Source: http://openjurist.org/323/f3d/782
Timestamp: 2015-08-02 08:40:14
Document Index: 435448101

Matched Legal Cases: ['§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 413', '§ 1395', '§ 413', '§ 1396', '§ 1396', '§ 1395', '§ 1102', '§ 1395', '§ 1291']

323 F3d 782 Community Hospital of the Monterey Peninsula v. G Thompson | OpenJurist
323 F. 3d 782 - Community Hospital of the Monterey Peninsula v. G Thompson Home
323 F3d 782 Community Hospital of the Monterey Peninsula v. G Thompson 323 F.3d 782
COMMUNITY HOSPITAL OF THE MONTEREY PENINSULA; Alameda Hospital; Antelope Valley Medical Center; California Hospital Medical Center; California Pacific Medical Center; Cedars-Sinai Medical Center; Chinese Hospital; Corcoran District Hospital; Clovis Community Hospital; Colusa Community Hospital; Daniel Freeman Memorial Hospitals; Daniel Freeman Marina Hospital; Davies Medical Center; Eden Hospital Medical Center; Fallbrook Hospital District; Fresno Community Hospital; Glenn General Hospital; Henry Mayo Newall Memorial Hospital; Hospital of the Good Samaritan-Los Angeles;Huntington Memorial Hospital; Inter Community Medical Center; John Muir Medical Center; Kern County Medical Center; Laurel Grove Hospital; Loma Linda University Hospital; Marshall Hospital; Merrithew Memorial Hospital Medical Center; Pacific Coast Hospital; Pomerado Hospital; Presbyterian Intercommunity Hospital; Providence St. Joseph Medical Center-Burbank; Riverside Community Hospital; San Joaquin General Hospital; San Luis Obispo County General Hospital; San Mateo County General Hospital; Santa Marta Hospital; Sharp Coronado Hospital; Sharp Memorial Hospital; Sierra Community Hospital Siskiyou General Hospital/Fairchild Medical Center; St. John Regional Medical Center; St. Luke's Hospital; Summit Medical Center; Sutter Tracy Community Hospital; Tahoe Forest Hospital; Tri-City Medical Center; Tulare District Hospital; Tuolumme General Hospital; University of California Irvine Medical Center; University of California at San Francisco Medical Center; University of California San Francisco-Mount Zion; Valley Memorial Hospital; Valleycare Medical Hospital; Woodland Memorial Hospital; Palomar Medical Center, Plaintiffs-Appellees-Cross-Appellants,v.Tommy G. THOMPSON, Secretary of Health and Human Services, Defendant-Appellant-Cross-Appellee.
No. 01-17512.
No. 02-15115.
Suzanne K. Yurk (argued), David W. Shapiro, Jocelyn Burton, San Francisco, CA, for the defendant-appellant-cross-appellee.
Sanford E. Pitler (argued), Carol Sue Janes, Vickie Joseph Williams, Seattle, WA; Donald W. Carlson, San Francisco, CA, for the plaintiffs-appellees-cross-appellants.
Appeal from the United States District Court for the Northern District of California; Vaughn R. Walker, District Judge, Presiding. D.C. No. CV-01-00142.
Before STAPLETON,* O'SCANNLAIN, and FERNANDEZ, Circuit Judges.
Appellant, Tommy Thompson, Secretary of the Department of Health and Human Services ("the Secretary"), challenges the district court's grant of summary judgment to the plaintiff hospitals ("the Providers"). At issue is the Secretary's obligation to reimburse the Providers for bad debts arising from the failure of Medicare Part B participants to make coinsurance and deductible payments under circumstances in which Medi-Cal, California's state Medicaid program, may be responsible for such payments.
Section 1395g(a) of Title 42 of the United States Code provides in part that "no [reimbursement] payments shall be made to any provider unless it has furnished such information as the Secretary may request in order to determine the amounts due such provider...." 42 U.S.C. § 1395g(a) (2002). Exercising this authority, the Secretary, throughout the relevant period, consistently required the Providers to submit evidence that they had billed Medi-Cal for coinsurance and deductible obligations and received a refusal to pay, known as a Remittance Advice or "R.A." The Providers found this "must bill" policy onerous for a number of reasons and undertook to develop a computer-based system intended to establish whether, and to what extent, Medi-Cal was liable for particular coinsurance or deductible payments under the applicable law. After the system was designed, the Providers asked if the Secretary would be willing to accept the data that the system would produce in lieu of evidence that Medi-Cal had refused to pay when billed. The Secretary declined to accept this tender, reaffirming the must-bill policy.
Because we find the must-bill policy to be a reasonable implementation of the reimbursement system and not inconsistent with the statute and regulations governing fiscal years 1989 through 1995 (the "relevant period"), we will reverse the summary judgment entered by the district court in favor of the Providers and remand with instructions that summary judgment be entered in favor of the Secretary.
A. Medicare, generally
Medicare pays for covered medical care provided to eligible aged and disabled persons. 42 U.S.C. §§ 1395-1395ggg (2002). The Centers for Medicare and Medicaid Services ("CMS"), formerly the Health Care Financing Administration ("HCFA"), is the component of the Department of Health and Human Services that administers the Medicare program for the Secretary. CMS is headed by the Administrator, who acts on behalf of the Secretary in administrating the Medicare program.
Medicare is divided into two parts. Part A authorizes payments primarily for institutional care, including hospital inpatient services and skilled nursing facilities. 42 U.S.C. §§ 1395c-1395i-4. Generally, everyone who is eligible for Social Security benefits is also eligible for Part A benefits.
Part B pays for physicians' services, outpatient hospital services, and durable medical equipment. 42 U.S.C. §§ 1395j-1395w-4. Part B resembles a private insurance policy. Individuals elect to be covered by Part B. They pay premiums as well as coinsurance and deductibles. 42 U.S.C. §§ 1395j, 1395l, 1395r, 1395s. Reimbursement for outpatient hospital services provided to Part B enrollees is handled by private insurance companies, who serve as fiscal intermediaries ("Intermediaries") for the Medicare program. See 42 U.S.C. § 1395u.
The Medicare statute and regulations prohibit cost shifting. See 42 U.S.C. § 1395x(v)(1)(A) (2002); 42 C.F.R. § 413.80(d) (2002). Generally, cost shifting occurs in the following two ways: (1) the necessary costs of delivering health care to Medicare enrollees are borne by individuals who are not Medicare recipients,1 or (2) the necessary costs of delivering health care to the hospital's other patients not covered by Medicare are borne by Medicare.2 See 42 U.S.C. § 1395x(v)(1)(A) (stating that "the necessary costs of efficiently delivering covered services to individuals covered by the insurance programs established by this subchapter will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by such insurance programs").
Part B enrollees are responsible for paying coinsurance and deductible amounts. Because the coinsurance and deductible amounts are sometimes uncollectible from the enrollee, Medicare reimburses the health care provider for this "bad debt" to prevent a cost shift from the Medicare recipient to individuals not covered by Medicare. See 42 C.F.R. § 413.80(d).
C. Crossover patients from state Medicaid programs
Medicaid is a federal-state program that enables states to provide necessary medical care to individuals whose resources are inadequate to pay for such care. See 42 U.S.C. §§ 1396-1396v. State Medicaid agencies may enter into a buy-in agreement with the Secretary whereby the State enrolls the poorest Medicare beneficiaries, some of whom are also eligible for Medicaid, into the Part B program. These patients are often called "crossover patients." Generally, the state agrees to pay the premiums, coinsurance, and deductibles for the crossover patients as part of its Medicaid program.
D. Medi-Cal crossover bad debts
Under 42 U.S.C. § 1396a(n), a state Medicaid program may impose a payment ceiling. The ceiling limits payment of the crossover patient's coinsurance and deductible to the difference between what the state would have paid for the service if the person had not been enrolled in Part B of Medicare and what Part B of Medicare actually did pay, up to the full amount of the coinsurance and deductible. Medi-Cal elected to impose such a ceiling in 1989.
For example, suppose the following facts: (1) a hospital incurs a cost of $100 in providing services to a crossover patient. (2) Medicare, under Part B, pays $80 of that cost. The amount representing the coinsurance and/or deductible usually paid by a non-crossover Part B enrollee is $20. If Medi-Cal determines that it would only pay $60 for the care provided to the crossover patient if the patient were not enrolled in Part B, then it will pay none of the deductible/coinsurance to the health care provider (60-80 < 0, therefore Medi-Cal pays none of the $20 coinsurance/deductible). However, if Medi-Cal determines that it would have paid $90 of the covered service, then it will pay the provider $10 of the deductible/coinsurance (90-80=10, therefore Medi-Cal pays for $10 of the $20 coinsurance/deductible).
In these examples, the health care provider is shortchanged by $20 and $10 respectively. To prevent cost shifting, Medicare, through the Intermediary, reimburses the provider for the amount over the Medi-Cal cost ceiling as a bad debt.
California's application of its payment ceiling to outpatient hospital services required each provider to prepare a detailed bill for Medi-Cal so that Medi-Cal could price the services as if it were the primary payer and compare that price to what Medicare had already paid. Medi-Cal would pay only the difference. The bill had to be hand-coded because Medi-Cal's electronic billing system was not compatible with Medicare's.
Shortly after Medi-Cal imposed the payment ceiling, the Providers asked the Intermediaries if they were required to bill Medi-Cal for amounts above the payment ceiling. Medi-Cal and the Intermediaries instructed the Providers that they were required to bill Medi-Cal and receive a formal denial from it in order to be reimbursed by Medicare for the bad debt.
Many providers elected not to bill Medi-Cal at all, or to bill Medi-Cal on only some claims because they determined that billing was too costly when compared to the money Medi-Cal would ultimately pay pursuant to the payment ceiling. Because the Providers did not bill Medi-Cal, they were denied Medicare reimbursement for the unbilled bad debts caused by Medi-Cal's payment ceiling.
The Providers, hoping to find an alternative to billing Medi-Cal, enlisted Carlson, Price, Fass and Company ("Carlson Price") to help them create a database of unbilled crossover bad debt. The Providers also secured a limited amount of help from the California Department of Health Services ("CDHS"). CDHS asked EDS, a private company that processes the Medi-Cal claims for the state of California, to assist Carlson Price in developing a list of unbilled bad debt amounts. EDS agreed and contracted independently with Carlson Price to help produce the bad-debt data for crossover patients.
Using the Carlson Price system, the Providers' consultant ran sample cost reports. Because of the costliness of the process, the consultant wanted to be assured that the proposed surrogate data would be accepted. Instead of producing the documentation, the Providers submitted a proposal outlining the method EDS would use to identify the bad debts for each hospital's cost year from 1989 to 1995.3 Accordingly, no documentation was submitted as part of the record to support the claims, other than that of the sample reports. The documentation to support the claims has not yet been created by EDS for a majority of the 310 reimbursement years in question. The Intermediaries, citing the must-bill policy, rejected the data relating to unbilled claims.
A. The PRRB decision
The Providers appealed the Intermediaries' decision to the Provider Reimbursement Review Board — the body charged with the initial appeal of an Intermediary's decision under Medicare. See 42 U.S.C. § 1395oo(a).
The PRRB based its decision on the provisions of the Provider Reimbursement Manual ("PRM"), which contains interpretive rules reflecting CMS's construction of its own regulations and statutes. California Hosp. 90-91 Outpatient Crossover Bad Debts Group v. Blue Cross of California, PRRB 2000-D80, 2000 WL 1460668 (Sept. 6, 2000). The PRRB held that the PRM allowed providers of services that are subject to the Medi-Cal payment ceiling to recover the unpaid deductibles and coinsurance amounts as bad debts, so long as the indigence of the patient had been established.4 With respect to crossover patients, the Board concluded that indigence of the patient was established by their being Medicaid eligible. The PRRB also concluded that the Carlson-Price data had "at a minimum, the same basic information as on a Medi-Cal remittance advice." Id. at *17.
The Administrator, acting on behalf of the Secretary, reversed the PRRB's decision, sustaining the Secretary's right to insist upon Medi-Cal being billed. California Hosp. 90-91 Outpatient Crossover Bad Debts Group v. Blue Cross of California, 2000 WL 33170706 (Oct. 31, 2000). The Administrator acknowledged that the PRM allowed a provider to deem patients qualifying for Medicaid indigent, but he held that the regulations required reasonable collection efforts before a bad debt was reimbursable. In the crossover-bad-debt context, the Administrator concluded that a reasonable collection effort under the regulations included establishing whether, and if so how much, Medi-Cal would pay.
The Administrator also held that the regulations require "the provider ... to keep records and data throughout the cost year and to then make available those records to the intermediary in order to settle the cost report in the normal course of business." Id. at *10. The Administrator concluded that by failing to bill Medi-Cal, "the providers did not maintain contemporaneous documentation in the ordinary course of business to support their claims." Id.
The Providers sought judicial review of the Administrator's decision and the district court overturned that decision. Cmty. Hosp. v. Thompson, No. C-01-0142, 2001 WL 1256890, 2001 U.S. Dist. LEXIS 16938 (N.D.Cal. Oct. 16, 2001). In the course of granting summary judgment for the Providers, the district court held that nothing in the statute, regulations, or the PRM required the must-bill policy and that the Secretary was seeking "to impose additional unstated and unwritten requirements," which they did not support. Id. at *14-15. The court also concluded that the must-bill requirement was expressly disavowed by one provision of the PRM, PRM-II § 1102.3L, which states that "it may not be necessary for a provider to actually bill the Medicaid program to establish a Medicare crossover bad debt where the provider can establish that Medicaid is not responsible for payment." Id. at *13.
The court further held that the must-bill policy violated the cost-shifting prohibitions of the statute and regulations, noting that the "must bill requirement causes some bad debt to go unrecovered and some billing procedures that cost more than they recover. These lost costs [, the court concluded,] must be redistributed somewhere." Id. at *16.
Finally, the court found that the Carlson-Price system was capable of "determin[ing] the amount that Medi-Cal will not pay pursuant to the its [sic] payment ceiling, without having to go through the often prohibitively burdensome process of hand billing Medi-Cal." Id. at *16. Therefore, the court reversed the Administrator's decision and remanded the matter to the Secretary with directions to accept the Carlson-Price data.5
IV. Jurisdiction and Standards of Review
The Administrator's reversal of the PRRB was a final decision by the Secretary, reviewable by the district court under 42 U.S.C. § 1395oo(f)(1). We review the district court's grant of summary judgment under 28 U.S.C. § 1291.
B. Standard of review, generally
The district court's review of the Administrator's