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Miracle Care Hospice, Inc. v. Sebelius

United States District Court, S.D. Mississippi, Northern Division

March 31, 2014



CARLTON W. REEVES, District Judge.

Before the Court is the Defendant's Motion to Dismiss [6] for lack of jurisdiction and failure to state a claim. The Defendant supports her motion with her memorandum of law [7] and reply [15]. The Plaintiff opposes the motion with its response [12] and memorandum [13]. Having reviewed the parties' submissions and relevant law, the Court finds that the motion should be granted.


Medicare is a government program that provides health coverage benefits for elderly and disabled individuals, among others. See 42 U.S.C. §§ 1395 et seq. The Secretary of the Department of Health and Human Services ("the Secretary") administers the Medicare program through the Centers for Medicare and Medicaid Services ("CMS"), an agency within the United States Department of Health and Human Services ("HHS").

The Medicare hospice benefit is designed to provide pain relief, comfort, and emotional and spiritual support to patients who have a terminal diagnosis. Qualified beneficiaries who elect hospice care agree to forego curative treatment for their terminal condition.

The Medicare program pays a hospice provider on a per diem basis according to the number of patients being served. However, the Medicare Act imposes a statutory cap on the amount of Medicare payments a hospice provider is entitled to in a given twelve-month accounting year. 42 U.S.C. § 1395f(i)(2)(A). The hospice cap is calculated after the end of the accounting year by multiplying the applicable "cap amount, " which is defined in § 1395f(i)(2)(B), by the "number of medicare beneficiaries in the hospice program in that year." Id. § 1395f(i)(2)(A). If Medicare payments to the hospice provider exceed the statutory cap for an accounting year, the hospice provider is required to return the excess funds to Medicare. 42 C.F.R. § 418.308(d).

With regard to the calculation of the hospice cap, 42 U.S.C. § 1395f(i)(2)(C) provides that

the "number of medicare beneficiaries" in a hospice program in an accounting year is equal to the number of individuals who [have elected to receive hospice benefits] and have been provided hospice care by (or under arrangements made by) the hospice program under this part of the accounting year, such number reduced to reflect the proportion of hospice care that each such individual was provided in a previous or subsequent accounting year or under a plan of care established by another hospice program.

42 U.S.C. § 1395f(i)(2)(C). This method of calculating the number of beneficiaries is referred to as the "patient-by-patient proportional methodology."

At issue in this case is the manner in which the number of Medicare beneficiaries is calculated. From 1983 until 2011, in accordance with 42 C.F.R. § 418.309(b)(1) ("the Regulation"), a streamlined method for calculating the number of hospice beneficiaries was used instead of the patient-by-patient proportional methodology. Based on the provisions of the Regulation, a hospice beneficiary was allocated to the hospice cap calculation for the accounting year in which he would likely receive most of his hospice care based on the aggregate data on the average length of days under hospice care.[1] However, beginning in 2007, numerous hospice providers objected to the Regulation, arguing that the Regulation's streamlined method for calculating the number of Medicare beneficiaries deviated from the patient-by-patient proportional methodology prescribed in § 1395f(i)(2)(C) of the Medicare Act. See, e.g., Lion Health Servs., Inc. v. Sebelius, 635 F.3d 693 (5th Cir. 2011); Los Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644 (9th Cir. 2011). Consequently, on April 14, 2011, CMS issued CMS-1355-R ("the Ruling"), which states the following:

This Ruling provides notice of CMS's determination to grant relief to any hospice provider that has a properly pending appeal... in any administrative appeals tribunal (that is, the Provider Reimbursement Review Board (PRRB), the Administrator of CMS, the Medicare fiscal intermediary hearing officer, or the CMS reviewing official) that seeks review of an overpayment determination for any hospice cap year (the period November 1 to October 31) ending on or before October 31, 2011 by challenging the validity of the beneficiary counting methodology set forth in 42 CFR 418.309(b)(1). In this regard, such a provider's hospice cap determination (as defined under 42 U.S.C. 1395f(i)(2)) for any cap year ending on or before October 31, 2011 and for which a timely appeal has been filed and is otherwise properly pending (as discussed herein) will be recalculated using a patient-by-patient proportional methodology for counting the number of Medicare beneficiaries as opposed to the methodology currently set forth in 42 CFR 418.309.

Medicare Program; Hospice Wage Index for Fiscal Year 2012, 76 Fed. Reg. 26731-01 (May 9, 2011). For the purposes of the Ruling, "a properly pending' appeal is one in which a provider has met all timeliness requirements set forth in section 1878 of the Social Security Act, Medicare regulations and other agency publications, guidelines, rulings, orders or rules." Id. at 26733.

Eventually, the Regulation was amended to require use of the patient-by-patient proportional methodology for cap years ending October 31, 2012, and all subsequent cap years, unless the hospice care provider elected to have its aggregate cap calculated using the streamlined methodology. 42 C.F.R. § 418.309(d)(2) (effective Oct. 1, 2011). However, under the Amended Regulation, "[f]or cap years ending October 31, 2011 and for prior cap years, a hospice's aggregate cap is calculated using the streamlined methodology, " unless the hospice care provider has not yet received the final cap determination for a cap year and elects to have the cap calculated using the proportional methodology, or unless the provider "filed a timely appeal regarding the methodology used for determining the number of Medicare beneficiaries in its cap calculation for any cap year...." Id. § 418.309(d)(1).

Miracle Care Hospice, Inc., a Medicare certified hospice provider located in Jackson, Mississippi, filed this action on July 16, 2012, seeking a determination that the manner in which its hospice caps were calculated for the hospice cap years ending in 2005 to 2008 was contrary to the plain language of 42 U.S.C. § 1395f(i)(2)(C), and a writ of mandamus requiring the Secretary to order the fiscal intermediary, Palmetto GBA ("Palmetto"), to reopen the cap determinations at issue and recalculate payment determinations in accordance with the Medicare Act. See Docket No. 1 (Complaint). Miracle Care alleges that in 2007, 2009, and 2010, Medicare demanded repayment from Miracle Care based on "[Medicare's] improper and unlawful calculation of Miracle Care's cap obligation" for the hospice cap periods ending in 2005 ...

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