[00:00:00] Speaker 00:
Case number 17-5098, C. Francis Medical Center at Howell Appellants versus Eric D. Harkin, Acting Secretary of the United States Department of Health and Human Services.

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Mr. Morrison for the appellants, Ms.

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Patterson for the appellees.

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Alright, Mr. Morgan.

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Good morning.

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May it please the Court?

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I'm Edgar Morrison, representing the Appellant Hospitals.

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My co-counsel is Stephen Calhoun.

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I have asked the Marshal to reserve three minutes for rebuttal.

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There are three reasons that the Court can and should rule in favor of the hospitals in this case.

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Number one, the 2013 amendment, by its own terms,

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does not apply to these hospitals, none of whom have requested a reopening of any final determination.

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Number two, even if the 2013 amendment is applicable to these statutory appeals, the rule as applied is arbitrary and capricious and contrary to the Medicare statute.

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And finally, and you only need reach this point if you agree that the rule prospectively applied is permissible,

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Even if it is permissible, prospectively applied, it's contrary to the statute and to centuries of legal tradition to apply it retroactively to these hospitals, and the Secretary has failed to meet the two very narrow exceptions to that prohibition.

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And as I mentioned, should you agree with either of our first two points, there's no need to reach the retroactivity issue.

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First, with respect to the 2013 amendment, the 2013 amendment is an amendment to Section 405.1885, which is entitled Reopening a Contractor Determination or a Reviewing Entity Decision.

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It only applies to reopenings.

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The operative part of the regulation is found in subparagraph B2 Romanet I,

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And that's where the three-year limit applies.

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And that only applies to, quote, a reopening made upon request.

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So none of these hospitals have requested a reopening.

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All of them have appealed to the Provider Reimbursement Review Board pursuant to the statutory authority of 1395-00.

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You agree that this theory is inconsistent, at least with the preamble?

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Is that fair?

[00:03:41] Speaker 04:
That our theory.

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Your theory.

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I agree that our theory is inconsistent with the preamble.

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The way I would respond, Your Honor.

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So you would have to show that the government's reading of the underlying regulation is unreasonable.

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What we can show, Your Honor, is that the preamble doesn't determine whether the rule applies.

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It's the text of the regulation itself.

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I understand, but it might have interpretive significance.

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Correct.

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And our point would be to the Court,

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that deference to the secretary on this particular issue is unwarranted when his interpretation is plainly erroneous or inconsistent with the actual text of the regulation.

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And this court recently in the Kaiser case, which is an important case for this, made that very ruling that 1885, that the secretary interpreted that regulation incriminatingly in that case.

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Is there any difference in the deference we owe the agency

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when the regulation, as in the Kaiser case, was long before the actual application in the case.

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And in this case where the regulation is issued and in the very same Federal Register notice, the agency explains what it means.

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That is, if an agency decides to explain the meaning of a rule that was passed ten years ago,

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And it might seem inconsistent on its face.

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Is that different?

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Do we owe a different deference where the agency is explaining the very rule that is now adopting?

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I don't think that the agency can satisfy its obligations to clearly apply the rule simply by stating in the preamble a statement that's inconsistent with the text of the regulation itself.

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I don't think that the fact that it's... I guess the question is in our determination of whether it's inconsistent or not.

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Do we owe a little more deference when it's done at the very same time the rule is issued?

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I'm not aware of any authority for that, Your Honor.

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I would argue that the contemporaneous nature of it actually probably mitigates against the Secretary's interpretation.

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Rather than this being something that we, 10 years later, come up with a theory about, this is actually at the very moment when the Secretary had the opportunity to very clearly publish a regulation

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He didn't do so clearly.

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And as a reminder... So it's just a mistake here?

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That's what you're really arguing is that the agency made a mistake.

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Because we don't have to guess at what it intended to do, because it's crystal clear in stating what it intended to do.

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It just made a mistake in how it actually implemented that.

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That's correct.

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It is clear what they claim they intended to do.

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I'd say 90 percent clear.

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But it's also clear that the text of the regulation itself doesn't support their interpretation.

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The part of the regulation that they changed was in subsection A, where they added this definition of predicate facts.

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The part of the regulation that is at issue, the three-year reopening, is in subsection B.

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And it only applies to reopenings made upon request.

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None of the hospitals in this case requested a reopening.

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So just on its face, it doesn't apply to our case.

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They had the opportunity in the rule, and the secretary noted that we considered amending 405-1835, which is what governs statutory appeals.

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but we basically decided at this time not to do so.

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We don't know why they decided not to do so, but it would have made it very clear.

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And what sense, this is a question I suppose for the government as well, but what sense would it make not to have it apply to one and not the other?

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Well, they're completely separate procedural mechanisms to appeal cost report determination.

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I understand that.

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I'm just saying if you wanted to preclude challenges to predicate facts,

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What sense would it make to allow predicate facts to be challenged in appeals but not in reopenings, do you think?

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All I can say is, again, they're different.

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The reopening regulation is completely permissive.

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It's not a creature of statute.

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It's a creature that the secretary created, whereas the statutory appeals that we proceeded under, under 1395-00, are quite clear that with very few restrictions, other than the amount in controversy and that you have to bring within 180 days,

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The provider is virtually unrestricted about what he can appeal under 1835.

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So why the Secretary didn't amend that regulation at the same time, I don't know.

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But the Kaiser case and then the long line of precedent, the Supreme Court bulls line of precedent, we believe is clear that

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Deference is not warranted when the Secretary's interpretation is contrary to the text of the statute.

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What about all the references to appeals that are included in the regulation?

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In the reopening section, what about the reference to appeal?

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In the text of the regulation itself?

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Yes.

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Romanette 3, I love that word, Romanette.

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Romanette 3, a specific finding on a matter of issue may include a predicate fact

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And then in parentheses in an appeal filed

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And then in Romanet 4, it says the three-year.

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And then in, let's see, C, I can't even tell what this is, looks like C3, reopening by CMS or contractor currently on appeal to the board.

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CMS or contractor may reopen.

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Secretary determination that's currently pending on appeal

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The section, as I mentioned earlier, the section that the Secretary amended in the appeal was subsection A, which you were just reading from.

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Yes.

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The subsection that provides a three-year limit is on subsection B, however, and it's very clear that subsection B only applies to reopenings made upon request.

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What is the parentheses in appeal filed?

[00:10:13] Speaker 04:
Your Honor, I don't know what the Secretary intended with that.

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That is a new part of the regulation.

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It could mean the predicate fact was determined at a prior point in time as a result of an appeal.

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I don't know exactly what the Secretary meant.

[00:10:28] Speaker 03:
So you're telling me it's ambiguous.

[00:10:30] Speaker 04:
I think that is ambiguous.

[00:10:32] Speaker 04:
I do think that's ambiguous.

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But in any event, its only ambiguity relates to subsection A. It has no applicability to subsection B, which is the three-year limit.

[00:10:46] Speaker 03:
Well, but doesn't subsection B relate back?

[00:10:50] Speaker 03:
Yes, but once you've amended the definition of or change what a specific finding on a predicate fact that applies to the rest of the.

[00:10:58] Speaker 04:
It does, but subsection B is the one that applies only to, quote, a reopening made upon request.

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It doesn't say a reopening made upon request or appeals under 1835.

[00:11:12] Speaker 04:
It's only reopenings.

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That's all that regulation applies to, and the Secretary

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made a mistake to echo Judge Kavanaugh in attempting to apply the regulation to these hospitals, but didn't properly do so.

[00:11:31] Speaker 04:
Even though he said in the preamble, this is what I want to do, I'm going to apply it to all pending appeals, he didn't have the authority to do that by virtue of 1885.

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If I could proceed, Your Honor.

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Secondly, even assuming that this regulation does apply to these hospitals, we strongly urge that it doesn't.

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As applied, it's arbitrary and capricious and inconsistent with the Medicare statute.

[00:11:59] Speaker 06:
This was- There's a big argument on that, as you're well aware, is finality and maybe burden is a better word in my view for that.

[00:12:09] Speaker 06:
uh... stale records things like that so exactly how would the agency proceed do you suspect or do you propose if you were to prevail on this on this claim your honor something that that the secretary's gonna have to determine there there could be a number of ways the secretary corrected i think the reason i'm asking is they say it's

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and I think they're tossing it back to you to say, no, actually, it is possible.

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Here's how you would do it, and I'm interested in your answer.

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Right.

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They stated that in their pleadings or in their briefs that it's not part of the record below.

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We don't have actually have any evidence of what the secretary, what data the secretary does or doesn't have.

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So part of your argument is that at a minimum, it should go back

[00:13:01] Speaker 06:
at a minimum for them to explain the staleness-burden argument.

[00:13:08] Speaker 04:
I wouldn't ask them to explain the staleness or burden if the Court remands it.

[00:13:12] Speaker 04:
I think the remand would be to instruct the Secretary to recalculate the standardized amount.

[00:13:18] Speaker 06:
But I'm saying there's a lesser included way to argument there, too, which is, on this record, it's substantively unreasonable or arbitrary and capricious, you would say.

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and maybe they have some argument they can use to justify that they haven't articulated it here.

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You don't want to take... You can go for the whole oaf.

[00:13:43] Speaker 06:
You don't have to go for a half oaf.

[00:13:44] Speaker 04:
No, no, no.

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When they... I'm not meaning to be coy either.

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I can't really fix that problem for the government.

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What I can say is that

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A few years later, seven years later, they corrected this problem with the capital cost perspective payment system.

[00:14:00] Speaker 05:
The problem seems to be a pretty pervasive one, which is it's really hard in the 2017s to go back and figure out what's happening in hospitals in 1981 or 1983 or 1984.

[00:14:19] Speaker 05:
And that's going to be true regardless of whether the issue is discharge or transfer or any other of the dozens, if not hundreds, of determinations that could go into a predicate-backed establishment.

[00:14:36] Speaker 04:
Thank you.

[00:14:37] Speaker 04:
That raises the issue of finality versus accuracy.

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The government is trumping finality over anything else.

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But to respond to your question, it's unreasonable.

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Yes, it may be difficult to try to figure out the correct data or to figure out a proxy for that.

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It's not something that I can do on the back of an envelope, but it's even worse for these hospitals to continue forever to be underpaid under the standardized amount because that error is not correct.

[00:15:10] Speaker 05:
How could anyone do this?

[00:15:13] Speaker 05:
The government's statement when this issue first came up in the early 80s was that we can't really do this because the data at the time don't distinguish discharges from transfers and they couldn't unscramble that in the early 80s.

[00:15:36] Speaker 05:
How in the world are they going to do it 35 years later?

[00:15:39] Speaker 04:
That's not what the government said in 1984, Your Honor.

[00:15:43] Speaker 04:
What the government said was that no data has been submitted or collected, I don't remember the operative word, to indicate the difference or the magnitude of the difference between transfers and discharges.

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An important point is that the Secretary was the one doing the collecting.

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It wasn't up to the provider community to submit something

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because the Secretary didn't even raise this issue until the final rule after the comment period had long expired.

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And what the Secretary said was he acknowledged there was an error.

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He called it a discrepancy.

[00:16:16] Speaker 04:
So he acknowledged the error.

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It wasn't that we can't determine if there was an error.

[00:16:20] Speaker 04:
He acknowledged that transfers were counted as part of the discharge count and shouldn't be under PPS.

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But he simply said that the magnitude of the change, it's not significant.

[00:16:32] Speaker 04:
We don't think it's material.

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And in fact, it's quite material.

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So he made a decision, what he calls and what the government calls in their brief, a judgment call, and claims that that judgment call was an appropriate one.

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In fact, the judgment call was just to ignore the error.

[00:16:51] Speaker 06:
Suppose we knew

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that there's no way to perfectly reconstruct which discharges were transfers, but that you could try to make a reasonable estimate.

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And the government says, well, we don't want to do a reasonable estimate.

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We can't go back and recalculate it exactly, so we're not going to recalculate it at all as a matter of finality and burden.

[00:17:20] Speaker 06:
What would you say in response to that?

[00:17:22] Speaker 04:
I think that would be unreasonable, not a permissible construction of the statute.

[00:17:28] Speaker 04:
We would get to that point if the court agreed that they had underpaid and that the standardized amount had been improperly calculated under 1395-WW.

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And so if that statute was not followed, then the statute was violated.

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And for the Secretary to violate the statute, and then years later to say, well, you know what, we can't figure out quite how to fix that, and so we're not going to fix it unless we can do it perfectly, that wouldn't be a reasonable response, Your Honor.

[00:18:00] Speaker 03:
Can I, just to pick up on Judge Katz's point, don't we have a race ipsa locator issue here?

[00:18:06] Speaker 03:
You have, we're now in 2018, and we're, 27, 2018, and we're looking back to facts that occurred in the early 80s, and not only with respect to this, but with respect to all the other predicate facts that Judge Katz was talking about.

[00:18:24] Speaker 03:
If there's a burden, why isn't the burden on

[00:18:29] Speaker 03:
challengers to say that, oh, no, it doesn't matter.

[00:18:32] Speaker 03:
That many years have passed, but the data is still somewhere.

[00:18:35] Speaker 03:
Why isn't that alone sufficient to make the agency's judgment that it will be difficult and maybe impossible to correct the record at this late date?

[00:18:47] Speaker 04:
To accept that argument would be, in essence, to reward the government for the original error.

[00:18:54] Speaker 03:
Well, that's a different question.

[00:18:55] Speaker 03:
I want to start with the first question, which is,

[00:18:59] Speaker 03:
The government is not unreasonable in saying that, from the viewpoint of this year, it's going to be hard, if not impossible, to correct something that occurred in the 80s.

[00:19:10] Speaker 03:
I mean, different computer systems?

[00:19:12] Speaker 03:
They didn't even have computers.

[00:19:13] Speaker 03:
I don't know how they listed that, you know, wrote these things down in those days.

[00:19:17] Speaker 03:
I get your balancing issue, but that issue is not unreasonable, is it?

[00:19:24] Speaker 04:
The observation that this was a long time ago and that this data is difficult to collect and collate and make some sense of is not an unreasonable observation, I agree.

[00:19:35] Speaker 03:
So now we get to the other side of the question, which is it's not fair, it's not reasonable to be stuck with an error.

[00:19:42] Speaker 03:
But that's true of every kind of statute of limitations.

[00:19:45] Speaker 03:
If the bank robber is not caught in seven years, he gets to keep his money and it's terrible.

[00:19:51] Speaker 03:
If somebody who assaults somebody is not caught in a certain number of years, it happens, but it's bad.

[00:19:59] Speaker 03:
Leave aside the criminal cases and all the civil cases.

[00:20:01] Speaker 03:
There are statutes of limitations.

[00:20:03] Speaker 03:
Somebody cheated somebody out of something.

[00:20:05] Speaker 03:
Very bad, but we don't go back and correct the record.

[00:20:08] Speaker 03:
Homicide is about the only circumstance.

[00:20:11] Speaker 03:
And terrorism, where we actually go back and say, we don't care about the passage of time.

[00:20:17] Speaker 03:
We're going to correct this anyway.

[00:20:18] Speaker 03:
So this is a kind of balancing that the law, both the common law and the statutory law, does all the time.

[00:20:25] Speaker 03:
Why is this any different than that?

[00:20:27] Speaker 04:
This case, Your Honor, I submit is different because examples that the court just gave are of single acts, homicide, some sort of event that occurred at one point in time and there's a statute of limitations that expires before that event can be challenged or corrected.

[00:20:44] Speaker 04:
This event, the improper calculation of the standardized amount in 1984, recurs each and every year.

[00:20:52] Speaker 04:
Every time these secretaries publishes the new inpatient

[00:20:55] Speaker 04:
perspective payment system final rule, that error is embedded in that rule.

[00:21:01] Speaker 04:
Every time the hospitals admit a Medicare patient and get paid for it, they're getting paid a fraction less than they should have been paid had that been properly determined in 1984.

[00:21:12] Speaker 06:
To go back to Chief Judge Garland's prior question, could this be done?

[00:21:21] Speaker 04:
Could the correction be done?

[00:21:23] Speaker 04:
Yeah.

[00:21:23] Speaker 04:
Yes, I think it absolutely could be done.

[00:21:25] Speaker 06:
And how?

[00:21:25] Speaker 06:
I mean, I started with this question, but I'm still searching for how.

[00:21:29] Speaker 04:
So I offered one suggestion of however the Secretary made the calculation for capital cost PPS just a few years later.

[00:21:37] Speaker 04:
They made an adjustment to remove transfers from the discharge count.

[00:21:42] Speaker 04:
I think it is, you know, about a 1 percent number.

[00:21:44] Speaker 04:
Don't quote me on that.

[00:21:45] Speaker 04:
The secretary all the time in the Medicare program, it's a very complex program, the secretary uses proxies and extrapolations and estimates all the time.

[00:21:56] Speaker 04:
Not everything in the Medicare program is an absolutely perfectly principled calculation.

[00:22:02] Speaker 04:
So the secretary is very accustomed to making judgment calls.

[00:22:06] Speaker 04:
The judgment call that he made in 1984 was just, you know what, it's not significant so we're not going to do anything about it.

[00:22:13] Speaker 04:
And we submit that he could have made a judgment call and should have made a judgment call to make some assessment of that error.

[00:22:21] Speaker 05:
Does that seem like an unreasonable judgment?

[00:22:24] Speaker 05:
I mean, just intuitively, you would think most people who leave hospital A

[00:22:33] Speaker 05:
leave it to go home rather than to be transferred to Hospital B. Right.

[00:22:37] Speaker 05:
Doesn't that seem to accord with common sense?

[00:22:41] Speaker 04:
Well, if I understand Your Honor's question, the PPS statute was quite clear to treat discharges and transfers separately.

[00:22:50] Speaker 05:
Oh, but the Secretary's judgment that it's a relatively small error doesn't seem obviously wrong to me.

[00:22:58] Speaker 05:
on this particular question.

[00:23:00] Speaker 04:
It's hundreds of millions of dollars, Your Honor, and the judgment call that the Secretary made at the time was to acknowledge the error.

[00:23:10] Speaker 04:
He called it a discrepancy, but he acknowledged we did not adjust for transfers.

[00:23:15] Speaker 04:
but he simply minimized it, said it doesn't have a significant effect.

[00:23:19] Speaker 04:
Seven years later, he realized it actually did have a significant effect and fixed it.

[00:23:24] Speaker 06:
Because it might have appeared small at the time, but now with the passage of time, it's quite obvious.

[00:23:29] Speaker 05:
No, actually, this is hundreds of millions of dollars.

[00:23:33] Speaker 05:
That's going to be the compounding effect?

[00:23:36] Speaker 04:
Just that you're off by five percent for 30 years.

[00:23:40] Speaker 04:
Yeah, there isn't actually any real compounding I don't think mathematically but it's it's simply that costs are more expensive today than they were then.

[00:23:48] Speaker 03:
Why did you not challenge this earlier?

[00:23:53] Speaker 04:
Your honor, the

[00:23:56] Speaker 04:
Secretary himself raised the issue in the final rule after PPS had actually already started.

[00:24:03] Speaker 03:
I'm sorry, that's not what I mean.

[00:24:04] Speaker 03:
I mean, the question of why didn't you challenge... Why these plaintiffs?

[00:24:07] Speaker 03:
Yeah, why the plaintiffs didn't challenge the erroneous base year many years before and for cost years many years before.

[00:24:17] Speaker 04:
I was giving background to get to your answer.

[00:24:20] Speaker 04:
No, that's all right.

[00:24:21] Speaker 04:
In 1984,

[00:24:23] Speaker 04:
The secretary himself raised the issue at the time of the publication of the final rule.

[00:24:27] Speaker 04:
There was no opportunity for anyone to comment.

[00:24:29] Speaker 04:
The provider community didn't really understand this issue at the time.

[00:24:34] Speaker 04:
I think, frankly, our clients in the early 2003, 2004,

[00:24:41] Speaker 04:
the decision-makers that our clients began to be aware of this issue and that was the time they initiated their appeals to the board.

[00:24:47] Speaker 05:
You have, what, 75 different hospitals?

[00:24:50] Speaker 05:
277.

[00:24:50] Speaker 04:
277, okay.

[00:24:51] Speaker 05:
So how many of them, if any, were getting reimbursements under this scheme?

[00:25:02] Speaker 05:
At what time frame?

[00:25:03] Speaker 05:
Was there anyone who was around in the early 80s who could have challenged that rule?

[00:25:07] Speaker 05:
I don't know the answer.

[00:25:08] Speaker 04:
I'm sure some of them were, Your Honor.

[00:25:13] Speaker 05:
Can I ask, I thought that this was just a stark unitary legal question, which is either the regulation means what the government says, in which case nobody can ever go back and challenge predicate fact,

[00:25:34] Speaker 05:
or it means what you say and the question is wide open in any appeal for any predicate fact.

[00:25:43] Speaker 05:
Did I understand you towards the beginning of the argument to suggest a different possibility which is

[00:25:51] Speaker 05:
Maybe some predicate facts can be challenged and others not, and there's an arbitrary and capricious review based on how obvious particular errors are or how hard particular calculations are.

[00:26:08] Speaker 05:
Would have thought it's either one or the other.

[00:26:10] Speaker 05:
Yeah.

[00:26:10] Speaker 04:
The – what's arbitrary and capricious?

[00:26:14] Speaker 04:
one of the things is to allow an embedded error into the system that has no opportunity for correction.

[00:26:21] Speaker 04:
It replicates itself each and every year.

[00:26:22] Speaker 05:
You say that, but it seems like your legal theory would enable challenges regardless of whether the error was small or large and regardless of whether the error was obvious or subtle.

[00:26:37] Speaker 04:
That's right.

[00:26:38] Speaker 04:
That's because 1395-00, which is the operative statutory provision governing all Medicare appeals,

[00:26:46] Speaker 04:
is virtually unrestricted, other than the 180-day requirement and the $10,000 amount in controversy requirement.

[00:26:53] Speaker 04:
There are no restrictions in that statute as to the topic that can be, it can be any matter covered by a cost report.

[00:27:00] Speaker 04:
The standardized amount is baked into both the Secretary's final rule and the individual cost reports of each provider each year.

[00:27:09] Speaker 06:
I understood you to be saying that

[00:27:12] Speaker 06:
It's unreasonable to enshrine false predicate facts into the formula going forward.

[00:27:18] Speaker 06:
Correct.

[00:27:19] Speaker 06:
But it's going to be different in different kinds of predicate fact cases to go back and try to challenge them as being wrong.

[00:27:27] Speaker 06:
In this case, you would be able to, you say, show that the transfer discharge number is wrong, and you have some support for that given what the Secretary did in other contexts.

[00:27:39] Speaker 06:
In other – to pick up on Judge Katz's question – in other contexts, though, you may not be able to go back and really recreate things to show that it was wrong in the first place, right?

[00:27:51] Speaker 06:
I can't speculate whether there might be – In other words, your point is about this predicate fact.

[00:27:56] Speaker 06:
The regulation is unreasonable, but is applied to this predicate fact.

[00:28:02] Speaker 06:
We know it's wrong.

[00:28:03] Speaker 06:
And therefore, and you say, and this is a hard part of the case for me, but you say it can be corrected, and therefore it's unreasonable not to correct it.

[00:28:14] Speaker 04:
This predicate fact amendment, the 2013 amendment, by definition only applies to predicate facts that have extended or permanent implications for the future.

[00:28:28] Speaker 04:
It doesn't apply to facts that are year-to-year sorts of facts.

[00:28:33] Speaker 04:
The secretary was careful to limit it that way.

[00:28:36] Speaker 04:
So by definition, what he's doing is not just for us, but for any hospital that wants to challenge

[00:28:43] Speaker 04:
an incorrect predicate fact that has ongoing reimbursement consequences, they're out of luck if they didn't do it within the statutory time period.

[00:28:51] Speaker 06:
I guess my point is it's going to be hard to show incorrectness for some that are really old and there are no records, but here you're saying we can easily show incorrectness because they've admitted incorrectness in the other

[00:29:04] Speaker 06:
as to the transfer discharge number.

[00:29:07] Speaker 06:
We may not know the precise amount of the incorrectness, but we know there's incorrectness.

[00:29:11] Speaker 04:
That's correct.

[00:29:12] Speaker 04:
And I'm certainly not trying to make an argument for any other plaintiffs out there, but our point is a broader one, indeed, than just this case.

[00:29:21] Speaker 04:
We are saying that it's unreasonable for the Secretary to adopt a regulation that has no statutory underpinning itself.

[00:29:28] Speaker 04:
that completely eliminates challenges to reimbursement formulas that have, by definition, ongoing reimbursement.

[00:29:37] Speaker 05:
But you agree that in the context of any particular challenge, it would be the hospital's burden to show error?

[00:29:45] Speaker 05:
Yes.

[00:29:46] Speaker 03:
Okay.

[00:29:46] Speaker 03:
Can I ask you, when you were distinguishing my examples of statute of limitations, your argument was that none of them

[00:29:53] Speaker 03:
None of those cases preserve ongoing effect of past actions, right?

[00:29:58] Speaker 04:
Essentially, yes.

[00:29:59] Speaker 03:
So in the Ledbetter case, the Supreme Court held that each new discriminatory pay is a separate item subject to the statute of limitations, notwithstanding the fact that it could be affected by discrimination that occurred outside of the time period.

[00:30:22] Speaker 03:
and so that you were not allowed to make an argument that discrimination outside the time period affected the future ones and therefore go back and correct that.

[00:30:33] Speaker 03:
Why isn't that the same?

[00:30:35] Speaker 03:
Maybe even worse because we're talking about sex and race discrimination in that circumstance rather than just lack of payment for medical costs.

[00:30:46] Speaker 04:
I'm not familiar with the letter of case, Your Honor, but I would

[00:30:51] Speaker 04:
just emphasize that the nature of the Medicare reimbursement system is such.

[00:30:58] Speaker 04:
that, and particularly in the prospective payment system part of it, that each year is a new year for that hospital.

[00:31:08] Speaker 04:
And so using other examples that the courts are aware of, for example, GME or the caps on the number of residents, there's a formula that's baked in from a base year, and that has implications in the future.

[00:31:21] Speaker 04:
So each and every year in the future,

[00:31:23] Speaker 04:
that formula is going to impact the reimbursement that year.

[00:31:26] Speaker 04:
It's a brand new reimbursement for us.

[00:31:29] Speaker 03:
The same thing is true for a woman whose current pay is lower than the men's because of discrimination that occurred

[00:31:42] Speaker 03:
five years ago, eight years ago, and yet she can't complain under the, Congress overruled that by statute, but the Supreme Court in reading that statute said that she can't complain about those past acts, those are past acts, even though they affect the present.

[00:32:00] Speaker 03:
And here the agency is saying, this happened a very long time ago, it could have been corrected sometime in the interim, you could have done it within three years, actually you could have done it all the way

[00:32:12] Speaker 03:
before they passed this new regulation.

[00:32:15] Speaker 03:
And that would have corrected forever for the prospective.

[00:32:18] Speaker 03:
But you didn't.

[00:32:19] Speaker 03:
That is bad.

[00:32:21] Speaker 03:
But on balance, our system puts a high value on repose.

[00:32:29] Speaker 03:
And that's what they've done here because of the problems that

[00:32:33] Speaker 03:
Judge Katz was talking about the difficulties of going back that far.

[00:32:38] Speaker 03:
So my only question is why isn't that, I know it's not the one you want, but the question is why isn't that reasonable?

[00:32:43] Speaker 03:
How can it be unreasonable to put so much value on a value repose that our system obviously puts high, even sometimes higher than race or sex discrimination?

[00:32:58] Speaker 04:
and not to minimize the very importance of that issue, and I'm not familiar with that case.

[00:33:04] Speaker 04:
But my reply, this court in the Cape Cod case stated affirmatively that it's not a reasonable or permissible construction of the Medicare statute to embed errors indefinitely into the future.

[00:33:16] Speaker 04:
That's what we're relying on, Your Honor.

[00:33:18] Speaker 06:
I mean, if Congress passed a statute doing so,

[00:33:20] Speaker 06:
Then it'd be like the lead better case if Congress passed the statute that said you couldn't that absolutely challenge the predicate facts after the question here is the exercise of agency discretion not reading a statute that precludes the challenge and the question ends whether it's reasonable and

[00:33:38] Speaker 06:
Judith Garland raises a good point.

[00:33:40] Speaker 06:
The law often puts a period of repose or says that certain old facts can't be challenged.

[00:33:48] Speaker 06:
The question here is whether it's reasonable and what the agency's reasons are.

[00:33:51] Speaker 04:
And to respond to that, Your Honor, the agency has argued this same issue the other way multiple times, the Regents case, the Health East case that we cite in our briefs.

[00:34:02] Speaker 04:
So the holding finality up as sort of a talisman

[00:34:06] Speaker 04:
that nothing else can surmount that is not reasonable.

[00:34:11] Speaker 04:
And Kate Codd was quite clear that you can't do that if it's going to simply lock in permanent errors into the system.

[00:34:19] Speaker 04:
These are not one-off claims.

[00:34:21] Speaker 04:
They're claims that reassert themselves each and every year.

[00:34:24] Speaker 04:
And we believe that the Secretary inappropriately calculated the standardized amount originally.

[00:34:33] Speaker 04:
failed to, even though he disagreed with the Kaiser case, failed to publish a regulation that applies to our hospitals who didn't ask to reopen any of their cost reports.

[00:34:43] Speaker 04:
And even though I didn't have a chance to get to this in the argument, the secretary clearly didn't satisfy the twin statutory formulas for applying the rule retroactively.

[00:34:53] Speaker 03:
Can I ask a wonderful question on that, just on the retroactivity and what you regard as retroactive?

[00:34:58] Speaker 03:
Is the only thing that you're regarding as retroactive here the application to pending cases or is it also retroactive for a regulation issued in 2013 to affect a cost year which is already finished even though

[00:35:16] Speaker 03:
the hospital hasn't yet filed its request for reimbursement.

[00:35:21] Speaker 03:
So just as a hypothetical, the issue in 2013, there's the cost year of 2012, the hospital hasn't yet filed for whatever reason, and the 2013 rule is now going to affect its ability to

[00:35:36] Speaker 03:
Is that also retroactive in your view?

[00:35:40] Speaker 04:
No.

[00:35:41] Speaker 04:
If I can restate it, I would argue that the cost reporting period that has been completed but has not been appealed in any kind of way by the provider, the 2013 amendment could apply to that.

[00:35:55] Speaker 04:
have a retroactive effect to those providers.

[00:35:58] Speaker 04:
It's the fact that we had already filed our appeals years before.

[00:36:01] Speaker 03:
So it's only because of the fact that you filed your appeals?

[00:36:03] Speaker 03:
Correct.

[00:36:04] Speaker 03:
So I was just wondering, I'm not asking you to expand your claim, but I'm just wondering about that.

[00:36:10] Speaker 03:
It does mean that if it applies with respect to the way in which we had decided Kaiser,

[00:36:19] Speaker 03:
that you now won't be able to get the money that you would have otherwise been able to get it for a year that's already passed.

[00:36:27] Speaker 03:
That is the consequence of a rule from 2013 that applies to cost years where there hasn't even been an appeal.

[00:36:34] Speaker 04:
And that's the nature of the appeal process and the cost reporting process.

[00:36:37] Speaker 04:
But you don't regard that as retroactive.

[00:36:39] Speaker 04:
That's a prospective issue.

[00:36:40] Speaker 04:
That's correct.

[00:36:41] Speaker 04:
But we obviously argue that the rule is impermissibly.

[00:36:44] Speaker 04:
No, I understand.

[00:36:45] Speaker 04:
It can't be applied prospectively.

[00:36:48] Speaker 03:
All right, we'll hear from the other side.

[00:37:01] Speaker 01:
May it please the Court, Melissa Patterson for the Secretary.

[00:37:03] Speaker 01:
I think it would be helpful to start with the idea of repose.

[00:37:09] Speaker 01:
The Secretary here has instituted a regulation that says

[00:37:14] Speaker 01:
Many years after an error was made, you can't go back and ask us to change that error.

[00:37:22] Speaker 01:
At some point, there is a limitations period.

[00:37:25] Speaker 06:
They're not trying to reopen cost reports.

[00:37:29] Speaker 06:
They're not trying to reopen closed cost reports.

[00:37:32] Speaker 01:
Not in that sense, Governor, but they are trying to reopen a determination made many, many cost reports ago.

[00:37:39] Speaker 06:
So, but isn't it, I would have thought the definition of arbitrary capricious is for the government to come in and say, we are going to knowingly use a false fact in perpetuity to calculate how much money you're owed.

[00:37:54] Speaker 06:
That would seem inherently unreasonable unless

[00:37:58] Speaker 06:
the government could say it's not false or there's no way for us to figure out whether it's false.

[00:38:06] Speaker 01:
I think we're getting close to the merits here.

[00:38:08] Speaker 01:
Just as an initial matter, I want to make clear, the board did not actually engage with the merits of the claim under WWD2A.

[00:38:16] Speaker 06:
I understand, but why isn't it inherently arbitrary and capricious for the government to come and say, we are going to bar challenges to predicate facts, thereby permanently enshrining in a formula that costs, that has hundreds of millions of dollars in the facts, a false fact that could be corrected?

[00:38:35] Speaker 06:
And that could be corrected as key as applied to particular cases.

[00:38:39] Speaker 06:
But even if it could be corrected, the government's saying, forget about it.

[00:38:43] Speaker 06:
We made a mistake once, so in perpetuity.

[00:38:46] Speaker 01:
I don't think that's quite the setup here, Your Honor.

[00:38:48] Speaker 01:
Suppose that the government, as you seem to be positing and I think as appellant said, proclaimed in 1983, we have made an error and yet we are baking that into the formula.

[00:39:00] Speaker 01:
Everyone who was a provider then would have had ample notice and... What about providers who weren't around then?

[00:39:06] Speaker 06:
Do they have a separate rule then?

[00:39:07] Speaker 06:
If they weren't around then, you can challenge it?

[00:39:09] Speaker 01:
No, Your Honor, but I think the idea that if you come into the system after a number has sort of been hardwired into the formula, and remember, this is part of a system designed to peg all future reimbursements to a determination made in 1983,

[00:39:22] Speaker 01:
I think it's hard for you to say I wasn't on notice about what that variable in the formula would be, that I thought I would have a chance to turn that constant into a variable.

[00:39:33] Speaker 01:
I'm not talking retroactivity.

[00:39:33] Speaker 06:
You're on notice.

[00:39:34] Speaker 06:
You just think it's wrong.

[00:39:36] Speaker 06:
It's wrong for me to be forced to receive millions of dollars less

[00:39:42] Speaker 06:
because of something that we all know is a mistake, and that could be corrected.

[00:39:47] Speaker 01:
That just... Governor, I do want to push back on the all know that this is a mistake.

[00:39:51] Speaker 01:
Again, the merits have not been addressed.

[00:39:52] Speaker 06:
The government very much thinks... But we can assume, but you would, even if we all do know it's a mistake, you're going to say the same rule applies, correct?

[00:39:58] Speaker 01:
I am your honor, because we think that there is consistent with the idea of repose.

[00:40:04] Speaker 01:
You have three years.

[00:40:05] Speaker 05:
So saying that the merits haven't been decided is really a little bit misleading, right?

[00:40:11] Speaker 05:
Because on your view, the merits never will be decided.

[00:40:15] Speaker 01:
I don't want to leave any impression that we concede that there was some sort of problem with the way we implemented the 1983 perspective payment system with the calculations we did back in 1983.

[00:40:27] Speaker 01:
My point to Judge Kavanaugh is that if this court were to decide that the regulation did not bar these appeals for whatever reason, the proper course would be to remanage the agency for further proceedings

[00:40:39] Speaker 01:
such that the agency could then engage with that.

[00:40:41] Speaker 01:
Again, we – at which point we would defend our implementation of DTA.

[00:40:47] Speaker 06:
We said in Kaiser that the Supreme Court and regents had – the Secretary had recognized the absurdity of allowing a mistake in a base year calculation to be perpetuated indefinitely due to the time limit on reopening.

[00:41:00] Speaker 01:
I think that if you read regions, your honor, there actually is a different lesson to be taken.

[00:41:04] Speaker 01:
In regions, recall, the providers were the ones saying, no, no, these years are closed.

[00:41:11] Speaker 01:
You cannot go back and reopen.

[00:41:13] Speaker 01:
You can't re-audit the data.

[00:41:14] Speaker 01:
If there's errors, those errors are baked in.

[00:41:18] Speaker 01:
In an exercise of discretion, the Secretary enacted a targeted regulation that departed from what we consider to be the background rule that after three years, those determinations are closed.

[00:41:29] Speaker 01:
But even with an only five-year gap in Regions, it was a matter of 1984 data that was subject to a 1989 re-auditing regulation, the Supreme Court specifically noted the validity of concerns about fading memories, about

[00:41:45] Speaker 01:
lost documentation, and it went through an analysis to decide whether or not the regulation, the re-auditing regulation the Secretary had put forth was reasonable despite that concern about stale evidence.

[00:41:58] Speaker 06:
The Secretary was the one there arguing that should not be a concern.

[00:42:02] Speaker 01:
Yes, and we had to justify why in that particular context, and remember... But here, this is my concern about the rule, is that as far as any

[00:42:12] Speaker 06:
examination of something that could be easily corrected and

[00:42:18] Speaker 06:
then you would push back on the merits if we went back to the secretary.

[00:42:22] Speaker 06:
This is what I was getting at with my questions.

[00:42:24] Speaker 06:
Justify yourself.

[00:42:25] Speaker 06:
Could this be corrected or it really can't be corrected?

[00:42:30] Speaker 06:
Now, you have some boilerplate language about staleness and records, but I don't know if that's true or not.

[00:42:36] Speaker 06:
It's not explained in any way.

[00:42:38] Speaker 06:
Maybe it is true, maybe it's not, but as to the facts here,

[00:42:43] Speaker 06:
It seems questionable because of the correction to the discharge transfer figure that was done in the other part of the system.

[00:42:52] Speaker 06:
But you would say it doesn't matter, even if we knew that it was wrong, and even if it was easily corrected, and even if for a particular predicate fact, we had it right here.

[00:43:04] Speaker 06:
We could do it in 10 minutes and correct it, and it would be hundreds of million dollars.

[00:43:07] Speaker 06:
You would still say that can't be challenged, and that's perfectly reasonable?

[00:43:10] Speaker 01:
Yes, and let me explain why, Your Honor.

[00:43:12] Speaker 01:
If it were really so evident that there was some sort of error, if we had said, this is wrong and we're going to use it anyway, we have tens of thousands of providers out there who have not only 180-day to appeal, and recall that in both Auburn Regional and your home, the Supreme Court specifically said, these are sophisticated providers who are fully capable with 180-day finding errors.

[00:43:40] Speaker 06:
And second- What if the error only became

[00:43:41] Speaker 01:
appearance later is question one variation and what if it's a provider that wasn't around at the time able to protect its right and here's the second part of my answer your honor which is that the perspective payment system is designed to promote predictability you're supposed to take a number an unchanging number and carry it forward every year I want to note that this is not congress didn't say that congress did not say that congress said look at the discharges

[00:44:08] Speaker 06:
and that the Secretary erred by counting transfers as discharges.

[00:44:12] Speaker 06:
Congress didn't say freeze false facts indefinitely.

[00:44:15] Speaker 01:
And then Congress said, take that standardized amount calculation that results from the aggregated allowable costs per discharge and carry it forward every year, update it only for inflation.

[00:44:25] Speaker 01:
And I want to note that this is a two-way street, Your Honor.

[00:44:28] Speaker 01:
We have bound ourselves

[00:44:31] Speaker 01:
If we find an error and we say, oh gosh, we have been overpaying people, the new regulation ties our hands from going back and clawing back amounts paid previously.

[00:44:42] Speaker 06:
Do you think it helps to say that the government is binding itself to throwing away hundreds of millions of dollars of its own if we made a mistake in the formula?

[00:44:49] Speaker 06:
I just think that compounds the problem.

[00:44:52] Speaker 01:
Your Honor, I think that it shows that the Secretary is serious when she says or even handed in saying that there is real value in propose and predictability in this scheme.

[00:45:06] Speaker 01:
If we have the standardized amount that undergirds every single inpatient prospective payment system payment,

[00:45:13] Speaker 01:
across decades and tens of thousands of providers changing and changing year to year.

[00:45:19] Speaker 01:
Remember the theory here is that every time it gets carried forward, that restarts your clock to challenge it.

[00:45:27] Speaker 01:
So suppose these providers

[00:45:28] Speaker 01:
Were to succeed on this appeal and suppose they got a remand and suppose the board said yeah We're gonna change the standardized amount that would happen once the sky is falling if that happens that would mean that every other Provider who thinks that they have come up with a new data set that's been in a closet since 1981 Could also force a change that means that force a change in what?

[00:45:49] Speaker 01:
Standardized in the standardized amount such that we would have an ever-shifting standardized amount it also means that the government is

[00:45:56] Speaker 06:
You really think those would be successful?

[00:45:58] Speaker 06:
The point, the reason this comes up is because we know it's wrong.

[00:46:02] Speaker 01:
I disagree, Your Honor.

[00:46:03] Speaker 01:
We do not know it's wrong.

[00:46:04] Speaker 01:
And that, again, is a merits matter that has not been determined yet.

[00:46:08] Speaker 06:
But even if we know it's wrong, it's not going to be able to be corrected.

[00:46:10] Speaker 01:
Even if we know it's wrong, it's been hardwired into the formula for 30 years at this point.

[00:46:14] Speaker 01:
And I think it is notable that Congress is certainly not inattentive to the Medicare statute and not inattentive to prospective payment system payments here repeatedly against the backdrop of a static standardized amount

[00:46:27] Speaker 01:
Congress has tinkered with this program, I think it would come as quite a surprise that now the Secretary is unreasonable.

[00:46:36] Speaker 06:
Did Congress freak out when Kaiser came down?

[00:46:39] Speaker 01:
They did not but of course there were no immediate consequences because they didn't well Kaiser did not purport to Kaiser addressed only the regulatory language as it existed at the time There was no statutory analysis and let the secretary free as the secretary then chose to do to engage in a new rulemaking that made clear that in the secretary's view that

[00:47:01] Speaker 01:
these types of challenges are not evergreen.

[00:47:03] Speaker 01:
You get three years to challenge them and then at that point everybody, the government can't change them, providers can't change them.

[00:47:10] Speaker 01:
It's a fixed constant.

[00:47:11] Speaker 05:
If we accept your friend's concession that it's the burden will always lie on the challengers to show error, why doesn't the difficulty of showing error of facts that happened 35 years ago, why doesn't that just underscore the narrowness of this and answer your finality and repose concerns to the extent that lots of challengers can bring

[00:47:41] Speaker 05:
challenges and almost all of them will fail because they can't meet their burden of showing error 35 years ago.

[00:47:50] Speaker 01:
Well, first, I think that that would entail a quite high level of administrative burden.

[00:47:55] Speaker 01:
And the Supreme Court in Auburn Regional said, listen, when the secretary is interpreting statutes here, we need to pay attention to her expertise in running this massive program.

[00:48:06] Speaker 01:
When she said that the appeal deadline was subject to no more than a three-year good cause, and this court, I think, had said it was subject to equitable tolling,

[00:48:17] Speaker 01:
The Supreme Court said, we are going to defer to the Secretary's interpretation of this very provision of the appeal right at 1395-00.

[00:48:24] Speaker 01:
I think it's important to recollect that that is the, I think, the statute on which they are hinging the idea that their appeal rights are somehow being truncated contrary to a statute.

[00:48:38] Speaker 01:
That statute does not say you get to challenge an error however long ago it was made.

[00:48:44] Speaker 01:
That statute says you may appeal an intermediary's decision with respect to a cost report.

[00:48:51] Speaker 01:
And in a very real sense, these are not errors within a cost report, which is a one-year period subject to a 180-day appeal challenge.

[00:49:00] Speaker 01:
It is somewhat startling to say that by enacting that scheme,

[00:49:04] Speaker 01:
Congress thought you essentially were going to have an unlimited opportunity to challenge that.

[00:49:09] Speaker 05:
Well, since you bring up the appeal statute, let's go back to the first issue in the case, which is whether the regulation even covers appeals.

[00:49:20] Speaker 05:
Your brief does a very effective job of aligning the preamble, which is very helpful for you, with the actual text, the regulation, which is not so helpful to you.

[00:49:35] Speaker 05:
I have to say, I just don't see how this regulation in the context of this scheme can be read to cover appeals.

[00:49:48] Speaker 05:
Appeals and reopenings are very different schemes, and the reopening regulation recognizes that.

[00:49:56] Speaker 01:
Your honor, I'm happy to walk through the text of the statute, or the regulation, but I think it is helpful to note, and this goes to a question that Chief Judge Garland asked, is that the preamble here, it is part of the very rulemaking.

[00:50:10] Speaker 01:
It was done through not noticing comment.

[00:50:12] Speaker 05:
But it doesn't have the force and effect of law.

[00:50:16] Speaker 05:
You still need an argument why the position in the preamble is at least a minimally reasonable reading of the regulation.

[00:50:25] Speaker 01:
You do, and so I think that the only argument they have is that our interpretation of the statute is flatly inconsistent with the plain language.

[00:50:34] Speaker 01:
I also want to note, I know that there is some... No, no, he's talking about the regulation.

[00:50:38] Speaker 03:
That's what you meant, I think.

[00:50:39] Speaker 01:
I did mean the regulation.

[00:50:40] Speaker 01:
I apologize, Your Honor.

[00:50:41] Speaker 01:
I know the law of the circuit under Grossmont Hospital is that you defer to reasonable interpretations of the Secretary's interpretations of the regulations.

[00:50:52] Speaker 01:
I think that the concerns that often arise with that regime are when an agency is trying to post-hoc narrow.

[00:50:59] Speaker 05:
Yeah, I understand.

[00:50:59] Speaker 05:
I mean, we can talk about whether to adjust the level of our deference depending on whether it's

[00:51:09] Speaker 05:
a preamble or a 10 years later, a sub-regulatory document.

[00:51:14] Speaker 05:
I get that, but you still have to have some textual basis for extending this regulation from reopenings to appeals.

[00:51:24] Speaker 05:
The statutory and regulatory structure seems crystal clear that an appeal is one kind of thing and a reopening is another kind of thing.

[00:51:36] Speaker 05:
Appeals go from one decision maker to another.

[00:51:39] Speaker 05:
They are statutory.

[00:51:43] Speaker 05:
They have their own limitations period.

[00:51:47] Speaker 05:
They are just different.

[00:51:49] Speaker 01:
But they have always been understood to intersect.

[00:51:51] Speaker 01:
And this court's analysis in Kaiser, I think, sets the backdrop here.

[00:51:56] Speaker 01:
The court, if it had been so clear that the reopening regulation just didn't intersect with your appeal rights, recall that the challenges there were also brought through the appeal mechanism.

[00:52:06] Speaker 01:
But the court didn't say, why are we talking about this reopening regulation?

[00:52:11] Speaker 05:
And when the government

[00:52:13] Speaker 05:
I think Kaiser was all about the old appeal regulation, but when the government lost Kaiser, the upshot was that providers could take appeals through the separate appeal mechanism.

[00:52:28] Speaker 01:
I'm not sure if you misspoke there.

[00:52:30] Speaker 01:
The Kaiser was all about the old reopening.

[00:52:32] Speaker 02:
I'm sorry, yeah, right.

[00:52:34] Speaker 01:
It was.

[00:52:34] Speaker 01:
And so the secretary explained that she was changing.

[00:52:37] Speaker 01:
The problem Kaiser identified was not that somehow reopening regulations had no intersection with the appeal, that somehow you could be

[00:52:45] Speaker 01:
in your appeal time but outside your reopening window.

[00:52:48] Speaker 01:
The problem was that the regulation then did not encompass predicate facts this court found.

[00:52:54] Speaker 01:
And so what did we do?

[00:52:55] Speaker 05:
We went back and we added a definition that said a specific finding... A definition of predicate facts which operates to narrow the statute of limit, the three-year statute of limitations that applies to reopenings

[00:53:15] Speaker 05:
not to be confused with the separate statutory, I think it's 180-day, statute of limitations for statutory appeals.

[00:53:24] Speaker 01:
So here's where it might be helpful to turn to the text.

[00:53:26] Speaker 01:
Sure.

[00:53:26] Speaker 01:
And I'm looking at subsection A1, Romanet 3.

[00:53:30] Speaker 05:
You're in 1885?

[00:53:31] Speaker 05:
I am, yes, Your Honor.

[00:53:33] Speaker 05:
Okay.

[00:53:34] Speaker 05:
Three, right, which is, as far as I can tell, the only textual reference to appeals in the amendment, correct?

[00:53:42] Speaker 01:
I believe that is correct, but I think it has to be read, and if you put the pieces together, so in Roman at 3, it says, I'm looking at the parenthetical, in an appeal filed or a reopening requested, and what that modifies is

[00:53:58] Speaker 01:
the period at issue, if what you are complaining about in the period at issue, in the cost report that's still open, whether through an appeal or through a reopening is a predicate fact, it is subject to the time limitations in subsection B. This is the definition of predicate facts, right?

[00:54:17] Speaker 01:
Yes.

[00:54:18] Speaker 05:
It says the predicate fact can be determined in an adjudication that happened

[00:54:24] Speaker 05:
is a determination through an adjudication that happened some time ago, right?

[00:54:30] Speaker 05:
The question arises about the 1984 data, and it is initially determined, let's say, in an adjudication in 1985, 1986, whatever.

[00:54:43] Speaker 05:
This parenthetical tells you that can be determined in a 1985 reopening or a 1985 appeal.

[00:54:52] Speaker 05:
It makes it a predicate fact.

[00:54:54] Speaker 05:
That's all that does.

[00:54:56] Speaker 01:
I think that the in an appeal filed or reopening requested modifies the period at issue, and the period at issue is the period at issue in a reopening request.

[00:55:08] Speaker 01:
Recall that subsection B24 makes clear that you calculate the three-year limit for each predicate fact separately.

[00:55:18] Speaker 01:
So read together, I think these provisions

[00:55:21] Speaker 01:
mean when what you are complaining about, when the period at issue that you are complaining about, whether through an appeal or through a reopening, is a predicate fact.

[00:55:32] Speaker 01:
You calculate the limitations period by virtue of subsection B24 separately.

[00:55:39] Speaker 05:
The period at issue here is something proximate to the present, right?

[00:55:44] Speaker 05:
It's 15 or 16 or 17, right?

[00:55:47] Speaker 05:
It's the cost report

[00:55:49] Speaker 01:
2002 through 2015, Your Honor.

[00:55:52] Speaker 05:
Okay, so the cost report for which they're seeking compensation.

[00:55:57] Speaker 01:
Yes.

[00:55:58] Speaker 05:
Right?

[00:56:00] Speaker 05:
And the predicate fact is something... That was determined before that.

[00:56:04] Speaker 05:
Determined before that.

[00:56:05] Speaker 05:
So for discharges and transfers, presumably, that's some... Now we're back to the early 80s for that.

[00:56:13] Speaker 05:
Yes.

[00:56:17] Speaker 05:
I don't see what this does other than tell you that the initial determination here in the early 80s can happen through an appeal or a reopening.

[00:56:31] Speaker 05:
I don't see how that impacts the question here whether a statute of limitations that on its face addresses reopening should be extended to the separate scheme for appeals.

[00:56:45] Speaker 01:
Well, Your Honor, we may just be reading the parenthetical differently.

[00:56:48] Speaker 01:
I think properly read and certainly as the Secretary unambiguously expressed in the preamble is that it is supposed to cut off challenges to a predicate fact unless they are through a timely appeal of the first cost period when they arose or were determined or applied in this particular way.

[00:57:09] Speaker 01:
And so, to the extent that this regulation is ambiguous, and I do want to note that Judge Bates determined that, properly read as a whole, this regime was unambiguous.

[00:57:20] Speaker 06:
He was counting a preamble on that.

[00:57:23] Speaker 01:
I think that he did a preamble, and we think properly took it into account.

[00:57:26] Speaker 01:
I think in the next paragraph, he then goes on to say, in any event, plaintiffs are simply understanding how these provisions intersect.

[00:57:35] Speaker 01:
And again, against the backdrop of Kaiser, where the problem was, your regulation just doesn't even apply to predicate facts.

[00:57:44] Speaker 06:
It is very clear what the Secretary was trying to accomplish by adding- Why is it so messy then to pick up on Judge Katz's point?

[00:57:52] Speaker 06:
This is an easily understood situation where the language could have been clearly articulated in the regulation, but it's not.

[00:58:01] Speaker 06:
What happened?

[00:58:03] Speaker 01:
Your Honor, I think agencies can always be clear.

[00:58:06] Speaker 01:
I do think it's helpful to remember two facts.

[00:58:07] Speaker 06:
That's always true, and that's true of judges too, but this is particularly botched.

[00:58:12] Speaker 06:
We shouldn't be having this argument if Kaiser was the backdrop and given the preamble.

[00:58:17] Speaker 01:
I think two facts are important to remember.

[00:58:20] Speaker 01:
One, while this certainly does cover the particular scenario at issue in Kaiser, this regulation covers huge swaths of activities.

[00:58:31] Speaker 01:
It's not only intermediary determinations, it's secretary determinations, it's board determinations.

[00:58:35] Speaker 01:
So the idea that the phrasing may be not entirely lucid as applied to this situation, I don't think should surprise anyone when the Secretary is having to regulate across such a wide spectrum of different types of decisions.

[00:58:48] Speaker 01:
And second, this was put out, I think, several months after the Kaiser decision was issued.

[00:58:54] Speaker 01:
The notice of proposed rulemaking, I think, came out in July of that year, I think three or four months after the Kaiser decision.

[00:59:00] Speaker 01:
So I think it would be a little

[00:59:03] Speaker 01:
unfair to say, well, we know exactly what you are trying to do, agency, and maybe there's a way that you can read the references to appeal here to get there, but we're just not going to believe you when you said and when you committed yourself.

[00:59:15] Speaker 01:
Recall that this is an interpretation of the statute promulgated through notice and comment rulemaking.

[00:59:20] Speaker 01:
The agency thinks if it's going to deviate from this rule by which it has found itself and binds providers, I think it would have to go through notice and comment rulemaking again.

[00:59:29] Speaker 01:
I don't think it could come in with a subnotice and comment rulemaking interpretation to kind of

[00:59:34] Speaker 01:
yank the rug out from people here.

[00:59:35] Speaker 01:
So in this instance, I think it would be very strange to say, well, we just don't know what the secretary means.

[00:59:41] Speaker 01:
The secretary didn't mean it to apply appeals.

[00:59:44] Speaker 01:
As the district court found, it is crystal clear that the secretary was trying to get at both appeals and reopenings through this change.

[00:59:51] Speaker 05:
To me, the parenthetical actually hurts your case because it underscores what other parts of 1885

[01:00:02] Speaker 05:
confirm, which is that appeals and reopenings are different.

[01:00:07] Speaker 01:
Yes, Your Honor, but by referring to appeals, if the period at issue that you are complaining about, whether through an appeal or through a reopening, is about a predicate fact, the time starts for that predicate fact as of the date it was issued.

[01:00:21] Speaker 05:
If that were true, then the government should have won Kaiser on the alternative ground that even apart from the terms of the old 1885 regulation,

[01:00:36] Speaker 05:
The appeal isn't challenging the reported issue because to the extent it's trying to go back and determine a predicate fact, which you say is not really in the cost report.

[01:00:52] Speaker 01:
I don't think any of that language was in the regulation at the time.

[01:00:57] Speaker 01:
Recall that we thought it already said that.

[01:00:59] Speaker 01:
We thought that the finding on a matter at issue already encompassed, already swept in predicate facts.

[01:01:05] Speaker 05:
No, but the statute for appeals to the PRRB talks about the period covered by the report.

[01:01:15] Speaker 05:
And your answer to their argument why the regulation is inconsistent with the statute is to say, well, period covered by the report just means

[01:01:27] Speaker 05:
the cost period insofar as it challenges newly arising factual questions.

[01:01:35] Speaker 05:
If you're using a 2015 cost report to re-adjudicate a 1984 predicate fact, you say, well, that's not really a 2015 cost report at that point.

[01:01:50] Speaker 01:
Well, Your Honor, we're looking at slightly different phrasings in the statute, and I don't think that the Secretary

[01:01:56] Speaker 01:
In referring to the period at issue and Roman at three necessarily was.

[01:02:03] Speaker 01:
was harkening back to the with respect to such cost report.

[01:02:08] Speaker 01:
I certainly think that that reflects a permissible understanding of the appeal statute, that the appeal statute does not give you an unfettered right, an unfettered clock that restarts every year in the prospective payment system.

[01:02:22] Speaker 01:
But I don't think the secretary, by using these somewhat different words to refer to the period at issue, was importing the same definition

[01:02:29] Speaker 01:
of 1395-00.

[01:02:31] Speaker 01:
I do want to make the point that the district court did not consider the appeal right in 1395-00 and that is because it was not actually challenged at that point.

[01:02:43] Speaker 05:
I understand that and I agree with your waiver point and they don't have a freestanding statutory argument in the appeal, but I also think that the structure

[01:02:55] Speaker 05:
of that statute which defines appeals, PRRB appeals as a creature wholly separate from reopenings has some bearing on how we read the reopening reg.

[01:03:07] Speaker 01:
It may have some bearing on it, Your Honor, but I think, again, filtered through the preamble, which is the Secretary's definitive interpretation that this language should not be interpreted to allow appeals to go forward when that clearly was not the Secretary's intent.

[01:03:23] Speaker 01:
And I do want to note, if the Court thinks that this language didn't do what the Secretary thought it did,

[01:03:30] Speaker 01:
The appropriate thing to do would be to remand to the agency for further proceedings, and it is possible the Secretary would have another crack at it at that point, since we know exactly what the Secretary wanted to do and the reasons that the Secretary thought that that was the best way to run the Medicare reimbursement appeal challenge.

[01:03:47] Speaker 06:
We usually remand for explanation.

[01:03:49] Speaker 06:
We don't remand for fixing the regulation.

[01:03:52] Speaker 01:
You could also remand for, you know, I think that if it took the course it did in Kaiser, the court simply said remand for further agency proceedings.

[01:04:01] Speaker 01:
If you were to determine that this regulation did not apply to appeals on its face, you would remand, the board would presumably

[01:04:10] Speaker 01:
restart the appeal process that was halted when it decided it lacked jurisdiction under this appeal.

[01:04:17] Speaker 01:
But as in Kaiser, I think that would leave the secretary free to use her discretion and to put out a regulation that perhaps more clearly did what she thought it did.

[01:04:28] Speaker 06:
You're talking about what the district court said in Kaiser?

[01:04:31] Speaker 01:
I believe that this court affirmed the district court's remand for further agency proceedings.

[01:04:37] Speaker 06:
It just says affirmed.

[01:04:40] Speaker 01:
I think earlier in the decision it says that the district court remanded for further agency proceedings and that would be the appropriate remedy here as well.

[01:04:47] Speaker 03:
I have two questions.

[01:04:52] Speaker 03:
Are there hospitals that might have relied on the allocation as it was to make determinations of what kind of patients to admit or not admit, what kind of cost to spend or not spend, and that might be now at a disadvantage for having made those business decisions if we were to go the way that the practitioners want?

[01:05:14] Speaker 01:
I think that is a risk, Your Honor, especially because the plaintiff's theory here would open it up to the secretary to also start deciding that there were errors or inaccuracies in the standardized amount.

[01:05:28] Speaker 01:
And so to the extent that their position as the statute requires anyone to be able to make these sorts of changes, I think it very much would hurt hospitals and the Medicare system who are trying to project their cost into the future.

[01:05:42] Speaker 06:
How?

[01:05:43] Speaker 01:
I think, well, there are a lot of different variables in these formulas, Your Honor, but one thing has always been understood to be fixed, and that is the baseline.

[01:05:51] Speaker 01:
Here it's the standardized amount.

[01:05:52] Speaker 01:
But these sorts of baseline where Congress says take a certain year and then inflate from there, those have been understood to be unchanging.

[01:06:02] Speaker 01:
They're supposed to be unchanging.

[01:06:03] Speaker 01:
And so I think if we all got into the business of tinkering with those numbers, you would be undermining to some extent the predictability that Congress intended this system to bring.

[01:06:19] Speaker 03:
When we say more accurate, we mean in 1982 or whatever the year was.

[01:06:25] Speaker 03:
Is that right?

[01:06:27] Speaker 01:
I'm not sure I understand the question.

[01:06:28] Speaker 03:
Well, when Judge Kavanaugh says or when the petitioners argue that that base year was inaccurate, that was a long time ago with respect to what the number, even if they are completely correct, even if the petitioners are completely correct, the allocation between discharges and transfers was whatever it was in that year, right?

[01:06:48] Speaker 01:
Yes, I think that's right.

[01:06:49] Speaker 03:
It's not what it is in this year.

[01:06:50] Speaker 03:
It's not what it was any time in the 20 years after that.

[01:06:53] Speaker 03:
That's correct.

[01:06:53] Speaker 03:
It's just a number.

[01:06:55] Speaker 01:
It is just a number.

[01:06:56] Speaker 03:
It could have been a number not based on transfers and allocations.

[01:06:59] Speaker 03:
Congress could have said $10.

[01:07:01] Speaker 06:
That's what Congress chose, though.

[01:07:02] Speaker 01:
It did.

[01:07:03] Speaker 06:
Maybe Congress's mistake to pick something that makes no sense, but that's what they picked, and the question is whether the agency has to stick with that or can dump it.

[01:07:14] Speaker 01:
Well, Your Honor, I don't want to go too far down the merits.

[01:07:15] Speaker 01:
Again, those have not been adjudicated by the board, but I do want to point out that the statute says that the agency is to use the most current data available.

[01:07:24] Speaker 03:
We're on a different subject.

[01:07:26] Speaker 03:
My question is, are there hospitals that arrange their own allocation of patients based on what they thought was a fixed number, who, if it now turns out that number is not fixed, might be disadvantaged?

[01:07:42] Speaker 03:
They made business decisions.

[01:07:44] Speaker 03:
They built things.

[01:07:45] Speaker 03:
They put in operating rooms, or they didn't.

[01:07:48] Speaker 03:
They brought in students to study, or they didn't, based on what they understood, how much they would be reimbursed for.

[01:07:57] Speaker 03:
And if that's changed, would that, for some of them anyway, would it be a disadvantage to them?

[01:08:05] Speaker 01:
I think that is a real possibility, Your Honor, yes.

[01:08:07] Speaker 06:
Where on the record is that explanation?

[01:08:10] Speaker 01:
It doesn't say that, Your Honor, but it does say that the Secretary did note both the Medicare programs and providers' interest in repose in these issues, and it goes on to note in response to the comments that say, well, you're just throwing accuracy under the bus, and we don't

[01:08:26] Speaker 01:
We don't think this is the way to go.

[01:08:29] Speaker 01:
They explained that at some point, both providers and the Medicare program should be able to close their books and know what a fixer-butt is.

[01:08:37] Speaker 06:
I don't discount that, but as I said to the plaintiff's counsel, I don't really see that explained in the way Chief Judge Garland just explained it.

[01:08:48] Speaker 06:
He did a better explanation than I see in what the agency did.

[01:08:53] Speaker 06:
I don't see this spelled out.

[01:08:55] Speaker 06:
In terms of the sky is falling repercussions, I just see a conclusory repose balanced against accuracy.

[01:09:04] Speaker 06:
And I don't know if it's hard or not hard to change these things.

[01:09:09] Speaker 06:
Maybe certain ones can be changed and certain ones can.

[01:09:11] Speaker 06:
Maybe we shouldn't allow any of them to be changed because, but I don't see the because explained.

[01:09:16] Speaker 01:
Well, Your Honor, I think the Secretary thought that by noting the problems of stale evidence against the backdrop of regents, which noted that that was a problem even for a five-year gap.

[01:09:27] Speaker 01:
And here, of course, the Secretary is looking back over 30 years to all sorts of predicate facts that have been determined along the way for different statutory regimes and said there is a problem that documents are no longer available, witnesses are no longer available.

[01:09:42] Speaker 01:
And at JA 1317, the Secretary does

[01:09:45] Speaker 01:
clearly spell out that concern.

[01:09:48] Speaker 01:
And so I think that the agency's path on this point is reasonable and reasonably discerned.

[01:09:54] Speaker 01:
I think if the agency had wanted to, it could have said something along the lines of what Judge Garland just articulated, but I do not think it was required to in order to sustain this rulemaking.

[01:10:04] Speaker 05:
Just following up on this point, under the law as it existed,

[01:10:09] Speaker 05:
Post-Kaiser, but before the regulatory amendment, wasn't the pre-existing law that providers could use appeals to challenge predicate facts?

[01:10:21] Speaker 01:
In the circuit between 2013 and 2017.

[01:10:23] Speaker 05:
Right, because that's what happened in Kaiser itself.

[01:10:26] Speaker 01:
It is.

[01:10:26] Speaker 05:
So to the extent the law is being changed in a way that might upset hospital planning, I would think that's a problem with the regulation.

[01:10:38] Speaker 05:
The regulation makes that problem worse by changing the laws that existed before.

[01:10:46] Speaker 01:
Well, Your Honor, I think there was only a brief period when it was established under this courts within the circuit.

[01:10:52] Speaker 01:
Of course, this is a nationwide program that folks could get review long after the fact of this type of predicate determination.

[01:10:59] Speaker 05:
Were there a lot of cases either pre-Kaiser or in circuits other than this one, post-Kaiser, where providers

[01:11:11] Speaker 05:
used appeals to challenge predicate facts and were tossed out on the ground that even before this amendment, they couldn't do that?

[01:11:20] Speaker 01:
No, Your Honor.

[01:11:20] Speaker 01:
I'm not aware of them, but I think that the backdrop rule was articulated in the regulation, or the backdrop rule as the Secretary understood it, and I don't want to be seen as trying to re-litigate Kaiser here.

[01:11:30] Speaker 01:
No, I understand.

[01:11:31] Speaker 01:
Right.

[01:11:31] Speaker 01:
The circuit went the other way.

[01:11:32] Speaker 01:
But the whole premise there of the argument was that the provider understood this to be closed and that we couldn't go back and re-audit.

[01:11:39] Speaker 05:
It just seems that when the preamble says that was the traditional – that was our traditional understanding, they're awfully thin on examples and statutory or regulatory sites.

[01:11:53] Speaker 01:
It does not give – I think the example it gives is the statement in the graduate medical education rulemaking at issue in regions that that had been how they always understood it to be.

[01:12:02] Speaker 01:
That certainly was the understanding the provider there was resting its claim on.

[01:12:06] Speaker 01:
Like, this is closed.

[01:12:07] Speaker 01:
It's been three years.

[01:12:08] Speaker 01:
You can't take it back.

[01:12:10] Speaker 03:
Um, and Kaiser involved a reopening and not an appeal.

[01:12:14] Speaker 01:
I believe Kaiser involved, uh, board appeals that the secretary argued were cut off by the reopening regulation.

[01:12:22] Speaker 01:
And this court said that the reopening regulation did not at that time cut off that type of, uh, did not actually apply at all to the predicate fact determinations.

[01:12:33] Speaker 03:
So was the agency's reason for changing the reopening section that the only section that was being attacked by the court was the reopening section?

[01:12:42] Speaker 01:
I believe so, Your Honor.

[01:12:43] Speaker 01:
That was the problem this court identified.

[01:12:46] Speaker 01:
And in the preamble, it explained that it was undertaking this rulemaking because of this court's Kaiser decision and because it needed to fix its regulation.

[01:12:58] Speaker 03:
There was no reference to the language of the appeal regulation in Kaizen.

[01:13:04] Speaker 01:
Uh, no, but throughout the, throughout the rulemaking, the Secretary actually does talk about 13 and 5.

[01:13:09] Speaker 01:
Well, in the Kaiser case, the court doesn't discuss the language.

[01:13:12] Speaker 01:
I believe that's correct, Your Honor.

[01:13:14] Speaker 03:
Yes, the, the only- But you're saying the Kaiser was an appeal and not a reopen?

[01:13:17] Speaker 01:
Yes.

[01:13:18] Speaker 01:
It, it was an appeal, and it was, I think, uh, uh, conceded that if you counted the appeal, the 180-day appeal in it, from the date of the, of the latter-day decisions, they were

[01:13:31] Speaker 01:
they were challenging, that they were timely in that sense.

[01:13:33] Speaker 01:
Our argument was that, well, no, because you're outside the three-year period to reopen predicate facts, what you're complaining about happened long before these cost reports.

[01:13:43] Speaker 01:
And, of course, that's the argument we lost, and that's what we were trying to fix vis-a-vis this rulemaking.

[01:13:48] Speaker 03:
What I'm asking is, was there an argument made in the Kaiser litigation that the appeals regulation was the only one that should have been considered because it was an appeal?

[01:13:58] Speaker 03:
and that the appeals regulation permitted going back to the earlier predicate facts.

[01:14:03] Speaker 01:
Not that I know of.

[01:14:04] Speaker 01:
It's certainly not reflected in the opinion, Your Honor.

[01:14:08] Speaker 06:
What do we do if the, sorry, one question, if we think the text of the regulation is clear and the preamble is also clear?

[01:14:17] Speaker 01:
Clear in which direction, Your Honor?

[01:14:18] Speaker 06:
Yeah, the opposite direction.

[01:14:21] Speaker 06:
What do we do in that circumstance in your view?

[01:14:23] Speaker 01:
Both the preamble and the text clearly say that appeals can go forward?

[01:14:26] Speaker 06:
No, they say the opposite thing.

[01:14:27] Speaker 06:
Say the preamble is clear in one direction, the text of a regulation is clear in the other direction.

[01:14:33] Speaker 01:
If you mean clear in the sense that our interpretation is inconsistent with the regulations text, then I think that you would say that this does not apply to appeals and you would remand the agency for further proceedings.

[01:14:47] Speaker 01:
I want to stress that

[01:14:48] Speaker 06:
So it really turns on the clarity or ambiguity of the regulation, whether we can bring the preamble into it.

[01:14:54] Speaker 01:
But I think if the regulation is ambiguous in any sense, then that it is properly read through the lens of the final rule in which it was announced.

[01:15:06] Speaker 01:
and against the backdrop of the Kaiser decision, which is what this entire rulemaking was brought in response to.

[01:15:11] Speaker 06:
Well, do you think the text of the regulation can become ambiguous because of a prior court decision?

[01:15:16] Speaker 01:
No, but I think that the Secretary's reference to the period at issue being at issue in an appeal or a reopening, and I know that I may be refighting a battle with Judge Katz is here, at minimum.

[01:15:26] Speaker 06:
So that parenthetical is your hook for ambiguity.

[01:15:29] Speaker 01:
I think it's certainly the strongest evidence of it, Your Honor.

[01:15:31] Speaker 01:
I do want to note this.

[01:15:32] Speaker 06:
Is there any other evidence?

[01:15:33] Speaker 01:
Yes, Your Honor.

[01:15:34] Speaker 01:
I think that it's the, if you look at the predicate fact, the fact that specific finding a matter at issue, this is what you can reopen with respect to, now includes a predicate fact, and you say, okay, how do you start the

[01:15:47] Speaker 01:
Okay, if you're challenging a predicate fact, you start from the date when that predicate fact was first determined.

[01:15:53] Speaker 01:
I think the structure also suggests the result that the agency thought it had accomplished here.

[01:15:58] Speaker 01:
So I think both that parenthetical and the overall structure of how reopening works did what the agency clearly said she thought she was doing.

[01:16:08] Speaker 06:
Let me ask it one final way, which is do you think a clear parenthetical can create ambiguity in an otherwise contradictory but clear text?

[01:16:17] Speaker 01:
I'm not sure I followed all of the adjectives in that sentence, but the parenthetical is... Let me phrase it clearly.

[01:16:23] Speaker 06:
The text is clear, and you say the text contradicts the preamble.

[01:16:28] Speaker 06:
Can that fact mean that we can say actually the text is ambiguous, not clear?

[01:16:35] Speaker 06:
Which fact your honor the fact of the parenthetical the parenthetical is part of the text your honor so I think Let me try it again if the text of a regulation was a text of a regulation is we think clear and goes against the government The preamble is in favor of the government Can we use the preamble to say that the text of the regulation actually isn't so clear, but is ambiguous and

[01:17:03] Speaker 01:
I'm not sure you could, Your Honor, if you think that this regulatory text is unambiguously does not accomplish the result we think it does.

[01:17:11] Speaker 01:
I think then that the preamble can't be used to create ambiguity.

[01:17:14] Speaker 01:
I think that we think at minimum.

[01:17:16] Speaker 06:
I think that's right.

[01:17:18] Speaker 01:
This regulation is, I mean, we think it unambiguously puts predicate facts on the three-year line, and that is what Judge Bates determined.

[01:17:26] Speaker 01:
However, if you thought that it was not unambiguous in our favor, we think at minimum it is ambiguous.

[01:17:32] Speaker 03:
That's right.

[01:17:32] Speaker 03:
No, I got that.

[01:17:35] Speaker 03:
Thank you.

[01:17:35] Speaker 03:
Okay.

[01:17:36] Speaker 03:
Thank you.

[01:17:36] Speaker 03:
I know the other side is out of time, but we will give the other side two minutes anyway.

[01:17:47] Speaker 04:
Just two or three key points I'd like to make, Your Honor.

[01:17:51] Speaker 04:
First, the Court spent a lot of time with government counsel discussing the text of the regulation and the meaning and that sort of thing.

[01:18:00] Speaker 04:
And I want to point you to the regulation itself, the December 10, 2013 Federal Register, because I think it's instructive about why we're having this debate.

[01:18:13] Speaker 04:
In your joint appendix, it's at page 1313,

[01:18:18] Speaker 04:
and 1317.

[01:18:19] Speaker 04:
Secretary, after the discussion about the purpose of the rule as a whole, says, finally, although we proposed revisions only to 405.1885, in order to clarify our regulations in accordance with this proposal, we stated that we were considering making similar changes regarding predicate facts

[01:18:42] Speaker 04:
to the regulations governing intermediary appeals at 405.1811 and appeals to the board at 405.1835.

[01:18:52] Speaker 06:
What federal register page are you on?

[01:18:53] Speaker 04:
Okay, 75165, the third column.

[01:18:59] Speaker 04:
The third column, first full paragraph.

[01:19:04] Speaker 04:
So they note at that point that they contemplated

[01:19:08] Speaker 04:
and were contemplating making similar changes to the PRB appeals regulation at 405-1835.

[01:19:15] Speaker 04:
And then at the conclusion of the regulation on page 75169 of the Federal Register, it says, at this time, we have decided not to make similar changes regarding predicate facts to the regulations governing intermediary appeals at 405.1811 and appeals to the Board at 405.1835.

[01:19:38] Speaker 04:
Now, we don't acknowledge the Secretary would have had the authority to do that.

[01:19:42] Speaker 04:
We absolutely reject that.

[01:19:44] Speaker 04:
But certainly the Secretary could have been more clear by amending or attempting to amend the regulation.

[01:19:49] Speaker 04:
That's the reason that her, excuse me, the Secretary's interpretation is completely contrary to the text of the regulation, and this Court owes no deference to that kind of interpretation.

[01:20:01] Speaker 04:
I wanted to also mention one of the arguments that Council made to support sort of the reasonableness of the regulation is that what's good for the goose is good for the gander.

[01:20:14] Speaker 04:
We're applying this regulation to ourself as well.

[01:20:16] Speaker 04:
And at page 75164 of the Federal Register in the middle column,

[01:20:21] Speaker 04:
It says, in talking about applying this rule, it says, however, we recognize exceptions when a particular legal provision of the Medicare statute, regulations, or CMS rulings authorizes as part of a specific rule the review and revision of a predicate fact after the expiration of the three-year rule.

[01:20:42] Speaker 04:
So there's a hole big enough for the government to drive its truck through.

[01:20:47] Speaker 04:
We don't think that's any evidence that the regulation is reasonable.

[01:20:52] Speaker 04:
If the court agrees with us that the regulation is invalid and is inappropriately applied to these hospitals, I want to emphasize that we filed our first appeals in 2005.

[01:21:07] Speaker 04:
We've been in this administrative process for 13 years almost.

[01:21:13] Speaker 04:
The remedy that we've asked for in our pleadings is for the court to order the secretary to recalculate the standardized amount by removing the transfer amount from discharges.

[01:21:27] Speaker 04:
If the court was otherwise disposed to remand the case for some general sort of further proceedings, I would simply ask that the agency be directed to use whatever resources are available to determine how

[01:21:45] Speaker 04:
to correct that standardized amount.

[01:21:48] Speaker 04:
The Secretary did acknowledge the error, despite the Council's statements.

[01:21:53] Speaker 04:
Second, in the Federal Register, it says there is a discrepancy.

[01:21:56] Speaker 04:
We didn't make this adjustment.

[01:21:59] Speaker 04:
We don't know today the exact magnitude or the exact way to fix it, but there has to be a way that it's fixable.

[01:22:05] Speaker 04:
And so we would ask for some instructions.

[01:22:07] Speaker 03:
What happened after Kaiser, with respect to the petitioners in Kaiser?

[01:22:11] Speaker 04:
What happened after?

[01:22:12] Speaker 04:
I think they were paid under the new... They were allowed to look back at the predicate facts?

[01:22:21] Speaker 04:
I didn't understand the question.

[01:22:23] Speaker 03:
What way were they paid?

[01:22:24] Speaker 03:
Were they allowed to go back and recalculate whatever the, I can't remember what the predicate fact was in Kaiser.

[01:22:30] Speaker 04:
Yeah, I think it was the GME cost.

[01:22:33] Speaker 03:
The GME after that.

[01:22:33] Speaker 03:
Correct.

[01:22:34] Speaker 04:
And so they were able to, what they found in error in their base year and, but they didn't identify that error until after three years had passed from the reopening.

[01:22:44] Speaker 04:
It was the very same, by the way, the very same issue that the government

[01:22:47] Speaker 04:
successfully changed in the Regents case.

[01:22:50] Speaker 04:
They went back and revisited the base year for GME in the Regents case and did it, they argued, under the authority of a regulation.

[01:22:58] Speaker 04:
But that's what the plaintiffs in Kaiser were requesting, an adjustment to their GME base year.

[01:23:03] Speaker 04:
And this court agreed.

[01:23:05] Speaker 04:
And so they were, to my understanding, is they were paid that that GMA base year was correct and so that the caps were raised.

[01:23:14] Speaker 04:
And they received additional reimbursement just for the years that were on appeal.

[01:23:19] Speaker 06:
Do you have any sense of how much money is involved?

[01:23:22] Speaker 04:
In our case, hundreds of millions.

[01:23:26] Speaker 04:
A lot of money, Your Honor.

[01:23:30] Speaker 03:
Okay, further questions?

[01:23:31] Speaker 03:
All right, we'll take the matter under submission.

[01:23:33] Speaker 03:
Thanks to both sides.