Opinion ID: 7708
Heading Depth: 2
Heading Rank: 2

Heading: The Hospital's reimbursement claim

Text: The district court reversed the decision of the Secretary because it determined that the OBRA prohibited the Secretary's disallowance of the Hospital's reimbursement claim for bad debts. In addition, the district court concluded that the Hospital had complied with all Medicare regulations and, therefore, there was no basis upon which to disallow the Hospital's reimbursement claim. On appeal, the Secretary challenges both of these conclusions. The Secretary argues that BCBS's disallowance of the 1 5 U.S.C. § 706 et seq. 2 Brackenridge Hospital v. Heckler, 753 F.2d 1307, 1313 (5th Cir.1985) (quoting Sun Towers, Inc. v. Schweiker, 694 F.2d 1036 (5th Cir.1983)). 3 Sta-Home Home Health Agency, Inc. v. Shalala, 34 F.3d 305, 308 (5th Cir.1994) (quoting Thomas Jefferson University v. Shalala, --- U.S. ----, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)). 4 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984). Hospital's reimbursement claim does not violate the OBRA. The OBRA provides, in pertinent part: The Secretary may not require a hospital to change its bad debt collection policy if a fiscal intermediary, in accordance with the rules in effect as of August 1, 1987, with respect to criteria for indigence determination procedures, record keeping, and determining whether to refer such a claim to an external collection agency, has accepted such policy before that date, and the Secretary may not collect from the hospital on the basis of an expectation of a change in the hospital's collection policy. Based on this statute, the Hospital argues, and the district court agreed, that the Secretary's disallowance of the hospital's claim was not in accordance with the law.5 On appeal, the Secretary argues that BCBS never formally accepted the Hospital's policy on determining indigency. Without formal acceptance, the Secretary argues, OBRA does not apply. In response, the Hospital argues that BCBS did accept its policy by reimbursing the Hospital for bad debts incurred in previous years while the current policy was in place. Specifically, the Hospital was reimbursed for $1,109,843 in bad debts for 1985 and $2,909,973 in bad debts for 1986. Each year before reimbursement, the BCBS completed a detailed audit of the reimbursable expenses filed by the Hospital. In addition, the Hospital points out that there is no method of formal acceptance provided by Medicare legislation or regulations. The Hospital insists that BCBS accepted the Hospital's policy when it agreed to reimburse bad debt expenses in previous years. A similar argument was discussed by the United States District Court for the District of Minnesota in Hennepin County Medical 5 Administrative Procedure Act, 5 U.S.C. § 706. Center v. Shalala.6 In Hennepin, a hospital sought judicial review of the Secretary's decision to disallow the hospital's reimbursement claim for bad debts. The hospital argued that the Secretary's action, in the light of the intermediary's previous acceptance of the hospital's policies on establishing indigency, violated the OBRA.7 The Hennepin court held that when the intermediary audited the hospital's reimbursement claims and then repaid the hospital for unpaid copayments, the intermediary accepted the hospital's policies within the meaning of the OBRA.8 The court stated that [t]o suggest that the approval of bad debt policies and procedures by the Intermediary and reimbursement of costs incurred in accordance with those policies did not constitute acceptance of those policies is to reject the clear meaning of the words of the statute in favor of a more strained construction.9 We agree. The Hennepin court's conclusion is based on a fair reading of the statute. The OBRA's prohibition against forcing a change in hospital policy is triggered by the intermediary's acceptance of the hospital's existing policies before August 1, 1987. The term acceptance is not defined and the statute includes no specific requirements for acceptance. We hold that BCBS's previous repayment of the Hospital's claim for reimbursement of bad debts after an investigation and audit constitutes acceptance under the OBRA. Since this acceptance occurred before 6 1993 WL 546591 (D.Minn.). 7 Id. at . 8 Id. 9 Id. August 1, 1987, the Secretary cannot now attempt to force the Hospital to change its policies by disallowing its claim for reimbursement. Thus, the district court correctly determined that the Secretary's action was contrary to law because it violated the OBRA. We need not address the issue of whether the Hospital complied with all Medicare regulation because violation of the OBRA provides a sufficient basis for affirming the district court's judgment in favor of the Hospital.10