United States District Court, S.D. Mississippi, Northern Division
BAPTIST MEMORIAL HOSPITAL-GOLDEN TRIANGLE, INC., CALHOUN HEALTH SERVICES, DELTA REGIONAL MEDICAL CENTER, GRENADA LAKE MEDICAL CENTER, MERIT HEALTH BATESVILLE, FORMERLY KNOWN AS TRI-LAKES MEDICAL CENTER, MISSISSIPPI, BAPTIST MEDICAL CENTER, INC., ST. DOMINIC-JACKSON MEMORIAL HOSPITAL, AND TISHOMINGO HEALTH SERVICES, INC. PLAINTIFFS
ALEX AZAR, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, SEEMA VERMA, IN HER OFFICIAL CAPACITY AS ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID SERVICES, AND CENTERS FOR MEDICARE AND MEDICAID SERVICES DEFENDANTS
MEMORANDUM OPINION AND ORDER
LEE, UNITED STATES DISTRICT JUDGE.
in this cause are Mississippi licensed hospitals which
participate in the Mississippi Medicaid Program and have been
designated as disproportionate share hospitals pursuant to 42
U.S.C. § 1396r-4. Defendants are Alex Azar, in his
official capacity as Secretary of the United States
Department of Health and Human Services (HHS), the federal
agency responsible for the administration of federal
responsibilities under the Medicaid statute; Seema Verma, in
her official capacity as Administrator of the Center for
Medicare and Medicaid Services; and Centers for Medicare
& Medicaid Services (CMS), the federal agency responsible
for administering the Medicaid and disproportionate hospital
share (DHS) program. In this action, plaintiffs challenge
defendants' enforcement of certain policies and/or rules
relating to the calculation of the hospital-specific limit
(HSL) of the Medicaid Disproportionate-Share Hospital program
(DSH), 42 U.S.C. § 1396r-4. The case is presently before
the court on the parties' cross-motions for summary
judgment. The court, having considered the memoranda of
authorities submitted by the parties, concludes that
plaintiffs' motion for summary judgment should be granted
and defendants' motion denied.
herein first allege that certain policies/rules posted on
defendant CMS's website in 2010 in the form of responses
to Frequently Asked Questions (FAQs) 33 and 34 regarding the
calculation of the HSL under 42 U.S.C. § 1396r-4(g)(1)
are invalid on procedural and substantive grounds. A number
of courts have considered identical challenges to either or
both of the FAQs, and all have concluded that the FAQs are
procedurally invalid for the reason that they are
“substantive legislative rule[s] that should have been,
but [were] not, promulgated through the notice-and-comment
rulemaking process required by the APA.”
Children's Health Care v. Centers for Medicare &
Medicaid Servs., No. 16-CV-4064 (WMW/DTS), 2017 WL
3668758, at *8 (D. Minn. June 26, 2017). See New
Hampshire Hosp. Ass'n v. Azar, 887 F.3d 62, 77
(1st Cir. 2018) (holding that the rule announced
in the FAQs 33 and 34 is legislative and is procedurally
improper for noncompliance with the notice-and-comment
procedures prescribed by the APA); Texas Children's
Hosp. v. Azar, Civ. Action No. 14-2060 (EGS), 2018 WL
2464462 (D.D.C. June 1, 2018) (concluding that FAQ 33 was not
“a mere interpretation of a governing statute or
regulation” but rather an attempt to promulgate a
legislative rule and thus could have been promulgated only in
accordance with the notice-and-comment provisions of the
APA); Mo. Hosp. Ass'n v. Hargan, No.
2:17-CF-04052-BCW, 2018 WL 814589, at *9 (W.D. Mo. Feb. 9,
2018) (holding that FAQs 33 and 34 were subject to
notice-and-comment procedures as they “substantively
impact the HSL calculation, as opposed to simply interpreting
the contours of the statute and the 2008 Rule” and thus
are “legislative in nature”); Tennessee Hosp.
Ass'n v. Price, No. 3:16-CV-3263, 2017 WL 2703540,
at *7 (M.D. Tenn. June 21, 2017) (finding that FAQs 33 and 34
make a substantive change to existing law without observance
of procedure required by law as they were not promulgated
pursuant to the required notice-and-comment rule-making
procedures); Children's Hosp. of the King's
Daughters, Inc. v. Price, 258 F.Supp.3d 672, 689 (E.D.
Va. 2017) (concluding that “FAQ 33 is a substantive
rule that should have been promulgated pursuant to
notice-and-comment”). This court finds the reasoning of
these courts to be sound and the conclusion that
defendants' responses to FAQs 33 and 34 are not
interpretive but rather legislative in nature to be obviously
correct. Therefore, as it is undisputed that FAQs 33 and 34
were not put through the APA's rule-making
(notice-and-comment) procedures, it follows that they are
invalid and cannot be enforced. Accordingly, plaintiffs'
motion for summary judgment as to FAQs 33 and 34 will be
granted and defendants' cross-motion denied.
addition to challenging FAQs 33 and 34, plaintiffs allege in
their complaint that a rule promulgated by defendants in
April 2017 following notice-and-comment that in substance
parroted the responses to FAQs 33 and 34 (the 2017 Final
Rule) is substantively unlawful and should be set aside
because it directly conflicts with the plain language of
§ 1396r-4(g)(1)(A) and is thus beyond defendants'
statutory authority. In their motion for summary judgment,
plaintiffs acknowledged that defendants have stipulated that
the 2017 Final Rule is operative only from its June 2, 2017
effective date and is not retroactive. For this reason, and
for the further reason that the 2017 Final Rule has recently
been vacated by the court in Children's Hospital
Association of Texas, Civ. Action No. 17-844 (EGS), 2018
WL 1178024 (D.D.C. Mar. 6, 2018), the court finds that
plaintiffs' motion for summary judgment as it relates to
the 2017 Final Rule should be granted and defendants'
on the foregoing, it is ordered that plaintiffs' motion
for summary judgment is granted and that defendants'
motion for summary judgment is denied.
separate judgment will be entered in accordance with Rule 58
of the Federal Rules of Civil Procedure.
 Each of these courts has set forth in
meticulous detail the pertinent statutory and regulatory
background, described the applicable standard of review, and
explained the parties' various arguments, which are
essentially the same in all these cases. This court can add
nothing to what has already been written on these matters and
finds it unnecessary to cover this ground again.
 Some of these courts have also found
the rules reflected in defendants' responses to FAQs 33
and/or 34 invalid on substantive grounds. See Missouri
Hosp. Ass'n v. Hargan, No. 2:17-CV-04052-BCW, 2018
WL 814589 (W.D. Mo. Feb. 9, 2018); Children's Hosp.
of the King's Daughters, Inc. v. Price, 258
F.Supp.3d 672, 689 (E.D. Va. 2017); Tennessee Hosp.
Ass'n v. Price, No. 3:16-CV-3263, 2017 WL 2703540,
at *7 (M.D. Tenn. June 21, 2017).
 While the court in Missouri
Hospital Association, 2018 WL 814589, ruled that the
plaintiff therein was “entitled to summary judgment
that the Final Rule is in excess of Defendants' statutory
authority” and ordered the Final Rule set aside, the
court did not specifically state that it intended its order
to have effect beyond the parties to that case. The court in
Children's Hospital Association of Texas, Civ.
Action No. 17-844 (EGS), 2018 WL 1178024 (D.D.C. Mar. 6,
2018), however, was clear. The court did not rule that the