Fresno Community Hospital and Medical Center v. Norris Cochran

 United States Court of Appeals

Argued September 9, 2020             Decided February 9, 2021

                         No. 19-5254

                      CENTER, ET AL.,



         Appeal from the United States District Court
                 for the District of Columbia
                     (No. 1:18-cv-00867)

     Katrina A. Pagonis argued the cause for appellants. With
her on the briefs was Robert L. Roth. John R. Hellow entered an

     Karen Schoen, Attorney, U.S. Department of Justice, argued
the cause for appellee. With her on the brief were Michael S.
Raab, Attorney, Robert P. Charrow, General Counsel, U.S.
Department of Health & Human Services, Brenna E. Jenny,
Deputy General Counsel and Chief Legal Officer - CMS, Janice
L. Hoffman, Associate General Counsel, and Susan Maxson
Lyons, Deputy Associate General Counsel for Litigation.

   Before: WILKINS and KATSAS, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.

   Opinion for the Court filed by Senior Circuit Judge

    RANDOLPH, Senior Circuit Judge: When Medicare
overpays hospitals, it offsets that mistake by reducing future
payments. A group of hospitals challenges one such reduction.
We must decide whether we have jurisdiction.


     By 2013, Medicare was out $11 billion. The backstory? A
tortuous tale — familiar to the parties — involving new
diagnostic codes and bookkeeping that did not keep up.1 But for
purposes here, the story begins when Congress gave the
Secretary of Health and Human Services a mission: recoup all
$11 billion by the end of fiscal year 2017. See American
Taxpayer Relief Act of 2012, Pub. L. No. 112-240,
§ 631(b)(2)(A)(ii)(IV), 126 Stat. 2313, 2353 (2013).

     Congress’s orders were simple.            To recoup the
overpayments, the Secretary must reduce the base rate (or
“standardized amount,” in Medicare jargon) paid for inpatient
care. See

id. (In essence, Medicare

would dock hospitals’ pay
to offset the accidental advance.) After running the numbers,
the Secretary opted to adjust the base rate gradually: -0.8% in
2014, -1.6% in 2015, -2.4% in 2016, and (if all went according

       Those curious about the Inpatient Prospective Payment System,
the Medicare Severity Diagnosis-Related Group classifications, and
resulting payment woes will find all that and more ably recounted in
District Judge Kollar-Kotelly’s opinion below. See Fresno Cmty.
Hosp. & Med. Ctr. v. Azar, 

370 F. Supp. 3d 139

(D.D.C. 2019).

to plan) a net -3.2% adjustment in 2017. See 78 Fed. Reg.
50,496, 50,515 (Aug. 19, 2013).

     Meanwhile, Congress was looking ahead to 2018. After
recouping the $11 billion, the Secretary expected to zero out the
adjustment right away. See

id. But Congress had

other ideas.
Instead of making “the adjustment (estimated to be an increase
of 3.2 percent) that would otherwise apply,” Congress told the
Secretary to adjust the base rate by 0.5% each year through
2023. See Medicare Access and CHIP Reauthorization Act of
2015, Pub. L. No. 114-10, § 414(1)(B)(iii), 129 Stat. 87, 163
(2015). In other words, the Secretary would slowly phase out
the recoupment adjustments: -2.7% in 2018, -2.2% in 2019,
-1.7% in 2020, -1.2% in 2021, -0.7% in 2022, and -0.2% in
2023. (Congress said nothing about the leftover -0.2%.)

     Things went smoothly until 2016, which brought two
further changes. First, while reviewing the 2017 budget, the
Secretary realized that a -3.2% adjustment would leave the
agency short of its $11 billion goal. So to stay on track, the
Secretary announced a -3.9% adjustment — 0.7% more than
planned. See 81 Fed. Reg. 56,762, 56,783–85 (Aug. 22, 2016).
Shortly thereafter, Congress made the second change. Fine-
tuning its earlier orders, Congress told the Secretary to increase
the base rate by 0.4588% (not 0.5%) in 2018. See 21st Century
Cures Act, Pub. L. No. 114-255, § 15005, 130 Stat. 1033, 1320

     The rest happened just as expected. In 2017, the Secretary
adjusted the base rate -3.9%. The agency met its goal. And
then, in 2018, the Secretary adjusted the base rate -3.4412% —
up 0.4588% from 2017.

    That brings us to this case. Shortly after the -3.4412%
adjustment took effect, Fresno Community Hospital and

Medical Center sued the Secretary, joined by 683 other
Medicare providers. Their grievance? The -0.7% solution. In
the hospitals’ view, the Secretary should have reversed that
expedient at the end of 2017. But instead, he carried it over into
2018 — costing the hospitals $840 million in lost payments.
Appellants’ Brief 42.

     The district court dismissed for lack of jurisdiction, citing
the judicial-review bar in § 7(b)(5) of the TMA, Abstinence
Education, and QI Programs Extension Act of 2007.2 We
review that decision de novo. See Am. Hosp. Ass’n v. Azar, 

895 F.3d 822

, 825 (D.C. Cir. 2018).



     Section 7(b)(5) bars “judicial review . . . of any . . .
adjustments made under [§ 7(b)]” of the Act. This “specific
language” defeats the presumption favoring review of agency
action, Block v. Cmty. Nutrition Inst., 

467 U.S. 340

, 349 (1984),
leaving a single question: whether the challenged action is “the
sort shielded from review,” Amgen Inc. v. Smith, 

357 F.3d 103

113 (D.C. Cir. 2004).

     Both the Act and the agency’s 2018 Medicare rule suggest
that it is. Start with the rule. According to the preamble, the
Secretary finalized a “+0.4588 percentage point adjustment” for
fiscal year 2018, as “required under” § 7(b)(1)(B). See 82 Fed.
Reg. 37,990, 38,009 (Aug. 14, 2017) (emphasis added,
capitalization omitted). And this tallies with the Act, which told

      Pub. L. No. 110-90, § 7(b)(4), 121 Stat. 984, 987 (2007),
amended by § 414(3), 129 Stat. at 163. “Welcome to — and apologies
for — the acronymic world of [Medicare] legislation.” Fry v.
Napoleon Cmty. Schs., 

137 S. Ct. 743

, 749 (2017).

the Secretary to “make an . . . adjustment . . . of an increase of
0.4588 percentage points” for fiscal year 2018.
§ 7(b)(1)(B)(iii).3

     Against all this, the hospitals insist that their quarrel is not
with an “adjustment” but instead with the “continued inclusion
of” (or “fail[ure] to reverse”) a -0.7% “payment reduction.”
Appellants’ Brief 3, 19. But it comes to the same thing.4 To say
that a -0.7% adjustment should have “expired” in 2017 is to say
that the 2018 adjustment was off by 0.7%. Id at 25. Which is
to say that the Secretary should have adjusted the 2018 base rate
-2.7412% instead of -3.4412%. Yet that is just the sort of
challenge that § 7(b)(5) forbids. Allowing such claims would
“eviscerate the statutory bar,” DCH Reg’l Med. Ctr. v. Azar, 

925 F.3d 503

, 506 (D.C. Cir. 2019), since almost any adjustment can
be reframed as a “continued inclusion” or “fail[ure] to reverse.”

     Changing course, the hospitals assert that the review bar
does not apply because the 2018 adjustment — or at least 0.7%
of it — was not an “adjustment[] made under” § 7(b). The
argument proceeds in four steps. Step one: § 7(b)(2) of the Act5
forbids the Secretary to include one year’s adjustment “in the
determination of” future base rates. Step two: adjustments that
     121 Stat. at 986, amended by § 414(1)(B), 129 Stat. at 163,
amended by § 15005, 130 Stat. at 1320.
       “Even a beginner in mathematics knows that the distance
between two points on the vertical axis is the same whether one
measures down or up.” Henry J. Friendly, “Some Kind of Hearing,”
123 U. Pa. L. Rev. 1267, 1295 (1975).
        “An adjustment made under [§ 7(b)(1)(B)] for discharges
occurring in a year shall not be included in the determination of [base
rates] for discharges occurring in a subsequent year.” § 7(b)(2), 121
Stat. at 986.

violate § 7(b)(2) cease to be “adjustments made under” § 7(b).
Step three: the -0.7% adjustment ran afoul of § 7(b)(2) when it
carried over into 2018. Step four: because of this, the -0.7%
adjustment falls outside the review bar. Appellants’ Brief

     The hospitals’ argument flatlines. Consider just one
premise: the claim that adjustments that violate § 7(b)(2) are not
“adjustments” for review-bar purposes. This idea recalls the old
maxim lex injusta non est lex: an unjust law is not a law.6
Whatever the merits of that jurisprudential theory, the hospitals’
knockoff finds no textual support. Section 7(b)(2) says nothing
about the review bar or about what counts as an “adjustment.”
Nor is there any hint that § 7(b)(2) can transform nonreviewable
adjustments into reviewable nonadjustments. In the end, then,
the hospitals’ review-bar challenge rounds to zero.

     As the Act and the 2018 rule show, the challenged action
“lie[s] at the heart of [the Secretary’s] authority.” 

Amgen, 357 F.3d at 114

. And because that action was “[a]n adjustment[]
made under” § 7(b), § 7(b)(5) permits no further review.


     But that is not quite the end of things. The hospitals also
urge us to set aside the -0.7% adjustment as “ultra vires.”
Appellants’ Brief 37–39. One way to state that surprising theory
is this: “courts may disregard statutory bars on judicial review”
when the agency has violated the underlying statute. 

DCH, 925 F.3d at 509

. As DCH points out, putting it that way would
essentially remove the statutory bar against judicial review.

Id. 6

       See, e.g., 28 St. Thomas Aquinas, Summa Theologiæ, I-II, Q.
96, art. 4 (Thomas Gilby ed., Cambridge Univ. Press 1966) (c. 1274)
(quoting St. Augustine, De Libero Arbitrio bk. I, 5 (c. 389)).

     Courts acknowledging the possibility of “ultra vires” review
have therefore made it available only when an agency “plainly
acts in excess of its delegated powers.”

Id. (quoting Nyunt v.

Chairman, Broad. Bd. of Governors, 

589 F.3d 445

, 449 (D.C.
Cir. 2009)). But not just any interpretive skirmish will do: here
the hospitals must show that the Secretary flouted a clear,
specific, statutory command. See

id. Here again, the

hospitals pin their hopes on § 7(b)(2). As
they read it, that provision “bars the Secretary from allowing
any recoupment adjustment to continue into a subsequent year.”
Appellants’ Brief 44. By carrying over the -0.7% adjustment
into 2018, the argument goes, the Secretary “violated an explicit
statutory prohibition.”

Id. at 35.

     That might be right if § 7(b)(2) forbade the Secretary to
“apply” one year’s adjustment to another year’s base rate. Or to
include it “in the adjustment of” future base rates. But that is
not what the statute says. Instead, § 7(b)(2) tells the Secretary
to exclude adjustments “in the determination of” future base
rates (emphasis added). Yet the hospitals glide past these words
without comment. At the same time, the hospitals read
requirements into § 7(b)(2) — “expiration date[s],” “express[]
prohibit[ions]” — that the text cannot bear. Reply Brief 5, 12.
In short, to read § 7(b)(2) as the hospitals do, we would have to
scrub up for statutory surgery, excising some words and
engrafting others.

      And then there is the puzzling upshot of the hospitals’ rule.
Recall that the Secretary adjusted the base rate -1.6% in fiscal
year 2015. Here is how the Secretary’s excellent brief explains
it: the agency “made another -0.8% recoupment adjustment . . .
in addition to keeping the -0.8% adjustment from fiscal year
2014 in place.” Appellee’s Brief 16 (citing 79 Fed. Reg. 49,854,
49,874 (Aug. 22, 2014)) (emphasis added). Oddly, the hospitals

do not object to this carryover. Appellants’ Brief 3. But that
aside, a practical question arises: how could the Secretary effect
gradual adjustments under the hospitals’ rule? Must he zero out
an adjustment on fiscal New Year’s Eve, only to reimpose it
once the clock strikes midnight? Section 7(b)(2) offers no
textual basis for such meaningless contortions.

     How, then, to make sense of § 7(b)(2)? Statutory context
holds the answer. We are told that the phrase “determination of
[base rates]” refers to the annual process of updating the base
rate for inflation. See Cape Cod Hosp. v. Sebelius, 

630 F.3d 203

, 205 (D.C. Cir. 2011). The Medicare statute outlines that
process, telling the Secretary how to calculate and apply the
annual “percentage increase.”         42 U.S.C. §§ 1395ww
(d)(3)(A)(iv)(II); (b)(3)(B)(i)(XX); (b)(3)(B)(iii).          And
§ 7(b)(2)? Read most naturally, § 7(b)(2) supplements those
instructions, telling the Secretary to ignore recoupment
adjustments when updating the base rate. Think of it this way.
If updating the base rate is like reckoning a cost-of-living raise,
then § 7(b)(2) tells the Secretary to calculate that raise using
gross (not adjusted) pay.

     It is amply clear that the 2018 adjustment did not violate
§ 7(b)(2), so we reject the hospitals’ call to set that action aside.
And because § 7(b)(2) does not forbid the Secretary to carry
over adjustments, we need not address how that provision relates
to § 7(b)(1)(B)(iii).


     One final matter. Through dueling footnotes, the parties
spar about our mandamus jurisdiction under the All Writs Act.
Appellants’ Brief 48 n.17; Appellees’ Brief 49 n.7; Reply Brief
22 n.11. Footnotes, of course, are “no place to make a
substantive legal argument on appeal.” CTS Corp. v. EPA, 759

9 F.3d 52

, 64 (D.C. Cir. 2014). But in any event, mandamus is
proper only when there is an independent basis for jurisdiction
and a “clear and indisputable” right to relief. In re al-Nashiri,

791 F.3d 71

, 75, 78 (D.C. Cir. 2015) (quoting Cheney v. U.S.
Dist. Ct. for D.C., 

542 U.S. 367

, 381 (2004)). The hospitals
have shown neither.


     We do not doubt that the hospitals felt a “significant
financial impact” from the -0.7% adjustment. Reply Brief 20.
Nor that the adjustment has “last[ed] longer than [its] causes.”
Boswell, Life of Johnson 472 (Angus Calder ed., Wordsworth
2008) (1791); see New Charleston Power I, L.P. v. FERC, 

56 F.3d 1430

, 1431 (D.C. Cir. 1995). But such matters are not ours
to resolve. Instead, our “limited role is to read and apply the law
th[at] policymakers have ordained, and here our task is clear.”
Romag Fasteners, Inc. v. Fossil, Inc., 

140 S. Ct. 1492

, 1497
(2020). The judgment of the district court is affirmed.

                                                      So ordered.

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