                            UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA


                               )
ADIRONDACK MEDICAL CENTER, et )
al.,                           )
                               )
            Plaintiffs,        )
                               )
       v.                      )                     Civil Action No. 11-313 (RMC)
                               )
KATHLEEN SEBELIUS, Secretary,  )
Department of Health and Human )
Services,                      )
                               )
            Defendant.         )
                               )


                                 MEMORANDUM OPINION

               Plaintiff Hospitals challenge the Secretary of Health and Human Services’

calculation of hospital-specific Medicare payment rates after January 1, 2009. The Secretary

moves to dismiss and remand, arguing that the case is not in a proper procedural posture for this

Court’s review. The motion will be denied as the course suggested by the Secretary will waste

administrative and court resources.

               The payment calculations that are the subject of this suit are part of Medicare’s

Inpatient Prospective Payment System, through which the Secretary sets Medicare payment rates

in advance. The rates govern hospital reimbursements for inpatient operating costs in any given

fiscal year. See 42 U.S.C. §§ 1395 et seq. Challenges to hospital payments are channeled

through the Provider Reimbursement Review Board (“PRRB”). See id. § 1395oo; 42 C.F.R.

§§ 405.1801-.1871. When a payment is challenged, PRRB determines whether it has

jurisdiction, see 42 C.F.R. § 405.1840, and if so, proceeds to the merits of the claim. Id.
§ 405.1843-.1871. Within 60 days, a PRRB decision is subject to review by the CMS1

Administrator; if the Administrator takes no action or declines to review the decision, PRRB’s

decision stands as the final agency action. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R.

§§ 405.1875(a)(2), .1877(a)(2), (3).

               Instead of making a finding on the merits, PRRB may determine that it lacks

authority to decide the underlying question of law and expedited judicial review (“EJR”) is

appropriate. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. §§ 405.1842(a). An EJR determination is a

final decision not subject to review by the Secretary, but instead judicial review is available. 42

U.S.C. § 1395oo(f)(1); 42 C.F.R. §§ 405.1842(a).

               Here, Plaintiffs are Medicare-participating hospitals who filed a challenge to

payment rates with PRRB and sought EJR. On December 9, 2010, PRRB determined that it

lacked jurisdiction over Plaintiffs’ appeals. Def.’s Mot. to Dismiss and Remand [Dkt. # 8]

(“Def.’s Mot.”), Ex. A (“PRRB Decision”) at 3. Anticipating that its jurisdictional decision

would be reversed, PRRB ruled in the alternative that if it did have jurisdiction, it lacked

authority to decide the underlying legal question and EJR was appropriate. Id., PRRB Decision

at 7-8.

               PRRB predicted that its jurisdictional decision would be reversed because, at least

since 2008, the Secretary has maintained that PRRB’s interpretation of 42 C.F.R. § 405.1804 as

precluding jurisdiction is in error. See Cape Cod Hosp. v. Leavitt, 565 F. Supp. 2d 137, 139

(D.D.C. 2008) (granting Secretary’s motion to dismiss and remand; Secretary declined to defend



          1
        “CMS” is the Centers for Medicare & Medicaid Services, an operating component of
the Department of Health and Human Services.

                                                 -2-
PRRB’s decision regarding jurisdiction). After Cape Cod, the Administrator has repeatedly

reversed jurisdictional dismissals by PRRB. See Compl. [Dkt. #1] ¶ 110, Armstrong Cty. Mem’l

Hosp. v. Sebelius, Civ. No. 11-565 (RCL) (filed Mar. 18, 2011); Compl. [Dkt. #1] ¶ 108, Banner

Baywood Heart Hosp. v. Sebelius, Civ. No. 10-1799 (RCL) (D.D.C.) (filed Oct. 25, 2010); Am.

Compl. [Dkt. #6] ¶ 109, Highland Hosp. v. Sebelius, Civ. No. 10-1064 (RCL) (D.D.C.) (filed

Aug. 10, 2010).

               In this case, PRRB’s decision stands as the final decision of the agency because

the CMS Administrator did not take any action on the decision within 60 days. The Secretary

now indicates that “the PRRB’s jurisdictional decision is in error and [the Secretary] does not

wish to defend that decision in this case.” Def.’s Mot. at 6. Plaintiff Hospitals agree that PRRB

erred in finding it lacked jurisdiction. The Secretary seeks dismissal and remand to permit the

Secretary (via the CMS Administrator) to reverse PRRB’s decision that it lacked jurisdiction.

The Secretary already had the opportunity to reverse PRRB’s decision, but failed to do so within

the 60-day time period. The process that the Secretary suggests is unnecessary, time-consuming,

and inefficient. It would merely serve to delay the resolution of this case on the merits. PRRB’s

decision constitutes final agency action, and it is properly before this Court.

               The Secretary contends that this case is analogous to Cape Cod and should

similarly be subject to dismissal and remand. In Cape Cod, the district court reviewed a PRRB

decision that it lacked jurisdiction to consider Medicare providers’ administrative appeals. The

Administrator failed to take action within the 60-day window for review. After the 60-day period

had expired, the Secretary determined that PRRB’s jurisdictional determination was incorrect.

565 F. Supp. 2d at 140. The Secretary moved for dismissal and remand, and the district court


                                                 -3-
granted the motion, concluding that PRRB “must be afforded an opportunity to consider the

merits of plaintiff’s claims before the substantive issues may be properly before this Court.” Id.

at 141.

               It is true that this case is like Cape Cod in that PRRB decided it lacked

jurisdiction, the Administrator failed to take action within the 60-day time period, and the

Secretary subsequently decided that it wanted to reverse PRRB. But PRRB’s decision in this

case is critically different. Here, PRRB decided in the alternative and “in the interest of judicial

economy” that, if it had jurisdiction (fully expecting that the Secretary would reverse its

jurisdictional determination), it lacked authority to decide the underlying issue of law and EJR

was required. PRRB Decision at 8. Unlike Cape Cod, here there is no need to provide PRRB

the opportunity to address the substantive issues. PRRB already did so and found that EJR was

required. Dismissal and remand will be denied, as this Court cannot countenance the

squandering of adjudicative resources that would result from the procedure suggested by the

Secretary.

               The Court will deny the Secretary’s Motion to Dismiss and Remand [Dkt. # 8].

The parties shall file a joint proposed dispositive motion briefing schedule no later than February

22, 2012. A memorializing Order accompanies this Memorandum Opinion.



Date: January 31, 2012                                          /s/
                                                  ROSEMARY M. COLLYER
                                                  United States District Judge




                                                 -4-
