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No. 08-564

 

In the Supreme Court of the United States

COOKEVILLE REGIONAL MEDICAL CENTER, ET AL., PETITIONERS

v.

CHARLES E. JOHNSON, ACTING SECRETARY OF
HEALTH AND HUMAN SERVICES

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

EDWIN S. KNEEDLER
Acting Solicitor General
Counsel of Record
MICHAEL F. HERTZ
Acting Assistant Attorney
General
ANTHONY J. STEINMEYER
AUGUST E. FLENTJE
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTION PRESENTED

Whether a court may apply an ambiguous statute in a manner consistent with a later-enacted statute clari fying the earlier statute's meaning consistent with this Court's decision in Landgraf v. USI Film Products, 511 U.S. 244 (1994).

In the Supreme Court of the United States

No. 08-564

COOKEVILLE REGIONAL MEDICAL CENTER, ET AL., PETITIONERS

v.

CHARLES E. JOHNSON, ACTING SECRETARY OF
HEALTH AND HUMAN SERVICES

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-11a) is reported at 531 F.3d 844. The order and memoran dum of the district court (Pet. App. 12a-29a) are unre ported.

JURISDICTION

The judgment of the court of appeals was entered on June 27, 2008. On September 15, 2008, the Chief Justice extended the time within which to file a petition for a writ of certiorari to and including October 27, 2008, and the petition was filed on that date. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. This case involves the interaction of the Medicaid and Medicare programs.

a. Title XIX of the Social Security Act, 42 U.S.C. 1396 et seq., is commonly referred to as the Medicaid Act. To participate in the Medicaid program, a State develops a plan that specifies the categories of eligible individuals who will receive medical assistance and the specific kinds of medical care and services that will be covered. See 42 U.S.C. 1396a. The Medicaid statute establishes certain plan limitations (ibid.), including limitations on who can be eligible for benefits under a state plan, such as income and resource limits. See, e.g., 42 U.S.C. 1396a(a)(10)(A)(i)(IV), (VI) and (VII).

Section 1115 of the Social Security Act also autho rizes demonstration projects to allow States to explore innovative health-care initiatives that the Secretary de termines are "likely to assist in promoting [Medicaid] objectives." 42 U.S.C. 1315(a). Individuals who are not eligible for Medicaid, but who are eligible for benefits under a demonstration project approved under Section 1115, are referred to as expansion populations.

b. The Medicare program provides payments for medical services for the elderly and disabled. 42 U.S.C. 1395c et seq. The operating costs of inpatient hospital services are paid primarily under the Prospective Pay ment System (PPS), 42 U.S.C. 1395ww(d), calculated in light of certain hospital-specific factors. This case in volves one of those hospital-specific adjustments, the Medicare disproportionate share hospital (Medicare DSH) adjustment. Consolidated Omnibus Budget Rec onciliation Act of 1985, Pub. L. No. 99-272, § 9105, 100 Stat. 158.

The Medicare DSH adjustment provides increased PPS payments to hospitals that serve a "significantly disproportionate number of low-income patients." 42 U.S.C. 1395ww(d)(5)(F)(i)(I). The calculation of a DSH adjustment depends in part on what is known as the Medicaid fraction, which is defined as:

the fraction (expressed as a percentage), the numer ator of which is the number of the hospital's patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under subchapter XIX of this chapter [i.e., the Medicaid program], but who were not entitled to benefits under part A of this subchapter [i.e., the Medicare program], and the de nominator of which is the total number of the hospi tal's patient days for such period.

42 U.S.C. 1395ww(d)(5)(F)(vi)(II) (emphasis added).

2. Prior to January 2000, the Secretary, in deter mining the Medicare DSH adjustment, excluded expan sion populations in calculating the Medicaid fraction. Those populations were not "patients entitled to Med icaid" but instead received benefits pursuant to a dem onstration project under Section 1315. 42 C.F.R. 412.106(b)(4) (1996); 51 Fed. Reg. 16,777 (1986) (includ ing only those patients "entitled to" Medicaid).

In December 1999, the Secretary determined that it was "necessary to clarify the definition of eligible Medicaid days" for purposes of the Medicare DSH be cause some fiscal intermediaries had made "Medicare DSH adjustment payments * * * attributable to the erroneous inclusion of * * * ineligible * * * demon stration population days in the Medicaid days factor." Cookeville C.A. App. 106, 108 (Program Memorandum Transmittal No. A-99-62). The Secretary observed that those intermediaries had erred, but held harmless those hospitals that had already received incorrect Medicare DSH payments. Id. at 108. On the other hand, where hospitals had not received such incorrect payments or had not previously filed an appeal on the issue, the Sec retary declined to make hold-harmless payments. Ibid.

On January 20, 2000, the Secretary promulgated a formal rule addressing the issue and changing her pol icy, but doing so only prospectively. That rule prospec tively allowed "hospitals to include the patient days of all populations eligible for Title XIX matching payments in a State's Section 1115 waiver in calculating the hospi tal's Medicare DSH adjustment." 65 Fed. Reg. 3136 (2000); 42 C.F.R. 412.106(b)(4)(ii) (2000). In issuing the rule, the Secretary explained that prior to the change, "[u]nder current policy * * * expanded eligibility groups [under Medicaid demonstration projects] * * * were not to be included in the Medicare DSH calcula tion." 65 Fed. Reg. at 3136.

3. In 2002, hospitals in Oregon challenged the Secre tary's pre-2000 policy of excluding expansion popula tions from the calculation of the Medicare DSH. The Ninth Circuit in Portland Adventist Medical Center v. Thompson, 399 F.3d 1091, 1096 (2005) (Portland Adven tist), declined to defer to the Secretary's pre-2000 policy and held that excluding expansion populations was in consistent with the plain language of the DSH statute. In response to Portland Adventist and related litigation, Congress enacted Section 5002 of the Deficit Reduction Act of 2005 (DRA), Pub. L. No. 109-171, 120 Stat. 31, which is entitled a "Clarification of Determination of Medicaid Patient Days for DSH Computation."

Section 5002(a) amended the Medicare DSH statu tory language to state that the Secretary has discretion to include or exclude demonstration project beneficia ries in the Medicare DSH. See DRA § 5002(a), 120 Stat. 31 (Pet. App. 51a) ("[T]he Secretary may, to the extent and for the period the Secretary determines appropri ate, include patient days of patients not so eligible but who are regarded as such because they receive benefits under a demonstration project."). Section 5002(b) also ratified the regulations the Secretary had promulgated in January 2000-expressly "including the policy in such regulations regarding discharges occurring prior to Jan uary 20, 2000," under which the Secretary excluded the expansion populations from the Medicare DSH calcula tion. DRA § 5002(b)(3), 120 Stat. 31 (Pet. App. 52a).

4. Petitioners are hospitals located in Tennessee, each of which seeks to have patient days attributed to expansion populations included in the Medicaid fraction of the Medicare DSH calculation for cost years prior to January 20, 2000. Pet. App. 13a. None of the hospitals qualified for the Secretary's hold-harmless policy, i.e., none of them had sought or received erroneous DSH payments for expansion populations prior to the Secre tary's issuance of the October 1999 Program Memoran dum. Petitioners' cases were pending when the DRA was enacted in February 2006. Id. at 15a.

a. The district court ruled prior to the DRA that the plain language of the Medicare DSH provision included the expansion populations, Pet. App. 30a-47a, but it re considered that ruling after the DRA's enactment. Id. at 13a-29a. The court held that the DRA applied to this case and required dismissal of petitioners' claims. The court explained that in spite of the DRA's express status as a "clarification" of existing law, the court "remain[ed] of the view that the DSH formula, as it existed [prior to the enactment of the DRA,] * * * expressly included expansion populations." Id. at 23a. The court nonethe less explained that "[t]he DRA's double-barreled ap proach * * * 'clarifying' the DSH formula while 'ratify ing' agency action that, if Congress were right, would not need to be ratified-resolves this problem by giving the court two paths to the same result." Id. at 27a.

b. The court of appeals affirmed. Pet. App. 1a-11a. It concluded that the Medicare DSH and demonstration project provisions of the Social Security Act, prior to enactment of the DRA, were "unclear * * * [as to] whether the Secretary had discretion to exclude the ex pansion waiver population from the disproportionate share hospital adjustment." Id. at 10a. The court held that Section 1315 plausibly gave the Secretary "discre tion * * * to determine which costs or how much of the costs are to be treated as expenditures," including "dis cretion to limit a hospital's reimbursement" under the Medicare DSH. Pet. App. 9a. The court further ob served that the Secretary had "acted as though the stat ute granted discretion," because she "chose to issue poli cies rather than regulations and to base them on practi cal concerns instead of statutory constraints." Id. at 10a. The court concluded that the DRA "did not retro actively alter settled law" but "simply clarified an ambi guity in the existing legislation." Ibid. Accordingly, the court held that "[i]t follows that there is no problem of retroactivity." Ibid.

ARGUMENT

Petitioners have not identified a conflict in the cir cuits on the issue actually addressed by the decision be low, and the court of appeals correctly held that the DRA raises no retroactivity issues under Landgraf. Moreover, the DRA expressly ratified the Secretary's exercise of discretion under governing regulations dur ing the pre-2000 period at issue here. Accordingly, fur ther review is not warranted, especially because the technical Medicare provisions at issue address a closed time period that ended with the enactment of the DRA in February 2006.

1. The court of appeals correctly concluded that the pre-DRA statute governing the DSH adjustment law was ambiguous as to whether the Secretary had discre tion to exclude expansion populations from the Medicare DSH. Pet. App. 9a. That law provided that the DSH adjustment had to reflect patients who "were eligible for medical assistance * * * under a state plan approved under [Medicaid]." 42 U.S.C. 1395ww(d)(5)(F)(vi)(II). The Secretary reasonably construed that language to mean that the DSH adjustment may count only those patients who were Medicaid eligible, and patients in cluded in expansion populations undisputably are not Medicaid eligible. As the court of appeals ex plained, the demonstration project statute, 42 U.S.C. 1315(a)(2)(A), may be read as "a grant of discretion * * * to limit a hospital's reimbursement for the expan sion waiver population, rather than permitting the hos pital to seek the [DSH] adjustment." Pet. App. 9a-10a. Given the ambiguity in the prior law, the court of ap peals properly held that "it follows that there is no prob lem of retroactivity" because the DRA "simply clarified an ambiguity in the existing legislation." Id. at 10a.

The court of appeals also properly looked to the DRA in construing the earlier legislation. As this Court has held, when Congress passes "[s]ubsequent legislation declaring the intent of an earlier statute," the new en actment should be accorded "great weight in statutory construction" of the earlier enactment. Loving v. Uni ted States, 517 U.S. 748, 770 (1996) (brackets in original) (quoting CPSC v. GTE Sylvania, Inc., 447 U.S. 102, 118 n.13 (1980)). Accordingly, the court of appeals correctly relied upon the DRA clarification in determining whe ther the preexisting DSH provision conferred discretion on the Secretary to exclude expansion populations.

2. Petitioners argue that certiorari is warranted be cause "the circuits have taken different approaches to whether a conclusion that legislation is a 'clarification' avoids [a] retroactivity analysis" under Landgraf v. USI Film Products, 511 U.S. 244 (1994). Pet. 14. There is, however, no conflict in the circuits on the specific ruling by the court of appeals, i.e. that the DRA raised no ret roactivity concerns because it did not alter the prior law giving the Secretary the discretion to exclude expansion populations in calculating the DSH adjustment. A nec essary prerequisite to engaging in the Landgraf analysis is that there be a "change in the law," i.e., a "new provi sion [that] attaches new legal consequences to events completed before its enactment." Landgraf, 511 U.S. at 270. If prior law was ambiguous as to the legal conse quences of past events, clarification of those consequenc es-whether by Congress or a court-does not work a change in the law.

Petitioners' retroactivity claims rest on the premise that "the pre-Act law clearly required inclusion of the expansion waiver patients in the [DSH] adjustment." Pet. App. 8a. The court of appeals rejected that premise (ibid.), and thus concluded that there was no change in the law that would have otherwise triggered a retroac tivity inquiry.

There is similarly no merit to petitioners' contention that this Court's review is warranted to address a pur ported circuit conflict "over whether reliance on prior law is a prerequisite for application of the presumption against retroactivity." Pet. 27. The court of appeals did not address that issue, much less hold that reliance is necessary to trigger a retroactivity analysis. Rather, the court of appeals merely noted the absence of reli ance concerns in this case because the Secretary's pre- DRA policy was to exclude expansion populations in the DSH calculation. Pet. App. 8a. That factual observation does not purport to require that reliance be shown.

3. In any event, review is not warranted for the ad ditional, independent reason that Congress clearly in tended the DRA to have retroactive effect. If the lan guage of "the statute in question is unambiguous" with regard to retroactivity, its "potential unfairness * * * is not a sufficient reason for a court to fail to give a stat ute its intended scope." Landgraf, 511 U.S. at 267, 273. Congress must simply "first make its intention clear" to "ensure that Congress itself has determined that the benefits of retroactivity outweigh the potential for dis ruption or unfairness." Id. at 268. In this case, as the district court concluded, to the extent the DRA consti tuted a change in the law, Congress made it "clear that [it] did intend this change to apply retroactively." Pet. App. 25a. As the court observed, the DRA ratified the Secretary's pre-2000 exclusionary policy, thus unambig uously expressing congressional intent that the Secre tary had the authority to apply his pre-DRA policy to pending cases. Id. at 26a-27a; see p. 5, supra. That con clusion is fatal to petitioners irrespective of the other points argued in their petition. Accordingly, review by this Court is not warranted because Congress clearly and unequivocally intended the law to apply to the past transactions at issue here.

4. The Court's review finally is unwarranted be cause the court of appeals' decision affects a limited and confined set of cases. The holding of the court of ap peals applies only to those DSH determinations made by the Secretary before he changed his policy in 2000. Pet. App. 5a. Since 2000, the Secretary has included expan sion populations in the DSH formula. Ibid. And the DRA now expressly gives the Secretary the discretion to either include or exclude those populations. Id. at 6a. Accordingly, the Secretary's pre-DRA authority to ex clude expansion populations is not an issue of ongoing and recurring importance that would warrant this Court's plenary review.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

EDWIN S. KNEEDLER
Acting Solicitor General
MICHAEL F. HERTZ
Acting Assistant Attorney
General
ANTHONY J. STEINMEYER
AUGUST E. FLENTJE
Attorneys

JANUARY 2009