Opposition Brief — Neiman v. Sullivan

, Supreme Court. U.S. 7

pee a.

FEB 16 1990

No. 89-811 JOSEPH F. SPANIOL, JR.

—_——_

Iu the Supreme Court of the United States

OCTOBER TERM, 1989

MARVIN NEIMAN, d/b/a/ CONCOURSE

NURSING HOME, PETITIONER

we

LouIs W. SULLIVAN, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

ANTHONY J. STEINMEYER

FRANK A. ROSENFELD

Attorneys

Departinent of Justice

Washington, D.C. 20530

(202) 633-2217

QUESTION PRESENTED

Whether the district court erred in holding that it

lacked jurisdiction to consider petitioner’s allegation

that the Medicare fiscal intermediary improperly

failed to consider petitioner’s claims for reimburse-

ment under Part B of the Medicare Act.

(I)

TABLE OF CONTENTS

Page

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Teen hie inal a saaliggbbaeans 6

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TABLE OF AUTHORITIES

Cases:

Anderson V. Occidental Life Insurance Co., 727

I I ME, asec scsccccsnensanncesscmennnectd 11

Association of Seat Lift Manufacturers v. Bowen,

858 F.2d 308 (6th Cir. 1988), cert. denied, 109

i 7 aaaahebehasnene 6

Bivens v. Six Unknown Named Agents of Federal

Bureau of Narcotics, 403 U.S. 388 (1971)........ 5,9

Bowen Vv. Michigan Academy of Family Physi-

i cansnsnnsennsenenens 2,4, 6,7

Bush v. Lucas, 462 U.S. 367 (1988) ..........00000.00... 9

Kuritzky v. Blue Shield of Western New York,

Inc., 850 F.2d 126 (2d Cir. 1988), cert. denied,

SI) WO TO as scsinciietseninnnmsinnibbbnnnnias 4,6

Peterson V. Weinberger, 508 F.2d 45 (5th Cir.),

cert. denied, 423 U.S. 880 (1975) 0.0.0.0... 11

Schweiker v. Chilicky, 108 S. Ct. 2460 (1988)........ 5,9

Texas Medical Ass’n Vv. Sullivan, 875 F.2d 1160

(5th Cir.), cert. denied, 110 S. Ct. 573 (1989)... 6

United Stoves v. Erika, Inc., 456 U.S. 201 (1982).. 2, 3, 4,

6, 11

Ysasi V. Rivkind, 856 F.2d 1520 (Fed. Cir. 1988).. 10

Statutes and regulations:

Medicare Act:

Ee ee 3, 6, 10

42 U.S.C. 1895ff (Supp. V 1987) .......0.. 8, 10

42 U.S.C. 1895ff (b) (Supp. V 1987) ........000000.... 3

REISS Sa eee 3, 10

42 U.S.C. 1395j-1395w (1982 & Supp. V 1987) .. 2

(III)

IV

Statutes and regulations—Continued : Page

42 U.S.C. 1895k (1982 & Supp. V 1987) ........... 2

ee erie I aia cccesemicceesssnnntsancecstens 2

Omnibus Budget Reconciliation Act of 1986, Tit.

IX, Pub. L. No. 99-509, 100 Stat. 1969:

§ 9341 (a), 100 Stat. 2037-2038 2.0... 3

§ 9341 (b), 100 Stat. 2088 ........... 3

Oe rn IE weethetiicctcsnidanneisenencecieoiapianctiisanshserniabbaions 10

42 C.F.R.:

EG | ee

Section 406.262(a) (1986) ................................

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Iu the Supreme Court of the United States

OCTOBER TERM, 1989

No. 89-811

MARVIN NEIMAN, d/b/a/ CONCOURSE

NURSING HOME, PETITIONER

VU.

Louis W. SULLIVAN, SECRETARY OF

HEALTH AND HUMAN SERVICES, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The decision of the court of appeals (Pet. App.

A22-A23) is unpublished, but the decision is noted at

888 F.2d 126 (table). The orders of the district

court (Pet. App. Al-A8, A9-A20) are reported at

722 F. Supp. 950 and 722 F. Supp. 954.

(1)

2

JURISDICTION

The judgment of the court of appeals was entered

on September 15, 1989. The petition for a writ of

certiorari was filed on November 15, 1989. This

Court has jurisdiction under 28 U.S.C. 1254(1).

STATEMENT

1. Medicare Part B is a voluntary supplemental

insurance program that provides reimbursement for

certain physician and related ancillary services. 42

U.S.C. 1395k (1982 & Supp. V 1987). Private in-

surance carriers administer Part B benefits under

contracts with the Secretary of Health and Human

Services (HHS). 42 U.S.C. 1395u(a)(1):; United

States v. Erika, Inc., 456 U.S. 201, 202-204 (1982);

Bowen v. Michigan Academy of Family Physicians,

476 U.S. 667, 674-675 (1986). The carrier reim-

burses Medicare patients, or their providers as as-

signees, for 80° of the “reasonable charges” for

services as determined by the carrier in accordance

with the Medicare statute and regulations promu!-

gated by the Secretary. 42 U.S.C. 1395j-1395w

(1982 & Supp. V 1987).

In order to be eligible for payment, either the

beneficiary or the institution that provided the med-

ical services to the beneficiary (the provider) must

submit a timely claim to the carrier. 42 C.F.R.

405.250 (1986). Providers must furnish all neces-

sary information to the carrier to allow the carrier

to determine reimbursement. 42 C.F.R. 405.252 (a)

(1986). If the carrier denies a claim, the provider

may request review from the carrier within six

months of the denial. 42 C.F.R. 405.807, 405.810.

See Erika, 456 U.S. at 208. If the carrier denies the

claim after this review, the provider may within six

months request an oral hearing if the amount in con-

3

troversy exceeds $100. 42 C.F.R. 405.820. See

Erika, 456 U.S. at 203. In addition, if the carrier

fails to act on an initial claim within 60 days of its

receipt, the provider may request initial determination

of the claim at an oral hearing. 42 C.F.R. 405.801

(a) and (b), 405.803(a), 405.820(d). During the

time period relevant to this dispute, the Act did not

provide for administrative review by the Secretary

or for judicial review of the carrier’s final determi-

nation whether a particular claim was covered by

Part B or of the amount of reimbursement due under

Part B. 42 U.S.C. 1395ff, 1395ii; Erika, 456 U.S. at

206-211."

2. Petitioner is the sole owner and operator of a

skilled nursing facility. Respondent Travelers In-

surance Company acted as the carrier for petitioner's

Medicare claims. Pet. App. Al. For the years 1976

to 1979, petitioner submitted to the carrier a number

of claims for Medicare reimbursement under both

Parts A and B. 7d. at A9. In count six of his com-

plaint (the only claim on which petitioner seeks re-

view in this Court), petitioner alleged that the car-

rier “intentionally, maliciously, and wantonly” re-

fused to process 2200 bills submitted by petitioner

for reimbursement under Part B for physical and

speech therapy services provided to over four hun-

dred patients in petitioner’s nursing facility (Pet.

1 In 1986, Congress amended 42 U.S.C. 1395ff(b) (Supp. V

1987) to permit judicial review of Part B benefit amount

determinations where the amount in controversy is $1000 or

more. Omnibus Budget Reconciliation Act of 1986, Pub. L.

No. 99-509, Tit. IX, § 9841 (a), 100 Stat. 2037-2038. However,

those amendments apply only to services furnished on or after

January 1, 1987. §9341(b), 100 Stat. 2038. Because the

services at issue in the instant case were rendered prior to

that date, the 1986 amendments do not apply here.

4

App. A2-A3; Gov’t C.A. Br. 17). The Secretary, on

behalf of himself and the carrier, responded to these

allegations, inter alia, by arguing that, in accordance

with this Court’s decision in Erika, the district court

lacked jurisdiction to review these claims. Gov't C.A.

Br. 20-27. With regard to the 2200 bills allegedly

not processed, the Secretary also asserted, based on

the documentation that petitioner provided, that the

allegations were frivolous on their face. The Secre-

tary pointed to evidence that the carrier had re-

viewed and either approved or denied bills submitted

on 343 patients, and had determined that another set

of bills lacked the proper documentation needed for

processing. With regard to the remaining group of

allegedly unprocessed bills representing claims on 33

patients, the Secretary explained that petitioner had

failed to exhaust administrative remedies in that he

had not requested a hearing within 60 days of sub-

mission of the bills to complain of failure to process.

See Gov’t C.A. Br. at 17-19. See also p.3, supra (reg-

ulations governing appeals to carrier for failure to

process claims).

3. The district court dismissed count six for lack

of jurisdiction (Pet. App. Al-A8). The court relied

on the distinction recognized by this Court in United

States v. Erika, supra, and Bowen v. Michigan Acad-

emy, supra, between a claim “merely that the insur-

ance carrier misapplied or misinterpreted valid rules

and regulations,” which is unreviewable, and “a

challenge to the validity of an agency rule or regula-

tions,” over which federal courts have jurisdiction.

Pet. App. A3 (quoting Kuritzky v. Blue Shield of

Western New York, Inc., 850 F.2d 126, 128 (2d Cir.

1988), cert. denied, 109 S. Ct. 787 (1989)). The

court concluded that petitioner “‘cannot escape the

5

reach of Erika by characterizing the action against

Travelers as an ‘ultra vires’ claim.” Jbid. It ob-

served that petitioner was not seeking “to invalidate

the methods by which carriers review and process

claims,” Pet. App. A4, “but had alleged only that the

carrier “failed to follow the proper procedures and

thereby deprived him of amounts legally reimburs-

able.” bid. The court concluded that “[t]his is pre-

cisely the type of matter which is left to review by

the carrier in a ‘fair hearing’ conducted pursuant to

$ 1395u(b)(3)(C), see Michigan Academy, supra,

476 U.S. at 678, and which is precluded from review

by Erika, supra.” Pet. App. A4.

The court also rejected petitioner’s theory that, by

allegedly denying him due process of law, the car-

rier’s actions could be challenged as a constitutional

tort under Bivens vy. Six Unknown Named Agents of

Federal Bureau of Narcotics, 403 U.S. 388 (1971).

The district court relied on Schweiker v. Chilicky,

108 S. Ct. 2460 (1988), in which this Court held that

no Bivens remedy was available for actions based on

claims for benefits under the social security disabil-

ity program, because Congress has already created

an elaborate system for review of those claims. The

district court concluded that a Bivens remedy like-

wise is unavailable here, where “Congress hals]

similarly created an elaborate and comprehensive

scheme for health care providers” to obtain review

of claims for reimbursement under Part B. Pet.

App. A6. The court of appeals affirmed without an

opinion, “for substantially the reasons stated by the

district court” (Pet. App. A23).

6

ARGUMENT

The unpublished order of the court of appeals

affirming the decision of the district court correctly

applies this Court’s rulings regarding review of Med-

icare Part B claims and does not conflict with any de-

cision of another court of appeals. The issue pre-

sented here is also of little continuing importance in

light of Congress’s intervening amendment of 42

U.S.C. 1395ff to permit judicial review of benefit

amount determinations under Part B of Medicare.

This Court has recently denied review in three other

cases raising similar issues of the reviewability of

Part B claims, see Texas Medical Ass’n vy. Sullivan,

875 F.2d 1160 (5th Cir.), cert. denied, 110 S. Ct. 573

(1989): Kuritzky v. Blue Shield of Western New

York, Inc., 850 F.2d 126, 128 (2d Cir. 1988), cert.

denied, 109 S. Ct. 787 (1989); Association of Seat

Lift Manufacturers v. Bowen, 858 F.2d 308 (6th Cir.

1988), cert. denied, 109 S. Ct. 1528 (1989). There

is no reason for a different disposition here.

1. a. In United States v. Erika, supra, this Court

held that 42 U.S.C. 1395ff precludes judicial review

of Part B reimbursement determinations. Michigai

Academy, 476 U.S. at 674-678, carves out an excep-

tion to that rule for direct challenges to the Secre-

tarv’s regulations and directives that prescribe the

method to be used by the carrier in making reim-

bursement determinations and calculating Part B

benefits. As the Michigan Academy Court explained,

476 U.S. at 677-678, such methods bind the carrier

hearing officer; therefore their legality cannot be

considered in a carrier hearing. The district court

correctly applied these principles to the particular

circumstances of this case.

Petitioner seeks to evade the distinction between a

misapplication by the carrier of the Secretary’s reg-

7

ulations, and a challenge to those regulations them-

selves, by complaining that the carrier’s deliberate

refusal to process or review his claims has effectively

denied him the administrative process prescribed by

Congress. Petitioner argues that when a carrier re-

fuses to process claims, there is, by definition, no

“fair hearing” or any other action by the carrier on

the claims. Thus, petitioner asserts, an action based

on the contention that a carrier has refused to proc-

ess claims cannot possibly be a “matter[] which Con-

gress * * * [left] to be determined in a fair hearing

conducted by the carrier.” Michigan Academy, 476

U.S. at 678.

The courts below were correct to reject petitioner’s

novel theory. At bottom, petitioner’s dispute is not

with the Secretary’s regulations but only with the ac-

tions of the carrier in applying those regulations to

the handling of petitioner’s claims. As such, it falls

squarely within Frika’s proscription rather than

Michigan Academy’s exception. Even assuming ar-

guendo the truth of petitioner’s allegations that the

carrier wantonly refused to process his claims or his

appeals—allegations conclusively refuted by the Sec-

retary in the district court—his charge still amounts

to nothing more than a claim that the carrier mis-

applied the procedures prescribed by the Secretary

for processing and reviewing Medicare Part B

claims. For the purpose of applying the distinction

established in Erika and Michigan Academy, an alle-

gation that the carrier has failed to process a claim

is no different from any other assertion that the

carrier did not properly follow the Secretary’s proce-

dural regulations in some particular manner. Nor is

it appreciably different from a routine claim that the

carrier erred in applying the Secretary’s substantive

regulations on such questions as the calculation of the

3

reasonable fee for services, or whether services are

covered or medically necessary. In all these situa-

tions, whether procedural or substantive, the carrier

can be wrong, even patently and egregiously wrong.

However, so long as the claimant is not asserting the

illegality of the Secretary’s regulations or procedures

themselves, Congress has determined that the carrier

has the last word, and the courts are without author-

ity to intervene.

b. At any rate, the issue concerning the precise

dividing line between claims that are precluded by

Erika and those that are allowed by Michigan Acad-

emy is of little continuing importance since Congress

has amended 42 U.S.C. 1395ff to permit judicial re-

view of benefit amount determinations under Part B

where the aggregate amount in controversy is $1000

or more. This new provision means that in the fu-

ture, if any provider wishes to assert that the carrier

refused to process his claims for reimbursement or

to hear his appeal, he can proceed to the district

eourt.©. Moreover, even with regard to still-pending

claims for services provided prior to January 1,

1987, this case is too unimportant to warrant this

Court’s attention. Petitioner has not cited any prior

reported case in which a provider or a beneficiary

2 Although the amended Section 1395ff allows district court

review of a decision to deny a claim only after a hearing, any

future provider who alleges that_he was wrongfully denied a

hearing will be able to allege and prove that the carrier failed

to provide him with the required hearing even though he took

all necessary steps to request a hearing, either after an initial

denial and the carrier’s decision to uphold the denial after

review, or after the provider requested an oral hearing when

the carrier failed to act on his claim within 60 days. If the

district court agrees with such an allegation, it presumably

will remand the claim to the carrier for the required hearing.

9

alleged that the carrier had failed to process his

claim or his appeal, and we are aware of no such

prior or pending cases. There is thus no reason for

this Court to decide whether judicial review of this

peculiar type of claim is precluded.

2. Petitioner also alleges that because his claim is

based in part on denial of due process, the district

court had jurisdiction over his claim that the carrier

committed a constitutional tort under Bivens v. Six

Unknown Named Agents of Federal Bureau of Nar-

cotics, 403 U.S. 388 (1971). The district court re-

jected this contention, relying on Schweiker v.

Chilicky, 108 S. Ct. 2460 (1988). There, this Court

held that a Bivens remedy was not available for ac-

tions based on claims for benefits under the social se-

curity disability program, because Congress has al-

ready created an elaborate system for review of those

claims. The statutory provisions and the Secretary’s

regulations similarly establish elaborate procedures

for processing Part B claims and appealing their

denial—procedures that this Court held in Erika

were intended by Congress to be exclusive. As this

Court explained in Chilicky and in Bush vy. Lucas,

462 U.S. 367 (1983), courts should not create a new

remedy of constitutional dimension when Congress

has already created a remedy that it deems adequate.

Allowing a Bivens remedy for an alleged procedural

violation involving a Part B claim would undermine

Congress’s decision to provide a comprehensive ad-

ministrative scheme for handling these claims.

Petitioner’s allegation that the carrier here “frus-

trated” the application of the Part B administrative

scheme is similarly unavailing. The inquiry under

Bush and Chilicky is not over whether the plaintiff

actually received relief under the alternative remedy,

but whether it is appropriate for the courts to create

10

a new type of remedy when Congress already pro-

vided an adequate one through a comprehensive ad-

ministrative scheme.* Petitioner’s allegation that the

available remedy in the instant case was not actually

provided to him is not a challenge to the adequacy of

the administrative remedy prescribed by Congress,

but only a challenge to the application of the remedial

procedures in his own case.*

3 Petitioner cites (Pet. 6 n.1) a decision of the Federal Cir-

cuit (not the D.C. Circuit, as he contends) holding that

Chilicky does not apply where the defendant has ‘‘frustrated”

the alternative avenue of relief. Ysasi v. Rivkind, 856 F.2d

1520, 1528 (Fed. Cir. 1988). In that case, however, the plain-

tiff alleged that a Border Patrol agent frustrated his ability

administratively to challenge the seizure of his truck by turn-

ing the truck over to the finance agency, which apparently

mooted the administrative appeal. in the present case, in

contrast, petitioner simply asserts that the carrier failed to

provide him with the process required by regulation—that is,

that the body charged with providing the remedy created by

Congress erred in carrying out its duty with regard to peti-

tioner’s claims.

4 At any rate, the amendment of Section 1395ff to provide

judicial review of Part B claims for services provided after

January 1, 1987, means that the question of the availability

of a Bivens remedy for Part B claims in the absence of direct

judicial review, like the statutory issue, has little prospective

importance.

In footnotes, petitioner raises two other grounds for juris-

diction. First, he mentions mandamus as a possible means to

avoid the preclusion of review in 42 U.S.C. 1395ff, and 1395ii

(which provides that judicial review of Medicare Act claims

shall be limited in accordance with the terms of 42 U.S.C.

405(h)) (Pet. 6 n.2). This Court has not definitively ad-

dressed, in the wake of Michigan Academy, whether man-

damus jurisdiction might be available over actions such as

petitioner’s involving Medicare Part B claims. However,

there is no reason for the Court to consider the issue here,

11

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

ANTHONY J. STEINMEYER

FRANK A. ROSENFELD

FEBRUARY 1990 Attorneys

where the possibility is only casually invoked by petitioner in

his petition, and apparently was neither presented nor argued

to the district court or the court of appeals. See Plaintiff-

Appellant C.A. Br.

Petitioner also cites diversity jurisdiction (Pet. 7 n.3) as

a possible basis for federal judicial review. First of all, there

is a serious question whether the parties here could satisfy the

requirement of diversity, since the carrier is not a proper

defendant in its own right but stands in the shoes of the

Secretary. See Erika, 456 U.S. at 206 n.4; Anderson Vv. Occi-

dental Life Insurance Co., 727 F.2d 855, 856 (9th Cir. 1984) ;

Peterson V. Weinberger, 508 F.2d 45, 50-52 (5th Cir.), cert.

denied, 423 U.S. 880 (1975). In any event, the Act’s carefully

drawn provisions, which the Court in Erika, 456 U.S. at 206-

211, held evince a clear congressional intent to bar judicial

review of the carrier’s determination of the amount of bene-

fits payable under Part B, equally preclude diversity as well

as federal question jurisdiction.

TU. S. GOVERNMENT PRINTING OFFICE; 1990 262203 762