Source: https://law.justia.com/cases/federal/appellate-courts/F3/286/476/608641/
Timestamp: 2019-09-18 21:41:47
Document Index: 719167111

Matched Legal Cases: ['§ 1396', '§ 1396', '§ 1396', '§ 433', '§ 433', '§ 11210', '§ 706', '§ 11325', '§ 11325', '§ 11115', '§ 11325', '§ 433', '§ 11310', '§ 11325', '§ 11310', '§ 11320', '§ 11115', '§ 11210', '§ 447', '§ 433']

Indiana Family & Social Services Administration, and Office of Medicaid Policy and Planning, Plaintiffs-appellants, Andelectronic Data Systems Corporation, Intervening Plaintiff-appellant, v. Tommy G. Thompson, Secretary of the United States Department of Health & Human Services, and Nancy-ann Min Deparle, Administrator, Health Care Financing Administration, Defendants-appellees, 286 F.3d 476 (7th Cir. 2002) :: Justia
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Indiana Family & Social Services Administration, and Office of Medicaid Policy and Planning, Plaintiffs-appellants, Andelectronic Data Systems Corporation, Intervening Plaintiff-appellant, v. Tommy G. Thompson, Secretary of the United States Department of Health & Human Services, and Nancy-ann Min Deparle, Administrator, Health Care Financing Administration, Defendants-appellees, 286 F.3d 476 (7th Cir. 2002)
US Court of Appeals for the Seventh Circuit - 286 F.3d 476 (7th Cir. 2002)
Decided April 12, 2002
Medicaid, as everyone knows, is a cooperative state-federal program designed to provide medical assistance to poor people. Although each state administers its own program, states with plans approved by the federal government are entitled to receive federal matching funds, referred to in administrative lingo as Federal Financial Participation (FFP). Federal money is available to pay for medical services at a rate based on a state's per capita income. It is also available to share the state's administrative expenses, generally at a 50 percent rate. In 1972, to encourage states to use modern computerized systems to process Medicaid claims, Congress passed legislation establishing enhanced rates of funding. The law provides that the federal government will pay 90 percent of costs attributable to the "design, development, or installation of ... mechanized claims processing and information retrieval systems." 42 U.S.C. § 1396b(a) (3) (A) (i). It will also pay 75 percent of costs "attributable to the operation" of the system. 42 U.S.C. § 1396b(a) (3) (B). The system must meet the requirements for a Medicaid Management Information System (MMIS), as certified by DHHS, in order to receive enhanced FFP funding.
The DAB upheld HCFA's rejection of a February 5 certification date but moved the certification date up a week from June 23 to June 17, or from the end to the beginning of the week when the backlog was processed.3 The DAB first noted that "a decision to withhold the processing" of electronic crossover claims "because of problems in securing Medicare provider numbers ... is not grounds for certifying Indiana's system as of February 5, 1995." AIM could not be "fully functional" without this "critical information." The DAB also wrote that "the AIM system had more problems than just the missing provider numbers." But " [r]egardless of the cause," the evidence established that AIM was not "continuously processing electronic crossover claims" until it started processing the backlog on June 17. The fact that AIM may have processed some electronic Medicare crossover claims in February and possibly in March 1995 was insufficient to show that AIM was "operating continuously" in light of the backlog.
We recall that the relevant statute provides that the federal government will pay 75 percent (remember the normal administrative rate is 50 percent) of expenses attributable to the "operation" of an approved information system. 42 U.S.C. § 1396b(a) (3) (B). The relevant regulation requires that the system has been "operating continuously during the period for which" enhanced funding is claimed. 42 C.F.R. § 433.116(d). Another regulation, 42 C.F.R. § 433.110(a) (1), directs the reader to HCFA's State Medicaid Manual (SMM) for additional guidelines. The manual requires that the "complete system with all its component subsystems ... has been operating continuously, processing all claims types, during all periods for which 75 percent FFP is claimed." SMM § 11210.
We have had some skirmishing about the relevant standards of review. Although we review a district court's ruling on a motion for summary judgment de novo, Mt. Sinai Hosp. Med. Ctr. v. Shalala, 196 F.3d 703, 707 (7th Cir. 1999), judicial review of the DAB's determination is made under 5 U.S.C. § 706, which requires that we uphold the Secretary's determination unless he made "an arbitrary or capricious decision, abused [his] discretion, acted contrary to law or regulation, or lacked the support of substantial evidence." Mt. Sinai, 196 F.3d at 708 (citations omitted).
Also at issue is the deference accorded the Secretary's interpretation of the SMM in the wake of United States v. Mead Corp., 533 U.S. 218, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001). Mead, which was decided 2 months after the district judge's ruling in this case, makes clear that not all agency interpretations of its own laws are entitled to full Chevron deference. Only those subject to notice-and-comment or comparable formalities qualify. Id. at 2172-73; United States Freightways Corp. v. Commissioner, 270 F.3d 1137, 1141 (7th Cir. 2001). Less formal agency interpretations, including those in agency manuals, receive "more flexible respect," Freightways, 270 F.3d at 1141, depending on the agency's care, consistency, formality, relative expertness, and the position's overall persuasiveness. Mead, 121 S. Ct. at 2171, 2175.
Indiana finds nothing objectionable in the manual itself but instead challenges what it calls the "Secretary's ad hoc interpretation" of the manual. Indiana asserts that it made a deliberate decision to "suspend" electronic crossover claims (by routing them into location 41) so it could obtain or reconcile Medicare provider numbers.4 By denying its claim for funding, the Secretary improperly interpreted "processing" not to include the suspension of claims for information verification and error correction. The Secretary instead interpreted "processing" as synonymous with "paying." Indiana asks us not to defer to this interpretation because it is nonsensical and conflicts with a manual provision requiring that a "claims processing subsystem" must " [a]utomatically suspend all transactions in error until corrections are made." SMM § 11325.
Indiana doesn't have the facts to pull off this argument. AIM was never in the business of identifying erroneous crossover claims and sending them to location 41 in order to allow Indiana to obtain missing provider numbers for those claims. Shortly after the "live" date, AIM began rejecting electronic crossover claims that lacked provider numbers. After edits were made, all electronic crossover claims were sent to location 41, regardless of whether they were missing information or not. As Judge Hamilton in the district court aptly put it, " [E]ven those providers who had correctly provided all necessary information had their claims for payment put on ice until the week beginning June 17, 1995."5 Thus, the issue for us is not whether the Secretary was wrong to find that processing does not include claim suspension for error correction. The DAB made no such determination. The relevant issue is whether we should upset the Secretary's conclusion that AIM's segregation of all electronic crossover claims, whether they contained errors or not, meant that AIM was not "processing" the claims.
This meaning is consistent with the manual and the regulation. We'll start with the requirement that a system "suspend all transactions in error until corrections are made." SMM § 11325. Even assuming that all of the crossover claims lacked the requisite information, Indiana did not suspend each transaction because of this error. Rather, it sequestered the entire group of electronic crossover claims to address the problems bedeviling what it suspected would be the majority of the claims. Moreover, AIM may well have suspended claims that were not in error by withholding payment on claims that may have contained correct information. It is a consistent reading of the "suspension" guideline to infer that claims not in error be allowed to proceed to payment. After all, the objectives of the MMIS are " [m]ore accurate and timely claims processing" and " [r]educed time to pay providers." SMM § 11115. Another guideline requires the claims processing subsystem to " [e]nsure that reimbursements to providers are rendered promptly and correctly." SMM § 11325. Moreover, the governing regulation requires "continuous" operations. 42 C.F.R. § 433.116(d). We doubt that a physician who submitted a valid electronic crossover claim, but had to wait months for payment because of problems with claims submitted by other providers, would think that AIM was busy "processing" crossover claims. The Secretary acted consistently with his statutory authority by adopting an interpretation of processing that encourages states to pay valid crossover claims efficiently, thereby encouraging physicians to provide medical services to the elderly and poor, which is, putting all this administrative mumbo jumbo to the side, the whole point of Medicare and Medicaid.7
And there is another ground for upholding the Secretary. Even assuming that AIM identified and withheld only those claims lacking provider numbers, the resulting backlog was substantial. The DAB found that the provider numbers were "critical information" for AIM's functioning and " [t]he responsibility to procure this information in a timely manner to ensure the full and continuous operation of the AIM system rested with Indiana."
Indiana has not challenged this finding, which we think is also entitled to deference. Indeed, it is not only consistent with but appears to be compelled by the manual. The manual provides that "the federally required MMIS" has six "core subsystems," one of which is "claims processing." SMM § 11310. The manual specifies that the claims processing subsystem must " [v]erify that all providers submitting in put are properly enrolled." SMM § 11325. There is also a "provider" subsystem. SMM § 11310. The provider subsystem must " [p]rocess provider applications and changes in a timely manner and maintain control over all data pertaining to provider enrollment" and " [b]uild and maintain a computerized file of provider data for claims processing." SMM § 11320. It is not inconsistent to read this requirement as encompassing Medicare provider numbers since the MMIS seeks " [c]ompatibility with Medicare claim processing and information retrieval systems for the processing of Medicare claims." SMM § 11115. And the Manual makes clear that the "complete system with all its component subsystems" must be "operating continuously, processing all claims types, during all periods for which 75 percent FFP is claimed" (italics added). SMM § 11210.
It is hard to tell whether Indiana contests this fact. Although Indiana's submissions at various levels of this dispute have at times suggested that Indiana suspended only erroneous claims, the record evidence indicates otherwise See Mary Simpson aff. ¶ 8 ("Indiana ... made a conscious decision to withhold the processing of Medicare crossover claims for up to six (6) months."); Pat Nolting aff. ¶ 7 ("In February 1995, a conscious decision was made ... to withhold processing of Medicare crossover claims.... [H]ad all Medicare crossover claims been processed in February 1995, there would have been a large number of rejected claims which would have required resubmittal by providers."). Indiana claims that it processed electronic crossover claims in March of 1995. The DAB properly found that there was no evidence to support that assertion.
Indiana has made much of the fact that it ultimately processed the backlogged claims within the 6 month time frame for crossover claims allowed by 42 C.F.R. § 447.45(d) (4) (ii). But the governing regulation for enhanced funding (which Indiana does not challenge) requires "continuous" operation. 42 C.F.R. § 433.116(d). A substantial backlog of electronic crossover claims developed in the spring of 1995. So the fact that Indiana may have been able to adjudicate the crossover claims under the most generous wire does not show that it was doing so continuously in light of the fact that it sidetracked the claims for some time