H. Lee Moffitt Cancer Center And Research Institute Hospital, Inc. v. Burwell

MOTION for Summary Judgment

D.D.C.June 16, 2017

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA H. LEE MOFFITT CANCER CENTER AND ) RESEARCH INSTITUTE HOSPITAL, INC., ) ) Plaintiff, ) ) v. ) Case No.: 16-2337 (CKK) ) THOMAS E. PRICE, M.D., Secretary, ) United States Department of ) Health and Human Services, ) ) Defendant. ) _________________________________________ ) PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT Pursuant to Federal Rule of Civil Procedure 56, Plaintiff respectfully moves for summary judgment in its favor on the grounds that there are no material facts in dispute and that Plaintiff is entitled to judgment as a matter of law. In support of this motion, the Court is respectfully referred to the accompanying Memorandum of Points and Authorities in Support of Plaintiff’s Motion for Summary Judgment. Case 1:16-cv-02337-CKK Document 13 Filed 06/16/17 Page 1 of 2 ii Respectfully submitted, /s/ Christopher L. Keough Christopher L. Keough DC Bar No. 436567 Stephanie A. Webster DC Bar No. 479524 Caroline L. Wolverton DC Bar No. 496433 AKIN GUMP STRAUSS HAUER & FELD LLP 1333 New Hampshire Avenue, N.W. Washington, D.C. 20036-1564 Phone: (202) 887-4038 Fax: (202) 887-4288 ckeough@akingump.com Dated: June 16, 2017 Counsel for Plaintiff Case 1:16-cv-02337-CKK Document 13 Filed 06/16/17 Page 2 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA H. LEE MOFFITT CANCER CENTER AND ) RESEARCH INSTITUTE HOSPITAL, INC., ) ) Plaintiff, ) ) v. ) Case No.: 16-2337 (CKK) ) THOMAS E. PRICE, M.D., Secretary, ) United States Department of ) Health and Human Services, ) ) Defendant. ) __________________________________________) PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT Christopher L. Keough DC Bar No. 436567 Stephanie A. Webster DC Bar No. 479524 Caroline L. Wolverton DC Bar No. 496433 AKIN GUMP STRAUSS HAUER & FELD LLP 1333 New Hampshire Avenue, N.W. Washington, D.C. 20036-1564 Phone: (202) 887-4038 Fax: (202) 887-4288 ckeough@akingump.com Counsel for Plaintiff Dated: June 16, 2017 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 1 of 32 i TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 1 STATUTORY AND REGULATORY BACKGROUND .............................................................. 2 A. Medicare Program: Transition from “Reasonable Cost” to “Prospective Payment” .......... 2 B. Statutory Provisions Intended to Protect Moffitt ................................................................ 3 C. Medicare Payment Determinations and Appeals ................................................................ 5 FACTS SPECIFIC TO THIS CASE............................................................................................... 6 A. The Secretary’s 2010 Study ................................................................................................ 6 B. Comments on the Proposed Adjustment ............................................................................. 6 C. The Secretary’s Final Implementation of the Adjustment .................................................. 8 D. Moffitt’s Medicare Reimbursement Determination .......................................................... 10 LEGAL STANDARD ................................................................................................................... 11 SUMMARY OF ARGUMENT .................................................................................................... 12 ARGUMENT ................................................................................................................................ 13 I. The Secretary’s 2012 Effective Date Conflicts With The Plain Text Of The Statute ...... 13 II. Statutory Context Confirms That The Secretary Violated The Statute’s Required Effective Date ................................................................................................................... 18 III. The Secretary’s Determination To Delay The Effective Date Of The Payment Adjustment Is Arbitrary And Capricious, Not Reasonable .................................................................. 22 CONCLUSION ............................................................................................................................. 26 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 2 of 32 * Authorities upon which we chiefly rely are marked with asterisks. ii TABLE OF AUTHORITIES CASES: Page(s) Adm’rs of Tulane Educ. Fund v. Shalala, 987 F.2d 790 (D.C. Cir. 1993) .................................................................................................18 Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20 (D.D.C. 2008) .......................................................................................5, 24 Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395 (D.C. Cir. 2004) .................................................................................................13 Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) .................................................................................................18 Catholic Health Initiatives v. Sebelius, 617 F.3d 490 (D.C. Cir. 2010) ...................................................................................................5 Chevron v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) .................................................................................................................11 City of Arlington v. FCC, 133 S. Ct. 1863 (2013) ...............................................................................................................1 *Coal. for Common Sense in Gov’t Procurement v. United States, 671 F. Supp. 2d 48 (D.D.C. 2009) .........................................................................14, 16, 17, 25 Dodd v. United States, 545 U.S. 353 (2005) .................................................................................................................13 Eagle Broad. Grp., Ltd. v. FCC, 563 F.3d 543 (D.C. Cir. 2009) .................................................................................................18 Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075 (D.C. Cir. 1996) .................................................................................................22 FTC v. Tarriff, 584 F.3d 1088 (D.C. Cir. 2009) ...............................................................................................13 Gutierrez–Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016) ...............................................................................................11 Henson v. Santander Consumer USA Inc., No. 16-349, slip op., 2017 WL 2507342 (June 12, 2017) .................................................13, 18 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 3 of 32 iii Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) .................................................................................................................11 Michigan v. EPA, 135 S. Ct. 2699 (2015) .............................................................................................................11 *Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) .............................................................................................................12, 23 *Nat’l Ass’n of Rehab. Facilities, Inc. v. Schweiker, 567 F. Supp. 47 (D.D.C. 1983) ..............................................................................14, 17, 18, 25 Sec. Indus. Ass’n v. Bd. of Governors, 468 U.S. 137 (1984) .................................................................................................................13 SEC v. Chenery Corp., 318 U.S. 80 (1943) ...................................................................................................................12 *Sierra Club v. EPA, 294 F.3d 155 (D.C. Cir. 2002) ...............................................................................14, 15, 19, 22 Vonage Holdings Corp. v. FCC, 489 F.3d 1232 (D.C. Cir. 2007) ...............................................................................................22 STATUTES: 5 U.S.C. § 706(2) ...........................................................................................................................11 42 U.S.C. § 1395 et seq. .............................................................................................................................2 § 1395k(a)(2)(B) ........................................................................................................................2 § 1395l(t) ....................................................................................................................................3 * § 1395l(t)(18)(A) .........................................................................................................1, 4, 8, 25 * § 1395l(t)(18)(B) ........................................................................................1, 4, 5, 12, 17, 18, 25 § 1395x(s)(2)(B) ........................................................................................................................2 § 1395kk–1.................................................................................................................................5 § 1395oo(a) ................................................................................................................................5 § 1395oo(f)(1) ..................................................................................................................5, 6, 11 Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 ..................................................3 Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501 .........................................................................................4 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 4 of 32 iv Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 § 1003.......................................................................................................................................19 § 1004.......................................................................................................................................19 § 1004(b) ..................................................................................................................................19 § 1104(b)(2)(C) ........................................................................................................................20 § 1104(c)(1) .............................................................................................................................21 § 1104(c)(2) .............................................................................................................................21 § 1253.......................................................................................................................................19 § 1323(b)(8)(B) ........................................................................................................................20 § 1333(a)(1) .............................................................................................................................20 § 1333(a)(4) .............................................................................................................................20 § 1401(e) ..................................................................................................................................19 § 1421(f)(1) ..............................................................................................................................19 § 1502(e) ..................................................................................................................................19 § 1512.......................................................................................................................................19 § 1513(d) ..................................................................................................................................19 § 1556(c) ..................................................................................................................................20 § 2001(a)(4) .............................................................................................................................19 § 2002(c) ..................................................................................................................................19 § 2004(d) ..................................................................................................................................19 § 2005(c)(2) .............................................................................................................................19 § 2402(g) ..................................................................................................................................19 § 2403(b)(2) .............................................................................................................................19 § 2501(d)(2) .............................................................................................................................20 § 2502(b) ..................................................................................................................................20 § 2702(a) ..................................................................................................................................21 § 2902(b) ..................................................................................................................................20 § 3007.......................................................................................................................................20 § 3108(b) ..................................................................................................................................20 § 3129(c) ..................................................................................................................................20 § 3135(b) ..................................................................................................................................20 § 3136(c) ..................................................................................................................................20 * § 3138...................................................................................................4, 6, 9, 10, 14, 17, 18, 21 § 3301(a) ..................................................................................................................................20 Social Security Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286 .........................................3 Social Security Amendments of 1983, Pub. L. No. 98-21, 97 Stat. 65 ...........................................3 RULES AND REGULATIONS: 42 C.F.R. § 405.1803..................................................................................................................................5 § 405.1867..................................................................................................................................5 § 413.20(b) .................................................................................................................................5 § 413.24(f)..................................................................................................................................5 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 5 of 32 v 49 Fed. Reg. 234 (Jan. 3, 1984) .......................................................................................................3 63 Fed. Reg. 47,552 (Sept. 8, 1998) ................................................................................................3 75 Fed. Reg. 46,170 (Aug. 3, 2010)...........................................................................................6, 14 75 Fed. Reg. 71,800 (Nov. 24, 2010)...........................................................................................6, 8 76 Fed. Reg. 74,122 (Nov. 30, 2011).........................................................6, 8, 9, 10, 14, 22, 23, 24 78 Fed. Reg. 50,496 (Aug. 19, 2013).........................................................................................5, 24 OTHER AUTHORITIES: Black’s Law Dictionary (10th ed. 2014) ........................................................................................14 Fed. R. Civ. P. 56(a) ......................................................................................................................11 Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 6 of 32 1 INTRODUCTION This case boils down to a simple rule of law. When Congress requires an agency to make a payment adjustment effective on a date certain, absent an extraordinarily compelling justification (not present here) for reading the statue differently, the agency is not free to substitute a later effective date. This is an action brought by H. Lee Moffitt Cancer Center and Research Institute Hospital, Inc. (“Moffitt”) to challenge a rule in which the Secretary of the Department of Health and Human Services disregarded Congress’ statutory command to make a payment adjustment effective for services furnished on or after a date certain. For years, Congress has been concerned that a small group of the world’s leading comprehensive cancer centers, including Moffitt, receive insufficient Medicare reimbursements to compensate them appropriately for the costs they reasonably incur in providing essential cancer treatments to Medicare beneficiaries. Prompted by that concern, Congress enacted a statute in 2010 requiring the Secretary to (1) perform a study of the costs incurred by the comprehensive cancer centers and other hospitals for outpatient services, 42 U.S.C. § 1395l(t)(18)(A), and (2) adjust the payments to the cancer centers upward to account for the differential, if any, between the costs incurred by the comprehensive cancer centers and the costs incurred by other hospitals to provide outpatient services, id. § 1395l(t)(18)(B). Critically here, Congress further required that the payment adjustment “shall” be “effective for services furnished on or after January 1, 2011.” Id. (emphasis added). The Secretary performed the study in 2010 before the effective date of the payment adjustment. The study validated Congress’ concerns. It showed that the comprehensive cancer centers’ costs are higher than the costs incurred by other hospitals. But, while the Secretary initially proposed in 2010 to apply the payment adjustment to services furnished on or after Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 7 of 32 2 January 1, 2011, as Congress required, the rule ultimately adopted a year later delayed the effective date of the payment adjustment by one year, to January 1, 2012. The Secretary’s asserted rationale for ignoring the congressionally mandated effective date is divorced from the statutory text and otherwise irrational. The rule states in circular fashion that because the agency chose not to finalize the payment adjustment it proposed before the January 1, 2011 statutory effective date and instead deferred promulgation of a final rule adopting the very same proposed adjustment until November 2011, the agency did not need to comply with the statutory mandate to apply the adjustment to services furnished on or after January 1, 2011. But the statute does not permit such a deferral. The statute requires the Secretary to apply the adjustment for services furnished on or after January 1, 2011. If Congress had meant that the Secretary could choose to defer the adjustment to later, it would have said so, as it did in other neighboring sections of the same legislation. Having meticulously prescribed a multitude of finely calibrated and very different effective dates for different provisions of the same enactment, Congress mandated, as even the Secretary recognized in the 2010 proposed rule, that the payment adjustment at issue “shall” be “effective for services furnished on or after January 1, 2011.” Moffitt, therefore, seeks an order enforcing the statute’s clear and explicit command and setting aside the Secretary’s ultra vires and irrational determination to make the adjustment effective only for services furnished on or after January 1, 2012. STATUTORY AND REGULATORY BACKGROUND A. Medicare Program: Transition from “Reasonable Cost” to “Prospective Payment” The Federal Medicare program provides health insurance to the aged, blind, and disabled under title XVIII of the Social Security Act. 42 U.S.C. § 1395 et seq. It consists of five parts, one of which—Part B—is relevant here. Part B covers outpatient hospital services. Id. §§ 1395k(a)(2)(B), 1395x(s)(2)(B). Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 8 of 32 3 As originally enacted, the Medicare statute required the Secretary to reimburse all hospitals for the “reasonable cost” of covered services furnished to inpatients and outpatients. See Social Security Amendments of 1965, Pub. L. No. 89-97, § 102(a), 79 Stat. 286, 302. In the 1980s, Congress began to transition to a “prospective payment” system, under which hospitals are paid fixed amounts that are set in advance for services furnished to Medicare patients. See Social Security Amendments of 1983, Pub. L. No. 98-21, § 601, 97 Stat. 65, 149–50 (establishing prospective payment system for inpatient services); Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4523, 111 Stat. 251, 445 (requiring the Secretary to adopt a prospective payment system for outpatient services). The statute governing the hospital outpatient prospective payment system is codified at 42 U.S.C. § 1395l(t). B. Statutory Provisions Intended to Protect Moffitt Congress was concerned from the outset that under the prospective payment system, a small group of eleven critically important comprehensive cancer centers, including Moffitt,1 would not receive sufficient Medicare reimbursement to cover an adequate percentage of the extraordinarily higher costs they reasonably incur in treating the most acutely ill cancer patients. As the Secretary recognized many years ago, this select group furnishes “intensive, costly, and generally atypical services” for which “payment may not be adequate under the prospective payment system.” 49 Fed. Reg. 234, 274 (Jan. 3, 1984); see 63 Fed. Reg. 47,552, 47,600 (Sept. 1 The other ten comprehensive cancer centers are: (1) Roswell Park Cancer Institute; (2) The University of Texas MD Anderson Cancer Center; (3) Memorial Sloan Kettering Cancer Center; (4) Dana-Farber Cancer Institute; (5) James Cancer Hospital and Solove Research Institute; (6) City of Hope Comprehensive Cancer Center; (7) Fox Chase Cancer Center; (8) Seattle Cancer Care Alliance; (9) Sylvester Comprehensive Cancer Center; and (10) USC Norris Comprehensive Cancer Center. Roswell Park Cancer Institute is challenging the same rule at issue here in another action pending in this Court, Roswell Park Cancer Inst. v. Price, 1:17-cv- 626-CKK (D.D.C.). Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 9 of 32 4 8, 1998) (recognizing that transition to prospective payment system would result in a nearly 30% loss in Medicare program reimbursement for comprehensive cancer centers). Congress, therefore, has repeatedly amended the statutory scheme governing payments for outpatient services to ensure that those eleven cancer hospitals would continue to be reimbursed for an adequate percentage of the actual, reasonable costs they incur to provide outpatient services furnished to cancer patients. See Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, Pub. L. No. 106-113 §§ 201(k), 202(a)(3), 113 Stat. 1501, 1501A-341–43 (adding sections 1833(t)(7)(D)–(F) of the Social Security Act, codified at 42 U.S.C. § 1395l(t)(7)(D)–(F)) (establishing a “hold harmless” payment to ensure that these cancer centers would not be reimbursed under the new prospective payment system for a smaller percentage of their reasonable costs than they received under the old reasonable cost reimbursement system). Pertinent here, as part of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (“ACA”), § 3138, 124 Stat. 119, enacted in 2010, Congress provided for a further payment adjustment for the eleven comprehensive cancer hospitals, which are “described in section 1395ww(d)(1)(B)(v) of the Social Security Act.” 42 U.S.C. § 1395l(t)(18)(B); see also Answer ¶ 21, ECF No. 8. The Affordable Care Act required the Secretary to perform a study of the costs incurred by the eleven cancer centers to determine if the costs they incur to provide services paid under the outpatient prospective payment system exceed the costs incurred by other hospitals for the same types of services. See 42 U.S.C. § 1395l(t)(18)(A). The Affordable Care Act also mandated that the Secretary “shall provide for an appropriate adjustment” to the payments made to that group of cancer hospitals if their costs exceed the costs incurred by other hospitals for outpatient services paid under the prospective payment system. Id. § Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 10 of 32 5 1395l(t)(18)(B). The statute further mandated that the Secretary “shall” apply a payment adjustment reflecting “those higher costs effective for services furnished on or after January 1, 2011.” Id. C. Medicare Payment Determinations and Appeals The Secretary employs “medicare administrative contractors” to perform various payment-related functions under the Medicare program. Catholic Health Initiatives v. Sebelius, 617 F.3d 490, 491 & n.1 (D.C. Cir. 2010); 42 U.S.C. § 1395kk–1. Within five months of the end of a hospital’s fiscal year, a hospital must file a “cost report” with the contractor designated by the Secretary. 42 C.F.R. §§ 413.20(b), 413.24(f). The contractor analyzes the hospital’s cost report and issues a retrospective, year-end payment determination, called a notice of program reimbursement, identifying the amount of Medicare program reimbursement due the hospital for services furnished to Medicare beneficiaries during the fiscal year covered by the cost report. See id. § 405.1803. The final settlement of a cost report following review and audit typically occurs two or more years after the end of applicable fiscal year. See Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 43 (D.D.C. 2008) (final settlement generally occurs two to three years after the close of the fiscal year); see also 78 Fed. Reg. 50,496, 50,630 (Aug. 19, 2013) (the Secretary stating that final settlement of cost report may occur “6 years or more after the payment year”). A hospital may appeal a contractor’s final determination as to the amount of Medicare program reimbursement due for a fiscal year to an administrative tribunal called the Provider Reimbursement Review Board (“Board”). 42 U.S.C. § 1395oo(a). The Board is bound by the Secretary’s rules and lacks authority to decide their validity. See 42 C.F.R. § 405.1867. The Medicare statute, therefore, authorizes the Board to determine that it is without authority to decide a relevant question of law or regulation to facilitate expedited judicial review. 42 U.S.C. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 11 of 32 6 § 1395oo(f)(1). If the Board makes that determination, then the hospital may commence a civil action in this Court within 60 days. Id. FACTS SPECIFIC TO THIS CASE A. The Secretary’s 2010 Study In 2010, the Secretary performed the study that Congress required and determined that (1) the eleven comprehensive cancer centers’ costs exceed the costs incurred by other hospitals for outpatient services paid under the prospective payment system, and (2) Medicare program payments made to the eleven comprehensive cancer centers amount to a lower percentage of their reasonable costs than other hospitals receive. 75 Fed. Reg. 71,800, 71,885–86 (Nov. 24, 2010). Accordingly, the Secretary proposed a payment adjustment that would raise the payments to the comprehensive cancer centers for outpatient services to 91% of their reasonable costs—a figure that reflects the average payment-to-cost ratio that the Secretary identified for other hospitals under the prospective payment system. See id. at 71,886 (“[W]e proposed an adjustment for cancer hospitals to reflect these higher costs, effective January 1, 2011”); see also 76 Fed. Reg. 74,122, 74,202–206 (Nov. 30, 2011). Consistent with Congress’ mandate, the proposed adjustment would have applied to services furnished on or after January 1, 2011. 75 Fed. Reg. 46,170, 46,235 (Aug. 3, 2010) (“[W]e are proposing an adjustment for cancer hospitals to reflect these higher costs effective January 1, 2011, as mandated by section 3138 of the Affordable Care Act.”) (emphasis added). B. Comments on the Proposed Adjustment Comments on the 2010 proposed rule by other hospitals, industry trade associations, and patient advocacy groups broadly supported an appropriate payment adjustment for the Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 12 of 32 7 comprehensive cancer centers. See, e.g., Rulemaking Record2 (“RR”) 666 (“[W]e support the study-backed proposed cancer hospital adjustments because of the importance of these centers of excellence to the treatment of patients with difficult and/or advanced cancers and to the clinical research and new equipment beta-testing that underlies many of the recent improvements in cancer care.”); RR 674 (the National Patient Advocate Foundation “heartily endorses this needed adjustment as well as CMS’s3 commitment to periodically provide future updates to keep reimbursement for these critical cancer hospitals current with their costs.”).4 In fact, several commenters, including several members of Congress, argued that the cancer centers should receive an even larger payment adjustment. RR 741–42; RR 747; see also RR 2286. Some commenters, while supporting an appropriate adjustment for comprehensive cancer centers, expressed concern that the Secretary had proposed to implement the cancer hospital adjustment in a way that would have inappropriately reduced Medicare payments to other hospitals. The American Hospital Association and the Association of American Medical Colleges, for example, supported the payment adjustment but questioned the agency’s proposal to apply it under the outpatient payment system in a way that would have inappropriately 2 Moffitt refers to Exhibit A of the Administrative Record, which relates to comments received by the Secretary, as the “Rulemaking Record” or “RR.” Moffitt refers to Exhibit B of the Administrative Record, which relates to the proceedings before the administrative agency below, as the “Administrative Record” or “AR.” 3 The Centers for Medicare & Medicaid Services (“CMS”) is a component of the Secretary’s agency with responsibility for day-to-day operation and administration of the Medicare program. Compl. ¶ 10, ECF No. 1; Answer ¶ 10, ECF No. 8. 4 See also RR 2312–13 (“As CMS confirmed through its analysis, cancer hospitals incur substantially higher costs, including the costs of drugs and biologicals, than other hospitals paid under OPPS. [The Biotechnology Industry Organization] therefore urges CMS to finalize its proposal to adjust payment for cancer hospitals paid under OPPS.”); RR 741–42; RR 747; RR 2209; RR 2286; RR 2294. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 13 of 32 8 penalized other hospitals. RR 857–60; RR 924–25. Likewise, the Greater New York Hospital Association commented: “While GNYHA strongly supports the cancer hospital adjustment in order to provide equitable payments to these hospitals and protect their viability, we urge CMS to consider the TOPs in the methodology for calculating the adjustment.” RR 2218.5 As the Secretary acknowledged, the question raised by these comments was not whether the agency should adopt the proposed payment adjustment to properly reimburse the comprehensive cancer centers for the higher costs they indisputably incur, but whether the Secretary had proposed to implement that adjustment in a way that would inappropriately reduce payments for other hospitals. 76 Fed. Reg. at 74,205 (explaining that the Secretary delayed the adjustment because “commenters expressed concerns about implementation of the adjustment” (emphasis added)). Indeed, no comments disputed that the comprehensive cancer centers incur higher costs—i.e., the actual question that Congress directed the Secretary to answer.6 42 U.S.C. § 1395l(t)(18)(A). C. The Secretary’s Final Implementation of the Adjustment In the 2010 final rule, the agency claimed it needed “further study and deliberation” concerning issues raised in comments on the proposed rule and did not have time to complete deliberations within the timeframe for publication of the final outpatient payment rule for calendar year 2011. 75 Fed. Reg. at 71,887. Then, a year later in a final rule adopted in November 2011 for calendar year 2012, the Secretary adopted the same adjustment originally 5 Accord RR 680; RR 827; RR 857–60; RR 924–25; RR 940; RR 993; RR 2100–01; RR 2113; RR 2238; RR 2271; RR 2325; RR 2329; RR 2358. 6 One comment by a group of for-profit hospitals questioned the technical specifics and sufficiency of the Secretary’s study but did not assert, and offered no evidence that would show, that the comprehensive cancer centers do not in fact have higher costs than other hospitals. RR 706–709; RR 2184–89; RR 2247–52; RR 2335–40. That commenter—the Federation of American Hospitals—is a trade association of for-profit, investor-owned or managed hospitals. RR 704. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 14 of 32 9 proposed in 2010, based on the same 2010 study and its findings. 76 Fed. Reg. at 74,202 (“After further review and deliberation of the issues associated with the cancer hospital payment adjustment, . . . we proposed a cancer hospital payment adjustment reflecting the same approach as we took in the . . . proposed rule.”). The Secretary, however, did not make the payment adjustment effective for services furnished on or after January 1, 2011, as required by Congress, but instead delayed the statutory effective date of the payment adjustment to services furnished on or after January 1, 2012. See id. at 74,583. In adopting the November 2011 final rule, the Secretary acknowledged that “commenters indicated that CMS must make the payment adjustment effective for services furnished on or after January 1, 2011, in order to comply with section 3138 of the Affordable Care Act.” Id. at 74,203. The agency responded that there had been “a variety of reasons” why the agency did not adopt the payment adjustment in the 2010 final rule for calendar year 2011. Id. at 74,205 (referring to the reasons given in the 2010 final rule and stating that “[g]iven the uncertainty surrounding these issues as well as public comments arguing against implementing a cancer hospital payment adjustment for CY 2011, we decided not to do so for CY 2011”). The agency asserted that “the obligation to provide a cancer hospital payment adjustment is triggered only insofar as the Secretary determines . . . that costs incurred by [the eleven cancer centers] exceed those costs incurred by other hospitals furnishing services under this subsection.” Id. at 74,205.7 Under the agency’s 2011 final rule, the payment adjustment for each cancer center is calculated and applied retrospectively, well after the end of each cost reporting period, when the 7 The Secretary “note[d] that, insofar as the cancer adjustment is budget neutral, the lack of a cancer hospital payment adjustment for CY 2011 also means that other payments were not reduced for CY 2011 to offset the increased payments from the adjustment.” 76 Fed. Reg. at 74,205. But, the Secretary did not assert that, and certainly did not articulate any reason why, any budget neutrality requirement would, or did, preclude compliance with the statute’s January 1, 2011 effective date. See id. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 15 of 32 10 hospital’s annual cost report is settled. See, e.g., id. (“[W]e are adopting a policy under which the amount of the payment adjustment will be made on an aggregate basis at cost report settlement.”). Because it typically takes about two years, and sometimes longer, to finally settle the Medicare cost report for a hospital’s fiscal year, see supra at 5, the Medicare cost reports for the services that Moffitt furnished to Medicare patients in 2011 had not yet been settled by November 2011, when the Secretary promulgated the final rule providing for a retrospective payment adjustment for the eleven comprehensive cancer centers. D. Moffitt’s Medicare Reimbursement Determination The Medicare contractor for Moffitt issued its notice of program reimbursement for Moffitt’s fiscal year ending June 30, 2011 on September 14, 2012, nearly a year after the Secretary promulgated the November 2011 final rule adopting the cancer center payment adjustment. See AR 339, 346. The contractor issued its notice of final payment determination for Moffitt’s fiscal year ending June 30, 2012 on September 9, 2013, nearly two years after the Secretary’s 2011 final rule. AR 156, 162. The Secretary’s failure to apply the statutorily-required payment adjustment for services furnished by Moffitt on or after January 1, 2011 and before January 1, 2012 had a significant financial impact on the hospital; it was paid approximately $7.4 million less than it should have been paid under section 3138 of the ACA for the services furnished in calendar year 2011. See AR 61, 239. Understandably dissatisfied with that substantial underpayment, Moffitt timely appealed the Secretary’s failure to apply the cancer center payment adjustment for services furnished in 2011 to the Secretary’s Board. See AR 5. The Board found that it was without authority to decide the legal questions at issue in this case, and ordered expedited judicial review. See AR 3–12. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 16 of 32 11 LEGAL STANDARD A motion for summary judgment should be granted where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The Administrative Procedure Act (“APA”) governs this Court’s review of Moffitt’s challenge to the Secretary’s determination. 42 U.S.C. § 1395oo(f)(1). The applicable provisions of the APA provide that the “reviewing court shall . . . hold unlawful and set aside agency action . . . found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; [or] in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2). In reviewing an agency’s construction of a statute, the Court’s review is governed by the test set forth in Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under the first step of the Chevron test, the Court asks “whether Congress has directly spoken to the precise question at issue.” Id. at 842. In answering the first question, no deference to the agency is due. Medtronic, Inc. v. Lohr, 518 U.S. 470, 512 (1996) (“Where the language of the statute is clear, resort to the agency’s interpretation is improper.”). Indeed, if Congress has foreclosed the Secretary’s interpretation of the statute, then the agency’s action must be set aside. Chevron, 467 U.S. at 842–43. Only where “the statute is silent or ambiguous” does the Court proceed to the second step, where “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843.8 8 Moffitt preserves for appeal its argument that the deference standard set forth in Chevron is improper and unconstitutional. Cf. Michigan v. EPA, 135 S. Ct. 2699, 2713 (2015) (Thomas, J., concurring) (“These cases bring into bold relief the scope of the potentially unconstitutional delegations we have come to countenance in the name of Chevron deference.”); City of Arlington v. FCC, 133 S. Ct. 1863, 1877–79 (2013) (Roberts, C.J., dissenting); Gutierrez–Brizuela v. (footnote continued) Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 17 of 32 12 “Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). A reviewing court cannot uphold agency action based on post hoc rationalizations supplied by an agency’s counsel. SEC v. Chenery Corp., 318 U.S. 80, 95 (1943). Instead, “an administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained.” Id. SUMMARY OF ARGUMENT Congress directly spoke to the question presented here, expressly requiring the Secretary to “provide for an appropriate adjustment . . . to reflect those higher costs effective for services furnished on or after January 1, 2011.” 42 U.S.C. § 1395l(t)(18)(B). The Secretary disobeyed Congress’ mandate and ignored the statute’s plain language when the agency did not apply the adjustment for services furnished on or after January 1, 2011 and before January 1, 2012. That ends the Chevron inquiry. The Secretary cannot escape the statutory 2011 effective date requirement through indecisiveness about how to properly implement the adjustment. The Secretary did the required study and thus knew in 2010 that the eleven comprehensive cancer centers’ costs exceed the Lynch, 834 F.3d 1142, 1149 (10th Cir. 2016) (Gorsuch, Circuit J., concurring) (“Chevron . . . permit[s] executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.”). Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 18 of 32 13 costs incurred by other hospitals for outpatient services paid under the prospective payment system. But even if that were not so (and it is), the statute still requires an adjustment effective for services furnished on or after January 1, 2011. The statute mandates that the Secretary “shall” apply the payment adjustment “for services furnished on or after January 1, 2011,” and that mandate is not dependent upon the timing of the Secretary’s final determination that these hospitals incur much higher costs or as to how to properly implement the required payment adjustment. ARGUMENT I. THE SECRETARY’S 2012 EFFECTIVE DATE CONFLICTS WITH THE PLAIN TEXT OF THE STATUTE At the first step of Chevron, the Court “begin[s] with a ‘plain language’ analysis of the statutory text.” Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 400 (D.C. Cir. 2004). The Court “assume[s] ‘that the legislative purpose is expressed by the ordinary meaning of the words used.’” Id. (quoting Sec. Indus. Ass’n v. Bd. of Governors, 468 U.S. 137, 149 (1984)). See also Henson v. Santander Consumer USA Inc., No. 16-349, slip op. at 9-10, 2017 WL 2507342, at *6 (June 12, 2017) (reiterating that the Judiciary “will presume” in interpreting a statute “‘that [the] legislature says . . . what it means and means . . . what it says’”) (quoting Dodd v. United States, 545 U.S. 353, 357 (2005)) (alterations in original). Here, the effective date of the cancer hospital adjustment is unambiguous and Congress’ directive was clear: to the extent that the Secretary determines that the cancer centers’ costs exceed those of other hospitals—a point that is not disputed, see supra at 6, 9—the Secretary “shall” apply a payment adjustment “effective for services furnished on or after January 1, 2011.” Id. (emphasis added). That language is not discretionary and provides no exceptions. See FTC v. Tarriff, 584 F.3d 1088, 1090 (D.C. Cir. 2009) (“shall” means “must” or “will”). And Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 19 of 32 14 there is no ambiguity in the phrase “effective for services furnished on or after January 1, 2011.” Black’s Law Dictionary (10th ed. 2014) (Defining “effective date” to mean “[t]he date on which a statute, contract, insurance policy, or other such instrument becomes enforceable or otherwise takes effect. This date sometimes differs from the date on which the instrument was enacted or signed.”). The Secretary acknowledged as much in the 2010 proposed rule, explaining that Congress had “mandated” that the agency apply “an adjustment for cancer hospitals to reflect the[ir] higher costs effective January 1, 2011.” 75 Fed. Reg. at 46,235. And although the Secretary skirted that mandate in the final rule adopted in 2011, the agency did not dispute comments that the statute requires that “CMS must make the payment adjustment effective for services furnished on or after January 1, 2011, in order to comply with section 3138 of the Affordable Care Act.” 76 Fed. Reg. at 74,203. It is well-established that when Congress sets an effective date certain without qualification, an agency has no choice but to comply with it. See, e.g., Sierra Club v. EPA, 294 F.3d 155, 160 (D.C. Cir. 2002); Coal. for Common Sense in Gov’t Procurement v. United States, 671 F. Supp. 2d 48, 56–57 (D.D.C. 2009); Nat’l Ass’n of Rehab. Facilities, Inc. v. Schweiker, 567 F. Supp. 47 (D.D.C. 1983). In Sierra Club, an environmental organization challenged the Environmental Protection Agency’s decision to extend a November 15, 1999 ozone attainment deadline set by statute for the Washington, D.C. metropolitan area. 294 F.3d at 158, 159. The EPA approved implementation plans for the D.C. area that did not meet the statutory attainment deadline, in absence of statutory exceptions that otherwise would permit an extension, based on its Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 20 of 32 15 determination that ozone in the D.C. area was negatively affected by upwind areas beyond the control of the States in the D.C. area. Id. The EPA characterized the Chevron step one analysis, presumably in an effort to manufacture ambiguity in the statutory text, as “whether an attainment date extension is available without an accompanying [exception] . . . where the Washington area’s ability to attain has been demonstrably compromised by upwind emissions outside its control.” Id. at 160. But the D.C. Circuit held that the plain language of the statute precluded the EPA’s extension of the statutory deadline even under the EPA’s framing of the question presented under Chevron step one. Id. Congress had included some exemptions from the attainment deadline elsewhere in the same enactment, but they did not apply to the D.C. area’s situation. Id. The court, therefore, concluded that “the presence of these specific exemptions [and] the absence of any other exemption . . . was deliberate,” and the agency’s disregard of the statutory attainment deadline was “contrary to the intent of the Congress.” Id. Pertinent here, the Court of Appeals stressed that it is a “rare” case in which a court should depart from the literal terms of a statute, and absent “an extraordinarily convincing justification,” a court should not “ratify an interpretation that abrogates the enacted statutory text.” Id. at 161 (internal quotation marks omitted). Further, the Court explained, “[a]n agency may not disregard the Congressional intent clearly expressed in the text simply by asserting that its preferred approach would be better policy.” Id. (internal quotation marks omitted). As in Sierra Club, the Secretary cannot use agency delay to justify noncompliance with the statutory deadline chosen by Congress. Because the statutory text is the best indication of congressional intent, there must be “extraordinarily convincing” evidence, lacking here, showing that Congress meant something different than what it said. Just like in Sierra Club, the effective Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 21 of 32 16 date exemptions found elsewhere in the Affordable Care Act, as discussed below, confirm that the absence of an exemption to the cancer center adjustment effective date provision was a deliberate choice by Congress, a point also illustrated in Coalition for Common Sense. In Coalition for Common Sense, the Court found in its Chevron step one analysis that the statutory effective date was unambiguous even though the agency’s final rule implementing the statute was not effective until 16 months later. 671 F. Supp. 2d at 50, 56–57. Like the Affordable Care Act provision at issue here, the statute at issue in that case was effective for items or services furnished on or after a specific date—“any prescription filled on or after the date of the enactment.” Id. The statute made prescriptions filled after that date subject to a federal price ceiling. Id. A trade association of pharmaceutical manufacturers challenged the application of the agency’s regulation requiring manufacturers to pay rebates on prescriptions that had been filled, and were paid at amounts in excess of the price ceiling, after the date of the statutory enactment and before the promulgation of an implementing rule that became effective 16 months later. Id. at 50–53. The trade association argued that because the statute did not expressly require rebates at all, and did not expressly require manufacturers to pay them (as opposed to retailers, for example), the agency had erred in its final rule requiring refunds on sales in excess of the federal ceiling between the statutory effective date (date of enactment) and the effective date of the agency’s rule. The Court rejected the trade association’s attempt to circumvent the statute’s plain language, explaining that the question under Chevron step one was whether the statutory price ceiling, “however implemented by the agency,” applied on the statutory effective date or only once the agency promulgated a rule to implement the statute. Id. at 56. Looking to the plain Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 22 of 32 17 language of the statute, the Court had no problem finding that the statute meant what it said. Id. at 56–57 (“[T]he statutory language is clear: ‘With respect to any prescription filled on or after the date of enactment . . . ,’ pharmaceuticals purchased through the retail pharmacy program are subject to the Federal Ceiling Prices . . .”). The same is true here. In section 3138 of the Affordable Care Act, Congress legislated that the Secretary “shall” apply the required adjustment for the comprehensive cancer centers “effective for services furnished on or after January 1, 2011.” 42 U.S.C. § 1395l(t)(18)(B). And, as in Coalition for Common Sense, “the most natural reading of the statute” is that all services furnished “on or after” that date are subject to the payment adjustment, 671 F. Supp. 2d at 57, “however implemented by the agency,” id. at 56. Schweiker similarly addressed the effective date of Congress’ amendment of the Medicare Act to add a new category of facilities that are entitled to government reimbursement for medical services rendered. 567 F. Supp. at 48. Congress mandated that the amendment “shall become effective with respect to a comprehensive facility’s first accounting period which begins on or after July 1, 1981.” Id. The Secretary, however, “failed to provide implementing regulations until over 17 months after that date.” Id. at 50–51. And the Secretary’s regulations did not provide for reimbursement for services rendered between the effective date established by Congress and the date that the Secretary’s regulations were issued. Id. at 48. The Court held that Congress’ inclusion of an effective date in the statute meant that the rule was required to apply to services on or after that date. Id. at 50–51. As in Coalition for Common Sense, the Court explained in Schweiker that “[d]efendants had discretion to choose the regulatory route” for implementing the statute, but however implemented, the agency did “not have discretion to choose the statute’s effective date.” Id. (emphasis added). Finally, the Court acknowledged that “[t]here might be good administrative reasons for deferring payment until Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 23 of 32 18 after regulations are in place” and that “[i]n the absence of the ‘effective date’ command of Congress, those considerations would have disposed of this case long ago.” Id. at 52. But, the Court emphasized, in that case, Congress had spoken. Id. In short, under Chevron, the Court’s inquiry starts and ends with the plain text of section 3138 of the Affordable Care Act. The plain text of the statute mandates that the payment adjustment “shall” apply to “services furnished on or after January 1, 2011.” 42 U.S.C. § 1395l(t)(18)(B). The Court, therefore, should set aside the provisions of the final rule delaying the effective date of the payment adjustment to January 2012 and compel the Secretary to make additional retrospective payments to Moffitt for services furnished in 2011. Cf. Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) (vacating the applicable portions of the Secretary’s final rules that improperly reduced Medicare payment rates for services furnished in prior years). II. STATUTORY CONTEXT CONFIRMS THAT THE SECRETARY VIOLATED THE STATUTE’S REQUIRED EFFECTIVE DATE In determining the plain meaning of a statute under the first step of the Chevron analysis, “the court applies the traditional tools of statutory construction in order to discern whether Congress has spoken directly to the question at issue.” Eagle Broad. Grp., Ltd. v. FCC, 563 F.3d 543, 552 (D.C. Cir. 2009). In applying traditional tools of construction, context is paramount. Adm’rs of Tulane Educ. Fund v. Shalala, 987 F.2d 790, 796 (D.C. Cir. 1993) (“Context is all.”). See also Henson, slip op. at 5-6, 2017 WL 2507342, at *4 (“extending [the Court’s] gaze from the narrow statutory provision at issue to take in the larger statutory landscape” and considering “contextual clues” in construing statute). When viewed in the context of the entire Affordable Care Act, and when compared with the language Congress used in that legislation’s other effective date provisions, it is evident that Congress meant what the plain statutory text governing the cancer center adjustment states: the payment adjustment “shall” be “effective for Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 24 of 32 19 services furnished on or after January 1, 2011.” 42 U.S.C. § 1395l(t)(18)(B). There is no evidence that Congress meant something else, let alone evidence supporting an “extraordinarily convincing justification” for abrogating the statute’s plain command. Sierra Club, 294 F.3d at 161 (internal quotation marks omitted). Although statutes generally are effective on the date of enactment, Congress meticulously prescribed several different effective dates for different provisions of the Affordable Care Act. In doing so, Congress carefully delineated parts of the Act that take effect or apply on the date of enactment,9 on a later specific date,10 a defined period after enactment,11 or at the beginning of a future period, such as the first day of a quarter of a fiscal or calendar year or a later “plan year,” “calendar year,” “fiscal year,” or “taxable year.”12 Other effective date provisions of the Affordable Care Act, however, like the amendment mandating the payment adjustment for the comprehensive cancer centers, apply to items or 9 See, e.g., ACA § 1004(b) (“The amendments made by sections 1002 and 1003 shall take effect on the date of enactment of this Act.”). 10See, e.g., id. § 1512 (March 1, 2013 effective date); id. § 2004(d) (January 1, 2019 effective date); id. § 2005(c)(2) (January 1, 2011 effective date); id. § 2002(c) (January 1, 2014 effective date). 11 See, e.g., id. § 2403(b)(2) (“30 days after the date of enactment of this Act”). 12 See, e.g., id. § 2402(g) (“the first day of the first fiscal year quarter that begins after the date of enactment of this Act”); id. § 1003 (specifying some provisions that are effective “beginning with the 2010 plan year” and others “[b]eginning with plan years beginning in 2014”); id. § 1004 (specifying some amendments that are “effective for plan years beginning on or after the date that is 6 months after the date of enactment of this Act” and others that are “effective for fiscal years beginning with fiscal year 2010”); id. § 1253 (“plan years beginning on or after January 1, 2014”); id. § 1401(e) (“taxable years ending after December 31, 2013”); id. § 1421(f)(1) (“taxable years beginning after December 31, 2010.”); id. § 1513(d) (“months beginning after December 31, 2013.”); id. § 1502(e) (“calendar years beginning after 2013”); id. § 2001(a)(4) (amending section 1902(k) of the Social Security Act to authorize a State Medicaid program to make certain elections “[b]eginning with the first day of any fiscal year quarter that begins on or after January 1, 2011, and before January 1, 2014”). Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 25 of 32 20 services “furnished” or “paid for,” or “claims filed,” “grants made,” or “costs incurred” after a date, including in some instances, dates occurring prior to any implementation by the agency and even prior to the enactment of the Act itself.13 In these instances, when Congress intended an exception to the effective date for services furnished after the prescribed effective date, it said so explicitly.14 And, when Congress meant to make an amendment effective only after the Secretary promulgates an implementing rule, it said that. See id. § 1323(b)(8)(B) (providing that “[a]ny requirement” under a regulation adopting additional requirements for a community health insurance option “shall be applicable to such option 90 days after the date on which the regulation involved becomes final”); id. § 1333(a)(1), (a)(4) (requiring the adoption of regulation for health care compacts, “[n]ot later than July 1, 2013,” and providing that such compacts “shall 13 See, e.g., id. § 2501(d)(2) (“drugs that are paid for by a State after December 31, 2009,” prior to enactment of the ACA); id. § 2902(b) (“items or services furnished on or after January 1, 2010,” prior to enactment); id. § 1556(c) (“claims filed under part B or part C of the Black Lung Benefits Act . . . after January 1, 2005, that are pending on or after the date of enactment of this Act”); id. § 2502(b) (“services furnished on or after January 1, 2014”); id. § 3129(c) (“grants made on or after January 1, 2010”); id. § 3301(a) (“drugs dispensed under this part on or after July 1, 2010”); id. § 3108(b) (“items and services furnished on or after January 1, 2011”); id. § 3007 (amending section 1848(p)(4)(B)(iii) of the Social Security Act to provide that the “Secretary shall apply the payment modifier established under this subsection for items and services furnished—(I) beginning on January 1, 2015, with respect to specific physicians and groups of physicians the Secretary determines appropriate; and (II) beginning not later than January 1, 2017, with respect to all physicians and groups of physicians.”). 14 See id. § 3136(c) (providing that “the amendments made by subsection (a) shall take effect on January 1, 2011 and shall apply to power-driven wheelchairs furnished on or after such date,” except that those amendments “shall not apply to payment made for items and services furnished pursuant to contracts entered into . . . prior to January 1, 2011”); see also id. § 3135(b) (requiring a reduction in fee schedule payment for imaging services “furnished on or after July 1, 2010” and “[e]ffective for fee schedules established beginning with 2010 (but not applied for services furnished prior to July 1, 2010)”). Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 26 of 32 21 not take effect before January 1, 2016”).15 Elsewhere Congress contemplated that the Secretary may make a determination and authorized the adoption of a rule if appropriate, but provided (as in the case of the cancer hospital adjustment) that the rule shall be effective as of a date certain and did not make the effective date dependent on the timing of adoption of the rule.16 These neighboring provisions of the same enactment underscore that Congress meant what it literally said in the statutory text requiring the Secretary to apply the payment adjustment for the higher costs incurred by the comprehensive cancer centers “for services furnished on or after January 1, 2011” and without regard to the timing of the Secretary’s determination as to the higher costs incurred by them. The varying language used in other effective date provisions of the Affordable Care Act confirms the plain meaning of the effective date provision in section 3138 of the Act. Some apply, like the cancer hospital payment provision in section 3138, as of a date certain, without regard to the timing of adoption of an implementing rule and even as of a date prior to enactment of the Act. See, e.g., supra at 20 n.13. Other provisions, unlike the cancer hospital payment provision in section 3138, provide for exceptions to the effective date 15 See also id. § 1104(b)(2)(C) (amending section 1173(g)(4)(B) of the Social Security Act to require the Secretary to adopt rules “not later than” a date certain and “in a manner ensuring that such operating rules are effective not later than” a later date certain); id. § 1104(c)(2) (requiring the agency to adopt a rule establishing a standard “not later than January 1, 2012, in a manner ensuring that such standard is effective not later than January 1, 2014”); id. § 1104(c)(1) (requiring the Secretary to “promulgate a final rule to establish a unique health plan identifier,” permitting the Secretary to “do so on an interim final basis,” and providing that “such rule shall be effective not later than October 1, 2012”). 16 See id. § 2702(a) (providing that the Secretary “shall identify current State practices that prohibit payment for health care-acquired conditions and shall incorporate the practices identified, or elements of such practices, which the Secretary determines appropriate for application to the Medicaid program in regulations. Such regulations shall be effective as of July 1, 2011, and shall prohibit payments to States under section 1903 of the Social Security Act for any amounts expended for providing medical assistance for health care-acquired conditions specified in the regulations. The regulations shall ensure that the prohibition on payment for health care-acquired conditions shall not result in a loss of access to care or services for Medicaid beneficiaries.”) Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 27 of 32 22 that otherwise applies. See, e.g., supra at 20 n.14. And Congress’ use of that different language in other effective date provisions of the same enactment gives rise to a mandatory presumption that Congress meant what it said in prescribing the effective date of the cancer center adjustment for “services furnished on or after January 1, 2011” and did not intend any unspoken exception to that effective date. See Vonage Holdings Corp. v. FCC, 489 F.3d 1232, 1240 (D.C. Cir. 2007) (‘“[W]here different terms are used in a single piece of legislation, the court must presume that Congress intended the terms to have different meanings.’” (internal quotation marks omitted)). At a minimum, they negate the existence of any sort of “extraordinarily convincing justification,” Sierra Club, 294 F.3d at 161 (quoting Engine Mfrs. Ass’n v. EPA, 88 F.3d 1075, 1088 (D.C. Cir. 1996)), for assuming that “Congress meant something other than what it literally said” in mandating the January 1, 2011 effective date for the cancer center payment adjustment. Id. III. THE SECRETARY’S DETERMINATION TO DELAY THE EFFECTIVE DATE OF THE PAYMENT ADJUSTMENT IS ARBITRARY AND CAPRICIOUS, NOT REASONABLE The Secretary’s decision to provide the adjustment beginning January 1, 2012 is also arbitrary and capricious because that decision does not follow from the reasons he gave for it. The Secretary’s essential explanation for delaying the effective date of the cancer center payment adjustment was that some comments had questioned the manner in which the agency proposed to “implement[]” the adjustment and, as a result, the Secretary did not finally adopt the payment adjustment until the agency promulgated a final rule in November 2011. See 76 Fed. Reg. at 74,205. Given the timing of that final rule, the Secretary concluded that the agency did not need to follow the statute’s effective date provision because “the obligation to provide a cancer hospital payment adjustment is triggered only insofar as the Secretary determines . . . that costs Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 28 of 32 23 incurred by [the eleven cancer centers] exceed those costs incurred by other hospitals furnishing services under this subsection.” Id. The Secretary’s ostensible rationale for disobeying the statutory effective date for the cancer center payment adjustment is arbitrary and capricious, not reasonable. See State Farm, 463 U.S. at 43 (“[T]he agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” (internal quotation marks omitted)). Even assuming arguendo the Secretary’s premise, that the Secretary’s cost determination is the “trigger[]” for the payment adjustment, the Secretary nowhere explained why or how it follows that the payment adjustment required by that trigger does not apply to services furnished between January 1, 2011 and the later effective date of the Secretary’s final rule.17 This surely does not flow from the plain text and structure of the statute. As already discussed, the statute mandates that the Secretary “shall” apply the payment adjustment to “services furnished on or after January 1, 2011.” The Secretary’s conflation of the conditions giving rise to the adjustment with the effective date of the adjustment is not reasonable. The logical disconnect between the Secretary’s finding (that his cost determination is the trigger for the payment adjustment) and his conclusion (that the adjustment can only apply to services furnished as of the January 1, 2012 effective date of his 2011 final rule) is all the more glaring in view of the fact that the Secretary’s own rule provides for the payment adjustment to be applied on a retrospective basis, long after services are furnished. See, e.g., 76 Fed. Reg. at 17 In truth, the Secretary knew and had determined in 2010 that the cancer centers incur higher costs than other hospitals. As discussed already, the Secretary’s final payment adjustment is based on the same study and the same findings that the Secretary performed in 2010 as discussed in the 2010 proposed rule. See supra at 8–9. But regardless of the timing of that determination, the statute requires the Secretary all the same to apply the required payment adjustment for “services furnished on or after January 1, 2011,” without exception. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 29 of 32 24 74,205 (explaining that the payment adjustment will be applied “in the form of an aggregate payment at cost report settlement instead of through an increased adjustment to . . . payments on a claims basis”). Because the payment adjustment applies, under the final rule, at the time of cost report settlement, id., payment of the adjustment is not made to the comprehensive cancer centers until years after the services are furnished. See Baystate Med. Ctr., 545 F. Supp. 2d at 43 (final cost report settlements generally occur two to three years after the close of the fiscal year); see also 78 Fed. Reg. 50,496, 50,630 (Aug. 19, 2013) (stating that final settlement of cost report may occur “6 years or more after the payment year”). Further, when the Secretary promulgated that rule, in November 1, 2011, the agency still had not finally settled the cost reports covering services rendered in calendar year 2011 (between the statutory effective date of January 1, 2011 and the January 1, 2012 effective date of the Secretary’s final rule). Moffitt’s cost reports for those services, for example, were not finally settled through the final payment determinations at issue until 2012 and 2013. See AR 156, 162, 339, 346. Thus, there was no practical necessity (and certainly not anything explained in the final rule) for the Secretary to defer the effective date of payment adjustments to the effective date of the rule. There is, therefore, no “rational connection between the facts found” and “the choice made” by the Secretary not to apply the required payment adjustment to services furnished on or after January 1, 2011, as the statute requires, through the retrospective cost report settlement process that the Secretary elected to use in his final rule. Nor do the comments questioning the way the Secretary originally proposed to implement the payment adjustment help the Secretary with respect to his decision to disregard the statutory effective date for the adjustment. As discussed already, the comments overwhelmingly supported the payment adjustment for comprehensive cancer centers but Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 30 of 32 25 questioned the original proposal to implement it in a way that, according to some commenters, would have reduced Medicare program expenditures by inappropriately penalizing other hospitals. See, e.g., RR 2238 (Association of American Medical Colleges supporting a payment adjustment for the comprehensive cancer centers but objecting to the original proposed “methodology for determining the adjustment” because it would have “lower[ed] federal outlays at the expense of all other hospitals.”). But those concerns about the manner of implementing the required payment adjustment had nothing to do with whether the comprehensive cancer centers’ costs “exceed those costs incurred by other hospitals,” 42 U.S.C. § 1395l(t)(18)(A), or more fundamentally whether “the Secretary shall” apply the adjustment “effective for services furnished on or after January 1, 2011,” id. § 1395l(t)(18)(B). All that matters in the end is where we started, Congress mandated an effective date for the required payment adjustment “however implemented by the agency.” Coalition for Common Sense, 671 F. Supp. 2d at 56. Even assuming for sake of argument that the Secretary “had discretion to choose” how or when to implement the adjustment, his agency did “not have discretion to choose the statute’s effective date,” Schweiker, 567 F. Supp. at 50–51, and, thus, the timing of the Secretary’s final rule implementing this statutory mandate is not a rational basis for the agency’s decision to disregard its effective date. “Congress has spoken.” Id. at 52. Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 31 of 32 26 CONCLUSION For the foregoing reasons, the Moffitt respectfully requests that the Court grant its motion for summary judgment and set aside the provisions of the Secretary’s final rule delaying the effective date of the cancer center payment adjustment by one year to January 1, 2012. Respectfully Submitted, /s/ Christopher L. Keough Christopher L. Keough DC Bar No. 436567 Stephanie A. Webster DC Bar No. 479524 Caroline L. Wolverton DC Bar No. 496433 AKIN GUMP STRAUSS HAUER & FELD LLP 1333 New Hampshire Avenue, N.W. Washington, D.C. 20036-1564 Phone: (202) 887-4038 Fax: (202) 887-4288 ckeough@akingump.com Dated: June 16, 2017 Counsel for Plaintiff Case 1:16-cv-02337-CKK Document 13-1 Filed 06/16/17 Page 32 of 32 i UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA H. LEE MOFFITT CANCER CENTER AND ) RESEARCH INSTITUTE HOSPITAL, INC., ) ) Plaintiff, ) ) v. ) Case No.: 16-2337 (CKK) ) THOMAS E. PRICE, M.D., Secretary, ) United States Department of ) Health and Human Services, ) ) Defendant. ) __________________________________________) PROPOSED ORDER Upon consideration of the parties’ cross-motions for summary judgment, the memoranda in support of the motions, and the administrative record, it is hereby: ORDERED that Plaintiff’s motion be, and hereby is, GRANTED. FURTHER ORDERED that Defendant’s motion be, and hereby is, DENIED. FURTHER ORDERED that the applicable provisions of Defendant’s 2011 final rule and regulation, 42 C.F.R. § 419.43(i)(1), delaying the effective date of the payment adjustment required under section 3138 of the Affordable Care Act, 42 U.S.C. § 1395l(t)(8), from January 1, 2011 to January 1, 2012, be, and hereby are, declared invalid and void in ab initio, and they are hereby VACATED. FURTHER ORDERED that Defendant be, and hereby is, ORDERED to correct the effective date for the cancer center payment adjustment as mandated in section 3138 of the Affordable Care Act so that it shall apply to services furnished on or after January 1, 2011. FURTHER ORDERED that Defendant be, and hereby is, ORDERED to pay Moffitt the Case 1:16-cv-02337-CKK Document 13-2 Filed 06/16/17 Page 1 of 2 2 additional amounts due as a result of that correction with respect to outpatient services furnished on or after January 1, 2011 and before January 1, 2012, plus interest calculated in accordance with 42 U.S.C. § 1395oo(f)(2). Dated: ________________________________ The Honorable Colleen Kollar-Kotelly United States District Judge Case 1:16-cv-02337-CKK Document 13-2 Filed 06/16/17 Page 2 of 2