Copies have been mailed to:

CHARLES MacKELVIE, Esq.

MacKelvie & Associates, P.C.
333 West Wacker Drive

Suite 950

Chicago, IL 60606-1218

Attorney for Plaintiff

SAMUEL D. BROOKS
Assistant U.S. Attorney
219 South Dearborn Street
Suite 500

Chicago, IL 60604

Attorney for Defendant


decision to deny Alden Town's request because it was untimely. (R. at 19.) About two months
later, the Administrator of the Centers for Medicare and Medicaid Services declined to review
the PRRB's decision, thereby making the PRRB's decision the final decision of the Secretary.

(R. at 1.) Alden Town now seeks judicial review of that decision pursuant to 42 U.S.C.

§ 139500(£)(1).

II. Discussion

A. The PRRB's Interpretation of 42 C.F.R. § 413.30(c)

Alden Town's first argument on appeal challenges the PRRB's interpretation of 42 C.F.R.
§ 413.30(c). By way of background, at the time AdminaStar sent Alden Town the Notice of
Program Reimbursement, 42 C.F.R. § 413.30(c) read as follows: "[A skilled nursing facility's]
request [for an exception to the routine cost limits] must be made to its fiscal intermediary within
180 days of the date on the intermediary's notice of program reimbursement." 42 C.F.R.
§ 413.30(c) (1998). Several weeks after Alden Town received the Notice of Program
Reimbursement from AdminaStar but before Alden Town mailed its exception request to
AdminaStar, the Secretary amended the regulation to read: "[A skilled nursing facility] must
make its request [for an exception to the routine cost limits] to its fiscal intermediary within 180
days of the date on the intermediary's notice of program pay."? 42 C.F.R. § 413.30(c) (1999).
The change in the regulation from "reimbursement" to "pay" was inadvertent. Revision of the

Procedures for Requesting Exceptions to Cost Limits for Skilled Nursing Facilities and

* The effective date of the amendment was September 7, 1999. Revision of the
Procedures for Requesting Exceptions to Cost Limits for Skilled Nursing Facilities and
Elimination of Reclassifications, 64 Fed. Reg. 42,610, 42,610 (Aug. 5, 1999).

-4-


Federal Register for the guidance of the public . . . substantive rules of general applicability,"
“statements of general policy," and "interpretations of general applicability." The statute also
states that "[e]xcept to the extent that a person has actual and timely notice of the terms thereof, a
person may not in any manner be required to resort to, or be adversely affected by, a matter
required to be published in the Federal Register and not so published." Jd, § 552(a). The statute
embraces the fundamental principle of administrative law that interested parties must have fair
notice of the rules governing their conduct before those rules are used to deprive them of their
rights. See, e.g., A.D. Transp. Express, Inc. v. United States, 290 F.3d 761, 767-68 (6th Cir.
2002); Trinity Broad. of Fla., Inc. v. FCC, 211 F.3d 618, 628-29 (D.C. Cir. 2000); United States
v. Chrysler Corp., 158 F.3d 1350, 1354 (D.C. Cir. 1998); Bd. of Trs. of Knox County Hosp. v.
Shalala, 135 F.3d 493, 500-01 (7th Cir. 1998); Dilley v. Nat'l Transp. Safety Bd., 49 F.3d 667,
670 (10th Cir. 1995); Stuart-James Co. v. SEC, 857 F.2d 796, 800 (D.C. Cir. 1988); Knutzen v.
Eben Ezer Lutheran Hous. Ctr., 815 F.2d 1343, 1351-52 (10th Cir. 1987); Simpson v. United
States, No. IP 83-1425-C, 1984 WL 201, at *2 (S.D. Ind. Feb. 13, 1984).

We find that the Secretary was not required to publish the PRRB's interpretation of the
1999 version of 42 C.F.R. § 413.30(c) because the PRRB's interpretation essentially restated and
did not materially change the procedure for making a request for an exception to the routine cost
limits. Alden Town places too much weight on the change from "reimbursement" to "pay."
More striking is the fact that the regulation's place and order in the Code of Federal Regulations
remained the same, the title and purpose of the regulation remained the same, and, besides one
word, the plain language of the regulation remained virtually the same. These factors, when

taken together, lead us to conclude that regardless of the change from "reimbursement" to "pay,"

-9-


After review, we sustain the PRRB's interpretation of "notice of program pay" to mean
“notice of program reimbursement" because this interpretation is neither plainly erroneous nor
inconsistent with 42 C.F.R. § 413.30(c). Reimburse is defined as "to repay" or "to pay back or
compensate for money spent or for losses or damages incurred." Webster's II New Riverside
University Dictionary 991 (1994). One of the definitions of pay is "to make payment," while
another includes "to discharge a debt or obligation." Jd. at 863. At least Webster's Third New
International Dictionary has recognized the similarity of the two words—listing reimburse as a
synonym of pay. Webster's Third New International Dictionary 1659, 1914 (1993). Alden Town
argues that because the phrase "notice of program pay" has never been used and defined under
Medicare law, it cannot now be interpreted to mean “notice of program reimbursement."
However, in the absence of a special meaning, this Court is left to consider the plain meaning of
"pay," which is sufficiently close to the plain meaning of "reimbursement" to sustain the PRRB's
interpretation that "notice of program pay" means "notice of program reimbursement."

We find that the PRRB's interpretation of "notice of program pay" to mean "notice of
program reimbursement" is consistent with 42 C.F.R. § 413.30(c) as well. Moreover, the
interpretation is necessary to give effect to the 1999 version of 42 C.F.R. § 413.30(c). The
regulation, which has been titled Requests Regarding Applicability of Cost Limits since 1998,
defines the time period during which a skilled nursing facility, such as Alden Town, may request
an exception to the routine cost limits imposed by an intermediary, such as AdminaStar. It
requires skilled nursing facilities to make such a request "within 180 days of the date on the
intermediary's notice of program pay." Unless one interprets "notice of program pay" to mean

“notice of program reimbursement," there would have been no time limit in the latter half of

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Elimination of Reclassifications: Correction, 65 Fed. Reg. 60,104, 60,104 (Oct. 10, 2000). The
current version of the regulation, as amended, reads: "[A skilled nursing facility] must make its
request [for an exception to the routine cost limits] to its fiscal intermediary within 180 days of
the date on the intermediary's notice of program reimbursement." /d. Against this, Alden Town
contends that the PRRB erred by interpreting "notice of program pay" to mean "notice of
program reimbursement" and by not interpreting "within 180 days of the date on the
intermediary's notice of program pay" to mean "within 180 days from receipt of the
intermediary's notice of program reimbursement."

Judicial review of an administrative agency's interpretation of its own regulation is
limited. Udall v. Tallman, 380 U.S. 1, 16 (1965); Ind. Ass'n of Homes for the Aging Inc. v. Ind.
Office of Medicaid Policy & Planning, 60 F.3d 262, 266 (7th Cir. 1995). As long as the agency's
interpretation of the regulation does not violate the Constitution or a federal statute, the agency's
interpretation must be given controlling weight unless it is plainly erroneous or inconsistent with
the regulation. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (quoting Udall, 380
US. at 16-17); Paragon Health Network, Inc. v. Thompson, 251 F.3d 1141, 1145 (7th Cir. 2001).
In other words, assuming the absence of a constitutional or statutory violation, the court's task is
not to decide which among competing interpretations best serves the regulation's purpose, but
rather to defer to the agency's interpretation unless an alternative reading is compelled by the
regulation’s plain language or by other indications of the agency's intent at the time of the

regulation's promulgation. Thomas Jefferson Univ., 512 U.S. at 512.

4 Alden Town also argues that the PRRB erred by interpreting "make its request" to mean
"the date received by AdminaStar." Because resolution of this argument is unnecessary to
resolve this case on appeal, we refrain from addressing it.

-5-


(recognizing that the "choice of substantially different words to address analogous issues
signifies a different approach"). An additional ground for rejecting Alden Town's argument is
that 42 C.F.R. § 413.30(c) pertains to a distinct event, different than the events covered by 42
C.E.R. § 405.1841(a), or any of the other regulations containing a date of receipt rule. Plainly, to
accept Alden Town's argument, as presented in its brief, would require this Court to uniformly
interpret all of the Medicare regulations with the language "180 days," regardless of the subject
matter and the plain language of each particular regulation and relevant statute. Alden Town
cites to no case, and we are not aware of any, that supports such an exercise of judicial authority.
For these reasons, we reject Alden Town's position.

Tn sum, we defer to the PRRB's ruling that Alden Town was required to make its request
for an exception to the routine cost limits within 180 days from the date on the Notice of
Program Reimbursement pursuant to 42 C.F.R. § 413.30(c). The date marked on the Notice of
Program Reimbursement was August 13, 1999, and 180 days from that date was February 9,
2000. Alden Town did not mail its request for an exception to the routine cost limits until

February 12, 2000—183 days after the date on the notice.

B. Proper Notice of the PRRB's Interpretation

Notwithstanding the above, Alden Town claims that the PRRB's decision should not
stand because its interpretation of "notice of program pay” to mean "notice of program
reimbursement" was not published according to 5 U.S.C. § 552(a)(1)(D), and thus it would be
unfair to hold Alden Town to that interpretation now. Section 552(a)(1)(D) of Title 5 of the

United States Code provides that each agency "shall separately state and currently publish in the

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Minute Order Form (05/97)

oN

United States District Court, Northern District of [linois

Ni f Assign dge + iti i r
roe Magistrate Judge Martin C. Ashman “than signed Tudge
CASE NUMBER 01 C 6649 DATE 7/1/2002
CASE Alden Town Manor Nursing Center vs. Tommy G. Thompson
TITLE

“MOTION:

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.]

DOCKET ENTRY:

qd) o Filed motion of [ use listing in “Motion” box above.]

(2) oO Brief in support of motion due___.

(3) o Answer brief to motion due___. Reply to answer briefdue___.

(4) oO Ruling/Hearing on set for at

(5) oO Status hearing[held/continued to] [set for/re-set for] on set for at

(6) Oo Pretrial conference[held/continued to] (set for/re-set for]on___ set for at.

(Or) oO Trial[set for/re-set for] on at

(8) Oo [Bench/Jury tria!] [Hearing] held/continued to at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) {]General Rule21 OI FRCP41(a)(1). C1 FRCP41(a)(2).

ao 4 [Other docket entry] | Enter memorandum opinion and order. Plaintiff’s motion for summary

judgment [11-1] and to set aside defendant’s PRRB decision [11-2] is denied. Defendant’s motion for
summary judgment [14-1] is granted. The Secretary’s final decision is affirmed.

(11) | [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required. number ; notices

J | Notices mailed by judge’s staff. JUL 2 2002

|_| Notified counsel by telephone. . dusesauei

Docketing to mail notices. YY

v¥ | Mail AO 450 form. 19N09 LoBt sigs" Me.
Copy to judge/magistrate judge. sega > sn anna002

date mailed notice

courtroom ena kd I~ Tar zo

deputy’s 1s

initials SPaagay 4

rmaiting deputy initials



Commission decided to relax the procedural rule, which required an applicant to list certain
names and dates prior to receiving permission from the commission to operate. Jd. In reversing
the district court, the Supreme Court held that the Interstate Commerce Commission was entitled
to a measure of discretion in administering its own procedural rules in the manner it deemed
necessary to resolve a problem. /d. at 538-39.

Hence, American Farm Lines concerned an agency's discretion to relax its own
procedural rules to promote the ends of justice, not a district court's authority to reverse an.
agency's decision to not relax its own procedural rules. The case is inapposite. If anything,
American Farm Lines belies Alden Town's argument. It presents the view that a district court
should not be quick to interfere with an agency's decision regarding its own procedural rules.
See, e.g., United States v. Jenks, 22 F.3d 1513, 1518 (10th Cir. 1994) ("An agency must be given
substantial latitude in determining how to implement a statutory mandate."); S. Motor Carriers
Rate Conference v. United States, 773 F.2d 1561, 1571 (11th Cir, 1985) ("As Jong as an agency's
procedures are reasonably designed to permit the agency to ‘discharge [its] multitudinous duties,’
a court should not interfere." (quoting Vermont Yankee Nuclear Power Corp. v. Nat'l Res. Def.
Council, Inc., 435 U.S. 519, 543 (1978))).

In any event, we fail to see why justice requires a waiver of the time limit in 42 C.F.R.

§ 413.30(c) given the ciccumstances of this case. Alden Town's failure to meet the deadline
appears to be more a result of poor time management rather than an unfair application of 42
CFR. § 413.30(c). Tellingly, when this Court asked Alden Town why its request for an
exception to the routine cost limits was untimely, Alden Town cited to administrative problems.

(See P1.'s Supplemental Br. at 1-2.) Alden Town never mentioned that during the time leading up

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Alden Town was fairly apprised that the PRRB would apply the 1999 version of 42 C.F.R.

§ 413.30(c) to Alden Town's request for an exception to the routine cost limits, and no further
guidance was necessary. See Dilley, 49 F.3d at 670; Stuart-James Co., 857 F.2d at 800; Knutzen,
815 F.2d at 1351-52; Simpson, 1984 WL 201 at *2. Significantly, the PRRB's interpretation of
"notice of program pay" to mean "notice of program reimbursement" did not constitute a change
of existing law, policy, or practice. Rather, it explained existing law, policy, and practice ina
manner that any reasonable skilled nursing facility would anticipate. See id.; cf D & W Food
Ctrs., Inc. v. Block, 786 F.2d 751, 757-58 (6th Cir. 1986) (commenting that since the Secretary's
interpretation departed from the literal language of the statute it would do violence to plain

English to characterize the interpretation as only a clarification of existing law).

Cc. Waiver

Lastly, Alden Town argues that the PRRB erred by not waiving Alden Town's
noncompliance with 42 C.F.R. § 413.30(c). To support this argument, Alden Town cites to
American Farm Lines y. Black Ball Freight Service, 397 U.S. 532, 539 (1970), for the general
principle that "it is always within the discretion of a court or an administrative agency to relax or
modify its procedural rules adopted for the orderly transaction of business before it when ina
given case the ends of justice require it." /d. (quoting NLRB v. Monsanto Chem. Co., 205 F.2d
763, 764 (8th Cir. 1953)).

In American Farm Lines, the Supreme Court reversed a district court's decision requiring
the Interstate Commerce Commission to strictly comply with a procedural rule designed

primarily for the benefit of the commission. 397 U.S. at 537-39. The Interstate Commerce

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1999 and early half of 2000 during which skilled nursing facilities had to make their requests for
an exception to the routine cost limits. Thus, 42 C.F.R. § 413.30(c) (1999) would have served no
purpose.

Likewise, we sustain the PRRB's interpretation of when the 180-day time period begins to
run. The 1999 version of the regulation states that "[a skilled nursing facility] must make its
request [for an exception to the routine cost limits] to its fiscal intermediary within 180 days of
the date on the intermediary's notice of program pay." The PRRB held that the 180-day period
started from the date on the Notice of Program Reimbursement. We cannot imagine a more
literal and proper application of this regulation than the one made by the PRRB in this case.

Alden Town makes much ado about nothing by pointing out that a handful of Medicare
regulations, other than 42 C.F.R. § 413.30(c), include or have been interpreted to include a date
of receipt rule—i.e., the applicable time period in the regulation commences when a party
receives a certain document. Section 405.1841(a) of Title 42 of the Code of Federal Regulations,
which includes the time period during which a skilled nursing facility must file an appeal to the
PRRB, provides one example, and we note that Alden Town cites to other examples as well. The
reason we reject this argument by Alden Town is because Alden Town has failed to present a
sufficient reason why the PRRB's reliance on the plain language of 42 C.F.R. § 413.30(c), rather
than the plain language of one of these other regulations, was in error. Contrary to Alden Town's
assertion, the language of the regulations containing a date of receipt rule is different than the
language of 42 C.F.R. § 413.30(c), not to mention that the statutes authorizing the creation of
some of those regulations contain language different than the statute authorizing the creation of

42 C.F.R. § 413.30(c). See Taracorp, Inc. v. N.L. Indus., 73 F.3d 738, 744 (7th Cir. 1996)

-7-


that it had "180 days from the date of this [Notice of Program Reimbursement)" to file an
objection to any of the adjustments. (R. at 139.) Alden Town received AdminaStar's Notice of
Program Reimbursement on August 16, 1999. (R. at 148; Pl.'s Mem. Supp. Summ. J. at 10.)

Ina letter dated and mailed on Saturday, February 12, 2000, Alden Town requested an
exception to the routine cost limits for providing atypical services to Medicare beneficiaries.
That is, Alden Town mailed its request for an exception to the routine cost limits 180 days from
the date it actually received the Notice of Program Reimbursement, but 183 days from the date
actually on the notice. Upon receipt of Alden Town's letter, AdminaStar denied Alden Town's
request because Alden Town did not file its request within "180 days from the date of . . . [the]
Notice of Program Reimbursement." (R. at 152.) AdminaStar relied on 42 C.F.R. § 413.30(c).

Shortly thereafter, on March 1, Alden Town appealed AdminaStar's decision to the
PRRB. (R. at 494-95.) Alden Town first argued that the phrase "notice of program pay," as used
in 42 C.F.R. § 413.30(c), could not be interpreted to mean "notice of program reimbursement."
Alden Town also claimed that the 180-day period contained in 42 C.F.R. § 413.30(c) began to
run from the date Alden Town received the Notice of Program Reimbursement, rather than from
the date on the notice. In the alternative, Alden Town argued that the phrase "notice of program
pay" in 42 C.F.R. § 413.30(c) was unclear, and that without a published interpretation of "notice
of program pay," the regulation was void. Lastly, Alden Town argued that, even if AdminaStar
interpreted and applied 42 C.F.R. § 413.30(c) properly, AdminaStar should have waived the
applicable time limit in the interests of justice.

The PRRB heard Alden Town's arguments on February 27, 2001. On June 26, 2001, the

PRRB issued its decision, rejecting Alden Town's arguments and affirming AdminaStar's

-3-


AO 450(Rev. 5/85)Judgment in a Civil Case

United States District Court
Northern District of Mlinois

Eastern Division

Alden Town Manor Nursing Center JUDGMENT IN A CIVIL CASE
Vv. Case Number: 01 C 6649
Tommy G. Thompson

O Jury Verdict. This action came before the Court for a trial by jury. The issues have been.
tried and the jury rendered its verdict.

a Decision by Court. This action came to hearing before the Court. The issues have
been heard and a decision has been rendered.

IT IS HEREBY ORDERED AND ADJUDGED that plaintiffs motion for summary judgment
[11-1] and to set aside defendant’s PRRB decision [11-2] is denied. Defendant’s motion for
summary judgment [14-1] is granted. The Secretary’s final decision is affirmed.

Michael W. Dobbins, Clerk of Court

Date: 7/1/2002 rndda Seceomme~

Imelda Saccomonto, Deputy Clerk



For the following reasons, this Court grants the Secretary's motion for summary judgment and

denies Alden Town's motion for summary judgment. The Secretary's final decision is affirmed.'

I. Background

Atall relevant times, Alden Town, a 249-bed nursing facility in Cicero, Illinois,
participated in the Medicare program. In general, Alden Town agreed to provide certain health
care services to Medicare beneficiaries so long as Alden Town received reimbursement from the
Secretary for the costs of such services. Alden Town's reimbursement was subject to routine cost
limits identified under Medicare law.”

Around May 31, 1997, Alden Town submitted a cost report to AdminaStar Federal, the
agent of the Secretary responsible for reviewing cost reports and determining appropriate
reimbursements. The cost report indicated the actual costs incurred by Alden Town as a result of
providing certain health care services to Medicare beneficiaries during the fiscal year ending
December 31, 1996. AdminaStar reviewed Alden Town's cost report and subsequently issued a
Notice of Program Reimbursement dated August 13, 1999; the notice was sent to Alden Town
via certified mail that same day. (R. at 138, 148.) The notice indicated adjustments made by
AdminaStar to Alden Town's cost report, explained the reasons for making adjustments to Alden

Town's cost report—namely, that certain routine cost limits applied—and notified Alden Town

' The parties have consented to have this Court conduct any and all proceedings,
including the entry of final judgment. See 28 U.S.C. § 636(c); Local R. 73.1(b).

? The routine cost limits function as caps on the costs reimbursed by the Secretary under
the Medicare system. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 404-06 (1993)
(providing an overview of the Medicare reimbursement system).

-2-


igen
IN THE UNITED STATES DISTRICT COURT pocnered

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION JUL 2 2002

ALDEN TOWN MANOR NURSING
CENTER,

fe pee ots

Plaintiff, Case No. 01 C 6649

Magistrate Judge
Martin C. Ashman

ve

TOMMY G. THOMPSON, Secretary
of Health and Human Services,

NN

Defendant.

MEMORANDUM OPINION AND ORDER

Alden Town Manor Nursing Center seeks judicial review of the Secretary's final decision
denying Alden Town's request for an exception to the routine cost limits under Medicare law.
The Provider Reimbursement Review Board (the "PRRB") denied Alden Town's request for an
exception to the routine cost limits because Alden Town's request was untimely pursuant to 42
C.F.R. § 413.30(c). Alden Town maintains that the PRRB's denial was based on an erroneous
interpretation of 42 C.F.R. § 413.30(c). Alternatively, assuming the PRRB's interpretation was
correct, Alden Town contends that the PRRB erred by enforcing 42 C.F.R. § 413.30(c) against
Alden Town because the PRRB's interpretation of the regulation was not published. Finally,
even if the PRRB correctly interpreted and applied 42 C.F.R. § 413.30(c), Alden Town contends

that the PRRB erred by not waiving Alden Town's noncompliance with the applicable time limit.


to the date its request was mailed, if was confused as to whether 42 C.F.R. § 413.30(c) applied.
Furthermore, Alden Town never claimed that it was misled by the Intermediary's actions or
statements during this time. Rather, Alden Town comes to us with only after-the-fact arguments

as to why 42 C.F.R. § 413.30(c) should not be applied against them.

TIL. Conclusion

For the aforementioned reasons, this Court affirms the Secretary's final decision denying
Alden Town's request for an exception to the routine cost limits because it was untimely. The
PRRB's interpretation of 42 C.F.R. § 413.30(c) was proper, and despite Alden Town's vehement
arguments to the contrary, Alden Town had fair notice of what the 1999 version of the regulation
required. Nonetheless, this Court recognizes that blind adherence to the plain language of 42
C.F.R. § 413.30(c) may lead to an unfair result, depending on the length of time between the date
on the notice of program reimbursement and the date the notice is actually received by the skilled
nursing facility. But such unfairness does not exist here. This Court also recognizes that given
the hurry-scurry of everyday business affairs, coupled with the differing time limits of the
Medicare regulations, the plain language of 42 C.F.R. § 413.30(c) may constitute a trap for the
unwary. Unfortunately, Alden Town has not supplied us with any authority, nor have we found
any, to effectively rewrite Medicare law on the basis of our “seat of the pants” feeling of

unfairness. If such an argument is to succeed, it must be made to a higher authority.

7 wie a ORDER: C Chee

Cal, ( C. ASHMAN
Dated: July 1, 2002. United States Magistrate Judge

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