On September 4, 2019, following remand from the Supreme Court’s decision in Azar v. Alina Health Services, No. 17-1484 (U.S. June 3, 2019), the United States District Court for the District of Columbia declined plaintiff hospitals’ request that the court direct HHS to calculate disproportionate share hospital (DSH) payments using HHS’s pre-2004 formula. The district court entered judgment for plaintiffs and remanded the case to HHS for further action consistent with the law established by the case but stopped short of ordering a specific formula to be used for calculating plaintiffs’ DSH payments.

As previously reported here, the Supreme Court’s June 3, 2019, 7-1 decision in Azar v. Alina Health Services upheld the D.C. Circuit’s earlier decision invalidating HHS’s policy to treat beneficiaries enrolled in Part C (also known as Medicare Advantage) as remaining entitled to benefits under Part A for purposes of calculating Medicare DSH payments. The Supreme Court held that the government’s Part C DSH policy was invalid because it did not comply with the Medicare statute’s notice and comment rulemaking requirement.

On remand to the district court, the plaintiffs requested that the court enter judgment vacating HHS’s determination to calculate plaintiffs’ DSH payments using its Part C DSH policy and remand to the agency for further proceedings to calculate DSH payments in accordance with HHS’s pre-2004 formula. Plaintiffs also requested that the court require the parties to file joint status reports every 30 days pending completion of the action on remand.

The Secretary argued that the court should not order the specific remedy requested by the Plaintiff hospitals. In fact, the Secretary argued, the Supreme Court’s decision prohibited the Secretary from merely reverting to his pre-2004 practice since that practice too was not the subject of notice and comment rulemaking. The only solution upon remand, the Secretary suggested, was for him to engage in new notice and comment rulemaking, consider the issue “afresh,” and apply whatever policy was ultimately adopted retroactively to 2004.

In a two-page order, the district court vacated HHS’s Part C DSH policy and ordered remand to DHS for further proceedings but refused to instruct DHS to use a specific formula to calculate plaintiffs’ DSH payments or order the parties to file the requested status reports. The court explained that “when a court reviewing agency action determines that an agency made an error of law, the court’s inquiry is at an end: the case must be remanded to the agency for further action consistent with the corrected legal standards.” The district court found that this was not the “rare case” when a court is convinced that remand would serve no purpose and directs the agency how to resolve a problem.

The case is Alina Health Services v. Azar, Civil Action No. 14-cv-01415 (TJK). Please click here for a copy of the court’s order.