Summary
**Medicare – Wage Index – Lugar Statute – APA – Remand** The district court held that a hospital did not waive its challenge to a CBSA assignment under the Lugar Statute by failing to comment during rulemaking, because it timely appealed to the Provider Reimbursement Review Board. The court further held that the Secretary violated the APA by failing to adequately explain his methodology for assigning qualified Lugar counties to CBSAs—specifically, his reliance on commuting data to central counties only—and remanded for a reasoned explanation and opportunity for public comment.
Topics
Practice areas
Questions Presented
- Whether East Texas waived its challenge to the CBSA assignment by failing to submit comments during the rulemaking period.
- Whether the Secretary adequately explained his interpretation and application of the Lugar Statute and implementing regulation in assigning Henderson County to the Tyler CBSA.
Holdings
- East Texas did not waive its challenge because it timely filed a request for a hearing before the PRRB, which is a proper vehicle for challenging the application of the regulation.
- The Secretary failed to articulate a satisfactory explanation for his action, as required by the APA, because he did not explain his methodology for assigning Lugar counties in the 2014 Final Rule or in prior final rules.
- The proper remedy is to remand to the Secretary for further explanation of his methodology, not to reach the merits of the assignment.
Key quotations
“Even where a party has waived its opportunity to pursue facial review of a regulation by failing to comment during a rulemaking proceeding, such a party can raise its arguments when the agency applies the rule.” (at 13-14)
“Because the Court concludes that the Secretary did not explain in the 1988, 2001, or 2004 Final Rules how he makes Lugar county assignments under the Lugar Statute, and he failed to provide any explanation of the methodology he used to assign Henderson County to the Tyler CBSA in the 2014 Final Rule, the Secretary has failed to 'articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.'” (at 18)
“The Supreme Court has explained that '[i]f the record before the agency does not support the agency action, ... the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.'” (at 19)
Factual background
East Texas Medical Center-Athens is a hospital in Henderson County, Texas. The Secretary assigned Henderson County to the Tyler, Texas CBSA for the Medicare wage index, whereas East Texas argued it should be assigned to the Dallas-Plano-Irving CBSA under the Lugar Statute because more workers commute to Dallas. The parties agreed that Henderson County qualifies as a Lugar county, but the Secretary had not explained his methodology for assigning Lugar counties. The court found that the Secretary failed to articulate a rational connection between the facts and the choice made.
Procedural history
East Texas appealed the Secretary's wage index assignment to the Provider Reimbursement Review Board (PRRB), which determined it lacked authority to grant relief. CMS declined review. East Texas then filed this action in federal district court under the Medicare Act and APA.
Remand instructions
The Secretary shall provide a meaningful explanation and an opportunity for the public to comment on how qualified Lugar counties are assigned to CBSAs under the Lugar Statute and implementing regulation.