Summary
This Ninth Circuit opinion addresses a challenge to the Department of Health and Human Services' 2020 low-wage-index policy, which artificially inflated Medicare wage index values for hospitals in the lowest quartile to aid recruitment in lower-income areas. The panel held that the Secretary of HHS exceeded his statutory authority because the manipulated index failed to reflect actual regional wage differences as required by the Medicare statute. While affirming the district court's finding that the policy was unauthorized, the appellate court vacated the remand order without vacatur, ruling that the appropriate remedy is full vacatur when an agency lacks the power to issue the challenged rule.
Topics
Practice areas
Questions Presented
- Whether the Ninth Circuit had appellate jurisdiction over the hospitals' cross-appeal challenging the district court's remand without vacatur.
- Whether the Medicare Wage Index Provision, 42 U.S.C. § 1395ww(d)(3)(E)(i), authorized HHS to increase the wage-index values of the lowest-quartile hospitals for policy reasons.
- Whether the Medicare Exceptions and Adjustments Provision, 42 U.S.C. § 1395ww(d)(5)(I)(i), independently authorized the low-wage-index policy.
- Whether the district court erred by remanding without vacating the unlawful policy.
Holdings
- The Ninth Circuit had jurisdiction to review the hospitals' cross-appeal because appellate jurisdiction extended to the district court's entire remand decision once HHS's appeal properly placed that decision before the court.
- The Wage Index Provision does not authorize HHS to artificially increase the wage-index values of the lowest-quartile hospitals to pursue the policy objective of recruiting and retaining medical staff in lower-income communities.
- The general Exceptions and Adjustments Provision cannot independently authorize the low-wage-index policy or override the specific requirements of the Wage Index Provision.
- The district court erred by remanding without vacating the low-wage-index policy because HHS lacked statutory authority to promulgate the policy and had not shown that the defect could be corrected on remand.
Key quotations
“We thus hold that the Wage Index Provision requires that the wage index “reflect” HHS’s best estimate of the relative wage levels of hospitals across the country—free from other policy goals that distort, rather than reflect, the regional wage differences.” (20)
“Here, HHS cannot correct its error on remand because the agency lacks statutory authority to promulgate the low-wage-index policy.” (27)
Factual background
Medicare inpatient hospital payments are calculated using a prospective-payment system that includes a wage index reflecting regional differences in hospital wage levels. In 2020, HHS increased the wage-index values for hospitals in the lowest quartile, while reducing payments to all hospitals by approximately 0.2 percent to maintain budget neutrality. The hospitals alleged that the policy exceeded HHS's statutory authority and reduced their Medicare payments by approximately $3.8 million.
Procedural history
After the Provider Reimbursement Review Board granted expedited judicial review, the hospitals sued under the Administrative Procedure Act. The Central District of California granted the hospitals summary judgment and remanded to HHS, but declined to vacate the policy because of potential disruption to the Medicare prospective-payment system. The Ninth Circuit held that it had jurisdiction over both appeals, affirmed the lack-of-authority ruling, vacated the remand-without-vacatur ruling, and remanded for further proceedings.
Remand instructions
The court affirmed the district court's holding that HHS exceeded its statutory authority, vacated the district court's decision to remand without vacating the policy, and remanded to the district court for further proceedings consistent with the opinion. The low-wage-index policy must be vacated because HHS lacks statutory authority to promulgate it.