Opinion ID: 560346
Heading Depth: 3
Heading Rank: 1

Heading: Source of the Secretary's Authority

Text: 11 The Department does not contend that its sample adjudication scheme for post-payment review of coverage determinations is based on explicit statutory authorization; it relies instead on its general (and uncontested) authority to recoup overpayments from providers. For example, Sec. 1395gg(b)(1) explicitly contemplates recoupment of overpayments to providers, declaring that where more than the correct amount is paid under this subchapter to a provider of services ... and the Secretary determines (A) that, within such period as he may specify, the excess over the correct amount cannot be recouped from such provider, an adjustment shall be made by decreasing subsequent payments to the beneficiary. See also 42 C.F.R. Sec. 405.370. Appellants contend that this case is not about whether HHS can recoup overpayments, but rather about how it decides that such overpayments have been made. 12 As discussed more fully below, sample adjudication has been used in previous instances involving post-payment review of coverage determinations under Part A. In HCFA Ruling 86-1, the agency simply reiterated its belief that it had the latitude to employ sample audits on post-payment review to efficiently recoup overpayments for non-covered services. 13 Two courts reviewing post-payment sample adjudications of Part A coverage determinations failed to find any fundamental infirmity in the procedure. For example, in Mount Sinai Hospital, the court recounted that 14 [a]llegations of wrongdoing by Mount Sinai in operation of the Medicare program were made in 1972. HEW subjected to review by a peer review committee of doctors a sample consisting of 710 patients from a single year. The statistical results of the committee's determinations of medically unnecessary hospital stays and ancillary services drawn from this sample were then applied to all years in question, producing a calculated, as opposed to actual, overpayment figure of $6.3 million. 15 517 F.2d at 333. Although it did not address the permissibility of sampling as such, the court held that the predecessor of HHS had a common law right of recoupment for overpayments involving services not covered under Part A. See id. at 343 (Under these circumstances and in light of the construction we put on Sec. 1395gg(b) ..., we think it clear that recoupment has always been available to HEW under facts like those of the instant case.). See also Daytona Beach General Hosp. v. Weinberger, 435 F.Supp. 891, 892-93 (M.D.Fla.1977). More recently, in Mile High Therapy Centers, Inc. v. Bowen, 735 F.Supp. 984 (D.Colo.1988), the court approved sample adjudication under Part B of Medicare. 16 Although HCFA Ruling 86-1 and the district court both cite Medicare sections that contemplate post-payment adjustments, these provisions deal with reasonable cost rather than coverage determinations. See 42 U.S.C. Sec. 1395g(a) (authorizing necessary adjustments on account of previously made overpayments or underpayments), 1395u(a) (authorizing such audits of the records of providers of services as may be necessary to assure that proper payments are made under Part B), 1395x(v)(1)(A)(ii) (dictating that reasonable cost regulations shall provide for the making of suitable retroactive corrective adjustments where, for a provider of services for any fiscal period, the aggregate reimbursement produced by the methods of determining costs proves to be either inadequate or excessive). Because they govern reasonable cost determinations, we do not read these provisions as explicit statutory authorization for sample adjudication on post-payment review of coverage determinations. 17 These provisions do, however, demonstrate that the Secretary generally has the duty and power to protect against overpayments to providers. We are not persuaded by appellants' suggestion that congressional silence in Part A should be construed as an intent to restrict post-payment audit procedures. As the court explained in Mount Sinai Hospital, the specific authority for after-the-fact adjustments for payments subsequently found to be erroneous under HEW's reasonable cost regulations does not suggest that other after-the-fact repayments or adjustments were not contemplated. 517 F.2d at 345 (reversing district court's holding that the right to recoup coverage overpayments was abrogated by the comprehensive statutory scheme of the Medicare Act). In fact, a 1981 amendment to the Act added a provision directing the Secretary to establish utilization guidelines concerning coverage of home health services and provide for the implementation of such guidelines through a process of selective postpayment coverage review.... 42 U.S.C. Sec. 1395y(f). 18 In this case, the district court adopted the holding of another court that had upheld sample adjudication on the basis of these same provisions in the context of Medicare Part B. See Mile High Therapy Centers, 735 F.Supp. at 986 (The above statutory citations give the Secretary considerable discretion and authority to maintain the integrity of the Medicare payment system.); see also Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 109 S.Ct. 468, 472, 102 L.Ed.2d 493 (1988) (construing Sec. 1395x(v)(1)(A)(ii), a subsection governing reasonable cost determinations (quoted above)); Wilson Clinic & Hosp., Inc. v. Blue Cross of South Carolina, 494 F.2d 50, 52 (4th Cir.1974) (Reopenings are contemplated generally by the Act ... [which] impliedly, if not expressly, envisages the canvassing of all payments to a provider.). The court in Mile High concluded that [t]he statistical sample method is one way of exercising this power to preserve the integrity of the Medicare trust fund and did not exceed HCFA's statutory authority. See 735 F.Supp. at 986. Although Part B is somewhat different from Part A, there is no essential difference in their recoupment powers for coverage overpayments. See Szekely v. Florida Medical Ass'n, 517 F.2d 345, 348-49 (5th Cir.1975), cert. denied, 425 U.S. 960, 96 S.Ct. 1742, 48 L.Ed.2d 205 (1976). Furthermore, amendments added in 1986 extended Part A claims adjudication procedures to Part B claims as well. See Sec. 1395ff (amended by Pub.L. 99-509, Sec. 9341, 100 Stat. 2037 (1986)). (Consequently, a contrary holding on the statutory question in this case could imperil sample adjudication under Part B.) 19 The logic of sample adjudication, accepted by courts that have approved the technique in other contexts, is that any minor errors will tend to balance out in the end. As the district court correctly observed: 20 The clear majority of those few courts having confronted statistical sampling in analogous contexts, while acknowledging its potential for unfairness in the abstract in particular cases, have nevertheless approved its use, primarily as a logistical imperative but also upon the hypothesis that any arbitrariness evens out in the long run. 21 Chaves, 732 F.Supp. at 189-90 (footnote omitted). Appellants point to decisions rejecting the Department's use of presumptions to make various determinations under the Social Security Act because these presumptions fail to satisfy the clear requirement for individualized determinations in certain provisions. But presumptions are not the functional equivalent of statistically derived patterns of over-billing by a particular provider. In other contexts and under other statutes, courts have routinely permitted the use of statistical sampling to determine whether there has been a pattern of overpayments spanning a large number of claims where case-by-case review would be too costly. See, e.g., Illinois Physicians Union v. Miller, 675 F.2d 151, 155 (7th Cir.1982) (Medicaid); Michigan Dep't of Edu. v. United States Dep't of Edu., 875 F.2d 1196, 1204-06 (6th Cir.1989) (vocational rehabilitation programs). 22 In Illinois Physicians Union, the court upheld the use of sampling audits to recoup Medicaid overpayments from participating physicians, squarely rejecting the contention that any formula for sampling and extrapolation is improper per se, and holding that extrapolation based on review of a relatively small sample is a valid audit technique in cases arising under the Social Security Act. 675 F.2d at 155. See also State of Georgia v. Califano, 446 F.Supp. 404, 409-10 (N.D.Ga.1977) (Audit on an individual claim-by-claim basis of the many thousands of claims submitted each month by each state [under Medicaid] would be a practical impossibility as well as unnecessary.). Similarly, in Michigan Department of Education the court upheld the government's use of a sample adjudication method to audit over 60,000 individual expenditure authorizations under the Rehabilitation Act. See 875 F.2d at 1205-06 ([W]hen, as here, the state is given every opportunity to challenge each disallowance as well as the audit technique itself, it appears that the state has been treated as fairly as is practicable under the circumstances.). 23 HHS concedes, as it must, that these decisions do not settle the statutory question in this case, but the Department contends that these holdings support the reasonableness of the sampling procedure generally, and there is nothing explicit in this statute that would prohibit such a procedure here. Appellants maintain that even if the absence of explicit authorization in the statute is not fatal to the Secretary's procedure, other provisions in the Act render his interpretation unreasonable. As explained below, we agree with HHS that the statutory scheme of individualized review of claims on pre-payment review can be reconciled with a sample adjudication procedure on post-payment review. Such an interpretation is reasonable given the logistical imperatives recognized by courts in other comparable circumstances.