S T. Helena Clear Lake Hospital, Doing Business As Adventist Health Clear Lake v. Xavier Becerra, Secretary, U.s. Department of Health and Human Services

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 24, 2022 Decided April 8, 2022
No. 21-5117
S T. HELENA C LEAR LAKE HOSPITAL, DOING BUSINESS AS
ADVENTIST H EALTH C LEAR LAKE,
APPELLANT
v.
XAVIER B ECERRA, S ECRETARY, U.S. DEPARTMENT OF HEALTH
AND HUMAN S ERVICES ,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:19-cv-00141)
Kelly A. Carroll argued the cause for appellant. With her
on the briefs were Robert L. Roth and Patric Hooper.
Kyle T. Edwards, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were
Brian M. Boynton, Acting Assistant Attorney General, Michael
S. Raab, Attorney, Janice L. Hoffman, Associate General
Counsel, U.S. Department of Health & Human Services, and
Susan Maxson Lyons, Deputy Associate General Counsel for
Litigation.

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Before: W ILKINS and KATSAS , Circuit Judges, and
S ILBERMAN, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
S ILBERMAN.
S ILBERMAN, Senior Circuit Judge: Appellant, a small
California hospital, claims it should be compensated under
Medicare for the cost of keeping various specialty doctors on
call. The Secretary of the Department of Health and Human
Services rejected that claim based on an interpretation of a
governing regulation. The district court affirmed the
Secretary’s decision and we agree.
I.
Faced with the high number of closures of rural hospitals,
Congress created the special designation of “critical access
hospitals.” That refers to certain rural hospitals that provide
24-hour emergency services located far from other hospitals.
They are limited to 25 inpatient beds and may not provide
inpatient care—beyond emergency room treatment—for more
than 96 hours (on the average). 42 U.S.C. § 1395i-
4(c)(2)(B)(iii). Patients more persistently ill are expected to
be transferred to larger hospitals. See id. St. Helena is one of
these critical access hospitals.
Unlike ordinary hospitals, which have Medicare costs
reimbursed based on a fixed fee schedule set by the Secretary
of Health and Human Services, critical access hospitals are
treated more favorably. They are reimbursed for 101% of
their “reasonable costs” in providing patient services. 42
U.S.C. §§ 1395f(l)(1), 1395m(g)(1).

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The Secretary has a long-term practice of denying
Medicare reimbursement to compensate doctors for being “on
call.” 63 Fed. Reg. 26,318, 26,353 (May 12, 1998).
However, Congress intervened in 2000. It passed legislation
authorizing emergency room doctors in critical access hospitals
to be paid for on-call time.1 42 U.S.C. § 1395m(g)(5). The
Secretary, who has broad authority to issue regulations
interpreting Medicare, issued a regulation essentially tracking
the statute. 42 C.F.R. § 413.70(b)(4) (hereinafter referred to
as the “key regulation”).
St. Helena, nonetheless, applied for Medicare
reimbursements for on-call costs it paid to non-emergency
room specialists in surgery, obstetrics, pediatrics, and
cardiology. It claimed that its on-call costs for inpatient care,
just as for emergency room care, are “necessary and proper”
under another Department regulation and therefore are,
perforce, reasonable. See 42 C.F.R. § 413.9(a). St. Helena’s
Medicare contractor, who administers St. Helena’s Medicare
reimbursements, denied the request asserting that non-
emergency room on-call costs were not reimbursable. St.
Helena then appealed to the Provider Reimbursement Review
Board.
Before the Board, St. Helena argued that it was required
by the federal Emergency Medical Treatment and Active Labor
Act, 42 U.S.C. §§ 1395dd, and California law to incur those
on-call costs. The Board rejected these arguments and
explained that the Secretary’s key regulation implicitly
prohibits St. Helena’s requested reimbursement because it only
1 Congress later added physician assistants, nurse practitioners, and
clinical nurse specialists to the list of emergency medical staff whose
on-call costs could be reimbursed by Medicare. Medicare
Prescription Drug, Improvement, and Modernization Act of 2003,
Pub. L. No. 108-183, 117 Stat. 2066, 2266.

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allowed the reimbursement of on-call costs for the emergency
room. The Administrator of the Centers for Medicare &
Medicaid Services, to whom the Secretary delegated authority
to review the Board, declined to review the decision, which
became the Secretary’s final action. St. Helena then appealed
to the district court, which granted the Secretary’s motion for
summary judgment, essentially affirming the Secretary.
II.
Appellant reiterates the arguments presented both to the
Board and the district court. It offers both evidentiary and
legal grounds to show that it was necessary and proper, and
therefore reasonable, to pay on-call costs for all doctors—not
just emergency room doctors.
When Appellant sought reimbursement, it entered into a
stipulation with its contractor to the effect that it could not
comply with its obligations without paying on-call specialists
for inpatient services. But as we have previously held, the
contractor is not the government and therefore the Secretary is
not bound by any such stipulation. See Appalachian Reg’l
Healthcare, Inc. v. Shalala, 131 F.3d 1050, 1053 n.4 (D.C. Cir.
1997). In any event, the stipulation of fact assumes a legal
conclusion—that the hospital is obliged to provide such
extensive inpatient services.
The parties agree that critical access hospitals have an
obligation to treat patients under federal law—at least for a
short time—after emergency room treatment. That obligation
apparently stems from the federal Emergency Medical
Treatment and Active Labor Act, which requires hospitals
providing emergency room service to “stabilize” patients
before releasing them or transferring them to a large hospital.
42 U.S.C. §§ 1395dd(b), (c); see also 42 C.F.R. § 489.24.

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Appellant also points to another Departmental regulation
which obliges all participating Medicare hospitals to comply
with state laws. 42 C.F.R. § 485.608. And it asserts
California law requires all hospitals to provide various
specialty services, particularly surgery. It is claimed that
Appellant cannot comply with both federal and state
obligations unless it can pay on-call compensation to
specialists in surgery, obstetrics, pediatrics, and cardiology.
We agree with the Secretary that the federal obligation to
stabilize patients coming from an emergency room does not
necessarily imply the need for various specialists. In that
regard, the Board reasonably concluded that since emergency
room doctors were readily available, they would have
sufficient capability to stabilize patients for transfer if
necessary.2
Appellant and the Secretary disagree as to whether, under
California law, St. Helena must provide obstetrics, pediatrics,
and cardiology services. See Cal. Code Regs. Tit. 22 § 70067.
But regardless of whether St. Helena is obligated to provide
those services, California law allows Appellant to make use of
“alternate . . . personal qualifications” in providing those
services. Cal. Code Regs. Tit. 22 § 70307(a). Thus, the
requirements governing obstetrics, pediatrics, and cardiology
services can be met with non-specialists with requisite
experience. Id.; see also Cal. Code Regs. Tit. 22, § 70435(a),
70539(a), 70549(a). Nor is the Secretary bound by the cases
Appellant cited in which the California Department of
Healthcare Services concluded that Appellant’s expenditures
2 Appellant argues that separate regulations discourage transfers to
other hospitals. But that regulation simply discourages unnecessary
transfers. 78 Fed. Reg. 50,496, 50,751.

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were reimbursable under the state’s Medi-Cal program. An
authorized expenditure is not the same as a requirement.
To be sure, Appellant makes a strong argument that
California law could be read, with a bit of a stretch, to oblige
critical access hospitals to have a surgeon on call. Cal. Code
Regs. Tit. 22, § 70225(a). On the other hand, the California
statute does provide that its requirements could be satisfied by
someone with surgical training. Id. It therefore seems
reasonable for the Board to conclude that St. Helena had
available emergency room doctors who would have sufficient
surgical training to meet the state requirements.
* * *
In any event, even if Appellant’s reading of California law
were persuasive, Appellant conceded at oral argument that if
the key regulation was legitimately interpreted by the Board,
that would be the end of the matter. We think that is exactly
the situation here. The statute and the regulation specifically
address on-call costs only for emergency room physicians. 42
U.S.C. § 1395m(g)(5); 42 C.F.R. § 413.70(b)(4). The
legislative maxim expressio unius est exclusio alterius
therefore comes into play.
The maxim is particularly applicable here because it is
undeniable that the Secretary had a de facto policy prior to the
passage of the key legislation whereby all physician on-call
costs were disallowed. Indeed, in a Q&A section
accompanying a regulation clarifying Medicare
reimbursements, the Secretary explained that Medicare did not
recognize “costs of ‘on-call’ physicians as allowable costs of
operating a [critical access hospital].” 63 Fed. Reg. at 26,353.
Thereafter, Congress intervened. It seems obvious, therefore,
that Congress acted because of its understanding of the

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Secretary’s policy. Moreover, the preamble of the critical key
regulation also described this policy, which the statute and
regulation modified for emergency room physicians. 66 Fed.
Reg. 39,828, 39,922.
To be sure, Appellant challenges any recognition of the
prior policy of not paying on-call costs because another
provision of the Medicare statute, 42 U.S.C. § 1395hh(a)(2),
precludes the Secretary from establishing or changing cost
policy without using notice-and-comment rulemaking and the
preamble of the regulation is not adequate to constitute legal
rulemaking. That is a troubling argument and, if correct, it
does at least cast doubt on the legality of the policy before
Congress acted. Still, although we have held that the
preamble of a regulation does not have quasi-legislative bite,
in other words it is not part of the legal requirement of the
regulation, AT&T Corp. v. Fed. Commc’ns Comm’n, 970 F.3d
344, 350–351 (D.C. Cir. 2020), the preamble of the key
regulation can be used to explain the regulation even if the pre-
existing policy turned out to be legally defective.
So even if invalid, the de facto policy can still be referred
to in interpreting the statute Congress passed in 2000 (and by
extension what the Secretary meant in the implementing
regulation). Certainly, Congress thought that the Secretary’s
policy of refusing to pay physicians’ on-call expenditures was
controlling, otherwise it would not have passed 42 U.S.C.
§ 1395m(g)(5) allowing on-call payments for emergency room
doctors. Indeed, if Appellant’s legal position is correct, it
would have been wholly unnecessary for Congress to have
passed the statute dealing with emergency room doctors; all
expenses for on-call doctors at critical access hospitals would
have been reimbursable.

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In sum, it is at least reasonable to read the key regulation
as precluding a policy change extending beyond on-call
emergency room physicians.3 And therefore we should defer
to the Secretary’s interpretation. See Auer v. Robbins, 519
U.S. 452 (1997); Chevron v. Nat. Res. Def. Council, 467 U.S.
837 (1984) (both Chevron and Auer are relevant precedents
since as, we’ve noted, the regulation closely tracks the statute);
see also St. Luke Cmty. Health Care v. Sebelius, No. CV 09-
92-M-DWM, 2010 WL 1839405 (D. Mont. May 5, 2010)
(deferring to the Secretary’s determination that on-call nurse
anesthetist costs are not reimbursable because nurse
anesthetists are not mentioned in the key regulation).
Yet, Appellant argues that we should not defer to the
Board’s interpretation of the regulation because the decision
was made by the Board rather than the Secretary. The district
court, however, was quite correct to reject that argument and
defer to the Board’s interpretation of its regulation because the
Secretary had ratified the Board’s interpretation by refusing to
reverse or modify it. HCA Health Servs. of Oklahoma, Inc. v.
Shalala, 27 F.3d 614, 616 n.1 (D.C. Cir. 1994).
* * *
For the reasons we set forth above, we affirm the district
court.
3 Appellant suggests an alternative reading that the key regulation is
limited to the outpatient, as opposed to inpatient, context. Even if
that interpretation was plausible, it would not be enough to overcome
the Board’s alternative reasonable interpretation.

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