[00:00:05] Speaker 00: Case number 19-5254, Fresno Community Hospital and Medical Center, joint business as community, regional medical center at all, at balance, versus Alex Michael Azar II, secretary, United States Department of Health and Human Services. [00:00:21] Speaker 00: Ms. [00:00:22] Speaker 00: Pagonis for the balance, Ms. [00:00:23] Speaker 00: Shone for the appellee. [00:00:30] Speaker 02: All right, good morning. [00:00:31] Speaker 02: Ms. [00:00:32] Speaker 02: Pagonis, we'll hear from you. [00:00:36] Speaker 05: Good morning, Your Honors. [00:00:38] Speaker 05: May it please the Court, Katrina Pagonis from Hooper Lundy and Bookman on behalf of Fresno Community Medical Center and 683 other Medicare participating hospitals. [00:00:48] Speaker 05: I'd like to reserve two minutes for rebuttal. [00:00:51] Speaker 05: This appeal concerns the Federal Court's power to review the Secretary's unlawful continuation of a 0.7% payment reduction. [00:00:59] Speaker 05: resulting in an $840 million yearly cut in hospital payments that the appellant hospitals timely and properly appealed. [00:01:08] Speaker 05: The district court, misapplying the preclusion statute, dismissed for lack of jurisdiction and in doing so erroneously concluded that review would only be available if the hospitals could establish the payment reduction was patently unlawful. [00:01:23] Speaker 05: The district court, however, was writing without the benefit of DCH Regional Medical Center versus ASAR and American Hospital Association versus ASAR, both of which confirm that the same agency error can simultaneously render a jurisdictional bar inapplicable and compel setting aside the agency action. [00:01:44] Speaker 05: So it is here. [00:01:45] Speaker 05: Section 7B5 of the TMA only precludes review of determinations and adjustments made under a statute that explicitly prohibits the Secretary from continuing payment reductions into subsequent years. [00:02:01] Speaker 05: And thus, the Secretary's continuation of the 0.7% fiscal year 2017 adjustment to reduce payments in 2018 is not subject to preclusion under the plain text of the statute. [00:02:14] Speaker 02: Didn't Congress in 2016 when it enacted the MACRA essentially direct the Secretary to, I guess, not restore completely a payment adjustment that had been made in prior years? [00:02:42] Speaker 02: By limiting the Not sure the right term to use, but the restoration to a total of 3.0% [00:02:56] Speaker 05: Yes, Your Honor, but with some caveats. [00:03:00] Speaker 05: When Congress acted in 2015, CMS had indicated for three years that, or actually for two years at that point, that it anticipated making a total 3.2% negative adjustment after ATRA that would be loaded into the rate by fiscal year 2017. [00:03:22] Speaker 05: And so Congress said instead of the offsetting adjustment for that 3.2% coming in in 2018, we're gonna pay for a Medicare physician payment rate fix with a ladder of adjustments through 2023 with the residual to be fully restored thereafter in subsequent years because it's very clear these temporary adjustments can't continue forever. [00:03:48] Speaker 05: um and so but when when it did so congress didn't just say this is in lieu of the positive adjustment that would apply in 2018 it said estimated to be 3.2 percent because it was acting well in advance of cms's finalization but my point my point in the question well there's several points in the question but one of them is that is that congress um directed the secretary to do something that is [00:04:18] Speaker 02: on its face contrary to what you say the plain language of 7b2 allows. [00:04:26] Speaker 05: 7B3 adopts another set of adjustments. [00:04:32] Speaker 05: So, you know, under macro loan, it essentially adopted a net negative 2.7% reduction. [00:04:39] Speaker 05: But because it was being done before Congress knew what money was on the table, it uses slightly different language. [00:04:45] Speaker 05: Congress was, you know, I have no concerns with Congress, you know, retaining some funds to achieve very specific congressional purposes. [00:04:56] Speaker 05: But here we have a surplus, unanticipated 0.7%, $840 million each year that Congress did not expect or anticipate and therefore did not speak to. [00:05:10] Speaker 05: And because Congress did not speak to that 0.7%, the default rules remain, which is that the ATRA adjustments after fiscal year 2017 need to be eliminated. [00:05:22] Speaker 05: Um, and so, so that, you know, it's, it's narrowly construing seven B three against that clear backdrop that in Attritt says those adjustments only apply for fiscal years, 2014, 2015, 2016, and 2017. [00:05:38] Speaker 05: And in seven B two, it says it needs to be removed from the standardized amount in a subsequent year. [00:05:45] Speaker 02: So anytime. [00:05:47] Speaker 02: If the secretary were to believe that an adjustment needed to be made and decrease the standard rate by a certain percentage and failed to, I guess, restore the standard rate to the base rate in a future year, [00:06:17] Speaker 02: Under your theory, that would always be reviewable because that's not an adjustment. [00:06:24] Speaker 05: Yes, Your Honor. [00:06:24] Speaker 05: The continuation of an adjustment is distinct from an adjustment made under the statute. [00:06:31] Speaker 02: And what court has ever held that? [00:06:37] Speaker 05: Well, we start with the narrow construction of the preclusion statute. [00:06:40] Speaker 05: And this is, say, most analogous to this court's interpretations of the preclusion statute in the outpatient prospective payment system, which refers to the development of a classification system under paragraph two, including the establishment of other adjustments, including a method under T2F, et cetera. [00:07:01] Speaker 05: And in each of those cases, Amgen's and American Hospital Association versus Azar and others, this court has said that it will look at the consideration of the merits and jurisdiction merge when determining the scope of the bar. [00:07:22] Speaker 05: And when an appellant is saying that, for example, this is not a method under subsection T2F, [00:07:29] Speaker 05: then that gets reviewed on the merits because the question of merits in the jurisdiction merge under the language of that preclusion statute. [00:07:37] Speaker 05: And this calls back to the requirement to narrowly construe a preclusion statute unless the secretary has, and only apply preclusion if the secretary can present clear and convincing evidence that Congress intended to preclude review. [00:07:53] Speaker 01: You think it's a narrow but fair reading of this preclusion statute to say, [00:08:00] Speaker 01: Review is precluded, but only if the government's position is right on the merits. [00:08:14] Speaker 01: That's what you're saying. [00:08:15] Speaker 05: Yes, Your Honor, with a caveat. [00:08:19] Speaker 05: Certainly, we couldn't have come in 2017 and said that the adoption of the net negative 3.9 adjustment was unlawful because that is the making of an adjustment. [00:08:32] Speaker 05: under subsection 7B1B2. [00:08:37] Speaker 05: But here we have the making of the adjustment, the positive 0.4588, but we have this unspoken to negative 0.7 that Congress didn't address, and it is being carried over. [00:08:52] Speaker 05: If we could take, for example, an extreme circumstance, if we have 2024 and the Secretary keeps the 0.7 plus the residual 0.2412 on the books, [00:09:02] Speaker 05: All right, that continuation of the net negative adjustment into 2024 would violate 7b2. [00:09:09] Speaker 05: It would also violate 7b4, which says that, you know, makes Tripoli sure that an adjustment can't continue after 2023. [00:09:19] Speaker 05: So the continuation of an adjustment is something prohibited by Congress. [00:09:25] Speaker 05: And Congress was not speaking to the continuation of an adjustment in the preclusion statute. [00:09:32] Speaker 01: In the governing statutes, CURES Act adjusts MACRA, which gives a very specific command to make an adjustment. [00:09:51] Speaker 01: That word used is adjustment, which is one of the same words that triggers the preclusion, triggers [00:10:00] Speaker 01: the judicial review bar in 7B4, and all of this is done under 7B of the TMA. [00:10:11] Speaker 01: Yes, Your Honor, however, 24% sure- Specific agency action under review in its label and in its substance is an adjustment to the standardized amount. [00:10:29] Speaker 05: The positive 0.4588% adjustment is an adjustment. [00:10:34] Speaker 05: However, the retention of the 0.7 is something distinct and separate in kind. [00:10:39] Speaker 05: Congress in 21st century cures, knowing that the final after adjustment was 3.9%, left in the statute 3.2%. [00:10:50] Speaker 05: And I think Congress's intent here is pretty clear from 21st century cures. [00:10:56] Speaker 05: They go down to the 10,000th of a percent. [00:10:59] Speaker 05: to get an adjustment, an additional negative adjustment of 0.0412%, which yields $60 million, according to the Congressional Budget Office. [00:11:10] Speaker 05: So they're searching for $60 million when there's $840 million on the table, had they simply changed 3.2% to 3.9%. [00:11:17] Speaker 02: The problem that I have with this argument is that the agency had said, the secretary had said, [00:11:30] Speaker 02: that it was going to reduce by a total of 3.9% I think in August of 2016. [00:11:37] Speaker 02: And then three months later or so, Congress writes this statute and they don't say that's wrong. [00:11:48] Speaker 02: It should be a total of 3.2%. [00:11:49] Speaker 02: I mean, your argument about Congress being specific cuts against you because [00:11:59] Speaker 02: You had had your clients had had this battle in the commentary when the regulation was being promulgated about whether the secretary could do what it did. [00:12:12] Speaker 02: And it disagreed with you. [00:12:15] Speaker 02: And then Congress acted and Congress didn't say, didn't correct the secretary. [00:12:22] Speaker 02: I mean, that weighs against you, if anything. [00:12:26] Speaker 05: The back and forth, Your Honor, in the 2017 rulemaking cycle concerned whether it gets to a negative 3.2% or negative 3.9%. [00:12:38] Speaker 05: And that is not the unlawful conduct that we are [00:12:44] Speaker 05: arguing here. [00:12:45] Speaker 05: We do not take issue with the making of an adjustment in fiscal year 2017. [00:12:51] Speaker 02: But you argue that Congress intended for the adjustment to be no more than 3.2 percent. [00:12:59] Speaker 02: And Congress could have said so after the Secretary said we're going to make an adjustment of up to 3.9 percent. [00:13:08] Speaker 05: Well, Your Honor, I would take the view that Congress did say so. [00:13:12] Speaker 05: The Secretary said, we're going to end up with net negative 3.9%. [00:13:16] Speaker 05: Congress left in language that said estimated to be 3.2% and did not adjust it to reflect that additional 0.7% or speak to that 0.7%, which is 20% higher than that 3.2% spoken to in the statute. [00:13:35] Speaker 05: And at that time, [00:13:37] Speaker 05: whether, you know, the CMS had not yet taken the position that in 2018, it was going to also continue the 0.7% reduction. [00:13:49] Speaker 05: So Congress had no way of knowing in 21st century cures that CMS was going to take the view that that 0.7% carries over despite Congress not having spoken to it. [00:14:04] Speaker 03: Excuse me. [00:14:06] Speaker 03: The point 04588 is an adjustment under the Act, right? [00:14:14] Speaker 05: Yes, Your Honor. [00:14:15] Speaker 03: Right. [00:14:16] Speaker 03: So what you're telling us is that that is an improper, incorrect adjustment. [00:14:23] Speaker 03: And yet the judicial review provision says, it doesn't say adjustments made by the secretary. [00:14:30] Speaker 03: It says any adjustments under this subsection. [00:14:34] Speaker 03: are not reviewable. [00:14:35] Speaker 03: So we can't review that the 0.04 and whatever and say it's too small. [00:14:42] Speaker 05: Well, in your honor, we are not asking this court to answer the question of whether the 0.4588 is appropriate. [00:14:49] Speaker 05: We are taking our view, which we think is supported by the plain text of the statute, is that there is a 0.7% that subsection B5B3 does not address [00:15:04] Speaker 05: And so, you know, the .4588, which gets you to a net negative 2.7412, apologies, Congress went down to the 10,000th of a percent, is not on the table for review. [00:15:19] Speaker 05: But the .7% that is not addressed in B3 is absolutely on the table because Congress said in B2 that that was only for discharges occurring in fiscal year 2017. [00:15:35] Speaker 01: Which is an argument that the adjustment that the agency made, the upward adjustment the agency made wasn't high enough because they didn't take account of other provisions in the statute. [00:16:03] Speaker 05: Yes, Your Honor. [00:16:04] Speaker 05: At the end of the day, when we load in everything and adjust the rate, we're arguing that there was an $840 million under payment that would be cured by a positive 0.7% adjustment. [00:16:19] Speaker 05: But it's not that it wasn't big enough or anything along those lines. [00:16:24] Speaker 05: It wasn't spoken to by Congress. [00:16:27] Speaker 05: And if Congress has not spoken to it, then the backdrop that Congress made triply sure was in place with the language in 7b2, the language in 7b1, b2. [00:16:39] Speaker 05: Both of those, you know, make very clear that the default rule is it evaporates in 2018. [00:16:47] Speaker 05: And Congress not having spoken to it. [00:16:48] Speaker 03: You're assuming the truth of your argument. [00:16:53] Speaker 03: When you say Congress didn't speak to it, that assumes when it said 0.04588, it wasn't saying, and we really mean it, this is the adjustment you should make. [00:17:03] Speaker 03: If that is what Congress did, and it certainly seems to be on the face of it, then it did speak to the 0.07. [00:17:11] Speaker 05: Well, viewed another way, the positive .4588 is not just said in isolation. [00:17:17] Speaker 05: It's .4588 in lieu of the adjustment that otherwise would apply, which is estimated to be 3.2%. [00:17:24] Speaker 05: That gets you to a net negative 2.7412%. [00:17:29] Speaker 05: That is what Congress spoke to. [00:17:31] Speaker 05: Congress said UCMS retain a net negative 2.7412% with some small margin for error. [00:17:39] Speaker 05: but did not authorize the secretary to retain anything more than that. [00:17:48] Speaker 05: I see I've gone over my time and I'll reserve the remainder for rebuttal if there are no further questions at this time. [00:17:53] Speaker 02: Any further questions? [00:17:56] Speaker 02: All right, thank you. [00:17:57] Speaker 02: We will hear from Council for APLE Ms. [00:18:02] Speaker 02: Schoen. [00:18:05] Speaker 06: Good morning. [00:18:06] Speaker 06: May it please the court, Karen Schoen, on behalf of the Secretary of Health and Human Services. [00:18:11] Speaker 06: The underlying dispute in this case is about the amount of the adjustment that the secretary was required to make in fiscal year 2018. [00:18:18] Speaker 06: The statute, in particular, subparagraph Little Roman 3, which is on JA 245, directs the secretary to make a 0.4588% adjustment in 2018 instead of the adjustment that would otherwise apply under [00:18:34] Speaker 06: Section 7B2 to offset the prior recoupment adjustments. [00:18:38] Speaker 06: And that's exactly what the secretary did. [00:18:41] Speaker 06: Plaintiffs, however, say that the secretary was required to make an additional 0.7% adjustment, such that the total adjustment would have been 1.14588%. [00:18:50] Speaker 06: Now, as a threshold matter, their claim is precluded by the statute's review bar because they're challenging the amount of an adjustment. [00:19:00] Speaker 06: But whether it's a review bar question or just a merits question, [00:19:04] Speaker 06: The directive under the statute is clear, and the secretary did exactly what the statute directed him to do. [00:19:10] Speaker 06: I think if I may, I think it's important to keep in mind that Congress amended that subparagraph, Little Roman III, to direct the 0.4588% adjustment after the secretary had already announced that the total recoupment adjustment would be 3.9%. [00:19:32] Speaker 06: And so if Congress had wanted the Secretary to make an additional 0.7% adjustment to reflect that higher recruitment adjustment that the Secretary ended up making, then Congress would have said so. [00:19:44] Speaker 06: Instead of directing a 0.4588% adjustment in 2018, Congress would have told the Secretary to make a 1.1588% adjustment. [00:19:55] Speaker 06: There's no reason to think that Congress intended anything other than [00:19:59] Speaker 06: the 0.4588% adjustment that it specified in subparagraph little Roman three. [00:20:08] Speaker 02: Are we supposed to interpret the statutory language with the jurisdictional bar narrowly? [00:20:19] Speaker 06: Well, I think there generally is a presumption in favor of judicial review. [00:20:24] Speaker 06: And so the provision should be interpreted [00:20:28] Speaker 06: with that backdrop. [00:20:30] Speaker 06: But I think here, what the provision says is that it bars judicial review of any determination or adjustment under subsection 7B. [00:20:41] Speaker 06: And what the secretary did was an adjustment under section 7B. [00:20:49] Speaker 02: Did the secretary call it an adjustment? [00:20:56] Speaker 06: Believe so, but I confess your honor. [00:20:59] Speaker 06: I'm not sure now what the language was in the rulemaking The statute however refers to it as an adjustment Little roman 3 says directs the secretary to make an additional adjustment I mean, I guess I guess the point i'm getting to is is that is that You know, how are we supposed to know an adjustment? [00:21:23] Speaker 02: Um, when we see it, you know, is, is it, is it like, you know, the obscenity tests will know it when we see it or what, what are the characteristics of, of an adjustment? [00:21:36] Speaker 02: Well, I think it doesn't matter if the secretary calls it something else. [00:21:42] Speaker 06: Well, I think what should, I mean, I think the best indicator here is the fact that the statute itself, um, refer to it as an adjustment. [00:21:51] Speaker 06: And since we're interpreting, [00:21:53] Speaker 06: the statute's review bar, I think it's very instructive to look at the way the statute referred to the thing that the secretary did by increasing the standardized amount by 0.4588%. [00:22:07] Speaker 06: And the statute refers to that as an adjustment. [00:22:10] Speaker 06: And the statute more generally refers to what the secretary otherwise would have done under 7b2 to offset the prior recruitment adjustments as an adjustment. [00:22:19] Speaker 06: So I think those are both very good clues and an arguably dispositive here that what the secretary did was make an adjustment. [00:22:28] Speaker 01: Is there any codified language in the CFR that you're aware of? [00:22:38] Speaker 01: I'm looking at the preamble of that agency action and it's expressly described as an adjustment in the preamble. [00:22:49] Speaker 01: They say they are finalizing the plus 0.4588 percentage point adjustment, but I don't have the actual reg or know if there's a reg, but this preamble tends to support you anyway for what that's worth. [00:23:06] Speaker 03: As does the statute, seven B, whatever, what is it, one B? [00:23:12] Speaker 03: Yeah, seven B, one B, capital B. [00:23:17] Speaker 03: says, which was the provision that was amended with a 0.45, says that you shall make an adjustment of the following amount. [00:23:28] Speaker 03: And so both the statute and the preamble support that. [00:23:38] Speaker 06: And again, Your Honor, Judge Wilkins, I think whether this is, I mean, as we've argued in our brief, we think this is within the plain terms of the review bar. [00:23:47] Speaker 06: whether it becomes a review bar question or you decide to reach the merits, I think the directive under the statute was clear. [00:23:54] Speaker 06: And the secretary did exactly what the statute directed him to do. [00:23:57] Speaker 03: Under your provision or your position that don't even need the jurisdictional bar. [00:24:08] Speaker 06: That's right. [00:24:09] Speaker 06: I mean, I think if you reach the merits, you know, I think the, you know, as the secretary said in the rulemaking, the directive under the statute was clear. [00:24:16] Speaker 06: The statute directs the secretary to make a 0.4588% adjustment, and that's exactly what the secretary did. [00:24:23] Speaker 03: The jurisdictional bar applies not only to judicial review, it also applies to administrative review. [00:24:29] Speaker 03: Was that invoked when the plaintiffs here challenged this? [00:24:38] Speaker 06: I'm not sure, Your Honor. [00:24:41] Speaker 06: I think it was just expedited for immediate judicial review. [00:24:45] Speaker 06: I'm not sure if that issue was ever actually addressed in the administrative proceeding. [00:24:53] Speaker 01: Okay. [00:24:55] Speaker 01: Is the bar on judicial review jurisdictional in the sense that we have to address it first? [00:25:03] Speaker 06: Um, I know, your honor. [00:25:06] Speaker 06: I mean, I think generally you do address it first. [00:25:08] Speaker 06: It's not a matter of Article III jurisdiction. [00:25:11] Speaker 01: Um, and in the recent, um... Stilco wouldn't compel us to... We could skip over. [00:25:19] Speaker 06: I mean, you could. [00:25:21] Speaker 06: And that's in fact what this court recently did in the American Hospital Association case, which plaintiffs cited in their 28-J letter, um, as to the hospital's second claim [00:25:33] Speaker 06: the court expressed doubt that they could review it because they had just determined that the adjustment was within the scope of the review bar, but nonetheless assumed statutory jurisdiction as they refer to it to go on and address the merits and dismiss the claim on that basis. [00:25:51] Speaker 06: So, I mean, you could potentially do that if you wanted to. [00:25:56] Speaker 01: But on the other hand, I mean, I had thought preclusion was [00:26:00] Speaker 01: Preclusion, judicial review, no review, jurisdiction strip, whatever you call it. [00:26:07] Speaker 01: I had thought it's actually an easier ground for you because the merits argument is that the secretary got this right. [00:26:18] Speaker 01: The reviewability argument is simply that the secretary was doing all of this under Section 7B, which seems very obvious. [00:26:27] Speaker 06: Right. [00:26:29] Speaker 06: I agree, Your Honor. [00:26:30] Speaker ?: Yes. [00:26:34] Speaker 06: I'd be happy to answer any other questions if the court has any. [00:26:39] Speaker 02: Any further questions? [00:26:41] Speaker 02: All right. [00:26:42] Speaker 06: Thank you, Your Honor. [00:26:44] Speaker 02: We'll give Ms. [00:26:46] Speaker 02: Pagonas two minutes for rebuttal. [00:26:51] Speaker 05: Thank you so much. [00:26:53] Speaker 05: There we go. [00:26:53] Speaker 05: I am unmuted. [00:26:56] Speaker 05: First, responding quickly to a question that Judge Randolph posed concerning the administrative review in this action, the question of jurisdiction was, the jurisdictional bar was raised in the issue statement before and the request for EJR before the PRRB. [00:27:17] Speaker 05: and the PRRB determined that it had jurisdiction and granted expedited judicial review for the federal courts to address the case. [00:27:29] Speaker 05: So it was not evoked by the PRRB. [00:27:33] Speaker 05: Now, I would just like to quickly point out that, for example, in Amgen versus Smith, where there was a question about a preclusion on review of the establishment of other adjustments, it was clear that we had an adjustment at play in Amgen. [00:27:51] Speaker 05: But the court said that the preclusion of review of other adjustments extends no further than the secretary's authority to make them. [00:27:59] Speaker 05: And the same approach should dictate the construction of the preclusion statute here. [00:28:06] Speaker 05: The preclusion on review of adjustments should extend no further than the secretary's authority to make adjustments. [00:28:14] Speaker 05: Now, under American Hospital Association versus Azar, that same analysis- Let's get back to Judge Cass's question. [00:28:21] Speaker 03: I mean, that makes the bar totally worthless because the only time that you can invoke it is when the secretary had authority to do what he did [00:28:30] Speaker 05: Well, the bar here operated for many years to wholly bar review of adjustments made in 2010 all the way through 2017, because in each step, the secretary had this authority to adopt an adjustment, applied his discretion to calculate the amount of the discretion and so forth, and adopted that adjustment. [00:28:56] Speaker 05: In 2018, Congress [00:28:59] Speaker 05: If you summarize, you know, what it says in B3 with, you know, it said to make a net negative 2.7412% and instead CMS adopted a net negative 3.4412% adjustment. [00:29:14] Speaker 05: CMS did something that was neither authorized nor contemplated by Congress and Congress, far from authorizing the secretary to make such an adjustment, said that the secretary cannot make or cannot continue over an adjustment. [00:29:31] Speaker 05: This is extraordinary, unusual, and limited authority that's granted in a TMA with all the subsequent amendments. [00:29:37] Speaker 05: that the Secretary does not have any place else in the Medicare Act. [00:29:42] Speaker 05: And that intent for a narrow authorization pervades the statute and makes clear that intent. [00:29:51] Speaker 05: And my clock disappeared, so I hope I have not gone, impeded too far on your time. [00:29:57] Speaker 00: Excuse me, judges. [00:29:58] Speaker 00: Time has run out. [00:30:00] Speaker 00: Thank you, Your Honors. [00:30:02] Speaker 02: All right, if there are no further questions, we will take the matter under advisement. [00:30:07] Speaker 02: Thank you, Council.