[00:00:01] Speaker 00:
Case number 16-5267, Mercy Hospital, Inc., Appellant vs. Eric B. Hargan, Acting Secretary, United States Department of Health and Human Services.

[00:00:11] Speaker 00:
Ms.

[00:00:11] Speaker 00:
Webster for the Appellant, Ms.

[00:00:13] Speaker 00:
Wright for the Appellate.

[00:00:15] Speaker 02:
Let me explain that Judge Tatel is joining us today, but is doing it by the wonders of modern technology.

[00:00:22] Speaker 02:
So, Judge Tatel, can you hear us?

[00:00:25] Speaker 01:
Yes, good morning.

[00:00:26] Speaker 02:
Okay, we can hear you.

[00:00:29] Speaker 02:
Asking questions is perfect.

[00:00:30] Speaker 02:
Good morning.

[00:00:31] Speaker 02:
How are you?

[00:00:31] Speaker 04:
Good morning.

[00:00:32] Speaker 04:
How are you?

[00:00:33] Speaker 02:
Fine.

[00:00:34] Speaker 02:
Proceed, please.

[00:00:35] Speaker 04:
I'm Stephanie Webster for the Appellant Mercy Hospital.

[00:00:38] Speaker 04:
Mercy Hospital challenges the Medicare contractor's retrospective calculation of the low-income percentage, or LIP, add-on to the base Medicare payment rate established by the Secretary for Rehabilitation Facilities.

[00:00:52] Speaker 04:
The court legal question before the court is whether the statute unambiguously precludes review of the lip pigment, one of several discretionary adjustments to the base payment rates for other factors.

[00:01:04] Speaker 04:
The answer is no.

[00:01:06] Speaker 04:
For over a decade, the secretary interpreted the statute the way the hospital does, to mean that only the unadjusted base prospective payment rates established under... What role should the secretary's prior and repudiated

[00:01:21] Speaker 02:
interpretation play in our deliberations?

[00:01:25] Speaker 04:
The Secretary's prior interpretation underscores that the statute is at least ambiguous.

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The Secretary now argues that the statute is unambiguous, but he had previously interpreted it to mean what the hospital means.

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uh... in the secretary's prior interpretation the statutory text as well as the context of the statutory scheme so that the statute is at least reasonably susceptible to divergent interpretation.

[00:01:56] Speaker 03:
Let me ask you again about the rules of interpretation here because I get the normal rule of considering ambiguity in favor of judicial

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review.

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But we have a provision here that applies both to administrative agency proceedings and to judicial proceedings.

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And in the City of Arlington versus FCC, the Supreme Court held that when it comes to agencies' determination of their own administrative jurisdiction, they get chevron deference.

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And so what I'm trying to reconcile is, do they get deference as it concerns their

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Administrative aspect of borrowing review versus the judicial review.

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How do we reconcile those things?

[00:02:42] Speaker 04:
Well, in our view, city of Arlington is not relevant here because it involved agency interpretation of its substantive regulatory authority.

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or jurisdiction as to the subject matter of what it had authority over, not jurisdiction in the sense of administrative appeals or suing judicial review.

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And in any event... Why would that matter?

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I get why they wouldn't get deference on determining the scope of our jurisdiction.

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But why would that matter?

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Why wouldn't the City of Arlington apply to them deciding how the administrative structure is supposed to work internally?

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Well, the two were tied together.

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The statute precludes administrative and judicial review.

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And under circuit precedent, the agency can't bootstrap deference to its interpretation with respect to judicial review through its interpretation of administrative review.

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Under Murphy exploration.

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Of course, if they got deference, then they'd be in the box of having a prior inconsistent position.

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Sure.

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Would they not?

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Yes, they would.

[00:03:46] Speaker 04:
Indeed.

[00:03:50] Speaker 04:
So, the text, the context, as well as the prior interpretation show that there is at least ambiguity in the statute, and the government has not met its heavy burden?

[00:04:07] Speaker 01:
Of course.

[00:04:12] Speaker 01:
I'm sorry.

[00:04:13] Speaker 00:
Webster.

[00:04:14] Speaker 01:
Webster, I'm sorry.

[00:04:16] Speaker 01:
I mean, you're assuming it's ambiguous because the Secretary has interpreted it two different ways, right?

[00:04:24] Speaker 01:
But the Secretary's earlier interpretation could have been wrong.

[00:04:29] Speaker 01:
That doesn't mean it's ambiguous from our perspective.

[00:04:32] Speaker 01:
It's we who have to decide whether it's ambiguous or not.

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Sure enough, it's possible that the Secretary's interpretation was wrong.

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We believe it was not wrong.

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It is the better reading of the statute.

[00:04:45] Speaker 01:
I know that's your view, but doctrinally, the way we look at this, I think, is that whether this is ambiguous or not is a judgment this court makes, correct?

[00:04:59] Speaker 01:
Yes, and our view... So then why don't you go ahead and explain

[00:05:04] Speaker 01:
Why do you think this is unambiguous in your favor?

[00:05:15] Speaker 04:
We contend that the best reading of the statute is our reading, but at the very least there is ambiguity.

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Section J3A requires the Secretary to determine prospective payment rates, and also provides that such rates are then adjusted, and that is indeed how the Secretary interpreted previously.

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In addition, the context and structure of such.

[00:05:44] Speaker 01:
Let me just interrupt you.

[00:05:45] Speaker 01:
You said the statute provides that the rate shall be adjusted, but that's not what it says.

[00:05:52] Speaker 01:
It's not the rate that's being adjusted.

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It's the average payment.

[00:05:58] Speaker 01:
At its core, here's what the statute says.

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The secretary shall determine a prospective payment rate.

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And that rate shall be based on the average payment, which adjusted by the five things.

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So it's the average payment that's adjusted.

[00:06:21] Speaker 04:
Yeah, our view is that the adjusted, it's such rate mentioned in the second sentence of paragraph J3A that is adjusted.

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And that's confirmed by section J3A2, which also regarding the adjustment frat wire payments.

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Excuse me.

[00:06:43] Speaker 01:
Did you diagram sentences in junior high school?

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Because if you diagram this sentence,

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The phrase adjusted by modifies average payment.

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You would have a diagonal line going down from average payment.

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That's what it modifies.

[00:07:09] Speaker 04:
I can't say as though I diagrammed sentences in junior high school, but I did try to diagram this one, and I think that it is at least ambiguous, and the context of subsection J supports that as well.

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Paragraph J3A2 also talks about reducing such rates, and in addition, the term prospective payment rates used elsewhere

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in subsection J must mean the unadjusted prospective payment rates in order for it to make sense.

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For example, paragraph J3A4 makes clear that such rates that are adjusted under the paragraph J3A2 that I just referenced must be the prospective payment rates before adjustment.

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In addition, paragraph J6 related to the wage index also confirms that the wage adjustment is made to the base prospective rates computed under paragraph J3, which is prior to the adjustment.

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In addition, the area wage adjustment itself is listed as one of the precluded items in paragraph J-8.

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And if the Secretary's view were correct that the area wage adjustment were part of the prospective payment rates under J-3, then there would have been no need to list it separately in J-8.

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There's also an issue with respect to the

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weighting factors.

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The weighting factors are mentioned in paragraph J5.

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which in paragraph J5 requires the secretary to publish the methodology and data used in computing the prospective payment rates and also separately requires the publication of the classification and weighting factors.

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And if classification and weighting factors were part of the prospective payment rates, there would be no reason to list those separately.

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And weighting factors as well are listed among the precluded items in J8.

[00:09:24] Speaker 03:
So the statutory bar judicial review applies to the establishment of the prospective payment rate.

[00:09:32] Speaker 03:
So when and where and how is the prospective payment rate established under your view?

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The prospective payment rate is established in the rulemaking each year in advance of the federal fiscal year.

[00:09:45] Speaker 03:
So you couldn't, so that's the rulemaking they publish in the Federal Register?

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Correct.

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And so your position is if they announce in the Federal Register, here's how we're going to do it, and they announce and there's some completely unlawful way of calculating it, you cannot challenge, you cannot bring an APA action to that Federal Register action because that would be the establishment of the prospective payment rate.

[00:10:08] Speaker 04:
Assuming that the item that you're challenging is part of the prospective payment rights.

[00:10:12] Speaker 04:
Yes.

[00:10:13] Speaker 04:
In our case, we are actually challenging the Medicare contractor's application of the rules.

[00:10:19] Speaker 03:
I get that.

[00:10:19] Speaker 03:
I'm trying to figure out, is your theory, normally the way you would think it would work is the challenges would be brought at the end of the notice and comment process.

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And if they announce a legal rule that said, we just refuse, for example, to apply weighting factors.

[00:10:35] Speaker 03:
We're just not going to do it.

[00:10:37] Speaker 03:
And no one would be able to challenge that until they actually sent in a bill and decided it was worth fighting over the bill?

[00:10:44] Speaker 04:
Well, in that case, there would be an ability to challenge because the secretary's action would be arguably be ultramiris.

[00:10:54] Speaker 03:
The secretary would not... Put aside that exception and what it means to be ultramiris, but under your reading of the statute and the judicial bar, that is exactly what's proscribed.

[00:11:04] Speaker 04:
the establishment of the weighting factors, right, and the classification system leading up to the weighting factors.

[00:11:09] Speaker 03:
Correct.

[00:11:09] Speaker 03:
But then if when you get your bill and you have your dispute with the contractor, all you're doing is challenging a categorical cross-cutting judgment about how they're going to compute these rates, as opposed to some sort of individualized mistake.

[00:11:28] Speaker 03:
Why isn't that just doing later what the bar says you couldn't do earlier?

[00:11:34] Speaker 03:
It sounds to me like you're saying whatever your challenges are, just hold them in reserve until you've submitted your bill and haven't gotten the money you want.

[00:11:41] Speaker 03:
And then you get to challenge the very thing that they bothered to say there's no judicial review of that legal error in establishing the prospective payment rate.

[00:11:53] Speaker 04:
We're saying that hospitals can challenge the application of the established rules.

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And here, there was a rule

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saying that the LIT payment was to be calculated like the Medicare disproportionate share hospital or DISH payment that applies to acute care hospitals and... Why have they said that in the Federal Register notice?

[00:12:15] Speaker 03:
I know normally the LIT payment is done afterwards because that's when the numbers are there, but if they announce forward-looking, by the way, of course we won't have the numbers to actually give you the calculation until later, but our intention is to apply

[00:12:32] Speaker 03:
when we do the low-income payment, your position is that you couldn't challenge it then as a challenge to the rule announced in the Federal Register notice, because that would be establishment or not?

[00:12:47] Speaker 04:
Well, our position is that the lit payment isn't part of the prospective payment rates and therefore isn't precluded.

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If you assume that it is,

[00:12:56] Speaker 03:
You could... They announced the legal rule for how this number is going to come out then.

[00:13:02] Speaker 03:
You say you could challenge... So your position is you could still challenge that.

[00:13:06] Speaker 03:
You just couldn't challenge something that they said was a miscalculation.

[00:13:12] Speaker 04:
Another aspect in which... We're saying we can challenge whether that rule was properly applied to the hospital in calculating the lip pavement.

[00:13:22] Speaker 03:
You don't dispute that they properly applied the rule.

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You just say the rule is wrong.

[00:13:28] Speaker 03:
No, actually, we like the rule.

[00:13:30] Speaker 04:
The rule says lit follows dish.

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And the secretary says – the secretary, in an effort not to pay as it would pay under dish, is – it has filed this motion to dismiss.

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We actually think the rule is just fine at it as is and want it applied properly in this case.

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And the rule is that LIPP follows DISH, and under DISH, the agency must follow the mandate of Northeast Hospital, and we would like the mandate of Northeast Hospital followed here as well.

[00:14:00] Speaker 03:
If you, imagine a hypothetical where you disagree with the rule.

[00:14:06] Speaker 03:
The rule is lip-worn politician.

[00:14:10] Speaker 03:
And your position is you could challenge that either.

[00:14:12] Speaker 03:
They just announced it in the Federal Register.

[00:14:14] Speaker 03:
Your position is you could challenge that either at the Federal Register stage or at the payment stage?

[00:14:20] Speaker 03:
Both?

[00:14:21] Speaker 03:
Because not everyone is challenging the rates?

[00:14:22] Speaker 04:
Yes, our position, because we believe the lip payment is not part of the prospective payment, we could challenge either, yes.

[00:14:28] Speaker 03:
What would you challenge then?

[00:14:30] Speaker 03:
What would be, what does the judicial review bar stop?

[00:14:34] Speaker 03:
What type of challenge to perspective payment rates at the federal register stage would there be that would be ripe?

[00:14:42] Speaker 04:
What kind of challenges are permitted, Your Honor?

[00:14:44] Speaker 03:
Well, what?

[00:14:45] Speaker 03:
No, what is foreclosed?

[00:14:46] Speaker 04:
Okay, what is foreclosed under the hospital's view?

[00:14:50] Speaker 04:
The that would be right at that stage before anybody has turned in a bill.

[00:14:55] Speaker 04:
the establishment of the weighting factors and the classification system.

[00:15:00] Speaker 03:
I'm just trying to figure out if the judicial bar is doing much practical work under your reading, because if you look at the scheme, wouldn't Congress be saying it's not right for you to bring a challenge back at that stage?

[00:15:11] Speaker 03:
Anyhow, you're supposed to go through this whole payment process.

[00:15:14] Speaker 03:
Congress knew about that.

[00:15:16] Speaker 03:
So that payment process already sort of displaced challenges back at the establishment stage under your view, did it not?

[00:15:26] Speaker 04:
At the establishment stage, there could be a challenge to the rule adopted by the secretary.

[00:15:41] Speaker 04:
Just to make sure I understand your question now, your honor is asking, what is reviewable or what is not reviewable under the hospital's reading?

[00:15:49] Speaker 03:
No, so under your reading, which as I understand it is, the establishment of the rate

[00:15:56] Speaker 03:
perspective payment rate occurs back when they do this federal register notes.

[00:16:01] Speaker 04:
Yes.

[00:16:02] Speaker 03:
And so that must be what Congress cut off review of.

[00:16:06] Speaker 03:
Is that right?

[00:16:06] Speaker 04:
Yes, the establishment of the of the listed items in J eight.

[00:16:10] Speaker 03:
Correct.

[00:16:10] Speaker 03:
And so what I'm trying to figure out

[00:16:12] Speaker 03:
is what work would the judicial review bar do under that theory?

[00:16:18] Speaker 03:
Because my concern is that any hospital that would want to bring a challenge to those legal rules back then would already be foreclosed by principles of brightness and the fact that there's an alternative scheme to take your claims to once you actually have submitted a bill and not gotten paid.

[00:16:35] Speaker 03:
I'm just trying to make sure that your position lets the judicial review bar still do some work.

[00:16:40] Speaker 04:
It still does some work, because under our view, there are still, aside from the lift payment, there are still other adjustments that have budget neutrality and other interactive components that are... But those adjustments aren't establishment of the rate, are they?

[00:16:58] Speaker 03:
I thought that was your whole position, was that the adjustments are to the rate, they are not the established rate.

[00:17:03] Speaker 04:
Well, there's the rate, and then there are adjustments such as the outlier adjustment, for example,

[00:17:09] Speaker 03:
This is an adjustment too?

[00:17:11] Speaker 04:
Yes.

[00:17:12] Speaker 03:
If your position is the adjustments are separate from establishment of the rate, then saying that someone could challenge adjustments doesn't give an example of what Congress was cutting off when it said you can't challenge establishment of the rate.

[00:17:26] Speaker 04:
Well, it's cutting off challenges to pieces of the entire payment rate that are set prospectively and have a budget neutrality slash interactive effect with other pieces of the rate.

[00:17:45] Speaker 04:
So it is doing some work by precluding establishment of all of the items listed in J-8.

[00:17:51] Speaker 04:
For example,

[00:17:53] Speaker 04:
the conclusion of review in J-8 of the case mix weighting factors, which is separately listed under J-8, those are set in advance and they're all relative to each other, and therefore it would make sense for Congress to have chosen to separately list that aside from the prospective rates under paragraph three.

[00:18:28] Speaker 04:
There is also evidence in J8 itself that the other factors adjustments under paragraph J8

[00:18:38] Speaker 04:
A35 should not be precluded.

[00:18:41] Speaker 04:
J8 does not preclude review of the establishment of the entire methodology under subsection J. It also doesn't preclude review of payments of the subsection, and those terms, methodology and payments under subsection, are otherwise used in subsection J, and Congress chose not to use them

[00:19:03] Speaker 04:
here.

[00:19:04] Speaker 04:
There are broader blanket bans on review elsewhere in Medicare.

[00:19:08] Speaker 02:
Let me let me check with my colleagues.

[00:19:10] Speaker 02:
Judge table.

[00:19:10] Speaker 02:
Do you have any more questions for?

[00:19:11] Speaker 02:
No, no, thank you.

[00:19:13] Speaker 02:
We'll give you two minutes back on rebuttal.

[00:19:15] Speaker 04:
So okay, you want me to continue?

[00:19:21] Speaker 02:
Your time is over.

[00:19:22] Speaker 02:
You're okay.

[00:19:22] Speaker 02:
Thank you.

[00:19:23] Speaker 02:
Okay, thank you.

[00:19:33] Speaker 02:
Morning.

[00:19:34] Speaker 05:
Good morning.

[00:19:35] Speaker 05:
Abby Wright on behalf of the acting secretary.

[00:19:37] Speaker 05:
I'd like to begin with paragraph three.

[00:19:40] Speaker 05:
Paragraph three directs the secretary to determine a perspective payment.

[00:19:44] Speaker 03:
Can I ask you?

[00:19:44] Speaker 03:
Yes.

[00:19:44] Speaker 03:
I'm very sorry.

[00:19:45] Speaker 03:
Before you get into anything more meaty, I just want to make clear on one thing.

[00:19:50] Speaker 03:
Sure.

[00:19:52] Speaker 03:
CMS was statutorily obligated to issue its decision within 60 days.

[00:19:58] Speaker 03:
And you listed as having been decided June 11

[00:20:05] Speaker 03:
which would not be within that 60-day period.

[00:20:07] Speaker 03:
And before I get into any analysis of whether that's jurisdictional or not, I have to say the handwriting at the end is a bit confusing.

[00:20:16] Speaker 03:
We know it was June 1 or June 11.

[00:20:18] Speaker 03:
I don't, Your Honor, and I haven't... You don't have to take time right now, then.

[00:20:23] Speaker 03:
It might be good if that could just get clarified after argument.

[00:20:25] Speaker 03:
We'd be happy to send in the 28.

[00:20:26] Speaker 03:
We haven't even think about whether... Yes, yes.

[00:20:29] Speaker 05:
And to be honest, we haven't... It's kind of scurrilous.

[00:20:31] Speaker 03:
It looks like it might be June 1.

[00:20:33] Speaker 03:
There's a lot of lines there.

[00:20:34] Speaker 03:
I just want to clarify that one thing.

[00:20:36] Speaker 05:
We'll send in the 28-J letter on the date.

[00:20:38] Speaker 03:
Sorry to distract you.

[00:20:39] Speaker 05:
Oh, that's... No, I'm sorry.

[00:20:41] Speaker 05:
I don't know the answer.

[00:20:42] Speaker 05:
So to turn to paragraph three, the secretary is directed to determine a prospective payment rate.

[00:20:50] Speaker 05:
Under plaintiff's reading, prospective payment rate means unadjusted rate, but if you substitute unadjusted rate into that paragraph,

[00:20:58] Speaker 05:
It simply doesn't make sense.

[00:20:59] Speaker 05:
And the paragraph directs the secretary to determine the prospective payment rate, which is the amount a hospital is paid per discharged patient.

[00:21:06] Speaker 05:
You start with the average payment rate, and the secretary makes five categories of adjustments.

[00:21:15] Speaker 05:
Paragraph J8 plainly precludes review of the prospective payment rates established under paragraph three.

[00:21:21] Speaker 05:
That is the amount that the... So when does the establishment happen?

[00:21:25] Speaker 05:
I think we agree the establishment happens in that rulemaking.

[00:21:28] Speaker 05:
That's when it's set forth what the hospital will be paid based on the discharge.

[00:21:32] Speaker 03:
They're not challenging anything in that federal register rule.

[00:21:36] Speaker 03:
They're challenging something that comes long after the fact.

[00:21:40] Speaker 05:
Well, in our view, the lip payment adjustment is calculated the way the contractor calculated.

[00:21:47] Speaker 05:
And so that was established at that point.

[00:21:49] Speaker 05:
It would be, I think, very easy for hospitals to make an end run around

[00:21:52] Speaker 03:
what congress has clearly tried to bar very broad a very broad well bar i mean that's sort of the question of course but uh... it's like my cards on the table here this is hard text to read through uh... you know it's not just a notice that everything is ambiguous in the statute but i won't do that because i'm sure careful reading sometimes works uh... but uh...

[00:22:21] Speaker 03:
The relevant provisions here actually seem to alternate sometimes between establishment, which seems to be this baseline and determination and determine or determination.

[00:22:30] Speaker 03:
Determine is a verb and establish is a verb.

[00:22:32] Speaker 03:
Determine seems to be what's commonly used to the adjustment process.

[00:22:39] Speaker 03:
You take what was established and then you do these other things, adjusting it.

[00:22:43] Speaker 03:
And that adjusting process and figuring out what the final number is, that's the determining of the payment.

[00:22:50] Speaker 05:
Well, I think the adjustments are also established as well.

[00:22:53] Speaker 03:
I know, but it doesn't bar the new adjustment.

[00:22:56] Speaker 03:
It bars establishment of the prospective payment rate, which you said happens at the federal register stage, which isn't when the lip payment is established.

[00:23:06] Speaker 05:
I mean, I think a couple of responses.

[00:23:08] Speaker 05:
I think determine and establish.

[00:23:11] Speaker 05:
The ordinary meaning of establish can mean I establish your salary.

[00:23:14] Speaker 05:
I establish that you get paid $100,000 a year.

[00:23:16] Speaker 05:
That's the amount that you will be paid.

[00:23:20] Speaker 03:
their their argument really comes down to I think what perspective payment rates means I think it's the phrase established perspective payment rate and yeah GS whatever might set or when I was in the government I'd have set my base salary but then there are all kinds of adjustments based on their savings plan and taxes and what insurance policies and so someone ultimately determined what my paycheck was and isn't this a similar

[00:23:46] Speaker 05:
I think process.

[00:23:47] Speaker 05:
If establishment, if all that's part of the establishment of the perspective payment rate, that just under plaintiff's theory means that at the time of the rulemaking, the only thing that you can't challenge, the only thing that work that 8B does is to say you can't challenge the establishment of that average

[00:24:05] Speaker 05:
unadjusted rate, which is basically meaningless because no one's going to challenge that.

[00:24:11] Speaker 03:
Well, maybe it means upfront, maybe what is going on here, and like I said, this is dense material, so I could be completely wrong, but one way to think of it is that there is this whole other scheme here that, you know, there'll be payments and contractors, and then you can challenge it to a board, and then you can challenge the CMS, and so this is very, look, wait till we've got a real-world money fight

[00:24:33] Speaker 03:
and then go through this administrative process with ultimate judicial review, and that this judicial review bar here is a way of forcing that channeling.

[00:24:42] Speaker 03:
Don't be coming running to us early on complaining about the rules.

[00:24:46] Speaker 03:
Wait until you've really got skin in the game that you've put in a bill, you've seen it calculated and computed, and that's what you want to challenge.

[00:24:54] Speaker 03:
I don't think so.

[00:24:57] Speaker 05:
It would do virtually nothing if that's what it was.

[00:25:00] Speaker 05:
All of these challenges come up through the contractor board administrator process and so we would be cutting out nothing basically.

[00:25:09] Speaker 05:
because everyone has a incentive.

[00:25:11] Speaker 03:
You want to just make an APA challenge to that federal register notice in advance of actually going through this process?

[00:25:16] Speaker 05:
Hospitals don't, I mean, I can't say they never do that.

[00:25:18] Speaker 05:
They do sometimes do that when there are big rule changes that they don't like.

[00:25:23] Speaker 05:
But on a sort of day-to-day, your bread and butter challenge is to the amount that establishes what you're getting paid per discharged patient.

[00:25:31] Speaker 03:
The statute doesn't use establish for what the hospital's getting paid.

[00:25:34] Speaker 03:
It uses determine.

[00:25:36] Speaker 03:
When it's talking about what check gets cut.

[00:25:39] Speaker 05:
It does use two different verbs.

[00:25:42] Speaker 05:
We don't ascribe a significance to that.

[00:25:44] Speaker 03:
Don't we have to as a matter of statutory construction?

[00:25:48] Speaker 05:
Synonyms can be in a statute.

[00:25:49] Speaker 03:
I don't have a site to talk about that.

[00:25:53] Speaker 05:
Determining, I determine your salary, I establish your salary, I think those are both words that we could use to mean the same thing.

[00:25:59] Speaker 03:
But it could also mean different in a salary way that I just explained.

[00:26:03] Speaker 03:
There's an establishment of sort of the rules, the baseline, and then there's individualized adjustments.

[00:26:09] Speaker 03:
And that's the determination process.

[00:26:11] Speaker 05:
Well, I think maybe I should turn to a case like Florida Health Sciences where

[00:26:15] Speaker 05:
the hospital attempted to say, I'm only challenging this part, I'm only challenging the data use, I'm not challenging the ultimate determination.

[00:26:25] Speaker 05:
I think here, even if you read determine and establish as different, the hospital can't challenge that determination without also challenging the establishment, the way that the secretary determined to calculate the lip adjustment.

[00:26:40] Speaker 05:
And so I think even if you want to read those as different verbs in different directions, I think what you'd have in effect was still a challenge to the establishment of those perspective payment rates.

[00:26:51] Speaker 05:
That's the amount that the hospital gets paid.

[00:26:54] Speaker 05:
The hospital's challenge here is to say, we don't like how you calculated our lip adjustment, we want to be paid more per discharged patient.

[00:27:01] Speaker 05:
And so I think it would still fall within paragraph eight B.

[00:27:07] Speaker 05:
And just to go back to why their reading of the language can't be right, again, I would just direct the court, just as the district court said here, there's an insurmountable hurdle, which is the language in paragraph three, which makes clear that that prospective payment rate means the final rate that the hospital is paid.

[00:27:26] Speaker 05:
It does not mean an unadjusted rate.

[00:27:29] Speaker 03:
It seemed to be so insurmountable for the agency when it had a contrary view for quite some time.

[00:27:33] Speaker 05:
Well, so that the regulation from 2001, as a district court said, there's no, it was not the product of

[00:27:40] Speaker 05:
legal research or reasoning that the court or CMS has been able to determine.

[00:27:44] Speaker 05:
There were no comments on it.

[00:27:45] Speaker 05:
There was no discussion.

[00:27:46] Speaker 05:
And, of course, the Secretary couldn't create jurisdiction where Congress had withdrawn it.

[00:27:52] Speaker 05:
So I think it's not relevant to this Court's determination of the scope of the judicial review bar that's before the Court.

[00:27:59] Speaker 03:
You're agreeing that agencies don't get any deference, at least, as to determining

[00:28:05] Speaker 03:
No, I think we would argue that we get deference to this.

[00:28:12] Speaker 03:
You took a considerate decision, you had it for quite some time.

[00:28:17] Speaker 03:
You seem to be applying it the way they're reading it.

[00:28:20] Speaker 05:
Well, a couple of responses.

[00:28:21] Speaker 05:
I mean, first, I think as your honor noted,

[00:28:25] Speaker 05:
or maybe it was opposing counsel.

[00:28:27] Speaker 05:
But the administrative and judicial review language is identical.

[00:28:30] Speaker 05:
So insofar as we don't get deference in this court for the judicial review bar, it doesn't really assist this court's analysis to think about, I think, what deference would be appropriate in the administrative context.

[00:28:41] Speaker 05:
In addition, in terms of the practice, what Plaintiff Hospital has pointed to are some occasions where there were proceedings before the board

[00:28:51] Speaker 05:
Plaintiff has not pointed to any time that the secretary and CMS is unaware of any time that the secretary or administrator actually confronted the issue and approved the practice.

[00:28:59] Speaker 05:
So I think in terms of what happened in reality on the ground, it just wasn't thought about for that 10-year period until it became to the forefront when the secretary was considering.

[00:29:10] Speaker 03:
You say it wasn't thought about.

[00:29:11] Speaker 03:
Weren't you actually applying it?

[00:29:13] Speaker 05:
The board was applying it.

[00:29:17] Speaker 05:
My point was just that there's no... In terms of the administrator confronting the issue and once the issue was confronted, the 2013 regulation... Did nobody came to court?

[00:29:29] Speaker 03:
No one came to court.

[00:29:33] Speaker 03:
We look at 1395 WWD-7.

[00:29:37] Speaker 03:
That is another example of where it talks about establishing diagnostic-related groups and weighting factors, but determining

[00:29:47] Speaker 03:
certain adjustments.

[00:29:48] Speaker 03:
So it's doing the establish and determine, seem to be different there, following the sort of model I was suggesting.

[00:29:55] Speaker 03:
Why isn't that?

[00:29:56] Speaker 05:
I think establishment makes, using that verb for the case mix, the weighting factors, makes sense.

[00:30:03] Speaker 05:
That is done

[00:30:06] Speaker 05:
the secretary groups patients that are of similar cost to treat and comes up with weighting factors.

[00:30:11] Speaker 05:
And those are established.

[00:30:12] Speaker 05:
And then they are applied to determine.

[00:30:15] Speaker 03:
To determine.

[00:30:16] Speaker 05:
That's right.

[00:30:16] Speaker 03:
But again.

[00:30:17] Speaker 03:
So you're using determined to mean something different than established, too, which is perfectly sensible.

[00:30:21] Speaker 05:
Again, I want to get back to my other point in response to that, which was that I think it would be, and they are still challenging the establishment, even if they are trying, which I think is not their argument, to be clear.

[00:30:32] Speaker 05:
I think their argument rests on the

[00:30:34] Speaker 05:
perspective payment rate, and that's what they briefed in the district court, and that's what the district court decided.

[00:30:39] Speaker 05:
But even taking this argument, they're still challenging the establishment, the way the Secretary chooses – chose to

[00:30:46] Speaker 05:
calculate the low-income percentage adjustment.

[00:30:48] Speaker 05:
They're not challenging the data that the secretary used.

[00:30:51] Speaker 05:
They're not challenging anything with respect to that calculation.

[00:30:55] Speaker 05:
They're really challenging how the secretary and contractors implementing the secretary's instructions calculate that low-income percentage adjustment.

[00:31:03] Speaker 05:
And that's the establishment.

[00:31:05] Speaker 02:
Let me ask you.

[00:31:05] Speaker 02:
You cited Florida Health Services.

[00:31:08] Speaker 02:
Thank you.

[00:31:09] Speaker 02:
Well, thank you.

[00:31:10] Speaker 02:
In your brief, I don't remember you arguing that point.

[00:31:14] Speaker 02:
Did you argue?

[00:31:15] Speaker 05:
Well, I think in response to Judge Millett's questions, this is not the way that Plaintiff Hospital framed their argument.

[00:31:20] Speaker 05:
So in response to her questions, I think Florida Health Sciences can be a helpful case for the idea that you can't sort of characterize your challenge to a sliver of something, thereby trying to avoid a broad provision of judicial review.

[00:31:38] Speaker 03:
So you say in your brief that, of course, this wouldn't cut off ultra-virus agency action.

[00:31:45] Speaker 03:
Why isn't what you're doing here, which is in defiance of our circuit precedent on how these things could be calculated?

[00:31:53] Speaker 05:
A couple of responses.

[00:31:54] Speaker 05:
I'd just like to start by noting that I went back and looked at this morning.

[00:31:58] Speaker 05:
I don't see them developing an ultraveer's argument in their opening brief.

[00:32:01] Speaker 05:
They used the phrase once in passing.

[00:32:03] Speaker 03:
You brought it up saying, don't worry about the consequences of our

[00:32:08] Speaker 03:
No judicial review can ever touch us arguments.

[00:32:11] Speaker 03:
So you yourself articulated as a cabin on your position here about how the statute works.

[00:32:17] Speaker 03:
So I don't think you can get away from it that easily.

[00:32:20] Speaker 05:
I don't think I can get away from that.

[00:32:21] Speaker 05:
I just wanted to make that point.

[00:32:22] Speaker 05:
I just want to know.

[00:32:23] Speaker 05:
So in Amgen, yes, this court, I think, has reserved the question of the possibility of ultra-varies review.

[00:32:29] Speaker 05:
A Northeast hospital dealt with the DISH payment, which is a statutorily based payment.

[00:32:35] Speaker 05:
The LIP payment incorporates, uses as a proxy that Medicare and Medicaid fraction.

[00:32:43] Speaker 05:
It is different from the DISH payment.

[00:32:46] Speaker 05:
In a couple of respects, it does not track the DISH payment directly.

[00:32:49] Speaker 05:
So the Affordable Care Act, for example, changed the DISH payment quite a bit.

[00:32:53] Speaker 05:
The LIP payment has not changed.

[00:32:55] Speaker 05:
There is no question with respect to the lip payment of the language that Congress used, because there is no language that Congress used.

[00:33:03] Speaker 05:
This is something the Secretary's policy decision implemented as a discretionary adjustment.

[00:33:08] Speaker 05:
So I think those are all reasonable arguments that take us well out of the sort of patent, the patented beyond agency authority.

[00:33:15] Speaker 03:
Well, at the time they rendered these services, at that time, when they rendered their medical services,

[00:33:24] Speaker 03:
How would they have thought they were gonna get paid?

[00:33:27] Speaker 05:
I don't know, because we don't, that's part of an empty hospital decision is all about the practice on the ground of dish payments.

[00:33:35] Speaker 05:
So that's obviously the merits, I don't think, are before this Court.

[00:33:39] Speaker 03:
All you're asking is... There's this problem of sort of services are rendered and then the rules are retroactively changed, and here it's a regulation built on a statute, but it would have been perfectly sensible for them to think that

[00:33:52] Speaker 03:
when you brought in this regulatory, brought in that statutory scheme into the regulatory framework, it was going to get calculated the way the statute required it to be calculated.

[00:34:02] Speaker 03:
And now you change the rules after we read the medical services.

[00:34:05] Speaker 05:
Well, to be clear, Your Honor, at Northeast Hospital, this court did not say the statute required it to be calculated in the way that it was calculated.

[00:34:10] Speaker 03:
No, the way it was – I'm talking about expectations at the time.

[00:34:13] Speaker 05:
The expectations – I don't know – this has not been developed.

[00:34:15] Speaker 05:
I don't know.

[00:34:16] Speaker 05:
I think we have reasonable arguments that take us well outside of the patent excess of authority, that the Secretary didn't hear – you know, imagine a statue where the Secretary didn't have authority to make discretionary adjustments, and the Secretary did that.

[00:34:29] Speaker 05:
I think that would be – that could fall into the ultra-various category.

[00:34:32] Speaker 05:
What we have really here is a dispute about the calculation of a discretionary adjustment factor.

[00:34:38] Speaker 05:
simply isn't within the very rare category of cases, and of course we don't have a case where the court actually did this, of ultra-various actions.

[00:34:49] Speaker 05:
Thank you, we ask that the district court be affirmed.

[00:35:02] Speaker 02:
Ms.

[00:35:03] Speaker 02:
Webster, could I ask you to respond to your friend's argument about the Florida Health Services cases, not analysis?

[00:35:12] Speaker 04:
Well, in our view, Florida Health does not dictate the outcome of this case, because here as there, there's a need to look at the specific language and context of the particular statute.

[00:35:24] Speaker 04:
And to the extent that

[00:35:26] Speaker 04:
Florida House stands for the proposition that the component parts of a particular calculation are precluded.

[00:35:32] Speaker 04:
If the whole of those parts is precluded, then that makes our surplusage argument all the stronger, because if that were true, then there would have been no need for Congress to separately list all the different items that are otherwise addressed under J-3.

[00:35:49] Speaker 02:
Isn't the LIP inextricably intertwined with the provider, with the prospective payment rate?

[00:35:55] Speaker 04:
Well, the lit payment is the least intertwined of any of the adjustments, and we don't believe it is inextricably intertwined.

[00:36:04] Speaker 04:
It is made after the fact at cost report settlement using data from the cost year at issue, and it doesn't involve any of the other calculations or prospectively set

[00:36:16] Speaker 04:
adjustments at all.

[00:36:19] Speaker 04:
It's prospectively set separate and apart from the federal rates of even a lot of the other adjustments that are made to those rates.

[00:36:30] Speaker 03:
So is that an argument then that you are barred from challenging other adjustments and just not this one?

[00:36:37] Speaker 04:
Well at the very least we contend that this adjustment should be reviewable because it is a retrospective adjustment

[00:36:44] Speaker 04:
not a prospective adjustment, and the term in J-8 is prospective payment rates.

[00:36:51] Speaker 04:
This is not a prospectively determined payment rate whatsoever.

[00:36:55] Speaker 04:
In fact, the data, paragraph J-5 requires the secretary publish the data methodology.

[00:37:02] Speaker 04:
It does publish the methodology for LIP, but it has never been able to publish the data.

[00:37:06] Speaker 04:
It can't, because that data is just simply not available until after the cost year is over.

[00:37:15] Speaker 04:
On the idea that the regulation was not reasoned, I think the agency's view in the administrative decision was that the word unadjusted was inadvertent, and that just doesn't seem credible to us, especially since the term unadjusted, the terms adjusted and unadjusted are otherwise used in the context of that rulemaking.

[00:37:37] Speaker 04:
It's not a word like an and or an or or not that inadvertently gets added.

[00:37:42] Speaker 04:
And in any event, that regulation was the product of notice and comment rulemaking.

[00:37:48] Speaker 04:
And we should presume that to the extent that the agency is adopting a regulation through notice and comment rulemaking that there was some consideration being given to how it reads.

[00:38:03] Speaker 04:
On the ultra virus point, we actually did indeed

[00:38:10] Speaker 04:
brief that, an opening brief at 53 and the reply brief at 28.

[00:38:16] Speaker 04:
In Northeast Hospital, this court decided that the secretary had exceeded her then his now statutory authority in applying the new rule on Part C days retroactively and likewise there would be

[00:38:36] Speaker 04:
the agency would be exceeding its authority here and doing the same for the lit payment.

[00:38:43] Speaker 02:
Great, thank you very much.

[00:38:44] Speaker 02:
Thank you.

[00:38:45] Speaker 02:
We'll have you on with the cases submitted.