                      UNITED STATES DISTRICT COURT
                      FOR THE DISTRICT OF COLUMBIA



 BAPTIST MEDICAL CENTER et al.

                  Plaintiffs,

             v.                     Civil Action No. 11-cv-0899


 SYLVIA M. BURWELL, in her
 official capacity as
 Secretary of Health and
 Human Services

                  Defendant.


                    MEMORANDUM OPINION AND ORDER

    Pending before the Court are the parties’ objections to

Magistrate Judge G. Michael Harvey’s Report and Recommendation

(“R&R”), which recommends that the Court grant in part and deny

in part plaintiffs’ motion for summary judgment, deny

defendant’s motion for summary judgment, and remand the matter

to the agency for further proceedings. See R&R, ECF No. 64. Upon

consideration of the R&R, plaintiffs’ objections, defendant’s

response to those objections, and the relevant law, the Court

adopts Magistrate Judge Harvey’s R&R and GRANTS IN PART and

DENIES IN PART plaintiffs’ motion for summary judgment, DENIES

defendant’s motion for summary judgment, and REMANDS this matter

to the agency.
I. Background

    The Court will not restate the full factual background of

this case, which is set forth in the Report and Recommendation.

See R&R, ECF No. 64 at 3–8. 1 By way of general overview, this

case concerns the administration of Medicare, the federal

program that provides health insurance to the elderly and

disabled. See 42 U.S.C. §§ 1395-1395cc; see also Northeast Hosp.

Corp. v. Sebelius, 657 F.3d 1, 2 (D.C. Cir. 2011)(explaining

Medicare statutory provisions). The Centers for Medicare and

Medicaid Services (“CMS”) is charged with administering the

Medicare program. The Medicare statute is divided into five

parts; three of which are relevant to this case. see id.

     The first relevant part is Medicare Part A which covers

medical services provided by hospitals and other institutional

providers. See 42 U.S.C. § 1395c. Under Part A, providers are

paid directly by the Secretary of Health and Human services for

the services they provide. See id. §§ 1395f(a)-(b), 1395x(u).

This payment arrangement is commonly known as the fee-for-

service system. Northeast Hosp., 657 F.3d at 2 (referring to the

“traditional Part A fee-for-service system.”).

    Over the last forty years, Congress has provided an

alternative to the fee-for-service arrangement under Part A

1 When citing electronic filings throughout this opinion, the
Court cites to the ECF header page number, not the original page
number of the filed document.
                                2
through different arrangements. Medicare Part C, the second

relevant part, is an alternative to the fee-for-service system

that allows an individual to choose to enroll with a Health

Maintenance Organization (“HMO”), preferred organization, or

other private managed care plan after 1999. 2   See Balanced Budget

Act of 1997 (BBA), Pub. L. No. 105-33, §4001, 111 Stat. 251, 270

(codified at 42 U.S.C. § 1395w-21). If a person chooses to enroll

in Part C, the Secretary makes payments to the managed care

plan, rather than directly to the provider. Id. § 1395w–

21(i)(1).

    From 1972 through the end of 1998, as an alternative to the

traditional fee-for-service system, Medicare beneficiaries

instead could enroll with a managed care organization, such as

an HMO, which entered into a payment contract with Medicare. See

Section 1876 of the Social Security Act; 42 U.S.C. § 1395mm

(“HMO statute”). 3 Similar to present-day Medicare Part C, if a

person chose to enroll in an HMO the Secretary made payments to

the managed care plan, rather than to the provider. The fiscal

2 Part C was formerly referred to as “Medicare + Choice” and is
currently referred to as “Medicare Advantage.” The parties refer
to Part C in their briefing when discussing the HMO statute, now
located in Part E, because it was located in Part C of the
Medicare statute during the relevant time period.
3 The Medicare HMO statute, 42 U.S.C. § 1395mm, is and has been

located in the “Miscellaneous Provisions” part of the Medicare
statute. During the periods at issue, “Miscellaneous Provisions”
were gathered in part C. Today, the Medicare + Choice (or
Medicare Advantage) program is located in Part C, and the
“Miscellaneous Provisions” have been moved to Part E.
                                3
periods at issue in this case are 1993–1998, i.e., prior to

1999, and therefore are governed by the HMO statute.

    Medicare Part E sets out various “Miscellaneous Provisions.”

Relevant to this case, Part E sets out a Prospective Payment

System (“PPS”) for reimbursing inpatient hospital services based

on “prospectively determined national and regional rates rather

than on the actual amount the hospital spends.” Northeast Hosp.,

657 F.3d at 3 (citing 42 U.S.C. § 1395ww(d)(1)-(4)). Providers

are also entitled to payment adjustments based on certain

factors. At issue in this case is the disproportionate share

hospital (“DSH”) payment adjustment, which provides that the

Secretary pays more for services provided by hospitals that

“serve[] a significantly disproportionate number of low-income

patients.” Id. (citing 42 U.S.C. § 1395ww(d)(5)(F)(i)(I)).

“Congress assumes that such patients cost more to treat than the

average Medicare patients, so these hospitals are entitled to

supplemental payments.” Allina Health Services v. Sebelius, 746

F.3d 1102, 1105 (D.C. Cir. 2014).

    Whether a hospital qualifies for a Medicare DSH adjustment,

and the amount of that adjustment, depends on the hospital’s

“disproportionate patient percentage [‘DPP’].” 42 U.S.C.

§ 1395ww(d)(5)(F)(v)-(vii). This percentage is a “proxy measure”

for the number of low-income patients a hospital serves. H.R.

REP. No. 99-241, pt. 1, at 17 (1985). The DPP is defined as the

                                4
sum of two fractions expressed as percentages. See 42 U.S.C.

§ 1395ww(d)(5)(F)(vi). Those fractions are referred to as the

“Medicare” fraction and the “Medicaid” fraction. Id.

§ 1395ww(d)(5)(F)(vi)(I) & (II); see also 42 C.F.R.

§ 412.106(b)(2). Both of these fractions require consideration

of whether a patient was “entitled to benefits under Part A.”

See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I).

    The first fraction, the Medicare fraction, is the percentage

of Medicare patients who are entitled to supplemental security

insurance. The numerator of this fraction is the sum of the

hospital’s patient days for patients who were “entitled to

benefits under Part A . . . and were entitled to supplementary

[social security insurance].” Id. § 1395ww(d)(5)(F)(vi)(I). The

denominator of the fraction is the total number of “hospital’s

patient days for such fiscal year which were made up of patients

who (for such days) were entitled to benefits under [Medicare]

Part A.” Id.

    The second fraction, the Medicaid fraction, is comprised of

the number of Medicaid patients not entitled to Medicare. The

numerator of the fraction is “the number of the hospital’s

patient days for such period which consist of patients who (for

such days) were eligible for medical assistance under a State

[Medicaid] plan . . . but who were not entitled to benefits

under [Medicare] Part A.” Id. § 1395ww(d)(5)(F)(vi)(II). The

                                5
denominator is the total number of patient days, regardless of

whether the patients were eligible for assistance through a

federal program. Id.

    A “fiscal intermediary,” typically a private insurance

company acting as the Secretary’s agent, calculates DSH

adjustments. See 42 C.F.R. §§ 421.1, 421.3, 421.100–.128. If a

hospital disagrees with the intermediary’s determination, it may

appeal to the Provider Reimbursement Review Board (“PRRB” or

“Board”), an administrative body appointed by the Secretary. See

42 U.S.C. § 1395oo(a),(h). The PRRB may affirm, modify, or

reverse the fiscal intermediary’s award. See id. § 1395oo(d).

The Board’s decision is the final agency action unless the

Secretary affirms, modifies, or reverses the Board’s decision

within 60 days after the provider is notified of the decision.

Id. § 1395oo(f)(1). A provider has a statutory right to seek

judicial review of the agency’s final decision in federal

district court. Id.

    Plaintiffs are several hospitals that offered inpatient

services for individuals whose care was paid for by HMOs. See

Compl., ECF No. 1 ¶¶ 5–6. The hospitals serve several elderly,

low-income patients and are therefore entitled to supplemental

payments, an amount determined by the disproportionate share

percentage. See id. For fiscal years, 1995-1998, the

Intermediary concluded HMO patient days should not be in the

                                6
numerator of the Medicaid fraction. QRS 1995-1998 DSH Medicare

HMO Days Grps. v. BlueCross BlueShield Ass’n, PRRB Dec. No.

2011-D20, 2011 WL 1231544, at *4 (Mar. 16, 2011). Plaintiffs

appealed this decision to the PRRB, arguing that the patient

days should be included in the Medicaid fraction because the HMO

patients are not entitled to benefits under Part A. Id. This

distinction matters because, if Part C beneficiaries are

“included in the Medicaid fraction rather than the Medicare

fraction, the hospitals receive a great deal more compensation.”

Allina, 746 F.3d at 1105.

    The PRRB disagreed with plaintiffs and found that the

“Intermediary properly excluded Medicare HMO days from the

Medicaid fraction. QRS 1995-1998 DSH Medicare HMO Days Grps.,

2011 WL 1231544, at *6. The Board reasoned that the HMO statute

required HMO patients to be excluded from the Medicaid fraction

because payments to HMOs are made from the Federal Hospital

Insurance Trust Fund established by Part A. Id. at 5–6. The

Board’s explanation was as follows:

          The Federal Hospital Insurance Trust Fund
          was established under Part A of the Medicare
          Act to fund the services provided under Part
          A.    42   U.S.C.    §§1395i(a)   and   (h).
          Consequently, prior to the change in the
          Medicare Act which created Part C, HMO
          inpatient   hospital   services  were   paid
          pursuant to Part A of Medicare.

          In Jewish Hospital, Inc. v. Secretary of
          Health and Human Services, 19 F.3d 270, 274-

                                7
          75 (6th Cir. 1994), the term “entitled” as
          it is used in the definition of the Medicare
          fraction at 42 U.S.C. §1395ww(d)(5)(F), was
          defined as follows:

          “[t]o be entitled to some benefit means that
          one possesses the right or title to that
          benefit. Thus the Medicare proxy fixes the
          calculation upon the absolute right to
          receive an independent and readily defined
          payment.”

          The explicit language of the DSH statute
          limits inclusion in the Medicaid fraction to
          those individuals or beneficiaries “eligible
          for medical assistance under state plan
          approved under XIX” and “not entitled to
          benefits    under   Part    A.”    42    C.F.R.
          §412.106(b)(4)(emphasis   added).     In   that
          services to Medicare beneficiaries enrolled
          in an HMO were paid under Part A during the
          fiscal periods prior to the effective date
          of Part C, the DSH statute requires those
          days   be    excluded   from    the    Medicaid
          percentage.


Id. at *5–6 (emphasis in original). Therefore, the Board found

that “the Intermediary properly excluded Medicare HMO days from

the Medicaid fraction.” Id. at 6.

    The Board also made a finding that the Secretary’s policy

during 1995-1998, the years at issue in this case, was to

include the HMO patient days in the Medicare, but not the

Medicaid fraction. Id. at *4. This finding was based on CMS’s

response to a comment in a statement published in the Federal

Register that stated that CMS believed:

          Based    on   the   language  of   section
          1886(d)(5)(F)(vi) of the Act, which states

                                 8
          that the disproportionate share adjustment
          computation should include “patients who
          were entitled to benefits under Part A”, we
          believe it is appropriate to include the
          days associated with Medicare patients who
          receive care at a qualified HMO. Prior to
          December 1, 1987, we were not able to
          isolate the days of care associated with
          Medicare patients in HMOs and, therefore,
          were unable to fold this number into the
          calculation. However, as of December 1,
          1987, a field was included on the Medicare
          Provider Analysis and Review (MEDPAR) file
          that allows us to isolate those HMO days
          that are associated with Medicare patients.
          Therefore, since that time, we have been
          including   HMO    days   in    SSI/Medicare
          percentage.

Id. The Board’s decision was issued on March 16, 2011 and the

Secretary declined to review the decision, making that decision

the final agency action. See 42 U.S.C. § 1395oo(f)(1).

    Plaintiffs sought judicial review under the APA, 5 U.S.C.

§ 701, et seq., of the Board’s decision to exclude HMO patient

days from the Medicaid fraction. The parties filed cross-motions

for summary judgment and the case was referred to Magistrate

Judge Harvey for an R&R. The parties have filed objections to

the R&R and this case is ripe for decision.

II. Standards of Review

    A. Objections to a Magistrate Judge’s R&R

    Pursuant to Federal Rule of Civil Procedure 72(b), once a

magistrate judge has entered a recommended disposition, a party

may file specific written objections. The district court “must


                                9
determine de novo any part of the magistrate judge’s disposition

that has been properly objected to,” and “may accept, reject or

modify the recommended disposition.” Fed. R. Civ. P. 72(b)(3).

Proper objections “shall specifically identify the portions of

the proposed findings and recommendations to which objection is

made and the basis for objection.” Local Civ. R. 72.3(b). “As

numerous courts have held, objections which merely rehash an

argument presented and considered by the magistrate judge are

not ‘properly objected to’ and are therefore not entitled to de

novo review.” Shurtleff v. U.S. Envtl. Prot. Agency, 991 F.

Supp. 2d 1, 8 (D.D.C. 2013)(quoting Morgan v. Astrue, Case No.

08–2133, 2009 WL 3541001, at *3 (E.D. Pa. Oct. 30, 2009)

(collecting cases)). Likewise, a court need not consider cursory

objections made only in a footnote. Hutchins v. District of

Columbia, 188 F.3d 531, 539 n.3 (D.C. Cir. 1999).

     B. Summary Judgment Standard

    Summary judgment should be granted only if the moving party

has shown that there are no genuine issues of material fact and

that the moving party is entitled to judgment as a matter of

law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317,

323 (1986); Waterhouse v. Dist. of Columbia, 298 F.3d 989, 991

(D.C. Cir. 2002). In a case involving review of a final agency

action under the APA, however, Rule 56(c)’s standard does not

apply because of the court’s limited role in reviewing the

                               10
administrative record. See N.C. Fisheries Ass’n v. Gutierrez,

518 F. Supp. 2d 62, 79 (D.D.C. 2007).

    Under the APA, it is the agency’s role to resolve factual

issues and to arrive at a decision that is supported by the

administrative record, whereas “the function of the district

court is to determine whether or not as a matter of law the

evidence in the administrative record permitted the agency to

make the decision it did.” Stuttering Found. of America v.

Springer, 498 F. Supp. 2d 203, 208 (D.D.C. 2007)(citation

omitted). “Summary judgment thus serves as the mechanism for

deciding, as a matter of law, whether the agency action is

supported by the administrative record and is otherwise

consistent with the APA standard of review.” Id. (citing

Richards v. Immigration & Naturalization Serv., 554 F.2d 1173,

1177 n.28 (D.C. Cir. 1977)).

    When reviewing agency action pursuant to the APA, the Court

must determine whether the challenged decision is, inter alia,

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

in accordance with law,” 5 U.S.C. § 706(2)(A); “in excess of

statutory jurisdiction, authority, or limitations, or short of

statutory right,” id. § 706(2)(C); or “without observance of

procedure required by law,” id. § 706(2)(D). The arbitrary or

capricious provision, under subsection 706(2)(A), “is a

catchall, picking up administrative misconduct not covered by

                               11
the other more specific paragraphs” of the APA. Ass'n of Data

Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Reserve

Sys. (ADPSO), 745 F.2d 677, 683 (D.C. Cir. 1984). The “scope of

review under the ‘arbitrary and capricious’ standard is narrow

and a court is not to substitute its judgment for that of the

agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm

Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

    Although this scope of review is deferential, “courts retain

a role, and an important one, in ensuring that agencies have

engaged in reasoned decision making.” Judulang v. Holder, 565

U.S. 42, 53 (2011). In evaluating agency actions under the

arbitrary and capricious standard, the court must be satisfied

that the agency has “examine[d] the relevant data and

articulate[d] a satisfactory explanation for its action

including a rational connection between the facts found and the

choice made.” Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C.

Cir. 2006)(internal citation and quotation marks omitted).

Moreover, when an agency “has failed to provide a reasoned

explanation, or where the record belies the agency’s conclusion,

[the court] must undo its action.” Cnty. of Los Angeles v.

Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999)(citation and

internal quotation marks omitted). In other words, “the agency

must explain why it decided to act as it did.” Butte Cnty. v.

Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010).

                               12
III. Analysis

    In its motion for summary judgment plaintiffs argued that

the Board’s ruling that individuals enrolled in HMOs between

1993 and 1998 should not be included in the Medicaid fraction

based on the Board’s interpretation of the phrase “entitled to

benefits under Part A” was inconsistent with the Court of

Appeals for the District of Columbia Circuit (“D.C. Circuit”)

precedent and therefore in violation of the APA. Pls.’ Mot., ECF

No. 53 at 11, 15–42 (citing Northeast Hosp., 657 F.3d at 1).

Defendant argued that the plaintiffs in this case were indeed

entitled to benefits under Medicare Part A, under the

Secretary’s reasonable interpretation of the HMO statute, and

therefore there was no violation of the APA. Def.’s Mot., ECF

No. 54 at 21. Specifically, defendant argued, contrary to even

the Board’s analysis, that an entitlement to benefits under Part

A simply means eligibility for benefits and not actual payment.

Def.’s Mot., ECF No. 54 at 21.

    Magistrate Judge Harvey found that the Board’s decision was

arbitrary and capricious and the R&R recommends that the Court

grant plaintiffs’ motion for summary judgment in part because:

(1) the agency’s interpretation of the term “entitled to

benefits under Part A” to mean having a right to payment made

for care under Part A was in direct conflict with the agency’s

contemporaneous interpretation of the phrase offered to the D.C.

                                 13
Circuit in Northeast Hospital; and (2) the agency failed to

consider whether its conclusion that HMO patient days should be

excluded from the Medicaid fraction was a departure from clear

prior policy during the time period relevant to this dispute.

R&R, ECF No. 64 at 13–21. Magistrate Judge Harvey recognized

that the Board’s failure to address evidence of a contrary

practice casts doubt on whether the adjudication should be given

retroactive effect. Id. at 20. Magistrate Judge Harvey noted one

additional wrinkle in the case, specifically that Plaintiff

Stamford Hospital’s dispute encompasses fiscal years 1993-1994,

while all other plaintiffs dispute fiscal years ranging from

1995-1998. Id. at 22. Magistrate Judge Harvey pointed out that

there was no evidence in the administrative record for the

fiscal years of 1993-1994. Id.

    Magistrate Judge Harvey recommends that the Court remand

this case back to the Secretary to: (1) provide its rationale

for its contemporaneous contradicting interpretation of the DSH

calculation, or to align its interpretation with that offered by

the Secretary in Northeast Hospital; (2) consider whether the

Secretary’s interpretation conflicts with prior practices, and,

if so, whether plaintiffs had settled expectations and whether

the changes produced real economic consequences for plaintiffs;

and (3) for the parties to develop a factual record concerning

the Secretary’s treatment of HMO patient days during 1993-1994

                                 14
fiscal years. Id. at 15–22.

    In their objections, plaintiffs agree with Magistrate Judge

Harvey’s finding that the Board’s decision was arbitrary and

capricious, however plaintiffs do not believe that a remand is

necessary. Pls.’ Objection, ECF No. 68 at 1. Rather than remand,

plaintiffs argue that the appropriate remedy is for the Court to

order the Board to count the HMO patient days in the Medicaid

fraction, which would require this Court to rule on whether the

HMO patient days were in fact paid under Medicare Part A during

the time frame at issue in this case. Id. at 8–11. Plaintiffs

also argue that no remand is necessary to consider Stamford

Hospital’s claims related to the 1993-1994 fiscal years because

there is sufficient evidence in the administrative record from

which a Court can determine that HMO patient days were excluded

from the Medicare fraction as far back as 1987. Id. at 16.

Alternatively, in the event of a remand, plaintiffs request that

this Court retain jurisdiction over this case.

     Defendant, on the other hand, disagrees with Magistrate

Judge Harvey’s finding that the Board’s decision was arbitrary

and capricious, but agrees that if the Court adopts the R&R that

a remand is the appropriate remedy. Def.’s Objection, ECF No. 69

at 10. Defendant argues that Magistrate Judge Harvey erred in

relying on Northeast Hospital because that case involved a

different legal question about a different Medicare program,

                               15
Part C. Id. at 8–10. Defendant states, however, that a remand is

appropriate in this case if the Court grants summary judgment in

plaintiffs’ favor. Id. at 10. Defendant takes no position as to

whether the Court should retain jurisdiction over this case

pending administrative review. See generally, id.

    The Court will first address defendant’s argument that the

Board’s decision was not in violation of the APA. After finding

that the Board indeed violated the APA in failing to address

both its contrary policy regarding HMO patient days, and

contrary contemporaneous interpretation of the Medicare statute,

the Court will next address plaintiffs’ objections which concern

the appropriate remedy in this case.

    A. Defendant’s Objections

    Defendant objects to Magistrate Judge Harvey’s

recommendation that the Board’s decision to exclude HMO patient

days from the Medicaid fraction was in violation of the APA. See

generally Def.’s Objection, ECF No. 69. Again, under APA review,

the question for the Court is whether the Board’s decision was

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

in accordance with law.” 5 U.S.C. § 706(2)(A). “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

                                16
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., 463 U.S. at

43. “An agency may not, for example, depart from a prior policy

sub silentio.” FCC v. Fox Tele. Stations, Inc., 556 U.S. 502,

515 (2009). Instead, “[a]n agency must . . . ‘display awareness

that it is changing position’” and provide “‘good reasons’” for

the change. Mary V. Harris Found. v. FCC, 776 F.3d 21, 24–25

(D.C. Cir. 2015)(quoting Fox Tele. Stations, 556 U.S. at 515).

Similarly, “[a]n agency errs when it ignores contradictory

relevant evidence regarding a critical factor in its decision.”

New Life Evangelistic Ctr., Inc. v. Sebelius, 672 F. Supp. 2d

61, 74 (D.D.C. 2009)(citing Morall v. Drug Enforcement Admin.,

412 F.3d 165, 178 (D.C. Cir. 2005)); see also El Rio Santa Cruz

Neighborhood Health Ctr., Inc. v. HHS, 396 F.3d 1265, 1278 (D.C.

Cir. 2005)(finding agency action “arbitrary and capricious

because [it] failed adequately to address relevant evidence

before it”). These considerations also apply to agency

adjudications. Allentown Mack Sales & Serv., Inc. v. NLRB, 522

U.S. 359, 374 (1998).

    Magistrate Judge Harvey found that the Board’s decision was

arbitrary and capricious because it failed to explain its

contrary change in position and failed to consider an important

aspect of the problem. See R&R, ECF No. 64 at 13–21. The Court

                               17
agrees. The Board’s decision was based on an interpretation of

the statute that focused solely on the source of payment. 2011

WL 1231544 at * 6. The Board concluded that “services to

Medicare beneficiaries enrolled in an HMO were paid under Part A

during the fiscal periods prior to the effective date of Part C,

the DSH statute requires those days be excluded from the

Medicaid percentage.” Id. Because the Federal Hospital Insurance

Trust Fund was established under Part A to fund services under

Part A, the Board reasoned, HMO inpatient hospital services were

paid pursuant to Part A and therefore the HMO patients were

“entitled to benefits under Part A.” Id. And because HMO

patients were entitled to benefits under Part A under this

interpretation of the statute, the Board excluded the HMO

patient days from the Medicaid fraction. See 42 U.S.C.

§ 1395ww(d)(5)(F)(vi)(II)(explaining numerator of Medicaid

fraction consists of patient days for individuals eligible for

medical assistance through a state plan, but not entitled to

benefits under Medicare Part A).

    The problem with that reasoning, as Magistrate Judge Harvey

explained, is that this holding is based on an interpretation

that “flatly contradicts” the agency’s contemporaneous

interpretation offered in Northeast Hospital of the same

statutory provision. See R&R, ECF No. 64 at 13–14. In Northeast

Hospital, the Secretary argued that “entitled to benefits under

                               18
Part A” meant mere eligibility for benefits and not a right or

entitlement to payment. Northeast Hosp., 657 F.3d at 6; cf. 2011

WL 1231544 at * 6 (“[t]o be entitled to some benefit means that

one possesses the right or title to that benefit. Thus the

Medicare proxy fixes the calculation upon the absolute right to

receive an independent and readily defined payment.”).

    The Board failed to consider, or even acknowledge, that it

was simultaneously arguing for contrary interpretations of the

same statutory provisions. In the administrative proceedings the

Board interpreted the phrase “entitled to benefits under Part A”

in the DSH calculation to mean having a right to payment for

care made under Part A. Medicare HMO Days Grps., 2011 WL

1231544, at *5–6.   Whereas the agency’s interpretation offered

to the D.C. Circuit was eligibility for payment and not a right.

See Northeast Hosp., 657 F.3d at 6. The Board’s decision relied

solely on this contrary interpretation of the statute, without

any explanation of its change of position. As the Supreme Court

has stated, “the requirement that an agency provide reasoned

explanation for its action would ordinarily demand that it

display awareness that it is changing position.” F.C.C. v. Fox,

556 U.S. 502, 515 (2009). Without some recognition of a reason

for this contrary interpretation, the agency did not meet its

obligation under the APA to provide a reasoned explanation for

its actions. See id.

                                19
    Similarly, the Board’s failure to address its change in

policy rendered its decision arbitrary and capricious. As the

D.C. Circuit explained in Northeast Hospital, during the fiscal

years at issue in this case, the agency’s practice was to

exclude the HMO patient days from the Medicare fraction.

Northeast Hosp., 657 F.3d at 16 (emphasis added). In responding

to the Secretary’s argument that the agency’s rulemaking in 1990

shows that the agency “interpreted the Medicare fraction to

include managed care days,” the D.C. Circuit explained that the

Secretary’s argument was belied by the agency’s actual practice

with regard to HMOs from at least as early as 1995. Id. The

Secretary’s actual practice of excluding HMO patient days from

the Medicare fraction was evidenced by the fact that “[the

Secretary] was not using the managed care field in the program

file for calculating Medicare fractions, making it impossible to

count HMO days in the Medicare fraction.” Id. (citing Baystate

Med. Ctr. v. Mut. of Omaha Ins. Co., PRRB Dec. No. 2006–D20,

2006 WL 752453, at *31 (Mar. 17, 2006)).

    When presented with evidence of this prior policy of

excluding HMO patient days from the Medicare fraction in the

proceedings below, the Board ignored it. See Administrative

Record (“A.R.”), ECF No. 51-2 at 90–91. During the

administrative proceedings, plaintiffs referenced testimony and

government reports which supported its argument that the agency

                               20
“did not actually adopt or follow [a] policy to count Medicare

HMO days in the Medicare [fraction].” Id. In failing to respond

to this evidence, the Board failed to examine the “relevant data

and articulate a satisfactory explanation” for its determination

of the issue, and ignored contradictory evidence regarding a

critical factor in its decision. Alpharma, Inc., 460 F.3d at 6

(D.C. Cir. 2006). Based on these errors, the Board did not

adequately explain its reasoning and its decision was arbitrary

and capricious. See Atchinson Topeka and Sante Fe Railway Co.,

v. Wichita Bd. Of Trade, 412 U.S. 800 at 808 (1973)(“Whatever

the ground for the departure from prior norms . . . it must be

clearly set forth so that the reviewing court may understand the

basis of the agency’s actions.”)

    Defendant responds by arguing Northeast Hospital was a

different case reviewing a different statutory scheme. Def.’s

Objection, ECF No. 69 at 5–10. The distinctions pointed out by

the defendant, however, are not legally significant. It is true

that Medicare Part C and the HMO statute are different systems,

however, the two systems are merely two types of managed care

programs. Each serves the same function within disputes over DSH

adjustments because enrollment in either program provides a

basis to claim that an enrollee is not “entitled to benefits

under Part A.” See Northeast Hosp., 657 F.3d at 6 (identical

argument with respect to Part C enrollment). In Northeast

                               21
Hospital, the Secretary offered the treatment of HMO patient

days as evidence that Medicare Part C patient days should be

treated the same because both HMO and Medicare Part C patient

days are types of “managed care days.” Id. at 16 (“The Secretary

argues that the 1990 rulemaking shows she has long interpreted

the Medicare fraction to include managed care days and has never

limited the calculation to reimbursements paid directly to

hospitals under Part A.”). Defendant now seeks to retreat from

this characterization to argue that the two programs should be

treated differently. To the extent that the Secretary seeks to

explain away the contrary position, this Court may not accept

defendant’s post-hoc rationalizations as a substitute for the

Board’s explanation, or lack thereof. See Remmie v. Mabus, 898

F. Supp. 2d 108, 120 (D.D.C. 2012)(stating agency’s purported

rationale of a final decision explained in its briefing to the

Court is no substitute for the agency’s actual explanation).

    B. Plaintiffs’ Objections

    Plaintiffs take issue with Magistrate Judge Harvey’s

recommendation to remand this case back to the Board, rather

than to direct the Board to include the HMO patient days in the

Medicaid fraction. Pls.’ Objection, ECF No. 68 at 8. As the D.C.

Circuit has explained, a remand to an agency with instructions

to reach a certain result is a “remedy reserved for rare cases

of an agency’s persistent failure to explain itself,” Checkosky

                                22
v. S.E.C., 139 F.3d 221, 222 (1998), or “in rare cases[] when

the reviewing court is convinced that remand would serve no

purpose,” Allina, 746 F.3d at 1111 n.6. Furthermore, “legitimate

concerns about judicial overreaching always militate in favor of

affording the agency just one more chance to explain its

decision.” Tennessee Gas Pipeline Co. v. F.E.R.C., 926 F.2d

1206, 1214 (D.C. Cir. 1991)(Thomas, J., concurring).

      Plaintiffs argue that remand for further proceedings is not

necessary in this case because the Board “must apply the version

of the Secretary’s regulations in effect during the time periods

relevant to this dispute, which limited the Medicare fraction to

only those specific inpatient days actually paid by Part A.”

Pls.’ Objection, ECF No. 68 at 8. In other words, plaintiffs

request that the Court “rule on whether HMO days were actually

paid under Part A,” and if they were not paid, to order the

Board to count the HMO patient days under the Medicaid fraction.

Id.

      Several cases in the D.C. Circuit counsel against this

option. In Tennessee Gas Pipeline Co. v. F.E.R.C., the D.C.

Circuit considered whether it was appropriate to remand for a

third time to an agency which twice failed to adequately explain

its decision. 926 F.2d 1206. Despite the fact that the case had

“dragged on for about eight years” and the agency had supplied

“woefully inadequa[te]” explanations in both the original and

                                 23
the remand proceedings, the Court remanded the case back to

F.E.R.C. a third time because “ratemaking is for the Commission

and not for [the court].” Id. at 1206.

    Conversely, in Greyhound Corp. v. ICC, the D.C. Circuit

found that, for the second time, the agency failed to justify

its conclusion to maintain securities jurisdiction over the

Greyhound Corporation although the agency’s own precedent seemed

to preclude such a ruling. 668 F.2d 1354 (D.C. Cir. 1981). The

D.C. Circuit concluded that since the agency had “ample time and

opportunity” during the first remand to “provide a reasoned

explanation” for the decision to maintain securities

jurisdiction, but failed to do so, the Court found “no useful

purpose to be served” by giving the agency a third opportunity

to supply a satisfactory explanation. Id. at 364.

     Perhaps most relevant to this case is the D.C. Circuit’s

opinion in Allina Health Services v. Sebelius. 746 F.3d 1102. As

in this case, plaintiffs in Allina alleged the agency had

erroneously interpreted the term “entitled to benefits under

Part A” for the purposes of the DSH calculation. Id. at 1105.

The district court held, among other things, that the agency had

failed to sufficiently explain a change in policy of how the DSH

calculation was computed. Id. Rather than remand the case back

to the agency, however, the district court “ordered the

Secretary to recalculate the hospitals’ reimbursements by

                               24
counting Part C days under the Medicaid fraction.” Id. at 1107.

    The D.C. Circuit reversed the portion of the district

court’s opinion directing the Secretary to recalculate the

hospitals’ reimbursements using an alternative methodology. Id.

at 1111. The D.C. Circuit stated that the district court erred

in not simply identifying the error and remanding for the agency

to address that error. Id. (citation omitted); see also Sec. &

Exch. Comm'n v. Chenery Corp., 332 U.S. 194, 201 (1947)(“After

the remand was made, therefore, the Commission was bound to deal

with the problem afresh, performing the function delegated to it

by Congress.”).

    Plaintiffs argue that “[t]he Court would not be intruding

upon the agency’s prerogatives in making this determination,

because the Board has already ruled that HMO days are paid under

Part A.” Pls.’ Objection, ECF No. 68 at 10. This argument misses

the point. The Board’s determination was made under an

inconsistent interpretation of a statutory provision. Moreover,

the Board failed to recognize, let alone address, what seems to

be a clear change in policy during the fiscal years relevant to

this case. Magistrate Judge Harvey’s recommendation for remand

is a sound one because the Board may very well make a different

determination once it “aligns its interpretation of the DSH

calculation with that offered by the Secretary in Northeast

Hospital.” See R&R, ECF No. 64 at 15. Under such circumstances,

                               25
the Court is not convinced that the Board’s actions were

egregious enough “to trigger the once-in-a-decade” remedy of a

Court directing the agency on how to solve a particular problem.

Tennessee Gas Pipeline, 926 F.2d at 1214; see also Cty. of Los

Angeles v. Shalala, 192 F.3d 1005, 1011 (D.C. Cir. 1999)

(“[U]nder settled principles of administrative law, when a court

reviewing agency action determines that an agency made an error

of law, the court's inquiry is at an end: the case must be

remanded to the agency for further action consistent with the

corrected legal standards.”).

    C. The Court Will Retain Jurisdiction Pending Completion of
       the Remand Proceedings

    Plaintiffs request that in the event of a remand this Court

retain jurisdiction over this case. Pls.’ Objection, ECF No. 68

at 20–21. Defendants do not object to this request. See

generally Def.’s Objection, ECF No. 69.

    The “norm” in administrative cases is to “vacate agency

action that is held to be arbitrary and capricious and remand

for further proceedings consistent with the judicial decision,

without retaining oversight over the remand proceedings.”

Baystate Med. Ctr. v. Leavitt, 587 F. Supp. 2d 37, 41 (D.D.C.

2008)(collecting cases). A court does have “discretion to retain

jurisdiction pending completion of a remand and to order

progress reports in the meantime” in unusual circumstances such


                                26
as “cases alleging unreasonable delay of agency action.” Alegent

Health-Immanuel Med. Ctr. v. Sebelius, 917 F. Supp. 2d 1, 3

(D.D.C. 2012).

    In this case, plaintiffs argue the likelihood of extreme

agency delay is sufficient to warrant the retention of

jurisdiction over this case. The appeals in this case were filed

in 2004 and the Board rendered a decision seven years later. In

light of the long delay in its first appeals, plaintiffs request

semi-annual reports on the status of the case to this Court

during remand. Considering the lapse of time between the various

appeals and the decision during the original administrative

proceedings, and the fact that the government does not object to

this request, the Court will retain jurisdiction over this

action.

IV. Conclusion and Order

     For the foregoing reasons, the Court adopts Magistrate

Judge Harvey’s R&R. Accordingly, the Court GRANTS IN PART and

DENIES IN PART plaintiffs’ motion for summary judgment, DENIES

defendant’s motion for summary judgment, and REMANDS this matter

to the agency. The Court shall retain jurisdiction over this

matter pending the completion of the remand proceedings.

     SO ORDERED.

Signed:   Emmet G. Sullivan
          United States District Judge
          February 28, 2019

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