Petition for Writ of Certiorari — Your Home Visiting Nurse Services, Inc. v. Shalala

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QO “Tere

971489 MAR1 1 1998

Ne. OFFWE OF THE CLERK

|

In The

Supreme Court of the United States

October Term, 1997

¢

YOUR HOME VISITING NURSE SERVICES, INC.,

Petitioner,

SECRETARY OF HHS,

Respondent.

S

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Sixth Circuit

°

PETITION FOR A WRIT OF CERTIORARI

°

Diana L. Gustin

Counsel of Record

11 Town Square

Post Office Box 1349

Norris, Tennessee 37828

(423) 494-3000

Counsel for Petitioner

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

Il.

Il.

IV.

QUESTIONS PRESENTED FOR REVIEW

Is there jurisdiction for review of a refusal to reopen

a Medicare provider’s cost report under:

42 U.S.C. § 139500

28 U.S.C. § 1331

28 U.S.C. § 1361

5 U.S.C. § 706

Is regulation 42 C.F.R. § 405.1885(c) based on a per-

missible construction of the Medicare statute?

Does the Secretary’s interpretation of the Medicare

statute and the regulation which prohibits review

constitute a deprivation of due process under the

United States Constitution, Amendment V?

In the event that petitioner prevails, is there justi-

fication for an award of attorneys fees under the

Equal Access to Justice Act 5 U.S.C. § 504 and 28

U.S.C. § 2412, because the Government's action was

not substantially justified?

PARTIES TO THE PROCEEDINGS

The petitioner, plaintiff-appellant in the proceeding

below, is Your Home Visiting Nurse Services, Inc. and its

home health care agency providers licensed as numbers

44-7100, 44-7300, 44-7234, and 44-7304 (Tennessee corpo-

rations). There is no parent or non-wholly owned subsid-

iary company to be listed as required by United States

Supreme Court Rule 29.6.

Respondent is the Secretary of Health and Human

Services, represented by Counsel for the Department of

Health and Human Services.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ........... i

PARTIES TO THE PROCEEDINGS ................. ii

TABLE OF AUTHIORITIOG .....ccccccccccccccccsess iv

PED CI not cn ccesesodapceccdesccecdndes 1

STATEMENT OF JURISDICTION.......... 6.666045. 1

STATUTORY PROVISIONS AND OTHER AUTHORI-

Be ED vokc ce scdcavesdegaseessencceceds 1

STATEMENT OF THE CASE.............-06050000 2

REASONS FOR GRANTING THE WRIT ........... 3

I. THE SIXTH CIRCUIT DECISION IS IN CON-

FLICT WITH OTHER UNITED STATES COURT

OP APPBALS. ...cccccccccccscrscesevccseveces 3

Il. THERE IS A PRESUMPTION OF JUDICIAL

PPP PerrrrrrrrrrrrrrTirrir rrr iri tii re 9

Ill. THE GOVERNMENT'S POSITION CANNOT BE

SUBSTANTIALLY JUSTIPIED.................. 22

ee a Rh 6 | PPrrererrrTrrrrrrir irri rier rey 25

APPTINGIIS A cease ccccccc cee scccnccccscvceces App. 1

APPT BD... nc cccccccccccccccccscceveveces App. 16:

APPTIGIIK Goo ccccccccccccsccccccesvesesccess App. 38

APPENDIX D uw... ce sccccccccccccccccccccescess App. 40

TE sob sk ch eapecgeseunedaedbaes App. 54

iv

TABLE OF AUTHORITIES

Page

Cases

Athens Community Hospital v. Schweiker, 686 F.2d

CED GE, Fe 66 Fo eke nedin sh ctsewonien ds bedi tues 8

Bowen v. Michigan Academy of Family Physicians,

GS Wee Ge SE 6 obec a habe dhsteevcéns cistine passim

Califano v. Sanders, 430 U.S. 99 (1977) ............0.45. 4

Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 476 U.S. 837 (1984)............... 14, 15

Foley Construction Co. v. U.S. ao of Engi-

neers, 716 F.2d 1202 (8th Cir. 1983)................ 22

Good Samaritan Hospital Regional Medical Center v.

Shalala, 894 F. Supp. 683 (S.D.N.Y. 1995) ........... 8

Good Samaritan Hospital Regional Medical Center v.

Shalala, 85 F.3d 1057 (2nd Cir. 1996) ............. 8,9

Hennepin County Medical Center v. Shalala, 81 F.3d

PED Coed GEE, Woe cece cc ccccccccscccssbeqtadel cee 6

Interstate Commerce Commission v. Brotherhood of

Locomotive Engineers, 482 U.S. 270 (1987) ........ 8, 10

Marbury v. Madison, 5 U.S. 137 (1 Cranch)........... 10

McNary v. Haitian Refugee Center, Inc., 498 U.S. 479

GUE a cc catacuevedsespagine petsapasépeiseveuecee 20

Memorial Hospital v. Sullivan, 779 F. Supp. 1406

GE. Fee nce doccccncnsesiccuvpcanhehsbedeewess 7

Staten Island Hospital v. Sullivan, No. 91 Civ-733,

SORE Pes GUN a ab ve Kubndsdcdvosasessncuabecucsces 8

Vv

TABLE OF AUTHORITIES — Continued

Page

St. Mary of Nazareth Hospital Center v. Schweiker,

741 F.2d 1447 (D.C. Cir. 1984) ...............005. 6, 8

Oregon v. Bowen, 854 F.2d 346 (9th Cir. 1988)

Justa peddercesnscughennstpacedonpateghiss 4, 5, 6, 8, 14

United States v. Nourse, 34 U.S. 8 (8 Pet.)............ 10

Your Home Visiting Nurse Services, Inc. v. Shalala,

No. 96-5525 (6th Cir. Dec. 22, 1997)......... 3, 20, 22

Statutes, CONSTITUTIONAL PROVISIONS, AND

Rutes Invowvep —

DP coca rwcancnecdncavccscanccetondiveed 1, 22

DP Wes A URE Kew w bed cdab ocasdb siden deidicccaved 1, 13

Se Cy 6 cdecdce vivececpeccuscewctsdeds 1, 14

i inn: Sonccnenidbasiedneureytnesapeuel 1, 7

Se EN 560504 covdcvcencteddosnsnnnvuaee 1,7

PP ba aeacaseccvecnceddudvbécceuvened 1, 22

BR ree eer 1, 4, 15, 16, 18

42 U.S.C. § 1395x(v)(1)(A)ii). . .. 2 2. ee ee eee 1, 4, 14

Ee Wes BT EA dos ee cevsuccecscescpene 1, 4,5, 9, 11

Ss I ES UE Bc Seti scdccdicdensatuesduses 1, 25

42 C.FR. § 605.1665 .............008. 1, 4, 6, 11, 15, 17

i ae 1, 22

vi

TABLE OF AUTHORITIES — Continued

Page

OrHer AUTHORITIES

S. Rep. No. TH7ER CIDE) 2. kc ccccccccecccccccsocces 11

H.R. Rep. No. 79-1980 (1946) .............- 522s eeeee 11

H.R. Rep. No. 96-1418 (1980) ..... 2.2... ..-. eee eee 23

PETITION FOR WRIT OF CERTIORARI

Your Home Visiting Nurse Services, Inc. respectfully

petitions for a writ of certiorari to review the judgment of

the United States Court of Appeals for the Sixth Circuit in

this case.

o

OPINIONS BELOW

The opinion of the court of appeals (App., infra,) is

reported at 1997 U.S. App. LEXIS 35873. The opinion of

the district court (App., infra,) is unreported.

e

STATEMENT OF JURISDICTION

The court of appeals for the Sixth Circuit entered its

judgment on December 22, 1997 (App., infra,). The juris-

diction of this Court is invoked under 28 U.S.C. § 1254(1).

e

STATUTORY PROVISIONS AND

OTHER AUTHORITIES INVOLVED

The statutory provisions and other authorities

involved include: 5 U.S.C. § 504; 5 U.S.C. § 706; 28 U.S.C.

§ 1254(1); 28 U.S.C. § 1331; 28 U.S.C. § 1361; 28 U.S.C.

§ 2412; 42 U.S.C. § 405(h); 42 U.S.C. § 1395x(v)(1)(A)(ii);

42 U.S.C. § 139500; U.S. Const. amend. V; 42 C.FR.

§ 405.1885; 42 C.F.R. § 421.5(b).

o

STATEMENT OF THE CASE

The petitioner provides home health services to Med-

icare beneficiaries and receives reimbursement from

Medicare. The Medicare Program is administered by the

United States Department of Health and Human Services.

Annual cost reports are submitted to fiscal intermediaries

such as Blue Cross and Blue Shield of South Carolina, an

agent of the Secretary of Health and Human Services.

The petitioner discovered new and material evidence

that suggested the 1989 cost reports should be reopened.

Within the appropriate time period (three years from the

date of the Notice of Program Reimbursement letters

which had closed the 1989 cost reports) the petitioner

made requests for reopening. Blue Cross refused to

reopen the cost reports. Petitioner appealed the denial to

reopen the cost reports to the Provider Reimbursement

Review Board. The Board would not accept jurisdiction of

the case. Petitioner appealed the Board’s decision to the

district court, where the case was dismissed and the

Board’s decision was upheld. The district court also

determined that it did not have the authority to review

the fiscal intermediary's refusal to reopen the cost reports

‘by resorting to alternative theories of jurisiction. The

Sixth Circuit Court of Appeals affirmed the district court

decision.

3

REASONS FOR GRANTING THE WRIT

I. The Sixth Circuit decision is in conflict with the

decision of other United States Court of Appeals.

The petitioner respectfully requests Supreme Court

review of the latest decision in a line of conflicting cases

regarding the right to judicial review. During the years

(984 through 1997, six separate decisions were rendered

on this question of law. In Your Home Visiting Nurse

Services, Inc. v. Shalala, No. 96-5525 (6th Cir. Dec. 22,

1997), the Sixth Circuit Court of Appeals has effectively

joined with the Second Circuit and the District of Colum-

bia Circuit to deny judicial review of a refusal to reopen a

Medicare cost report.

In this case, an employee of an insurance company

made a decision which thus far has been insulated from

judicial review. The insurance company who employed

this individual contracts with the Health Care Financing

Adm. nistration to act as the fiscal intermediary and agent

of the secretary of Health and Human Services in admin-

istering Medicare reimbursement. The intermediary

(through the insurance company employee) refused to

grant petitioner’s request to reopen its Medicare cost

reports. Petitioner asserts that the refusal to reopen the

cost report was arbitrary, capricious, and otherwise inap-

propriate under the law.

The Sixth Circuit Court of Appeals’ decision perpetu-

ates the dispute among the circuit courts on this issue. Six

federal court cases referenced below examined some of

the same key provisions of the Medicare statute:

e 42 U.S.C. § 139500(a) (West Supp. 1996) -

appeal process for providers dissatisfied

with a final determination

e 42 U.S.C. § 1395x(v)(1)(A)(ii) (West Supp.

1997) — reasonable cost, regulations, retroac-

tive corrective adjustments

e 42 U.S.C. § 405(h) (West Supp. 1997) — finality

of Secretary’s decision

Nevertheless, the courts are not in agreement.

The Ninth Circuit Court of Appeals addressed this

question in 1988, holding that review is available under

42 U.S.C. § 139500(a) and that the Provider Reimburse-

ment Review Board has jurisdiction to review the fiscal

intermediary’s decision not to reopen a cost report. Ore-

gon v. Bowen, 854 F.2d 346 (9th Cir. 1988). As a result of

that decision, providers located within the Ninth Circuit

have a right to obtain review of a refusal to reopen a cost

report by appeal to the Provider Reimbursement Review

Board. (Providers may then obtain judicial review of the

Secretary's final determination after completion of the

administrative review process outlined in the statute.)

The Provider Reimbursement Review Board manual con-

tains a provision which allows review of this issue if, and

only if, the provider is located in the Ninth Circuit:

Refusal to Reopen. — A refusal by the intermedi-

ary to grant a reopening requested by the pro-

vider is not appealable to the Board, pursuant to

42 C.F.R. § 1885(c), except for providers which

are located within the jurisdiction of the U.S.

Ninth Circuit Court of Appeals, where such a

refusal to reopen is appealable. In such Ninth

Circuit cases, the issue to be heard by the Board

afte ———-_s ee —_o-s

is whether the intermediary abused its discre-

tion in refusing to reopen such determination or

decision.

Prov. Reimb. Man., Part L, § 2926.6.

In Oregon, 854 F.2d 346, the court recognized the

plain meaning of 42 U.S.C. § 139500(a) entitled the pro-

vider to review of a refusal to reopen the cost report.

Petitioner urges this Court to accept this petition to

resolve the dispute as to the plain meaning of the statute:

Any provider of services which has filed a

required cost report within the time speci-

fied in regulations may obtain a hearing

with respect to such cost report by a Pro-

vider Reimbursement Review Board . . . if -

(1) such provider

(A)(i) is dissatisfied with a final deter-

mination of the organization serving as its

fiscal intermediary . . . as to the amount of

total program reimbursement due the pro-

vider for the items and services fur-

nished ...

(2) the amount in controversy is $10,000 or

more, and

(3) such provider files a request for a hearing

within 180 days after notice of the inter-

mediary’s final determination under para-

graph (1)(A)(i).

42 U.S.C. § 139500(a).

An intermediary’s refusal to reopen a cost report is a

final determination. It is not a temporary decision sched-

uled for a later review, but is, admittedly, final.

“Although the NPR is often the final determination in

question, the fiscal intermediary’s refusal to reopen also

qualifies as a final determination, a fact the Secretary

concedes in his briefs.” Oregon, 854 F.2d at 349.

While the Eighth Circuit Court of Appeals has not yet

ruled on the precise question of judicial review of an

intermediary’s refusal to reopen a Medicare cost report, in

1996 it did remand a case back to the district court for

additional findings of fact regarding circumstances

required to validate the intermediary’s decision to reopen a

cost report. Hennepin County Medical Center v. Shalala, 81

F.3d 743 (8th Cir. 1996). The court questioned the exis-

tence of new and material information sufficient to justify

the intermediary's decision to reopen the cost reports. Id.

These questions were to be answered by the district court

through further proceedings. Id. The Eighth Circuit has

obviously decided that a district court has the right to

review the reopening process. The Hennepin court made

reference to Oregon, 854 F.2d 346, the Ninth Circuit case

which allows review of a refusal to reopen a cost report.

In 1984, four years before the Ninth Circuit decision

on the matter, the District of Columbia Circuit Court of

Appeals ruled on the issue of judicial review for a refusal

to reopen a cost report. In St. Mary of Nazareth Hospital

Center v. Schweiker, 741 F.2d 1447 (D.C. Cir. 1984), the

court held that 42 C.F.R. § 405.1885(c) makes denials of

reopenings unreviewable. Nevertheless, in 1991, a district

court within the District of Columbia Circuit acknowledged

jurisdiction to review an intermediary’s refusal to reopen

a cost report by virtue of the federal question statute, 28

U.S.C. § 1331, and the mandamus statute, 28 U.S.C.

§ 1361. Memorial Hospital v. Sullivan, 779 F. Supp. 1406

(D.D.C. 1991).

The district court in Memorial Hospital found alterna-

tive sources to allow review of an intermediary’s refusal

to reopen cost reports. Id. The district court felt it was

inappropriate for the Secretary to direct providers not to

appeal to the Provider Reimbursement Review Board, but

instead to file for reopening of their cost reports to

include self-disallowed data, only to have the request for

reopening denied. Id.

[T]he Secretary cannot relegate providers to a

dead-end procedure under the Medicare statute,

and then argue that the provider loses because

the Medicare statute is the exclusive means of

redress. When such bureaucratic red tape stran-

gles a provider’s right to judicial review, the

Court may invoke its federal question jurisdic-

tion and mandamus power.

Id. at 1412.

Based upon the record presented in that case, the

court found that the intermediary acted arbitrarily, capri-

ciously, and abused its discretion in denying the plain-

tiff’s request to reopen the cost reports citing the HHS

regulation and Provider Reimbursement manual sections

which require a reopening in the event that “new and

material evidence has been submitted.” Id. at 1412-13.

Because there was new evidence and an inconsistency of

iaw, there was a basis for reopening. This fact is impor-

tant since even the District of Columbia Circuit recog-

nized that reopening is permitted to hear new evidence.

St. Mary of Nazareth, 741 F.2d at 1449 (citing Community

Hospital v. Schweiker, 686 F.2d 989, 996 (D.D.C. 1982)

(emphasis in original)). The same reasoning was set forth

by this Court in the case of Interstate Commerce Commis-

sion v. Brotherhood of Locomotive Engineers, 482 U.S. 270

(1987). “If review of denial to reopen for new evidence or

change in circumstance is unavailable, the petitioner will

have been deprived of all opportunity for judicial consid-

eration — even on a ‘clearest abuse of discretion’ basis — of

facts which, through no fault of his own, the original

proceedings did not contain.” Id. at 270.

The Second Circuit Court of Appeals did not accept

the Oregon explanation of the plain meaning of the stat-

ute. Good Samaritan Hospital Regional Medical Center v.

Shalala, 85 F.3d 1057 (2nd Cir. 1996). Instead, the Second

Circuit endorsed the game of statutory construction

played by a district court in the Southern District of New

York:

While . . . a decision not to reopen is in some

sense “final,” it does not in and of itself estab-

lish an “amount of total reimbursement.”

Instead it is a final determination that there are

not grounds on which to reconsider a previous

final determination as to the amount of total

program reimbursement.

Good Samaritan, 85 F.3d at 1061 (citing Good Samaritan

Hospital, 894 F.Supp. at 690 (complete citation omitted in

original) (citing Staten Island Hospital ». Sullivan, No. 91-

Civ-733, 1992 WL 675952, at 5 n. 6 (D.D.C. Mar. 31,

1992))).

The Good Samaritan court position is not, in peti-

tioner’s view, a reasonable reading of the statute. More-

over, it neglects to address the heart of the problem. If the

refusal to reopen is not a final determination for purposes

of appeal, but is a final determination that there are not

grounds on which to reconsider a previous final deter-

mination, what recourse is available to the provider with

valid grounds for the reopening, whose reopening

request is denied? The rationale put forth in Good Samar-

itan leaves a provider wrongfully denied a reopening

with no remedy or redress. These cases present two ques-

tions for this Court to resolve:

1. Which construction of 42 U.S.C. § 139500(a)

is correct?

2. Is there an alternative basis for jurisdiction

to review a refusal to reopen a Medicare cost

report?

II. There is a presumption of judicial review.

This Court has not yet reviewed the question of a

Medicare provider’s right to judicial review of the refusal

to reopen a cost report. However, two conflicting deci-

sions from this Court were repeatedly cited for opposing

propositions by the parties herein. In 1977, this Court

held there is no review for a refusal to reopen a previ-

ously adjudicated claim for social security benefits under

section 10 of the Administrative Procedure Act. Califano v.

Sanders, 430 U.S. 99 (1977). Ten years later, this Court

ruled on the reopening question again, but stated that:

“only when a petition to reopen and reconsider an agency

order alleges new evidence or changed circumstances is

the agency’s refusal to reopen subject to judicial review,

and then, only as to whether such refusal was arbitrary,

10

capricious, or an abuse of discretion.” Interstate Commerce

Commission, 482 U.S. at 271.

This Court has long recognized the strong presump-

tion of judicial review dating back to the year 1803 when

Chief Justice Marshall insisted that “the very essence of

civil liberty certainly consists in the right of every indi-

vidual to claim protection of the laws.” Bowen v. Michigan

Academy of Family Physicians, 476 U.S. 667, 670 (1986)

(citing Marbury v. Madison, 1 Cranch 137, 163, 2 L. Ed. 60

(1803)). In 1835, the Chief Justice again noted the tradi-

tional observance of this right which has laid the founda-

tion for our modern presumption of judicial review:

“It would excite some surprise if, in a govern-

ment of laws and of principle, furnished with a

department, whose appropriate duty it is to

decide questions of right, not only between indi-

viduals, but between the government and indi-

viduals; a ministerial officer might, at his

discretion, issue this powerful process . . .

leaving the debtor no remedy, no appeal to the

laws of his country, if he should believe the

claim to be unjust. But this anomaly does not

exist; this imputation cannot be cast on the leg-

islature of the United States.”

Id. (citing United States v. Nourse, 9 Pet. 8, 28-29, 9 L. Ed.

31 (1835) (emphasis added)). The Court in Michigan Acad-

emy goes on to point out that:

Committees of both Houses of Congress have

endorsed this view. In undertaking the compre-

hensive rethinking of the place of administrative

agencies in a regime of separate and divided

powers that culminated in the passage of the

Administrative Procedure Act (APA) .. . the

11

Senate Committee on the Judiciary remarked:

“Very rarely do statutes withhold judicial

review. It has never been the policy of Congress

to prevent the administration of its own statutes

from being judicially confined to the scope of

authority granted or to the objectives specified.

Its policy could not be otherwise, for in such a

case statutes would in effect be blank checks

drawn to the credit of some administrative offi-

cer or board.”

Id. at 670-71 (citing S. Rep. No. 79-752, at 26 (1945)

(emphasis added)). More evidence was offered by the

court in Michigan Academy, id. at 671, through review of

the H.R. Rep. No. 79-1980, at 41 (1946) where the commit-

tee on the Judiciary of the House of Representatives

agreed that Congress intends that there be judicial

review, and emphasized the clarity and precision with

which a contrary intent must be expressed.

In the petitioner’s case, the statute at issue expressly

provides for judicial review of final determinations,

though it does not expressly define a refusal to reopen a

cost report as being a final determination which can be

appealed. 42 U.S.C. § 139500(a). The statute sets out the

method for obtaining judicial review when a provider is

dissatisfied with a final determination related to Medi-

care reimbursement. Id. While the statute does not pre-

clude judicial review, the Secretary of Health and Human

Services cuts off any review process through a regulation

which is interpreted to preclude judicial review. The reg-

ulation at issue is 42 C.F.R. § 405.1885(c) (1997) which

states that “jurisdiction for reopening a determination or

decision rests exclusively with the administrative body

that rendered the last determination or decision.”

12

Although the language of the regulation does not

expressly prohibit review of the determination, the Secre-

tary’s nw rpretation of the regulation does. The manual

which the Secretary of HHS provides to her agents as

direction for the implementation of the law clearly shows

the Secretary intends to deny review:

Notice of Refusal to Reopen or Correct. - A

provider has no right to a hearing on a finding

by an intermediary or a hearing officer that a

reopening or correction of a determination or

decision is not warranted. Accordingly a hear-

ing paragraph should not be included in any

letter or notice setting forth such a finding. The

notice will, however, explain the basis for refus-

ing to reopen or correct the determination or

decision and will be issued by the intermediary,

hearing officer, PRRB or the Secretary having

responsibility for the reopening according to

2931.

Prov. Reimb. Man., Part I § 2932.1.

As a result of these instructions, even in the most

egregious circumstances, an intermediary’s refusal to

reopen a cost report will not be reviewed in any manner,

and certainly not by the Provider Reimbursement Review

Board, unless the provider is fortunate enough to be located

within the Ninth Circuit Court of Appeals jurisdiction. Pro-

viders within the Ninth Circuit must be aware of their

right to request review based upon the Ninth Circuit

Court of Appeals decision because the Secretary of HHS

does not inform them of their right to review. Regardless

of the magnitude of injustice committed by an intermedi-

ary’s refusal to allow a reopening, there is no recourse for

13

a provider unless they are located within the Ninth Circuit

Court of Appeals district and know the Ninth Circuit law.

This Court reviewed the Medicare statute in 1986 and

ruled that judicial review was warranted in Michigan

Academy, 476 U.S. 667. Many of the same sections of the

Medicare statute which led this Court to grant judicial

review in that case have been addressed by the lower

court decisions which led to this petition for certiorari.

The continuing relevance of the Michigan Academy ruling

was questioned by the Sixth Circuit Court of Appeals.

(App. 1) The competing constructions of the statutes and

the Supreme Court decisions should be addressed by this

Court. There is an obvious need for this Court to come to

a final conclusion on this question and end the disparity

between the federal courts which exists today. The map at

page 54 of the Appendix demonstrates the impact of this

dilemma upon the nation.

The petitioner in the present case offered new and

material evidence in support of its request to reopen the

1989 Medicare cost reports. Therefore, petitioner demon-

strated circumstances to justify reopening. Unfortunately,

this evidence was not examined by the Provider Reimbur-

sement Review Board, the U.S. District Court for the

Eastern District of Tennessee, or the Sixth Circuit Court of

Appeals due to their refusal to accept jurisdiction of this

case to either hear the merits of the petitioner’s argument

or to remand the case to the appropriate forum to hear

the merits of the petitioner’s allegations that the inter-

mediary acted arbitrarily and capriciously in its refusal to

reopen the cost reports. A reviewing court should set

aside agency action that is arbitrary, capricious, and an

abuse of discretion. 5 U.S.C. § 706 (West 1996).

14

The petitioner asserts that the evidence offered was

sufficient to justify the re-opening of the cost report with

a suitable retroactive adjustment. The Medicare statute

requires the Secretary of HHS to promulgate regulations

for the implementation of such corrective adjustments. 42

U.S.C. § 1395x(v)(1)(A)(ii). The court in Oregon, 854 F.2d

at 349 recognized this section of the statute as authority

for the reopening regulation: “[nJothing in the plain lan-

guage of this mandate indicates unreviewability.” It is the

Secretary’s regulation that prohibits review of the inter-

mediary’s failure to make an appropriate retroactive cor-

rective adjustment. The standard for assessing the

validity of federal regulations appears in Chevron, U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 476 U.S. 837,

842-843 (1984):

When a court reviews an agency’s construction

of the statute which it administers, it is con-

fronted with two questions. First, always, is the

question whether Congress has directly spoken

to the precise question at issue. If the intent of

Congress is clear, that is the end of the matter;

for the court, as well as the agency must give

effect to the unambiguously expressed intent of

Congress. If, however, the court determines con-

gress has not directly addressed the precise

question at issue, the court does not simply

impose its own construction on the statute, as

would be necessary in absence of an administra-

tive interpretation. Rather, if the statute is silent

or ambiguous with respect to the specific issue,

the question for the court is whether the

agency’s answer is based on a permissible con-

struction of the statute.

15

Some regulations are considered unreasonable and

therefore fail the second prong of the standard as stated

in Chevron. The petitioner urges this Court to accept this

case in order to examine the Secretary’s regulation at 42

C.F.R. § 405.1885(c) for the purpose of determining

whether the regulation is a permissible construction of

the relevant portions of the Medicare statute.

By accepting this case, this Court will have the oppor-

tunity to resolve the statutory construction questions and

also address the continuing viability of the Court’s deci-

sion in Michigan Academy, 476 U.S. 667, a case which

petitioner asserts is controlling law for this controversy.

In Michigan Academy, physicians challenged the val-

idity of a federal regulation which authorized payment of

benefits under Part B of the Medicare program in differ-

ent amounts for similar services. Id. Obviously, the physi-

cians who were receiving less reimbursement for

rendering similar services did not find the regulation

acceptable. The district court held that this regulation, to

the extent that it authorized different reimbursement

rates for certain physicians, contravened the Medicare

statute. The Sixth Circuit expressed the view that:

(1) the regulation was invalid due to its failure

to recognize a statutory mandate that similar

physician’s services be considered identically,

and (2) judicial review was not precluded

whether by 42 U.S.C. § 405(h) as incorporated

into the Medicare program under 42 U.S.C.

§ 1395ff.

Id. at 667. Before Michigan Academy was heard at the

Supreme Court level, the Sixth Circuit had ruled favora-

bly with regard to the question of the availability of

16

judicial review and had also reaffirmed its conclusion,

after further proceedings, reiterating for a second time

that the validity of the regulation was subject to judicial

review. On Certiorari, this Court affirmed the Sixth Cir-

cuit’s decision, without deciding the merits as to the

validity of the regulation, holding that judicial review of

the validity of a regulation is not precluded by Section

1395ff or Section 405(h). Id.

There are some striking similarities between the com-

plaint of the physicians in Michigan Academy and the

petitioner’s complaint herein. Both addressed the unfair-

ness of being paid different amounts for the same ser-

vices. In Michigan Academy, 476 U.S. 667, doctors were

being paid different amounts. In this case, a nurse and

her husband, owners of a Medicare home health agency

provider, were being paid less than other owners of } »me

health agencies within the same geographical region.

Petitioner is the Medicare Provider that was owned and

operated by the nurse and her husband. Owners of pro-

viders are entitled to a reasonable amount of compensa-

tion for their salary. Each year the fiscal intermediary

reviews costs of the provider, including owners’ compen-

sation. A dispute arose in the 1980s concerning the appro-

priate amount of owners’ compensation which Medicare

would consider allowable reasonable cost. Like the physi-

cians in Michigan Academy, the petitioner felt it was unfair

to receive less compensation for its owners’ salary than

the intermediary allowed for their competitors. In Michi-

gan Academy, the regulation itself allowed different pay-

ment for the same services. Id. In the petitioner’s case,

there is an employee of the intermediary (an insurance

company) which allows different payment to be made for

17

the same services. This was accomplished in part by an

intermediary's use of a secret salary survey. Unbe-

knownst to the petitioner, an intermediary had developed

a salary survey for use in determining the amount of

salary it would consider allowable for a home health

agency owner. The intermediary did not tell the peti-

tioner about this salary survey. Once this salary survey

was discovered and the petitioner realized its owners had

not been paid as much as competitors were paid for the

same type of position, petitioner requested reopening of

the 1989 cost reports. The nurse and her husband realized

they had not received a fair payment in comparison with

their peers. This is a violation of the Medicare statute and

Medicare regulations, just like the situation in Michigan

Academy was a violation of the Medicare statute. “The

Sixth Circuit Court of Appeals affirmed and expressed

the view that (1) the regulation was invalid due to its

failure to recognize a statutory mandate that similar phy-

sician’s services be considered identically.” Michigan

Academy, 476 U.S. at 667.

Although a specific regulation did not prescribe the

inappropriate payment in the petitioner’s case, the result-

ing injustice is the same. While different regulations are

in controversy, the basic theme and subject matter in the

two cases are quite similar. The regulation at issue in

petitioner's case is 42 C.F.R. § 405.1885(c). This regulation

does not allow for a review of the intermediary’s refusal

to reopen the cost report to correct this error concerning

the owners’ compensation. This Court will surely agree

that if it was unfair for physicians who rendered similar

services to be paid different amounts then it is also unfair

18

for owners of a provider to be paid less than their com-

petitors. Without a review of the intermediary’s refusal to

reopen the cost reports, there is no remedy for this situa-

tion.

In Michigan Academy, 476 U.S. 667, the physicians

complained about the regulation. Not only was the val-

idity of the regulation at issue, but more important for

the purposes of consideration of this Writ, jurisdiction to

review the complaint about the regulation was at issue. Id.

This Court carefully reviewed the Medicare statute to

address questions raised by Section 405(h) concerning

jurisdiction. Id. (Generally, Section 405(h) is perceived as

a bar to federal court jurisdiction when litigants want to

shortcut the administrative appeal process by immediate

resort to the judiciary.) On appeal to this Court, the

Secretary of HHS did not seek review of the Sixth Circuit

court’s decision in Michigan Academy as to the merits of

the regulation invalidated. Id. Instead, the Secretary

renewed the contention that Congress had forbidden

judicial review of all questions affecting the amount of

benefits payable under Part B of the Medicare program.

Id. On certiorari, this Court reviewed the appeal process

available to individuals who felt they had received less

than the appropriate amount of Part B benefits. Id. (At

that point in time, a more limited review process was

available for Part B amount determinations.) The Secre-

tary took the position that Congress had deliberately

intended to foreclose further review of part B claims, and

urged this Court to accept this position and thus deny the

litigants review of the regulation at issue. Id. This Court

held that the plaintiff’s in Michigan Academy had mounted

19

a challenge to the Secretary’s regulation, an action which

was not foreclosed by Section 1395ff.

The reticulated statutory scheme, which care-

fully details the forum and limits of review of

“any determination ... of .. . the amount of

benefits under part A,” and of the “amount

of ... payment” of benefits under Part B, simply

does not speak to challenges mounted against

the method by which such amounts are to be

determined rather than the determinations

themselves. As the Secretary has made clear,

“the legality, constitutional or otherwise, of any

provision of the Act or regulations relevant to

the Medicare Program” is not considered in a

“fair hearing” held by a carrier to resolve a

grievance related to a determination of the

amount of a part B award. As a result, an attach

on the validity of a regulation is not the kind of

administrative action that we described in Erika

as an “amount determination” which decides

“the amount of the Medicare payment to be

made on a particular claim” and with respect to

which the Act impliedly denied judicial review.

Michigan Academy, 476 U.S. at 675-76 (citing Erika 456 U.S.

at 208 (complete citation omitted from original)).

The point was made still clearer by the Court: “[i]n

light of Congress’ express provision for carrier review of

millions of what it characterized as “trivial” claims, it is

implausible to think it intended there be no forum to

adjudicate statutory and constitutional challenges to reg-

ulations promulgated by the Secretary.” Id. at 678

(emphasis added).

20

The Secretary of HHS had argued that the third sen-

tence of Section 405(h) precludes resort to federal ques-

tion jurisdiction. This Court rejected that argument and

labeled it as an extreme position which “we would be

most reluctant to adopt without a showing of ‘clear and

convincing evidence.’ ” Id. at 681.

The Secretary raised the same arguments in the peti-

tioner’s case that were unsuccessful in Michigan Academy.

By doing so, the Secretary continued to block any and all

review of the intermediary's refusal to reopen the peti-

tioner’s cost reports.

The Sixth Circuit erred when it failed to consider

Michigan Academy as controlling in petitioner’s case. The

Sixth Circuit discounted petitioner’s reliance upon Michi-

gan Academy by shifting the focus to the inconsequential

fact that the case concerned Part B benefits. On this basis,

the Sixth Circuit found: “[j]urisdictional questions arising

under Part B claims are now treated in this circuit identi-

cally to such questions arising under Part A, so Michigan

Academy's amount/methodology distinction no longer

has force.” Your Home, No. 96-5525, 11 n.3, App. 1. It is

the petitioner’s position that the significance of the ruling

in Michigan Academy is not acknowledged by the Sixth

Circuit. It is a viable decision which still retains its prece-

dential value in the eyes of this Court. In 1991, this Court

cited Michigan Academy as controlling law when it held

that District Court had federal question jurisdiction to

hear respondents’ constitutional and statutory challenges

to the Immigration and Naturalization Service procedures

thereby recognizizig the continuing force of the decision.

McNary v. Haitian Refugee Center, Inc., 498 U.S. 479, 497

(1991).

21

Counsel for the petitioner asserts the Sixth Circuit

failed to appreciate the important principles espoused in

the Michigan Academy decision. This Court’s ruling in

Michigan Academy, 476 U.S. 667, did not focus upon the

different appeal procedures allowed for Part B versus

Part A benefits, but rather, concerned itself with the

situation in which the problem presented is not even

about the amount of the benefit determination. This

Court clearly stated the need for judicial review of com-

plaints about regulations, statutes, and constitutional

challenges. Id. This is the very essence of the subject

matter of petitioner’s case. Therefore, the petitioner’s

case is controlled by the holding of the Michigan Academy

decision and yet, the Sixth Circuit ignored the decision as

precedent.’ The Sixth Circuit decision now calls into

question the continuing validity of that decision. It is

crucial for this Court to accept this petition in order to

confirm the continuing precedential effect of Michigan

Academy, a case that is extremely important to all Medi-

care providers who must voice a complaint about the

Secretary’s regulations and her interpretations of the

Medicare statute. The Sixth Circuit decision deprives

petitioner of the right to due process, as guaranteed by

the Fifth Amendment to the Constitution of the United

States and sets the stage for all Medicare providers within

the Sixth Circuit to have their due process rights violated

as well.

Disregarding the precedential value of Michigan

Academy was not the only serious error made by the Sixth

Circuit Court. The Sixth Circuit also erred in its statement

concerning the need to join the insurance company as an

indispensable party. Code of Federal Regulation title 42

22

section 421.5(b) (1997) provides that intermediaries and

carriers act on behalf of HCFA in carrying out certain

administrative responsibilities and that HCFA is the real

party of interest in any litigation involving the adminis-

tration of the program. The Sixth Circuit implied that the

intermediary should have been joined in the suit as an

indispensable party, a direct contradiction to the Secre-

tary’s own regulation. Your Home, No. 96-5525, 9 n.2, App.

1. This statement appears to invite litigation against the

insurance companies on an individual basis.

Ill. The government's position cannot be substantially

justified.

Finally, the petitioner would urge this Court to con-

sider the Equal Access to Justice Act, 5 U.S.C. § 504 (West

1996) and 28 U.S.C. § 2412 (West 1996), in regard to this

matter. If the petitioner is successful and eventually pre-

vails in this case, the Equal Access to Justice Act would

allow an award of attorneys’ fees where the position of

the United States was not substantially justified. Whether

or not the position of the United States was substantially

justified should be considered on the basis of the record

which is made in the civil action for which fees and other.

expenses are sought. The test of whether the govern-

ment’s position is substantially justified is one of rea-

sonableness in law and in fact and the United States has

the burden of proof with regard to a showing of substan-

tial justification for its position. Foley Construction Co. v.

U.S. Army Corps of Engineers, 716 F.2d 1202, 1204 (8th Cir.

1983). This standard is said to represent a middle ground

between an automatic award of fees and an award only in

23

circumstances where the government's position was friv-

olous. H.R. Rep. No. 96-1418, at 14, reprinted in 1980 U.S.

Code Cong. & Ad. News 4993. The government's position

in this case is not substantially justified where there was

a secret salary survey discovered that revealed the peti-

tioner’s owners should have been paid the owners’ com-

pensation they claimed was reasonable. The petitioner’s

providers had filed administrative appeals related to

owners’ compensation for 1987, 1990, 1991, 1992, 1993,

and 1994. All of these appeals were settled in October

1996 by the intermediary and additional owners’ com-

pensation was allowed. (See letters of settlement, App.

55.) The only year which the intermediary has refused to

pay additional owners’ compensation is the year for

which a request to reopen was required because an

administrative appeal had not been made. In other

words, the intermediary has agreed that the owners were

not paid the appropriate amount of owners’ compensa-

tion for the years of 1987, 1990, 1991, 1992, 1993, and

1994. These cases were settled before the scheduled hear-

ings dates at the Provider Reimbursement Review Board.

(In 1988, there were no audit adjustments made to disal-

low any portion of owners’ compensation.) In 1989, the

year for which the request for reopenings were made and

denied, there was no appeal for Board review requested

within the 180 days of receipt of the initial Notice of

Program Reimburseinent Letters since the owners had

not yet discovered the secre! salary survey which

revealed that competitors were paid more than the peti-

tioner’s owners. It was not unti! after the 180 days elap-

sed that the petitioner’s previders discovered the secret

salary survey which was the new and material evidence

24

that was the basis for the request for reopening of the

1989 cost reports. Because it is so clear that the intermedi-

ary is presently aware it paid the incorrect amount of

owners’ compensation for the petitioners owners for all

of the years in question, including the 1989 year, the

government's stance of continuing to refuse to reopen the

cost reports to correct this error in the 1989 cost reports

simply cannot be substantially justified.

It is inherently unfair for an employee of an insur-

ance company to decide that some owners of home health

agencies will not be paid as their competitors (who are

virtually across the street) are paid. The reason for the

discrepancy will never be known where the decision

remains unreviewable. The insurance company employee

who made this decision not to reopen the 1989 cost

reports is not a member of the judiciary, not an elected

official, not a lawyer, not a hearing officer. The individual

is just a person with a job at an insurance company that

has a contract to serve as a Medicare fiscal intermediary.

A person in such a position can be advised of mathe-

matical errors on the settlement of a cost report and still

refuse to reopen the cost report to make corrections. Even

if the errors were caused by mistakes made by the inter-

mediary, the cost report can still remain unopened. To

sum up, no matter what the reason for the denial of

reopening, there is no review, no appeal, no remedy, no

justice in the Sixth Circuit. This leaves the power of law

in the hands of one person working for an insurance

company. This individual may not know what the Fifth

Amendment to the United States Constitution guarantees.

This person may not understand the phrase “due pro-

cess” and the legal ramifications of that concept. Most

25

citizens in America expect to receive their day in court. In

this situation, the Secretary of HHS and the Sixth Circuit

have abolished that right. Instead, an employee of an

insurance company will dispense or withhold justice.

From this person’s decision, there is no appeal. The gov-

ernment’s position cannot be justified, and certainly can-

not be “substantially justified.”

°

CONCLUSION

The inconsistent treatment of Medicare providers has

occurred because of the various interpretations of federal

law. These disparities will continue within the districts

unless this Court accepts this case and rules upon this

issue. Providers in different geographic locations are

receiving different measures of justice. The magnitude of

the impact of these differences will continue to affect the

providers nationwide until this controversy is resolved

by one ruling which will govern all Medicare providers.

Based upon the arguments and authorities presented

herein, the petitioner respectfully requests careful consid-

eration of this matter as appropriate for U.S. Supreme

Court review.

Respectfully submitted,

Diana L. Gustin

Counsel of Record

11 Town Square

Post Office Box 1349

Norris, Tennessee 37828

(423) 494-3000

Counsel for Petitioner

APPENDIX A

SIXTH CIRCUIT COURT CASE

App. 1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 24

ELECTRONIC CITATION: 1997 FED App. 0366P (6th Cir.)

File Name: 97a0366p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Your Home Vistrinc Nurse)

SERVICES, INc., )

ape )

Plaintiff-Appellant, No. 96-5525

v.

)

)

Secretary or Heatta and)

HuMAN SERVICES, '

)

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of Tennessee at Knoxville.

No. 95-00276 — Leon Jordan, District Judge.

Argued: June 5, 1997

Decided and Filed: December 22, 1997

Before: LIVELY, MERRITT, and SUHRHEINRICH,

Circuit Judges.

COUNSEL

ARGUED: Diane L. Gustin, Knoxville, Tennessee, for

Appellant. Howard H. Lewis, SOCIAL SECURITY

ADMINISTRATION, OFFICE OF GENERAL COUNSEL,

Atlanta, Georgia, for Appellee. ON BRIEF: Diana L.

Gustin, Knoxville, Tennessee, for Appellant. Howard H.

Lewis, SOCIAL SECURITY ADMINISTRATION, OFFICE

App. 2

OF GENERAL COUNSEL, Atlanta, Georgia, D. Gregory

Weddle, OFFICE OF THE U.S. ATTORNEY, Knoxville,

Tennessee, for Appellee.

OPINION

MERRITT, Circuit Judge. We are asked once again to

review and construe federal health care statutes and reg-

ulations governing reimbursement to a “provider” of ser-

vices.

The plaintiff, Your Home Visiting Nurse Service, Inc.,

provides home nursing services to Medicare beneficiaries

and receives reimbursement from Medicare. This pro-

gram is administered by the United States Department of

Health and Human Services. As part of the reimburse-

ment procedures, Your Home submits annual cost reports

to Blue Cross and Blue Shield of South Carolina, a fiscal

intermediary acting as the agent of defendant, the Secre-

tary of Health and Human Service.

Your Home sought to reopen cost reports submitted

to Blue Cross for fiscal year 1989 due to findings of “new

and material” evidence that the reports should be mod-

ified. Blue Cross declined to reopen the cost reports. Your

Home then appealed Blue Cross’s denial to reopen the

cost reports to the Provider Reimbursement Review

Board. The Review Board found that it lacked jurisdiction

to review a fiscal intermediary’s decision not to reopen

the plaintiff's 1989 cost reports. Your Home appealed the

denial of jurisdiction by the Review Board to the district

App. 3

court. The district court dismissed the complaint, uphold-

ing the Review Board’s determination that it lacked juris-

diction and further holding that the district court did not

have federal question or mandamus jurisdiction to review

directly the fiscal intermediary’s decision. A timely

appeal to this Court followed. For the reasons set forth

below, this Court affirms the judgment of the district

court.

This appeal concerns four cost reports that Your

Home submitted for the 1989 fiscal year. Blue Cross

issued notices of program reimbursement pursuant to 42

C.F.R. § 405.1803 for these cost reports, setting out the

reimbursement due and listing the expenses allowed and

disallowed. Your Home did not appeal any of the four

notices of program reimbursement to the Review Board

within the 180-day appeal period specified by statute, 42

U.S.C. § 139500. Your Home, however, did file a timely

request with Blue Cross to reopen the 1989 cost reports

pursuant to 42 C.F.R. § 405.1885 on the ground that Your

Home had discovered “new and material evidence”

affecting its reimbursement. In particular, Your Home

alleged that a prior fiscal intermediary calculated the

applicable owner compensation rates incorrectly for the

1987 fiscal year, which then in turn affected the 1989 cost

reports.

Your Home raises three issues on appeal: (1) whether

the Provider Reimbursement Review Board has jurisdic-

tion to review a fiscal intermediary’s denial of a request

to reopen a Medicare cost report; (2) whether the district

court has federal question jurisdiction to review a fiscal

intermediary's denial of a request to reopen a Medicare

App. 4

cost report and (3) whether the district court has man-

damus jurisdiction to review a fiscal intermediary's

denial of a request to reopen a Medicare cost report. We

will address each of these issues separately below.'

1. The Review Board’s Jurisdiction

42 U.S.C. § 139500(a) states:

Any provider . . . which has filed a required cost

report .. . may obtain a hearing with respect to

such cost report by a Provider Reimbursement

Review Board .. . if [in addition to other

requirements that are not at issue] (1) such pro-

vider (A)(i) is dissatisfied with a final deter-

mination of the . . . fiscal intermediary . . . as to

the amount of total program reimbursement due

the provider... .

Your Home’s argument turns on whether a fiscal inter-

mediary’s denial of a request to reopen is unambiguously

a “final determination . . . as to the amount of total

program reimbursement due the provider” within the

plain meaning of that phrase.

' On April 3, 1997, Your Home filed a Motion to Request

Addition of Document as Exhibit. Tne “document” is actually

two letters purporting to resolve outstanding cases between

Blue Cross/Blue Shield and Your Home through an

“Administrative resolution.” On April 10, 1997, the Secretary

filed an objection to Your Home’s Motion. Because the

documents were not considered by the District Court, we will

not consider them here in the first instance. Moreover, the

documents do not address the year at issue in this case (1989)

and, even if we were to consider the documents filed by Your

Home, they would not alter our holding here.

App. 5

The reopening procedure was created by regulation

rather than statute. The Medicaid statute does not

require, or even mention, a reopening procedure. Nev-

ertheless, the regulations promulgated by the Secretary

specify that a fiscal intermediary’s determination “may be

reopened” (emphasis added) when a request to reopen is

made within three years of the determination. 42 C.F.R.

§ 405.1885(a). The regulations specify, however, that

[jurisdiction for reopening a determination or decision

rests exclusively with that administrative body that ren-

dered the last determination or decision.” 42 C.F.R.

§ 405.1885(c). The criteria for reopening are set forth in

the Provider Reimbursement Manual, which provides:

Whether or not the intermediary will reopen a

determination, otherwise final, will depend

upon whether new and material evidence has

been submitted, or a clear and obvious error

was made, or the determination is found to be

inconsistent with the law, regulations and rul-

ings, or general instructions.

Provider Reimbursement Manual § 2931.2.

Although the regulations specify that new determina-

tions after a cost report has been reopened are subject to

review in the same manner as initial decisions, 42 C.F.R.

§ 405.1889, the regulations are silent as to whether a

decision not to reopen is subject to review. The Provider

Reimbursement Manual, however, states: “A refusal by

the intermediary to grant a reopening requested by the

provider is not appealable to the Board... . ” Provider

Reimbursement Manual, Appendix A, { B.4.

The Provider Reimbursement Review Board found

that it lacked jurisdiction based on the above language in

App. 6

the Provider Reimbursement Manual. The district court

affirmed, construing the Provider Reimbursement Man-

ual language as an interpretive rule pursuant to Shalala v.

Guernsey Mem. Hosp., 514 U.S. 87 (1995), and deferring to

the Secretary’s interpretation of the Review Board’s juris-

diction pursuant to Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984). At

least two circuit courts have also held that the Review

Board does not have jurisdiction over refusals to reopen

based on the language in the Manual. Good Samaritan

Hosp. Reg’! Med. Ctr. v. Shalala, 85 F.3d 1057 (2d Cir. 1996);

Athens Community Hosp., Inc. v. Schweiker, 743 F.2d 1,4 n.1

(D.C. Cir. 1984); Saint Mary of Nazareth Hosp. Ctr. v. Schwe-

iker, 741 F.2d 1447 (D.C. Cir. 1984) (when fiscal intermedi-

ary reopens with respect to some, but not all, issues,

Provider Reimbursement Review Board lacks jurisdiction

to review partial denial of reopening).

Your Home argues that deference to the Secretary's

interpretation in the Manual is inappropriate here

because that interpretation is contrary to the plain mean-

ing of the statute. In particular, Your Home argues that a

denial of a reopening request is plainly a “final deter-

mination” as that phrase is used in the statute. Your

Home attempts to bolster this argument by relying on the

presumption that administrative actions are subject to

judicial review. See Bowen v. Michigan Academy, 476 U.S.

667, 670 (1986).

In Good Samaritan Hospital, the Second Circuit

explained its holding as follows:

the plain meaning of [42 U.S.C.] § 139500(a)

does not compel a holding that a reopening

denial is a ‘final determination’ of the amount of

App. 7

total program reimbursement. To the contrary,

we believe that the statute may be construed

permissibly as stating that a reopening denial is

a refusal to revisit the (inal determination... . .

[W]hile . . . a decision not to reopen is in some

sense ‘final,’ it does not, in and of itself, estab-

lish an amount of total program reimbursement

[as required by the statute]. Instead it is a final

determination that there are not grounds on

which to reconsider a previous final determina-

tion as to the amount of total program reimbur-

sement.

Good Samaritan Hosp., 85 F.3d at 1061 (quoting Good

Samaritan Hosp. Reg’l Med. Ctr. v. Shalala, 894 F.Supp. 683

(S.D.N.Y. 1995)). In light of this statutory ambiguity, def-

erence to the Secretary’s regulations and interpretations

is appropriate.

This conclusion is bolstered by the Supreme Court's

holding in Califano v. Sanders, 430 U.S. 99 (1977). In

Sanders, an Administrative Law Judge denied a social

security disability claimant’s request to reopen a claim

and the claimant sought judicial review. The claimant

argued that the district court had jurisdiction pursuant to

section 205(g) of the Social Securi*y Act, which provides:

“Any individual, after any final decision of the Secretary

made after a hearing to which he was a party . . . may

obtain a review of such decision by a civil action com-

menced within sixty days... .” 42 U.S.C. § 405(g). The

Supreme Court held that this did not confer jurisdiction

because the Social Security Act does not require hearings

on petitions to reopen. Moreover, the Court suggested

that there would be no federal court jurisdiction even if

App. 8

the Secretary promulgated regulations allowing for hear-

ings on such petitions:

[T]he opportunity to reopen final decisions and

any hearing convened to determine the propri-

ety of such action are afforded by the Secretary's

regulations and not by the Social Security Act.

Moreover, an interpretation that would allow a

claimant judicial review simply by filing and

being denied a petition to reopen his claim

would frustrate the congressional purpose . . . to

impose a 60-day limitation upon judicial review

of the Secretary’s final decision on the initial

claim for benefits.

Sanders, 430 U.S. at 108.

The Medicare statute, similar to the Social Security

Act, does not require the Secretary to afford Medicare

providers an opportunity for rehearing of fiscal inter-

mediaries’ determinations. Therefore, even if our task in

this case were to construe the statute at issue without

benefit of the Secretary's interpretation in the Manual,

Sanders suggests that the proper interpretation would be

to avoid frustrating the congressional purpose to impose

a 180-day limitation upon Provider Reimbursement

Review Board review of a fiscal intermediary’s final

determination on an initial cost report by holding that the

statute does not confer jurisdiction on the Review Board

to conduct such a review. The Secretary’s interpretation

of the Medicare statute in the Manual is reasonable in

light of Sanders. If that interpretation is not foreclosed by

the plain language of the statute, and we find it is not, we

must defer to it pursuant to Chevron.

App. 9

Your Home, relying on Powderly v. Schweiker, 704 F.2d

1092 (9th Cir. 1983), argues that this Court should not

defer to the Secretary’s interpretation in the Provider

Reimbursement Manual because that interpretation is a

substantive rule and substantive rules must be promul-

gated in accordance with the Administrative Procedure

Act’s notice and comment period requirements, which

was not done here. The rule in question, however, is an

interpretive rule and the Administrative Procedure Act

exempts interpretive rules from its notice and comment

requirements. 5 U.S.C. § 553(b)-(c). As the Powderly court

explained, “|s]ubstantive rules are those which effect a

change in existing law or policy. Interpretive rules are

those which merely clarify or explain existing law or

regulations.” Powderly, 704 F.2d at 1098. As in Powderly,

the Manual provision at issue here does not change any

existing law or policy and does not remove any previ-

ously existing rights of Medicare providers. It merely

explains “what the more general terms of the Act and

regulations already provide.” Id. The Manual merely pro-

vides an interpretive rule. As the Supreme Court recently

held, such agency interpretive rules are subject to defer-

ence when they are not contrary to statute. See Shalala v.

Guernsey Mem. Hosp., 514 U.S. 87 (1995).

Your Home’s reliance on the presumption that fed-

eral courts have jurisdiction to review administrative

decisions is also unavailing. Although the Sanders Court

did not address that presumption explicitly, the Sanders

decision suggests that the presumption does not apply to

administrative proceedings not required by statute that

expand a claimant’s opportunity for administrative

App. 10

review beyond statutory requirements that, in them-

selves, provide adequate opportunities for judicial

review. Your Home could have obtained judicial review

of the fiscal intermediary's final decision on its initial

claim by filing an appeal with the Review Board within

180 days of that decision and continuing with further

appeals, if necessary, as provided in the Medicare statute.

Those statutory procedures are adequate to preserve judi-

cial review. As in Sanders, the Secretary is entitled to

create a reopening procedure to provide even greater

protection to providers than required by statute without

having to incur the additional expense entailed by full

administrative and judicial review of refusals of requests

to reopen.

2. Federal Question Jurisdiction

Your Home argues that even if the Provider Reimbur-

sement Review Board lacked jurisdiction to consider Your

Home’s appeal, the district court had either federal ques-

tion jurisdiction or mandamus jurisdiction to review

directly the fiscal intermediary’s refusal to reopen. Your

Home therefore requested as relief an order directing the

fiscal intermediary, Blue Cross, to reopen the cost reports

at issue.?

2 We note that, despite this request for relief, Your Home

failed to join Blue Cross in the suit. Although not addressed by

the court below, this may constitute a failure to join an

indispensable party. If that is so, the district court could have

ordered that Blue Cross be joined as a party or, if that was not

possible, dismissed the suit on that basis. Fed. R. Civ. P. 19.

Because neither the district court nor the Secretary raised the

failure to join an indispensable party, we will not base our

holding on that issue.

App. 11

The applicable regulations limit judicial review of the

Secretary's decisions. 42 U.S.C. § 1395ii provides:

[t]he provisions of . . . subsection[ ] .. . (h) .. . of

section 405 of this title, shall also apply with

respect to this subchapter . . . except that, in

applying such provisions with respect to this

subchapter, any reference therein to the Com-

missioner of Social Security or the Social Secu-

rity Administration shall be considered a

reference to the Secretary or the Department of

Health and Human Services, respectively.

42 U.S.C. § 405(h) provides:

No findings of fact or decision of the Commis-

sioner of Social Security shall be reviewed by

any person, tribunal, or governmental agency

except as herein provided. No action against the

United States, the Commissioner of Social Secu-

rity, 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 sub-

chapter.

Your Home argues that “claim” as used in § 405(h) is a

term of art referring to a Medicare claim for reimburse-

ment and that collateral challenges not requiring consid-

eration of the merits are outside the scope of the statute.

Your Home’s argument is foreclosed by Heckler v.

Ringer, 466 U.S. 602 (1984). In Ringer, the Secretary of

Health and Human Services issued an administrative rul-

ing that Medicare did not cover a certain surgical pro-

cedure. Four individual claimants brought a suit

challenging the ruling, asserting federal question jurisdic-

tion. The Court held that § 405(h) barred the suit, finding

that “the inquiry in determining whether § 405(h) bars

App. 12

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.” Id. at

614-15. The proper test is whether “ ‘both the standing

and the substantive basis for the presentation’ of the

claims” is the Medicare statute. Id. at 615 (quoting Wein-

berger v. Salfi, 422 U.S. 749, 760-61 (1975)). See also Califano

v. Sanders, 430 U.S. 99 (1977) (§ 405(h) precludes federal

question jurisdiction).

Here both the standing and the substantive basis for

the presentation of Your Home’s claims comes from the

plain language of the Medicare statute. Therefore § 405(h)

precludes federal question jurisdiction.*

3. Mandamus Jurisdiction

Finally, Your Home argues that the district court had

mandamus jurisdiction to review Blue Cross’ failure to

reopen. Section 405(h) explicitly precludes jurisdiction

pursuant to 28 U.S.C. §§ 1331 & 1346, but does not

mention the mandamus statute, 28 U.S.C. § 1361. The

Supreme Court has explicitly left open the question of

whether or not § 405(h) precludes mandamus jurisdiction.

See, e.g., Califano v. Yamasaki, 442 U.S. 682 (1979). Several

3’ Your Home’s reliance on Bowen v. Michigan Academy of

Family Physicians, 476 U.S. 667 (1986), is unavailing. Michigan

Academy concerned a Part B Medicare provider. Jurisdictional

questions arising from Part B claims are now treated in this

Circuit identically to such questions arising under Part A, so

Michigan Academy's amount/ methodology distinction no longer

has force. Farkas v. Blue Cross & Blue Shield, 24 F.3d 853, 860 (6th

Cir. 1994).

App. 13

courts, however, have held that mandamus jurisdiction

exists over challenges to the Secretary’s procedural rules.

See Ellis v. Blum, 643 F.2d 68, 78 (2d Cir. 1981); Frost v.

Weinberger, 515 F.2d 57, 62 (2d Cir. 1975); Knuckles v.

Weinberger, 511 F.2d 1221, 1222 (9th Cir. 1975); Martinez v.

Richardson, 472 F.2d 1121, 1125-26 (10th Cir. 1973).

Mandamus jurisdiction is available only if (1) the

plaintiff has exhausted all available administrative

appeals and (2) the defendant owes the plaintiff a “clear

nondiscretionary duty” that it has failed to perform.

Heckler v. Ringer, 466 U.S. 602, 616. The district court

found that Your Home failed to exhaust administrative

appeals because it failed to appeal Blue Cross’ initial

decision within 180 days, not the decision not to reopen

the cost reports. The district court also held that there

was no violation of a clear non-discretionary duty

because the Secretary has discretion over the decision

whether or not to reopen a cost report based on “new and

material evidence.”

The district court’s holding with respect to exhaus-

tion is incorrect. Your Home’s failure to appeal the initial

determination would preclude mandamus review of that

determination, but does not preclude review of a decision

not to reopen. Your Home has exhausted all available

remedies with respect to its claim that Blue Cross improp-

erly denied its request to reopen.

With respect to the existence of a nondiscretionary

duty, the relevant regulation states:

A determination of an intermediary . . . may be

reopened . . . by such intermediary officer . . . on

App. 14

motion of the provider affected by such deter-

mination or decision to revise any matter in

issue at any such proceedings.

42 C.F.R. § 405.1885(a) (emphasis added). In addition, the

Provider Reimbursement Manual provides:

Whether or not the intermediary will reopen a

determination, otherwise final, will depend

upon whether (1) new and material evidence

has been submitted, (2) a clear and obvious

error was made, or (3) the determination is

found to be inconsistent with the law, regula-

tions and rulings, or general instructions.

Provider Reimbursement Manual § 2931.2.

In Good Samaritan Hospital Regional Medical Center v.

Shalala, 894 F.Supp. 683 (S.D.N.Y. 1995), aff'd on other

grounds, 85 F.3d 1057 (2d Cir. 1996), the court, after

reviewing these provisions, concluded that the fiscal

intermediary’s reopening determination is discretionary

because the regulation says only that the fiscal intermedi-

ary “may” reopen, and the manual merely lists the factors

that must be considered, without specifying that reopen-

ing must be granted if those factors are present.

The district court looked to the Secretary in deter-

mining the existence of a nondiscretionary duty. The dis-

trict court looked to the wrong party under the language

in the regulation. Although the Secretary has discretion

over whether to allow reopenings, the proper question is

whether Blue Cross, the fiscal intermediary, had a non-

discretionary duty to reopen pursuant to the Secretary’s

regulations and interpretations thereof. As noted above,

Blue Cross was not a party to this action. However, even

if Blue Cross had been joined as a party, its decision not

App. 15

to reopen was discretionary based on Good Samaritan

Hospital and would not have triggered mandamus juris-

diction. Therefore, the district court properly found that

it did not have mandamus jurisdiction, even though its

analysis was incorrect.

For the foregoing reasons, we AFFIRM the judgment

of the district court.

APPENDIX B

DISTRICT COURT DECISION

App. 16

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF

TENNESSEE AT KNOXVILLE

YOUR HOME VISITING

NURSE SERVICES, INC.,

Plaintiff, No. 3:95-cv-276

“ (Filed Mar. 22, 1996)

SECRETARY OF HEALTH

AND HUMAN SERVICES,

Defendant.

me eee ee ee ee ee ee”

ORDER

For the reasons stated in the Memorandum Opinion

filed contemporaneously with this Order, it is hereby

ORDERED that the defendant’s motion to dismiss or, in

the alternative, for summary judgment [doc. 5] is

GRANTED, and all claims against the defendant are DIS-

MISSED.

ENTER:

/s/ Leon Jordan

Leon Jordan

United States District Judge

App. 17

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF TENNESSEE

AT KNOXVILLE

YOUR HOME VISITING NURSE)

SERVICES, INC., )

Plaintiff, )

) No. 3:95-cv-276

Vv. )

)

)

)

)

(Filed

March 22, 1996)

SECRETARY OF HEALTH

AND HUMAN SERVICES,

Defendant.

MEMORANDUM OPINION

This civil matter is before the court on the defen-

dant’s motion to dismiss or in the alternative for sum-

mary judgment [docs. 5 and 6]. The plaintiff has

responded [doc. 7], and the defendant has replied [doc.

9]. Oral argument was heard on the defendant’s motion

and thus, the motion is ripe for the court’s consideration.

For the reasons stated below, the court finds the defen-

dant’s motion well-taken, and the complaint must be

dismissed.

The issue in this case arising under the Medicare

statute is whether the refusal of a fiscal intermediary to

reopen a Medicare service provider’s cost report is

administratively or judicially reviewable. The Sixth Cir-

cuit Court of Appeals has not addressed this issue, and

there is a split of opinion among the other circuit courts

of appeal.

The plaintiff in this case is a service provider under

the Medicare program. The complaint seeks a review of

App. 18

the determination by the Provider Reimbursement

Review Board (PRRB) that it had no jurisdiction to recon-

sider the decision of the fiscal intermediary, Blue Cross

and Blue Shield of South Carolina (BCBS/SC), to not

reopen the plaintiff’s 1989 cost report. The plaintiff asks

this court to reverse the PRRB’s decision that it had no

jurisdiction and either remand the case back to the PRRB

so it can review BCBS/SC’s decision not to reopen the

cost report or to make a finding that BCBS/SC erred in

not reopening the cost report. In its response to the

defendant’s motion, the plaintiff has withdrawn its

request that the court determine the amount of compen-

sation due the plaintiff and concedes that this is a deci-

sion for BCBS/SC to make.

I. BACKGROUND

A. Relevant Statutes and Regulations

The Medicare program was established by Congress

to provide a system of health insurance for the aged and

disabled. 42 U.S.C. § 1395 et seq. The program is divided

into two parts: Part A which provides insurance for inpa-

tient institutional services, home health services and

post-hospital services, 42 U.S.C. §§ 1395¢ and 1395d; and

Part B which covers physician, outpatient hospital, and

other health services, 42 U.S.C. §§ 1395j, 1395/1 and 1395x.

Home health care agencies (providers), such as the plain-

tiff in this case, participate in the Medicare program by

entering into provider agreements with the Secretary. 42

U.S.C. § 1395h. Under these agreements, the provider

agrees to provide Medicare beneficiaries with services

App. 19

and seek reimbursement from private insurance com-

panies (fiscal intermediaries) who act as agents of the

Secretary.

At the end of a provider’s fiscal year, the provider is

required to file a cost report with the fiscal intermediary.

42 C.F.R. § 413.20(b). The fiscal intermediary analyzes the

cost report and furnishes the provider with a notice of

program reimbursement (NPR) which sets out the reim-

bursement due the provider and lists the expenses

allowed and disallowed. 42 C.F.R. § 405.1803.

The NPR also advises the provider of its appeal

rights. Id. li the provider is dissatisfied with the NPR and

the amount in controversy is $10,000 or more, it may

request a hearing before the PRRB within 180 days of the

issuance of the NPR. 42 U.S.C. § 139500. The PRRB may

affirm, modify or reverse the decision of the fiscal inter-

mediary. Id. The Secretary may then review the PRRB

decision within sixty days. If the provider is still dissat-

isfied, then the provider may seek judicial review in the

United States district court within sixty days of the final

decision. Id.

If the provider does not appeal the final cost report

determination within 180 days, the cost report is closed

and the amount of reimbursement is not subject to fur-

ther review. However, the Medicare regulations permit

one exception to this timetable; that is, the Secretary or

the provider may seek to have the fiscal intermediary

reopen the cost report within three years of the fiscal

intermediary’s decision. (The three-year limitation may

be waived if the decision “was procured by fraud or

App. 20

similar fault of any party.”) 42 C.F.R. § 405.1885. Reopen-

ings require a showing that there is new and material

evidence to be submitted, that clear or obvious error was

made, or the original decision was inconsistent with the

law. Provider Reimbursement Manual (PRM) (HIM-15)

§ 2931.2. Neither the Medicare regulations nor the PRM

provide a mechanism for appealing a denial of a reopen-

ing request, and it is this lack of authorization for an

appeal which creates the issue in this case.

B. Procedural History

On March 29, 1991, BCBS/SC issued four NPR’s to

the plaintiff’s four agencies for the fiscal year 1989. Each

NPR informed the plaintiff that it had 180 days to appeal

the determination of BCBS/SC. The plaintiff did not file

administrative appeals with PRRB within 180 days. Dur-

ing the course of appealing later NPR’s, the plaintiff

discovered that BCBS/SC had set a base rate for the

plaintiff's owner compensation by comparing plaintiff's

owner compensation rate to individual agencies rather

than chain operations such as plaintiff’s. The plaintiff

alleges that this resulted in a base salary rate which was

much lower than its owners were entitled.

Upon discovery of this information, the plaintiff

sought to have BCBS/SC reopen the cost reports for fiscal

year 1989, claiming that it had new and material evidence

to submit for the intermediary’s consideration. BCBS/SC

declined to reopen the cost reports and the plaintiff

attempted to appeal this decision with the PRRB. The

PRRB determined that it did not have jurisdiction over a

decision not to reopen a cost report because a decision

App. 21

not to reopen a cost report is not a “final determination”

within the meaning of the statute and regulations. The

plaintiff then filed this action asking this court to review.

the PRRB’s decision.

Il. DISCUSSION

A. Standard of Review

Pursuant to 42 U.S.C. § 139500(f)(1), a decision by the

PRRB is subject to review in accordance with the Admin-

istrative Procedures Act (Chapter 7 of Title 5, United

States Code). A court may set aside a final agency action

only if it is “arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with the law.” 5 U.S.C.

§ 706(2)(A); see also, Thomas Jefferson Univ. v. Shalala, __

U.S. ___, 114 S.Ct. 2381, 2386, 129 L.Ed.2d 405 (1994). This

standard of review is considered to be “highly deferen-

tial.” See Binghamton Gen. Hosp. v. Shalala, 856 F. Supp.

786, 792 (S.D.N.Y. 1994). A court should give substantial

deference to an agency’s construction of a statutory

scheme it is entrusted to administer. See Chevron U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,

844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984); Bingham-

ton, 856 F. Supp. at 792.

Where Congress has expressly authorized an agency

to promulgate regulations, as it has with the Medicare

scheme, “[sJuch legislative regulations are given control-

ling weight unless they are arbitrary, capricious, or mani-

festly contrary to the statute.” Chevron, 467 U.S. at 844,

104 S.Ct. at 2782. Further, an agency’s interpretation of its

regulations is entitled to great deference unless the inter-

pretation is plainly erroneous or inconsistent with the

App. 22

underlying regulation or statute. See Thomas Jefferson

Univ., 114 S.Ct. at 2386. This is especially true when the

regulations concern “a complex and highly technical reg-

ulatory program” such as the Medicare program. Id. at

2387 (quoting Gardebring v. Jenkins, 485 U.S. 415, 430

(1988)).

In its motion to dismiss or for summary judgment,

the defendant argues that, under Sixth Circuit law, this

court’s review is limited to whether the PRRB erred in

determining that it lacked jurisdiction. Saline Community

Hosp. v. Secretary of Health and Human Services, 744 F.2d

517 (6th Cir. 1984). In Saline, the plaintiffs attempted to

amend their cost reports to include an additional amount

for reimbursement after the deadline for filing their cost

reports. Id. at 518. The fiscal intermediaries rejected the

proposed amendments because the amendments did not

“revise” the cost report information previously submit-

ted.! The PRRB declined to hear the plaintiffs’ appeals

because it determined that its jurisdiction was limited to

a review of the fiscal intermediary’s determination on the

cost reports and matters covered therein. Id. at 519. Since

the cost reports did not have the proposed amendments,

the PRRB declined jurisdiction. Id. The Sixth Circuit

stated that the PRRB “properly refused the requests for

hearings.” Id. The court found that the PRRB’s finding of

no jurisdiction was a final decision subject to judicial

review, but judicial review was limited to that issue

! The regulation provides: “Amended cost reports to revise

cost report information which has been previously submitted

may be permitted or required as determined by the Health Care

Financing Administration.” 42 C.F.R. § 405.435(f).

App. 23

alone. “The district court could not rule on the merits of

the claim over which the Board declared it lacked juris-

diction, only on whether the Board's jurisdictional deci-

sion was correct.” Id. at 520 (emphasis in original).

In its response, the plaintiff appears to agree that this

is the correct “scope of review” for this court, and avers

that it “does not ask this Court to rule upon the merits of

the claim. If this court finds the Board was incorrect in

the decision that it lacked jurisdiction, the case should be

remanded back to the Board.” See doc. 7, at p. 5. How-

ever, the plaintiff then states:

In the alternative, the plaintiff asked this Court

to make its own finding that the intermediary

abused its discretion in refusing to re-open the

1989 cost report and to order the intermediary

to re-open the cost report to review the new and

material evidence concerning the previous inter-

mediary’s use of a salary survey for owners’

compensation which was not comparable to the

owners of the plaintiff's chain operation. .

Doc. 7, at pp. 5-6. The plaintiff argues that this request is

not for a ruling on the merits.

The court disagrees. Any finding that this court

might make concerning whether the intermediary abused

its discretion in failing to reopen the 1989 cost report

would be, in fact, a ruling on the merits of the claim since

this court would have to decide whether the plaintiff's

evidence was new and material. The PRRB determined

that it did not have jurisdiction over BCBS/SC’s decision

not to reopen, and under Saline, this court's review is

limited to a review of the PRRB’s determination. See also

Binghamton, 856 F. Supp. at 793.

App. 24

B. Review of the PRRB’s Decision

In her motion to dismiss or for summary judgment,

the Secretary argues that the PRRB’s decision that it did

not have jurisdiction was correct. The Secretary submits

that her agency’s regulations and the Provider Reimbur-

sement Manual support this view.

Section 139500(a) of Title 42, United States Code,

provides, in relevant part:

Any provider of services which has filed a

required cost report within the time specified in

regulations may obtain a hearing with respect to

such cost report by a Provider Reimbursement

Review Board . . . if -

(1) such provider -

(a)(i) is dissatisfied with a final determination

of the organization serving as its fiscal inter-

mediary .. .

(2) the amount in controversy is $10,000 or

more, and

(3) such provider filed a request for a hearing

within 180 days after notice of the intermedi-

ary’s final determination. . . .

Thus, the question for this court is whether a deci-

sion by the fiscal intermediary not to reopen is a final

determination since the PRRB only has jurisdiction over

final determinations. It must be noted again that the

statute does not address reopening procedures; the

reopening procedures are found only in the implement-

ing regulations. The regulations state that a provider

affected by a determination of the intermediary, the

App. 25

PRRB, or the Secretary may move to reopen the deter-

mination or decision to revise any matter in issue. 42

C.F.R. § 405.1885(a). The regulations provide that when

an intermediary decision is reopened and revised, the revi-

sion will be considered to be an appealable final deter-

mination. But, subpart (c) provides: “Jurisdiction for

reopening a determination or decision rests exclusively

with that administrative body that rendered the last

determination or decision.” 42 U.S.C. § 405.1885(c).

The Secretary has expressed her interpretation of this

portion of the regulations in the Provider Reimbursement

Manual. Appendix A to the PRM states at paragraph 4:

Refusal to Reopen. - A refusal by the intermedi-

ary to grant a reopening requested by the pro-

vider is not appealable to the Board, pursuant to

42 CFR § 405.1885(c), except for providers which

are located within the jurisdiction of the U.S.

Ninth Circuit Court of Appeals, where such

refusal to reopen is appealable.... ”

As pointed out by the defendant, the Supreme Court

recently has indicated that manual provisions are an

appropriate means for the Secretary to express her inter-

pretation of the regulations. See Shalala v. Guernsey Memo-

rial Hospital, __ U.S. ___, 115 S.Ct. 1232, 131 L.Ed.2d 106

(1995).

The plaintiff argues that the regulation cited above is

a substantive rule which was not promulgated in accor-

dance with the notice and comment period required by

the APA and, therefore, should not be enforced. In her

reply brief, the defendant submits that “[i]t is hard to

imagine a better example of an interpretive rule than

§ 2932.1 which simply rephrases a regulation, 42 C.F.R.

App. 26

§ 405.1885(c). The court agrees. The manual rules are

clearly interpretive of the regulations and given to pro-

viders to help them comply with the Secretary’s regula-

tions.

The Sixth Circuit has not addressed whether the

intermediary’s decision not to reopen a cost report is a

final determination subject to appeal to the PRRB, and

there is a difference of opinion among the other circuits.

For example, the Circuit Court of Appeals for the District

of Columbia has held that 42 C.F.R. § 405.1885(c) makes-

denials of reopenings unappealable. See, e.g., St. Mary of

Nazareth Hosp. Ctr. v. Schweiker, 741 F.2d 1447, 1449 (D.C.

Cir. 1984). The District Court for the Southern District of

New York has come to this same conclusion. See Good

Samaritan Hosp. Regional Medical Ctr. v. Shalala, 894 F.

Supp. 683, 695 (S.D.N.Y. 1995); Binghamton, 856 F. Supp. at

799. To the contrary, the Ninth Circuit Court of Appeals

has found that the PRRB could review a refusal by the

intermediary to reopen a cost report.? See State of Oregon

v. Bowen, 854 F.2d 346, 349-40 (9th Cir. 1988).

Obviously, the plaintiff urges this court to follow the

Ninth Circuit. However, this court finds that the Secre-

tary’s determination as reflected in the Medicare regula-

tions and Provider Reimbursement Manual that denials

of reopening requests are unreviewable is a reasonable

interpretation of the Medicare statute.

The court finds the District Court’s opinion in Bingh-

amton very beneficial. In Binghamton, the issue before the

2 This result is reflected in the language of the PRM quoted

above.

App. 27

District Court for the Southern District of New York was

nearly identical to the issue here: whether the PRRB had

jurisdiction to review a decision by the fiscal intermedi-

ary not to reopen cost reports and allow evidence of

reimbursement for malpractice insurance. The court

undertook a careful review of the statutes, regulations

and the manual provisions and determined that the PRRB

was correct in its determination that it did not have

jurisdiction to review reopening decisions. Binghamton,

856 F. Supp. at 799.

The court first determined that a decision not to

reopen is not a final determination within the meaning of

the statute (42 U.S.C. § 139500). Id. at 795. The court

recognized that the statute is ambiguous but decided that

the most reasonable interpretation is that denials of

reopening are not appealable final determinations. The

court reasoned that an intermediary’s decision not to

reopen a cost report is “basically a decision not to disturb

its previous decision. As such, it is akin to the decision of

a judicial panel or en banc court to deny rehearing, and

‘no one supposes that that denial, as opposed to the panel

opinion, is an appealable action.’ ” Id. at 794 (quoting ICC

v. Brotherhood of Locomotive Engineers, 482 U.S. 270, 280,

107 S.Ct. 2360, 2366, 96 L.Ed.2d 222 (1987)).

Since the Binghamton court determined that the stat-

ute was ambiguous, the court looked next to the Secre-

tary’s reopening regulations. Binghamton, 856 F. Supp. at

796. The court discussed 42 C.F.R. § 405.1885(c) (quoted

above) and stated:

To the extent that there is any ambiguity in

§ 405.1885(c)’s assertion that jurisdiction for

App. 28

reopening “rests exclusively” with the reopen-

ing agency, this is put to rest in the manual,

which expressly precludes review of intermedi-

aries’ decisions denying reopening. . . . The

Secretary's interpretation of the regulations as

set forth in the PRM is entitled to deference.

Id. at 797.

Finally, the court looked at the Ninth Circuit case

which has come to the opposite conclusion and found

that the decision was flawed in several respects. First, the

court noted that the Ninth Circuit failed to consider the

policies and procedures set by the Secretary in the PRM.

Id. Second, the court noted that the Ninth Circuit failed to

read § 405.1885(c) in context with the other reopening

regulations, specifically, there is no regulation authoriz-

ing review of reopening denials comparable to § 405.1889

which provides for review of revised cost reports after

reopening. Id. at 798. The court stated that this demon-

strates a decision by the Secretary to make reopening

denials unreviewable. Id. Finally, the Binghamton court

found the Ninth Circuit's policy reasons unpersuasive.

The Ninth Circuit found that there must be judicial

review of reopening denials under the general presump-

tion that agency action should be reviewable. See State of

Oregon, 854 F.2d at 350. However, the Binghamton court

recognized that the Supreme Court rejected a challenge to

a reopening denial in the context of the Social Security

program. See Califano v. Sanders, 430 U.S. 99, 104, 97 S.Ct.

980, 984, 51 L.Ed.2d 192 (1977).

In Sanders, the Supreme Court was called upon to

decide if judicial review was available after the Secretary

(of Health, Education and Welfare) declined to reopen a

App. 29

claim for benefits under the Social Security Act.> Like the

statutory and regulatory scheme for Medicare, only the

Social Security regulations provided for a reopening

mechanism. The Court recognized that “judicial review

should be widely available to challenge the actions of

federal administrative officials.” Sanders, 430 U.S. at 104,

97 S.Ct. at 984. However, the Court went on to hold that

section 405(g) of Title 42, United States Code, clearly

limited judicial review to “final dec‘sions.” Id. 430 U.S. at

108, 97 S.Ct. at 986. The Court stated: “[A]n interpretation

that would allow a claimant judicial review simply by

filing - and being denied - a petition to reopen his claim

would frustrate the congressional purpose, plainly evi-

denced in [§ 405(g)], to impose a 60-day limitation upon

judicial review of the Secretary’s final decision on the

initial claim for benefits.” Id.

The Binghamton court concluded by holding that the

“Secretary’s determination, in the Medicare regulations

and the Provider Reimbursement Manual, that denials of

reopening requests are unreviewable is a reasonable

interpretation of the Medicare statute.” Binghamton, 856 F.

Supp. at 799. This court agrees and finds that the PRRB’s

decision that it lacked jurisdiction was correct. The defen-

dant’s motion to dismiss or for summary judgment on

this issue must be granted.

3 See Rhode Island Hosp. v. Califano, 585 F.2d 1153 (1st Cir.

1978) (finding that 42 U.S.C. 405(g) is the “functional

equivalent” of section 139500).

App. 30

C. Plaintiff’s Alternate Bases for Jurisdiction

The plaintiff also claims that this court has federal

question and mandamus jurisdiction. The defendant

argues that federal question jurisdiction has been stat-

utorily rejected and mandamus relief is not available

because the plaintiff cannot demonstrate that it exhausted

all avenues of relief or that the Secretary owes it a non-

discretionary duty.

First, on the issue of federal question jurisdiction (28

U.S.C. § 1331), the applicable statute is 42 U.S.C. § 1395ii.

That statute specifically incorporates § 405(h) of Title 42

into the Medicare program statutes. Section 405(h) pro-

vides:

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 govern-

mental 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,

United States Code, to recover on any claim

arising under this subchapter.

The defendant argues that since the plaintiff’s claim is

brought under the Medicare Act, this statute precludes

federal question jurisdiction. See Heckler v. Ringer, 466

U.S. 602, 614, 104 S.Ct. 2013, 2021, 80 L.Ed.2d 622 (1984).

If, as the defendant argues, the plaintiff’s claim arises

under the Medicare Act, then the plaintiff's only avenue

to judicial review is found at 42 U.S.C. § 139500. The

defendant argues that since the plaintiff did not avail

App. 31

itself of the remedies available under § 139500, the plain-

tiff cannot rely on federal question jurisdiction.

The plaintiff attempts to distinguish its claim as one

for which federal question jurisdiction might lie. Relying

upon Bowen v. Michigan Academy of Family Physicians, 476

U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986), the plain-

tiff argues that since it is not seeking review of the

reimbursement claim itself, this court has federal ques-

tion jurisdiction over the reopening denial. However, in

Michigan Academy, the plaintiffs were challenging the val-

idity of a regulation. The Supreme Court stated that this

type of action was not a claim arising out of the Medicare

Act; in other words, the plaintiffs were not seeking to

have a claim adjudicated.

This is not the situation in the present case. Ulti-

mately, the plaintiff is seeking review of its claim for

increased owners’ compensation, although there were

some procedural hurdles along the way. As the Supreme

Court in Ringer noted, even though the plaintiff com-

plains about the Secretary’s procedures, that complaint is

“inextricably intertwi.ied” with the plaintiff’s claim for

increased owners’ compensation. Ringer, 466 U.S. at 614,

104 S.Ct. at 2021. “[T]o be true to the language of the

statute, 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.” Id. at 615,

104 S.Ct. at 2021.

The court finds that the plaintiff’s claim “arises

under” the Medicare Act, since it is, at bottom, a claim for

increased compensation. See Good Samaritan Hosp.

App. 32

Regional Medical Ctr. v. Shalala, 894 F. Supp. 683, 695

(S.D.N.Y. 1995) (considering a nearly identical issue and

finding that the claims arise under the Medicare statute).

The court finds that federal question jurisdiction is not

available to the plaintiff.

Next, in its complaint the plaintiff also suggests that

this court has mandamus jurisdiction (28 U.S.C. § 1361).

The defendant argues that this court does not have man-

damus jurisdiction either because the plaintiff has not

exhausted all avenues of relief (the plaintiff failed to

appeal the NPR within 180 days) and the plaintiff cannot

show that the defendant owes the plaintiff a clear, non-

discretionary duty (whether to reopen to reopen [sic] the

cost report to consider the plaintiffs’ “new and material”

evidence is matter within the discretion of the Secretary).

See Ringer, 466 U.S. at 616-17, 104 S.Ct. at 2022-23; Good

Samaritan, 894 F. Supp. at 695-96. The plaintiff has not

responded to this portion of the defendant’s argument.

The court finds the defendant’s argument that this

court does not have mandamus jurisdiction well-taken,

and the plaintiff’s jurisdictional claim on this basis must

be denied.

App. 33

Ill. CONCLUSION

For the reasons stated above, the defendant’s motion

to dismiss or for summary judgment is granted and the

plaintiff’s claims are dismissed.

ENTER:

/s/ Leon Jordan

Leon Jordan

United States District Judge

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APPENDIX B

PROVIDER REIMBURSEMENT REVIEW BOARD

DISMISSAL OF CASE

App. 34

DEPARTMENT OF HEALTH AND HUMAN SERVICES

PROVIDER REIMBURSEMENT REVIEW BOARD

6660 Security Boulevard

Baltimore, Maryland 21207

Jan. 10, 1995

REFER TO 95-0006G Location Professional Bldg

CERTIFIED MAIL Room 104

Diana L. Gustin, Esq.

London & Amburn

1716 Clinch Avenue

Knoxville, TN 37916

Dear Ms. Gustin:

RE: Your Home Visiting Nurse Services, Inc., Denial of

the Reopening Group Appeal, Provider Nos. 44-

H003, 44-7100, 44-7234, 44-7304, FYE 12/31/89,

PRRB Case No. 95-0006G

The Provider Reimbursement Review Board (Board) has

reviewed the documentation submitted in the above cap-

tioned case. The decision of the Board is set forth below.

Pursuant to 42 U.S.C. § 139500(a) and 42 C.F.R.

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

before the Board with respect to costs claimed on a timely

filed cost report if it is dissatisfied with the final deter-

mination of the Intermediary, the threshold amount of

$50,000 required for Board jurisdiction over a group

appeal has been met, and the request for hearing is filed

within 180 days of the date of the final determination.

In this case, the Provider filed an appeal within 180 days

from the date of the refusal of the Intermediary to reopen

the cost report; but more than 180 days after the Notice of

App. 35

Program Reimbursement (NPR) had been issued. The

Board finds that it does not have jurisdiction over the

Intermediary’s refusal to reopen the cost report. The

Board holds that 42 C.F.R. § 405.1885(c) governs the

review of a denial to reopen a cost report. Section

405.1885(c) states that jurisdiction for reopening a deter-

mination rests exclusively with the administrative body

that rendered the last determination. Since the Intermedi-

ary was the administrative body that rendered the last

determination, it is the Intermediary’s decision whether

or not to reopen the cost report.

Consequently, the Board finds that it does not have juris-

diction over this appeal and hereby dismisses this case.

This determination is subject to the provisions of 42

U.S.C. § 1395(f) and 42 C.F.R. § 405.1875 and .1877.

FOR THE BOARD:

/s/ Charles E. Tyler

Charles E. Tyler

Board Member

Enclosures: 42 U.S.C. § 1395(f), 42 C.F.R. §§ 405.1875 and

1877

cc: Bessie T. Wheeler, BC/BS of South Carolina

Wilson Leong, BCBSA

APPENDIX B

INTERMEDIARY REFUSAL TO REOPEN

App. 36

Medicare

Audit and Reimbursement

Post Office Box 100190

Columbia, South Carolina 29202

~ April 21, 1994

Ms. Diana L. Gustin

London & Amburn, P.C.

1716 Clinch Avenue

Knoxville, Tennessee 37916

Re: Your Home Visiting Nurse Service, Inc.

Provider No: 4407100, 44-7300, 44-7234, 44-7304

FYE: December 31, 1989

Dear Ms. Gustin:

I am writing in response to your letter of March 28, 1994,

which was addressed to Bruce Hughes. In this letter, you

requested a reopening of the 1989 cost reports of Your

Home Visiting Nurse Service, Inc., to increase the amount

of owners’ compensation. The compensation contained

on the settled cost reports is the amount that was initially

claimed when the cost reports were filed.

A request for reopening can be granted for several rea-

sons. These reasons, as stated in Section 2931.2 of HCFA

Publication 15-1, are:

new and material evidence has been submitted,

or a clear and obvious error was made, or the

determination is found to be inconsistent with

the law, regulations and rulings, or general

Your request for reopening is denied. The manner in

which the home office cost statement was filed was not

App. 37

inconsistent with the law, regulations and rulings or gen-

eral instructions. A clear and obvious error was not made

when these cost reports were filed. And, new and mate-

rial evidence has not been presented to establish that the

compensation claimed was inappropriate.

If you have any questions, you may contact me at (803)

788-0222, extension 1252.

Sincerely,

/s/ Jim Peebles

Jim Peebles

Audit Manager

Medicare Audit and Reimbursement

cc: Bruce Hughes, Medicare Administration

Sharon Roberts, Medicare Audit and Reimbursement

Bessie Wheeler, Medicare Audit and Reimbursement

Pat Anderson, Medicare Audit and Reimbursement

APPENDIX C

COURT OF APPEALS JUDGMENT

ISSUED AS MANDATE

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App. 38

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No: 96-5525

YOUR HOME VISITING NURSE SERVICES, INC.,

Plaintiff-Appellant,

V.

SECRETARY OF HEALTH AND HUMAN SERVICES,

Defendant-Appellee.

Before: Lively, Merritt, and Suhrheinrich, Circuit Judges.

JUDGMENT

(Filed Dec. 22, 1997)

ON APPEAL from the United States District Court

for the Eastern District of Tennessee at Knoxville.

THIS CAUSE was heard on the record from the dis-

trict court and was argued by counsel.

IN CONSIDERATION WHEREOF, it is ORDERED

that the judgment of the district court is AFFIRMED.

ENTERED BY ORDER OF THE COURT

/s/ Leonard Green

Leonard Green, Clerk

App. 39

Issued as Mandate: February 20, 1998 A True Copy.

COSTS: NONE Attest:

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SO vows vanegaded S Deputy Clerk

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APPENDIX D

STATUTES, CONSTITUTIONAL

PROVISIONS, AND REGULATIONS

App. 40

I. STATUTORY PROVISIONS

5 U.S.C. § 504 (West 1996) —- Equal Access to Justice Act:

Costs and Fees of Parties

(a)(1) An agency that conducts an adversary adjudica-

tion shall award, to a prevailing party other than the

United States, fees and other expenses incurred by that

party in connection with that proceeding, unless the adju-

dicative officer of the agency finds that the position of the

agency was substantially justified or that special circum-

stances make an award unjust. Whether or not the posi-

tion of the agency was substantially justified shall be

determined on the basis of the administrative record, as a

whole, which is made in the adversary adjudication for

which fees and other expenses are sought

5 U.S.C. § 706 (West 1996) — Administrative Procedure

Act: Scope of Review

To the extent necessary to decision and when pre-

sented, the reviewing court shall decide all relevant ques-

tions of law, interpret constitutional and statutory

provisions, and determine the meaning or applicability of

the terms of an agency action. The reviewing court shall -

1) compel agency action unlawfully withheld

or unreasonably delayed; and

2) hold unlawful and set aside agency action,

findings, and conclusions found to be -

A) arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance

with law;

B) contrary to constitutional right, power,

privilege, or immunity;

App. 41

C) in excess of statutory jurisdiction,

authority, or limitations, or short of

statutory right;

D) without observance of procedure

required by law;

E) unsupported by substantial evidence in

a case subject to sections 556 and 557 of

this title or otherwise reviewed on the

record of an agency hearing provided

by statute; or

F) unwarranted by the facts to the extent

that the facts are subject to trial de novo

by the reviewing court.

In making the foregoing determinations, the court shall

review the whole record or those parts of it cited by a

party, and due account shall be taken of the rule of

prejudicial error.

28 U.S.C. § 1254 (West 1993) Courts of appeals; cer-

tiorari; certified questions

Cases in the courts of appeals may be reviewed by the

Supreme Court by the following methods:

(1) By writ of certiorari granted upon the petition of

any party to any civil or criminal case, before or after

rendition of judgment or decree;

(2) By certification at any time by a court of appeals

of any question of law in any civil or criminal case as to

which instructions are desired, and upon such certifica-

tion the Supreme Court may give binding instructions or

require the entire record to be sent up for decision of the

entire matter in controversy.

App. 42

28 U.S.C. § 1331 (West 1996) — Federal Question Jurisdic-

tion

The district courts shall have original jurisdiction of all

civil actions arising under the Constitution, laws, or

treaties of the United States.

28 U.S.C. § 1361 (West 199%) - Mandamus

The district courts shall have original jurisdiction of any

action in the nature of mandamus to compel an officer or

employee of the United States or any agency thereof to

perform a duty owed to the plaintiff.

28 U.S.C. § 2412 (West 1996) - Equal Access to Justice

Act

(b) Unless expressly prohibited by statute, a court may

award reasonable fees and expenses of attorneys, in addi-

tion to the costs which may be awarded pursuant to

subsection (a), to the prevailing party in any civil action

brought by or against the United States or any agency or

any official of the United States acting in his or her

official capacity in any court having jurisdiction of such

action. The United States shall be liable for such fees and

expenses to the same extent that any other party would

be liable under the common law or under the terms of

any statute which specifically provides for such an

award.

App. 43

42 U.S.C. § 405(h) (West Supp. 1997) - Commissioner’s

Decision Binding

(h) The findings and decisions of the Commissioner of

Social Security after a hearing shall be binding upon all

individuals who were parties to such a hearing. No find-

ings of fact or decision of the Commissioner of Social

Security shall be reviewed by any person, tribunal, or

governmental agency except as herein provided. No

action against the United States, the Commissioner of

Social Security or any officer or employee thereof shall be

brought under section 1331 or 1346 of title 28, United

States Code, to recover on any claim arising under this

title.

42 U.S.C. § 1395x(v)(1)(A) (West Supp. 1997) —- Reason-

able Cost

(v)(1)(A) The reasonable cost of any services shall be the

costs actually incurred, excluding therefrom any part of

incurred cost found to be unnecessary in the efficient

delivery cf needed health services, and shall be deter-

mined in accordance with regulations establishing the

method or methods to be used, and the items to be

included, in determining such costs for various types or

classes of institutions, agencies, and services; except that

in any case to which paragraph (2) or (3) applies, the

amount of the payment determined under such para-

graph with respect to the services involved shall be con-

sidered the reasonable cost of such services. In

prescribing the regulations referred to in the preceding

sentence, the Secretary shall consider, among other

things, the principles generally applied by national orga-

nizations or established prepayment organizations

App. 44

(which have developed such principles) in computing the

amount of payment, to be made by persons other than

recipients of services, to providers of services on account

of services furnished to such recipients by such pro-

viders. Such regulations may provide for determination

of the costs of services on a per diem, per unit, per capita,

or other basis, may provide for using different methods

in different circumstances, may provide for the establish-

ment of limits on the direct or indirect overall incurred

costs or incurred costs of specific items or services or

groups of items or services to be recognized as reasonable

based on estimates of the costs necessary in the efficient

delivery of needed health services to individuals covered

by the insurance programs established under this title,

and may provide for the use of charges or a percentage of

charges where this method reasonably reflects the costs.

Such regulations shall (i) take into account both direct

and indirect costs of providers of services (excluding

therefrom any such costs, including standby costs, which

are determined in accordance with regulations to be

unnecessary in the efficient delivery of services covered

by the insurance programs established under this title) in

order that, under the methods of determining costs, the

necessary costs of efficiently delivering covered services

to individuals covered by the insurance programs estab-

lished by this title will not be borne by such insurance

programs, and (ii) provide for the making of suitable

retroactive corrective adjustments where, for a provider

of services for any fiscal period, the aggregate reimburse-

ment produced by the methods of determining costs

proves to be either inadequate or excessive.

App. 45

42 U.S.C. § 139500 (West Supp. 1996) - Provider Reim-

bursement Review Board: Jurisdiction

a) Any provider of services which has filed a required

cost report within the time specified in regulations may

obtain a hearing with respect to such cost report by a

Provider Reimbursement Review Board (hereinafter

referred to as the “Board”) which shall be established by

the Secretary in accordance with subsection (h) and

(except as provided in subsection (g)(2)) any hospital

which receives payments in amounts computed under

subsection (b) or (d) of section 1886 and which has sub-

mitted such reports within such time as the Secretary

may require in order to make payment under such sub-

section may obtain a hearing with respect to such pay-

ment by the Board, if -

(1) such provider -

(A)(i) is dissatisfied with a final deter-

mination of the organization serving as its fiscal

intermediary pursuant to section 1816 as to the

amount of total program reimbursement due the

provider for the items and services furnished to

individuals for which payment may be made

under this title for the period covered by such

report, or

(ii) is dissatisfied with a final determina-

tion of the Secretary as to the arnount of the

payment under subsection (b) or (d) or section

1886,

(B) has not received such final determina-

tion from such intermediary of a timely basis

after filing such report where such report com-

plied with the rules and regulations of the Secre-

tary relating to such report, or

App. 46

(C) has not received such final determina-

tion on a timely basis after filing a supplemen-

tary cost report, where such cost report did not

so comply and such supplementary cost report

did so comply,

(2) the amount in controversy is $10,000 or

more, and

(3) such provider files a request for a hearing

within 180 days after notice of the inter-

mediary’s final determination under para-

graph (1)(A)(i), 180 days after notice of the

Secretary's final determination, or with

respect tu appeals pursuant to paragraph

(1)(B) or (C), within 180 days after notice of

such determination would have been

received if such determination had been

made on a timely basis.

b) The provisions of subsection (a) shall apply to any

group of providers of services if each provider of services

in such group would, upon the filing of an appeal (but

without regard to the $10,000 limitation), be entitled to

such a hearing, but only if the matters in controversy

involve a common question of fact or interpretation of

law or regulations and the amount in controversy is, in

the aggregate, $50,000 or more.

c) At such hearing, the provider of services shall have

the right to be represented by counsel, to introduce evi-

dence, and to examine and cross-examine witnesses. Evi-

dence may be received at any such hearing even though

inadmissible under rules of evidence applicable to court

procedure.

d) A decision by the Board shall be based upon the

record made at such hearing, which shall include the

App. 47

evidence considered by the intermediary and such other

evidence as may be obtained or received by the Board,

and shall be supported by substantial evidence when the

record is viewed as a whole. The Board shall have the

power to affirm, modify, or reverse a final determination

of the fiscal intermediary with respect to a cost report and

to make any other revisions on matters covered by such

cost report (including revisions adverse to the provider of

services) even though such matters were not considered

by the intermediary in making such final determination.

e) The Board shall have full power and authority to

make rules and establish procedures, not inconsistent

with the provisions of this title or regulations of the

Secretary, which are necessary or appropriate to carry out

the provisions of this section. In the course of any hearing

the Board may administer oaths and affirmations. The

provision of subsections (d) and (e) of section 205 with

respect to subpoenas shall apply to the Board to the same

extent as they apply to the Secretary with respect to title

Il.

f) (1) A decision of the Board shall be final unless the

Secretary, on his own motion, and within 60 days after

the provider of services is notified of the Board’s deci-

sion, reverses, affirms, or modifies the Board’s decision.

Providers shall have the right to obtain judicial review of

any final decision of the Board, or of any reversal, affir-

mance, or modification by the Secretary, by a civil action

commenced within 60 days of the date on which notice of

any final decision by the Board or of any reversal, affir-

mance, or modification by the Secretary is received. Pro-

viders shall also have the right to obtain judicial review

of any action of the fiscal intermediary which involves a

App. 48

question of law or regulations relevant to the matters in

controversy whenever the Board determines (on its own

motion or at the request of a provider of services as

described in the following sentence) that is without

authority to decide the question, by a civil action com-

menced within sixty days of the date on which notifica-

tion of such determination is received. If a provider of

services may obtain a hearing under subsection (a) and

has filed a request for such a hearing, such provider may

file a request for a determination by the Board of its

authority to decide the question of law or regulations

relevant to the matters in controversy (accompanied by

such documents and materials as the Board shall require

for purposes of rendering such determination). The Board

shall render such determinations in writing within thirty

days after the Board receives the request and such accom-

panying documents and materials, and the determination

shall be considered a final decision and not subject to

review by the Secretary. If the Board fails to render such

determination within such period, the provider may

bring a civil action (within sixty days of the end of such

period) with respect to the matter in controversy con-

tained in such request for a hearing. Such action shall be

brought in the district court of the United States for the

judicial district in which the provider is located (or, in an

action brought jointly by several providers, the judicial

district in which the greatest number of such providers

are located) or in the District Court for the District of

Columbia and shall be tried pursuant to other provisions

in section 205. Any appeal to the Board or action for

judicial review by providers which are under common

ownership or control or which have obtained a hearing

App. 49

under subsection (b) must be brought by such providers

as a group with respect to any matter involving an issue

common to such providers.

2) Where a provider seeks judicial review pursuant to

paragraph (1), the amount in controversy shall be subject

to annual interest beginning on the first day of the first

month beginning after the 180-day period as determined

pursuant to subsection (a)(3) and equal to the rate of

interest on obligations issued for purchase by the Federal

Hospital Insurance Trust Fund for the month in which the

civil action authorized under paragraph (1) is com-

menced, to be awarded by the reviewing court in favor of

the prevailing party.

3) No interest awarded pursuant to paragraph (2) shall

be deemed income or cost for the purposes of determin-

ing reimbursement due providers under this Act.

g)(1) The finding of a fiscal intermediary that no pay-

ment may be made under this title for any expenses

incurred for items and services furnished to an individual

because such items or services are listed in section 1862

shall not be reviewed by the Board, or by any court

pursuant to an action brought under subsection (f).

(2) The determinations and other decisions described in

section 1886(d)(7) shall not be reviewed by the Board or

by any court pursuant to an action brought under subsec-

tion (f) or otherwise.

h) The Board shall be composed of five members

appointed by the Secretary without regard to the provi-

sions of title 5, United States Code, governing appoint-

ments in the competitive services. Two of such members

App. 50

shall be representative of providers of services. All of the

members of the Board shall be persons knowledgeable in

the field of payment of providers of services, and at least

one of them shall be a certified public accountant. Mem-

bers of the Board shall be entitled to receive compensa-

tion at rates fixed by the Secretary, but not exceeding the

rate specified (at the time the service involved is ren-

dered by such members) for grade GS-18 in section 5332

of title 5, United States Code. The term of office shall be

three years, except that the Secretary shall appoint the

initial members of the Board for shorter terms to the

extent necessary to permit staggered terms of office.

i) The Board is authorized to engage in such technical

assistance as may be required to carry out its functions,

and the Secretary shall, in addition, make available to the

Board such secretarial, clerical, and other assistance as

the Board may require to carry out its functions.

j) In this section, the term “provider of services”

includes a rural health clinic and a Federally qualified

health center.

Il. CONSTITUTIONAL PROVISIONS

U.S. Const. amend. V.

No person shall be held to answer for a capital or other-

wise infamous crime, unless on a presentment or indict-

ment of a grand jury, except in cases arising in the land or

naval forces, or in the militia, when in actual service in

time of war or public danger; nor shall any person be

subject for the same offense to be twice put in jeopardy of

life or limb, nor shall be compelled in any criminal case to

App. 51

be a witness against himself, nor be deprived of life,

liberty, or property, without due process of law; nor shall

private property be taken for public use, without just

compensation.

Ill. REGULATIONS

42 C.F.R. § 405.1885 (1997) — Reopening a determination

or decision

a) A determination of an intermediary, a decision by a

hearing officer or panel of hearing officers, a decision by

the Board, or a decision of the Secretary may be reopened

with respect to findings on matters at issue in such deter-

mination or decision, or by such intermediary officer or

panel of hearing officers, Board, or Secretary, as the case

may be, either on motion of such intermediary officers or

panel of hearing officers, Board, Secretary, or on the

motion of the provider affectea by such determination or

decision to revise any matter in issue at any such pro-

ceedings. Any such request to reopen must be made

within 3 years of the date of the notice of the intermedi-

ary or Board hearing decision, or, where there has been

no such decision, any such request to reopen must be

made within 3 years of the date of notice of the inter-

mediary determination. No such determination or deci-

sion may be reopened after such 3-year period except as

provided in paragraphs (d) and (e) of this section.

b) A determination or a hearing decision rendered by

the intermediary shall be reopened and revised by the

intermediary if, within the aforementioned 3-year period,

the Health Care Financing Administration notifies the

intermediary that such determination or decision is

App. 52

inconsistent with the applicable law, regulations, or gen-

eral instructions issued by the Health Care Financing

Administration in accordance with the Secretary’s agree-

ment with the intermediary.

c) Jurisdiction for reopening a determination or decision

rests exclusively with that administrative body that ren-

dered the last determination or decision.

d) Notwithstanding the provisions of paragraph (a) of

this section, an intermediary determination or hearing

decision, a decision of the Board, or a decision of the

Secretary shall be reopened and revised at any time if it is

established that such determination or decision was pro-

cured by fraud or similar fault or any party to the deter-

mination or decision.

e) Paragraphs (a) and (b) of this section apply to deter-

minations on cost reporting periods ending on or after

December 31, 1971. (See § 405.1801(c)). However, the

3-year period described shall also apply to determina-

tions with respect to cost reporting periods ending prior

to December 31, 1971, but only if the reopening action

was undertaken after May 27, 1972 (the effective date of

the regulations which, prior to the publication of the

Subpart R, governed the reopening of such determina-

tions).

42 C.F.R. § 421.5(b) (1997) — Intermediaries and Carriers:

General Provisions

(b) Indemnification of intermediaries and carriers. Inter-

mediaries and carriers act on behalf of HCFA in carrying

out certain administrative responsibilities that the law

imposes. Accordingly, their agreements and contracts

App. 53

contain clauses providing for indemnification with

respect to actions taken on behalf of HCFA and HCFA is

the real party of interest in any litigation involving the

administration of the program.

APPENDIX E

MAP OF JURISDICTIONS

App. 54

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APPENDIX E

SETTLEMENT

App. 55

FILE COPY

Diana L. Gustin

ATTORNEY at Law

First Tennessee PLaza, Surre 2001

e 800 Soutn Gay Srreer

e Knoxvitte, Tennessee 37929

TeverpHone (423) 523-5545 e Te_ecorprmr (423) 523-4738

February 19, 1997

Ms. Patricia J. Elder, Case Manager

United States Court of Appeals

for the Sixth Circuit

100 East Fifth Street, Rm. 532

Potter Stewart U.S. Courthouse

Cincinnati, Ohio 45202-3988

RE: Your Home Visiting Nurse Service, Inc. v.

Sect. Health & Human Services and

Health Care Finance Administration

Case No. 96-5525

Dist. Court No. 95-CV-276

Dear Ms. Elder:

Enclosed please find a copy of an Administrative Resolu-

tion which covered several different years of Owners’

Compensation to the Plaintiff/Appellant on the above

captioned matter. The Administrative Resolution was

entered into on October 4, 1996. The Plaintiff/Appellant

filed its reply brief on June 11, 1996. I would like to

include the Administrative Resolution as a late filed

exhibit to the Plaintiff/Appellant’s reply brief. Please let

me know the procedure I should follow to accomplish

this filing.

App. 56

Please contact me to advise.

Sincerely,

/s/ Diana L. Gustin

Diana L. Gustin

DLG/bsl

Enclosure

cc: Ms. Betty Leake, YHVNS

Mr. Howard Lewis, DHHS

App. 57

BlueCross BlueShield

Association

An Association of

Independent Blue Cross

and Blue Shield Plans

676 North St. Clair Street

Chicago, Illinois 60611

Telephone 312.440.6023

Fax 312.440.5950

Bernard M. Talbert

Associate General Counsel

Via Facsimile

October 4, 1996

Mr. Gene Barnett

Medicare Audit & Reimbursement

Blue Cross and Blue Shield of

South Carolina

P.O. Box 199190

Columbia, SC 29202

Re: Your Home Visiting Nurse Service

PRRB Case No. 89-0277G and subsequent years

Dear Gene:

Thanks for the proposed Administrative Resolution for

Your Home Visiting Nurse Service (YHVNS) as well as

the October 4, 1996 letter to Diane Gustin. I thought you

did a great job of coming up with a practical approach to

a difficult case. Please accept this letter as BCBSA’s for-

mal approval.

App. 58

If you have any questions, please call.

Very truly yours,

/s/ Bernie Talbert

Bernard M. Talbert

cc: Diana Gustin, Esq. (Via Fax)

App. 59

[LOGO]

Medicare

Palmetto Government Benefits Administrators

Audit and Reimbursement

Post Office Box 100190

Columbia, South Carolina 29202-3190

October 4, 1996

Diana Gustin

«.ttorney At Law

First Tennessee Plaza, Suite 2001

800 South Gay Street

Knoxville, Tennessee 37929

Re: Your Home Visiting Nursing Services

Compensation Appeal

Provider Number: Various

FYE: 12/31/87, 12/31/90, 12/31/91,

12/31/92, 12/31/93 and 12/31/94

PRRB Case Numbers: Various

This letter is to confirm the resolution of the PRRB cases

for the above listed FYEs. The parties have agreed that

the amounts listed on the attachments to this letter titled

“YHVNS’ Owners Compensation —- Proposed Administra-

tive Resolution” and “YHVNS’ Owners’ Compensation

Proposed, Pension Expense” will be allowed. Addi-

tionally, the Intermediary agrees that any interest applica-

ble to the overpayment involved with these adjustments

will be refunded pursuant to 42 CFR 405.376 and Pro-

vider Reimbursement Manual Section 2219.5(B). Further,

the Intermediary agrees to expedite the reopening of the

applicable cost reports.

This agreement will need to be affirmed by the Blue Cross

and Blue Shield Association. You should receive this by

App. 60

Monday, October 7, 1996. If you have any questions or if

you do not receive the BCBSA’s official approval, please

give me a call at home at (803) 787-6287 or at Palmetto

GBA at (803) 788-0222, extension 26227.

Sincerely

/s/ Gene Barnett

Gene J. Barnett, Esq.

Provider Appeals Specialist

Medicare Audit and Reimbursement

cc: Bernard Talbert, Esq., BCBSA

App. 61

YHVNS’ OWNERS’ COMPENSATION - PROPOSED

ADMINISTRATIVE RESOLUTION

Betty Leake

Paid

1994 154,407

1993 165,152

1992 163,401

1991 141,065

1990 115,568

1989 NA

1988 NA

1987 92,139

Richard Leake

Paid

1994 135,246

1993 130,675

1992 123,463

1991 108,729

1990 79,468

1989 N/A

1988 N/A

1987 70,324

Rick Leake

Paid

1994 59,556

1993 55,895

1992 45,609

1991 36,943

Pro

Allowable

Allowed Amount

130,051 141,000

122,114 132,000

114,661 124,000

107,663 117,000

101,092 109,000

71,331 86,000

Pro

Allowable

Allowed Amount

96,913 99,000

90,998 93,000

85,444 87,000

56,893 82,000

43,804 77,000

32,884 60,000

Proposed

Allowable

Allowed Amount

44,150 51,000

41,455 48,000

38,925 45,000

36,943 42,000

Reopening

Adjustment

10,949*

9,886"

9,339"

9,337*

7,908"

14,669

Reopening

Adjustment

2,087*

2,002*

1,556*

25,107*

33,196

27,116

Reopening

Adjustment

6,850"

6,545*

6,075*

0

App. 62

1990 39,216 34,318 39,216 4,898

1989 N/A

1988 N/A

1987 16,009 14,663 16,009 1,346

(worked only part of year)

*An additional amount will be allowed to partially

reverse the adjustment made to pension expense based

on salary. Will compute after salary is approved. Gener-

ally an additional 15% will be added, but for some years

the entire allowable pension expense was not incurred.

Pension Expense

Betty Leake

Comp. Adj. (See Pension Reopening

other Attachment) Adjustment

1994 No pension adjustment was made

1993 955

1992 9,339 1,346

1991 9,337 1,401

1990 7,908 1,186

Richard Leake

1994 No pension adjustment was made

1993 2,002 300

1992 1,556 224

1991 25,107 3,766

1990 33,196 4,979

Rick Leake

1994 No pension adjustment was made

1993 6,545 982

1992 6,075 875

16,015