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Kearney Regional Medical Center v. United States Department of Health and Human Services

United States District Court, D. Nebraska

November 29, 2016

KEARNEY REGIONAL MEDICAL CENTER, Plaintiff,
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, and SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, Defendants.

          MEMORANDUM OPINION

          LYLE E. STROM, Senior Judge

         This matter is before the Court on cross-motions for summary judgment with regard to the April 9, 2014, denial of Kearney Regional Medical Center's (“plaintiff” or “KRMC”) application to participate in the Medicare program. Filing Nos. 17, 26, 28. The Centers for Medicare and Medicaid Services (“CMS”), a federal subagency of the United States Department of Health and Human Services (“HHS”), denied KRMC's application. See Filing No. 17 at 1, Filing No. 18 at 2. These motions have been fully briefed, and the administrative record (“record”) has been provided to the Court. Filing Nos. 19, 27, 29, 34. After a review of the motions, briefs, the entire administrative record, and relevant law, the Court finds as follows.

         I. Background

         At the time of plaintiff's application to the Medicare program, KRMC was a new facility that obtained a Certificate of Occupancy from the city of Kearney, Nebraska on September 27, 2013. Filing No. 19-2 at 9. On December 9, 2013, KRMC received a state operating license. Id. “Between December 9 and December 30, 2013, [KRMC] admitted 21 inpatients.” Id. From January 13 to 15, 2014, the American Osteopathic Association Healthcare Facilities Accreditation Program (“AOA”) conducted a survey by reviewing the medical records for prior inpatients admitted in December 2013.[1] Id. at 9-10. On February 7, 2014, AOA granted KRMC full accreditation and recommended to CMS that KRMC be given “deemed status.”[2] Id. at 10.

         From December 30, 2013, to February 10, 2014, no inpatients were treated at KRMC. Id. KRMC asserts that this was due to the head of the AOA survey team informing KRMC that it was not necessary to have inpatients present in the hospital to conduct the survey. Id. Plaintiff asserts, and the Administrative Law Judge (“ALJ”) concluded that from February 10, 2014, to May 7, 2014, KRMC cared for fifty-one inpatients. Id. at 4.

         On April 9, 2014, KRMC's application was denied by CMS. Id. at 10. On April 17, 2014, after reconsideration, CMS affirmed its decision to deny plaintiff's application. Id. Following CMS's denial of plaintiff's application, AOA withdrew its February 7, 2014, accreditation. Id. AOA conducted a second accreditation survey between April 28 and 30, 2014. Id. Following the second survey, AOA again recommended to CMS that KRMC receive deemed status. Id. CMS subsequently granted KRMC “deemed status to participate in Medicare effective May 8, 2014.” Id.

         Plaintiff requested an ALJ hearing contesting CMS's April 17, 2014, denial of KRMC's application. Id. at 11. The ALJ disposed of the case in favor of defendants through cross motions for summary judgment. See Filing No. 19-2 at 3, 8, 11. The ALJ granted summary judgment in favor of defendant. Id. at 8. Plaintiff sought review through the HHS Departmental Appeals Board (“DAB”) which conducted a hearing on February 25, 2015. See Filing Nos. 19-2 at 9, 19-5 at 1. On May 25, 2015, DAB affirmed the ALJ's grant of summary judgment. Filing No. 19-2 at 17. On July 29, 2015, plaintiff filed a complaint with this Court seeking review of defendants' final agency action. Filing No. 1.

         II. LAW

         A. Summary Judgment

         Generally, a motion for summary judgment will be granted by the Court, “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). A “material” fact is one that “might affect the outcome of the suit under the governing law, ” and a genuine issue of material fact exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

         B. Review of Agency Action

         A provider of services may seek judicial review of final agency action denying an application to enroll in the Medicare program subject to 42 U.S.C. § 405(g). See 42 U.S.C. §§ 1395cc(j)(8), 1395cc(h)(1)(A). The Social Security Act states that “[t]he findings of the [Secretary of Health and Human Services] as to any fact, if supported by substantial evidence shall be conclusive . . . .” 42 U.S.C. § 405(g).

         Plaintiff argues that the Court should review this case under both the substantial evidence standard pronounced by § 405(g) and the arbitrary and capricious standard of the Administrative Procedure Act (“APA”). Filing No. 27 at 11-12. See also 5 U.S.C. § 706. To support review under the APA's arbitrary and capricious standard, plaintiff relies on Friedman v. Sebelius, 686 F.3d 813 (D.C. Cir. 2012)(holding that the language of § 405(g) does not preclude review under the APA's arbitrary and capricious standard). Defendants assert that 42 U.S.C. § 405(h) adopted § 405(g) as the sole method of review, thereby precluding the application of the arbitrary and capricious standard to review of final agency action in this context. Filing No. 29 at 11. The Court need not resolve the dispute over which standard of review is appropriate under the circumstances, because the result under both the substantial evidence and arbitrary and capricious standards is the same.

         A reviewing court shall “hold unlawful and set aside agency action, findings, and conclusions found to be (A) arbitrary, capricious, an abuse of discretion, or otherwise ...


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