United States Court of Appeals 

for the Federal Circuit ______________________ 

INGHAM REGIONAL MEDICAL CENTER, 

MCLAREN NORTHERN MICHIGAN, BAY 

REGIONAL MEDICAL CENTER, LAKEWOOD 

HEALTH SYSTEM, GIFFORD MEDICAL CENTER, 

INC.,

Plaintiffs-Appellants

v.

UNITED STATES,

Defendant-Appellee

______________________ 

2016-2081

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:13-cv-00821-MBH, Judge Marian Blank 

Horn.

______________________ 

Decided: November 3, 2017

______________________ 

DIANE ELIZABETH COOLEY, Pires Cooley, Washington, 

DC, argued for plaintiffs-appellants. Also represented by 

ALEXANDER JOHN PIRES, JR. 

PHYLLIS JO BAUNACH, Commercial Litigation Branch, 

Civil Division, United States Department of Justice, 

Washington, DC, argued for defendant-appellee. Also 

represented by BENJAMIN C. MIZER, ROBERT E.
2 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

KIRSCHMAN, JR., STEVEN J. GILLINGHAM; GERALD 

ANTHONY WESLEY, Defense Legal Services Agency, United 

States Department of Defense, Aurora, CO. 

______________________ 

Before PROST, Chief Judge, DYK and HUGHES, Circuit 

Judges.

HUGHES, Circuit Judge. 

Ingham Regional Medical Center, Mclaren Northern 

Michigan, Bay Regional Medical Center, Lakewood 

Health System, and Gifford Medical Center, Inc. brought 

suit against the Government alleging that they were 

underpaid for certain outpatient medical services. The 

Court of Federal Claims dismissed Appellants’ complaint 

for failure to state a claim upon which relief can be granted. We find that Ingham may bring a claim for breach of 

contract but that Appellants may not bring moneymandating claims under 10 U.S.C. § 1079(j)(2) and 

32 C.F.R. § 199.7(h)(2) because the Government’s interpretation of the statute was reasonable. Accordingly, we 

reverse-in-part, affirm-in-part, and remand. 

I 

In 1956, Congress established TRICARE, a military 

health care system (previously called the Civilian Health 

and Medical Program of the Uniformed Services 

(CHAMPUS)). TRICARE provides medical and dental 

care for current and former members of the military and 

their dependents. The Secretary of Defense is responsible 

for contracting with outside health care providers to 

deliver medical care to TRICARE recipients. See 10 

U.S.C. § 1073(a)(2); 32 C.F.R. § 199.1. Hospitals that 

provide TRICARE services are reimbursed in accordance 

with guidelines set forth by the Department of Defense 

(DoD). See 32 C.F.R. § 199.14. 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 3

In 2001, Congress amended the TRICARE statute 

governing the reimbursements for outside healthcare 

providers. The statute previously permitted, but did not 

require, DoD to use Medicare reimbursement rules. The 

amendment replaced the permissive word “may” with 

“shall” such that the statute read:

The amount to be paid to a provider of services for 

services provided under a plan covered by this 

section shall be determined under joint regulations to be prescribed by the administering Secretaries which provide that the amount of such 

payments shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of 

services of the same type under title XVII of the 

Social Security Act [Medicare].

10 U.S.C. § 1079(j)(2) (2002) (emphasis added).1 Thus, 

§ 1079(j)(2) required TRICARE to use the same reimbursement rules as Medicare to the extent practicable.

DoD responded to the statutory change by issuing an 

Interim Final Rule, effective August 12, 2002. TRICARE; 

Sub-Acute Care Program; Uniform Skilled Nursing Facility Benefit; Home Health Care Benefit; Adopting Medicare 

Payment Methods for Skilled Nursing Facilities and 

Home Health Care Providers, 67 Fed. Reg. 40,597-02

(June 13, 2002). The Interim Final Rule noted that 

Medicare was phasing in a new Outpatient Prospective 

Payment System (OPPS) methodology for outpatient 

services and that DoD: 

plan[ned] to follow the Medicare approach. However, because of complexities of the Medicare 

transition process and the lack of TRICARE cost 

 

1

 The statute has since been amended, and this 

language is currently found at § 1079(i)(2) (2014).
4 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

report data comparable to Medicare’s, it is not 

practicable for the Department to adopt Medicare 

OPPS for hospital outpatient services at this time. 

Id. at 40,601; J.A. 4. The Interim Final Rule adopted new 

methods of payment for four categories of hospital-based 

outpatient services. DoD issued a Final Rule in 2005, 

which provided a more detailed explanation of the payment rules for hospital-based outpatient services. See 

TRICARE; Sub-Acute Care Program; Uniform Skilled 

Nursing Facility Benefit; Home Health Care Benefit; 

Adopting Medicare Payment Methods for Skilled Nursing 

Facilities and Home Health Care Providers, 70 Fed. Reg.

61,368-01 (October 24, 2005). For most outpatient services, hospitals would receive payments “based on the 

TRICARE-allowable cost method in effect for professional 

providers or the CHAMPUS Maximum Allowable Charge 

(CMAC).” Id. at 61,371. These payment rules applied 

until 2009, when TRICARE introduced a new payment 

system for hospital outpatient services that was similar to 

the Medicare OPPS rules. 

Hospitals complained that CMAC was only intended 

to be used for individual health care providers, not institutions with large overhead costs. TRICARE responded 

to these complaints by hiring a consultant, Kennel and 

Associates, Inc., to undertake a study of the accuracy of 

its payments to the hospitals. The Kennel Study compared CMAC payments to the payments that would have 

been made using Medicare payment principles, and 

determined that DoD “(1) underpaid hospitals for outpatient radiology but, (2) correctly paid hospitals for all 

other outpatient services.” J.A. 5 (emphasis in original). 

Subsequently, DoD created a discretionary payment 

process and notified the hospitals via letter on April 25, 

2011. The letter explained that DoD would permit the 

hospitals to request a review of their TRICARE reimbursements: 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 5

Based on the request, your hospital may be paid 

an adjustment, subject to the availability of appropriations, in return for your acceptance of 

DoD’s offer of additional payment based on criteria established by the agency . . . . [P]ayment of 

the discretionary adjustments will also be contingent on the execution of a release by the hospital 

of any hospital outpatient service claims against 

the agency. 

J.A. 91–92. 

On the TRICARE webpage, DoD published a document titled “NOTICE TO HOPSITALS OF POTENTIAL 

ADJUSTMENT TO PAST PAYMENTS FOR 

OUTPATIENT RADIOLOGY SERVICES” (the Notice) 

and answers to Frequently Asked Questions (the FAQs). 

The Notice explained, in relevant part, that: 

The TRICARE regulation provisions on hospital 

outpatient services, in the absence of adoption of 

the Medicare OPPS methodology, adopted comparable Medicare payments for similar services provided in other sites (i.e., physician offices). That 

is, TRICARE looked to the similarity of services 

being provided, not the site of services, in adopting a reimbursement methodology for hospital 

outpatient services. . . . 

[I]n reviewing payments for hospital services, 

DoD has determined that, for radiology services . . . the technical component of the allowable 

charge did not approximate the Medicare fair 

payment for such hospital services as well as it 

could have. That is, looking at the Medicare reimbursement methodologies in existence prior to 

adoption of Medicare OPPS in 2000, . . . some radiology services were underpaid in comparison. . . . Thus, although payments to hospitals for 

radiology services were consistent with the duly 
6 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

promulgated regulation, there is a basis for 

TRICARE to provide an opportunity to make some 

discretionary net payment adjustments to approximate more closely Medicare payment methods. . . . 

General TRICARE policy is that payment methodologies follow to the extent practicable Medicare 

payments. Prior to adopting [OPPS], Medicare 

used a blended rate that factored in a percentage 

of hospital costs and a percentage of the global 

physician fee schedule to reimburse hospital outpatient radiology services. In contrast, TRICARE 

regulation limited reimbursement to hospitals for 

individual outpatient radiology services to the 

technical component portion of the CHAMPUS 

Maximum Allowable Charge (CMAC), which was 

one component of Medicare’s physician fee schedule. Consistent with TRICARE policy under statute to pay similar to Medicare, we have 

determined that discretionary adjusted payments 

may better reflect the Medicare payment amounts 

for outpatient radiology claims.

J.A. 96–97.

The Notice also described the nine-step process by 

which hospitals could request review of payments for 

outpatient radiology services. Steps 1 and 2 instructed 

hospitals to submit a request for review and described the 

procedure for submitting the request, including filling an 

Excel spreadsheet (the Spreadsheet) with identification 

and contact information. Steps 3 through 7 described the 

review process, including the methodology TRICARE 

would follow to extract claims for outpatient radiology 

services and the formula and calculations TRICARE 

would use to determine the adjusted payments. The 

hospitals were informed that TRICARE had the necessary 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 7

information in its possession and that they should not 

submit claims-level data.

Step 8 explained that the hospitals would receive a 

written response (the Payment Adjustment Worksheet)

that would “provide the calculated discretionary adjusted 

payment and the calculations from which the adjustment 

was derived.” J.A. 100. Step 8 also stated that although 

“the methodology for calculating the adjusted rate is not 

subject to questions,” the hospitals could submit “questions regarding the data used in the calculations,” “accompanied by detailed explanation of the alleged errors 

and the proposed corrections with supporting documentation.” J.A. 100. 

Step 9 explained that TRICARE’s response would include “a release and agreement to accept the discretionary 

adjusted payment by the hospital.” J.A. 100. The hospitals would receive the payment after signing and returning the release and agreement. The Release reads, in 

part:

By accepting the offer of the Department of Defense (“DoD”) to provide a net adjustment to prior 

payments of hospital outpatient radiology services 

as described in the DoD’s letter dated April, 25, 

2011, and in consideration of any future net adjustments to prior payments of hospital outpatient 

radiology services made by the DoD . . . [the Hospital] shall completely release, acquit, and forever 

discharge the Government, TRICARE beneficiaries, and any MCSCs . . . from any and all claims, 

demands, actions, suits, causes of action, appeals . . . that Releasor ever had, now has, or 

hereafter can, shall, or may have against Releasees, whether known or unknown, on account 

of or arising out of or resulting from or in any way 

relating to payments, reimbursements, adjustments, recoupments, or any other means of com-
8 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

pensation by Releasees made at any time for outpatient services rendered to TRICARE beneficiaries by Releasor . . . . 

J.A. 112.

Each Appellant submitted a request for discretionary 

payment. The government agreed “to provide a net 

adjustment to prior payments of hospital outpatient 

radiology services as described in the DoD’s letter dated 

April, 25, 2011 . . . .” J.A. 112. In return, Ingham agreed 

to release “any and all claims . . . whether known or 

unknown” related to payments for TRICARE outpatient 

services. Id. McLaren, Gifford and Lakewood refused to 

sign the Release because they believed the proposed 

payment amounts were incorrect. Therefore, they did not 

receive any payments. Bay Regional Medical Center

received a response stating that it had been overpaid for 

radiology services and was owed nothing. 

Certain other hospitals were represented by counsel 

during the discretionary payment process and contested 

TRICARE’s calculations. TRICARE acknowledged that 

there were errors in the calculations that it had not been 

aware of, and agreed to pay the represented hospitals 77% 

more than the originally offered payments for outpatient 

radiology. J.A. 12. TRICARE did not recalculate the 

payments for any of the hospitals that did not contest 

their discretionary payment offer.

Pursuant to a Freedom of Information Act request, 

Appellants received redacted versions of the Kennel 

Study. Appellants allege that the Kennel Study contains 

multiple errors and that if it had been done correctly, the 

study would have revealed that all outpatient services 

were underpaid, not only radiology. Appellants filed suit 

in the Court of Federal Claims alleging that DoD had 

miscalculated the payments for outpatient radiology 

during the discretionary payment process and that they 

had been underpaid for all outpatient services. 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 9

The Court of Federal Claims dismissed Appellants’ 

case for failure to state a claim. They appeal three 

claims: (1) breach of express contract between Ingham 

and DoD based on the discretionary payment process; 

(2) revision of Ingham’s contract based on mutual mistake, in light of the errors in the calculations of radiology 

outpatient services and the Kennel study; and (3) violations of money-mandating statutes and regulations, 10 

U.S.C. §§ 1079 and 1086 and 32 C.F.R. § 199.7(h)(2).

We have jurisdiction under 28 U.S.C. § 1295(a)(3). 

II

The Court of Federal Claims found that Ingham failed 

to state a claim for breach of contract after determining 

that Ingham’s claim was barred by the Release. We 

review de novo “[w]hether the complaint was properly 

dismissed for failure to state a claim.” Gould, Inc. v. 

United States, 935 F.2d 1271, 1273 (Fed. Cir. 1991). We 

also review contract interpretation and statutory interpretation de novo. Id.; Am. Airlines, Inc. v. United States, 

551 F.3d 1294, 1299 (Fed. Cir. 2008). 

The Court of Federal Claims determined that Ingham

and the agency entered into a contract that consisted of 

the April 25, 2011 letter, the Notice, the FAQs, the 

Spreadsheet, the Payment Adjustment Worksheet, and 

the Release. J.A. 30–31. Ingham alleges that the agency 

breached the contract because it failed to follow the 

agreed upon methodology in calculating the payment 

adjustment. The Court of Federal Claims found that 

although Ingham’s allegations were sufficient to plead a 
10 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

breach of contract,2 the Release was “sufficiently broad to 

bar all of plaintiffs’ breach of contract claims.” J.A. 40. 

We find that the Release does not bar Ingham’s 

breach of contract claim. Absent special circumstances, “a 

general release bars claims based upon events occurring 

prior to the date of the release.” Augustine Med., Inc. v. 

Progressive Dynamics, Inc., 194 F.3d 1367, 1373 (Fed. Cir. 

1999). But here, the release the Government relies on is 

in the very same contract it is accused of breaching. In 

these circumstances, a release cannot bar claims for 

breach of contract. In Link v. Department of Treasury, 51 

F.3d 1577 (Fed. Cir. 1995), we held that the agency could 

not enforce an appeal waiver in a last-chance settlement 

agreement because the agency had failed to carry out its 

responsibilities under the agreement. Id. at 1583–84. We 

concluded that the agency’s breach of contract released 

Mr. Link from his obligation not to appeal his removal. 

Id. To hold otherwise would allow an agency to flout its 

contractual commitments with impunity. See McCall v. 

U.S. Postal Serv., 839 F.2d 664, 667 (Fed. Cir. 1988).

Similarly here, the Release cannot be enforced against 

a claim for breach of the underlying contract. Ingham 

asserts that DoD failed to follow the methodology for 

calculating payment adjustments in the contract. Indeed, 

DoD’s promise to follow the agreed upon methodology was

part of the consideration for Ingham’s agreement to the 

Release in the first place. DoD cannot then use the Release to bar Ingham’s claim that DoD did not adhere to its 

 

2 DoD concedes that “[t]he court correctly found 

that appellants had pled sufficient facts to state a claim 

that the Government had breached the contract . . . .” 

Appellee Br. at 20. The only issue on appeal relating to 

Ingham’s breach of contract claim is whether the release 

in question could apply to a breach of the contract including that same release. 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 11

obligations under the same contract. Accordingly, the 

court erred in finding that Ingham could not bring a claim

for breach of contract.3 

III

Appellants also argue that the Court of Federal 

Claims improperly dismissed their money-mandating

claims for failure to state a claim. 

In 2002 and 2005, DoD issued Interim and Final 

Rules that adopted CMAC payment rules because it was 

not practicable at that time to adopt Medicare OPPS for 

hospital outpatient services. Appellants argue that 

adopting CMAC caused TRICARE to underpay the hospitals, and therefore, DoD violated § 1079(j), which required 

TRICARE to pay providers “to the extent practicable in 

accordance with the same reimbursement rules as apply 

to payments to providers of services of the same type” 

under Medicare. 

The Court of Federal Claims concluded that because 

“defendant’s obligation was to attempt to emulate OPPS, 

rather than any prior Medicare reimbursement methods,” 

J.A. 59, Appellants “failed to adequately plead any facts 

showing that the reimbursement rates instituted by the 

Interim Final and Final Rules represented an unreasonable interpretation of 10 U.S.C. § 1079(j)(2),” J.A. 60. 

The parties agree that the statute is ambiguous and 

that Chevron deference applies. See Biodiversity Legal 

Found. v. Babbitt, 146 F.3d 1249, 1253–56 (10th Cir. 

1998) (applying the Chevron approach to similar statutory 

language). We must defer to DoD’s construction of the 

 

3 Ingham alternatively seeks a claim for contract 

reformation based on mutual mistake. Because we reverse the dismissal of Ingham’s breach of contract claim, 

we do not reach the issue of mutual mistake. 
12 INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES

statute as long as it “reflects a plausible construction of 

the plain language of the statute and does not otherwise 

conflict with Congress’ expressed intent.” Rust v. Sullivan, 500 U.S. 173, 184 (1991).

Appellants do not argue that TRICARE was required 

to implement OPPS. Rather, they contend that TRICARE 

was required to implement a system that was similar to 

pre-OPPS Medicare reimbursement rules for hospitals. 

CMAC did not satisfy this requirement because it was 

only intended to reimburse individual providers, not 

hospitals. Therefore, Appellants assert that DoD’s implementation of CMAC rates was not a reasonable interpretation of § 1079(j)(2). 

We hold that Appellants failed to state a claim in this 

case. Section 1079(j)(2) is money-mandating in the sense 

that it directs the agency to determine payment amounts 

“in accordance with the same reimbursement rules” as 

Medicare to the extent practicable. During the relevant

time period, Medicare was transitioning to the OPPS 

methodology. The use of that methodology was admittedly impractical, and nothing in the statute compelled the 

DoD to utilize the pre-OPPS Medicare approach. Congress did not prescribe the types of rules that the agency 

was required to use if the Medicare methodology was 

impractical, so long as the choice was a reasonable one in 

light of the statute. Adoption of the CMAC rates was

reasonable and not inconsistent with § 1079(j)(2). Because Appellants were paid in accordance with the reasonable approach the agency adopted, they cannot state a 

money-mandating claim. 

Appellants also argue that their reading of the statute 

is consistent with DoD’s own interpretation of its statutory obligations. For support, they point to DoD’s statements that CMAC “did not approximate the Medicare fair 

payment for such hospital services as well as it could 

have.” J.A. 96. Appellants contend that through such 
INGHAM REGIONAL MEDICAL CENTER v. UNITED STATES 13

statements and the institution of the discretionary payment process, the agency admitted that its actions did not 

abide by the statute. 

We disagree. DoD’s offer of discretionary payment adjustments does not mean it lacked the authority to implement the CMAC rules. The Notice states that 

TRICARE had chosen to “make some discretionary net 

payment adjustments to approximate more closely Medicare payment methods.” J.A. 97. Nevertheless, both 

actions—implementing CMAC and offering discretionary 

payment adjustments—were within DoD’s discretion in 

interpreting § 1079(j)(2). 

Because DoD was not required to implement any specific reimbursement rules and the approach adopted was 

reasonable, we affirm the trial court’s dismissal of Appellants’ money-mandating claims. 

IV 

For the reasons set for this in this opinion, we reverse 

the dismissal of Ingham’s breach of contract claim, affirm 

the dismissal of Appellants’ money-mandating claim, and 

do not reach the claim for mutual mistake. We remand 

for further proceedings on the breach of contract claim.

AFFIRMED-IN-PART, REVERSED-IN-PART, AND 

REMANDED

No costs.