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United States Court of Appeals for the Ninth Circuit
December 3, 2003, Argued and Submitted, Pasadena, California ; April 13, 2004, Filed
[*1017] SCHWARZER, Senior District Judge:
These actions challenge the rates at which the government reimbursed hospitals participating in Medicare for certain inpatient treatment expenses during the fiscal years (FYs) 1991 to 1996. The plaintiffs are seventy-nine hospitals and two healthcare corporations (collectively, hospitals) who contend that the Secretary of the United States Department of Health and Human Services (the Secretary) acted in an arbitrary [**2] and capricious fashion in setting the thresholds for so-called "outlier payments" by which hospitals are reimbursed for patients with abnormally high costs. They argue that the Secretary committed four errors of methodology in arriving at the thresholds which determine the hospitals' entitlement to additional reimbursement. On cross-motions for summary judgment, the district court entered judgment for the Secretary, holding that the hospitals had waived these asserted errors by failing to raise them in the notice-and-comment rulemakings before the Secretary. The district court had jurisdiction under 42 U.S.C. § 1395oo(f) and we have jurisdiction under 28 U.S.C. § 1291. For the reasons stated below, we affirm.
STATUTORY AND REGULATORY BACKGROUND
The Statutory Framework
Medicare provides reimbursement for certain healthcare costs for eligible persons. See 42 U.S.C. § 1395-1395ggg. Congress established a "Prospective Payment System" (PPS) to reimburse hospitals for the operating costs of inpatient healthcare services rendered to Medicare beneficiaries. Social Security Amendments, Pub. L. No. [**3] 98-21, 97 Stat. 65 (1983) (codified as amended at 42 U.S.C. § 1395ww(d)); 42 C.F.R. Pt. 412 (2001). PPS reimburses hospitals for inpatient Medicare services according to an average per-patient standardized rate. See 42 U.S.C. § 1395ww(d)(3)(A), (D). The Secretary calculates the standardized rate prospectively based on adjusted estimates of total Medicare reimbursements for the upcoming fiscal year. See id. § 1395ww(d)(2)(A)-(C); 42 C.F.R. § 412.62. To calculate reimbursement for actual patients, the Secretary each year adjusts the average standardized rate by a multiplier based on the average cost of diagnosing and treating patients with similar conditions, so-called "diagnosis-related groups." (DRGs). See 42 U.S.C. § 1395ww(d)(3)-(4), (5); 42 C.F.R. § 412.60.
For treatment of patients with abnormally high costs, the PPS provides additional reimbursement through "outlier payments." Health care providers can seek outlier payments where either the length of a patient's hospital stay sufficiently exceeded the stay of others in her DRG or a patient's [**4] treatment costs sufficiently exceeded the adjusted standardized rate. Such outlier payments are intended to compensate providers for some of the costs of providing such atypically expensive services. See 42 U.S.C. § 1395ww(d)(5)(A).
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
363 F.3d 1013 *; 2004 U.S. App. LEXIS 7121 **
UNIVERSAL HEALTH SERVICES INC., a Delaware corporation, doing business through its wholly-owned subsidiaries; AUBURN REGIONAL MEDICAL CENTER INC., a Washington corporation dba Auburn General Hospital; UHS OF BELMONT INC., an Illinois corporation fdba Belmont Community Hospital; NORTHWEST TEXAS HEALTHCARE SYSTEM, a Texas corporation fka Dallas Family Hospital Inc. dba Dallas Family Hospital; UHS OF MANATEE INC., a Florida corporation fka Doctors' Hospital of Hollywood, Inc. dba Doctors' Hospital of Hollywood; CHARLOTTE MEDICAL CENTER INC., a Louisiana corporation fka UHS of De La Ronde Inc., fdba De La Ronde Hospital; MCALLEN MEDICAL CENTER INC., a Texas corporation fdba McAllen Medical Center; UHS OF RIVER PARISHES INC., a Louisiana corporation dba River Parishes Medical Center; VALLEY HOSPITAL MEDICAL CENTER INC., a Nevada corporation fka Universal Health Services of Nevada Inc., dba Valley Hospital Medical Center; UHS OF DELAWARE INC., a Delaware corporation fka Panorama Community Hospital Inc., dba Panorama Community Hospital; UHS OF FLORIDA INC., former General and Limited Partner of Doctors' General Hospital Ltd., dba Universal Medical Center; VICTORIA REGIONAL MEDICAL CENTER INC., fka Doctors Hospital of Victoria Inc., dba Victoria Regional Medical Center; WELLINGTON REGIONAL MEDICAL CENTER INCORPORATED, dba Wellington Regional Medical Center; INLAND VALLEY REGIONAL MEDICAL CENTER, INC., a California corporation fka Universal Health Services of Inland Valley Inc., dba Inland Valley Regional Medical Center and Westlake Medical Center Inc., dba Westlake Medical Center; SPARKS FAMILY HOSPITAL INC., a Nevada corporation general partner of Northern Nevada Medical Center LP, formerly Sparks Reno Partnership LP, a Delaware limited partnership, dba Northern Nevada Medical Center, fdba Sparks Family Hospital; DOCTORS' HOSPITAL OF SHREVEPORT INC., a Louisiana corporation, fka UHS of Shreveport Inc., dba Doctors' Hospital of Shreveport; BROOKWOOD HEALTH SERVICES, INC., dba Brookwood Medical Center; WEST ALABAMA GENERAL HOSPITAL, formerly owned and operated by West Alabama General Hospital Inc.; CENTRAL ARKANSAS HOSPITAL INC., dba Central Arkansas Hospital; SAINT MARY'S REGIONAL MEDICAL CENTER INC., dba Saint Mary's Regional Medical Center; NATIONAL PARK MEDICAL CENTER INC., dba National Park Medical Center; AMI/HTI TARZANA ENCINO JOINT VENTURE, dba Encino Tarzana Regional Medical Center (Encino); CIRCLE CITY MEDICAL CENTER, formerly owned and operated by Circle City Medical Center Inc.; MEDICAL CENTER OF GARDEN GROVE INC., dba Garden Grove Hospital and Medical Center, fka Medical Center of Garden Grove; VALLEY DOCTORS' HOSPITAL, dba Medical Center of North Hollywood; NEW HOSPITAL SOUTH BAY INC., dba South Bay Hospital; SIERRA VISTA HOSPITAL INC., dba Sierra Vista Regional Medical Center; SAN DIMAS COMMUNITY HOSPITAL; AMISUB OF CALIFORNIA INC., dba Encino Tarzana Regional Medical Center (Tarzana), fka Tarzana Regional Medical Center; AMISUB (IRVINE MEDICAL CENTER) INC., dba Irvine Regional Hospital and Medical Center, fka Irvine Medical Center; BROOKWOOD MEDICAL CENTER OF ORLANDO INC., general partner of Doctors' Mercy Hospital Ltd., dba Medical Center of Orlando; PALM BEACH GARDENS COMMUNITY HOSPITAL INC., dba Palm Beach Gardens Medical Center; LIFEMARK HOSPITALS OF FLORIDA INC., dba Palmetto General Hospital; MEMORIAL HOSPITAL OF TAMPA LTD., dba Memorial Hospital of Tampa; AMISUB (NORTH RIDGE HOSPITAL) INC., dba North Ridge Medical Center; HOSPITAL CONSTRUCTORS LTD., dba Town and Country Hospital; TENET HEALTHSYSTEMS SPALDING INC., dba Spalding Regional Hospital, fka Griffin Spalding Hospital; NORTH FULTON MEDICAL CENTER INC., dba North Fulton Regional Hospital; LIFEMARK HOSPITAL OF LOUISIANA INC., dba Kenner Regional Medical Center, fka St. Jude's Regional Medical Center, fka St. Jude's Medical Center; AMISUB (CULVER UNION HOSPITAL) INC., dba Culver Union Hospital; LUCY LEE HOSPITAL INC., dba Three Rivers Healthcare-North Campus, fka Lucy Lee Hospitals; LIFEMARK HOSPITALS OF MISSOURI INC., dba Columbia Regional Hospital; CREIGHTON ST. JOSEPH REGIONAL HEALTHCARE SYSTEM LLC, dba St. Joseph Hospital; AMISUB OF NORTH CAROLINA INC., dba Central Carolina Hospital; FRYE REGIONAL MEDICAL CENTER INC., dba Frye Regional Medical Center; AMISUB OF SOUTH CAROLINA INC., dba Piedmont Healthcare System, fka Piedmont Medical Center; EAST COOPER COMMUNITY HOSPITAL INC., dba East Cooper Regional Medical Center, fka East Cooper Community Hospital; AMISUB (SFH) INC., dba Saint Francis Hospital; TENET HEALTHCARE LTD., dba Brownsville Medical Center; BELLAIRE GENERAL HOSPITAL, formerly owned and operated by Bellaire General Hospital Inc.; TENET HEALTHCARE LTD., dba Mid-Jefferson Hospital; TENET HEALTHCARE LTD., dba Park Place Medical Center; TENET HEALTHCARE LTD., dba Nacogdoches Medical Center; TENET HEALTHCARE LTD., dba Park Plaza Hospital; ODESSA HOSPITAL INC., dba Odessa Hospital, aka Odessa Women's and Children's Hospital; AIKEN REGIONAL MEDICAL CENTERS INC., dba Aiken Regional Medical Centers; UHS OF PUERTO RICO INC., dba Hospital San Francisco; UHS OF PUERTO RICO INC., dba Hospital of San Pablo; UHS OF NEW ORLEANS INC., a Louisiana corporation dba River Parishes Hospital; VALLEY HEALTH SYSTEM LLC, a Nevada limited liability corporation, fka Universal Health Services of Nevada Inc., dba Valley Hospital Medical Center; WESTLAKE MEDICAL CENTER INC., a California corporation dba Westlake Medical Center; TENET MGH INC., an Arizona corporation fka Mesa General Hospital Medical Center Inc., dba Mesa General Hospital Medical Center; TENET HEALTHSYSTEM TGH INC., an Arizona corporation fka Tucson General Hospital Inc., dba Tucson General Hospital; NAI COMMUNITY HOSPITAL OF PHOENIX INC., an Arizona corporation dba Community Hospital Medical Center; AHM WCH INC., fka Woodruff Community Hospital; ST. LUKE MEDICAL CENTER, a California corporation dba St. Luke Medical Center; BROTMAN PARTNER LP, dba Brotman Medical Center; WHITTIER HOSPITAL MEDICAL CENTER INC., a California corporation dba Whittier Hospital Medical Center; CVHS HOSPITAL CORPORATION, dba Centinela Hospital Medical Center; VALLEY COMMUNITY HOSPITAL, dba Valley Community Hospital; MIDWAY HOSPITAL MEDICAL CENTER INC., a California corporation dba Midway Hospital Medical Center; SANTA ANA HOSPITAL MEDICAL CENTER INC., a California corporation dba Santa Ana Hospital Medical Ctr/Doctors Hospital of Santa Ana AHM CGH INC., dba Chapman General Hospital; MONTEREY PARK HOSPITAL; HARBOR VIEW HEALTH PARTNERS LP, dba Harbor View Medical Center; TENET HEALTHSYSTEM DMC INC., an Iowa corporation fdba Davenport Medical Center; GULF COAST COMMUNITY HOSPITAL INC., dba Gulf Coast Medical Center; SC MANAGEMENT INC., dba Twin Rivers Regional Medical Center; TENET HEALTHSYSTEM WP INC., dba Woodland Park Hospital; SC SAN ANTONIO INC., dba Southwest General Hospital; TENET HEALTHSYSTEM QA INC., dba Lander Valley Medical Center, Plaintiffs-Appellants, v. TOMMY G. THOMPSON, Secretary of the United States Department of Health and Human Services, Defendant-Appellee.
Prior History: [**1] Appeal from the United States District Court for the Central District of California. D.C. No. CV-01-00356-SVW. Stephen V. Wilson, District Judge, Presiding.
Disposition: Affirmed. Appellants' request for judicial notice denied.
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