The Ninth Circuit held that a Department of Health and Human Services (HHS) regulation regarding Medicare reimbursements, 42 C.F.R. § 418.309, is facially invalid, because it conflicts with the plain meaning of the authorizing statute, 42 U.S.C. § 1395f(i)(2).
The Circuit Court affirmed the district court’s injunction barring the agency from enforcing the regulation against the hospice but held that the injunction barring the agency from enforcing the agency nationally was too broad. Los Angeles Haven Hospice, Inc. v. Sebelius, 2011 WL 873303 (9th Cir. March 15, 2011). The panel was Hall (nominated by Reagan), Fisher (nominated by Clinton), and Bybee (nominated by Bush II).
Medicare provides a hospice benefit for terminally ill patients, subject to a cap on payments. The statute sets the cap based on a proportional allocation of the number of Medicare patients across years of service. 42 U.S.C. § 1395f(i)(2)(c). In an implementing regulation promulgated in 1983, HHS decided not to provide for proportional allocation of individual beneficiaries across years but rather to count an individual only in a single year, specifically the one in which he or she first elected the hospice benefit. Los Haven Haven Hospice, Inc. brought suit against HHS to challenge an alleged overpayment for 2006.
The district court agreed with Haven Hospice that the regulation is invalid and invalidated the 2006 overpayment demand. It enjoined HHS from enforcing the regulation against Haven Hospice and from enforcing the regulation nationally. HHS appealed the decision.
HHS argued that the hospice did not have standing because it could not prove that its obligations would be lower under a regulation that would follow the statute. The Ninth Circuit rejected that argument, noting that the hospice had “established a substantial likelihood” that the regulation increased the hospice’s liability. As a result, invalidation of the regulation would redress the injury to the hospice.
On the merits, the court found that the regulation conflicted with the statute. The court stated: “The regulation is at odds with the plain language of the statute in that it omits the individualized, proportional allocation calculation expressly called for in the statute, and substitutes an ‘alternative’ that HHS considers more convenient and less burdensome.”
HHS contended that the word “proportion” in the statute is ambiguous, and therefore, the agency’s reasonable interpretation was entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The court disagreed and held that the “context of the surrounding language” rendered the statutory directive clear and unambiguous. The court held that the agency is not entitled to Chevron deference, because “Congress’s language and intent when it drafted § 1395f(i)(2)(C) were clear and unambiguous.”
HHS argued that the only possible relief would be remand to the agency, specifically the Provider Reimbursement Review Board (PRRB), for recalculation of the amount owed, and not invalidation of the regulation. HHS argued that an injunction exceeded the court’s jurisdiction under 42 U.S.C. § 1395ooo(f)(1).
The court rejected HHS’s argument. Because the Secretary would not give any assurances that she would voluntarily refrain from enforcing the regulation, the district court had “both the authority and the discretion to enjoin future application of the invalid regulation” to Haven Hospice. The Ninth Circuit noted that Haven Hospice had presented its claim to the PRRB, and the PRRB concluded that the issue was a pure question of law that it was without authority to resolve. Therefore, Haven Hospice satisfied the presentment requirement of 42 U.S.C. § 1395ooo(f)(1), and the legal question was within the jurisdiction of the court. The court found that there was “no statutory or case law bar to declaratory or injunctive relief” in such circumstances.
However, the court vacated the nationwide injunction as too broad. The court noted that other circuits are considering challenges to the regulations, and a nationwide injunction would preclude other circuits from analyzing the issue. The court found that an injunction barring enforcement against Haven Hospice provided complete relief in this case, and nothing broader was warranted.