Adirondack Medical Center v. Kathleen Sebelius
408 U.S. App. D.C. 161, 2014 WL 259678, 740 F.3d 692 (2014)
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Rule of Law:
When a statutory scheme contains both a specific provision authorizing an agency to take a particular action and a separate, broad grant of general authority, the specific provision does not preclude the agency from acting under its general authority unless Congress has unambiguously expressed such an intent.
Facts:
- The Medicare program uses two primary reimbursement methods for hospitals: a 'federal rate' based on a standardized national amount, and a 'hospital-specific rate' for certain rural and underserved hospitals based on their historical costs.
- In 2007, the Secretary of Health and Human Services updated the diagnostic weighting system (DRGs) used in payment calculations, which inadvertently led to systematic overpayments due to changes in hospital coding practices.
- To counteract these overpayments, Congress passed 42 U.S.C. § 1395ww(d)(3)(A)(vi), which specifically authorized the Secretary to 'adjust the average standardized amounts' used for the 'federal rate' hospitals.
- The Secretary initially made adjustments only to the standardized amounts as directed.
- Concerned that this approach would place a disproportionate burden on 'federal rate' hospitals, the Secretary decided to spread the impact of the adjustment across all hospitals.
- The Secretary invoked a separate, broad grant of statutory authority, 42 U.S.C. § 1395ww(d)(5)(I)(i), to also make a downward adjustment to the payments for hospitals receiving the 'hospital-specific rate'.
- A group of 'hospital-specific rate' hospitals (the Hospitals) objected, arguing this adjustment would harm their ability to provide care and was not authorized by the specific statute Congress had passed to address the overpayments.
Procedural Posture:
- A group of hospitals (the Hospitals) sought expedited judicial review of the Secretary's decision from the Provider Reimbursement Review Board.
- The Board initially disclaimed jurisdiction, but the Medicare administrator reversed that finding.
- The Hospitals filed a lawsuit against the Secretary in the U.S. District Court for the District of Columbia, claiming the Secretary's decision was arbitrary, capricious, and exceeded her statutory authority.
- The district court granted the Secretary’s motion to dismiss, finding the statutory scheme ambiguous and deferring to the Secretary's reasonable interpretation.
- The Hospitals, as appellants, appealed the district court's decision to the U.S. Court of Appeals for the D.C. Circuit, with the Secretary as the appellee.
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Issue:
Does a specific statutory provision authorizing the Secretary of Health and Human Services to adjust 'standardized amounts' to offset Medicare overpayments preclude the Secretary from using a separate, general grant of authority to make similar adjustments to 'hospital-specific rates'?
Opinions:
Majority - Brown, Circuit Judge
No. A specific statutory provision authorizing adjustments to 'standardized amounts' does not preclude the Secretary from using a separate, general grant of authority to make similar adjustments to 'hospital-specific rates'. The court applied the two-step Chevron deference framework. At step one, the court found the statutory scheme to be ambiguous. The Hospitals' argument that the specific provision implicitly excluded other remedies (under the canon expressio unius est exclusio alterius) was rejected as a 'feeble helper' in administrative law, especially when countervailed by a broad grant of authority. The court noted that the specific provision was permissive ('may adjust') and could be read as clarifying the Secretary's authority rather than limiting it. Since various canons of statutory construction failed to reveal a clear congressional intent, the statute was deemed ambiguous. At step two, the court determined that the Secretary's interpretation was reasonable. The Secretary's goal was to combat artificial increases in Medicare payments that did not reflect real changes in patient care and to distribute the financial burden of the correction equitably among all hospitals. This action prevented a windfall for the 'hospital-specific rate' hospitals at the expense of all others. Therefore, the Secretary reasonably exercised her broad authority under § 1395ww(d)(5)(I)(i) to make adjustments she deemed appropriate, and the court must defer to that reasonable interpretation.
Analysis:
This case reinforces the significant deference courts grant to administrative agencies under the Chevron doctrine. It demonstrates that an agency may permissibly rely on a broad, general grant of statutory authority even when a more specific provision exists to address a particular issue, so long as the two are not 'irreconcilably conflicting.' The court's reluctance to find clear congressional intent at Chevron step one based on canons of construction like expressio unius or the general/specific rule signals a high bar for challenging an agency's interpretation of an ambiguous statute. This outcome provides agencies with substantial flexibility to choose from multiple statutory tools to implement policy and solve problems.
