Amicus Curiae Brief — Your Home Visiting Nurse Services, Inc. v. Shalala
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G ‘Jur 29 1998
No. 97-1489
© UF THE C.ERK
In the Supreme Cok
OF THE
United States
OCTOBER TERM, 1997
Your HOME VISITING NuRSE SERVICES, INC.,
Petitioner,
Vv.
DONNA E. SHALALA,
Secretary of Health and Human Services,
Respondent.
BRIEF OF AMICI CURIAE
The American Hospital Association and
The Federation of American Health Systems
DeNIse Rios RODRIGUEZ Mary R. GREALY
Counsel of Record Senior Washington Counsel
AMY BLUMBERG HAFEY American Hospital Association
Foley & Lardner 325 Seventh Street, N.W.
2029 Century Park East, Washington, D.C. 20004
35th Floor (202) 638-1100
Los Angeles, CA 90067-3021
(310) 277-2223
LAURA STEEVES GOGAL FrReEDERIC J. ENTIN
Vice President and General Counsel
Chief Counsel American Hospital
Federation of American Association
Health Systems One North Franklin
1111 19th Street, N.W., Chicago, Illinois 60606
Suite 402 (312) 422-3000
Washington, D.C. 20036
(202) 833-3090
Bowne of Los Angeles, Inc., Law Printers (213) 627-2200
QUESTIONS PRESENTED
1. Whether there is jurisdiction for review of refusals by
fiscal intermediaries to reopen Medicare providers’ cost
reports under 42 U.S.C. § 139500, 28 U.S.C. § 1331, 28
U.S.C. § 1361 and/or 5 U.S.C. § 706?
2. Whether 42 C.F.R. § 405.1885(c) is based on a per-
missible construction of the Medicare statute?
TABLE OF CONTENTS
QUESTIONS PRESENTED.............5555:
TABLE OF AUTHORITIES..............555.
INTEREST OF AMICI CURIAE ...........++:
SUMMARY OF ARGUMENT ...............
PIFUFIE 6 veh ace cc secrsesecccccccccccces
I. MEDICARE PROVIDERS ARE
ENTITLED TO ADMINISTRATIVE
REVIEW OF REFUSALS TO REOPEN
COST REPORTS UNDER THE
MEDICARE STATUTE ................
A. The Secretary’s Inequitable
Implementation Of The Administrative
Ey ee
B. The Plain Language And Clear Intent
Of Section 139500 Provide For Review
Of Reopening Determinations.........
C. Review Of Reopening Denials Is Not
Inconsistent With The 180-Day Appeal
DEE La caciewesKecdinaGapbedeacerce
D. The Secretary’s Interpretation Violates
Fundamental Principles Of Fairness
And Administrative Law .............
Il. IF JURISDICTION IS NOT
AVAILABLE UNDER SECTION 139500,
JURISDICTION LIES UNDER 28 U.S.C.
§ 1331, 28 U.S.C. § 1361 OR 5 U.S.C. § 706
Ill. AS INTERPRETED BY THE
SECRETARY, THE REOPENING
REGULATION IS INCONSISTENT
WITH THE MEDICARE STATUTE.....
CONCLUSION 2. cc ccccccccccccccscccvsceess
10
14
iii
TABLE OF AUTHORITIES
Cases
Abbot Labs. v. Gardner, 387 U.S. 136 (1967) .. 21, 22
Ashland Reg'l Med. Cir. v. Shalala, ___ F.
Supp. _ (E.D. Pa. 1998), reprinted in
[1998-1 Transfer Binder] Medicare &
Medicaid Guide (CCH) 4 46,201 (E.D. Pa.
ME 6 Eb phdities Cae KOUESEy bDADOv ENR cHEec 20% 16
Athens Community Hosp., Inc. v. Schweiker, 743
ee Ae MD os cacccet Cneeeeese 9
Bailey v. United States, 516 U.S. 137 (1995).... 6
Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399
iG hitndnehet bsthiuis d diesndhcee aidan dns 6, 7,8
Beverly Hosp. v. Bowen, 872 F.2d 483 (D.C. Cir.
PRUE sevacscddddenebddésercéeuseed 21
Bowen v. Michigan Academy of Family
Physicians, 476 U.S. 667 (1986).......... 9, 21, 22, 23
Califano v. Sanders, 430 U.S. 99
a Sabie 6 co tds dae bhail oaks dates 12, 13, 22, 24
Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984)... 8, 25
Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123
EE awn od. pd Ube bat bcddéiakeds 25
Good Samaritan Hosp. v. Shalala, 508 U.S. 402
Pht tieshGubcwabedhdasbcioeresion de 10
Good Samaritan Hosp. Reg'l Med. Cir. v.
Shalala, 85 F.3d 1057 (2nd Cir. 1996) ....... 6,9
Heckler v. Ringer, 466 U.S. 602 (1984) ........ 22
Immigration and Naturalization Serv. v. Doherty,
Se ees Se GE inle'd 6d cWebacun'e oo eens 22
Interstate Commerce Comm'n v. Brotherhood of
Locomotive Eng’rs, 482 U.S. 270 (1987) ..... 13, 22
iv
TABLE OF AUTHORITIES
Cases
Page
Kootenai Hosp. Dist. v. Bowen, 650 F. Supp.
oe, § ee eee Perey 14
Mem'l Hosp. v. Sullivan, 779 F. Supp. 1410
1 dh) RDS ae nae oS See 23
Nealon v. California Stevedore & Ballast Co., 996
PF») 4 * ya rere 25
Oregon v. Bowen, 854 F.2d 346
Le ey Perry ee 6, 7, 9, 10, 24, 26
Pauley v. BethEnergy Mines, Inc., 501 U.S. 680
(OSSD cnx tecdedaaes.obs shbbiabcotecdciees 26
Pistachio Group of the Ass'n of Food Indus. v.
United States, 671 F. Supp 31 (Ct. Int'l Trade
IGG) cb cacdacevicnengeevesdscauendsacer 15
Regions Hosp. v. Shalala, 118 S. Ct. 909
CORBIN 60s veccccvtécucbssctOdoue abe 8, 11, 12, 19, 20
R.H. Johnson & Co. v. Sec. & Exch Comm'n, 198
Fa GS CANE Oe. FOGG csicccccdevccedece 14
Saint Mary of Nazareth Hosp. Ctr. v. Schweiker,
741 F.2d 1447 (D.C, Cir. 1984)............. 9
Tallahassee Mem'l Reg'l Med. Cir. v. Bowen, 815
F.2d 1435 (ith Cir. 1987)................. 8, 26
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504
COTOD o.cbins vd nce tarebercncesien cases sede 26
United Black Fund, Inc. v. Hampton, 352 F.
Summ. GOB CTAB. FSFED ho vied ceetecon 15
United States v. Erika, Inc., 456 U.S. 201
(OGRE Sic ks ci ddusbcbcsalbewdeiadidec: 14-15, 16, 22
United States v. Larionoff, 431 U.S. 864 (1977) .. 24
Washington Hosp. Ctr. v. Bowen, 795 F.2d 139
{lee B | Pee ee ye wr re. 25
TABLE OF AUTHORITIES
Cases
Page
Weinberger v. Salfi, 422 U.S. 749 (1975) ....... 22
Western Med. Enters., Inc. v. Heckler, 783 F.2d
Se aE ED 5 cid cc vindndbhessseces 11
Your Home Visiting Nurse Servs., Inc. v
Secretary of Health and Human Servs., 132
Pee a Ge GS OUD cbcerceccecocccccre passim
Statutes
Administrative Procedure Act, Title 5, chapter 7 24
nr ici te seu Gubw¥dee t6dbsececese 21
PP c0 kd sbacb pane nok be ueep es 21, 22, 23, 24
eid oa eke seksi aekesabieus 21, 23
I iii ae wo ian wee cece é 23
GE Bice He GPO ROUOD ov cc ccccccccccccecs l
ee et 17
42 U.S.C. § 1395x(v)(1)(A) (ii) ............-. 9, 10
rnp ae A a a a 9
Ge Bs PR an tC uae baa 8b os cccccccces 9
42 US.C. § 199SH(B)(1)(C).. 2... cece ceeees 15
Se I os. bo ceuseenccendéeéedeacés passim
Le ED un ccdcencevecesedacact 4,5, 8,11
42 U.S.C. § 139S500(a)(1)(A)(i) ............. 6
I in oon von cedacent’ ees 14
EE anv cncchtcconsedeaes 9
A ee 9
er 9
Sas PIED do cocedvcccceccees 17
vi
TABLE OF AUTHORITIES
Regulations
Page
42 C.F.R. § 405.1803 .. 5... cece cee eee ween 5
42 C.F.R. § 405.1835 ... 2... cece cece eee enee 5
42 C.F.R. § 405.1841 (a) ....... 6c eee eee ees 5
42 C.F.R. § 405.1841(b) . 2.6... eee eens 11
42 CPR. § GBS.1GES 2... ccc cccccccccccccccess 2, 20, 24
42 C.F.R. § 405.1885(a) ... 2.2... cee cece e eee 5
42 C.F.R. § 405.188S(c)... 1... cece eee eees 5-6, 24, 26
42 CPR. 6 GGG.1GED occ cccccccccccccccvees 5, 10
42 C.F.R. § 412.106(b) (4) . 2... 2. ee eee eee 20
42 CPR. S4UDFME])) 220 cccccccccccecccseces 5, 10
42 CIR. SEIDAME) 2 cess ccccccccccccvsese 5
42 C.F.R. § 413.40(¢) (4) .... 2... cece cece eens 10
42 C.F.R. § 413.40(€) (5) ... 2... cece ee eeeees 10
42 C.F.R. § 413.86(¢)(1) (ill) .... 62... 6. eee 20
42 C.F.R. §§ 421.120-421.124............500es 17
Federal Registers
63 Federal Register 13590, 13592 (March 20,
DOGBD occ cdovccdbseectudntade coghgeeecne's 18
59 Federal Register 46258 (Sept. 7, 1994) ...... 17
54 Federal Register 40286, 40302 (Sept. 29,
DOE boc kvccccctacccactesethgdeutans a <: 20
Vii
TABLE OF AUTHORITIES
Manuals
Page
Provider Reimbursement Manual (HIM-15)
§ 2931.2 reprinted in 2 Medicare & Medicaid
ee SE I ig cis bi dotintie gases 5, 13,17
Provider Reimbursement Manual Appendix A to
§ 2926 reprinted in 2 Medicare & Medicaid
es Ek Be 6, 24
Legislative History
Omnibus Budget Reconciliation Act of 1986,
Pub.L. 99-1509, § 9341(a)(1) .............. 15
Social Security Amendments of 1972, H.R. Rep.
No. 92-231 (1972), reprinted in 1972
NE bc aS endacidedcteccecess .. .8, 15, 16
Social Security Amendments of 1972, at 118
Se SE Us eh 15
Administrative Rulings
HCFA Ruling No. 97-2 (1997) reprinted in
[1997-1 Transfer Binder] Medicare & Medi-
caid Guide (CCH) § 45,105 (1997) ........ 19-20, 21
Articles
™*G News Release, July 16, 1998 ............. 17
INTEREST OF AMICI CURIAE
With the written consents of both parties, which have
been filed with the Court, amici curiae respectfully submit
this brief in support of petitioner, Your Home Visiting
Nurse Services, Inc.'
Amici curiae are two associations of health care providers.
The American Hospital Association (“AHA”) is the pri-
mary organization of hospitals in the United States. The
AHA’s mission is to promote high quality health care and
health services through leadership and assistance to huspi-
tals in meeting the health care needs of their communities.
Its membership includes approximately 5,000 hospitals,
health systems, networks and other providers of care. In
addition, over 40,000 health care professionals hold individ-
ual memberships in the AHA.
The Federation of American Health Systems is the na-
tional trade organization representing approximately | ,700
privately owned and managed community hospitals and
health care systems. These systems provide comprehensive
health care services across the acute and post-acute spec-
trum. The majority of the freestanding specialty hospitals in
the United States are represented by the Federation.
The overwhelming majority of amici's members partici-
pate as providers of services in the Medicare program.
42 U.S.C. §§ 1395-139Seee. Medicare payments for ser-
vices rendered to beneficiaries account for approximately
forty percent of the revenue of the average member hospital.
Hospitals and other health care providers rely on Medicare
as a major source of revenue to assure their financial
survival. Any substantial loss of Medicare payments can
‘Counsel for amici curiae listed on the cover authored this brief in
whole. No party, other than amici curiae, its members or its counsel has
made a monetary contribution to the preparation or submission of this
brief.
2
affect a provider's continued ability to provide needed ser-
vices to Medicare beneficiaries and others in the commu-
nity. Accordingly, amici have an immediate and continuing
interest in the integrity of the payment process and in the
adequacy of the procedures in place to assure accurate
payment determinations.
Amici’s members, as participants in Part A of the Medi-
care program, must submit annual cost reports. The cost
report is a complex document that addresses virtually every
financial aspect of the operations of a provider. Beginning
with the provider's financial books and records, the cost
report involves thousands of calculations and the application
of volumes of statutes, regulations and policies to the finan-
cial activities of the provider over the fiscal year to deter-
mine a total annual reimbursement amount. A single cost
report adjustment can increase or decrease a provider's
Medicare reimbursement by millions of dollars.
To assure the accuracy of the annual payment determina-
tion, the Secretary of Health and Human Services (“Secre-
tary”) has promulgated a regulation which allows for the
reopening of cost reports within three years. 42 C.F.R.
§ 405.1885. The Secretary, as well as providers, routinely
avail themselves of the reopening process to address new,
material evidence and to correct clear and obvious errors of
fact and law in the payment determination. The Secretary
asserts here that the decision of a Medicare fiscal intermedi-
ary to deny a provider’s request to reopen its cost report may
not be reviewed by any individual, agency, administrative
tribunal or court. Given the importance of the cost reporting
process in the determination of Medicare reimbursement,
this delegation of absolute and final discretion to an em-
ployee of a private contractor cannot be sustained.
If the Court upholds the Sixth Circuit’s decision in Your
Home Visiting Nurse Services, Inc. v. Secretary of Health
and Human Services, amici’s members will continue to be
3
subject to arbitrary decisions by employees of private gov-
ernment contractors on reopening issues that may have
substantial financial consequences.
SUMMARY OF ARGUMENT
This case represents another in a long line of attempts by
the Secretary to deny providers administrative and judicial
review of her Medicare payment determinations. The Secre-
tary interprets the Medicare statute and regulations to
preclude any review whatsoever of the determination of a
fiscal intermediary to deny a provider's request for reopening
of its cost report. Because the jurisdictional statute in
question, 42 U.S.C. § 139500, clearly and unequivocally
authorizes the Provider Reimbursement Review Board
(“Board”) to review any final intermediary determination
that affects a provider's total annual reimbursement, the
Secretary’s restrictive reading must be rejected.
In addition, the Secretary's reopening process is ripe for
abuse, and is fundamentally unfair to Medicare providers.
She has delegated blanket discretion to deny reopening
requests to private intermediaries that are known to have
business interests in conflict with the interests of providers.
Through the performance standards imposed on_ in-
termediaries, she has created additional incentives against
the reopening and correction of erroneous determinations.
The potential abuses inherent in the Secretary’s reopening
scheme do not stop at the intermediary level. The Secretary
has demonstrated her willingness to take advantage of the
process. She directs intermediaries to reopen cost reports to
recoup Overpayments, and, at times, directs them not to
reopen when the correction of errors would result in addi-
tional payments to providers. Although the potential for
abuse could be mitigated through administrative and judi-
cial review, the Secretary has chosen to deny the very
protection Section 139500 was intended to provide.
4
Amici urge the Court to reverse the Sixth Circuit's
decision in Your Home, and to hold that, pursuant to the
statutory directive of Section 139500, the Board has juris-
diction to review denials of reopening. Alternatively, if the
Court finds that the Medicare statute does not confer
jurisdiction, the other grants of jurisdiction urged by peti-
tioner should apply to protect providers from the arbitrary
denial of payments due under the Medicare statute.
ARGUMENT
I.
MEDICARE PROVIDERS ARE ENTITLED TO AD-
MINISTRATIVE REVIEW OF REFUSALS TO RE-
OPEN COST REPORTS UNDER THE MEDICARE
STATUTE
A. The Secretary’s Inequitable Implementation Of The
Administrative Review Process.
Congress has established the Provider Reimbursement
Review Board as the administrative forum for review of
Medicare Part A payment determinations. The governing
statute sets forth three conditions that a provider must meet
to trigger the Board’s jurisdiction. A hearing is available if
the provider:
(1)(A)(i) is dissatisfied with a final determina-
tion of... its fiscal intermediary... as to the
amount of total program reimbursement due the
provider... for the period covered by such
report...
** *
(2) the amount in controversy is $10,000 or more,
and
(3) such provider files a request for a hearing
within 180 days. ...
5
42 U.S.C. § 139S500(a) (Supp. 1998). See also 42 C.F.R.
§ 405.1835 (1997).
The Board’s jurisdiction will typically be invoked after a
provider has filed a cost report with its fiscal intermediary,
and the intermediary has reviewed the cost report and has
issued a payment determination known as a “Notice of
Program Reimbursement.” See 42 C.F.R. § 405.1803.
Under the regulations, a provider may file an appeal with the
Board within 180 days after the issuance of the Notice of
Program Reimbursement, after the issuance of a revised
notice, or within 180 days after certain other determinations.
42 C.F.R. §§ 405.1841 (a), 405.1889, 413.30(c), 413.40(e).
It is the Secretary’s view, however, that an appeal is not
available after a request to reopen a prior determination has
been denied.
The reopening rule at issue in this case provides that an
intermediary’s determination may be reopened, so long as a
request is made within a three year period. 42 C.F.R.
§ 405.1885(a). The Provider Reimbursement Manual limits
reopening to cases where (1) new and material evidence has
been submitted; (2) a clear and obvious error has been
made; or (3) a determination is found to be inconsistent
with the law, regulations and rulings, or general instructions.
Provider Reimbursement Manual (HIM-15) § 2931.2, re-
printed in 2 Medicare & Medicaid Guide (CCH) § 7739
[ hereinafter Manual ].’ Although it makes an exception for
providers located in the Ninth Circuit, the Manual states
that a refusal by the intermediary to grant a reopening
request is not appealable to the Board and cites 42 C.F.R.
* Although it does not have the force and effect of law, the Manual
provides guidance regarding the Secretary's interpretation of the law.
6
§ 405.1885(c) as the authority for this restriction.’ Manual,
supra at Appendix A to § 2926, 9 B.4, reprinted in 2
Medicare & Medicaid Guide (CCH) 9 7719G. This at-
tempt to limit review of the intermediary’s determination
must be rejected.
B. The Plain Language And Clear Intent Of Sec-
tion 139500 Provide For Review Of Reopening
Determinations.
In determining whether the Board has jurisdiction to
review an intermediary’s denial of reopening, the plain
meaning of the statute must control. Bethesda Hosp. Ass'n
v. Bowen, 485 U.S. 399, 403 (1988). See also Bailey v.
United States, 516 U.S. 137, 144-45 (1995) (In interpreting
the meaning of a statute, courts must start with the language
of the statute.). A decision by the intermediary not to
reopen a provider’s cost report is unquestionably a “final
determination of the... fiscal intermediary...as to the
amount of total program reimbursement due the provider.”
42 U.S.C. § 139500(a) (1) (A) (i). It is a decision that the
provider is not entitled to the reimbursement it secks,
despite the new and material evidence, or the clear error of
fact or law, presented by the provider.
The Secretary has conceded in the past, and the Sixth
Circuit has agreed, that the decision not to reopen is a final
determination, at least in some sense. Oregon v. Bowen, 854
F.2d 346, 349 (9th Cir. 1988); Your Home Visiting Nurse
Servs., Inc. v. Secretary of Health and Human Servs., 132
F.3d 1135, 1138-39 (6th Cir. 1997) (quoting Good Samari-
tan Hosp. Reg'l Med. Ctr. v. Shalala, 85 F.3d 1057, 1061
(2nd Cir. 1996)). However, the Sixth Circuit reached the
erroneous conclusion that this final determination is not
Section 405.1885(c) provides: “Jurisdiction for reopening a determi-
nation rests exclusively with that administrative body that rendered the
last determination or decision.”
7
related to the amount of program reimbursement due a
provider. Where a provider makes a timely and proper
request for reopening seeking additional reimbursement, the
denial of that reopening is a final determination by the
intermediary that the provider’s total amount of program
reimbursement will not include the additional amount re-
quested. While a denial of reopening may be, as the Sixth
Circuit would characterize it, a refusal by the intermediary
to revisit the first determination, this does not alter the fact
that the intermediary, in denying reopening, has made
another determination as to the total amount of the pro-
vider’s Medicare reimbursement. Indeed, the Ninth Circuit
has explicitly recognized that denials of reopening “directly
implicate” a provider's amount of total program reimburse-
ment. Oregon v. Bowen, 854 F.2d at 349.
In Bethesda Hospital Association, the Court was faced
with a similarly narrow interpretation of the Board’s juris-
diction under Section 139500. 485 U.S. 399. In that case,
the Secretary attempted to preclude the Board from review-
ing a provider’s challenge to the validity of a regulation,
because the provider failed to obtain the intermediary's
determination on the specific cost item at issue. She argued
that, because a provider must be “dissatisfied” with a final
determination of the intermediary, a provider is entitled only
to a hearing on claims actually presented first to the inter-
mediary. The Court properly refused to entertain the Secre-
tary’s “strained interpretation,” and found that the express
language of that section requires nothing more than a
provider’s dissatisfaction with a final determination of its
program reimbursement. /d. at 404. Here, the Court should
confirm the broad grant of authority to the Board under
Section 139500 and should similarly refuse to narrow the
Board's jurisdiction under an equally strained interpretation
of the term “final determination.”
Although the plain meaning of the statute decides the
issue presented here, additional support for a broad reading
of Section 139500 is found in its legislative history.“ The
Court must give effect to the unambiguously expressed
intent of Congress. Chevron U.S.A., Inc. v. Natural Re-
sources Defense Council, Inc., 467 U.S. 837, 843 n.9 (1984).
See also Regions Hosp. v. Shalala, 118 S. Ct. 909, 915
(1998).
The legislative history of Section 139500 demonstrates
that Congress intended to give providers a definite adminis-
trative means by which to appeal an intermediary’s final
determination. Social Security Amendments of 1972, H.R.
Rep. No. 92-231 (1972), reprinted in 1972 U.S.C.C.A.N.
4989, 5094. Specifically, when Congress identified the lack
of any provision for an appeal by a provider of an intermedi-
ary’s determination, it established the Board to assist provid-
ers and intermediaries to reach reasonable and mutually
satisfactory settlements of disputed reimbursement items.
Id.; Tallahassee Mem’! Reg'l Med. Cir. v. Bowen, 815 F.2d
1435, 1459 (11th Cir. 1987), cert. denied, 485 U.S. 1020
(1988). The Sixth Circuit's conclusion that the Board did
not have jurisdiction over the intermediary's determination
on reopening is directly inconsistent with this legislative
history.
Moreover, nothing in the legislative history suggests that
Congress intended to prohibit all judicial review of denials of
reopening. Neither the Sixth Circuit, wor the other circuit
courts that have examined this issue, have identified any
legislative history to support the preclusion of Board review
*In Bethesda Hosp. Ass'n, for example, after the Court examined the
express language of Section 139500(a) and concluded that the plain
language was determinative of the issue, it continued its analysis by
examining the “language and design of the statute as a whole.” 485 U.S.
at 405 (citations omitted).
9
of denials of reopening.’ Good Samaritan Hosp. Reg'l Med.
Ctr, 85 F.3d 1057 (2nd Cir. 1996); Athens Community
Hosp., Inc. v. Schweiker, 743 F.2d 1 (D.C. Cir. 1984); Saint
Mary of Nazareth Hosp. Ctr. v. Schweiker, 741 F.2d 1447
(D.C. Cir. 1984). In the absence of such evidence, the
strong presumption that Congress intends judicial review of
administrative action must control. Bowen v. Michigan
Academy of Family Physicians, 476 U.S. 667, 676 (1986).
The Court should adopt the sound reasoning of the Ninth
Circuit in the Oregon v. Bowen case which is in accord with
the presumption of judicial review and which found support
for Board jurisdiction in the plain meaning and congres-
sional intent of Section 139500. If the Board and the courts
are prevented from reviewing denials of reopenings, provid-
ers that are faced with new and material evidence or clear
and obvious errors, will be without recourse, thereby nullify-
ing the very purpose behind Section 139500. As the Oregon
v. Bowen court found, the Secretary's position that the
Board does not have jurisdiction over reopening denials
would “partly eviscerate[ ] the congressional intent of pro-
viding administrative review of a fiscal intermediary’s cost
determination because [the Secretary’s] policy would allow
questions of mistaken cost determinations to go unre-
viewed.” 854 F.2d at 350.° Finding that there was no reason
*In fact, when Congress intends that Board and judicial review of a
particular matter should be precluded, it addresses the issue directly
through the statute. E.g., 42 U.S.C. § 139500(g), prohibiting review of
determinations made pursuant to 42 U.S.C. §§1395y and
1395ww(d) (7); 42 U.S.C. § 1395yy(e)(8), precluding administrative
and judicial review of certain portions of the prospective payment system
rates under 42 U.S.C. §§ 1395ff or 139500.
°The Ninth Circuit found support for the review of reopening deter-
minations in the Medicare statutory provision calling for “retroactive
corrective adjustments” to assure that reimbursement is neither inade-
quate nor excessive. 42 U.S.C. § 1395x(v)(1)(A)(ii). The Ninth
Circuit's decision is consistent with this Court's reading of the same
10
to conclude that Congress intended to prevent review, the
court held that the Board had jurisdiction to review a denial
of a reopening request. Jd. at 349-50.
C. Review Of Reopening Denials Is Not Inconsistent
With The 180-Day Appeal Limit.
The Sixth Circuit decision in Your Home reflects a
concern that administrative appeals of reopening denials
would somehow frustrate Congress’ intent that there be a
180-day time limit by which providers must appeal a final
determination. 132 F.3d at 1139. However, permitting an
appeal from a reopening denial in no way dissipates the |80-
day appeal deadline. A provider would continue to be
subject to the 180-day time limit which, pursuant to the
statutory language, would run from the most recent determi-
nation, i.e., the refusal to reopen.
In fact, the Secretary’s regulations recognize that there
may be more than one final determination with respect to an
annual cost report and, as a result, more than one | 80-day
appeal period. Providers may request a hearing before the
Board within 180 days of each revised determination issued
after a reopening. 42 C.F.R. § 405.1889. Similarly, a pro-
vider may appeal a denial of an exception to, or exemption
from, certain cost limitations. 42 C.F.R. §§ 413.30(c),
413.40(e) (4)-(5). Clearly, the Secretary has not read Sec-
provision as a “year-end book balancing” requirement. Good Samaritan
Hosp. v. Shalala, 508 U.S. 402, 414 (1993). The reopening process
allows for retroactive corrective adjustments within three years to assure
that final payment is consistent with the Secretary's regulations, thereby
assuring the accuracy of the year-end book balancing. The Ninth Circuit
correctly concluded that nothing in Section !1395x(v)(1)(A) (ii) sug-
gests nonreviewability.
tion 139500 to authorize only a single 180-day appeal
period.
Moreover, the reopening process itself evidences the Sec-
retary’s conclusion that the need for accuracy in the reim-
bursement determination should override the finality
concerns that would be served by imposing a single | 80-day
appeal limit. In Regions Hospital, the Court examined the
Secretary’s authority to reopen and reaudit cost reports
beyond the three year reopening period for purposes of
determining base year costs to be used under a new payment
methodology. The Secretary took the position that the
results of the reaudit would be applied to those cost report-
ing periods still within the three year reopening window.
Neither the Court nor the Secretary was concerned that this
approach would undermine the finality concerns underlying
the 180-day appeal limit. Instead the Court considered the
“three-year reopening window” as the applicable statute of
limitations after which a cost report would be considered
closed and final. 118 S. Ct. at 913, 915-16, 918.
Arguing that the three year time limit should not prevent
the reaudit, the Secretary in the Regions Hospital case
maintained that the reaudits were necessary “[t]o prevent
perpetuation of past mistakes under the new . . . methodol-
ogy,” and to ensure that future payments would be based on
an “accurate” determination. Jd. at 914. The Court was
persuaded to permit the reaudit based on the Secretary's
"The regulations also permit the Board to extend the 180-day appeal
limit for good cause. 42 C.F.R. § 405.1841 (b). See also Western Med.
Enters., Inc. v. Heckler, 783 F.2d 1376, 1379 (9th Cir. 1986), in which
the court held that the 180-day time limit does not bar the Secretary
from extending the time limit for good cause, because “| 39500 is not a
narrow jurisdictional statute.” That court evaluated the language and
history of 139S00(a) and determined that Congress did not intend to
create a “jurisdictional bar” to extension of the time limit by the Board.
Id.
12
assertion that Congress, when it changed Medicare payment
methodologies, “surely did not want to cement misclassified
and nonallowable costs into future reimbursements, thus
perpetuating literally million-dollar mistakes.” Jd. at 917.
The Secretary’s interest in accuracy overrode concerns of
finality. It is hypocritical for the Secretary to now argue that
providers are time barred from requesting review because
the initial 180-day period has run from the intermediary's
first determination, when that limit was of no concern to her
under the reaudit rule.*
The Sixth Circuit also relied on the Court’s decision in
Califano v. Sanders, 430 U.S. 99 (1977), as support for the
argument that permitting appeals of reopening denials
would frustrate the congressional purpose to impose a 180-
day limitation. Your Home, 132 F.3d at 1139. The Court in
Sanders interpreted appeal provisions related to social secur-
ity disability benefits. In that case, the Court held that
judicial review was not available for a denial of a Social
Security claimant's request for reopening, in part because it
would frustrate the congressional purpose behind a 60-day
time limit on requesting judicial review. Sanders, 430 U.S.
at 108. The Sixth Circuit's reliance on this case, however, is
misplaced. Unlike the three year time limit on requests for
reopening, the regulation at issue in the Sanders case did not
provide a time limit on requests for reopening, and inde,
the Social Security claimant had waited seven years to
request reopening. Additionally, the claimant in Sanders
merely sought a redetermination of his case and made no
‘Interestingly, when the provider in the Regions Hospital case com-
plained that the Secretary's reaudit rules jeopardized finality, the Court
consoled the provider by indicating that court review under the Admin-
istrative Procedure Act “should protect the Hospital from any future
reaudits performed without legitimate reason.” 118 S. Ct. at 916 n.2.
The petitioner here should similarly be protected from the intermedi-
ary’s refusals to reopen “without legitimate reason.”
13
allegation of new evidence. Under the applicable Medicare
reopening standards, reopenings are limited to cases where
there is new and material evidence presented, a clear and
obvious error, or a determination is found to be inconsistent
with law or regulations. Manual, supra, § 2931.2. Finally,
and most importantly, the claimant in Sanders was able to
avail himself of “administrative channels” and have an
Administrative Law Judge rule on his reopening request.
430 U.S. at 102-03. Unless the Court overrules the Sixth
Circuit decision in this case, however, there is absolutely no
review of the intermediary's determination — judicial, ad-
ministrative or otherwise.
The more recent Supreme Court case of Jnterstate Com.
merce Commission v. Brotherhood of Locomotive Engi-
neers, 482 U.S. 270 (1987), is more on point here. That case
involved a challenge to the Interstate Commerce Commis-
sion’s refusal to reconsider an order that it had issued. Based
on the facts of the case and the failure of the party to allege
new evidence or changed circumstances, the Court decided
that the denial of the request was not subject to judicial
review. However, the Court noted that the result would be
different under other circumstances:
If review of denial to reopen for new evidence or
changed circumstances is unavailable, the peti-
tioner will have been deprived of all opportunity
for judicial consideration — even on a “clearest
abuse of discretion” basis—of facts which,
through no fault of his own, the original proceed-
ing did not contain.
Id. at 279. The Court’s reasoning in Locomotive Engineers
is directly applicable here. Under the Medicare rules, prov-
iders are entitled to reopening only where new and material
evidence exists or where clear and obvious errors of fact or
law are present. If the Board’s review of a denial of reopen-
ing is foreclosed, Medicare providers will be denied the
14
opportunity for review, even in cases where the intermediary
has committed the clearest abuse of discretion with respect
to those facts. This result is inconsistent with the clear
legislative history of Section 139500 reflecting congressional
intent to favor administrative and judicial review. Congress
did not intend providers to be subjected to the whims of
intermediaries without the opportunity for administrative
and judicial review. As the district court for the Northern
District of California noted:
The fiscal intermediaries are merely contractors.
They are not officers of the Secretary. Under the
Secretary's view, the fiscal intermediary could re-
ject all requests to reopen, whether or not the
requests had merit, and the Review Board could
not intervene. This interpretation contradicts the
broad authority Congress granted to the Review
Board in 42 U.S.C. § 139500(d).
Kootenai Hosp. Dist. v. Bowen, 650 F. Supp. 1513, 1520
(N.D. Cal. 1987) (emphasis in original). The Sixth Cir-
cuit’s holding that reopening denials are not subject to
Board review, therefore, conflicts with the plain meaning
and congressional intent of Section 139500, and should be
reversed.
D. The Secretary’s Interpretation Violates Fundamen-
tal Principles Of Fairness And Administrative Law.
Although the federal government frequently contracts
with private parties for the performance of various functions,
the Secretary's delegation of unfettered discretion to an
employee of a private contractor appears to be unprece-
dented.’ While it is true that the Court in United States v.
*Generally, where delegation by a federal agency to a private party
has been upheld, the agency has retained final reviewing authority. See
R.H. Johnson & Co. v. Sec. & Exch. Comm'n, 198 F.2d 690 (2nd Cir.
15
Erika, Inc., 456 U.S. 201 (1982) upheld the delegation of
final decision-making authority to Medicare carriers under
Part B of the program, that case arose in a completely
& erent context and is easily distinguishable. In Erika, the
Court precluded judicial review only in the face of a clear
congressional directive to limit review of payment determi-
nations made by carriers (the Part B counterpart to Part A
intermediaries) involving relatively small individual claims
that arise under Part B. The Court was persuaded by
extensive legislative history indicating that Congress sought
to avoid overloading the courts with “quite minor matters.”
456 U.S. at 209 (citing legislative history to the Social
Security Amendments of 1972, 118 Cong.Rec. 33992
(1972))."°
No such congressional directive exists here. On the con-
trary, Congress has expressed an unequivocal intent to
assure Medicare Part A providers adequate administrative
and judicial review of their payment determinations. H.R.
Rep. No. 92-231 (1972), reprinted in 1972 U.S.C.C.A.N.
1952) (Commission's delegation to the National Association of Securi-
ties Dealers (“NASD”) was proper since the Commission reviewed
NASD’s disciplinary findings), cert. denied, 344 U.S. 855 (1952);
Pistachio Group of the Ass'n of Food Indus. v. United States, 67\ F.
Supp. 31 (Ct. Int'l Trade 1987) (finding valid an agency's delegation of
authority to the New York Federal Reserve Bank (“NY Fed.”) because
the agency retained authority to review the NY Fed.'s determination of
the exchange rate), affd 685 F. Supp. 848 (Ct. Int'l Trade 1988);
United Black Fund, Inc. v. Hampton, 352 F. Supp. 898 (D.D.C. 1972)
(recognizing as proper the delegation of authority from the agency to the
United Way since the agency retained final reviewing authority).
'°It is important to note that Congress itself apparently found the lack
of judicial review to be untenable and amended the statutory provision at
issue in Erika in 1986 to provide for judicial review of the determination
of the amount of payment due under Part B, where the amount in
controversy exceeds $1,000. 42 U.S.C. § 1395ff(b)(1)(C); Omnibus
Budget Reconciliation Act of 1986, Pub. L. No. 99-509, § 9341(a)(1),
100 Stat. 1874, 2037 (1986).
16
4989, 5094-95. Nor can the payment disputes that arise in
the reopening context be considered “minor matters” that
do not justify the consumption of administrative or judicial
resources. As the recent case of Ashland Regional Medical
Center v. Shalala reflects, the payment amounts in dispute
under a reopening can be substantial. _ F. Supp. — (E.D.
Pa. 1998), reprinted in [1998-1 Transfer Binder] Medicare
& Medicaid Guide (CCH) 9 46,201 (E.D. Pa. 1998). In
that case, the reopening denial deprived the provider of
more than five million dollars in Medicare reimbursement to
which it was clearly entitled. Such substantial Medicare
revenue can often mean the difference between the financial
survival of a health care provider or the loss of an important
health care service to the community.
Your Home also differs substantially from Erika in that a
carrier hearing was available to the plaintiff in Erika, while
the petitioner here has been denied any review process
whatsoever. The petitioner in Your Home is faced with a
summary denial issued by an intermediary employee, which
merely states that the petitioner did not meet the require-
ments for reopening. No rationale was provided for rejecting
the petitioner’s allegations of new and material evidence and
factual and legal errors. (Appendix to Petitioner’s Petition
for Certiorari at 9.) While the petitioner in Erika was
granted the opportunity through the carrier hearing process
to explore the basis for the initial denial and present its
arguments, petitioner here had no process in which it could
identify even the most egregious kind of bias on the part of
the intermediary’s employee.
Finally, the decision-making authority delegated to the
carrier in Erika allowed for considerably less discretion on
the part of the private contractor. Although payment
amount determinations under Medicare Part B are governed
by voluminous and specific rules and regulations, the deci-
sion as to whether to reopen 2 cost report is governed by the
17
three broad standards set forth in the Manual, supra, at
§ 2931.2. As the scope of discretion is broadened, so also is
the possibility of an abuse of discretion heightened.
The dangers inherent in the delegation of broad discretion
to private parties are particularly apparent in this case.
Because their compensation from Medicare represents a
significant source of revenue for intermediaries, it is in their
interest to retain their multimillion dollar government con-
tracts. To do so, they must continue to meet performance
standards established by the Secretary. 42 U.S.C. § 1395h;
42 C.F.R. §§ 421.120-421.124. See, e.g., 59 Federal Register
46258 (1994). This creates strong incentives to deny re-
openings based on such inappropriate factors as the time and
cost of processing the changes requested by the provider. ''|
Congress has recently recognized the potential for con-
flicts of interest among Medicare contractors and has acted
to mitigate those conflicts in a newly established contracting
program. In 1996, Congress enacted the Medicare Integrity
Program, establishing a new category of Medicare contrac-
tors that will assume many of the functions currently per-
formed by Medicare carriers and intermediaries. The
Medicare Integrity contractors must comply with the strict
conflict of interest standards generally applicable to federal
acquisition and procurement. 42 U.S.C. § 1395ddd(c) (3).
Addressing this requirement in the preamble to the pro-
posed Medicare Integrity Program regulations, the Secre-
tary expressly acknowledged the ever increasing potential for
'' These dangers are underscored by the $144 million Blue Cross/Blue
Shield of Illinois recently agreed to pay to resolve federal charges of
falsifying records to cover up its poor performance as a Medicare
contractor. In the Office of Inspector General's News Release dated
July 16, 1998, the OIG stated that such misconduct was not unprece-
dented. Medicare Carrier Agrees To Pay Record $144 Million
Settlement, OIG News Release (July 16, 1998)
<http:// www.hhs.gov/ progorg/oig/bcbs/hcscse.html>.
18
actual and apparent conflicts of interest among Medicare
contractors:
In recent years, however, Medicare intermediaries
and carriers, like most health insuring organiza-
tions, have expanded their business and product
lines to become large integrated health care deliv-
ery systems .... This creates a conflict of interest
when the contractor reviews claims ...and per-
forms other payment safeguard activities for its . . .
provider's and supplier’s competitors.
We have been criticized for the lack of effective
mechanisms to mitigate these conflicts of interest.
Even when we are assured that proper mecha-
nisms are in place, the appearance of a conflict
remains in the eyes of competitors.
63 Federal Register 13590, 13592 (1998). The safeguards
against conflicts of interest in the Medicare Integrity Pro-
gram that have been included in the statute and proposed in
the regulations were not in place to protect petitioner in this
case and will not be available to other providers subject to
intermediaries’ discretion in the reopening process. In-
termediaries will be free to disadvantage their competitors
by improperly denying them substantial sums of Medicare
reimbursement with impunity.
Even if there is no specific bias, the intermediary's em-
ployee could flip a coin to determine whether a reopening
would be granted and there would be no review process to
identify or remedy the abuse of discretion. While the Secre-
tary, at some point, considered the reopening determination
important enough to issue criteria governing the decision,
she apparently now is willing to risk the possibility that those
criteria may be applied arbitrarily or ignored altogether.
Further, the Secretary's interpretation leads to inconsis-
tency among intermediaries in the application of the stan-
19
dards. This is particularly troublesome for the many multis-
tate health care entities that are amici’s members. For
example, a hospital in Michigan may be granted a reopening
and receive payment for a substantial cost, while its sister
hospital in Ohio may be denied reopening and payment for
the same type of cost, under the same circumstances, by
another intermediary, another employee of the same inter-
mediary or even the same employee. Clearly there is no
rational basis for this result.
At first glance it may be difficult to understand why the
Secretary would choose to allow such potential abuses to go
totally unchecked where Section 139500 provides the obvi-
ous means to assure the integrity of the reopening process
through the availability of administrative and judicial re-
view. The reason for the Secretary’s position becomes clear,
however, upon an analysis of the budgetary consequences of
her position. Under her view, when a provider has been
overpaid she may reopen the cost report determination and
recoup the overpayment. If the provider has been underpaid,
however, she can either direct the intermediary not to
reopen the cost report to pay the additional amount due, or
may rely on the intermediary’s arbitrary denial of reopening
to avoid payment. While this approach may be financially
beneficial to the government, it is clearly inconsistent with
the Secretary’s obligations under the Medicare statute and is
patently unfair to providers that have served Medicare
beneficiaries with the expectation of payment in accordance
with the law.
A comparison of the graduate medical education
(“GME”) regulations at issue in Regions Hospital, with the
Secretary's implementation of the disproportionate share
hospital (“DSH”) adjustment calculation in HCFA Ruling
20
No. 97-2 (1997),'? clearly demonstrates the Secretary’s
willingness to selectively use her skewed process to the
detriment of providers.’
, “
At issue in Regions Hospital was the Secretary's “reau-
dit” rule, under which she reaudited GME costs incurred in
a base year to assure that future GME payments would be
accurate. The reaudit rule was designed, in part, to permit
recoupment of prior excess reimbursements for years in
which cost reports had not become final, i.e., within the
three year window. 54 Federal Register 40286, 40302
(1989); 118 S. Ct. at 914. As the Court noted, the revised
costs determined on reaudit were applied to those cost
reporting periods “still open” under Section 405.1885. 118
S. Ct. at 914; 42 C.F.R. § 413.86(e) (1) (iii). The Secre-
tary’s authority to make such adjustments in the interest of
accuracy and within the three year window was not chal-
lenged by the petitioner and was not questioned by the
Court.
The concern for accuracy did not prevail, however, under
HCFA Ruling No. 97-2. After four courts of appeals struck
down an aspect of her calculation of special payments to
DSH providers under 42 C.F.R. § 412.106(b) (4), the Sec-
retary issued a ruling acquiescing in the courts’ interpreta-
tion of the regulation. Application of the courts’ rulings
would have required additional payments to providers. Not-
withstanding the fact that prior determinations made under
'2 Reprinted in {1997-1 Transfer Binder] Medicare & Medicaid
Guide (CCH) $45,105 (1997). HCFA Ruling No. 97-2 can also be
found at its Website, <http://www.hcfa.gov/regs/hr97-2.htm>.
HCFA Ruling No. 97-2 has been attached hereto for the Court's
reference.
'5GME and DSH represent special Medicare payments for hospitals
that are intended to reimburse them for the costs of operating teaching
programs and the high cost of treating unusually large numbers of poor
patients, respectively.
21
the invalid policy were clearly inconsistent with law, and
that reopening was therefore required under the Secretary's
own criteria, HCFA Ruling No. 97-2 directs intermediaries
not to reopen cost reports to pay the additional amounts due.
HCFA Ruling No. 97-2 at 2 (Attachment at a-4).
If the Secretary's position is upheld in this case, she will
avoid administrative and judicial review when reopening
requests are denied based on the directive of HCFA Ruling
No. 97-2, even in those four circuits in which the courts of
appeals have ruled her prior method of determining DSH
payments to be inconsistent with law. Congress could not
have intended to insulate such blatant inequities from judi-
cial scrutiny.'* “Bureaucratic ordering of this sort should not
go unchecked by a reviewing court.” Beverly Hosp. v.
Bowen, 872 F.2d 483, 486 (D.C. Cir. 1989).
IF JURISDICTION IS NOT AVAILABLE UNDER
SECTION 139500, JURISDICTION LIES UNDER 28
U.S.C. § 1331, 28 U.S.C. § 1361 OR 5 U.S.C. § 706
If the Secretary’s construction of Section 139500 is up-
held, amici support petitioner’s assertion that alternative
bases for federal court jurisdiction are available to determine
whether the intermediary abused its discretion in this case.
As noted above, the Court has clearly and consistently
recognized the strong presumption that Congress intends
judicial review of administrative action. Michigan Academy,
476 U.S. at 670; Abbott Laboratories v. Gardner, 387 US.
'*The Secretary in her brief before the Sixth Circuit asserts that she
could do away with the reopening process altogether. (Respondent's
Brief Before the Sixth Circuit at 24 n.9.) While amici question her
authority to do so without articulating a rational basis for the change, it
seems unlikely that she would eliminate a process that is so dramatically
slanted in her favor.
22
136, 140 (1967). The Sixth Circuit in this case relied on the
Court’s holding in Califano v. Sanders to overcome the
presumption, suggesting that because the reopening process
was created by regulation, rather than by statute, the pre-
sumption does not apply. However, the Court’s action in
Immigration and Naturalization Serv. v. Doherty suggests to
the contrary. 502 U.S. 314, 322 (1992). In that case, the
Court reviewed a decision to deny reopening of deportation
proceedings under the abuse of discretion standard even
though the reopening process is derived from regulations.
Indeed, in numerous cases the Court has indicated that a
decision in response to a request to reopen an administrative
determination is subject to review, regardless of whether the
reopening process is established by statute or regulation. See
Locomotive Eng'rs, 482 U.S. at 292 n.7 (Stevens, J., con-
curring), and cases cited therein.
A review of the Court's decisions addressing federal court
jurisdiction over claims arising under the Medicare statute
indicates that, while the Court will scrupulously hold claim-
ants to the statutorily created avenues to judicial review,
where the statute provides no review process, federal ques-
tion jurisdiction will be available. Compare Michigan Acad-
emy, 476 U.S. 667 (1986) (Court found jurisdiction under
Section 1331) with Heckler v. Ringer, 466 U.S. 602
(1984) and Weinberger v. Salfi, 422 U.S. 749 (1975)
(claimants required to exhaust administrative remedies).
Only where there is an unambiguous statement of congres-
sional intent to preclude judicial review altogether, will
access to the courts be denied. Erika, 456 U.S. 201.
Here there is no evidence of a congressional intent to
preclude jurisdiction. Therefore, if the statutorily established
avenue to the courts through the Board is foreclosed in this
case, jurisdiction to address the serious federal question
presented by petitioner must lie under Section | 331. Even if
the Court concludes that Section 139500 does not make
23
denials of reopenings reviewable, this conclusion alone is not
sufficient to support an implication that such denials cannot
be reviewed under other grants of jurisdiction. More specific
evidence of congressional intent to preclude review would be
required to support a jurisdictional bar. Michigan Academy,
476 U.S. at 674.
The Secretary argues that 42 U.S.C. § 405(h) prevents
any resort to Section 1331 as a source of jurisdiction. In the
absence of persuasive evidence of legislative intent to dele-
gate the reopening determination to the unfettered discre-
tion of an intermediary's employee however, the Court
should decline to indulge the government's extreme position
that Congress intended no review at all of the substantial
oy raised by petitioner. Michigan Academy, 476 U.S. at
In concluding that jurisdiction is available to review a
denial of reopening under both Section 1331 and Sec-
tion 1361, the District Court of the District of Columbia
aptly stated:
[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 strangles a pro-
vider's right to judicial review, the Court may
invoke its federal question jurisdiction and manda-
mus power.
Memorial Hosp. v. Sullivan, 779 F. Supp. 1410, 1412
(D.D.C. 1991).
‘*If the Court concludes that all judicial review is precluded in this
case, it will ultimately be faced with the “serious constitutional ques-
tion” that will arise if Section 405(h) denies a judicial forum for
constitutional claims. Michigan Academy, 476 U.S. at 681 n.1 2.
24
In the event that the Court concludes, however, that
review is not available under Section 1331, amici join the
petitioner in urging the Court to find that the district court
may exercise its mandamus power to assure that the Secre-
tary complies with her statutory obligation. In the alterna-
tive, amici urge the Court to reconsider its decision in
Sanders and to find the Administrative Procedure Act, 5
U.S.C., chapter 7, as an independent source of jurisdiction.
AS INTERPRETED BY THE SECRETARY, THE RE-
OPENING REGULATION IS INCONSISTENT
WITH THE MEDICARE STATUTE
The reopening regulation, set forth at 42 C.F.R.
§ 405.1885, permits intermediaries to reopen cost reports
within a three year period. Section 405.1885(c) states that
“(j]urisdiction for reopening a determination or decision
rests exclusively with that administrative body that rendered
the last determination or decision.” Although this section of
the regulation vests discretion with the intermediary to
decide whether to reopen, nothing in this provision discusses
the review of that determination. Oregon v. Bowen, 854 F.2d
at 349.
Section 405.1885(c) cannot be read implicitly to preclude
review of reopening denials. Although the Sixth Circuit
found the regulations “silent as to whether a decision not to
reopen is subject to review,” it deferred to the language in
the Manual that states that a refusal by the intermediary to
grant a reopening request is not appealable to the Board.
Your Home, 132 F.3d at 1138; Manual, supra, at Appen-
dix A to § 2926, § B.4. However, to the extent the Secre-
tary’s interpretation is inconsistent with the statute, it is
unlawful. See, e.g., United States v. Larionoff, 431 U.S. 864,
872-73 (1977). As discussed above, the plain meaning of
the statute, as well as the legislative history, mandate that
25
the Board be able to review all final determinations of the
intermediary as to a provider’s total reimbursement. Ac-
cordingly, the Manual section precluding review is invalid,
and the court’s decision in Your Home must be reversed.
Further, any construction of the regulation itself to prohibit
Board review is also invalid because it directly contradicts
Section 139Soo.
The Sixth Circuit was persuaded to uphold the Secre-
tary’s interpretation of Section 139500 and the reopening
regulation, due in part, to its deference to the Secretary.
Deference to the Secretary's interpretation, however, is
inappropriate in this case. Courts remain the final authority
on issues of statutory construction, and deference must yield
to the clear meaning of the statute as revealed by its
language, purpose and history. Chevron, 467 U.S. at 843 n.9.
See also, Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123,
1130 (7th Cir. 1989), modified, 866 F.2d 228 (7th Cir.
1989). bm ae is clear that the Board has jurisdiction
over any rmination of the intermediary regarding a
provider's Medicare reimbursement. An interpretation on
conflicts with the statute is not entitled to deference. See
Washington Hosp. Ctr. v. Bowen, 795 F.2d 139, 143 (D.C.
Cir. 1986), citing Chevron, 467 U.S. at 842 (“If the intent
of Congress is clear, that is the end of the matter.”).
Even if the Court concludes that Section 139500 is
ambiguous, however, no particular deference to the Secre-
tary is warranted in this case. The traditional deference
granted to agency interpretations is based on the Court's
respect for the agency’s special competence regarding mat-
ters within its area of expertise. Procedural issues, however,
do not implicate that special competence and therefore are
subject to less deference. See e.g, Nealon v. California
Stevedore & Ballast Co., 996 F.2d 966, 969 (9th Cir. 1993).
Because this issue pertains to an interpretation of the
Board’s jurisdiction, rather than the complexities of the
26
Medicare program, this Court need not accord any particu-
lar deference to the Secretary’s contention that the Board
lacks jurisdiction over reopening denials. Tallahassee Mem'l
Reg'l Med. Cir. v. Bowen, 815 F.2d at 1458 (Because
Section 139500 is a jurisdictional statute—“a type of
statute with which courts are quite familiar” — rather than
one involving the Secretary’s interpretation of a “technical
and complex” area, the court accorded less deference in
order to “carefully consider any agency action that poten-
tially has the effect of barring access to the federal courts.”)
Cf, Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994) (Deference warranted because Medicare regulation
regarding anti-distribution principle concerned “a complex
and highly technical regulatory program” in which the
identification and classification of relevant criteria required
significant expertise.) (quoting Pauley v. BethEnergy Mines,
Inc., 501 U.S. 680, 697 (1991)).
As interpreted by the Secretary in the Manual, supra,
Section 405.1885(c) is inconsistent with the plain language
of the statute. The Court should find that 42 C.F.R.
§ 405.1885(c) does not preclude the Board’s jurisdiction
over reopening denials.
CONCLUSION
Amici urge the Court to adopt the reasoning of the Ninth
Circuit in Oregon v. Bowen, rejecting the Secretary's inter-
pretation of Section 139500 as inconsistent with the statute
and congressional intent. Alternatively, the Court should
find jurisdiction in the federal district court to review the
denial of petitioner's claim under general federal question
27
jurisdiction, the court's mandamus powers or under the
Administrative Procedure Act.
Dated: July 29, 1998 Respectfully submitted,
DENISE Rios RODRIGUEZ
Counsel of Record
AMY BLUMBERG HAFEY
FoLey & LARDNER
Altorneys for Amici Curiae
The American Hospital
Association and the
Federation of American
Health Systems
4
Se a ee os com
‘ — _——— *
= oF
—
——=—
as
ee ee
Ruling No. 97-2
Date: February 1997
This Ruling states the policy of the Health Care Financing
Administration concerning the determination to change its
interpretation of section 1886(d)(5)(F)(vi) (II) of the So-
cial Security Act (the Act) and 42 CFR 412.106(B)(4) to
follow the holdings of the United States Courts of Appeals
for the Fourth, Sixth, Eighth, and Ninth Circuits. Under the
new interpretation, the Medicare disproportionate share ad-
justment under the hospital inpatient prospective payment
system will be calculated to include all inpatient hospital
days for service for patients who were eligible on that day for
medical assistance under a State Medicaid plan in the
Medicaid fraction, whether or not the hospital received
payment for those inpatient hospital services. _
MEDICARE PROGRAM
Hospital Insurance (Part A).
INTERPRETATION OF MEDICAID DAYS _IN-
CLUDED IN THE MEDICARE DISPROPORTION-
ATE SHARE ADJUSTMENT CALCULATION
PURPOSE: This Ruling announces the Health Care Fi-
nancing Administration’s (HCFA) determination to change
its interpretation of section 1886(d)(5)(F)(vi)(I1) of the
Social Security Act (the Act) and 42 CFR 412.106(B) (4)
to follow the holdings of the United States Courts of
Appeals for the Fourth, Sixth, Eighth, and Ninth Circuits.
Under the new interpretation, the Medicare disproportionate
share adjustment under the hospital inpatient prospective
payment system will be calculated to include all inpatient
hospital days of service for patients who were eligible on that
day for medical assistance under a State Medicaid plan in
a-2
the Medicaid fraction, whether or not the hospital received
payment for those inpatient hospital services.
CITATIONS: Section 1886(d)(5)(F) of the Social Se-
curity Act and 42 CFR 412.106(b) (4).
PERTINENT HISTORY: The Medicare disproportionate
share hospital (DSH) adjustment calculation, which is set
forth in section 1886(d)(5)(F) of the Act, has been the
subject of a substantial amount of litigation. The adjustment
is calculated by determining a hospital's disproportionate
patient percentage which is the sum of two fractions, the
Medicare fraction and the Medicaid fraction. In the Medi-
care fraction, the number of patient days for patients who
(for those days) were entitled to both Medicare Part A and
Supplemental Security Income (SSI) under Title XVI of
the Act is divided by the total number of patient days for
patients entitled to Medicare Part A for that same period.
The Medicaid fraction consists of the number of patient
days for patients who for those days “were eligible for
medical assistance under a State plan approved under Ti-
tle XIX [Medicaid] but who were not entitled to benefits
under Medicare Part A” (section 1886(d)(5)(F) (vi) (11)
of the Act), divided by the total number of patient days for
that same period. The Medicaid fraction is the subject of
this ruling.
In implementing the calculation of the Medicaid fraction,
HCFA interpreted the statutory language to include as
Medicaid patient days only those days for which the hospital
received Medicaid payment for inpatient hospital services.
This interpretation has been considered by the courts of
appeals in four judicial circuits. The initial issue in the
litigation was whether HCFA should have counted days for
patients who had been found to be Medicaid eligible, but
who had exceeded Medicaid coverage limitations on inpa-
tient hospital days of service (and, consequently, no Medi-
caid payment was made for those days). In later cases,
a-3
plaintiffs challenged HCFA’s exclusion of any days of inpa-
tient hospital services for patients who met Medicaid eligi-
bility requirements, regardless of the reason for which no
Medicaid payment was made. In each of the cases, the court
declined to uphold HCFA’s interpretation, reasoning that
the statutory language “eligible for medical assistance”
would include days on which the patient meets Medicaid
eligibility criteria regardless of whether payment is made.
Although HCFA believes that its longstanding interpreta-
tion of the statutory language was a permissible reading of
the statutory language, HCFA recognizes that, as a result of
the adverse court rulings, this interpretation is contrary to
the applicable law in four judicial circuits.
In order to ensure national uniformity in calculation of DSH
adjustments, HCFA has determined that, on a prospective
basis, HCFA will count in the Medicaid fraction the num-
ber of days of inpatient hospital services for patients eligible
for Medicaid on that day, whether or not the hospital
received payment for those inpatient hospital services. This
would not include days for which no Medicaid payment was
made because of the patient’s spenddown liability, because
an individual was not eligible for Medicaid at that point.
Pursuant to this Ruling, Medicare fiscal intermediaries will
determine the amounts due and make appropriate payments
through normal procedures. Claims must, of course, meet
all other applicable requirements. This includes the require-
ment for data that are adequate to document the claimed
days. The hospitals bear the burden of proof and must verify
with the State that a patient was eligible for Medicaid (for
some covered services) during each day of the patient's
inpatient hospital stay. As the intermediaries may require,
hospitals are responsible for and must furnish appropriate
documentation to substantiate the number of patient days
claimed. Days for patients that cannot be verified by State
a-4
records to have fallen within a period wherein the patient
was eligible for Medicaid cannot be counted.
We will not reopen settled cost reports based on this issue.
For hospital cost reports that are settled by fiscal in-
termediaries on or after the effective date of this ruling,
these days may be included. For hospital cost reports which
have been settled prior to the effective date of this ruling,
but for which the hospital has a jurisdictionally proper
appeal pending on this issue pursuant to cither 42 CFR
405.1811 or 42 CFR 405.1835, these days may be included
for purposes of resolving the appeal.
RULING: For all cost reporting periods beginning on or
after February 27, 1997, the Medicare disproportionate
share adjustment will be determined by including in the
calculation of the Medicaid fraction set forth in section
1886(d)(5)(F)(vi) (11) of the Act the additional days as
set forth above.
IV. EFFECTIVE DATE
This Ruling is effective February 27, 1997.
Dated: 2/27/97
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.