[00:00:01] Speaker 00: case number 22-5249 et al. [00:00:04] Speaker 00: Bridgeport Hospital doing business as Yale New Haven Health et al versus Xavier Becerra, Secretary, United States Department of Health and Human Services at balance. [00:00:15] Speaker 00: Mr. Peters for the balance, Ms. [00:00:17] Speaker 00: Begonis for the appellates. [00:00:23] Speaker 00: Good afternoon. [00:00:29] Speaker 05: May it please the court, David Peters on behalf of the Secretary of Health and Human Services. [00:00:35] Speaker 05: The secretary promulgated the low-wage index policy to address growing disparities in low-wage hospitals. [00:00:42] Speaker 05: Two separate provisions of the Medicare statute independently authorized the secretary to promulgate the policy. [00:00:48] Speaker 05: The first is 42 USC section 1395 WWD3E, which gives the secretary express flexibility in constructing the index. [00:00:57] Speaker 05: And the second is section D5I, which gives the secretary broad authority to issue adjustments and exceptions to factors of wage index. [00:01:06] Speaker 05: Secretary's broad authority under these provisions is evident from statutory text and confirmed by decisions of this court. [00:01:12] Speaker 05: The district court nonetheless concluded that the secretary lacked statutory authority to promulgate the policy. [00:01:17] Speaker 05: That was wrong. [00:01:19] Speaker 05: District court's reasoning cannot be squared [00:01:24] Speaker 03: Peter, is there any way in which the two actions here, the low wage index and the budget neutrality policy can be decoupled or does the agency view them as one holistic policy? [00:01:42] Speaker 05: Your Honor, the secretary explained that they were adopting the budget neutrality adjustment to offset the effects of the low wage index policy. [00:01:48] Speaker 05: They are two separate [00:01:52] Speaker 05: to the wage index, but the secretary promulgated them together. [00:01:55] Speaker 05: If it's true, Your Honor, that the secretary, that plaintiffs here are only negatively affected by the budget neutrality adjustment. [00:02:04] Speaker 05: We haven't argued or appealed that that is a standing issue, but it is true that that's the only policy that they are challenging in terms of the only remedy that they are seeking to make it true. [00:02:15] Speaker 05: The two were issued together as part of a broader policy to address disparities between hospitals. [00:02:22] Speaker 03: If we vacated only the budget neutrality adjustment, what would happen? [00:02:31] Speaker 05: Your Honor, if the policy, if only the budget neutrality adjustment was vacated, which we don't think should be the case because we think that the both policies. [00:02:38] Speaker 03: You don't think either one should be vacated? [00:02:40] Speaker 05: Yes, sure. [00:02:41] Speaker 05: But taking that for the question, if the budget neutrality adjustment was the only policy that was vacated, [00:02:49] Speaker 05: The manager will go back to the agency and the secretary would have to decide what the effect would be on the payments for other hospitals. [00:02:55] Speaker 05: As we explained in our briefing, the secretary enacted or promulgated the budget neutrality adjustment to offset the provisions. [00:03:04] Speaker 05: It would be up to the secretary to determine whether additional steps may be taken to the payments that had been made now to low-wage hospitals. [00:03:16] Speaker 05: But again, our position is that neither should be vacated because both secretaries had statutory authority under two separate provisions to issue it. [00:03:23] Speaker 05: Happy to address that. [00:03:25] Speaker 05: Again, the D3E authority is a broad grant of authority to the secretary to make adjustments to the weight index. [00:03:32] Speaker 05: And one part of that is the determination about how historic data appropriately captures for looking. [00:03:38] Speaker 04: Do you think it would make sense for us to [00:03:41] Speaker 04: vacate just the neutrality aspect. [00:03:46] Speaker 04: Soon we think that the way you did the adjustment was illegal, and that therefore there should have been no adjustment. [00:03:54] Speaker 04: And because there was no adjustment, it wouldn't have triggered budget neutrality adjustment of the adjustment. [00:04:02] Speaker 04: It wouldn't make any sense for us to just vacate the budget neutrality part of that, right? [00:04:08] Speaker 05: I mean, that is the remedy that the plaintiff sought was simply to seek a picture of the budget neutrality adjustment that would put the secretary in a bit of a bind or would create complications for the secretary on remand, which is what the district court recognized below. [00:04:27] Speaker 04: The district court recognized that part of the inconsistency. [00:04:29] Speaker 04: What's the practical difference between vacating just the budget neutrality part? [00:04:37] Speaker 04: and vacating the allegedly illegal adjustment along with budget neutrality and follow on the practical difference between those two. [00:04:47] Speaker 05: Yes, you know, the difference would be that this in the in the situation in which both policies are vacated, the secretary would have to evaluate what the effect would [00:04:59] Speaker 05: payments to low-wage hospitals whose payments were increased as a result of the policy. [00:05:04] Speaker 04: Whereas that requirement... That's actually a pretty big practical difference. [00:05:09] Speaker 04: If under course one, some low-wage hospitals that have gotten money might have to give some of the money back. [00:05:16] Speaker 05: The security hasn't potentially... The security hasn't determined what steps would be taken, but [00:05:23] Speaker 05: If the policy was vacated, that would call into question payments made to those hospitals. [00:05:27] Speaker 04: And if the other course were taken, if just the relief that the plaintiffs requested is granted, then you think there's a scenario where the low budget hospitals that have gotten money would get to keep the money? [00:05:47] Speaker 05: In that situation, Your Honor, the low wage policy would still be on the books, at least for the time being. [00:05:53] Speaker 05: It's not clear why the secretary would then need to go out. [00:05:55] Speaker 05: And the secretary may have to make a determination about whether there would be a requirement to go out because of the offsetting budget neutrality being vacated to go out and kind of fall back those payments. [00:06:06] Speaker 05: That's a determination the secretary hasn't made yet. [00:06:08] Speaker 05: And I don't want to hear what the definitive position of the secretary would be in that situation. [00:06:16] Speaker 05: Again, Your Honor, I mean, I'm happy to turn to the merits. [00:06:18] Speaker 04: I don't want to step on anyone's toes if they're. [00:06:22] Speaker 04: So on the merits, do you know of any precedent that interprets the word reflect to. [00:06:32] Speaker 04: To mean what I think you all what the government needs it to mean, which is, you know, something not very precise. [00:06:41] Speaker 05: You're right. [00:06:42] Speaker 05: This court's precedent, I would support I would point to the energy case with energy cases, you know, in the word reflects expansive enough here to not mandate a specific level of exactitude or precision. [00:06:55] Speaker 05: If the if the Congress wanted [00:06:57] Speaker 05: the secretary to exact, to perform exact calculation and spit out an exact, specifically precise number, they would use the word equals, which they do throughout the statutory provision. [00:07:07] Speaker 05: The fact that the secretary, the fact that the Congress used the word reflex indicates that there is some play in the joints for the secretary to make an determination about how data appropriately captures future looking wage levels. [00:07:20] Speaker 04: And I think we, I think we have a precedent that says the government needs to make its quote best approximation. [00:07:27] Speaker 04: that. [00:07:27] Speaker 04: Um did you do that here? [00:07:29] Speaker 04: Yes, John. [00:07:30] Speaker 05: Um the secretary concluded that, uh, low wage hospitals, wage levels were attributable in part to the fact that to the way in which the wage calculation has operated and the secretary reasonably concluded that would be appropriate to strip out. [00:07:46] Speaker 05: Those provisions of in the wage index, but they didn't actually [00:07:57] Speaker 04: I mean, I get that you would argue that your way will accurately predict that low wage hospitals wages will be higher in the future. [00:08:12] Speaker 04: Right? [00:08:13] Speaker 04: Certainly, your honor. [00:08:13] Speaker 04: But it seems like your premise is that they're they're lower than they should be now. [00:08:21] Speaker 04: They're lower than you want them to be now. [00:08:24] Speaker 04: And [00:08:25] Speaker 04: If that's the case, and the formula reflects that, then it seems like that's the best approximation of where they are now. [00:08:32] Speaker 04: It's supposed to be an approximation of where they are now, right? [00:08:35] Speaker 05: No, Your Honor. [00:08:36] Speaker 05: A few things. [00:08:37] Speaker 05: So what the Secretary is reasonably approximating is what the regional wage difference will be for the forthcoming fiscal year. [00:08:45] Speaker 05: So it is always the case that [00:08:48] Speaker 05: because the secretary has to rely on historic data, that the predictions that the secretary, that that data is always inaccurate in some sense because it is data from 2016 and the secretary is relying on it to make a prediction about what regional differences will be like in fiscal year 2020. [00:09:04] Speaker 05: And so the best approximation that the secretary must make is what's the best approximation for what regional wage differences will be like in fiscal year 2020 and inherited them. [00:09:15] Speaker 05: And that's what you did here? [00:09:17] Speaker 05: Yes, Your Honor. [00:09:18] Speaker 05: And inherent in that is making the determination about how closely data that is four years old captures what the regional differences are going to be. [00:09:25] Speaker 05: And I would point this court's attention to the first Anishinaabe case. [00:09:29] Speaker 05: That's the Judge Griffith's opinion, in which the secretary had data that was accurately reported, and yet the secretary still removed from that data, data from the hospital. [00:09:41] Speaker 04: But that's inputs, not outputs. [00:09:44] Speaker 04: I don't think there's been a case [00:09:47] Speaker 04: that government can tinker with the outputs of the wage index because it basically doesn't like the outputs of the wage index. [00:09:58] Speaker 05: This wasn't a policy decision about what the secretary liked or disliked. [00:10:01] Speaker 05: The secretary concluded that low-wage hospitals' wage levels [00:10:13] Speaker 05: were attributable in part to the fact that the calculation itself has this issue of lag and circularity and decided to strip out those effects from the wage index. [00:10:23] Speaker 05: Now, in order to make the wage index calculation more accurate, I mean, it's perfectly sensible for the secretary who has broad authority to construct the index to say, if there's something about the way in which I've constructed the index that's contributing to kind of inaccurate wage index levels, we should take that out of the process, which is what the secretary did here. [00:10:43] Speaker 05: And that's a perfectly sensible thing for the secretary to do. [00:10:47] Speaker 04: I mean, maybe it seems more like you are, as a policy matter, kind of picking some winners and losers. [00:10:54] Speaker 04: And you're thinking the low wage hospitals are not able to attract the talent they need, but there's the low wages. [00:11:02] Speaker 04: So we're going to give them some money, but that means taking money away from the high-wage hospitals because it has to be budget neutral, in which case it's going to be harder for the high-wage hospitals to continue to attract the talent that they've been attracting. [00:11:13] Speaker 04: So you're sucking talent from the high-wage hospitals and sending it to the low-wage hospitals. [00:11:18] Speaker 04: Maybe that's a great policy. [00:11:20] Speaker 04: That seems like almost what I thought the point of it was as the secretary explained the point. [00:11:28] Speaker 05: No, Your Honor, I would direct the court to 84 FR 42331 where the secretary made it clear that this was not a policy-driven decision. [00:11:36] Speaker 05: It was one that was driven by concerns about the accuracy of the wage index. [00:11:40] Speaker 05: But to take a step back, Your Honor, even if that were the secretary's conclusion, even if it was a policy-driven, the word reflects is quite expansive and allows the secretary to make determinations about [00:11:52] Speaker 04: reasonable determinations about the ways in which historic data captures regional levels. [00:11:57] Speaker 04: Did you argument that it's not a policy determination? [00:12:00] Speaker 04: Is that a reason that you haven't asserted Chevron deference in this case on appeal? [00:12:09] Speaker 05: We haven't invoked the Chevron deference. [00:12:12] Speaker 05: In part, we just think the statute is, the language in the statute itself gives discretion to the secretary. [00:12:18] Speaker 05: And so you can see that Chevron doesn't apply. [00:12:22] Speaker 05: I wouldn't concede that. [00:12:24] Speaker 05: I would just say that the court need not reach whether Chevron applies because the language in the statute expressly gives the court flexibility, sorry, expressly gives secretary discretion. [00:12:33] Speaker 05: And this court defers to the secretary's exercise of that discretion without having to reach the Chevron question. [00:12:40] Speaker 05: Judge Walker, you issued a concurring opinion in the sending of education case that effectively said as much. [00:12:46] Speaker 05: And I think the same would be true here. [00:12:48] Speaker 04: So we're not giving a vote to Chevron for that reason. [00:12:51] Speaker 04: And if I can just go back to Remedy, and then I'll be quiet. [00:12:55] Speaker 04: Can you identify a case like this one where we've held the remand without baffeter is appropriate? [00:13:02] Speaker 04: when we say that the agency has exceeded its authority. [00:13:08] Speaker 04: It's not just the agency has poorly explained, unreasonably explained its decision, but the agency has exceeded its statutory. [00:13:14] Speaker 05: Yes, Your Honor. [00:13:15] Speaker 05: We cited a few examples in our brief, but I would give you here as well. [00:13:18] Speaker 05: The North Carolina VEPA case from 2008. [00:13:22] Speaker 05: the Center for Biological Diversity, the EPA. [00:13:24] Speaker 05: That's a team decision. [00:13:26] Speaker 05: In both of those cases, it was not just a lack of a rational explanation. [00:13:29] Speaker 05: It was that the second fair was the EPA didn't have authority to promulgate the policy. [00:13:34] Speaker 05: And especially, I think, Your Honor, in the North Carolina EPA case, the panel originally held that they couldn't remand without vacatur. [00:13:42] Speaker 05: And then on reconsideration, it, in fact, remand without vacatur. [00:13:47] Speaker 05: after concluding that it would be appropriate, given the kind of disruptive consequences that vacancy would entail. [00:13:52] Speaker 04: If I go back and look at the Center for Biological Diversity, and it seems to me it was more of a procedural error than a statutory authority error, then... Your Honor, I think with batch diversity, frankly, there's lots and lots of problems with the rule there. [00:14:04] Speaker 05: It was held invalid on several grounds. [00:14:06] Speaker 05: I think at least part of it was not just a procedural or something that could be corrected. [00:14:09] Speaker 05: It was also about the authority to do so. [00:14:12] Speaker 03: Mr. Peters, HHS says that [00:14:16] Speaker 03: It maintains its argument that vacator is not an appropriate remedy at all under the APA as a general matter, recognizing, obviously, that our cases say otherwise. [00:14:27] Speaker 03: But so I'm wondering what the government's position is if we were, say, to issue declaratory relief, saying that this regulation exceeds statutory authority. [00:14:40] Speaker 03: And that's all we did. [00:14:42] Speaker 03: What would be the difference between that and vacator? [00:14:45] Speaker 03: Because if we say that this regulation lacks statutory authority, meaning it never had, it was never a lawful regulation, wouldn't that effectively be the same as vacating? [00:14:59] Speaker 05: Yeah, it would certainly be the case. [00:15:00] Speaker 05: I think there are some practical differences. [00:15:02] Speaker 03: Tell me what the practical differences will be. [00:15:04] Speaker 05: In that case, [00:15:06] Speaker 05: there would be, the secretary would then take step to remedy the violation. [00:15:12] Speaker 05: It would do so though against the backdrop of a status quo effectively, where the policies were in place rather than within a backdrop of- Why would the policy be in place if a court has said that it never had statutory authority? [00:15:24] Speaker 03: How could the regulations still be in place? [00:15:28] Speaker 03: Like, wouldn't it just be a regulation without lawful authority? [00:15:33] Speaker 05: I think it would be. [00:15:34] Speaker 05: I'm not sure there was much of a difference between the two. [00:15:36] Speaker 05: It would be a regulation that would no longer be. [00:15:39] Speaker 05: It would be illegal for the secretary to enforce it anymore. [00:15:43] Speaker 05: Presumably, the secretary would then take steps to remedy that. [00:15:46] Speaker 05: I think the upshot as a secretary would have been able to give the secretary sufficient room to make a determination of what steps to take there. [00:15:57] Speaker 05: in on remand if the policy was still effectively on the books, even if it wasn't going to be enforced. [00:16:03] Speaker 05: And I think here, Your Honor, the tricky part is payments have gone out for fiscal year 2020. [00:16:07] Speaker 05: I'm sorry? [00:16:08] Speaker 05: Payments have gone out for fiscal year 2020. [00:16:11] Speaker 05: And so I think part of the problem would be the Secretary having to make a determination of what to do with that. [00:16:16] Speaker 05: I think in a situation where there's a declaratory, the Secretary couldn't take any steps to enforce it. [00:16:22] Speaker 05: But there might be a more immediate [00:16:27] Speaker 05: Problem is the policy back vacated. [00:16:31] Speaker 03: And I mean, I wonder if declining to vacate here would set a precedent that, in effect, disruptive consequences alone are enough to remand without vacator, right? [00:16:45] Speaker 03: And say in a situation, assuming that we thought the regulation lacked legal authority, and then we were to remand without vacator. [00:16:51] Speaker 03: I mean, in a situation like that, doesn't that give all the weight to the disruptive consequences [00:16:57] Speaker 03: of the allied signal factors? [00:17:00] Speaker 05: Not necessarily, Your Honor. [00:17:01] Speaker 05: I mean, again, as the district court pointed out, one of the oddities here is that the district court found the principal issue with the wage index policy. [00:17:09] Speaker 05: The only medial request was as to the budget neutrality adjustment. [00:17:15] Speaker 05: And so that was part of the consideration that went into the district court's conclusion. [00:17:21] Speaker 05: It wouldn't be an abusive discretion for the district court to make that determination. [00:17:24] Speaker 05: It's true that under the allied signal factors, there's always this kind of dynamic where there has been a violation. [00:17:32] Speaker 05: So it does seem to turn a lot on the second factor. [00:17:36] Speaker 05: But as this court has explained, or as the district court explained, here where there are payments to hospitals nationwide, there might be a real reason to be cautious about vacating the budget neutrality adjustment. [00:17:52] Speaker 05: I see my time is up. [00:17:53] Speaker 03: I have one more question. [00:17:57] Speaker 03: So I have a question. [00:17:58] Speaker 03: If we were to conclude that the authority for this, there's authority for this regulation, not under D3E, but under D5I. [00:18:09] Speaker 03: There's so many letters. [00:18:11] Speaker 03: Lots of letters. [00:18:12] Speaker 03: Statutory provisions. [00:18:15] Speaker 03: If we were to conclude that, [00:18:18] Speaker 03: Is there any limit on the secretary's ability to make adjustments and exceptions? [00:18:24] Speaker 03: Because D5I is a pretty broad provision, right? [00:18:30] Speaker 03: And yet Congress has made all these very specific [00:18:33] Speaker 03: you know, statutory requirements about how these indexes and payments will be calculated. [00:18:38] Speaker 03: And that also gives the secretary a broad exceptions and adjustments authority. [00:18:43] Speaker 03: Is there any limitation on that authority? [00:18:46] Speaker 05: Certainly, Your Honor. [00:18:47] Speaker 05: I mean, this court's decision in Adirondack Medical Center, which on the D5I question is squarely on the point, the court there explained that [00:18:55] Speaker 05: If there are other provisions within the Medicare statute that have sufficiently preclusive language to suggest that exercising D5I in a way that would be irreconcilably conflicting, that's more specific provision, then that would not be an appropriate use of the D5I authority. [00:19:09] Speaker 05: But the court there explained that [00:19:12] Speaker 05: In fact, Congress knows how to use the word only when it wants to be sufficiently preclusive and that it didn't use the language as the specific provision in the Adirondack Medical Center case. [00:19:23] Speaker 05: And the same kind of language is missing in D3i. [00:19:26] Speaker 05: So the secretary could use the D5i authority to enact this policy, even if the D3e authority didn't authorize the secretary to do so. [00:19:36] Speaker 05: So it's not an unbound amount of authority. [00:19:38] Speaker 05: But this court has recognized that it is a quite broad [00:19:42] Speaker 05: broad spectrum grant of authority. [00:19:44] Speaker 01: Just one more thing, Your Honor. [00:19:45] Speaker 01: I have an observation and then a question. [00:19:49] Speaker 01: I've been looking at federal statutes for quite some time, and I have never seen one as detailed as this. [00:19:59] Speaker 01: There's a constant refrain [00:20:02] Speaker 01: that we hear that Congress is not doing its job because what it's doing is passing legislation that's very broadly worded and letting the agency fill in the blanks. [00:20:17] Speaker 01: But this statute is just the opposite. [00:20:20] Speaker 01: It describes community hospitals as being apart by 30 road miles. [00:20:28] Speaker 01: It talks about how many beds a particular hospital has to have, how many discharges it has to have. [00:20:35] Speaker 01: And then some of the mathematical formulas here would challenge, I think, Albert Einstein, [00:20:41] Speaker 01: They, it's, we've got, I don't even know what this is, VII, whatever. [00:20:47] Speaker 01: It's the indirect teaching adjustment. [00:20:50] Speaker 01: Are you familiar with that? [00:20:51] Speaker 01: It's C to the X power parens one plus R to the ninth power minus one, where R is the ratio of the hospital's full-time equivalent interns, and N equals 0.405. [00:21:07] Speaker 01: Now, that's rather detailed legislation, and it seems to me that, and this is not my question, it seems to me that that sort of background in sub-four before sub-five sort of indicates that the discretion that the secretary has is far from unlimited in the manner that you're talking about, because we're talking about filling in interstitials [00:21:36] Speaker 01: in legislation that is as detailed as any I've ever seen, that's my observation. [00:21:44] Speaker 01: Here's my question. [00:21:46] Speaker 01: You agree that, do you not, that the APA applies in this case? [00:21:54] Speaker 01: I agree, Your Honor. [00:21:56] Speaker 01: I think the cause of action here is an APA cause of action. [00:22:00] Speaker 01: Yeah, right. [00:22:00] Speaker 01: The 706 is the judicial review provision that governs [00:22:06] Speaker 01: Correct, John. [00:22:07] Speaker 01: That's correct. [00:22:08] Speaker 01: Okay. [00:22:09] Speaker 01: Tell me what your interpretation to justify remanding without vacating is in the face of Section 706 2A of the APA, which says when we find otherwise illegal agency action, quote, we shall hold it unlawful and set it aside. [00:22:34] Speaker 01: What does set it aside mean? [00:22:37] Speaker 05: I would direct this court, I would direct the question to Justice Gorsuch's concurrence in the Texas case. [00:22:43] Speaker 05: He observed there that there may be, that set aside may not entail vacatur, that it may more naturally be read to be kind of disregard. [00:22:53] Speaker 01: What's the interpretation you put on that language, hold on lawful and set aside? [00:23:05] Speaker 01: What's the interpretation you put on? [00:23:08] Speaker 05: A few things, Your Honor. [00:23:09] Speaker 05: For one, I would say that the government's position has been that language in 706. [00:23:14] Speaker 05: It was what? [00:23:14] Speaker 05: The government's position is that the language in 706 does not mandate vacatur. [00:23:19] Speaker 05: Among other things, 706 isn't the remedial provision of the APA. [00:23:23] Speaker 05: It's not mandatory? [00:23:24] Speaker 05: It's not a mandatory requirement is the government's position. [00:23:27] Speaker 05: But this court's. [00:23:28] Speaker 05: What is it? [00:23:29] Speaker 05: It's just an optional requirement? [00:23:31] Speaker 05: No, Your Honor, 706 is the scope of review, and it's a shell set aside, not may set aside to shell. [00:23:41] Speaker 05: Of course, Your Honor. [00:23:41] Speaker 05: And the point is only that whether the requirement that reviewing courts shall set aside lawful action, or there are other provisions that shall be set aside, the government's position is that does not mandate that there be vacatur. [00:23:57] Speaker 05: Our position in this case is that [00:24:00] Speaker 05: This court has recognized that vagature is the typical remedy under 706. [00:24:05] Speaker 05: And we are not, this panel can't overturn that, so we're not challenging it. [00:24:10] Speaker 05: We are just noting that the government's position that that is not in that presentation. [00:24:14] Speaker 01: You know, I read your brief, and I don't see that you're parsing this language at all. [00:24:19] Speaker 01: And basically, your brief stands for the proposition, well, this court has done that. [00:24:24] Speaker 01: And look, this case, we just remanded. [00:24:28] Speaker 01: In that case, we just remanded, and we didn't vacate. [00:24:31] Speaker 01: The problem with that is that it's a troubling proposition, because it's basically saying whatever is is right. [00:24:39] Speaker 01: And the reason it's troubling it means that nothing that ever was was wrong. [00:24:45] Speaker 05: Our position on appeal is simply that vacature, that remedy, is an available remedy under this court's precedent, as this court has recognized [00:24:54] Speaker 05: time and again. [00:24:55] Speaker 05: And so we are not asking this court to set new ground in terms of recognizing that vacature without remedy is an appropriate remedy. [00:25:04] Speaker 05: If I may just address the earlier observation about the detail here. [00:25:10] Speaker 03: Can I just ask one more question about the remedy while you're talking about that? [00:25:13] Speaker 03: I mean, is it the government's view that whether we remand or vacate and remand is purely a matter of equitable discretion under the APA? [00:25:26] Speaker 05: It was the district court's remedial discretion as to whether to remand without vacatur. [00:25:30] Speaker 05: And so the appeal would be whether the district court abused that remedial discretion. [00:25:35] Speaker 03: Well, if remand without vacatur is within equitable discretion, then the position is also that to vacate is also a question of equitable discretion. [00:25:45] Speaker 03: Like any remedy after finding of unlawfulness is within our equitable discretion. [00:25:50] Speaker 05: Yes, John. [00:25:51] Speaker 05: Vacature would be an example remedy. [00:25:55] Speaker 01: Do you think judicial review of agency action in the 20th and 21st centuries are actions in equity? [00:26:07] Speaker 01: I'm not sure if I've thought through that question sufficiently. [00:26:14] Speaker 01: I have a very large volume in my chambers, and it's a story on equity. [00:26:20] Speaker 01: And you can look through it, and then you're not going to find an equitable action involving judicial review of agency action. [00:26:30] Speaker 05: I mean only, Your Honor, that the APA has, that the scope of remedies under the APA is such that the district court can exercise discretion about what remedies to take. [00:26:41] Speaker 05: And that is, again, I would direct this court's attention to justice for such as concurrence in the Texas case where it lays out in these arguments, we are not [00:26:50] Speaker 05: We're not challenging that the availability of that vacature without remedy is an inappropriate remedy here. [00:26:56] Speaker 05: We're just saying that the score did not abuse its discretion, but it made that determination here. [00:27:00] Speaker 03: And so your view is that the APA leaves open this discretion? [00:27:03] Speaker 03: Yes, Your Honor. [00:27:05] Speaker 03: These open their- Kind of equitable discretion. [00:27:08] Speaker 03: Because otherwise, where does it come from? [00:27:09] Speaker 03: It's not within the APA, then. [00:27:11] Speaker 03: So if it's not a law-based remedy, that it must be an equitable remedy? [00:27:18] Speaker 05: You're right. [00:27:19] Speaker 05: Say that the indication is that when the APA was enacted, court's general practice was to treat regulatory action as if it was legislative in nature. [00:27:30] Speaker 05: And court's general practice was to, when viewed with a unlawful law, Congress, to treat that law as not binding. [00:27:38] Speaker 05: But of course, the court couldn't strike it from the books. [00:27:42] Speaker 05: And then when the APA was enacted, courts treated [00:27:47] Speaker 05: agency action as legislative in nature. [00:27:49] Speaker 05: So it would make sense to think that they would do the same type of thing as to a rule, which would say it disregarded, which might be the reason why it set aside languages there, but they wouldn't vacate it in the sense that they wouldn't do away with it fully. [00:28:02] Speaker 03: I was waiting for you to cite John Harrison. [00:28:04] Speaker 05: Yes, you're right. [00:28:06] Speaker 05: And they are coming to me. [00:28:07] Speaker 03: There's some. [00:28:08] Speaker 05: But if I may, just on the marriage, just wanted to address, just right off your point, it is certainly the case [00:28:17] Speaker 05: that 1395WW and 1395WWD is a particularly detailed provision. [00:28:24] Speaker 05: But that doesn't foreclose the secretary's authority, specifically under the D5I provision, to make exceptions and adjustments. [00:28:31] Speaker 05: You know, the provision that was at issue in the Adirondack Medical Center, which is cited. [00:28:39] Speaker 01: It says that the word others, I don't have it in front of me, but in five, right? [00:28:45] Speaker 01: Isn't it? [00:28:46] Speaker 01: By regulation for such other exceptions and adjustments. [00:28:48] Speaker 01: Other exceptions and adjustments. [00:28:51] Speaker 01: And so if you go through sub four, which precedes sub five, you'll find all kinds of adjustments and exceptions. [00:29:04] Speaker 01: And so why shouldn't we construe that [00:29:07] Speaker 01: than five as the kinds of minor adjustments that are contained in sub four, which this is not by any stretch. [00:29:20] Speaker 05: This is a temporary policy that affects 0.02% of Medicare payments in a given year is a very minor policy in terms of its scope. [00:29:30] Speaker 05: This is the type of adjustment that is very similar to how the secretary has previously exercised. [00:29:35] Speaker 05: How much money is at stake? [00:29:37] Speaker 05: I think it's $245 million for all hospitals. [00:29:40] Speaker 05: That's the 0.02%. [00:29:41] Speaker 01: I mean, that's a minor. [00:29:43] Speaker 01: I mean, maybe that's in the scheme of things is a minor number. [00:29:49] Speaker 05: I think the total payments at issue here is $122 billion. [00:29:53] Speaker 05: And this is affecting 0.02%. [00:29:55] Speaker 05: That's for all payments made under the prospective payment system for 2020. [00:30:00] Speaker 05: So the 0.02%. [00:30:01] Speaker 05: If you're right, it is minor. [00:30:02] Speaker 04: Doesn't that then suggest that factor would not be very disruptive? [00:30:08] Speaker 05: It might still be interrupted by individual hospitals. [00:30:10] Speaker 05: The point, Your Honor, was just that this is a temporary policy that was enacted by the Secretary that affects, again, 0.02% of payments, that this is the type of adjustment that is contemplated by Section D5I. [00:30:23] Speaker 03: Well, it's temporary, but hasn't the current administration indicated it plans to use this through 2024? [00:30:30] Speaker 05: It is continuing for the next fiscal year 2024, Your Honor. [00:30:33] Speaker 05: So it is, as the Secretary explained, it was necessary to maintain this for at least four years because of the way in which the index is calculated, which is [00:30:42] Speaker 05: the issue that the secretary was addressing in the first instance. [00:30:46] Speaker 05: And they have confirmed it for fiscal year 2024, in part because fiscal year 2020 data is very difficult to parse because it's the year in which COVID-19 affected hospital payment rates. [00:30:58] Speaker 01: Just to be clear, we see language in your brief, I think, about budget neutrality. [00:31:10] Speaker 01: Yes, sir. [00:31:11] Speaker 01: I just want to be clear. [00:31:13] Speaker 01: You're referring to the provision in three, right? [00:31:21] Speaker 01: It says, what does it say? [00:31:24] Speaker 05: I have it here, Your Honor, if you want me to read it. [00:31:26] Speaker 05: It says, this is provision D3E. [00:31:29] Speaker 05: Several sentences down. [00:31:30] Speaker 01: It says, any adjustments or updates made under this subparagraph shall be made in a manner that assures the aggregate payments [00:31:39] Speaker 01: in the fiscal year or not greater or less than those that would have been made without the adjustment. [00:31:44] Speaker 01: So that's why you have to rob Peter to pay Paul, right? [00:31:52] Speaker 05: That is the requirement to be, that is why there needs to be a budget neutrality adjustment yarn. [00:31:56] Speaker 05: That's what the secretary concluded because they're acting with underneath. [00:31:58] Speaker 01: If you give the bump to the lower quarter, you've got to take away a bump from the upper quarter because of that provision. [00:32:09] Speaker 05: Yes, Your Honor. [00:32:10] Speaker 05: Under D3E, the budget neutrality requirement means that because there was a change in the wage index, an adjustment to the wage index, then there must be a budget neutrality requirement. [00:32:21] Speaker 05: Got it. [00:32:21] Speaker 05: Thank you. [00:32:23] Speaker 03: Mr. Peters, do you have any cases that have a similar arrangement to the statute where the statute is very specific in the way Judge Randolph has already described, and then there is also a very open-ended grant of exemption power? [00:32:40] Speaker 03: Because it's, I mean, those are both in this statute. [00:32:43] Speaker 03: Both Congress paid extremely detailed attention to how this would be calculated, and then provides for this very open-ended adjustments authority. [00:32:52] Speaker 05: Yeah, I have two, Your Honor. [00:32:54] Speaker 05: One, we discussed at length and in briefs was just Adirondack Medical Center. [00:32:57] Speaker 05: The Adirondack Medical Center provision is also in 1395 WWD3. [00:33:01] Speaker 05: The provision is extremely specific. [00:33:05] Speaker 05: This is provided the authority of the secretary to make an adjustment to one set of hospitals. [00:33:11] Speaker 05: And then the secretary relied on D5I to make the same adjustment to another set of hospitals. [00:33:15] Speaker 05: And this court explained, the plaintiff's whole theory there was that the use of D5I would render meaningless the more specific provision. [00:33:22] Speaker 05: And this court expressly rejected that proposition. [00:33:25] Speaker 05: And that is the exact argument that plaintiffs are making here. [00:33:27] Speaker 05: And the Adirondack Medical Center reasoning applies with equal force. [00:33:33] Speaker 05: The second case, Your Honor, just to show that this structure isn't at all novel, is a case that isn't cited in the briefs, [00:33:40] Speaker 05: to give it to you. [00:33:41] Speaker 05: It's Amgen v. Smith. [00:33:43] Speaker 05: It is 357 F3 103. [00:33:44] Speaker 05: That's 357 F3 103. [00:33:48] Speaker 05: That's a 2004 case. [00:33:50] Speaker 05: And it also is a Medicare provision, a Medicare Part B provision. [00:33:56] Speaker 05: And I have the statutory provision as well if you'd like, which is 1390, sorry, 1395 L22E, sorry, LT2E. [00:34:07] Speaker 05: But the provision there was, [00:34:08] Speaker 05: part of Medicare Part B that said certain adjustments must be made to Medicare Part B reimbursement rates. [00:34:15] Speaker 05: And then there was a separate provision that allowed for equitable adjustments. [00:34:21] Speaker 05: And there, the secretary made an equitable adjustment to a Medicare Part B payment rate, even though the more specific provision said that this provision shall be made. [00:34:30] Speaker 05: And the court there concluded that [00:34:33] Speaker 05: the broad, equitable authority under the exception provision allowed the secretary to make that. [00:34:39] Speaker 05: It's the exact same reasoning. [00:34:40] Speaker 05: It's the exact same structure. [00:34:41] Speaker 05: It's a very common feature of the Medicare provision. [00:34:47] Speaker 04: You mentioned Adirondack a lot. [00:34:50] Speaker 04: I understand why. [00:34:52] Speaker 04: But it was a Chevron case. [00:34:57] Speaker 04: You are not asking us to apply Chevron here. [00:35:02] Speaker 04: Doesn't that matter? [00:35:03] Speaker 05: I don't think so, Your Honor. [00:35:05] Speaker 05: I mean, again, the discretion under D5i is express, right, as the secretary deems necessary. [00:35:13] Speaker 05: That would indicate that the secretary have to find ambiguity in the formula in order to [00:35:19] Speaker 05: So just to start with the D5I provision, then talk to the D3E provision. [00:35:23] Speaker 05: So the D5I provision gives the secretary broad authority. [00:35:26] Speaker 05: This court generally defers to that exercise of that broad authority. [00:35:29] Speaker 05: Then there's the D3E provision. [00:35:31] Speaker 05: Even if this court concludes that D3E didn't authorize the secretary to promulgate the low-wage policy, all that would mean is that the secretary lacked authority under that provision. [00:35:40] Speaker 05: It wouldn't preclude the secretary from relying on some other provision. [00:35:44] Speaker 05: And again, that flows naturally from Paterontic Medical Center. [00:35:47] Speaker 05: The courts was applying Chevron there, but there wasn't any doubt that the provision that was at issue, the more specific provision, didn't authorize the adjustment that was made. [00:35:56] Speaker 05: And so there wasn't any question about whether there was any. [00:36:03] Speaker 05: I mean, I'm happy to walk through that language, but the provision at issue there was very specific that it allowed an adjustment as to one set of hospitals. [00:36:10] Speaker 04: Right. [00:36:11] Speaker 04: And then it was debatable whether or not that same [00:36:15] Speaker 04: thing could be applied to other non non no the secretary then said the d5i authority could enact another another adjustment that that provision would not have provided for right i think we might be saying the same thing and i it might be that i'm just stating it but since you mentioned engine can i ask you a question about engine [00:36:35] Speaker 04: Did we say something along the lines of the word adjustment is similar to the term modify and that it stands for a very limited change, kinds of very limited change that MCI talked about when it defined modify? [00:36:54] Speaker 05: The court recognized that there was a limit to what adjustment could mean. [00:36:58] Speaker 05: And if there was a provision, like in the MCI case, or the Biden v. Nebraska case, in which there was a wholesale change to the ways in which the statute operated, then that would maybe no longer be an adjustment. [00:37:09] Speaker 05: In the case, the example in Amgen was [00:37:12] Speaker 05: If it had overruled the provision that it was a pass-through adjustment, if it had made pass-through adjustments not available at all, that might not be an adjustment. [00:37:23] Speaker 05: If the secretary relied on D5I to say that there was no adjustments at all under the wage index, to say the wage index just didn't apply, [00:37:31] Speaker 05: That would be a rewriting of the statute in a way that would be beyond the authority. [00:37:35] Speaker 05: But to adjust 0.02% on a temporary basis is precisely the type of limited modification or adjustment that D5I contemplates, that Amgen contemplates, and that's not the same as the Biden and Nebraska case or the MCI case. [00:37:50] Speaker 03: So exception and adjustment is a matter of degree. [00:37:55] Speaker 05: I think that's right, Your Honor. [00:37:56] Speaker 05: I mean, again, it's an adjustment. [00:37:58] Speaker 03: From how we read these provisions together. [00:38:02] Speaker 05: Yes, sir. [00:38:02] Speaker 05: I mean, it's adjustment and exception, right? [00:38:05] Speaker 05: So the exception contemplates not just an adjustment, but that a payment that is required would then be accepted. [00:38:14] Speaker 05: And so the adjustment, which all it does is shift a percentage of that's being paid, seems to be well within the D5I authority. [00:38:23] Speaker 05: The adjustment that was issued in Adirondack was also in the hundreds of millions of dollars. [00:38:29] Speaker 05: There's also the Shands case, Your Honor. [00:38:31] Speaker 05: There are two, there was a budget neutrality adjustment in the hundreds of millions of dollars. [00:38:35] Speaker 05: The secretary has used the D5I authority in the past, very similar to this, to allow certain hospitals to change their wage index provisions when the secretary concluded that it would be equitable to do so. [00:38:47] Speaker 05: This is of a piece with what the secretary has previously done under D5I. [00:38:51] Speaker 04: I think you have a hard argument, but I think you have made it really well. [00:38:59] Speaker 04: Thank you. [00:39:15] Speaker 02: May it please the court. [00:39:16] Speaker 02: Katrina Pagonis from Hooper, Lundy, and Bookman on behalf of Appellee Cross Appellant Hospitals. [00:39:23] Speaker 02: The Secretary's action here is a poorly researched, expensive, redistributive experiment undertaken without statutory authority, and it has been properly found unlawful by the two district courts to review it today. [00:39:37] Speaker 02: Now, this court has spent some time exploring remedies with my friend on the other side. [00:39:43] Speaker 02: And so if I can address quickly one issue that has not arisen, which is appellee cross appellant's request for interest under 1395-00F2 of the statute that enables the hospitals to appeal this issue. [00:40:01] Speaker 02: 1395 OOF 2 speaks in terms of a mandate to the court requiring the award of interest to a prevailing party in a Medicare Act suit such as this. [00:40:14] Speaker 02: The district court did not address the demand for interest below and it is the hospital's concern that absent a judicial order requiring a payment of interest, additional [00:40:29] Speaker 02: steps would be necessary through an uncertain procedural landscape in order to obtain that interest. [00:40:38] Speaker 01: How do you expect to collect on this judgment? [00:40:42] Speaker 02: At this moment, CMS could calculate to the penny how much is owed to the hospitals. [00:40:48] Speaker 02: And for our appellee hospitals, it's about $3.6 million. [00:40:53] Speaker 02: The interest payment, however, the award of interest doesn't need to specify to the penny. [00:40:58] Speaker 02: It just simply needs to establish the temporal balance and percent. [00:41:03] Speaker 01: My question's a little bit different than that because there's an old Supreme Court case [00:41:09] Speaker 01: It's Behr, B-U-R-R, but it's not Aaron Behr. [00:41:14] Speaker 01: In the 50s, I think it is. [00:41:16] Speaker 01: It says that even though an agency can sue and be sued, and that's a waiver of sovereign immunity, that if there's a question of money damages or monetary recovery, and it has to come out of the treasury, then that sue and be sued is not a waiver [00:41:38] Speaker 01: of money coming out of the Treasury. [00:41:41] Speaker 01: And so the ruling was against the private party in that case in favor of the United States, which is why I'm asking you, you know, where is this 245 million plus interest going to come from? [00:41:57] Speaker 02: The secretary routinely faces adverse judgments and instructs its Medicare administrative contractors to make payment under alternative rules out of the Medicare trust fund. [00:42:12] Speaker 02: And so it is not a... It's a trust fund? [00:42:16] Speaker 02: The Part A trust fund for Medicare Part A payments made to hospitals. [00:42:21] Speaker 02: Okay. [00:42:22] Speaker 02: It's your honor. [00:42:23] Speaker 04: If we vacate remand, do we just say, and on remand to calculate interest, period? [00:42:29] Speaker 04: Is that how the order looks? [00:42:30] Speaker 02: The example would be what the district court did in the alleged health manual, which is granting an award of damages and instructing the secretary to determine the amount of payment. [00:42:46] Speaker 02: and you know, the amount of payment would be based on the secretary's own determination of the amount owed to the appellee hospitals. [00:42:55] Speaker 02: But that, you know, the legend health and manual provides what I think is a fairly solid model of how these interest awards should be granted in cases that require further action on remand to determine the amount, exact amounts. [00:43:10] Speaker 04: Why didn't you ask for back a tour of the budget [00:43:15] Speaker 04: neutrality application, but not back to what you argue is the illegal payment to low wage hospitals that triggered the budget neutrality. [00:43:27] Speaker 02: Absent the budget neutrality adjustments, appellee hospitals would not be harmed by the low wage index policy. [00:43:35] Speaker 04: It would be a theoretical or you don't have standing to challenge the [00:43:42] Speaker 04: The rule that says pay low-wage hospitals more. [00:43:48] Speaker 04: If you don't have standing to challenge that part of the rule, then maybe we don't have jurisdiction to vacate that part of the rule. [00:43:57] Speaker 04: Is that your position? [00:43:59] Speaker 02: I am not necessarily taking a position about the scope of the court's jurisdiction with respect to the low-wage index hospital policy itself. [00:44:10] Speaker 02: We don't think that the court needs to go there. [00:44:14] Speaker 02: And perhaps as a theoretical matter, it is more appropriate for the secretary on remand to engage stakeholders about what should become of the low-wage index. [00:44:26] Speaker 04: I would have thought you would say we were injured [00:44:28] Speaker 04: The adjustment to the wage index to pay low wage hospitals more because it required the government to pay us less. [00:44:37] Speaker 04: Therefore, vacate. [00:44:39] Speaker 04: What I just said. [00:44:41] Speaker 02: Yes, your honor. [00:44:41] Speaker 02: So, um. [00:44:44] Speaker 02: Appellee hospitals were undeniably impacted by the pay for. [00:44:49] Speaker 02: I had assumed that you were addressing a hypothetical without that kind of impact. [00:44:56] Speaker 02: But yes, appellee hospitals were absolutely impacted by the pay for, unwinding the pay for. [00:45:02] Speaker 04: When you say pay for, that's the extra payment adjustment for low wage hospitals, right? [00:45:07] Speaker 02: The 0.2016% negative adjustment that applied to the plaintiff hospitals. [00:45:12] Speaker 04: No, no, no. [00:45:12] Speaker 04: I'm talking about the adjustment for the low wage hospitals. [00:45:15] Speaker 02: The adjustment for low wage hospitals only impacted other hospitals outside of that quartile to the extent that they had to put the bill for it. [00:45:25] Speaker 04: I mean, you keep saying that. [00:45:27] Speaker 02: I'm sorry, Judge Walker. [00:45:29] Speaker 04: I'm not mad at you for being open and honest about what I think your position has been throughout the litigation. [00:45:36] Speaker 04: I'm not sure I agree, and I'm not sure it's in your interest. [00:45:40] Speaker 03: I mean, your position is part of why you ended up with remand without vacator. [00:45:47] Speaker 03: I mean, the district court's view in part was that the strange splitting of this one regulatory policy [00:45:55] Speaker 03: made it very hard for the district court to figure out what to do. [00:46:00] Speaker 03: So your litigating position in part has created some of this remedial problem. [00:46:09] Speaker 03: Certainly, at least according to the district court. [00:46:12] Speaker 02: Certainly, the district court said that these two things are inextricably intertwined and our remedies need to address. [00:46:19] Speaker 02: Aren't they? [00:46:19] Speaker 02: Why are they not inextricably intertwined? [00:46:22] Speaker 02: They are intertwined for purposes of evaluating the lawfulness of the payment reduction. [00:46:29] Speaker 02: One has to look at what the payment reduction. [00:46:32] Speaker 02: Isn't that your whole position that it's unlawful? [00:46:34] Speaker 03: So if they're inextricably connected, don't they rise and fall together? [00:46:39] Speaker 02: It would not be unreasonable for a court to take the position that both need to be vacated. [00:46:47] Speaker 03: Just not want to be arguing against giving money to rural hospitals. [00:46:51] Speaker 03: Like, I mean, is there some, you know, [00:46:55] Speaker 02: The wage index is an extraordinarily sensitive portion of the inpatient payment statute. [00:47:05] Speaker 02: It gives and takes to different hospitals across the country. [00:47:10] Speaker 02: We're representing hospitals that were impacted in a very particular way. [00:47:15] Speaker 02: Today, I'm only speaking to the impact that they experience. [00:47:19] Speaker 02: But the confines of my client's interests don't necessarily mirror what the court's abilities. [00:47:31] Speaker 03: Some question on the merits. [00:47:34] Speaker 03: that the government has a very uphill battle to justify its policy under D3E. [00:47:40] Speaker 03: But what about this exceptions power, right? [00:47:43] Speaker 03: I mean, this, you know, I guess D5I is extremely broad. [00:47:49] Speaker 03: The secretary shall provide by regulation for such other exceptions and adjustments, right, to payment amounts under this subsection. [00:47:57] Speaker 03: And if you look at such other and you look at the types of adjustments that came before, they are arguably of a piece with the type of adjustment that was made here. [00:48:09] Speaker 03: So why doesn't this provision give them the authority to do what they did? [00:48:14] Speaker 02: I think, well, a couple things. [00:48:16] Speaker 02: One is it's not clear from the final rule that that's what the secretary was doing. [00:48:22] Speaker 02: When confronted with questions about his D5I authority, he reverted to his argument about D3E and his argument that it was a technical adjustment. [00:48:32] Speaker 02: Let's engage. [00:48:33] Speaker 03: Let's assume that they did properly. [00:48:36] Speaker 02: Yes, your honor. [00:48:36] Speaker 02: So had it been invoked, D5I speaks to other exceptions and adjustments. [00:48:43] Speaker 02: And Adirondack deals with a particular situation where Congress spoke clearly about standardized amounts but did not speak about hospitals paid under the hospital-specific rate. [00:48:55] Speaker 02: And so the secretary made another adjustment. [00:48:58] Speaker 02: for hospitals paid under that hospital specific rate. [00:49:01] Speaker 02: Here we have a situation where Congress mandated the secretary, he shall make adjustments based on the wage index. [00:49:12] Speaker 02: And so this is not a case like Adirondack where there was wholesale silence. [00:49:19] Speaker 02: Congress instructed the secretary of the exact adjustment he had to make with respect to the wage index. [00:49:26] Speaker 03: And so this I mean, what does this this means that the provision can't the secretary can't make an exception or adjustment to anything that is specified previously? [00:49:36] Speaker 03: Like, wouldn't that read this provision out of the statute? [00:49:41] Speaker 02: No, your honor. [00:49:42] Speaker 02: You know, Adirondack provides us with a good example of cases where despite the length of the statute, there might be areas of silence within the statute. [00:49:51] Speaker 02: It's just my position is that D3E is not one of those areas. [00:49:56] Speaker 02: Congress mandated to compare the national wage average wages with the regional wages and do an adjustment to the labor related faction. [00:50:04] Speaker 02: Congress went back and created exceptions where it wasn't comfortable with how it was working. [00:50:09] Speaker 02: It made a lot of it. [00:50:10] Speaker 03: Congress did make a lot of [00:50:11] Speaker 03: exceptions. [00:50:12] Speaker 03: One may ask why after making such specific exceptions, they also gave a broad grant of general exception power, but that is what they did. [00:50:19] Speaker 03: I mean, you look at the exception just before I is that the secretary can make exceptions and adjustments, I guess adjustments to take account of the unique circumstances of hospitals located in Alaska. [00:50:33] Speaker 03: And why? [00:50:34] Speaker 03: Why isn't an adjustment for rural hospitals a [00:50:37] Speaker 03: a similar type of adjustment. [00:50:39] Speaker 03: There's sort of a policy reason for doing it, at least according to the secretary. [00:50:43] Speaker 03: There are a whole bunch of these exceptions. [00:50:47] Speaker 03: And then a provision that suggests that the secretary can make such other adjustments and exceptions, which I read to mean similar to the exceptions that Congress specified. [00:50:59] Speaker 03: So I guess my question is why is this adjustment not like those other adjustments and exceptions? [00:51:05] Speaker 03: I mean, just for the unique circumstances of Alaska and Hawaii. [00:51:09] Speaker 02: Well, I mean, within the confines of D3E, Congress dealt with frontier states already, dealt with every hospital with a wage index that's less than the national average. [00:51:22] Speaker 02: And so the reticulate nature of D3E and the mandate at the beginning of D3E that makes the wage index adjustment non-optional for the secretary. [00:51:36] Speaker 02: ought not to be read to allow the secretary apply other adjustments to vitiate it. [00:51:42] Speaker 03: Ought not to be. [00:51:43] Speaker 03: Maybe it would be better policy to not give the secretary such broad exception power in a statute that Congress had made such specific exceptions in. [00:51:53] Speaker 03: But the statute does give them this exceptions power. [00:51:56] Speaker 03: So what work does it do? [00:51:59] Speaker 02: In areas where we don't have a specific versus general problem, it allows the secretary perhaps to do quite a bit. [00:52:07] Speaker 02: But where Congress has said specifically this must be done, it does not open the door for the secretary to say, you know what, I don't want there to be differences in Medicare payment that are this significant based on differences in wages. [00:52:23] Speaker 02: And that's what the secretary did here. [00:52:26] Speaker 02: D3E mandates differences in payment based on differences in area weightings. [00:52:31] Speaker 01: Talk about mandatory requirements. [00:52:33] Speaker 01: I want to come back to some of the questions that my colleagues were asking you. [00:52:41] Speaker 01: What occurs to me is that let's suppose you brought this lawsuit and the secretary agreed without [00:52:51] Speaker 01: responding to the complaint, agreed with your allegation and therefore removed the decrease, right? [00:53:02] Speaker 01: That would be illegal, wouldn't it? [00:53:06] Speaker 02: For the secretary to settle? [00:53:09] Speaker 01: The secretary, think about judges and orders and everything else. [00:53:13] Speaker 01: The secretary just caved into your lawsuit [00:53:16] Speaker 01: and says, okay, I think you've got a point here. [00:53:19] Speaker 01: I hereby remove the decrease for the top 25%. [00:53:23] Speaker 01: That would be illegal. [00:53:27] Speaker 02: Yeah, the secretary could not make law in a settlement, but with the plaintiff hospitals, he could acquiesce prospectively and in future rulemaking. [00:53:37] Speaker 01: They do that because sub three says that it's gotta cancel out to the same as if [00:53:46] Speaker 01: no adjustments were made. [00:53:48] Speaker 01: And in this hypothetical I'm giving you, it's greater than one because the lower 25 would be getting the bump. [00:53:58] Speaker 01: And that would be illegal under the sub three. [00:54:03] Speaker 01: Sorry. [00:54:04] Speaker 01: So it, it, it, yes. [00:54:05] Speaker 01: So your honors. [00:54:06] Speaker 01: So, okay. [00:54:07] Speaker 01: I just want to follow up on that. [00:54:08] Speaker 01: Yes. [00:54:09] Speaker 01: If a court orders it, isn't the court ordering [00:54:12] Speaker 01: to follow up on the questions that my colleagues, is the court ordering the secretary to do something illegal? [00:54:21] Speaker 01: Without touching the lower 25%, a court order to get rid of the decrease in the top 25% is in flat out contradiction of that provision. [00:54:36] Speaker 01: I guess my follow-up question is, why should whatever ruling comes down be prospective only? [00:54:44] Speaker 02: Your honor, our view is, sorry, to clarify, our view is not that a ruling should be prospective only because we're challenging fiscal year 2020 in this case. [00:54:54] Speaker 02: And so it has to apply retrospectively in order to address the payments that were unlawfully withheld from the appellee hospitals. [00:55:04] Speaker 02: And I believe your honor's question is, because D3E mandates the aggregate payments under the wage index not [00:55:13] Speaker 02: and it's not grow because of the wage index wouldn't paying back hospitals for the 0.2 0.16% and create a problem within the confines of the [00:55:30] Speaker 02: Our view is on remand. [00:55:31] Speaker 02: The secretary would certainly, in light of the court's determination that the low wage index hospital policy is unlawful, would need to grapple with how to reconcile it. [00:55:44] Speaker 02: But our hospitals shouldn't have to wait [00:55:48] Speaker 02: for the secretary to figure out what to do with the what it's doing with respect to the low wage index hospitals in order to get the full amount of payment that they should. [00:55:59] Speaker 02: I would also point out that it's very easy to be surgical for the secretary on remand because he applied a wage index adjust budget neutrality adjustment for the natural wage index and then applied education for the what. [00:56:14] Speaker 02: for the natural wage index. [00:56:15] Speaker 02: For the wage index, he calculated before this policy. [00:56:19] Speaker 02: And then he did a second budget neutrality adjustment only for this policy. [00:56:25] Speaker 02: And so it's very clean, very surgical. [00:56:27] Speaker 02: We know exactly which dollars are paid for for this policy versus the ones that are there to make the normal wage index or natural wage index, so to speak, budget neutral. [00:56:41] Speaker 04: Imagine the rule has to have just going to simplify a little. [00:56:45] Speaker 04: First half is we're going to pay the low-wage hospitals more money. [00:56:48] Speaker 04: Second half is for budget neutrality reasons, we're going to pay the other hospitals less money. [00:56:53] Speaker 04: Assume for the sake of this question that I think you have to either vote. [00:56:57] Speaker 04: You have to either vacate both halves or vacate neither half. [00:57:03] Speaker 04: Which do you want us to do? [00:57:05] Speaker 02: I would ask that the court vacate both halves. [00:57:09] Speaker 04: Okay. [00:57:09] Speaker 04: You didn't ask for that in terms of the relief below. [00:57:13] Speaker 04: Can we provide you more relief than you asked? [00:57:22] Speaker 02: You know, the argument in favor of doing so is that the Administrative Procedure Act on Section 706 says what the court shall do when it finds something unlawful. [00:57:34] Speaker 02: And so although the hospitals haven't sought that here, this court could approach its authority under Section 706 and its obligations under Section 706 to reach both. [00:57:50] Speaker 04: And I think you've touched on the answer to this next question some, but I honestly don't understand it. [00:57:56] Speaker 04: So maybe take another shot or maybe maybe have a chance to address this specific question. [00:58:01] Speaker 04: But what is the practical difference for you between vacating neither half and vacating both halves? [00:58:12] Speaker 02: If the court remands without vacator on both halves, the concern is the vacator can inspire agency indifference, as this court has noted. [00:58:28] Speaker 02: And the concern is that that will delay our hospital's path to getting made whole. [00:58:35] Speaker 02: And we know from experience, Medicare litigation and remedies for Medicare litigation can pass on through generations of lawyers, and that should not be the experience of the appellee hospitals here. [00:58:52] Speaker 03: If I can ask you just one other question about remedy. [00:58:55] Speaker 03: Is there a difference to the hospitals here, whether we vacated or whether we issued a declaratory judgment? [00:59:04] Speaker 03: saying that this school was invalid or unlawful. [00:59:09] Speaker 02: Well, as my friend on the other side acknowledged, is there is there a difference? [00:59:14] Speaker 02: I think that I think that there is a difference in that [00:59:19] Speaker 02: Vakator makes the rule a nullity. [00:59:23] Speaker 02: And so on remand, the secretary and his contractors cannot apply it to any hospital when settling cost reports, et cetera, and finalizing payments. [00:59:37] Speaker 02: So it puts us in a circumstance of greater [00:59:43] Speaker 02: clarity, um, greater clarity than we would have, um, with just declaratory relief. [00:59:52] Speaker 02: Um, taking it off the books means that it cannot be applied to our the 0.2 0 1 6%. [00:59:59] Speaker 04: Thank you. [01:00:06] Speaker 06: Thank you. [01:00:16] Speaker 05: Thank you. [01:00:17] Speaker 05: If I may, I'd like to start with the D5I authority. [01:00:21] Speaker 05: I think, as Judge Rao, your question suggested, plaintiff's interpretation of that provision would seem to read the broad authority out of the statute. [01:00:29] Speaker 05: Plaintiff's position, which seems to echo the district court's position, that the secretary can rely on D5I only to the extent that some other provision already authorized the secretary to do that. [01:00:40] Speaker 05: And that that wouldn't mean that D5I has no independent effect. [01:00:43] Speaker 05: That can't be right. [01:00:45] Speaker 05: the exact reasoning that this court rejected an Adirondack Medical Center. [01:00:50] Speaker 05: It's also true that D5 broadly has any number of exceptions, some of which also apply broadly and some of which authorize additional payments. [01:01:00] Speaker 05: And so these adjustments here, both the low wage index policy and the offsetting budget neutrality adjustment are well within of a piece of prior exercises by the secretary of both the D5I and other D5 authority. [01:01:15] Speaker 05: On the D3E provision, Your Honor, I just want to add a few questions about that earlier in the process. [01:01:20] Speaker 05: I just want to clarify one distinction I think is worth noting. [01:01:24] Speaker 05: There are two distinct inquiries as to the D3E authority. [01:01:29] Speaker 05: One is, does the Secretary have authority at all to make adjustments when there's a determination that historic data is somehow not appropriately capturing or looking regional wage differences? [01:01:40] Speaker 05: And this court said in the first Hanajat case, the secretary has that authority. [01:01:46] Speaker 05: They reaffirmed that in the second Hanajat case. [01:01:50] Speaker 05: Now, there was a separate inquiry as to whether the secretary exercised that authority reasonably and reasonably explained it. [01:01:56] Speaker 05: And so I just want to clarify that it is clear that this court has said that the statutory authority is [01:02:03] Speaker 05: the secretary has a statutory authority to do something like this. [01:02:05] Speaker 05: Even if the court were to conclude that it was somehow unreasonable or unreasonably explained, which we don't agree with, but if the court were to conclude that, that wouldn't be that the secretary lacks statutory authority. [01:02:13] Speaker 05: It would be that the decision was somehow unreasonable and perhaps arbitrary and capricious. [01:02:17] Speaker 05: I just want to clarify that there is a distinction there and that this court has consistently recognized the authority of the secretary to make adjustments at this time. [01:02:24] Speaker 05: I think my time is up. [01:02:27] Speaker 05: There are no other questions. [01:02:30] Speaker 03: Thank you. [01:02:34] Speaker 03: I'm going to ask for a minute for bottle time. [01:02:38] Speaker 03: Do you have anything further? [01:02:39] Speaker 02: Yes, Your Honor. [01:02:39] Speaker 02: I have nothing further to add. [01:02:40] Speaker 03: Thank you very much. [01:02:41] Speaker 02: Thank you.