Academic journal article Boston College Law Review

Deference to the Agency Is the Best Policy: The D.C. Circuit Applies Chevron in Denying Additional Medicare Reimbursements to Provider Hospitals in Washington Regional Medicorp

Academic journal article Boston College Law Review

Deference to the Agency Is the Best Policy: The D.C. Circuit Applies Chevron in Denying Additional Medicare Reimbursements to Provider Hospitals in Washington Regional Medicorp

Article excerpt


Comprising more than one tenth of the federal budget, Medicare is the federally administered program responsible for providing millions of elderly and disabled Americans with health insurance.1 When provider hospitals treat Medicare patients, they are reimbursed by the Department of Health and Human Services ("HHS").2 Hospitals are usually reimbursed according to the Prospective Payment System ("PPS"), through which each hospital receives a fixed amount per year for services rendered to Medicare patients. 3 For many years, psychiatric hospitals constituted an exception to this rule, as they received reimbursements based on their reasonable actual costs.4 The Tax Equity and Fiscal Responsibility Act ("TEFRA") of 1982 defined the method for calculating the psychiatric hospitals' reimbursement payments.5

Not surprisingly, the courts are tasked with the interpretation of this Medicare reimbursement statute.6 In December 2015, in Washington Regional Medicorp v. Burwell, the U.S. Court of Appeals for the District of Columbia Circuit joined the U.S. Courts of Appeals for the Third and Sixth Circuits in holding that the governing statute and its corresponding regulations supported the Secretary's calculation of reimbursement payments.7 Additionally, the D.C. Circuit suggested that the statute and regulations, even if ambiguous, were entitled to deference in accordance with the U.S. Supreme Court's 1984 decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.8 Conversely, the U.S. Court of Appeals for the Fifth Circuit, in Hardy Wilson Memorial Hospital v. Sebelius decided five years earlier in 2010, held that the regulations in question unambiguously accorded with the hospital's method of calculation.9

This Comment argues that the D.C. Circuit reached the correct result by appropriately deferring to the administrative agency as required by Chevron and its progeny.10 This Comment further argues that the holding of the D.C. Circuit is consistent with congressional intent in passing Medicare reimbursement legislation.11 Part I of this Comment provides an overview of the legislative history surrounding Medicare reimbursements before discussing the factual and procedural history of Washington Regional Medicorp. 12 Part II explores the split between the Fifth Circuit and the D.C. Circuit when applying Chevron to the Medicare reimbursement statute and regulations.13 Lastly, Part III argues that the D.C. Circuit correctly held that the hospital was not entitled to higher reimbursement payments just because the statutory caps had expired.14


The Center for Medicare and Medicaid Services ("CMS") is the component of the HHS responsible for administering the Medicare program.15 Through the CMS, hospitals are reimbursed for the services they provide to Medicare patients.16 In the past decade, dispute over the calculation of these reimbursements has resulted in numerous lawsuits.17 Section A of this Part traces the development of the Medicare reimbursements through the lens of an evolving federal statutory scheme and its corresponding regulations.18 Section B of this Part summarizes the U.S. District Court for the District of the District of Columbia's 2014 decision in Washington Regional Medicorp v. Burwell, while also discussing the means of interpreting the pertinent statutory scheme and its accompanying regulations.19

A. History of Medicare Reimbursements

To combat Medicare's exorbitant hospital expenditures, Congress enacted TEFRA in 1982, directing the Secretary of HHS to drafta legislative proposal for PPS that would distribute a fixed amount to hospitals for total services rendered.20 In the interim, Congress imposed a system of limits on the annual rate of increase for reimbursements, which was based on a hospital's reasonable costs.21 Under the interim plan, hospitals were reimbursed for their reasonable costs not exceeding a ceiling based on the hospital's "target amount" for the given year. …

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