1

CMS, formerly known as the Health Care Financing Administration, is the

operating component of the United States Department of Health and Human Services

(DHHS) charged with administering the Medicare program.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 07-2546

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Saint Marys Hospital of Rochester, * 

Minnesota, * 

* 

Appellant, * 

* Appeal from the United States

v. * District Court for the 

* District of Minnesota.

Michael O. Leavitt, in his official * 

capacity as Secretary of Health * 

and Human Services, * 

* 

Appellee. *

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Submitted: March 13, 2008

Filed: July 28, 2008

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Before BYE, SMITH, and COLLOTON, Circuit Judges.

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SMITH, Circuit Judge.

After having its Medicare-reimbursement-adjustment request denied as

untimely by the Administrator of the Centers for Medicare and Medicaid Services

(CMS),1

 Saint Marys Hospital of Rochester, Minnesota ("Saint Marys") sought
2

A decision by the CMS Administrator stands as the final decision of the DHHS

Secretary. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. §§ 405.1875, 405.1877.

3

The Honorable David S. Doty, United States District Judge for the District of

Minnesota.

4

CMS contracts out its payment and audit functions under the Medicare

program to third-parties known as fiscal intermediaries. Blue Cross Blue Shield of

Minnesota was Saint Marys's fiscal intermediary for fiscal year 1994, but Blue Cross

Blue Shield was subsequently replaced by Noridian Administrative Services.

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judicial review of the final administrative decision2

 by commencing a civil action in

the district court against Michael Leavitt, in his official capacity as the Secretary of

the United States Department of Health and Human Services ("Secretary"). The

district court3

 granted summary judgment in favor of the Secretary, upholding the

Administrator's decision. We affirm.

I. Background

As a provider of Medicare benefits, Saint Marys is entitled to reimbursement

for certain services it provides to Medicare patients. 42 U.S.C. § 1395, et seq. As such,

at the close of fiscal year 1994, Saint Marys submitted a cost report to its fiscal

intermediary4

 showing its 1994 costs and the portion of those costs to be allocated to

Medicare. See 42 C.F.R. § 413.02 (requiring cost reports from Medicare providers on

an annual basis based on the provider's accounting year). The intermediary reviewed

the cost report, determined the total amount of Medicare reimbursement due to Saint

Marys, and on June 24, 1997, issued Saint Marys a Notice of Program Reimbursement

(NPR) for fiscal year 1994. See 42 C.F.R. § 405.1803 (requiring an intermediary,

upon receipt of a Medicare provider's cost report, to furnish the provider an NPR

within a reasonable period of time).

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), in certain

circumstances, permits a hospital to request an exception or adjustment to the
5

December 21, 1997, was the 180th day after June 24, 1997, the date of the

NPR. However, because December 21, 1997, fell on a Sunday, the parties agree that

any act required to be performed by that date need only have been performed by

Monday, December 22, 1997, to comply with the 180-day time period.

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otherwise applicable rate-of-increase ceilings relevant to the reimbursement of

operating costs. 42 U.S.C. § 1395ww(b)(4)(A)(i); 42 C.F.R. § 413.40. Believing that

it met the circumstances necessary, Saint Marys prepared a request for adjustment to

the TEFRA rate-of-increase ceiling for fiscal year 1994 and placed the request in the

mail on December 22, 1997. The intermediary received the adjustment request on

December 24, 1997, but rejected it as untimely because the request was not received

by the intermediary until 183 days after the date of the NPR—three days beyond the

180-day deadline set forth by the regulations.5 See 42 C.F.R. § 413.40(e)(1).

Saint Marys timely appealed the intermediary's denial to DHHS's Provider

Reimbursement Review Board ("Review Board"), asserting that the regulations only

required the adjustment request to be mailed, not received, within 180 days of the

NPR. The Review Board ruled in favor of Saint Marys, vacated the denial of the

adjustment request, and remanded for the intermediary to consider the request on the

merits. CMS then timely appealed the Review Board's decision to the CMS

Administrator for final administrative review. The Administrator reversed the Review

Board's decision, ruling that TEFRA adjustment requests must be received by the

intermediary within the 180-day period.

Saint Marys timely sought judicial review of the final agency decision in the

United States District Court for the District of Minnesota. Based on an undisputed

factual record, the parties submitted cross-motions for summary judgment. The district

court denied Saint Marys motion and granted summary judgment in favor of the

Secretary, finding that the Secretary had consistently interpreted the regulatory

language as requiring that a TEFRA adjustment request had to be received by the

intermediary within 180 days from the date of the NPR. The court concluded that the
6

Section 3004.2 of the PRM instructs Medicare providers that:

A hospital's request for an adjustment to the payment allowed under the

rate of increase ceiling must be submitted to its intermediary no later

than 180 days from the date on the intermediary's Notice of Program

Reimbursement (NPR). The request may be filed once the cost report is

submitted.

CMS-Pub. 15-1, § 3004.2

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Secretary's determination that Saint Marys TEFRA adjustment request was untimely

was not arbitrary, capricious, an abuse of discretion, or contrary to law.

II. Discussion

The timeliness of a request for an adjustment to the TEFRA rate-of-increase is

governed by 42 U.S.C. § 413.40(e)(1). Prior to October 1, 1995, and thus during Saint

Marys's 1994 cost reporting period, § 413.40(e)(1) provided:

A hospital may request an adjustment to the rate-of-increase ceiling

imposed under this section. The hospital's request to its fiscal

intermediary may be made upon receipt of the intermediary's notice of

amount of program reimbursement (NPR) and must be made no later

than 180 days after the date on the intermediary's NPR for the cost

reporting period for which the hospital requests an adjustment.

42 C.F.R. § 413.40(e)(1) (1994) (emphasis added).

Saint Marys contends that the 1994 version of the regulations should apply.

Relying on the language of the 1994 regulations—that the adjustment request must be

"made" within 180 days from the date of the NPR—and the directives in the Medicare

Provider Reimbursement Manual (PRM),6

 Saint Marys argues that it timely "made"

its adjustment request because it mailed the request before the 180-day period expired.
7

In full, the proposed rule preamble stated:

We propose to revise § 413.40(e)(1) to clarify that a request for a

payment adjustment must be received by a hospital's fiscal intermediary

no later than 180 days from the date on the notice of amount of program

reimbursement (NPR). As currently worded, this section states that a

request must be "made" rather than "received." We have consistently

interpreted the word "made" to mean "received by the fiscal

intermediary" since the original regulation was promulgated (47 FR

43282, September 30, 1982). However, use of the word "made" in §

413.40(e)(1) has resulted in varying interpretations of the timely filing

requirement by hospitals and their fiscal intermediaries. In the interest of

a uniform and consistent application of our policy, we are proposing to

clarify the regulation by substituting "received by the hospital's fiscal

intermediary" for "made" in § 413.40(e)(1).

60 Fed. Reg. 29202, 29245 (June 2, 1995).

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The regulations, however, did not define the term "made" thus making the

adjustment request timeliness deadline ambiguous. The term "made" could plausibly

mean either the date that the request was sent or mailed, or the date that the request

was received by or filed with the intermediary. To "clarify" the ambiguity, CMS

proposed an amendment to § 413.40(e)(1) in June 1995. See 60 Fed. Reg. 29202,

29245 (June 2, 1995) ("We propose to revise § 413.40(e)(1) to clarify that a request

for a payment adjustment must be received by a hospital's fiscal intermediary no later

than 180 days from the date on the [NPR]."). The preamble to the proposed rule

regarding the amendment noted that the regulation then in effect used the word

"made" rather than "received," but stated that CMS had "consistently interpreted the

word 'made' to mean 'received by the fiscal intermediary' since the original rule was

promulgated" in 1982. Id. The proposed rule preamble further explained that the

clarification was needed to avoid misinterpretations by hospitals and intermediaries.

Id.7
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After the clarifying amendment was passed, CMS issued notice that the final

rule had been adopted, and it again reiterated that the change in wording in §

413.40(e)(1) from "made" to "received by" was to clarify CMS's consistent

interpretation that requests for adjustment had to be received by the hospital's

intermediary no later than 180 days from the date of the NPR. 60 Fed. Reg. 45778,

45840 (Sept. 1, 1995). The final rule preamble stated: 

We proposed to revise § 413.40(e)(1) to clarify that a request for a

payment adjustment must be received by a hospital's fiscal intermediary

no later than 180 days from the date of the notice of program

reimbursement (NPR). Currently, this section states that a request must

be "made" rather than "received." We have consistently interpreted the

word "made" to mean "received by the fiscal intermediary" since the

original regulation was promulgated (47 FR 43282, September 30,

1982). However, use of the word "made" in § 413.40(e)(1) has resulted

in varying interpretations of the timely filing requirement by hospitals

and their fiscal intermediaries. In the interest of a uniform and consistent

application of our policy, we proposed to clarify the regulation by

substituting "received by the hospital's fiscal intermediary" for "made"

in § 413.40(e)(1).

60 Fed. Reg. 45778, 45840 (Sept. 1, 1995).

Thus, effective October 1, 1995, 42 C.F.R. § 413.40(e)(1) was amended to read:

A hospital may request an adjustment to the rate-of-increase ceiling

imposed under this section. The hospital's request must be received by

the hospital's fiscal intermediary no later than 180 days after the date on

the intermediary's initial notice of amount of program reimbursement

(NPR) for the cost reporting period for which the hospital requests an

adjustment.
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42 C.F.R. § 413.40(e)(1) (emphasis added); see also 60 Fed. Reg. at 45,840 (Sept. 1,

1995) ("Effective Date: This final rule is effective on October 1, 1995").

Therefore, no later than October 1, 1995—more than two years before Saint

Marys mailed its request for adjustment—the clarified language of § 413.40(e)(1) was

in effect and unambiguously required that the reimbursement adjustment request be

"received by" the intermediary no later than 180 days after the date of the NPR. Id.

Accordingly, under the operative version of § 413.40(e)(1), Saint Marys's adjustment

request was clearly untimely.

But even if the 1994 version of § 413.40(e)(1) applied, Saint Marys's

adjustment request was still untimely. "'The plain meaning of a statue controls, if there

is one, regardless of an agency's interpretation.'" Horras v. Leavitt, 495 F.3d 894, 900

(8th Cir. 2007) (quoting Hennepin County Med. Ctr. v. Shalala, 81 F.3d 743, 748 (8th

Cir. 1996)). "If there is ambiguity in a statute that an agency has been entrusted to

administer, however, the agency's interpretation is controlling when embodied in a

regulation, unless the interpretation is 'arbitrary, capricious, or manifestly contrary to

the statute.'" Horras, 495 F.3d at 900 (quoting Hennepin County Med. Ctr., 81 F.3d

at 748 (in turn quoting Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467

U.S. 837, 843–44 (1984))); see also In re Old Fashioned Enters., Inc., 236 F.3d 422,

425 (8th Cir. 2001) ("Although substantial deference is due an agency's interpretation

of its regulations, no deference is due if the interpretation is contrary to the

regulation's plain meaning."). We also accord deference "when an agency has

developed its interpretation contemporaneously with the regulation, when the agency

has consistently applied the regulation over time, and when the agency's interpretation

is the result of thorough and reasoned consideration." Advanta USA, Inc. v. Chao, 350

F.3d 726, 728 (8th Cir. 2003) (quoting Sioux Valley Hosp. v. Bowen, 792 F.2d 715,

719 (8th Cir. 1986)).
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Here, the proposed rule preamble, 60 Fed. Reg. at 29245, and the final rule

preamble, 60 Fed. Reg. at 45840, both expressly state that CMS had "consistently

interpreted the word 'made' to mean 'received by the fiscal intermediary' since the

original regulation was promulgated [in 1982]." Saint Marys provided no evidence

that CMS has ever taken a position inconsistent with this "received by" interpretation.

Thus, deference must be given to CMS's interpretation of its own regulations, Advanta

USA, 350 F.3d at 728. Further, the agency's interpretation is controlling because it is

not arbitrary, capricious, or contradictory to the plain meaning of the regulation.

Horras, 495 F.3d at 900; In re Old Fashioned Enters., Inc., 236 F.3d at 425.

While Saint Marys's asserted interpretation of the 1994 version of §

413.40(e)(1) is plausible, that interpretation is not compelled by the plain wording of

the statute nor by other indications of the agency's intent at the time of the regulation's

promulgation. Further, although Saint Marys contends that the agency has interpreted

"made" in other regulations to mean the date of mailing, it has provided no evidence

that CMS ever interpreted "made" in the previous version of § 413.40(e)(1) to mean

anything other than "received by." Additionally, Saint Marys's argument that the

proposed and final rule preambles demonstrate that CMS has inconsistently

interpreted "made" misreads those preambles, as they both state that the "use of the

word 'made' in § 413.40(e)(1) . . . resulted in varying interpretations of the timely

filing requirement by hospitals and their fiscal intermediaries." See 60 Fed. Reg. at

29245; 60 Fed. Reg. at 45840 (emphasis added). CMS is not a hospital or fiscal

intermediary.

Contrary to Saint Marys's position, the preambles explain that CMS has

"consistently interpreted the word 'made' to mean 'received by the fiscal

intermediary,'" but because of the misinterpretations by hospitals and intermediaries

the regulation's wording was changed, "[i]n the interest of a uniform and consistent

application." Id. Accordingly, under either version of the regulation, the rule has been
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consistently applied to require a TEFRA adjustment request to be received by the

intermediary no later than 180 days from the date of the NPR.

Saint Marys also argues that it detrimentally relied on § 3004.2 of the Medicare

Provider Reimbursement Manual (PRM). As noted above, the PRM states that the

adjustment request must be "submitted" by the hospital no later than 180 days after

the date of the NPR. Although the PRM does not define "submitted" or "submit,"

Saint Marys asserts that "submitted" means "mailed by" rather than "received by" the

180 day deadline. 

"To help providers like [Saint Marys], the Secretary issues a Provider

Reimbursement Manual [(PRM)]. 'The PRM is an extensive set of informal

interpretative guidelines and policies published to assist intermediaries and

providers.'" Horras, 495 F.3d at 900 (quoting Providence Hosp. of Toppenish v.

Shalala, 52 F.3d 213, 218 (9th Cir. 1995)). The interpretive rules in the PRM are

"issued by an agency to advise the public of the agency's construction of the statutes

and rules which it administers." Shalala v. Guernsey Memorial Hosp., 514 U.S. 87,

99 (1995) (quotations and citation omitted). However, the PRM's "[i]nterpretive rules

do not require notice and comment, . . . do not have the force and effect of law and are

not accorded that weight in the adjudicatory process." Id. "[T]his court has indicated

that an agency's interpretation which is not subjected 'to the rigors of notice and

comment' is not entitled to substantial deference." In re Old Fashioned Enters., Inc.,

236 F.3d at 425 (quoting King v. Morrison, 231 F.3d 1094, 1096 (8th Cir. 2000)

(refusing to defer to agency program statement)).

Because the PRM "does not have the force and effect of law and [is] not

accorded that weight in the adjudicatory process," Guernsey Memorial Hosp., 514

U.S. at 99, Saint Marys's arguments based on its alleged reliance on the PRM must

fail. The PRM did not state that an adjustment request must be mailed within the 180-

day period, as Saint Marys claims; it stated that the request must be "submitted"
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within 180 days, and "submitted" was not defined by the PRM. Although it would

have been helpful if the Secretary had clarified the PRM when it clarified §

413.40(e)(1), "[t]he PRM, while a useful guide to interpreting the Medicare statute

and regulations, is not strictly binding on the Secretary." Baptist Health v. Thompson,

458 F.3d 768, 778 n.9 (8th Cir. 2006) (quoting Paragon Health Network, Inc. v.

Thompson, 251 F.3d 1141, 1147 (7th Cir. 2001)). Further, Saint Marys's alleged

reliance on the PRM was not reasonable in light of the Secretary's clarifying change

to § 413.40(e)(1) which became effective in 1995—two years prior to Saint Marys's

request. See id. (finding hospital's reliance on PRM was not reasonable in light of

earlier direct communication from DHHS contradicting PRM).

In sum, regardless of the 42 C.F.R. § 413.40(e)(1) version applied, Saint

Marys's appeal fails. The Secretary's interpretation of its regulations is controlling as

its interpretation was not contradictory to the plain meaning of the regulation, nor was

its decision arbitrary, capricious, or an abuse of discretion.

III. Conclusion

Accordingly, the district court's judgment is affirmed.

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