St. Francis Medical Center v. Shalala

Opinions of the United

1994 Decisions States Court of Appeals

for the Third Circuit

8-5-1994

St. Francis Medical Center v. Shalala, et al.

Precedential or Non-Precedential:

Docket 93-3405

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UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 93-3405

____________

ST. FRANCIS MEDICAL CENTER,

Appellant

v.

DONNA E. SHALALA, Secretary of the

Department of Health and Human Services,

BRUCE C. VLADECK, Administrator,

Health Care Financing Administration; and

JACK MARTIN, Chairman, Provider

Reimbursement Review Board

____________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

____________________

(D.C. Civil No. 89-02452)

Argued: March 2, 1994

Before: SLOVITER, Chief Judge, ALITO, Circuit Judge,

and PARELL, District Judge*

(Opinion Filed: August 9, 1994)

STEPHEN P. NASH, ESQ.

MELINDA J. ROBERTS, ESQ. (ARGUED)

DAVID W. THOMAS, ESQ.

JACQUELINE O. SHOGAN, ESQ.

Nash and Company

700 Westinghouse Building

Pittsburgh, PA 15222

Attorneys for Appellant

* The Honorable Mary Little Parell, United States District Court

Judge for the District of New Jersey, sitting by designation.

FRANK W. HUNGER

Assistant Attorney General

Civil Division

THOMAS W. CORBETT, JR.

United States Attorney

PAUL J. BRYSH

Office of United States Attorney

633 United States Post Office

and Courthouse Building

Pittsburgh, PA 15219

BARBARA H. FISHER

Department of Health & Human Services

6325 Security Boulevard

500 East High Rise Building

Baltimore, MD 21207

GERARD KEATING (ARGUED)

Department of Health & Human Services

Health Care Financing Division

330 Independence Avenue, S.W.

Washington, D.C. 20201

Attorneys for Appellees

____________________

OPINION OF THE COURT

____________________

ALITO, Circuit Judge:

St. Francis Medical Center (SFMC) is a provider of

health care services covered under Part A of Title XVIII of the

Social Security Act, 42 U.S.C. § 1395 et. seq., which is commonly

known as the Medicare Act. SFMC appeals from a district court

order dismissing its amended complaint for lack of jurisdiction

under 28 U.S.C. § 1331. We affirm.

I.

A. Before 1982, Medicare providers were reimbursed for

the "reasonable cost" of covered services. See Sacred Heart

Medical Ctr. v. Sullivan, 958 F.2d 537, 540 (3d Cir. 1992).

"Under this regime, hospitals and other health care providers had

little incentive to curb operating costs and render services more

economically, for the federal government bore the financial

burden of increases." Id. (footnote omitted). "In 1982,

Congress determined that the Medicare Program should be modified

to provide hospitals with better incentives to render services

more economically. Accordingly, in the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA) Congress amended the [Social

Security Act] by imposing a ceiling on the rate of increase of

inpatient operating costs recoverable by a hospital." Id.

(footnote omitted).

"Under TEFRA, a hospital may receive no more than the

`target amount' of per patient costs." St. Francis

Medical Ctr. v. Sullivan, 962 F.2d 1110, 1111 (3d Cir.

1992) (St. Francis I). The statute provided:

"`target amount' means with respect to a hospital for a

particular 12-month cost reporting period -- (i) in the

case of the first reporting period for which this

subsection is in effect, the allowable operating costs

of inpatient hospital services . . . recognized . . .

for such hospital for the preceding 12-month cost

reporting period." [42 U.S.C. §] 1395ww(b)(3)(A). For

each reporting period subsequent to the initial period,

the target amount was increased by a specified

percentage. Section 1395ww(b)(3)(A). Under this

system, hospitals were obligated to absorb operating

costs in excess of their target amounts, but they

received bonuses if their operating costs were less

than their targeted amounts. Section 1395ww(b)(1)(A).

Sacred Heart Medical Ctr., 958 F.2d at 540.

TEFRA also directed the Secretary to provide for

exemptions from, and exceptions or adjustments to, the TEFRA

limits (see 42 U.S.C. § 1395ww(b)(3)(A)), and the Secretary has

done so. Before 1991, 42 C.F.R. § 413.40(g) (1990), which bore

the heading "Exceptions," permitted the Health Care Financing

Administration (HCFA)1 to "adjust a hospital's operating costs .

. . upward or downward" if the hospital could "show that it

incurred unusual costs (in either a cost reporting period subject

to the ceiling or the hospital's base period) due to

extraordinary circumstances beyond its control" (42 C.F.R. §

413.40(g)(2) (1990)) or if the hospital had experienced a change

in its "case mix" (42 C.F.R. § 413.40(g)(3) (1990)). In

addition, 42 C.F.R. § 413.40(h), which bore the heading

"Adjustments," provided in pertinent part:

1

. The Secretary has delegated considerable administrative

responsibility for the Medicare Program to the HCFA. See Sacred

Heart Medical Ctr., 958 F.2d at 540 n.4.

HCFA may adjust the amount of the operating costs

considered in establishing cost per case for one or

more cost reporting periods, including both periods

subject to the ceiling and the hospital's base period,

to take into account factors that could result in a

significant distortion in the operating costs of

inpatient hospital services.

42 C.F.R. § 413.40(h)(1) (1990).

In 1991, these provisions were combined to form what is

now 42 C.F.R. § 413.40(g) (1993). Under this provision, the HCFA

"may adjust the amount of the operating costs considered in

establishing the rate-of-increase ceiling for one or more cost

reporting periods, including both periods subject to the ceiling

and the hospital's base period, under the circumstances specified

below." Subsequent provisions state that such adjustments may be

granted for essentially the same reasons listed in the previous

version of the regulations. See 42 C.F.R. § 413.40(g)(2)-(3)

(1993).2

2

. These provisions state:

(2) Extraordinary circumstances. HCFA may make an

adjustment to take into account unusual costs (in

either a cost reporting period subject to the ceiling

or the hospital's base period) due to extraordinary

circumstances beyond the hospital's control. These

circumstances include, but are not limited to, strikes,

fire, earthquakes, floods, or similar unusual

occurrences with substantial cost effects.

(3) Comparability of cost reporting periods -- (i)

Adjustment for distortion. HCFA may make an adjustment

to take into account factors that would result in a

significant distortion in the operating costs of

inpatient hospital services between the base year and

the cost reporting period subject to the limits.

The Secretary now interprets 42 C.F.R. § 413.40(g)

(1993) to mean that a provider may obtain two different types of

"base period inpatient operating cost adjustments." Appellees'

Br. at 7. According to the Secretary, the first type is "cost

year-specific" and may raise a provider's target amount for the

purpose of recovering that year's costs but not for the purpose

of calculating bonus payments. Id. at 7-9. The second type of

adjustment, the Secretary explains, results in "a permanent

adjustment to the base period inpatient operating costs used to

calculate the TEFRA limit," and "any permanent increase in the

limit would come into play under the TEFRA bonus provision

beginning only with the fiscal year after the one for which any

permanent base period relief [is] granted." Id. at 8-9. SFMC

argues vigorously that the Secretary's recognition of this second

type of adjustment represents a recent change in position that

was taken for purposes of litigation.

In 1983, Congress largely replaced the TEFRA system

with a "prospective payment system" (PPS) (see Sacred Heart

Medical Ctr., 958 F.2d at 540), but certain types of hospitals

and hospital units were excluded from the PPS. See 42 U.S.C. §

1395ww(b), and (d)(1)(A)-(B); 42 C.F.R. §§ 412.20(b), 412.22(b).

Among the excluded units were distinct part rehabilitation units.

See 42 U.S.C. § 1395ww(d)(1)(B); 42 C.F.R. §§ 412.23, 412.30.

B. SFMC operates a general acute-care hospital that

includes a rehabilitation unit. For TEFRA purposes, the

hospital's base period ended on June 30, 1985. During this

period, SFMC's fiscal intermediary concluded that SFMC did not

have a distinct part rehabilitation unit under the applicable

regulations "since less than 75% of its patients required

intensive rehabilitation. The intermediary terminated the

provider as a distinct part rehabilitation unit and the Health

Care Financ[ing] Administration . . . upheld that decision. To

comply with the 75% rule, the Medical Center transferred some of

its `non-qualifying' patients from the rehabilitation unit to its

acute care facility. This transfer was completed in the year

ending July 30, 1986 . . . ." St. Francis I, 962 F.2d at 1112.

Because this transfer was not completed until after the base

period ended, SFMC maintains,

certain "non-qualifying" patients were included on the

original 1985 cost report for the Medical Center's

rehabilitation unit, but then were transferred out of

that unit by 1986. The absence of these "non-

qualifying" patients from the group of patients treated

by the unit in 1986 meant that the Medical Center's

average patient costs were higher in 1986 than the

estimates of those costs derived from the 1985 base

year cost report. In addition, the base year cost

report did not include costs associated with a physical

expansion project completed in 1986.

Id. at 1113.

SFMC sought relief under 42 C.F.R. § 413.40(g) and (h)

for the cost reporting period ending June 30, 1986. Although the

intermediary recommended partial relief, the HCFA denied SFMC's

requests. The HCFA concluded that SFMC's transfer of

nonqualifying patients out of the rehabilitation unit after the

base period did not constitute "an extraordinary circumstance

beyond the hospital's control" but resulted from a "management

decision" to claim the transferred patients as rehabilitation

cases in the base year. App. at 24-25. The HCFA also concluded

that an adjustment was not warranted by the hospital's building

program. Id. at 24-25. The HCFA noted that expansion is usually

undertaken to accommodate "increased utilization," which in turn

tends to "offset any impact on a target rate." Id. at 24.

However, in SFMC's case, the HCFA observed, "while an expansion

program was being implemented, the size of the rehabilitation

unit was being decreased." Id.

SFMC appealed to the Provider Reimbursement Review

Board (PRRB), but the PRRB held that it lacked jurisdiction to

hear the appeal because, among other things, SFMC had not

satisfied the $10,000 amount-in-controversy requirement in 42

U.S.C. § 1395oo(f). The PRRB wrote:

Under Section 1878(a) Title XVIII, Social Security Act,

as amended, [42 U.S.C. § 1395oo(a)], and 42 C.F.R.

405.1835 and 1841, a provider has a right to a hearing

before the Board with respect to costs claimed on a

timely filed cost report if it is dissatisfied with the

final determination of the intermediary . . . , and the

amount in controversy is $10,000, or more, and the

request for hearing was filed within 180 days of the

date of the final determination . . . . [T]he amount

in controversy for the issues you wish to raise is less

than $10,000. Since the above statutory requirement is

a prerequisite to a provider's right to a hearing, the

Board finds that it does not have jurisdiction over

this appeal and hereby dismisses the appeal of the

subject year.

App. at 32.3

SFMC then filed this action in district court.

Asserting that the district court had jurisdiction under 42

U.S.C. § 1395oo(f), SFMC's complaint alleged that the PRRB had

"wrongfully declined jurisdiction" and that the fiscal

intermediary and the HCFA had erred in denying SFMC's requests

"to amend and/or reopen its 1985 cost report." App. at 62. The

complaint sought a declaration that the intermediary, the HCFA,

and the PRRB had acted improperly. Id. In addition, the

complaint requested that the court order that SFMC be given

permission to amend its 1985 cost report; that the intermediary,

the HCFA, and the PRRB "recalculate [SFMC's] base year cost per

discharge in accordance with its amended cost report"; and that

SFMC be awarded "the sums due it pursuant to the amended cost

3

. While the PRRB denied jurisdiction over SFMC's claims for

fiscal year 1985, it exercised jurisdiction over SFMC's claims

for fiscal year 1986. These claims were settled, and SFMC was

granted reimbursement for its full inpatient operating costs for

fiscal years 1986 through 1988. App. at 36, 46-50; Appellant's

Br. at 12. This reimbursement totalled $1,117,355. App. at 37-

38. With respect to bonus payments, the settlement stated:

The Provider agrees that no exception awarded under 42

C.F.R. 413.40(g) by virtue of this settlement or any

HCFA decision related to the capital expansion program

shall entitle the Provider to any TEFRA incentive

payments or other payments in excess of final audited

costs. The parties make no agreement with respect to

the appropriateness of any TEFRA incentive payments or

other payments in excess of final audited costs should

an adjustment be awarded under 42 C.F.R. 413.40(h).

Id. at 39-40. SFMC subsequently dismissed its 1986 PRRB appeal.

Id. at 259.

report, together with interest thereon" and attorney's fees. Id.

at 62-63.

The Secretary moved to dismiss the case for lack of

jurisdiction, contending that SFMC had not met the $10,000

amount-in-controversy requirement in 42 U.S.C. §1305oo(f). The

magistrate judge to whom the case had been referred rejected this

argument and therefore recommended that this motion be denied and

that the case be remanded to the PRRB. The magistrate judge did

not find that SFMC was seeking to recover $10,000 or more for the

cost reporting period at issue, i.e., the period ending on June

30, 1986. Instead, the magistrate judge concluded:

The PRRB attempts to isolate each year involved to

determine whether it meets the $10,000.00 requirement,

but the claim requires the board to look at the years

1985 through 1988 as a whole because they are

inextricably connected, since the base year is the

foundation for a continuing inaccuracy in plaintiff's

reimbursements from Medicare. Plaintiff easily meets

the $10,000.00 jurisdictional amount as defined in 42

C.F.R. Section 405.1839(a)(2) for the years l986, 1987

and 1988, for which the TEFRA rate of increase limits

are determined by the 1985 cost report. It is

unreasonable and inefficient to require plaintiff to

file annually for an exception to the TEFRA limits when

a recalculation of the base year cost report, if proven

to be inaccurate, would obviate the problem.

App. at 71-72. The district court accepted the magistrate

judge's recommendation.

On appeal, a divided panel of our court reversed and

held that SFMC had not satisfied the $10,000 amount-in-

controversy requirement. Noting that "[t]he `amount in

controversy' is defined by [42 U.S.C. § 1395oo(a)(1)(A)(i)] as

`the amount of total program reimbursement due to the provider

for the items and services furnished to individuals for which

payment may be made . . . for the period covered by such

report,'" the panel held that a single provider may not

"aggregate claims over several cost reports in order to satisfy

the amount in controversy requirement of § 1395oo(a)." St.

Francis I, 962 F.2d at 1114, 1115 (emphasis supplied in St.

Francis I). However, in response to SFMC's argument that the

district court had jurisdiction under 28 U.S.C. § 1331, the panel

remanded the case to the district court so that SFMC could

petition for leave to amend its complaint to assert jurisdiction

under that provision. 962 F.2d at 1117. In doing so, however,

the panel made clear that it was not deciding whether SFMC's

claims could "properly be asserted under this jurisdictional

provision." Id. at 1117 n.10.

On remand, SFMC was granted leave to file an amended

two-count complaint that asserted jurisdiction under 28 U.S.C. §

1331. Count I of the amended complaint alleged:

The methodology, or lack of methodology, utilized by

HCFA to deny to St. Francis Medical Center a base year

adjustment (to achieve comparability between cost

reporting periods) has resulted in HCFA's imposition of

improper and unreasonable reimbursement ceilings (TEFRA

Ceilings) upon the Medical Center's rehabilitation

unit.

App. at 212. Count II alleged that SFMC's equal protection

rights had been violated because it had been treated differently

from providers "whose post-base year costs for post-base year

cost reporting periods . . . are undistorted." Id. at 213.

Counts I and II of the amended complaint sought essentially the

same relief as SFMC's prior complaint. Id. at 213-15.

The defendants moved to dismiss, and the magistrate

judge recommended that the motion be granted on the ground that

42 U.S.C. § 405(h) precluded the exercise of jurisdiction under

28 U.S.C. § 1331. The district court agreed and dismissed the

amended complaint. This appeal followed.

II.

Under the Medicare Act, 42 U.S.C. § 1395oo(f)(1), a

provider has "the right to obtain judicial review of any final

decision" of the PRRB by means of a civil action filed in

district court. In St. Francis I, however, our court held that

SFMC could not obtain judicial review under this provision

because it had not satisfied the $10,000 amount-in-controversy

requirement of 42 U.S.C. § 1395oo(a). SFMC thus turned to 28

U.S.C. § 1331 as an alternative avenue for obtaining review, but

SFMC's reliance on this provision raises other jurisdictional

problems.

The Medicare Act, 42 U.S.C. § 1395ii, incorporates 42

U.S.C. § 405(b), which provides in relevant part:

The findings and decision of the Secretary after a

hearing shall be binding upon all individuals who were

parties to such hearing. No findings of fact or

decision of the Secretary shall be reviewed by any

person, tribunal, or governmental agency except as

herein provided. No action against the United States,

the Secretary, or any officer or employee thereof shall

be brought under section 1331 or 1346 of Title 28 to

recover on any claim arising under this subchapter.

42 U.S.C. § 405(h) (emphasis added). Therefore, if SFMC's

amended complaint seeks "to recover on [a] claim arising under

[the Medicare Act]," this provision deprives the district court

of jurisdiction under 28 U.S.C. § 1331.

As the District of Columbia Circuit has noted,

resolution of this jurisdictional issue requires us to consider

two lines of Supreme Court precedent: the "Salfi-Ringer line"

and the "Erika-Michigan Academy line." See National Kidney

Patients Ass'n v. Sullivan, 958 F.2d 1127, 1130 (D.C. Cir. 1992),

cert. denied, 113 S. Ct. 966 (1993). We will consider each of

these lines separately.

A. If the "Salfi-Ringer line" controls, the decision

of the district court dismissing SFMC's complaint was clearly

correct. In Weinberger v. Salfi, 422 U.S. 749 (1975), the Court

considered an action brought on behalf of a class of persons who

had been denied Social Security benefits pursuant to a provision

of the Social Security Act that permitted a widow or stepchild to

obtain benefits only if that claimant had become the wife or

stepchild of the deceased at least nine months before his death.

A three-judge court held that this statutory requirement was

unconstitutional, but the Supreme Court concluded that 42 U.S.C.

§ 405(h) deprived the lower court of jurisdiction to entertain

the suit under 28 U.S.C. § 1331. The Court rejected the

proposition that section 405(h) merely requires exhaustion of

administrative remedies (422 U.S. at 757), as well as the

argument that the plaintiffs' claims arose under the Constitution

rather than the Social Security Act. Id. at 760. The Court

wrote:

It would, of course, be fruitless to contend that

appellees' claim is one which does not arise under the

Constitution, since their constitutional arguments are

critical to their complaint. But it is just as

fruitless to argue that this action does not also arise

under the Social Security Act. For not only is it

Social Security benefits which appellees seek to

recover, but it is the Social Security Act which

provides both the standing and the substantive basis

for the presentation of their constitutional

contentions. Appellees sought, and the District Court

granted, a judgment directing the Secretary to pay

Social Security benefits. To contend that such an

action does not arise under the Act whose benefits are

sought is to ignore both the language and the substance

of the complaint and judgment. This being so, the

third sentence of § 405(h) precludes resort to federal-

question jurisdiction for the adjudication of

appellees' constitutional contentions.

Id. at 760-61. The Court thus held that individuals wishing to

challenge the duration-of-relationship requirement were required

to proceed under 42 U.S.C. § 405(g) rather than under 28 U.S.C. §

1331. See 422 U.S. at 763-67.

In Heckler v. Ringer, 466 U.S. 602 (1984), the

plaintiffs were individuals who wanted Medicare to pay Part A

benefits4 for a surgical procedure known as bilateral carotid

4

. As we recently explained:

Medicare coverage is primarily divided into two

parts. Part A covers all inpatient hospital expenses

through an insurance plan. See 42 U.S.C. §§ 1395c to

body resection (BCBR). The Secretary through the HCFA adopted a

policy that "no payment [was] to be made for Medicare claims

arising out of the BCBR surgical procedure when performed to

relieve respiratory distress." Id. at 607; see also id. at 608.

Asserting jurisdiction based in part on 28 U.S.C. § 1331, the

plaintiffs filed suit, contending that the Secretary's policy

violated "constitutional due process and numerous statutory

provisions." 466 U.S. at 610. The Supreme Court held, however,

that jurisdiction under 28 U.S.C. § 1331 was not available, and

the Court specifically rejected the distinction that the court of

appeals had drawn between substantive and procedural claims. 466

U.S. at 614-15. "[T]o be true to the language of the statute,"

(..continued)

1395i-4. All Medicare-eligible patients receive this

benefit. . . .

Part B covers certain physician services, hospital

outpatient services, and other health services not

covered under Part A. See 42 U.S.C. §§ 1395j to 1395w-

4(j). Part B coverage is not freely or automatically

available to all Medicare-eligible patients. To obtain

this coverage, Medicare-eligible patients must first

enroll in the Part B insurance program by paying

insurance premiums ("Part B insurance premiums"). See

§§ 1395o-1395s. Once this is done, the federal

government pays 80% of the "reasonable costs" of

outpatient hospital services and 80% of the "reasonable

charges" for physician services rendered to the

insured. §13051. The Part B patients themselves must

pay the remaining 20% of the charges for the reasonable

outpatient hospital services and physician services

(co-payments or coinsurance), as well as an annual

deductible. Id.; § 1395cc(a)(2)(A).

Pennsylvania Medical Soc'y v. Snider, No. 93-7775 (3d Cir. July

22, 1994), slip op. at 4.

the Court wrote, "the inquiry in determining whether § 405(h)

bars federal-question jurisdiction must be whether the claim

`arises under' the Act, not whether it lends itself to a

`substantive' rather than a `procedural' label." 466 U.S. at

615.

Turning to the case at hand, the Court concluded that

the plaintiffs' "challenge to the Secretary's BCBR payment policy

`[arose] under' the Medicare Act." Id. at 615 (brackets added).

The Court found it inconsequential that the plaintiffs "sought

only declaratory and injunctive relief and not an actual award of

benefits as well" because "[f]ollowing the declaration which

respondents seek from the Secretary -- that BCBR surgery is a

covered service -- only essentially ministerial details will

remain before respondents would receive reimbursement." Id.

Instead of invoking 28 U.S.C. § 1331 or the mandamus statute, the

Court held, claimants wishing to challenge the Secretary's BCBR

policy were required to proceed under 42 U.S.C. § 405(g). 466

U.S. at 617.

If Salfi and Ringer are controlling in this case, there

can be little doubt that the district court lacked general

federal-question jurisdiction. The Medicare Act provides "both

the standing and substantive basis" for SFMC's claims. Salfi,

422 U.S. at 761. Moreover, SFMC "sought . . . a judgment

directing the Secretary to pay [Medicare] benefits." Id.

Accordingly, under these precedents, SFMC's claim "arises under"

the Medicare Act for purposes of section 405(h). See Ringer, 466

U.S. at 615; Salfi, 422 U.S. at 760-61; In re Univ. Medical Ctr.,

973 F.2d 1065, 1073 (3d Cir. 1992); Abington Memorial Hosp. v.

Heckler, 750 F.2d 242, 244 (3d Cir. 1984), cert. denied, 474 U.S.

863 (1985). Under these precedents, it makes no difference that

SFMC asserted constitutional and procedural claims. See Ringer,

466 U.S. at 615; Salfi, 422 U.S. at 761.

B. SFMC makes little attempt to distinguish Salfi or

Ringer. Instead, SFMC relies on the Supreme Court's later

decision in Bowen v. Michigan Academy of Family Physicians, 476

U.S. 667 (1986), which concerned a regulation governing payments

under Part B of the Medicare program. This regulation permitted

carriers to establish separate prevailing charges for specialists

and nonspecialists performing the same services. An association

of physicians and several individual doctors challenged the

regulation on constitutional and statutory grounds, but the

Secretary contended that "Congress ha[d] forbidden judicial

review of all questions affecting the amount of benefits payable

under Part B of the Medicare program." Id. at 669. In making

this argument, the Secretary relied on United States v. Erika,

Inc., 456 U.S. 201 (1982), in which the Court had held that the

Medicare Act precluded any judicial review of a carrier's

decision concerning the amount awarded on a Part B claim. The

Secretary also argued that 42 U.S.C. § 405(h) bolstered this

conclusion.

The Supreme Court, however, disagreed. Beginning with

"the strong presumption that Congress intends judicial review of

administrative action" (476 U.S. at 670), the Court held that

neither the Medicare Act nor 42 U.S.C. § 405(h) demonstrated with

the requisite clarity that Congress intended to preclude all

judicial review of "any action taken under Part B of the Medicare

program." 476 U.S. at 673. The Court held that the portion of

the Medicare Act governing review of Part B determinations, as

interpreted in Erika, "simply does not speak to challenges

mounted against the method by which such amounts are to be

determined rather than the determinations themselves." Id. at

675 (emphasis in original). The Court then concluded that,

whereas a carrier's decision concerning the amount of a Part B

claim was not subject to any form of judicial review, those Part

B matters that a carrier cannot decide -- "including challenges

to the validity of the Secretary's instructions and regulations"

-- are not insulated from review under the Medicare Act. Id. at

678.

As for 42 U.S.C. § 405(h), the Court wrote that it

would not "indulge the Government's assumption that Congress

contemplated review by carriers of `trivial' monetary claims

. . . but intended no review at all of substantial statutory and

constitutional challenges to the Secretary's administration of

Part B of the Medicare program." 476 U.S. at 680 (footnote

omitted). The Court found insufficient evidence to show that

Congress meant to take this "extreme position." Id.

In subsequent cases involving Part B of the Medicare

program, we explained that "Erika and Michigan Academy define the

ends of a continuum." American Ambulance Serv. v. Sullivan, 911

F.2d 901, 905 (3d Cir. 1990); see also Medical Fund-Phila.

Geriatric Ctr. v. Heckler, 804 F.2d 33, 38 (3d Cir. 1986). We

elaborated:

At one end are disputes over amount computations at

issue in a particular case. At the other are disputes

arising from the Secretary's rules, regulations and

instructions which are applied by the Hearing Officer.

A Hearing Officer is not at liberty to disregard these

rules. . . . "[M]atters which Congress did not delegate

to private carriers, such as challenges to the validity

of the Secretary's instructions and regulations, are

cognizable in courts of law." Michigan Academy, 476

U.S. at 680, 106 S. Ct. at 2140-41 (emphasis in

original).

American Ambulance Serv., 911 F.2d at 905.

Contrary to SFMC's argument, we do not believe that

Michigan Academy supports its reliance on general federal-

question jurisdiction in this case. Michigan Academy concerned

the availability of general federal-question jurisdiction to

review the validity of a Part B regulation. Under Part B, a

carrier cannot review the legality of such a regulation (see

Michigan Academy, 476 U.S. at 675-76, 680) and, as Erika held, a

carrier's determination of the amount of a Part B payment is not

reviewable. Thus, if general federal-question jurisdiction had

not been available in Michigan Academy, the plaintiffs in that

case would have had no avenue for challenging the validity of the

regulation under which their payments were calculated.

By contrast, the Medicare Act provides avenues by which

a provider seeking Part A payments may contest both the amount of

its payments and the methods by which those payments are

calculated. If the provider seeks review of a reimbursement

determination and does not wish to challenge a provision of the

Act or regulations, it may, upon compliance with the

jurisdictional requirements imposed by statute, take an appeal to

the PRRB (see 42 U.S.C. § 1395oo(f)(1)). Alternatively, if the

provider wishes to challenge a provision of the Act or a

regulation, it may seek a determination by the PRRB that the

Board lacks the authority to decide the question (see 42 U.S.C. §

1395oo(f)(1)) and then obtain judicial review. See Good

Samaritan Hosp. v. Shalala, 113 S. Ct. 2151, 2156 (1993);

Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399, 401-02 (1988).

Since a provider seeking Part A payments has these

avenues of review available under the Medicare Act, the

presumption that Congress did not intend to foreclose judicial

review, which was central to the decision in Michigan Academy, is

inapplicable. And in the absence of that presumption, we read 42

U.S.C. § 405(h), as incorporated into the Medicare Act and as

interpreted in Salfi and Ringer, to mean that SFMC may not assert

its claim under 28 U.S.C. § 1331.

In Westchester Management Corp. v. United States HHS,

948 F.2d 279 (6th Cir. 1991), cert. denied, 112 S. Ct. 1936

(1992), the Sixth Circuit considered a case quite similar to the

one before us. Noting that 42 U.S.C. § 1395oo(f)(1) provided "an

avenue of judicial review for the type of challenge that [the

provider] assert[ed]," the court stated that "the Michigan

Academy exception applies only when there is no other avenue of

judicial review." 948 F.2d at 282. The court continued:

Congress has expressly provided for judicial review

of the type of claim that Westchester Management

asserts, when the claim exceeds the $10,000 amount-in-

controversy requirement. Congress created a special

procedure by which a provider that, unlike Westchester

Management, is entitled to a Board hearing may demand

that the Board determine whether it has authority to

pass on a relevant legal question, such as the validity

of an instruction of the Secretary. If it determines

that it lacks authority, the provider may proceed

directly to court for judicial review of its legal

challenge. See 42 U.S.C. § 1395oo(f)(1). If we were

to accept Westchester Management's construction of

Michigan Academy -- that there is always jurisdiction

under 28 U.S.C. §§ 1331 and 1346 for challenges to

instructions, rules, and regulations, but not for

amount determinations -- this special procedure,

created by 42 U.S.C. § 1395oo(f)(1), would become

superfluous.

The better construction requires that Westchester

Management pursue the exclusive jurisdictional grant

within the Medicare Act. Its claim that it has no

avenue of judicial review is meritless; 42 U.S.C. §

1395oo(f)(1) provides an avenue of judicial review for

the sort of challenge to the validity of the

Secretary's instructions that it raises. Westchester

Management is, however, denied access to that avenue

because it is unable to meet the amount-in-controversy

requirement. There is no contention that Congress

lacks the power to limit jurisdiction by prescribing

minimum amount-in-controversy requirements.

Id. at 282-83; see also Colonial Penn Ins. Co. v. Heckler, 721

F.2d 431, 436 (3d Cir. 1983); Frankford Hosp. v. Davis, 647 F.

Supp. 1443, 1446-47 (E.D. Pa. 1986); Mount Sinai Medical Ctr. v.

Sullivan, Medicare & Medicaid Guide (CCH) ¶ 39,103 (D.D.C. Nov.

30, 1990). We find this analysis persuasive.

We note, moreover, that administrative remedies are now

available for providers who believe that their base period

operating costs are too low. Beginning in 1990, a provider may

request a new base period. See 42 U.S.C. §§ 1395ww(b)(4)(A)-(B)

(Supp. 1993); 42 C.F.R. § 413.40(i). As previously noted (see

pages 4-5, supra), a provider may also request a permanent base-

period cost adjustment under 42 C.F.R. § 413.40(g). A denial of

either of these requests may be appealed to the PRRB and is

thereafter subject to judicial review under 42 U.S.C. §

1395oo(f)(1).

SFMC contends that these procedures are inadequate in

its case. SFMC correctly notes that the granting of a new base

period beginning in 1990 pursuant to 42 C.F.R. § 413.40(i) would

not permit it to recover the bonus payments that it believes it

should have received prior to that date. As for a permanent

base-period cost adjustment, SFMC argues that the Secretary has

only recently recognized the availability of such relief.

Indeed, SFMC charges that the Secretary previously took the

position that no such relief was available and that the

Secretary's current interpretation of the relevant regulations is

simply a "convenient litigating position." The Secretary

disputes these charges. But whether or not SFMC's charges are

justified, we do not think they have a bearing on the

availability of jurisdiction under 28 U.S.C. § 1331, for "Subject

matter jurisdiction can never be created by estoppel." Rubin v.

Buckman, 727 F.2d 71, 72 (3d Cir. 1984); see Insurance Corp. of

Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702

(1982).

SFMC also argues that, even now, while the Secretary

acknowledges that a permanent base-period adjustment would apply

in determining a provider's entitlement to TEFRA bonus payments

in future years, the Secretary takes the position that such an

adjustment would not apply in determining a provider's

entitlement to bonus payments in the year in which permanent

adjustment is granted. In other words, SFMC contends that the

administrative procedure may cause a provider to lose a year of

incentive payments.

This argument does not persuade us that such a provider

must be permitted to sue to recover these bonus payments under 28

U.S.C. § 1331. If such a provider has a substantive entitlement

to these bonus payments under the Medicare Act, it is by no means

clear to us that the provider could not obtain those payments in

an action under 42 U.S.C. § 1395oo(f)(1), irrespective of the

regulations or the Secretary's interpretation of them. On the

other hand, if such a provider has no such entitlement, then

obviously the Secretary's position causes the provider no harm.

But in any event, even if the Secretary's position may by some

means cause the provider to lose a year of bonus payments, that

possibility is insufficient to persuade us that jurisdiction

under 28 U.S.C. § 1331 must be recognized.

We have considered all of SFMC's remaining arguments,

and we find them to lack merit. Accordingly, we will affirm the

decision of the district court dismissing SFMC's complaint.