the agency and finds that the interpretation does not violate the regulation.
D. Violation of Constitutional Equal Protection
Lastly, the plaintiffs argue that the Secretary's interpretation of the term "inpatient" violates equal protection because it disadvantages one group of individuals — namely, medicare beneficiaries who stayed in a hospital for three days or more prior to transfer to an SNF but who spent less than three of those days in formal, inpatient status — as compared to another — namely, Medicare beneficiaries who were admitted as inpatients early enough in their hospital stay to have spent three days as formal inpatients prior to transfer to an SNF. The former is not a protected class, and so the Secretary's interpretation is subject to rational basis review. That is, Congress may not invidiously discriminate against a group based on characteristics that "bear no rational relation to a legitimate legislative goal."Weinberger v. Salfi, 422 U.S. 749, 772 (1975) (citations omitted).
In the present case, the court finds no facts, disputed or otherwise, that could permit a conclusion that the formal inpatient admission rule discriminates based upon characteristics that bear no rational relation to a legitimate legislative goal. Although the court draws no conclusion as to whether this rule is desirable, the Secretary has identified rational reasons for it. For example, he argues that the current "inpatient" definition ties coverage decisions to physicians' medical assessments, because the manual requires physicians or other health care providers to consider medical factors in deciding whether and when to designate a patient as an inpatient. This reason relates to a legitimate, legislative goal of covering SNF care for individuals who have required significant periods of acute hospital care while also limiting Medicare's costs. Therefore, the plaintiffs' equal protection claim fails.
V. CONCLUSION
For the foregoing reasons, the court GRANTS the defendant's motion to strike [Doc. No. 72] to the extent specified in the text of this ruling, DENIES the plaintiffs' motion for summary judgment [Doc. No. 55], and GRANTS the defendant's motion for summary judgment [Doc. No. 59]. The clerk is ordered to close the case.
SO ORDERED.