[00:00:17] Speaker 05:
Thank you very much, Your Honor.

[00:00:19] Speaker 05:
The issue in this case is whether, for reimbursement for psychiatric hospitals, a target amount that was initially derived from the base year should be employed for the cost years 2003 and 2004, or whether a capped amount that was put in place by the Balanced Budget Act for a five-year period should instead be used.

[00:00:45] Speaker 05:
I'd like to concentrate on

[00:00:47] Speaker 05:
Two major arguments this morning.

[00:00:51] Speaker 05:
The first one is a regulatory argument based upon CMS's regulations, and the second is allied to that and has to do with CMS's statements in the Federal Register leading up to this period.

[00:01:04] Speaker 02:
Well, can we start?

[00:01:05] Speaker 02:
I don't think you have to do this, but the statute's most important to me.

[00:01:08] Speaker 02:
Yes.

[00:01:09] Speaker 02:
So could either you want to start with the statute or give up on the statute?

[00:01:13] Speaker 05:
No, I'm not going to give up on the statute.

[00:01:15] Speaker 03:
So let's start with the statute.

[00:01:18] Speaker ?:
Okay.

[00:01:18] Speaker 05:
Starting with the statute, the statute basically, well first of all, the target amount is defined by the statute, originally refers to a base year, and that's the way, and the updated amount, it says to apply the prior year's cap, sorry, target amount for each new cost year.

[00:01:38] Speaker 05:
And that was always construed to mean based upon a base year until these caps

[00:01:43] Speaker 05:
came in.

[00:01:44] Speaker 02:
So the statute says, and now we're talking about 3A2 in the case of a later reporting period, the target amount for the preceding 12-month reporting period increased by the applicable percentage.

[00:01:59] Speaker 02:
Yes.

[00:02:00] Speaker 02:
And then HI says, for cost reporting period beginning during fiscal years 1980 through 2002, the target amount may not exceed the amount as updated

[00:02:13] Speaker 02:
up to or for such cost under 2, and 2 is a 75th percentile cap, right?

[00:02:18] Speaker 02:
Correct.

[00:02:18] Speaker 02:
And so, for example, for the year 2002, the target amount was the capped amount under that.

[00:02:27] Speaker 02:
Yes.

[00:02:27] Speaker 02:
That's right, right?

[00:02:28] Speaker 02:
And that means that if you then go back to 3A2, that the target amount for the next year is preceding target.

[00:02:39] Speaker 02:
You begin with the preceding target amount, which is the capped amount.

[00:02:43] Speaker 02:
I don't think so, Your Honor, and here's the reason.

[00:02:52] Speaker 05:
It's the use of the word target amount that creates perhaps some lack of clarity here.

[00:02:58] Speaker 02:
You told me that the statute itself defines target amount, and that's what I was using.

[00:03:02] Speaker 02:
The target amount for such hospital is X. That's what it says.

[00:03:11] Speaker 05:
It says it's an update

[00:03:13] Speaker 05:
from the prior year's target amount.

[00:03:15] Speaker 05:
Okay, so what's the prior year's target amount?

[00:03:18] Speaker 02:
And doesn't HI tell you what the prior year's target amount is for fiscal year 2002?

[00:03:25] Speaker 02:
It says what the cap is.

[00:03:26] Speaker 02:
No, it says in the case of a hospital unit that was within this class for a cross-reporting period during fiscal year 2002, the target amount may not exceed the amount updated

[00:03:42] Speaker 02:
under clause two, that is, it may not exceed the amount in the 75th percentile.

[00:03:47] Speaker 05:
Yeah, it says it may not exceed, but the target amount could be different from the cap.

[00:03:52] Speaker 02:
Well, could be.

[00:03:53] Speaker 02:
I'm not saying, that's why I'm saying, maybe it's not clear, but it does seem the better reading that the target amount is what it says it is.

[00:04:01] Speaker 02:
The target amount is the amount

[00:04:07] Speaker 02:
is an amount that can't exceed 75 percent.

[00:04:10] Speaker 05:
It can't exceed, that's correct, but there's two other things that I would like to mention in that regard.

[00:04:16] Speaker 05:
First of all, CMS had in effect during these years, I mean they say that we should give deference to their interpretation, they had in effect a regulatory definition of what the target amount was.

[00:04:29] Speaker 02:
Of course we're going to get to that, but on the language itself,

[00:04:33] Speaker 02:
We didn't look at whether we're giving them deference or not.

[00:04:38] Speaker 02:
In the language itself, it seems that I'm not clear why the government doesn't have the better reading of the statute.

[00:04:46] Speaker 05:
Well, what I'll call the original target amount, perhaps, based upon the base year, continued to be computed during this time period.

[00:04:58] Speaker 05:
even for hospitals that exceeded the original cost, exceeded the 75th percentile.

[00:05:04] Speaker 05:
And in fact, sort of the natural reading of it, in my opinion, is that after 2002, you would in fact revert to that.

[00:05:16] Speaker 05:
And that's what CMS itself said on many occasions, and I've set them out in the brief, but we have about five long block quotes in there.

[00:05:23] Speaker 02:
All right, so then you really want to rely on what CMS has said, even as regulations or otherwise.

[00:05:29] Speaker 02:
So why don't we go on to that?

[00:05:30] Speaker 02:
I interrupted you.

[00:05:31] Speaker 05:
Yeah, that's okay.

[00:05:33] Speaker 05:
So go ahead, Bush.

[00:05:34] Speaker 05:
Sure.

[00:05:36] Speaker 05:
What I'm relying on here is several things in the regulations that were in effect at the time.

[00:05:43] Speaker 05:
And first of all is the

[00:05:46] Speaker 05:
The definition of target amount, which I've mentioned, which is the allowable net Medicare inpatient operating costs in the hospital base here, updated.

[00:05:56] Speaker 01:
That's A3.

[00:05:56] Speaker 05:
Yes, A3.

[00:05:57] Speaker 05:
And those are sort of terms of art.

[00:06:00] Speaker 05:
Anytime you encounter these words like net allowable costs or reasonable costs, in Medicare that means based upon the hospital's own costs as determined from its cost report.

[00:06:11] Speaker 05:
It's totally inconsistent with a nationwide 75th

[00:06:14] Speaker 05:
percentile.

[00:06:16] Speaker 02:
That section only says it's derived from.

[00:06:19] Speaker 02:
It doesn't say it is.

[00:06:20] Speaker 02:
It says it's derived from, right?

[00:06:23] Speaker 02:
Yes.

[00:06:23] Speaker 02:
And then subsection B then says each hospital's target amount is based on its allowable meditation and then continues on, right?

[00:06:35] Speaker 02:
Uh-huh.

[00:06:36] Speaker 02:
The fact that it's derived from doesn't necessarily mean it is.

[00:06:39] Speaker 02:
It doesn't say the target amount is this amount.

[00:06:42] Speaker 02:
It's derived from and of course

[00:06:45] Speaker 02:
that the one that's capped is also derived from the base year plus the increases plus the then capped, right?

[00:06:52] Speaker 02:
So is that inconsistent?

[00:06:54] Speaker 02:
Is there a view that that's what this means?

[00:06:59] Speaker 05:
I think there's two things there.

[00:07:02] Speaker 05:
The derived from, basically a target amount is a per discharge per patient amount.

[00:07:09] Speaker 05:
So you have to take all the costs in the base year

[00:07:11] Speaker 05:
and then determine what share is Medicare, and then divide that among the number of Medicare discharges.

[00:07:18] Speaker 05:
So that's what the derived from means, I think.

[00:07:22] Speaker 05:
And as far as the 75th percentile, no, it cannot possibly represent anything regarding the hospital's own cost.

[00:07:32] Speaker 05:
They're taking the 75th percentile average across the United States, and it's not related to

[00:07:39] Speaker 05:
the particular hospital's cost.

[00:07:41] Speaker 02:
Well, they're then limiting the hospital's cost by that, right?

[00:07:45] Speaker 02:
So if a hospital's costs were below that amount, it just would have no effect, right?

[00:07:52] Speaker 02:
The cap would have no effect, right?

[00:07:53] Speaker 02:
Correct, yes.

[00:07:54] Speaker 02:
So it is, you get all the way up to the cap based on your costs, but you don't get the cap unless you have those costs.

[00:08:06] Speaker 02:
I'm not about that, right?

[00:08:08] Speaker 05:
Unless you meet or exceed those costs, yeah.

[00:08:10] Speaker 05:
That's right.

[00:08:11] Speaker 02:
So in that sense, it's derived from the cost.

[00:08:15] Speaker 02:
It's not just derived from the cap, obviously.

[00:08:18] Speaker 02:
If it was derived from the cap, everybody would get the cap, which they don't.

[00:08:22] Speaker 05:
Right.

[00:08:22] Speaker 05:
I mean, that much is true.

[00:08:24] Speaker 05:
But what I'm saying is that limiting Fayetteville City Hospital or anybody else who happens to exceed that cap to a national number means they're being reimbursed in a way that has no reference to their

[00:08:36] Speaker 05:
own inpatient operating costs.

[00:08:38] Speaker 05:
I mean, we were cut down here from, I can't remember the exact figure, but $16,000 or $17,000 per discharge to about $10,000 or $11,000 for both of these cost years.

[00:08:46] Speaker 05:
And it's because the hospital's costs were higher than a lot of other places.

[00:08:52] Speaker 05:
And the reason why they're higher is it's a Jerry's psych facility, so-called.

[00:08:56] Speaker 05:
They have older patients there who tend to be sicker.

[00:08:59] Speaker 05:
You have to treat medical problems as well as

[00:09:02] Speaker 05:
psychiatric problems.

[00:09:04] Speaker 02:
And so... Neither here nor there, but if the perspective payment system had applied, would they have been cut down also?

[00:09:12] Speaker 05:
I have no idea what effect that would have.

[00:09:14] Speaker 01:
Haven't you had some experience with that though?

[00:09:16] Speaker 05:
PPS?

[00:09:17] Speaker 05:
Yeah.

[00:09:17] Speaker 05:
Well, there's all different kinds of PPS systems.

[00:09:20] Speaker 05:
There's the original high PPS, inpatient PPS, which went into effect.

[00:09:25] Speaker 04:
But doesn't the hospital that you represent, haven't they had some experience with PPS since it was

[00:09:32] Speaker 05:
If they have, I don't know what their reimbursement rate is.

[00:09:35] Speaker 05:
I'm sorry.

[00:09:36] Speaker 04:
Let me ask you.

[00:09:37] Speaker 05:
It would not inherently be lower or higher.

[00:09:40] Speaker 05:
Not inherently either way.

[00:09:41] Speaker 04:
Let me ask you a very, if we can pull back at least for a little bit here.

[00:09:47] Speaker 04:
Sure.

[00:09:48] Speaker 04:
It seems to me the way the deference works for our court is that at somewhere along the line, either the statute or the regulations, you're going to have to show some clarity.

[00:10:02] Speaker 04:
right, because if you can't point to clarity in resolving this problem to us, we're going to be deferring to the experts coming up with the reasonable interpretation.

[00:10:11] Speaker 04:
So you have to find some clarity somewhere.

[00:10:15] Speaker 04:
And as I take it, your argument is, and congressional intent has always touched on here, your argument is that it's clear that Congress didn't intend that the caps

[00:10:30] Speaker 04:
extend past 2002, right?

[00:10:32] Speaker 04:
I mean, that's part of your argument.

[00:10:33] Speaker 04:
It's clear that Congress did not intend those caps to... It's a little different from that.

[00:10:41] Speaker 05:
Okay.

[00:10:42] Speaker 05:
Okay.

[00:10:42] Speaker 05:
And if I understand this Court's precedence correctly and Chevron correctly and that sort of thing... See, we said that.

[00:10:50] Speaker 05:
I had to bring it up.

[00:10:52] Speaker 02:
Students are now satisfied.

[00:10:53] Speaker 05:
You are playing Chevron bingo out there.

[00:10:59] Speaker 05:
Chevron deference applies in the sort of primary sense when you have a statute where Congress has delegated something to an agency and they give a formal interpretation of it by a regulation or some other official means.

[00:11:15] Speaker 05:
And our contention here is that that has been done in this case.

[00:11:19] Speaker 05:
CMS promulgated regulations to implement these caps.

[00:11:23] Speaker 05:
And basically we're just asking that they be followed.

[00:11:26] Speaker 04:
Well, but here's another view.

[00:11:27] Speaker 04:
So tell me what's wrong with this view.

[00:11:30] Speaker 04:
It's clear that Congress did not intend the caps to extend beyond 2002.

[00:11:39] Speaker 04:
But isn't it also, is there any evidence that Congress intended to go back to the base year TEFRA caps as well?

[00:11:47] Speaker 04:
I mean, isn't what's going on here is that Congress did not anticipate this.

[00:11:53] Speaker 04:
Congress thought the PPF was going to be in place, and it's not.

[00:11:56] Speaker 04:
And so what do we do in that sort of regulatory void?

[00:12:01] Speaker 04:
And in that land, right, isn't that the land of great deference to CMS here?

[00:12:11] Speaker 05:
And in that case, I would ask you to follow what CMS said the results were gonna be.

[00:12:16] Speaker 05:
And if you look at their publications in the Federal Register, they were quite clear.

[00:12:19] Speaker 04:
Okay, so then we get back to my point.

[00:12:21] Speaker 04:
You have to find clarity somewhere, and you're saying,

[00:12:24] Speaker 04:
We should find clarity in what CMS said.

[00:12:28] Speaker 04:
Yes.

[00:12:29] Speaker 04:
Obviously, if we disagree with you on that, if we find some ambiguity in the regulations here, then you lose.

[00:12:36] Speaker 04:
But that's the point.

[00:12:39] Speaker 04:
So you're resting your arm.

[00:12:40] Speaker 04:
You're going to take it on the clarity of the regulations.

[00:12:44] Speaker 05:
Clarity of the regulatory scheme and CMS's interpretation of it.

[00:12:50] Speaker 05:
Contemporaneous interpretation of it, not retroactive.

[00:12:53] Speaker 05:
The unusual thing we've got here is that usually when you have an APA case, you've got a decision, you've got a rule, you've got an agency issuance of some type, you know, and the question is look at that and see if it comports with APA requirements.

[00:13:08] Speaker 05:
Here what we've got is an amendment that came up in 2005 that purported to change the effectiveness of the statute.

[00:13:19] Speaker 02:
I mean, this is what they're... That's not what they purported to do.

[00:13:21] Speaker 05:
They... Of the regulation, I'm sorry.

[00:13:23] Speaker 02:
Well, I guess there are two different possibilities.

[00:13:26] Speaker 02:
One is the regulation, but they say all they were doing is clarifying the decision that they've always intended, that they've always taken.

[00:13:34] Speaker 02:
It's described as clarification, right?

[00:13:37] Speaker 05:
They described it, but let me just point you back.

[00:13:39] Speaker 02:
They said it was intended to change.

[00:13:41] Speaker 02:
They say it was intended to clarify.

[00:13:43] Speaker 05:
Well, in point of fact, in the reimbursement context, it caused a great change.

[00:13:47] Speaker 05:
It caused my client to lose

[00:13:53] Speaker 05:
It did not purport to.

[00:13:57] Speaker 05:
But in my view, it did.

[00:13:59] Speaker 05:
In the real world, it did.

[00:14:01] Speaker 05:
And what they said, over a period of years, every year, you know, they publish an IPPS regulation.

[00:14:08] Speaker 05:
And over a period of years, they said that, on or after October 1, 2002, payments to these classes exist.

[00:14:17] Speaker 05:
Oh, I'm sorry.

[00:14:18] Speaker 05:
This was the proposed reg in the spring of 2002.

[00:14:20] Speaker 05:
And then there's another one.

[00:14:24] Speaker 05:
that follows it, the final IPPS reg for 2003.

[00:14:28] Speaker 05:
In other words, the very cost year we're dealing with here, the very first year, and they say that these excluded hospitals or hospital units are no longer subject to caps on the target amount.

[00:14:41] Speaker 05:
But then they go on to say, these excluded hospitals and hospital units continue to be paid on a reasonable cost basis.

[00:14:49] Speaker 03:
You're looking at the August 1, 2002

[00:14:53] Speaker 05:
Sorry, this one is May.

[00:14:57] Speaker 05:
What about the August?

[00:14:58] Speaker 05:
August, just to complete the May, it says paid on a reasonable cost basis and payments are based on their Medicare inpatient operating costs not to exceed the ceiling.

[00:15:09] Speaker 05:
That's a hospital-specific cost.

[00:15:11] Speaker 05:
That's how CMS interprets its own regulation.

[00:15:14] Speaker 02:
And then for the August one... Can I just ask about this?

[00:15:22] Speaker 02:
There's no cap applied in 2003.

[00:15:25] Speaker 02:
There's this echo effect that you talk about of the cap, but there is no actual cap applied in 2003, right?

[00:15:35] Speaker 05:
I don't call it an echo effect.

[00:15:36] Speaker 05:
I think one of the other courts do.

[00:15:38] Speaker 05:
But my point is that it has the exact same effect as a cap.

[00:15:41] Speaker 02:
Well, it can still go above.

[00:15:44] Speaker 02:
whatever the cap would be.

[00:15:45] Speaker 02:
There's no cap in 2003.

[00:15:47] Speaker 02:
It just uses the preceding.

[00:15:49] Speaker 05:
Which was capped.

[00:15:50] Speaker 05:
Yeah, and so then it's just updated by a couple of percentage points.

[00:15:53] Speaker 02:
Well, it depends on, like, take the year and then, I don't know, I assume it has something to do with the cost of moving on or something like that.

[00:16:00] Speaker 02:
It does.

[00:16:01] Speaker 02:
So when they say that beginning in 2003, payments will no longer be subject to a 75th percentile cap, again, it seems at least one reading

[00:16:13] Speaker 02:
It's just like a sprint forward reading, is that in 2003 there's no cap.

[00:16:17] Speaker 02:
That doesn't say anything about how you calculate 2003 based on whether there was a cap for the previous year.

[00:16:26] Speaker 05:
It does, though.

[00:16:28] Speaker 05:
In May it says that they will be paid on the basis of their reasonable costs, and payments are based on their Medicare inpatient operating costs.

[00:16:36] Speaker 07:
That has to matter.

[00:16:42] Speaker 06:
I don't think so, Your Honor, because under PPS, for instance, it's not really based on cost.

[00:16:57] Speaker 05:
It's based on a prospectively determined rate.

[00:17:05] Speaker 06:
under some of the possibilities.

[00:17:06] Speaker 05:
Yeah, but the cap is not.

[00:17:08] Speaker 06:
But it's still based on the cost.

[00:17:10] Speaker 05:
Yeah.

[00:17:11] Speaker 05:
But it says it'll be paid based upon their aggregate Medicare inpatient operating costs, which may not exceed.

[00:17:19] Speaker 02:
It also says that it would still be computed using the hospitals for the unit's target amount from the previous cost report.

[00:17:25] Speaker 02:
Is that right?

[00:17:28] Speaker 05:
For 2003?

[00:17:29] Speaker 05:
For 2003, what they're doing,

[00:17:35] Speaker 05:
And the regulation that we rely on, which is CMS's regulation, 413.40C4, and this is the, I'll call it the triple I, that's the governing regulation at this point.

[00:17:51] Speaker 02:
So this is important, I think.

[00:17:54] Speaker 02:
You're saying that it should be based on triple I. Yes.

[00:17:57] Speaker 02:
But the provision that you're, the rule that you're actually talking, the May statement that you're talking about, under 81,

[00:18:06] Speaker 02:
set in the last sentence of a one-sixth uh... that whole paragraph is all about in accordance with the existing double-i it doesn't say triple-i it says in accordance with the existing double-i yeah but double-i is subject to triple-i well the government's position is triple-i doesn't apply so you would have a strong case and they say that again on the next page if it said you were to be using triple-i which is what you would

[00:18:36] Speaker 02:
The May statement doesn't refer to IIII.

[00:18:42] Speaker 05:
It does refer to IIII.

[00:18:43] Speaker 05:
That's correct.

[00:18:45] Speaker 05:
But it's subject to IIII.

[00:18:46] Speaker 05:
And if you look at the regulation, look at the structure of it, basically IIII, which was added at the time that the caps went into effect, is made the only small subsection there that applies to psychiatric hospitals, long-term care hospitals, and rehab hospitals.

[00:19:06] Speaker 05:
It says, if you want to know the rule for those kinds of hospitals, you look at IIII.

[00:19:10] Speaker 05:
That's all you look at.

[00:19:12] Speaker 05:
And if they wanted to go back to II, then you get into a situation where it says it's based upon updating the previous year, but then we come to the circular question as to target amount.

[00:19:28] Speaker 05:
you know, what was the previous year's target amount?

[00:19:30] Speaker 05:
Was it capped or not?

[00:19:32] Speaker 01:
That's to give this question, which is you have to give us clarity, not circularity.

[00:19:37] Speaker 05:
Right, right.

[00:19:37] Speaker 05:
Well, I'm saying the clarity is here in the statements that CMS made, which basically said, we're going back to the old system.

[00:19:45] Speaker 05:
You're going to get your inpatient operating costs now.

[00:19:47] Speaker 05:
After 2002, caps are expired.

[00:19:49] Speaker 05:
They're all gone.

[00:19:50] Speaker 05:
And there's not the slightest hint in there anywhere that it's going to be a capped amount.

[00:19:54] Speaker 05:
They could have said that if that was going to be the case.

[00:19:57] Speaker 05:
And they did.

[00:19:58] Speaker 04:
Isn't that a bit surprising, given the trajectory of congressional action on this one?

[00:20:05] Speaker 04:
I mean, everything was leading towards capping or having things go down.

[00:20:11] Speaker 04:
And to come along and say, and you're saying that you believe in some CMS, I understand it, but my question is, isn't that surprising that CMS took that view at that time, given what seems to be the direction Congress was

[00:20:27] Speaker 04:
pushing this.

[00:20:29] Speaker 04:
I see no evidence that Congress wanted to go back to the good old days that you're trying to claim for those two years now.

[00:20:40] Speaker 04:
I think the one that you've raised with the statements by CMS, and we'll hear from the government what they have to say about it.

[00:20:51] Speaker 04:
Okay.

[00:20:51] Speaker 04:
All right.

[00:20:51] Speaker 05:
Thank you very much.

[00:20:57] Speaker 04:
That was called a set-up.

[00:21:05] Speaker 00:
Good morning.

[00:21:06] Speaker 00:
May it please the Court, Karen Schoen on behalf of the Secretary.

[00:21:09] Speaker 00:
In calculating the hospital's target amount, CMS did exactly what the statute unambiguously required it to do.

[00:21:15] Speaker 00:
Section B3A, Little Roman 2 of the statute, which sets forth the meaning of target amount, provided that a hospital's target amount for a given cost period was equal to its target amount for the preceding 12-month cost reporting period.

[00:21:29] Speaker 00:
updated by the applicable percentage increase.

[00:21:32] Speaker 00:
So to calculate the hospital's 2003 target amount, the agency had to use the 2002 target amount, notwithstanding that it had been limited by the cap.

[00:21:41] Speaker 00:
Even if there were some ambiguity in the statute, the agency's decision to use the 2002 target amount, which had been limited by the cap, was reasonable.

[00:21:49] Speaker 00:
And as Judge Griffith just pointed out, I think that the legislation over time evidences a clear congressional intent to limit the growth of Medicare costs and to move toward a more uniform objective reimbursement standards.

[00:22:03] Speaker 00:
And to revert to a base year calculation as if the caps had never applied simply flies in the face of that congressional intent.

[00:22:11] Speaker 00:
And I think it's helpful to actually look at the numbers in this case.

[00:22:14] Speaker 00:
The hospital's 2002 target amount, which was limited by the cap, was $10,469.

[00:22:19] Speaker 00:
The applicable percentage increase for 2003 was 3.5%.

[00:22:25] Speaker 00:
And so the 2003 target amount that the agency calculated

[00:22:29] Speaker 00:
was $10,835.

[00:22:31] Speaker 00:
Under the calculation that plaintiff advocates, its 2003 target amount would be $18,298.

[00:22:37] Speaker 00:
That's almost a 75% increase over the 2002 target amount.

[00:22:44] Speaker 00:
And given the clear congressional intent to limit the growth of Medicare costs, I think that simply cannot be what Congress intended.

[00:22:52] Speaker 02:
Does the respective payment system come into play now?

[00:22:55] Speaker 00:
It has.

[00:22:56] Speaker 00:
In these hospitals?

[00:22:56] Speaker 00:
Yes.

[00:22:57] Speaker 02:
And do we know what it would have been under that?

[00:22:59] Speaker 00:
I don't know the figures.

[00:23:01] Speaker 02:
For most hospitals it was... I think its purpose of the perspective payment system was also to limit growth and to not let it rely only on individual hospitals' costs.

[00:23:14] Speaker 00:
That's right, to reduce a lot of the variability and to have more uniform payment standards.

[00:23:18] Speaker 00:
That's correct.

[00:23:26] Speaker 00:
You spent a lot of time looking at the preamble in August 1st, 2002.

[00:23:33] Speaker 00:
And Hospitals Council pointed to the use, for example, of... You were actually talking about the May 1, although I asked about the August 1.

[00:23:44] Speaker 00:
OK.

[00:23:45] Speaker 00:
Well, if it's OK, I'll point to the August 1st language.

[00:23:48] Speaker 00:
I have that in front of me.

[00:23:49] Speaker 00:
This one always keeps open.

[00:23:52] Speaker 00:
Yeah.

[00:23:53] Speaker 00:
It's at 67 Fedreg 5103.

[00:23:56] Speaker 00:
And he pointed to the reasonable cost language there.

[00:23:59] Speaker 00:
And one thing I'd like to just point out, the context of this, because this discussion was in the context of Congress's directive to move to the prospective payment system.

[00:24:09] Speaker 00:
And the very next paragraph, beyond what was quoted in the briefs, then talks about beginning after October 1st, 2002, rehabilitation hospitals and long-term care hospitals would be moving to a prospective payment system.

[00:24:22] Speaker 00:
The reference that the agency used for reasonable cost was meant to distinguish the two types of systems, the old reasonable cost system that was governed by Part 4.13 of the regulations, of which the regulation that's at issue here was a part, versus the new prospective payment system where the implementing regulations were in Part 4.12.

[00:24:42] Speaker 00:
And so I just want to make sure that it's clear that it wasn't meant to refer to a hospital's own reasonable costs and therefore it couldn't potentially

[00:24:51] Speaker 00:
have been limited by the CAP.

[00:24:52] Speaker 00:
I think it was really just meant to distinguish the two types of systems.

[00:24:57] Speaker 00:
I'd also like to note, and I apologize this provision is not in our addendum, but there's also another provision that was enacted at the same time as the CAPS in section B7 of the statute, which applied to so-called new providers.

[00:25:13] Speaker 00:
And those were hospitals that first received reimbursement after October 1st, 1997.

[00:25:19] Speaker 00:
And what that did is it limited, it effectively imposed a cap of 110% of the median target amounts for a given year.

[00:25:27] Speaker 00:
And there was no expiration.

[00:25:29] Speaker 00:
So I think it would be somewhat anomalous to go back to a base year calculation as if there had never been any caps for old providers, but to effectively cap new providers to 110.

[00:25:42] Speaker 00:
We did not, Your Honor, no.

[00:25:50] Speaker 00:
I don't have a good answer for that.

[00:25:54] Speaker 07:
I agree.

[00:26:01] Speaker 00:
I wish we had mentioned it in our brief.

[00:26:07] Speaker 00:
You know, I'm happy to answer any other questions the court may have.

[00:26:13] Speaker 00:
If there are no further questions, we'd ask that you affirm the judgment of the district court.

[00:26:17] Speaker 00:
Thank you.

[00:26:27] Speaker 05:
Thank you, Your Honor.

[00:26:29] Speaker 05:
One thing that really hasn't been mentioned too much as part of all this is the fact that this whole change, and it was a change because it changed our reimbursement and a lot of other providers as well, was all implemented completely retroactively.

[00:26:42] Speaker 05:
It was done in August of 2005.

[00:26:44] Speaker 05:
That's when the final Federal Register notice was passed.

[00:26:48] Speaker 02:
It's only retroactive if you think that it was a change.

[00:26:53] Speaker 02:
I appreciate that your

[00:26:55] Speaker 02:
Yours changed because the intermediary originally did one thing and then did another.

[00:27:00] Speaker 02:
But the question is whether HHS has changed its view.

[00:27:05] Speaker 05:
Right?

[00:27:05] Speaker 05:
It changed its view, and I think it has changed its view, as I've argued before.

[00:27:08] Speaker 05:
But my point is that just from a timing perspective here, this is after the health care services were provided by the hospital, after the cost years in question, after the... If we thought that there wasn't a change, that this is consistent with

[00:27:23] Speaker 02:
the view that they expressed in 2002, then there's no retroactive request.

[00:27:31] Speaker 05:
That's a hard one to answer because their expressions were so clear.

[00:27:36] Speaker 02:
I'm doing it as hypothetical.

[00:27:38] Speaker 02:
Imagine that we thought that in 2002 they were clear about this and what they said in 2005 was only as they claim a clarification.

[00:27:50] Speaker 02:
Then there's no retroactive

[00:27:52] Speaker 05:
I guess if there's no change, there's no retroactive change.

[00:27:54] Speaker 02:
Thank you very much.