Opinion ID: 71971
Heading Depth: 2
Heading Rank: 2

Heading: Effect of Legislative Moratorium (OBRA)

Text: As an alternative basis on which to grant summary judgment in favor of University, the district court found that the legislative moratorium embodied in OBRA of 1987, as amended, barred the Secretary's retroactive disallowance of Medicare bad debt reimbursement for fiscal year 1986. As previously noted, the moratorium prohibits the Secretary from imposing new or different bad debt criteria on a provider after August 1, 1987, if the intermediary had accepted the provider's policies before that date in accordance with the rules then in effect. The district court reasoned that Blue Cross's previous allowance of University's bad debt claims constituted acceptance of University's bad debt criteria. The court further determined that, because University's bad debt collection practices were reasonable and consistent with PRM §§ 310 and 310.2, they were in accordance with the rules in effect prior to the moratorium. University essentially reiterates on appeal the district court's discussion and adds that the Secretary's retroactive disallowance would constitute an application of either a new rule or a more stringent version of the rule known to the provider prior to OBRA's enactment. University again suggests that the Secretary's reading of PRM § 310 is strained and gives rise to a substantive retroactive modification of Medicare policy that OBRA was intended to prevent. The Secretary argues that OBRA is not triggered under the facts of this case. The Secretary suggests that the intermediary's previous allowance of University's bad debt claim cannot be construed as acceptance pursuant to OBRA because (1) acceptance must be express and based on full, accurate information, unavailable to Blue Cross in this instance until after a full audit; (2) even if the intermediary's allowance of a claim is deemed to be equivalent to tacit acceptance by the Secretary, the intermediary's approval of a provider's bad debt collection practice is ineffective if the practice later is found to be inconsistent with Medicare policy and rules; and (3) the moratorium prohibits the Secretary from requiring a provider to change its bad debt policy (assuming a fiscal 10 intermediary previously has accepted such policy) with respect to referral of claims to an external collection agency; the collection agency used by University was in-house and, therefore, not within the scope of OBRA. Two circuits courts to have addressed the effect of OBRA on retroactive disallowance of Medicare bad debt claims have reached somewhat conflicting (though not necessarily contrary) results. Harris County Hospital District v. Shalala, 64 F.3d 220 (5th Cir.1995), relied on by University, involved the Secretary's decision retroactively to disallow a hospital's Medicare bad debt claim based on the hospital's alleged non-compliance with regulations outlining the method of determining whether a patient is indigent. The Fifth Circuit held that, although OBRA does not explicitly define the term acceptance, an intermediary's previous repayment of a provider's claim for Medicare reimbursement of bad debt following an investigation and audit constitutes acceptance for purposes of triggering the moratorium. Id. at 222. Because the acceptance occurred prior to August 1, 1987, OBRA barred the Secretary from later disallowing an earlier claim for reimbursement. See id. Hennepin County Medical Center v. Shalala, 81 F.3d 743 (8th Cir.1996), concerned the Secretary's decision to reopen and re-audit its recommendation for reimbursement for a previous fiscal year based on new information indicating that the hospital had not engaged in equally vigorous collection efforts with respect to Medicare and non-Medicare accounts prior to the 120-day mark. The Eighth Circuit observed that, because [a] notice of program reimbursement and the reimbursement that flows from it, are the only tangible forms of acceptance a provider can expect from an intermediary, allowance of a bad debt claim by an intermediary could, in the majority of cases, function as a form of acceptance of the provider's bad debt practices. Id. at 749. The court further held, however, that [a] reimbursement notice will not always be equivalent to an acceptance.... Congress enacted the moratorium with the intention of preserving the bad debt reimbursement rules and regulations as they existed prior to August 1, 1987.... 11 If issuance of a notice of program reimbursement were invariably an acceptance .... the reopening regulation and others issued before August 1, 1987 would be superfluous. This would frustrate the intent of Congress that existing regulations be enforced. Id. The court also interpreted OBRA's requirement that acceptance be in accordance with the rules in effect as of August 1, 1987 to mean that, for acceptance to trigger the terms of the moratorium, the provider's bad debt collection practices must have been consistent with Medicare rules existing in 1987: In passing the moratorium, Congress was motivated to prevent unexpected consequences to providers from the inspector general's proposed changes in the criteria for bad debt reimbursement. Permitting correction of errors made by intermediaries in the application of rules existing on August 1, 1987 is consistent with that policy. It appears Congress merely sought to freeze a moment in time, forbidding the Secretary to change the criteria after that date, but allowing full enforcement of the policies before it .... We conclude on this analysis that Congress intended the moratorium to apply only where a provider was in compliance with rules existing on August 1, 1987, as embodied in the regulations, the PRM, and PRRB decisions. Id. at 751. We find the reasoning advanced by the Eighth Circuit in Hennepin to be persuasive and, therefore, adopt it in light of the facts of this case.5 As noted by that court, in the vast majority of cases, an intermediary's allowance of a claim remains unchallenged and undisturbed; it therefore serves as the functional equivalent of acceptance of the provider's claim in those cases. Where the intermediary conducts a full audit and discovers new, previously unavailable information indicating that the provider's practices were not consistent with Medicare rules and guidelines in existence prior to August 1, 1987, however, the moratorium is not triggered and retroactive disallowance may be appropriate. We also reject University's restatement of the proposition that the Secretary's 5 Significantly, the Hennepin court noted that its decision might not be directly contrary to that reached by the Fifth Circuit in Harris. See Hennepin, 81 F.3d at 750 n. 4. In Harris, the intermediary already had conducted an audit before allowing the provider's bad debt claim. The decision does not indicate whether the audit specifically targeted the provider's Medicare bad debt collection practices, nor is there any suggestion that new, material evidence had been made available to the intermediary subsequent to its allowance. Harris, therefore, is factually distinguishable from both Hennepin and the instant case. 12 disallowance of its Medicare bad debt claim constitutes either a new substantive rule or a stiffer application of a pre-existing rule; as discussed previously, we do not view the Secretary's application of PRM § 310 in this instance to be tantamount to rulemaking, nor is it an unfair, inconsistent application of a policy not previously known to providers. We conclude that the Secretary's disallowance of University's Medicare bad debt claim for the 1986 fiscal year is not barred by the OBRA moratorium.