                     UNITED STATES DISTRICT COURT
                     FOR THE DISTRICT OF COLUMBIA


RAPID CITY REGIONAL HOSPITAL, :
                              :
               Plaintiff,     :
                              :
          v.                  :         Civil Action No. 06-1828 (GK)
                              :
KATHLEEN SEBELIUS,1 Secretary :
of Health and Human Services, :
                              :
               Defendant.     :

                           MEMORANDUM OPINION

     Plaintiff Rapid City Regional Hospital (“Plaintiff” or “Rapid

City”) is a non-profit provider of inpatient hospital services

located in South Dakota.        Plaintiff brings this action against

Kathleen Sebelius in her official capacity as Secretary of the

Department of Health and Human Services (“Defendant” or “HHS”),

after Defendant dismissed Rapid City’s administrative appeal for

failure to comply with a filing deadline. Pursuant to the Medicare

Act, 42 U.S.C. § 1395 et seq., and the Administrative Procedure Act

(“APA”), 5 U.S.C. § 551 et seq., Rapid City challenges that

decision. This matter is before the Court on Plaintiff’s Motion for

Summary Judgment [Dkt. No. 14] and Defendant’s Motion for Summary

Judgment   [Dkt.   No.   15].   Upon   consideration   of   the   Motions,

Oppositions, Replies, and the entire record herein, and for the


     1
       Pursuant to Fed. R. Civ. P. 25(d), Secretary of Health and
Human Services Kathleen Sebelius is automatically substituted as
defendant for former Secretary Michael O. Leavitt.
reasons stated below, Plaintiff’s Motion for Summary Judgment is

denied and Defendants’ Motion for Summary Judgment is granted.

I.    BACKGROUND2

      Part A of the Medicare Act provides for prospective payments

to healthcare providers, such as Plaintiff, that offer inpatient

care to Medicare beneficiaries.         See 42 U.S.C. § 1395ww(d).      Under

this “prospective payment system” (“PPS”), hospitals receive a pre-

determined payment that is calculated based on a complex statutory

formula.      Providers file annual cost reports that detail the

“reasonable costs” they have incurred and the portion of those

costs that are covered by Medicare.            42 U.S.C. § 1395g(a); 42

C.F.R. § 413.50.       HHS delegates Medicare administration to the

Centers for Medicare and Medicaid Services (“CMS”).               CMS often

contracts out to “fiscal intermediaries” the task of auditing the

providers’    cost    reports    and    creating   a   Notice   of    Program

Reimbursement (“NPR”).       42 C.F.R. §§ 405.1803, 421.100.

      Rapid City disagreed with the NPR issued in October of 2005 by

the intermediary for Fiscal Year 1999, arguing that it erred in

calculating the “disproportionate share” adjustment (“DSH”), one of

the several payment adjustments that may be made pursuant to the

PPS   under   42    U.S.C.   §   1395ww.     The   Medicare     Act   permits

dissatisfied providers to bring their claims before the Provider



      2
          Unless otherwise noted, the facts set forth herein are
drawn from parties’ Statements of Material Facts Not in Dispute.

                                       -2-
Reimbursement Review Board (“PRRB” or “the Board”).            42 U.S.C. §

1395oo(a). In April of 2006, Plaintiff appealed its NPR for FY1999

to the PRRB.

     The PRRB is authorized by statute to “make rules and establish

procedures, not inconsistent with the provisions of this subchapter

or regulations of the Secretary, which are necessary or appropriate

to carry out the provisions” of the statute.            Id. at § 1395oo(e).

CMS issued PRRB Instructions in March of 2002, setting forth the

Board’s      policies   and   guidelines.     See   PRRB   Instructions    at

Introduction.3

     The      Instructions     require     both   the   provider   and    the

Intermediary to file preliminary and final position papers. Id. at

II.B.       The due dates for the provider’s preliminary and final

position papers are included in an Acknowledgment and Critical Due

Dates letter sent from the PRRB to the provider.             Id. at I.C.I.

Providers submit a preliminary position paper to the Intermediary--

not to the Board--which is tasked with reviewing the provider’s

position paper before engaging in a settlement meeting with the


        3
          Since the filing of this action, the PRRB Instructions in
place have been modified in key respects. See PRRB Rules (July 1,
2009), available at http://www.cms.hhs.gov/PRRBReview/Downloads
/PRRBRules2009_070109.pdf.    These updated Rules apply only to
appeals pending or filed on or after July 1, 2009. Id. at Forward.
For purposes of this Memorandum Opinion, the relevant text is the
2002       PRRB      Instructions,            available         at
http://www.cms.hhs.gov/PRRBReview/Downloads/PRRB_Instructions_Mar
ch_03.pdf, which is the version that governed Plaintiff’s 2006
appeal. Therefore, the Court will rely on the Instructions as they
existed in 2006.

                                     -3-
provider and filing, if necessary, its own position paper with the

Board.     Id. at II.B.I.      At this early stage of the appeal, the

Board requires the provider to submit to it only the first page of

its preliminary position paper and certification that a full copy

was submitted to the Intermediary.          Id.

       The PRRB Instructions state that if a provider “fail[s] to

meet the preliminary position paper due date and fail[s] to supply

the Board with the required documentation, the Board will dismiss

[the provider’s] appeal for failure to follow Board procedure.”

Id.4   In addition, the May 9, 2006, Acknowledgment Letter received

by Plaintiff stated that “[y]ou (the provider) are responsible for

pursuing your appeal in accordance with the Board’s procedures,

which are outlined in the Board’s instructions.”                 AR at 4.    It

continued, “[i]f you miss any of your due dates including meeting

either     position   paper   due   date,   the   Board   will   dismiss    your

appeal.”     Id.   Rapid City received notice in the same letter that

“[t]he Board will not send a due date reminder.”             Id.

       Federal regulations merely require that the appeal be filed

within 180 days of receipt of the Intermediary’s NPR, and that the

provider identify and explain its reasons for challenging the

Intermediary’s decision, 42 C.F.R. § 405.1841; therefore, the




       4
          Dismissal is not automatic if the intermediary misses a
deadline; rather, the matter is referred to CMS and the hearing may
continue. PRRB Instructions at I.C.XIV; II.B.I.

                                      -4-
position paper requirement was implemented by the PRRB alone, and

not by statutory or regulatory text.

     Rapid City filed a timely appeal on April 21, 2006.     The Board

received the letter of appeal on April 25, 2006.           The letter

contained   information   about   the   substance   of   Rapid    City’s

challenges to the Intermediary’s decision.      On May 9, 2006, the

PRRB acknowledged receipt of the appeal, and provided Plaintiff and

the Intermediary with due dates for preliminary and final position

papers.   According to the May 9, 2006, letter from the PRRB, Rapid

City’s preliminary position paper was due on August 1, 2006.       AR at

3. Plaintiff failed to file its preliminary position paper by that

date, and thus, on August 23, 2006, the Board dismissed its appeal

for failure to comply with PRRB procedures.     Id. at 2

     Rapid City eventually filed its preliminary position paper

with the Intermediary, which was received on September 13, 2006.

Id. at 1.    On the same date, it supplied the Intermediary with a

motion to reinstate its appeal.         Id.   The Board received a

facsimile copy of the motion filed with the Intermediary.         Id. at

10-28.    The Board sent Rapid City a letter on December 29, 2006,

informing Plaintiff that its motion to reinstate must be filed

directly with the Board (as opposed to the Intermediary).        AR at 8.

The Board then dismissed Plaintiff’s motion for reinstatement.

Plaintiff disputes the claim that it failed to file its motion for

reinstatement with the PRRB.


                                  -5-
II.   STANDARD OF REVIEW

      The Medicare Act provides for judicial review of a final

decision made by the Board.       42 U.S.C. § 1395oo(f)(1).   The Act

instructs the reviewing court to apply the provisions of the APA.

Id.   Under the APA, the agency decision is set aside if it is

“arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.”      5 U.S.C. § 702(2)(A).

      “The arbitrary and capricious standard [of the APA] is a

narrow standard of review.”       Citizens to Preserve Overton Park,

Inc. v. Volpe, 401 U.S. 402, 416 (1971).    It is well established in

our Circuit has held that “[t]his court’s review is . . . highly

deferential” and “we are ‘not to substitute [our] judgment for that

of the agency’ but must ‘consider whether the decision was based on

a consideration of the relevant factors and whether there has been

a clear error of judgment.’”     Bloch v. Powell, 348 F.3d 1060, 1070

(D.C. Cir. 2003) (citations and internal quotation marks omitted);

see also United States v. Paddack, 825 F.2d 504, 514 (D.C. Cir.

1987).

      If the “agency’s reasons and policy choices . . . conform to

‘certain minimal standards of rationality’ . . . the [agency

decision] is reasonable and must be upheld.”       Small Refiner Lead

Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C. Cir. 1983)

(citation omitted); see Kisser v. Cisneros, 14 F.3d 615, 619 (D.C.

Cir. 1994).


                                   -6-
      Summary judgment will be granted when there is no genuine

issue as to any material fact. See Fed. R. Civ. P. 56(c).                Since

this case involves a challenge to a final administrative decision,

the   Court’s   review   on    summary    judgment   is   limited   to    the

administrative record.        Holy Land Found. for Relief and Dev. v.

Ashcroft, 333 F.3d 156 (D.C. Cir. 2003) (citing Camp v. Pitts, 411

U.S. 138, 142 (1973)); Richards v. Immigration & Naturalization

Serv., 554 F.2d 1173, 1177 (D.C. Cir. 1977)) (“Summary judgment is

an appropriate procedure for resolving a challenge to a federal

agency’s administrative decision when review is based upon the

administrative record.”).

III. ANALYSIS

      A.   The PRRB’s Decision to Dismiss Rapid City’s Appeal for
           Failure to Meet a Filing Deadline Was Not Arbitrary or
           Capricious.

      Plaintiff first argues that in dismissing the appeal, the

Board acted arbitrarily and capriciously because it relied only on

the procedural rule regarding the timely filing of a preliminary

position paper. In doing so, Rapid City contends, the Board failed

to look beyond the preliminary paper rule to the purpose that it

was meant to serve, i.e. to determine whether prior filings by

Plaintiff sufficiently described its position for the Board.               In

relying solely on the procedural rule, the PRRB allegedly failed to

examine all of the factors relevant to its ultimate decision to




                                    -7-
dismiss the appeal.         See Pl.’s Mot. for Summ. J. at 10-11 (“Pl.’s

Mot.”).

      Plaintiff simultaneously claims that it is “not insensitive

to, or unappreciative of . . . the heavy workload under which the

[Board] operates, or to the complexity of the issues before it.”

Pl.’s Opp’n and Reply at 1 [Dkt. No. 20].                   The Board hears

thousands of appeals each year, and as a result of the volume and

complexity of the appeals, faces a substantial backlog of cases.

See High Country Home Health Inc. v. Thompson, 359 F.3d 1307, 1310

(10th Cir. 2004) (describing PRRB’s burdensome case load); Rehab.

Ass’n of Virginia, Inc. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir.

1994) (“There can be no doubt but that the statutes and provisions

in question, involving the financing of Medicare and Medicaid, are

among     the   most   completely       impenetrable   texts   within    human

experience.”).      Plaintiff insists that despite its massive docket,

“there are limits to the Board’s ability to dismiss [a]ppeals

before it.”      Pl.’s Opp’n and Reply at 1.

      The Board must provide a “rational connection between the

facts found and the choice made.”             Motor Vehicle Mfrs. Ass’n v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).             The August

23,   2006,     dismissal    informed    Plaintiff   that   “the   preliminary

position paper was not submitted to the Intermediary and the

required information was not submitted to the Board.”              AR at 2.   As




                                        -8-
a result, the Board “close[d] this case and remove[d] it from the

docket.”      Id.

       The PRRB relied on its rule that a Plaintiff must meet its

filing deadlines or suffer dismissal of its appeal.                See PRRB

Instructions at II.B.I.       Courts have time and again found that the

crafting of such procedural rules is well within agency authority

and expertise.        See, e.g., Inova Alexandria Hosp. v. Shalala, 244

F.3d 342, 349 (4th Cir. 2000); Novacare, Inc. v.           Thompson, 357 F.

Supp. 2d 268, 273 (D.D.C. 2005); United Home Care v. Thompson, No.

99-3123, slip op. at 11 (D.D.C. Sept. 30, 2002).           Rapid City does

not dispute that it had notice of the rule, and that it violated

it.5       Pl.’s Mot. at 5-6.      In dismissing the appeal, the PRRB

considered      the    relevant   factors   before   it,   and   rendered   a

reasonable decision based on those factors. Therefore, the Board’s

decision was not arbitrary or capricious. Cf. State Farm, 463 U.S.

at 43.      Several courts have reached the same conclusion when faced

with similar facts.       See UHI, Inc. v. Thompson, 250 F.3d 993, 996

(6th Cir. 2001); Novacare, 357 F. Supp. 2d at 271-72; United Home

Care, slip op. at 15; Little Co. of Mary Hosp. and Health Care

Ctrs. v. Shalala, No. 98-8232, slip op. at 9 (N.D. Ill. Mar. 30,

2000); Saint Joseph Hosp. and Healthcare Ctr. v. Shalala, No. 99-

7775, slip op. at 10-11 (N.D. Ill. Dec. 11, 2000).


       5
          Plaintiff’s explanation for missing the deadline is that
there was a “miscommunication between the hospital and its
reimbursement consultant.” Pl.’s Mot. at 5.

                                      -9-
     Additionally,           an    appellate      court   addressed   directly    the

counter-argument raised by Plaintiff, that the Board could have and

should   have    relied       on    other   submissions     by   Rapid   City    as   a

substitute for the preliminary position paper.                   Plaintiff argues

that in failing to look behind the purpose of the position paper

rule, the Board’s decision did not consider all the relevant

factors.        In    High    Country,      the    Tenth   Circuit    rejected    the

provider’s “argument that the final position paper was unnecessary

because [the provider’s] arguments could be gleaned from other”

filings, including the preliminary position paper.                    359 F. 3d at

1313.    The court found that, “[t]he PRRB was under no duty to hunt

around in the record . . . in an attempt to discern the nature of

High Country’s legal claims,” even if such a search would have

yielded the same information that was supposed to be filed in the

tardy position paper.              Id.   Accordingly, the Tenth Circuit held

that dismissal was not arbitrary or capricious.                  The Court concurs

with the reasoning and outcome of High Country.

     Rapid City attempts to salvage its arguments by distinguishing

this case law.         In doing so, it relies on distinctions without

differences.         Plaintiff’s argument is that the above cases dealt

with the late filing of final position papers, whose function is

entirely different from that of preliminary position papers. Pl.’s

Opp’n and Reply at 9-12. Plaintiff implies that the requirement to




                                            -10-
file the preliminary position paper is redundant in this case, as

all of the information was already before the Board.                    Id.

       The decisions, however, do not rely on the unique nature of a

final position paper to affirm the Board’s dismissals.                   See, e.g.,

Novacare, 357 F.2d at 271 (citing to UHI, 250 F.3d at 996-97)

(affirming      dismissal      for    failure    to     submit    “the    required

paperwork”); Inova, 244 F.3d at 345 (affirming dismissal where

provider failed to file either position paper).               Rather, the cases

rely   solely    on    the   more    general    proposition      that    legitimate

procedural rules can be relied upon to control the Board’s docket

by dismissing appeals that are not timely filed.                   Id.; see also

High Country, 359 F.3d at 1311 (discussing utility of strict

procedural deadlines and need for Board to manage docket); cf.

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 506-07 (1994)

(noting    that       “substantial     deference”       granted     to        agency’s

interpretation of own regulations); Dillmon v. Nat’l Transp. Safety

Bd., 588 F.3d 1085, 1089 (D.C. Cir. 2009) (observing that arbitrary

and capricious review is deferential).

       Plaintiffs would have the Court look behind the rule to

determine whether the purpose of the preliminary position paper

requirement was met by earlier submissions.               As discussed further

below, the procedural default rule was a legitimate exercise of

agency    authority,     and   was    necessary    to    assist    the    Board    in

controlling its docket. High Country, 359 F.3d at 1312 (explaining


                                       -11-
need for deadlines); Novacare, 357 F. Supp. 2d at 272 (stressing

importance of “smooth functioning of agency’s appellate process”)

(citation omitted).    It is completely rational and reasonable for

a court, or agency, to impose deadlines, and to interpret them

strictly and uniformly.    See Hooper v. Nat’l Transp. Safety Bd.,

841 F.2d 1150, 1151 n.2 (D.C. Cir. 1988) (“We do not, of course,

hold that the [Board] has no power to enforce its [procedural

default] rule as strictly as it pleases. . . .”).          Consistent with

the authority and need to promulgate such rules, the Court cannot

credit Plaintiff’s suggestion that the Board may not dismiss the

appeal for a procedural default because the regulations only allow

it   to   “affirm,   modify,   or    reverse    a    determination   of    an

intermediary,” 42 C.F.R. § 405.1869.         See Pl.’s Mot. at 15-16.     The

Board has the authority to manage its docket and dismiss appeals in

the event of procedural defaults.          See United Home Care, slip op.

at 9.

     B.     PRRB Instructions Did Not Exceed the Board’s Statutory
            Authority and Were Not Inconsistent with HHS Regulations.

     Rapid City also contends that the rule allowing for dismissal

improperly shifts the burden for developing pre-hearing positions

from the intermediary to the provider.              In doing so, Plaintiff

maintains, the rule runs afoul of regulations that require the

Intermediary to gather pre-hearing information and present it to

the PRRB.    See 42 C.F.R. § 405.1853(a).            Plaintiff argues that

because the Board was permitted by Congress to formulate rules that

                                    -12-
were not “inconsistent with regulations . . . of the Secretary,” 42

U.S.C.   §   1395oo(e),   the    dismissal    rule    exceeds   the   Board’s

statutory authority.      Pl.’s Mot. at 14-15.

     The regulations do assign the Intermediary certain duties,

including    assembling    evidence,     attempting     to   meet   with     the

provider, and “ensur[ing] that all available documentary evidence

in support of each party’s position is part of the record.”                  42

C.F.R.   §   405.1853(a).6       “Such     evidence,”   according     to     the

regulations, “will ordinarily include a position paper from the

provider.”    Id.

     Plaintiff admits that “the Board’s interpretation of the

Agency’s regulation is entitled to substantial deference.”                 Pl.’s

Opp’n and Reply at 15.          The Supreme Court instructs that “the

agency’s interpretation must be given ‘controlling weight unless it

is plainly erroneous or inconsistent with the regulation.’” Thomas

Jefferson, 512 U.S. at 511 (citation and quotation marks omitted).

If the Board’s Instructions “sensibly conform[] to the purpose and

wording of the regulation,” the Instructions will be upheld.

Northern Indiana Pub. Serv. Co. v. Porter County Chapter of Izaak

Walton League of America, Inc., 423 U.S. 12, 15 (1975).




     6
          Although the exact provisions of this regulation have
been amended, the Secretary still requires the Intermediary to
perform certain duties in an effort to narrow the issues. C.F.R.
§ 405.1853(a)

                                    -13-
       The   agency’s   regulations,       while    they        assign   certain

responsibilities to the Intermediary, do not exempt the provider

from fulfilling any of its obligations set forth in the PRRB

Instructions. In fact, for the Intermediary to fulfill its duties,

it must have the compliance of the provider, which is what the

Instructions seek to ensure.        The Intermediary must assemble all

“available” evidence, which “ordinarily” includes a position paper

from the provider.       42 C.F.R. § 405.1853(a).                This language

suggests that the provider will have independent obligations to

provide such evidence and submit its position paper. In short, the

PRRB    Instructions    requiring    the    provider       to     meet   certain

requirements are not inconsistent with regulations that place

affirmative     obligations   on    the     Intermediary.            Under   the

regulations, it is critical that both parties participate in the

narrowing of the issues that will be before the Board; therefore,

the Board’s Instructions “sensibly conform” to the regulations’

“wording and purpose.”     See Northern Indiana, 423 U.S. at 15.

       C.    The Board’s Refusal to Consider Plaintiff’s Motion for
             Reinstatement Was Not Arbitrary or Capricious.

       Rapid City faxed a copy of its Motion to Reinstate its appeal

to the PRRB on December 6, 2006.           AR at 10 (cover sheet showing

facsimile sent from Rapid City to fax number of PRRB, to the

attention of Maureen Sacratini).           The Motion had earlier been

provided to the Intermediary.       AR at 11.      In a letter date-stamped

December 29, 2006, the Board notified Plaintiff that the faxed

                                    -14-
version of the Motion did not meet procedural requirements.                 AR at

8.   The letter informed Rapid City that it had to file a copy of

the Motion, “by mail, . . . directly with the Board” if Rapid City

wanted to the Board to consider it.           Id.

     There is no evidence in the record that Rapid City ever filed

its Motion by mail after receiving this letter.               Parties disagree

as to whether the Motion was satisfactorily filed with the Board on

December   6.    Rapid   City   insists    that      the   Board    rendered    an

arbitrary and capricious decision in refusing to consider its faxed

Motion for Reinstatement.       Pl.’s Reply at 20-21.

     The text of the PRRB Instructions sets forth procedures

controlling how parties must seek reinstatement of their appeals.

PRRB Instructions at I.C.XIII.7        Nowhere in Part I.C.XIII of the

Instructions    does   the   PRRB   require    the    provider     to   file   for

reinstatement via mail.         However, the Instructions, in setting

forth “Board Policies and Procedures for Pursuing an Appeal,”

provide that “[t]he Board requires a confirmation copy by mail of

any documents sent by telephone facsimile.”8               Id. at I.C.II.

     The Board’s stated reason for deciding not to consider the

Motion is that it was improperly filed.              AR at 8.      In conducting


     7
          This is the only section of the Instructions that is
cited to in the Board’s December 29 letter explaining that the
Motion had to be filed by mail. AR at 8.
     8
          The policy of requiring confirmations via mail is
eminently reasonable, given that facsimile transmission is not a
totally reliable means of submission.

                                    -15-
arbitrary and capricious review, courts are highly deferential to

agency decisions, and cautious to “not substitute [their] judgment

for that of the agency.”        Rural Cellular Ass’n v. FCC, 588 F.3d

1095, 1105 (D.C. Cir. 2009); see also Eagle Broadcasting Group,

Ltd. v. FCC, 563 F.3d 543, 551 (D.C. Cir. 2009) (commenting on

standard of review applied to arbitrary and capricious claims).

     The Board cannot be said to have offered “an explanation for

its decision that runs counter to the evidence before the agency,”

463 U.S. at 4, and thus cannot be found to be in violation of State

Farm.   Instead, it took note that the Motion was not mailed to the

PRRB, and explained that faxing the Motion was not an adequate

substitute    for   mailing   it.      The    letter   referenced   that    more

specific guidance was contained in the PRRB Instructions.                 Cf. id.

(“We will . . . uphold a decision of less than ideal clarity if the

agency’s path may reasonably be discerned.”) (internal citation and

quotation marks omitted).           The letter provided Rapid City an

opportunity    to   properly    file    its    Motion    pursuant    to    those

Instructions and the notice contained in the letter.                Rapid City

never re-filed.      Therefore, the Board’s refusal to consider the

Motion was not arbitrary or capricious.




                                     -16-
IV.   CONCLUSION

      For the foregoing reasons, Defendant’s Motion for Summary

Judgment is granted, and Plaintiff’s Motion for Summary Judgment is

denied.   An order shall issue with this Memorandum Opinion.




                                       /s/
February 2, 2010                      Gladys Kessler
                                      United States District Judge



Copies to: attorneys on record via ECF




                               -17-
