Opinion
No. 99 C 7775
December 11, 2000
MEMORANDUM OPINION
Before the court are cross-motions for summary judgment. For the following reasons, plaintiff's motion is denied and defendant's motion is granted.
BACKGROUND
I. Statutory and Regulatory Framework
This action arises under Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et. seq., which establishes the federally funded health insurance program known as Medicare. Part A of Medicare provides insurance for inpatient hospital and related post-hospital services. A hospital may participate in the Medicare program as a provider by entering into a "provider agreement" with the Secretary. 42 U.S.C. § 1395cc. Plaintiff Saint Joseph's Hospital (the "Hospital") provides Medicare services as described in Part A.
To receive reimbursement for these services, a provider must file an annual cost report with its fiscal intermediary, typically an insurance company, which acts as a paying agent under contract with the Secretary. 42 C.F.R. § 413.20; 42 U.S.C. § 1395h. The fiscal intermediary, in this case Blue Cross and Blue Shield of Illinois, reviews cost reports, determines reasonable costs, and oversees payment of claims. Id. For each cost report period, the intermediary issues to the provider a Notice of Program Reimbursement ("NPR"), which reflects the intermediary's determination of the total amount of reimbursement due to the provider. 42 C.F.R. § 405.1803.
If a provider disputes the fiscal intermediary's determination, it may file an appeal before the Medicare administrative tribunal, the Program Reimbursement Review Board ("PRRB" or the "Board"). 42 U.S.C. § 1395oo(a). The Medicare statute requires that a provider satisfy three jurisdictional requirements to receive a PRRB hearing: (1) there must be a final payment determination; (2) the amount in controversy must be $10,000 or more; and (3) the provider must file its request for a hearing within 180 days after receiving notice of the intermediary's final determination. 42 U.S.C. § 1395oo (a)(1) — 1395oo (a)(3). If the provider satisfies the jurisdictional requirements and the PRRB has the authority to decide the matter at issue, see 42 C.F.R. § 405.1867, then the PRRB may hold a hearing and issue a decision. 42 U.S.C. § 1395oo (f)(1); 42 C.F.R. § 405.1875. The Secretary's delegate, the HCFA Administrator, may then review that decision. Id. The Administrator's decision, or that of the PRRB if the Administrator declines review, becomes the Secretary's final decision. 42 C.F.R. § 405.1877. The provider may request judicial review in an appropriate federal district court within sixty days of receipt of the Secretary's final decision. 42 U.S.C. § 1395oo (f)(1); 42 C.F.R. § 405.1877 (a)
Under 42 U.S.C. § 1395oo (e), Congress delegated to the PRRB the authority to make rules and establish procedures that facilitate the activities of the PRRB. Pursuant to this delegation, the PRRB created the Provider Reimbursement Manual ("PRM") which establishes procedures for managing the PRRB's case load, including dismissal of an appeal for the failure of the provider to comply with a PRRB order or request. 42 C.P.R. §§ 405.1835-1873. Specifically, the PRM includes a section entitled Notice of Dismissal of Board Hearing, providing that:
[T]he Board may, at its discretion, dismiss a request for hearing when you fail to submit requested information within the period of time directed by the Board . . . ., and do not prior to the dismissal provide an acceptable reason for your failure. Following such dismissals the Board hears requests for reinstatement submitted by the provider. The Board may also dismiss an appeal or an issue from an appeal when acceptable position papers are not submitted.
PRM § 2924.4B. The PRRB, under the PRM, may also reinstate a dismissed request at its discretion.
II. Procedural History
Here the plaintiff, Saint Joseph's Hospital (the "Hospital") properly filed its fiscal year 1991 cost report for Medicare services with the Intermediary, Blue Cross and Blue Shield. The Intermediary issued an NPR on September 20, 1993 adjusting certain of the Hospital's costs to result in a reimbursement approximately $250,000 less than the Hospital had requested. In response, on January 6, 1994, the Hospital filed a request for a hearing appealing the Intermediary's adjustment.
On September 12, 1996, Steven R. Kirsch, Director of the Division of Jurisdiction and Case Management at the PRRB sent a letter to the Hospital addressed to Chief Financial Officer, Leo Voet. The letter stated:
This is to advise you that the Board will schedule a hearing on the subject appeal during the month of December 1999, or shortly thereafter. In accordance with the enclosed revised instructions, preliminary position papers are due to the Intermediary by the 1st of May 1999.
Final position papers and evidence exhibits are to be exchanged and filed with the Board no later than the 1st of August 1999 (note the change in the number of copies) THE DUE DATES FOR BOTH PRELIMINARY AND FINAL POSITION PAPERS ARE FIRM DATES AND WILL NOT BE CHANGED REGARDLESS OF ANY MOTIONS, JURISDICTIONAL CHALLENGES, DISCOVERY REQUESTS, REQUESTS FOR SUBPOENAS, ETC.
Certified Administrative Record at 22 (Emphasis in original).
A second "reminder letter," sent from Kirsch to the Hospital on behalf of the Board on December 30, 1997, also advising the Hospital of the position paper schedule, is part of the Certified Administrative Record, at 18. However, the Hospital claims it has no record of receiving the second notice.
On April 30, 1999, the Hospital submitted its preliminary position paper to the Intermediary and notified the Board of its submission, in compliance with the schedule. Though it was not obligated by the PRM to do so, the Intermediary could have reviewed the Preliminary Position Paper, perhaps met with the Hospital to discuss settlement, and then prepared its own preliminary position paper. The Intermediary did none of these things. And neither party provided the other with a final position paper or filed a final position paper with the Board by the due date of August 1, 1999. On August 18, 1999 the Board sent a letter to the Hospital, dismissing its appeal for failure to file a final position paper.
The Intermediary's failure to submit a preliminary or final position paper is not grounds for dismissal of the appeal. The PRM states that if an intermediary fails to submit its final position paper by the due date, the Board may schedule the case for hearing and contact the HCFA regional office regarding the intermediary's compliance with its Medicare contract. PRM §§ 2921.5D, 2921.5E
On August 27, 1999, the Hospital asked the Board to reinstate the appeal and forwarded a copy of its preliminary position paper. On that same date, the Hospital submitted a copy of its final position paper to the Board for the first time. On September 30, 1999, the Board denied the Hospital's request. On November 12, 1999, the HCFA Administrator upheld the Board's decision and advised the Hospital that if it intended to seek judicial review in the matter, it had to initiate a civil action within 60 days of the Board's decision in accordance with 42 C.F.R. § 405.1877.
On November 30, 1999 plaintiff filed a Complaint for Declaratory Judgment in this court seeking review of the Board's dismissal of its appeal and of the Administrator's refusal to reinstate. At a Rule 16 conference held on May 1, 2000, the parties agreed that summary judgment motions would be the most efficient manner to resolve the case. The parties' cross-motions are before us now.
DISCUSSION
The Hospital's main argument is that the PRRB's decision was "arbitrary and capricious, not supported by substantial evidence, and otherwise contrary to law." It seeks an order that the Secretary remand this case to the PRRB for a hearing on the merits. The Secretary counters with two arguments: first, that we do not have jurisdiction to hear this claim because the Board's dismissal does not constitute a "final decision" as required for judicial review; and, alternatively, that the Board's decision was not arbitrary or capricious and is, in fact, supported by substantial evidence.
I. Jurisdiction is Proper in This Court
The Hospital brings this action pursuant to § 1395oo(f)(1), which states:
Providers shall have the right to obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary, by a civil action commenced within 60 days of the date on which notice of any final decision by the Board or of any reversal, affirmance, or modification by the Secretary is received . . .42 U.S.C. § 1395 (f)(1). The Secretary argues that because a hearing on the merits of the Hospital's claim never occurred, a final decision was never reached; thus jurisdiction is not proper in this court. However, the Seventh Circuit held in Edgewater Hospital, Inc. v. Bowen, 857 F.2d 1123, 1132 (7th Cir. 1988), that the Board's dismissal of a similar matter based on lack of jurisdiction due to untimely filing was a "final" decision; thus, review before the district court was appropriate. The Seventh Circuit noted that, ". . . while the Medicare Act and, in particular, 42 U.S.C. § 1395oo(f)(1) are structured so as to limit judicial review, there is nothing in either the statute or the legislative history which suggests that such review is limited exclusively to substantive issues." Id., quoting Athens Community Hospital. Inc. v. Schweiker, 686 F.2d 989, 994 (D.C. Cir. 1982); see also, Little Co. of Mary v. Shalala, 98-C-8232 (M.D. Ill. March 30, 2000). The Court concluded than a dismissal for untimeliness could appropriately be considered by the district court. Id. Accordingly, we find that we do have jurisdiction to consider the PMRB's decision in this matter.
There is some case law to support this argument. See, e.g.Cambridge Hosp. Ass'n. v. Bowen, 629 F. Supp. 612, 615-616 (D. Minn. 1986) (holding that in the absence of a PRRB hearing, plaintiffs have failed to exhaust their administrative remedies and therefore no "final decision" exists for the district court to review) (collecting cases).
II. The Board's Determination Is Sustained on the Merits
The statute providing for judicial review of Medicare provider reimbursement decisions, 42 U.S.C. § 1395oo(f)(1), incorporates the review standards set forth in the Administrative Procedure Act ("APA").See Board of Trustees of Knox County Hosp. v. Shalala, 135 F.3d 493, 499 (7th Cir. 1998). Under the APA, 5 U.S.C. § 706 (2)(A) and (E), agency actions, findings and conclusions may be set aside only if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or "unsupported by substantial evidence." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-415 (1971). Moreover, "[w]e must give substantial deference to the agency's interpretation of its own regulations." Knox, 135 F.3d at 499 (citations omitted).
The Hospital does not dispute that its final position paper was not filed by the August 1, 1999 deadline. The Secretary argues that this case involves nothing more than a straightforward application of the Board's published procedural rules to the facts; because the final position paper was untimely, the Board was firmly within its discretionary authority when it dismissed the Hospital's appeal. plaintiff counters that the Board acted arbitrarily and capriciously when it refused to consider the Hospital's late position paper and to exercise its discretion to reinstate the appeal.
The Hospital's position is that the Board's decision was unfair because it failed to consider all the facts and circumstances surrounding the late filing; as the PMRB acknowledges, the only fact that it considered relevant to its decision to dismiss was that the Hospital failed to file a timely position paper. Plaintiff argues that this represented a lack of diligence on the part of the Board that was "patently unfair," particularly since the Board knew the Hospital was actively engaged in the appeal process (because the Hospital had filed a timely preliminary position paper). The Hospital cites several cases where the HCFA Administrator chose, in its discretion, to reinstate appeals that were dismissed under similar circumstances, and plaintiff argues that its preliminary position paper (which was submitted in a timely manner) was nearly identical to its final position paper, and therefore the Board could not have been prejudiced by the Hospital's delay. The Hospital also asserts that the Board's notice procedures were insufficient, and, finally, that the Board's procedures are biased in favor of the Intermediary (for whom there is no automatic dismissal for failure to comply with the final position paper deadline) and against the Hospital.
We disagree. The Hospital missed a deadline, and its case was dismissed. We do not find that the Board was under any obligation to consider any other facts. It dismissed the Hospital's appeal the way it would have, or could have, dismissed any other late appeal. While the Hospital criticizes the Board's notice procedures, it does not claim that it was unaware of the deadline.
That the Secretary might have intervened does not alter our conclusion that the Board acted neither arbitrarily nor capriciously when it dismissed the Hospital's appeal. The HCFA Administrator decisions to the contrary that the Hospital supplies to illustrate that the Secretary could have reinstated the appeal do not persuade us that the dismissal was inappropriate in this case.
The Hospital acknowledges receipt of at least one letter from the PRRB stating when the final position paper had to be filed. Nor does the Hospital suggest that it did not understand the procedures or that it was unaware of the PRM provision providing the Board with discretion to dismiss an appeal for lack of timely filing.
The Hospital did not assert any reason for its lateness in its requests for reinstatement or in its initial motion before this court, which the secretary notes in Defendant's Amended Motion for Summary Judgement in Response to Plaintiff's Motion for summary Judgment, at 25. In its reply, the Hospital explains that this is because it "has been the Hospital's intent to work with the Board in good faith to reinstate the case, asserting appropriate legal guidelines and recognizing prior board actions with regard to similar cases, and not address personal issues." Plaintiff's Reply to Defendant's Response to Plaintiff's Motion for summary Judgment ("Plaintiff's Reply"), at 4. But because "[d]efendant's statements demand a response," the Hospital then notes that Reva Mitchell, the Hospital's Director of Reimbursement, spent the summer of 1999 out of the office obtaining treatment for cancer and related complications. Plaintiff's Reply, at 5. This information, which was never before the Board, cannot alter our conclusion that the Board's actions were appropriate.
With respect to the argument that the Board treats intermediaries differently from providers, we concur in the reasoning of a recent decision from this district:
. . . [T]he fact that the PRRB may treat providers and intermediaries differently does not implicate due process concerns. While the provider and the intermediary may have different interests in an appeal before the PRRB, only the provider has a direct financial interest. If the PRRB agrees that the provider is entitled to additional reimbursement, the intermediary does not pay the difference or suffer any financial harm. Only the provider initiates and drives the appeal. The intermediary merely provides additional information to the PRRB to aid the PRRB in making its decision. There is nothing arbitrary in allowing a case to proceed without the benefit of a position paper arguing the intermediary's position.Little Co. of Mary v. Shalala, No. 98-C-8232 (N.D. Ill. March 30, 2000) (Anderson, J.); see also, Your Home Visiting Nurse Services v. Shalala, 525 U.S. 449, 455 ("As for the alleged `double standard,' given the administrative realities we would not be shocked by a system in which underpayments could never be the basis for reopening.") We do not find that the Board's procedures result in any unjust or disparate treatment of the Hospital. Furthermore, the Board must be allowed to adopt reasonable procedural rules and guidelines to ensure the efficient management of its caseload.
Plaintiff also argues that the Board's rules governing the schedule for position paper submission are substantive rules, and that the PRRB unfairly enacted them without conducting the appropriate notice and comment procedures required by the APA. 5 U.S.C. § 533. However, the notice and comment rules do not apply to "interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice." 5 U.S.C. § 533 (b). As the Supreme court noted with respect to another rule set forth in the PRM, "the PRM . . . is a prototypical example of an interpretive rule." Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 99 (1995). Likewise, we find that the rules that the Hospital challenges in this matter are procedural and not substantive.
Finally, the Hospital has provided no basis for estoppel in this case. It has described no inequitable conduct.
Plaintiff makes a final argument that the Board's initial dismissal was void because it was not done pursuant to a quorum. However, the entire Board made the decision not to reinstate the appeal, and the Administrator declined to disturb the decision of the Board. Furthermore, as the secretary notes, a quorum is only required for rendering Board decisions that are issued following a hearing. 42 C.F.R. § 405.1843, 405.1845; PRM 2925.6. Plaintiff's argument is without merit.
We find that the PRRB's decision to dismiss was not arbitrary or capricious.
CONCLUSION
For the foregoing reasons, defendant's motion for summary judgment is granted, and plaintiff's motion for summary judgment is denied. A final judgment order will be entered.