Opposition Brief — Allemnore Community Hospital v. United States

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In the Supreme Court of the United States

OCTOBER TERM, 1996

ALLEMNORE COMMUNITY HospIrAL, INC., ET AL.,

PETITIONERS

VU.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WALTER DELLINGER

Acting Solicitor General

FRANK W. HUNGER

Assistant Attorney General

ANTHONY J. STEINMEYER

BRIAN M. SIMKIN

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

(ZUESTION PRESENTED

Whether the Tucker Act, 28 U.S.C. 1491, provides

for review of claims by providers of Medicare services

when 42 U.S.C. 139500 of the Medicare Act provides

for administrative and judicial review of such claims.

(I)

TABLE OF CONTENTS

Page

STII SHEUND cinue-cobensecndesubseabenbesnsenssesebvesunnennsebeineutenhes 1

i ce Lr eceenalanaetens 1

IID Qablabhntcilidbasuies sientenickslotatbebebenbectdbabibbbbsedrersiebiin 2

SIE bnenidcithetathakinntosndapeetistueterenietinvetinaniienaionetaetes 7

SUUIEIIDIIIET. Goahitcnsasighabetnpvcabueanvactpan gids dinasstaneniiniatesannicaunben ll

TABLE OF AUTHORITIES

Cases:

Alvarado Community Hosp. v. Shalala, No. CV

94-0972 (C.D. Cal. May 3, 1996), appeal pending,

I a il nchainloens 10

Bethesda Hosp. Ass’» v. Bowen, 485 U.S. 399

CUIUUIEE iaesthantubiinetennanntsdetabuindincasadidlintigiidienemaliceustvees 5, 6

Block v. Community Nutrition Inst., 467 U.S. 340

GEIIUD concienndiabbinibeersentanerarinnsenrsiisubinedeaiciagnteateiinesseis i)

Bowen v. Michigan Academy of Family Physicians,

eT anneeneale 7,8

Brown v. General Services Admin., 425 U.S. 820

UII . Gicancchiinadllniaaiabnandimmbivesnebaiitatabinaduapatdhereanamens 8)

Good Samaritan Hosp. v. Shalala, 508 U.S. 402

UIT dureibiepheath inhale tanith hciratanieanatibialtl nin nh masieebinacihbinitions 2

Heckler v. Ringer, 466 U.S. 602 (1984) ................08 11

Preiser v. Rodriguez, 411 U.S. 475 (1978) ............... i)

Preseault v. Interstate Commerce Comm’n,

ec i IEE . cnipeieenescdlch didn celeinigabablindviednatienemnanaeds )

Ruckelshaus v. Monsanto, 467 U.S. 986 (1984) .. 9 11

St. Vincent’s Med. Ctr. v. United States, 32 F.3d

ee es Ga: THEIPUEP nnuicradimicnidedthdunbidsonssbiandcsiasbidarbenes 6

Stonite Products Co. v. Melvin Lloyd Co., 315 U.S.

a a a al SR ty CE ET OO

United States v. Demko, 385 U.S. 149 (1966) .........

United States v. Erika, Inc., 456 U.S. 201 (1982) ..

United States v. Fausto, 484 U.S. 439 (1988) .........

oof ©

(IID

Constitution, statutes and regulations: Page

U.S. Const. Amend. V (Just Compensation Clause) .. 9

Act of Oct. 26, 1974, Pub. L. No. 93-484, § 3(a),

Oe TE ED ancstaenistinisspieedsitishentedaiihienteneiesnitiin 8

Social Security Act, 42 U.S.C. 301 et segq.:

Tit. II, 42 U.S.C. 405(h) (§ 205(h)) ..........eeeeeeeeees 4, 7,8

Tit. XVIII (Medicare Act), 42 U.S.C. 1395 et seg. .. 2

SD UE ae SU seitnnienintbiesiivtiknniicah cingniosininasinatiaiatniain 4

OB ULL, TORO cessicnseocsnrememiviomncinnnnanes 7

Ge WE BE eerrricenpeninsetnamiviscineniinontepasiandiaien 4,7

GD URE BO Gintrncsvisnsitnrncdncevrins 5, 6, 7, 8, 9, 10, 11

GS SERA: ID etiivcistnitcieteitanticnithainsecinconicoatinl 10

42 U.S.C. 139500(a)(1)(A)() ..........ccccsecssreeesneeeeees 5

42 U.S.C. 139500(a)(1)(A)(ii) ...........ecceeessessseeseeees 5

GB CDK) TROD ticcstsccaveivintictithtiicianivens 5

GR Ua SED Strennnceerieniinnnnnia 5

TED NE D tcectesescssasesccssanpnnicnedtatbiniee 8

Ge Uh ks SIGE EA. tekesictgntncnreGoitheiecseniariernns 5, 6, 10

Ge Ui SED teviinitiecenciensntsirneivitiinintainignn 5

Oe Fak: SINE Sethsitiitnbptinisnancdvernsahrnaimannnnnnnaicngs 2

42 U.S.C. 1895 ww(d)2)(E) ...........cccccoscssssccsssssene 3

42 U.S.C. 1895wWw(d)(3)(B) ............sscssccsscssseeseees 3

42 U.S.C. 1895ww(d)(5)(A) ........ccccccrcssccccccccsesees 2, 10

42 U.S.C. 1895Ww(d)(S)(A)GIV) .......eeeeeeceeeeeeeees 2, 10

Social Security Amendments of 1972, Pub. L. No.

92-603, § 243(a), 86 Stat. 1420 ..............ccccccsssceeeseeeees 8

Social Security Amendments of 1983, Pub. L. No.

SA BEF TUR. GB sae cscs iiistnnctecnsish incdinbbnis ceived 2

Tucker Act, 28 U.S.C. 1491(a)(1) ..............cceccsccsesceces 6

42 C.F.R.:

Section 405.1803

Section 405.1807

Section 405.1809(a)

Section 405.1809(b)(2)

Section 405.1841(b)

Section 413.20

Section 413.60

SPOS OSSHSE SESS OHHH ESTEE SE EEE HOH EEESEH ECE EES

SOHO SHESHSOSHEEHEH EERE SE OSER ESE RE SETS EEE EEE

SSOP SESH EEE E SEES EEEESE SES EEOEH SEEDER EEE O EES

SRST EES SEEHEEEEEHESESE TEETH EES E REE OOS

SPOTS E HE EEEH OSES TEE SHEE DESH OHO ERS

SOSH HEH SSSHESCHEE HEHE SESE HEHEHE ESE SET ESES

oO & OFT or or or or

SPER OH EES SHEETS ES ESE SESH ORE SEEOSESOES

Miscellaneous: Page

48 Fed. Reg. 39,776-39,777 (1983) ..........cccccccseeseseseeses 3

49 Fed. Reg. (1984):

ED, SED cncicecneginteseninapetnsitininossnnessseqnicamennevecenesens 3, 10

50 Fed. Reg. 35,708-35,710 (1985) ...........:cccccceeeeeeeeeees

51 Fed. Reg. 31,523-31,525 (1986) ...........cscccecsserereeees

52 Fed. Reg. 33,047-33,049 (1987) .............sssccceeseceeeees

53 Fed. Reg. 38,504-38,510 (1988) .............sesceseseeeeeeees

54 Fed. Reg. 36,498-36,500 (1989) ...........cccccsccceeeseeeees

55 Fed. Reg. 36,075-36,077 (1990) ..............csssessssesesees

OS Fie, Be, Gee GEE) scancnccccccsercccesrsesatorserccenesee

S. Rep. No. 1230, 92d Cong., 2d Sess. (1972) ..............

onrnrh kh & hb hb h

at ee EE A

Jn the Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-578

ALLEMNORE COMMUNITY HospITAL, INC., ET AL.,

PETITIONERS

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The order of the court of appeals (Pet. App. 1-2) is

unpublished, but the decision is noted at 92 F.3d 1206

(Table). The opinion of the United States Court of

Federal Claims (Pet. App. 5-7, 9-10) is reported at 32

Fed. Cl. 608. The orders of the United States Court

of Federal Claims (Pet. App. 11-12) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on

July 9, 1996. The petition for a writ of certiorari was

filed on October 7, 1996. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

(1)

STATEMENT

1. Title XVIII of the Social Security Act estab-

lishes a federally funded health insurance program

for the elderly and disabled known as Medicare. See

42 U.S.C. 1395 et seg. (the Medicare Act). The Secre-

tary of Health and Human Services (the Secretary)

has delegated administrative responsibility for the

program to the administrator of the Health Care

Financing Administration (HCFA). The Social Secu-

rity Amendments of 1983 amended 42 U.S.C. 13895ww

and replaced the “reasonable cost” system of reim-

bursing provider hospitals with a Prospective Pay-

ment System, under which payment rates generally

are established without regard to a hospital’s actual

costs. See Good Samaritan Hosp. v. Shalala, 508

U.S. 402, 406 n.3 (1993).

Section 1395ww also provides for additional pay-

ments in “outlier” cases in which a patient’s hospital

stay is unusually lengthy or costly when compared to

most discharges classified within the same discharge

related group (DRG). 42 U.S.C. 1395ww(d)(5)(A). The

Secretary is required to establish payment crite-

ria applicable to all Medicare hospitals for outlier

cases prior to each federal fiscal year. bid. The total

amount of outlier payments made under Section

1395ww(d)(5)(A) for discharges in a fiscal year “may

not be less than 5 percent nor more than 6 percent of

the total payments projected or estimated to be made

based on DRG prospective payment rates for dis-

charges in that year.” 42 U.S.C. 1395ww(d)(5)(A)(iv).

For each fiscal year since 1984, the Secretary has

established prospective outlier payment criteria so

that nationwide outlier payments were expected to

equal between five and six percent of total PPS in-

patient services payments. See, e.g., 48 Fed. Reg.

39,776-39,777 (1983); 49 Fed. Reg. 264-266 (1984).’

In January 1984, the Secretary stated that outlier

criteria and payments for a fiscal year would not be

adjusted retroactively based on actual annual Medi-

care payment data for that fiscal year:

Using the data we had available, we set the

outlier criteria so that an estimated six percent of

total payments would be made for outliers. Nev-

ertheless, there is no necessary connection be-

tween the amount of estimated outlier payments

- and the actual payments made to hospitals for

eases that actually meet the outlier criteria.

While we expect that under these criteria outlier

payments will approximate six percent of total

payments, we will pay for any outlier that meets

the criteria, even if aggregate outlier payments

result in more than six percent of total payments.

Under such circumstances, we will continue to

make these payments for the remainder of the

Federal fiscal year without adjusting the DRG

rates to compensate for the additional payments.

Similarly, if we overestimate the amount of out-

lier payments, we will not adjust the DRG rates

1 To make outlier payments budget-neutral, Congress di-

rected the Secretary to reduce PPS rates to reflect the per-

centage of expected outlays for outlier payments. 42 U.S.C.

1395ww(d)(2)(E) and (3)(B).

to compensate hospitals for funds that were not

actually paid for outlier cases.

49 Fed. Reg. 265 (1984). The Secretary reiterated

that position in succeeding years.

2. Section 205(h) of the Social Security Act, 42

U.S.C. 405(h), which is made applicable to the Medi-

care Act by 42 U.S.C. 1395ii, provides:

The findings and decision of the [Secretary *]

after a hearing shall be binding upon all indi-

viduals who were parties to such hearing. No

findings of fact or decision of the [Secretary]

shall be reviewed by any person, tribunal, or

governmental agency except as herein provided.

No action against the United States, the [Sec-

etary], or any officer or employee thereof shall

be brought under section 1331 or 1346 of title

28 to recover on any claim arising under this

subchapter.”

42 U.S.C. 405(h) (emphasis added).

The Medicare Act allows provider hospitals to chal-

lenge their payments under the Medicare program.

Each fiscal year, hospitals submit to a fiscal inter-

mediary a cost report containing the hospital’s re-

quest for reimbursement. 42 U.S.C. 1395h; 42 C.F.R.

413.20. The fiscal intermediary audits the cost report

and issues a Notice of Program Reimbursement

2 See 50 Fed. Reg. 35,708-35,710 (1985); 51 Fed. Reg.

31,523-31,525 (1986); 52 Fed. Reg. 33,047-33,049 (1987); 53 Fed.

Reg. 38,504-38,510 (1988); 54 Fed. Reg. 36,498-36,500 (1989); 55

Fed. Reg. 36,075-36,077 (1990); 56 Fed. Reg. 43,227 (1991).

8 Section 1395ii provides that the reference to the

Commissioner of Social Security in Section 405(h) “shall be

considered a reference to the Secretary * * * of Health and

Human Services.” 42 U.S.C. 1396ii.

(NPR) reflecting the total program reimbursement

due the provider for items and services covered by the

Medicare Act. 42 C.F.R. 405.1803, 405.1807, 413.60; see

Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399, 401

(1988).

Under Section 139500, a provider that is “dis-

satisfied with a final determination of * * * its

fiscal intermediary * * * as to the amount of

total program reimbursement due the provider,” or

that is “dissatisfied with a final determination of the

Secretary as to the amount of the payment under

subsection * * * (d) of section 1395ww,” may request

a hearing before the Provider Reimbursement Re-

view Board (PRRB). 42 U.S.C. 189500(a)(1)(A)(i) and

(ii). The provider must request such a hearing

within 180 days of the fiscal intermediary’s final

determination, and the amount in controversy must

equal or exceed $10,000. 42 U.S.C. 139500(a)(2) and

(3). The Board may “affirm, modify, or reverse a final

determination of the fiscal intermediary.” 42 U.S.C.

139500(d). The Secretary further may either affirm,

reverse, or modify the Board’s decision. 42 U.S.C.

139500(f)(1). Following a final decision of the PRRB

(or any reversal, affirmance, or modification by the

Secretary), a provider may seek judicial review in the

United States District Court in the judicial district

where the provider is located or in the District of

* Under the Act, certain determinations (not relevant

here) are not reviewable. 42 U.S.C. 139500(g).

5 For “good cause,” the PRRB may waive the 180-day

limitation for up to a three-year period. 42 C.F.R. 405.1841(b).

The Secretary’s regulations also allow for a hearing before the

fiscal intermediary for amounts in controversy of at least

$1,000 but less than $10,000. 42 C.F.R. 405.1809(a) and (b)(2).

IE IIE ee

6 a

Columbia. Jbid. Section 139500 also provides for

expedited judicial review in district court whenever

the Board determines that it lacks authority over any

“question of law or regulations relevant to the mat-

ters in controversy.” IJbid.; see Bethesda Hosp. Ass’n,

485 U.S. at 401.

3. Petitioners are hospital providers which filed

suit in the United States Court of Federal Claims to

seek additional outlier payments for fiscal years 1985

and 1986 because the payments in those years al-

legedly “were less than the outlier payments due

them under 42 U.S.C. § 1395ww(d)(5)(A)(iv).” Pet. 5.

Petitioners contend that the court had jurisdiction

over their claims under the Tucker Act, 28 U.S.C.

1491(a)(1).° Petitioners did not seek administrative or

judicial review under Section 139500 within 180 days

after receipt of their NPR for the contested cost

years, because, they allege, they were not aware until

1992 of the total amount of outlier payments nation-

wide in 1985 and 1986. Pet. 4-6.

The government moved to dismiss petitioners’ re- |

spective complaints for lack of jurisdiction, claiming |

that the review procedures mandated by Section

139500 preclude jurisdiction under the Tucker Act.

During the pendency of the motion to dismiss, the

Federal Circuit decided St. Vincent’s Medical Center

v. United States, 32 F.3d 548 (1994) (Pet. App. 18-23),

6 In relevant part, 28 U.S.C. 1491(a)(1) provides:

The United States Court of Federal Claims shall have

jurisdiction to render judgment upon any claim against

the United States founded either upon the Constitution, or

any Act of Congress or any regulation of an executive

department, or upon any express or implied contract with

the United States.

which held that “[bJecause the Medicare Act contains

its own comprehensive administrative and judicial

review scheme, there is no Tucker Act jurisdiction

over Medicare reimbursement claims.” Pet. App. 16.

Citing St Vincent's, the Court of Federal Claims

granted the government’s motions to dismiss peti-

tioners’ suits. Jd. at 5-12. The cases were consoli-

dated on appeal, and the Federal Circuit affirmed

without opinion. /d. at 1-2.

ARGUMENT

The court of appeals’ decision is correct and does

not conflict with any decision of this Court or any

other court of appeals. Further review is not war-

ranted.

1. Section 205(h) of the Social Security Act, incor-

porated into the Medicare Act by 42 U.S.C. 1395ii,

provides that “[nJo * * * decision of the [Secretary]

shall be reviewed” by any “tribunal” except as pro-

vided by the Medicare Act. 42 U.S.C. 405(h). Because

petitioners did not avail themselves of the administra-

tive and judicial review procedures under Section

139500, the Federal Circuit correctly held that peti-

tioners’ claims must be dismissed.

Contrary to petitioners’ Suggestion (Pet. 8-12),

construing Section 205th) to limit judicial review

here does not conflict with Bowen v. Michigan

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

This Court held in Michigan Academy that 42 U.S.C.

405(h) and 1395ff(b)(1(C) do not foreclose review in

district court of the Secretary’s Medicare Part B

regulations establishing the method of determining

benefits. 476 U.S. at 675, 680. The Court was guided

by “the strong presumption that Congress intends

judicial review of administrative action” and the ab-

sence of any explicit provision in Part B (as it then

existed) for judicial review. Jd. at 670. In the present

case, however, petitioners seek under the Tucker Act

review of agency action precisely contemplated by

Section 139500, i.e., the amounts of their reimburse-

ments, including payments for outlier cases. Unlike

in Michigan Academy, application of Section 205(h)

to bar Tucker Act jurisdiction in the present case

would not deny providers a means to obtain judicial

review of their claims.

Prior to 1972, the Medicare Act did not permit

hospital providers to challenge their Medicare cost

determinations. S. Rep. No. 1230, 92d Cong., 2d Sess.

51 (1972). The Act was amended in 1972 and 1974 to

establish the PRRB and provide a comprehensive

scheme for review of payment disputes involving

amounts of $10,000 or more. Social Security Amend-

ments of 1972, Pub. L. No. 92-603, § 243(a), 86 Stat.

1420, 42 U.S.C. 139500; Act of Oct. 26, 1974, Pub. L.

No. 93-484, § 3(a), 88 Stat. 1459, 42 U.S.C. 139500(f).

Thus, the administrative and judicial review proce-

dures of Section 139500 are exclusive as to claims

covered by Section 139500.

This Court has held that when Congress enacts a

comprehensive administrative and judicial review

scheme for challenging agency action, the Tucker

Act does not provide an alternative basis for review.

See United States v. Fausto, 484 U.S. 489, 448-449

(1988) (review procedures in the Civil Service Reform

Act preclude judicial review under the Tucker Act);

United States v. Erika, Inc., 456 U.S. 201, 208 (1982)

(Medicare Act’s review provisions under Part B of the

Medicare program preclude judicial review under the

Tucker Act).’ Similarly, because Section 139500 sets

forth a precisely drawn and comprehensive scheme of

judicial review of payments to providers under the

Medicare program, the Tucker Act does not provide

the Court of Federal Claims with jurisdiction to hear

petitioners’ claims.®

Petitioners do not dispute that their claims are

covered by Section 139500’s review procedures. Pet.

* This rule is consistent with the principle that a remedy

furnished by a precisely drawn, detailed statute preempts a

more general, otherwise applicable remedy. See, e.g., Brown v.

General Services Admin., 425 U.S. 820 (1976) (Title VII of Civil

Rights Act of 1964 preempts preexisting employment discrimi-

nation remedies); Preiser v. Rodriguez, 411 U.S. 475 (1973)

(state prisoners may not seek redress under Civil Rights Act

because of comprehensive remedial scheme of habeas corpus);

United States v. Demko, 385 U.S. 149 (1966) (prison workers’

compensation system preempts Federal Tort Claims Act);

Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942)

(specific venue statute for patent infringement cases is exclu-

sive law governing venue in such cases).

® Petitioners mistakenly rely (Pet. 12-16) on cases dis-

favoring implied repeal of Tucker Act jurisdiction. See, e.g.,

Preseault v. Interstate Commerce Comm'n, 494 U.S. 1 (1990);

Ruckelshaus v. Monsanto, 467 U.S. 986 (1984). Those cases

arose under the Just Compensation Clause and did not involve

the present situation in which Congress specifically has pro-

vided for review of the purported claims in another forum.

Similarly, petitioners’ contention (Pet. 24) that there is no

“Tejlear and convincing evidence’ of congressional intent to

bar all judicial review” is erroneous in light of Section 139500.

See also Block v. Community Nutrition Inst., 467 U.S. 340, 350-

351 (1984) (“This Court has * * * never applied the ‘clear and

convincing evidence’ standard in the strict evidentiary sense,”

but “has found the standard met, and the presumption favoring

judicial review overcome, whenever the congressional intent to

preclude judicial review is ‘fairly discernible in the statutory

scheme.’” (citation omitted)).

4-6. Indeed, hundreds of Medicare providers have

invoked Section 139500 to challenge the level of

their outlier reimbursement as not meeting the

five percent projection required by Section

1395ww(d)(5)(A)iv). See, e.g., Alvarado Community

Hosp. v. Shalala, No. CV 94-0972 (and consolidated

cases) (C.D. Cal. May 3, 1996), appeal pending, No.

96-55967 (9th Cir., filed June 19, 1996). Petitioners’

contention that they could not timely pursue review

under Section 139500 “through no fault of [their]

own” (Pet. i), even if true,® does not create juris-

diction under the Tucker Act. Because Congress

directed that providers dissatisfied with the program

payments, including outlier payments computed un-

der Section 13895ww/(d)(5)(A), must first seek review

before the PRRB, petitioners first must present

their claims, including any arguments that would

overcome the time limitations of Section 139500, to

the PRRB. If the PRRB determines that petitioners

are not entitled to relief for any reason, petitioners

must seek judicial review of the PRRB’s decision in

district court. 42 U.S.C. 139500(f)(1).”

® Petitioners argue (Pet. 4-5, 14) that, until 1992, they did

not receive the Secretary’s “final determination” of total ag-

gregate outlier payments. However, the Secretary is not re-

quired to publish actual Medicare payment data on a nation-

wide basis, and the Secretary first set forth the prospective

payment methodology for outlier payments in 1984. 49 Fed.

Reg. 264-266 (1984). Thus, the absence of national data on total

outlier payments did not prevent petitioners from making

their own claims under Section 139500(a) within 180 days after

receipt of their NPRs for any given cost year.

1 The fact that petitioners may seek judicial consideration

of their claims under Section 139500 also belies petitioners’ con-

tention (Pet. 23-24) that to preclude Tucker Act jurisdiction

over those same claims would raise constitutional questions.

2. Judicial review is also precluded because peti-

tioners have not exhausted their administrative

remedies before the PRRB. Heckler v. Ringer, 466

U.S. 602 (1984) (exhaustion of administrative reme-

dies is mandatory in the Medicare program). Tucker

Act jurisdiction would not relieve petitioners of their

obligation to pursue administrative review before pre-

senting their claims to the courts. See Ruckelshaus

v. Monsanto Co., 467 U.S. 986, 1018 (1984) (requiring

exhaustion of administrative remedies before seeking

relief under Tucker Act). Because petitioners failed

to seek any review under Section 139500, the courts

below properly dismissed their claims.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.