Empire Health Foundation, for Valley Hospital Medical Center v. ALEX M. AZAR II, Secretary of the United States Department of Health and Human Services

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EMPIRE HEALTH FOUNDATION, for
Valley Hospital Medical Center,
Plaintiff-Appellee,
v.
ALEX M. AZAR II, Secretary of the United
States Department of Health and Human
Services,
Defendant-Appellant.
No. 18-35845
D.C. No. 2:16-cv-00209-RMP
MEMORANDUM*
EMPIRE HEALTH FOUNDATION, for
Valley Hospital Medical Center,
Plaintiff-Appellant,
v.
ALEX M. AZAR II, Secretary of the United
States Department of Health and Human
Services,
Defendant-Appellee.
No. 18-35872
D.C. No. 2:16-cv-00209-RMP
On Remand from the United States Supreme Court
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FILED
DEC 5 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Before: M. SMITH and N.R. SMITH, Circuit Judges, and TUNHEIM,** District
Judge.
On June 24, 2022, the Supreme Court issued its opinion reversing our
decision in Empire Health Foundation, for Valley Hospital Medical Center v.
Azar, 958 F.3d 873 (9th Cir. 2020), and remanded the case for further proceedings.
We now address Empire’s remaining challenge.
This case concerns the calculation of disproportionate share hospital (DHS)
adjustment payments made to healthcare providers by the Department of Health
and Human Services (HHS), specifically how the “Medicare fraction” is
calculated. Empire challenged HHS’s interpretation of “patient days … which
were made up of patients who (for such days) were entitled to benefits under
[Medicare],” and argued that the term must include days for which Medicare
actually paid for a patient’s care. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). The
Supreme Court disagreed, holding that the phrase included patient days for all
patients who are statutorily eligible for Medicare, regardless of whether Medicare
paid on a given day. Becerra v. Empire Health Found., for Valley Hosp. Med.
Ctr., 142 S. Ct. 2354, 2362 (2022).
Neither the Supreme Court nor this panel addressed Empire’s alternative
** The Honorable John R. Tunheim, United States District Judge for the
District of Minnesota, sitting by designation.

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argument challenging HHS’s calculation of patient days for those patients “entitled
to supplemental security income [(SSI)] benefits,” which also factors into the
Medicare fraction. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). Under HHS policy,
this figure includes patient days only when SSI benefits are paid to an individual
on a given month, not merely when they are eligible for benefits. See Medicare
Program, 75 Fed. Reg 50,042, 50,280–81 (Aug. 16, 2010). Empire argues that, if
“entitled to benefits under [Medicare]” means all eligible patients, then HHS’s
interpretation of “entitled to SSI benefits,” which requires that benefits are actually
paid, is inconsistent and invalid.
At the district court, this argument was rejected for lack of subject-matter
jurisdiction on the grounds that it was beyond the scope of the Provider
Reimbursement Review Board’s (PRRB) authorization of expedited judicial
review. See 42 U.S.C. § 1395oo(f)(1) (allowing PRRB to authorize expedited
judicial review of challenges to Medicare reimbursement that involve issues
beyond PRRB’s power to decide).
The district court’s conclusion was error. Empire requested review of the
“validity of … 42 CFR § 412.106(b)(2),” which encompasses the agency’s
interpretation of both phrases, and argued that the regulation is “arbitrary and
capricious because [it] is not permitted to have two different meanings of ‘entitled’
within the … Fraction.” Empire’s request thus raises the inconsistency between

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HHS’s interpretations of “entitled to Medicare” and “entitled to SSI,” not merely
its interpretation of “entitled to Medicare.” Accordingly, when the PRRB granted
Empire’s request, it framed the issue as “Whether the Secretary properly calculated
the Provider’s Disproportionate Share Hospital (‘DSH’)/Supplemental Security
Income (‘SSI’) percentage,” which encompasses the regulation’s Medicare and
SSI patient-days calculations. Likewise, Empire’s Complaint challenges HHS’s
interpretation of “entitled to” in both parts of the regulation. Thus, Empire’s
alternative argument is within the scope of the PRRB’s authorization for expedited
judicial review and thus within the district court’s jurisdiction.
Accordingly, we reverse with respect to subject-matter jurisdiction over
Empire’s alternative argument and remand for the district court to consider the
argument in the first instance and to obtain supplemental briefing on the impact of
the Supreme Court’s ruling in this case. See, e.g., Ctr. for Bio. Diversity v. U.S.
Forest Serv., 925 F.3d 1041, 1052–53 (9th Cir. 2019) (remanding for the district
court to consider the merits of a claim in the first instance, where the district court
improperly determined there was no jurisdiction). Empire’s motion to consider the
argument in the alternative and order supplemental briefing, Docket No. 65, is
denied. The Secretary’s motion to affirm the district court’s dismissal of the
plaintiff’s alternative claim, Docket No. 67, is also denied.
REVERSED; REMANDED.

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