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Medicare reimbursement case appears to stump justices

The fate of safety-net hospitals hangs in the balance while the Supreme Court parses a change to how hospitals are reimbursed in relation to their share of low-income patient populations.

WASHINGTON (CN) — Wrestling with a complicated challenge to how the government reimburses hospitals that cater to low-income patients through Medicare payments, several members of the high court voiced exasperation Monday as they plunged the thornier question of how agencies interpret their own statutes. 

“These people are exhausted, just like me after reading this case,” Justice Stephen Breyer griped at one point. At another, Justice Clarence Thomas referred to the language in the case as “indecipherable.” 

Part of the the last batch of petitions the Supreme Court granted before summer recess, the case here involves a 2004 rule from the Department of Health and Human Services that calculates how Medicare benefits are applied after the allotted inpatient days are exceeded while the patient remains in the hospital. 

The agency uses a higher rate when it reimburses hospitals that care for a higher percentage of low-income individuals — known as disproportionate share hospitals. To calculate which hospitals apply for this rate, Congress created a formula using the sum of two fractions. The equation calculates what proportion of patients are “entitled” to benefits from Medicare Part A and Social Security Income and what proportion of patients were “eligible” for Medicaid. The ambiguity in the interpretation of these two phrases has caused conflict between the agency and hospitals looking for reimbursement. 

Empire Health Foundation initiated the challenge over its Medicare reimbursement from a short-term acute-care hospital operated by the Valley Hospital Medical Center. When it prevailed at the Ninth Circuit, Health and Human Services brought a petition for certiorari, saying the appellate panel misread the law and the context. 

Jonathan Bond, who is assistant the solicitor general, picked up that argument Monday, saying the Ninth Circuit incorrectly rested on inferences of the meaning of eligible and entitled within the statute. Insisting that the agency’s interpretation of the phrases matches the meaning from Congress, Bond said the case is focused on which patients are entitled to Part A benefits.

“The court of appeals and respondent's contrary reading rests on two inferences based on other language concerning other programs,” Bond said. “The court of appeals inferred from Congress's references to ‘persons eligible for Medicaid’ that in the Medicare fraction Congress must have meant 'entitled to Part A' to mean something different than it means throughout the statute. But Congress's use of ‘entitled’ and ‘eligible’ is fully explained by its usage of those terms in the underlying Medicare and Medicaid programs governed by separate statutory frameworks. Congress simply took those terms as it found them.” 

Chief Justice John Roberts noted meanwhile that the political history says otherwise. 

“There's a backstory to all this, and that was that Congress was, I would say, extremely frustrated with what the agency was doing over time,” Roberts said.

Justice Brett Kavanaugh also dissected the government's argument piece by piece.  “There's just kind of a panoply of problems here,” the Trump appointee said. 

Empire Health — represented by Daniel Hettich, an attorney from King & Spalding — argued that HHS violated Congress’ instructions in its interpretation of the rule. 

“Since the agency's own interpretation can only also reduce the Medicaid fraction, it can never increase it, this means that the agency has once again categorically excluded indigent patients, in violation of Congress's clear instructions,” Hettich argued. 

Justice Samuel Alito lambasted Hettich’s argument on this point.  

“Do you really think that a majority of the Senate and a majority of the House thought through the particular question that faces us in this case, and they all said, yes, your interpretation is the right interpretation, that's what we want,” the Bush appointee said. “Do you seriously want to make that argument?”

Because the law concerns how HHS interprets its own rule, the government asked the court to apply the Chevron doctrine — the court’s 1984 ruling forcing federal courts to defer to an agency’s interpretation of its own statute. 

“Our reading fits together at least better with the overwhelming majority of the act's provisions and has a plausible straightforward theory of the congressional design that fits with a population focus,” Bond said. “And at a minimum, that's a reasonable reading on which Congress would want the agency's view to get deference.” 

Justice Sonia Sotomayor appeared skeptical, however, of giving the agency deference when the final rule did the opposite of what HHS proposed to do. 

“What's most significant to me, the final rule did the opposite of what the agency initially proposed to do … I don't see how we give you Chevron deference under those circumstances,” the Obama appointee said. 

Justice Neil Gorsuch remarked that the government often relies on deference in cases that few people know about or understand. 

“What do we do about the fact that, as in this case, Chevron is very often asserted by the government to defend an interpretation that not only few people were given any advance notice of or understood, or maybe they were too exhausted to understand by the time it all was adopted, but also tends to favor the government's own pecuniary interests,” the Trump appointee asked. “Should we be granting deference in those circumstances?” 

Breyer said he had an “awful qualm” about using Chevron in this case. 

“I have an awful qualm about using Chevron here, because the point of it is supposed to be that a reasonable member of Congress would have wanted the agency to figure this out, and where it figures it out, doesn't figure it out, gets everything mixed up, it's a pretty tough case to use Chevron,” the Clinton appointee said. 

Hettich argued that the impact of a decision in this case would be significant on safety-net hospitals. 

“Safety net hospitals have much thinner margins than hospitals in general, where a couple of percent — I know my friend on the other side said, oh, you know, it's just a percent or two — for these hospitals, that can be the difference between keeping their doors open or closed,” Hettich said. 

Hettich and the Department of Justice did not respond to requests for comment following oral arguments.   

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