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Trinity Regional Medical Center v. Azar

United States District Court, N.D. Iowa, Central Division

September 10, 2018

TRINITY REGIONAL MEDICAL CENTER, Plaintiff,
v.
ALEX M. AZAR II, Secretary of Health and Human Services, Defendant.

          ORDER

          LINDA R. READE, JUDGE.

         TABLE OF CONTENTS

         I. INTRODUCTION ....................................... 2

         II. RELEVANT PROCEDURAL HISTORY ........................ 2

         III. SUBJECT MATTER JURISDICTION .......................... 2

         IV. STANDARD OF REVIEW ................................. 3

         A. Review of Final Decision .............................. 3

         B. Review of Report and Recommendation .................... 3

         V.RELEVANT FACTUAL BACKGROUND ........................ 4

         A. The Parties ....................................... 4

         B. Relevant Statutory and Regulatory Background ............... 4

         C. Overview of the Dispute ............................... 7

         VI. ANALYSIS ........................................... 10

         A. Substantial Deference ...............................10

         B. Classification of Costs as Variable .......................12

         C. Reimbursement of Variable Costs through DRG ..............13

         D. Consistency with Underlying Statute ......................14

         E. Consistent Application ...............................15

         F. Consistency with Manual .............................17

         VII. CONCLUSION ........................................ 18

         I. INTRODUCTION

         The matter before the court is Plaintiff Trinity Regional Medical Center's (“Trinity”) Objections (docket no. 33) to United States Chief Magistrate Judge C.J. Williams's Report and Recommendation (docket no. 32), which recommends that the court affirm Defendant Secretary of Health and Human Services's (“Secretary”) decision to deny additional reimbursement.

         II. RELEVANT PROCEDURAL HISTORY

         On April 21, 2017, Trinity filed the Complaint (docket no. 1). In the Complaint, Trinity claims that the Secretary failed to reimburse it amounts to which it is entitled under the Medicare program as a sole community hospital that experienced a significant decrease in volume beyond its control. See generally Complaint. On July 3, 2017, the Secretary filed an Answer (docket no. 8) generally denying that Trinity was entitled to additional reimbursement. On November 3, 2017, Trinity filed the Plaintiff's Brief (docket no. 14). On December 12, 2017, the Secretary filed the Defendant's Brief (docket no. 17). On January 12, 2018, Trinity filed the Reply Brief (docket no. 22). On the same date, the matter was referred to Judge Williams for issuance of a report and recommendation. On March 19, 2018, Judge Williams issued the Report and Recommendation, which recommends that the court affirm the Secretary's decision to deny reimbursement. On April 2, 2018, Trinity filed the Objections. On April 16, 2018, the Secretary filed the Response to Objections (docket no. 34). Neither party has requested oral argument and the court finds that oral argument is unnecessary. The matter is fully submitted and ready for decision.

         III. SUBJECT MATTER JURISDICTION

         The court has jurisdiction over the instant action pursuant to 42 U.S.C. § 1395oo(f)(1). See 42 U.S.C. § 1395oo(f)(1) (stating that “[p]roviders shall have the right to obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary”).

         IV. STANDARD OF REVIEW

         A. Review of Final Decision

         The Secretary's decision is the result of formal adjudication and, therefore, judicial review is governed by the standard set forth in the Administrative Procedure Act (“APA”). See Id. Under the APA, a reviewing court may set aside an agency decision if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or “unsupported by substantial evidence.” 5 U.S.C. §§ 706(2)(A), (E). “When reviewing an agency decision, [the court] accord[s] substantial deference to the agency's interpretation of the statutes and regulations it administers.” Siebrasse v. USDA, 418 F.3d 847, 851 (8th Cir. 2005). However, courts do not defer to an agency interpretation that is “inconsistent with the plain language of the statute or constitutes an unreasonable interpretation of an ambiguous statute.” Afolayan v. INS, 219 F.3d 784, 787 (8th Cir. 2000). Simply put, courts “do not defer to legal interpretations that are arbitrary, capricious, or manifestly contrary to the statutory law.” Patel v. Ashcroft, 375 F.3d 693, 696 (8th Cir. 2004).

         B. Review of Report and Recommendation

         The standard of review to be applied by the court to a report and recommendation of a magistrate ...


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