Opinion ID: 486487
Heading Depth: 1
Heading Rank: 3

Heading: the self-disallowing hospitals

Text: 82 Having decided that the 1986 rule is not properly retroactive in this case, we are left with the question of the five self-disallowing hospitals--the hospitals that followed the 1979 regulation in their cost reports (thereby disallowing the desired pre-1979 reimbursement themselves) but later timely appealed to the PRRB for reimbursement under the pre-1979 rule. The Secretary argues that these hospitals failed to include [the malpractice insurance] claims on their cost reports or otherwise raise an issue with respect to such claims with the intermediary. Appellant's Brief at 14. According to the Secretary, because the hospitals did not force their intermediaries to disallow any claimed reimbursement, the hospitals cannot appeal to the PRRB. The Secretary focuses on 42 U.S.C. Sec. 1395oo(d), which defines the decision-making power of the PRRB. The Secretary argues that the PRRB properly declined [to take jurisdiction and] to consider the hospitals' claims since the hospitals had failed to satisfy the statutory prerequisites for a hearing on these claims. Id. If the PRRB did not have jurisdiction, the Secretary argues, then neither the district courts nor this court can take jurisdiction over the claims. 83 In the Baptist Hospital case, the district court rejected these arguments, writing that the self-disallowing hospitals 84 filed cost reports as required by the Medicare statute regulation, and malpractice insurance costs here at issue were matters covered by such cost reports within the meaning of the Medicare statute. Because hospital administrators for these hospitals were reluctant to file claims specifically designating cost amounts alleged to be violative of the statute because counsel believed that to do so might subject them to criminal charges for fraud, does not diminish or in any way dilute the fact that [the self-disallowing hospitals] in fact did file their cost reports as required and within those reports was contained the basis for contest and reimbursement for inaccurately or improvidently determined allowances. 85 Order Denying Motion to Dismiss at 5-6, Baptist Hospital. Judge Stafford, in the Tallahassee Memorial case, cited the Baptist Hospital district court decision. 86 At the outset we note that this circuit has recently decided a closely related case, North Broward Hospital District v. Bowen, 808 F.2d 1405 (11th Cir.1987), which involves the appeals of self-disallowing hospitals to the PRRB. The North Broward case held that the PRRB properly rejected the appeal of a hospital district that failed to include certain allowable costs in its cost report. As will be discussed below, however, North Broward does not control this case because this case involves a different jurisdictional grant of judicial review, one added by Congress after the cost year involved in the North Broward case. Unlike in this case, the hospitals in North Broward were not challenging the validity of a Medicare regulation, but were merely attempting to raise with the PRRB claims that they inexplicably failed to raise with their intermediaries. See id. at 1407 n. 2. While the North Broward case is in line with the leading case in this area, Athens Community Hospital v. Schweiker, 743 F.2d 1 (D.C.Cir.1984) (Athens II ), neither opinion requires a finding that the PRRB correctly rejected the appeals of the five hospitals involved here.
87 Before attempting to resolve this issue, we must first consider the appropriate scope of this court's review of the Secretary's determination of the jurisdiction of the PRRB. Typically, the standard of review is narrow and this court will not substitute its judgment for that of the agency. Lloyd Noland, 762 F.2d at 1565; accord Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). The interpretation of an agency charged with the administration of a statute is entitled to substantial deference. Blum v. Bacon, 457 U.S. 132, 141, 102 S.Ct. 2355, 2361, 72 L.Ed.2d 728 (1982). Where ... the agency is interpreting its own structure in a technical and complex area, its interpretation should be sustained if it is reasonable and permissible construction of the statute. Southern Motor Carriers Rate Conference v. United States, 773 F.2d 1561, 1567 (11th Cir.1985). Absent a clear error of judgment, the agency's construction should be upheld. North Broward, 808 F.2d at 1408. 88 In this case, however, we are not reviewing the Secretary's interpretation in a technical and complex area. The question of the self-disallowing hospitals revolves around the admittedly difficult interpretation of a few simple phrases. More importantly, the statute to be interpreted is a jurisdictional statute--a type of statute with which courts are quite familiar. See St. Luke's Hospital v. Secretary of Health and Human Services, 810 F.2d 325 (1st Cir.1987) (refusing to defer to Secretary on interpretation of 42 U.S.C. Sec. 1395oo); Celanese Chemical Company v. United States, 632 F.2d 568, 572 (5th Cir. Unit A 1980) (refusing to defer to agency on jurisdictional question), cert. dismissed, 453 U.S. 950, 102 S.Ct. 27, 69 L.Ed.2d 1033 (1981). While being deferential, we must carefully consider any agency action that potentially has the effect of barring access to the federal courts. This is especially true in light of the clear expression by Congress of its concern for efficient access to judicial review, as discussed below. 44
89 In attempting to resolve the question of the self-disallowing hospitals, we must closely scrutinize 42 U.S.C. Sec. 1395oo, the section that establishes and controls the PRRB, and that permits appeals of certain claims to the federal courts. For this case, three subsections of Sec. 1395oo are relevant: Subsection (a) sets out prerequisites for appeal to the PRRB, subsection (d) defines the decisional power of the PRRB, and subsection (f) describes the conditions under which a Medicare provider can obtain judicial review of reimbursement claims. 45 90 In this case, both the district courts and the parties have focused on the interpretation of subsection (d), which outlines the basis and extent of decisions of the PRRB. Similarly, most of the cases cited by the parties base their decisions on analyses of subsection (d). See, e.g., Athens Community Hospital v. Schweiker (Athens II), 743 F.2d 1, 4-9 (D.C.Cir.1984). 46 After a review of the legislative history of all of Sec. 1395oo, however, we find that because of the specific circumstances of this case subsection (f) is more relevant to the question of self-disallowing hospitals in this case. Recognizing the novelty of this approach, we think that a review of the history of the PRRB itself will reveal the importance and meaning of subsection (f). The legislative history of that subsection, considered and amended by Congress more than any other part of Sec. 1395oo, indicates the concern of Congress in quick and efficient judicial review of issues like those presented in this litigation.
91 In 1972, Congress identified as a problem in the Medicare statutes the lack of any specific provision for an appeal by a provider of services of a fiscal intermediary's final reasonable cost determination. H.R.Rep. No. 231, 92d Cong., 2d Sess., reprinted in 1972 U.S.Code Cong. & Admin.News 4989, 5095. Congress therefore established the Provider Reimbursement Review Board (the PRRB) and set out a specific procedure for settling disputed final determinations applying to the amount of program reimbursement. Id. The PRRB was aimed at assist[ing] providers and intermediaries to reach reasonable and mutually satisfactory settlements of disputed reimbursement items. Id. Congress added that the new procedure would not apply to questions of coverage or disputes involving individual beneficiary claims. Id. 92 The resulting provision in the Social Security Amendments of 1972, Pub.L. No. 92-603, Sec. 243, 86 Stat. 1329, 1420 (1972), created what is now 42 U.S.C. Sec. 1395oo. As originally enacted in 1972, the provisions of Sec. 1395oo have gone substantially unchanged, with the exception of subsection (f), controlling judicial review of PRRB actions. The original subsection (f) permitted only limited judicial review, confined to cases where the Secretary, on his or her own motion, reversed or modified a PRRB decision: 93 (f) A decision of the [PRRB] shall be final unless the Secretary, on his own motion, and within 60 days after the provider of services is notified of the [PRRB's] decision, reverses or modifies (adversely to such provider) the [PRRB's] decision. In any case where such a reversal or modification occurs the provider of services may obtain a review of such decision by a civil action commenced within 60 days of the date he is notified of the Secretary's reversal or modification. Such action shall be brought in the district court of the United States for the judicial district in which the provider is located or in the District Court for the District of Columbia and shall be tried pursuant to the applicable provisions under chapter 7 of title 5, United States Code, notwithstanding any other provisions in section 205. 94 86 Stat. at 1422. 95 Two years later, Congress amended subsection (f) and expanded the scope of the providers' right to appeal to the federal courts. The amended section, renumbered as (f)(1), 48 permits appeal of any decision of the PRRB, whether or not the Secretary modifies the decision. The amendment, which left the third sentence of the original section intact, replaced the first two sentences with language that has not since been amended: 96 (f)(1) A decision of the [PRRB] shall be final unless the Secretary, on his own motion, and within 60 days after the provider of services is notified of the [PRRB's] decision, reverses, affirms, or modifies the [PRRB's] decision. Providers shall have the right to obtain judicial review of any final decision of the [PRRB], or of any reversal, affirmance, or modification by the Secretary, by a civil action commenced within 60 days of the date on which notice of any final decision by the [PRRB] or of any reversal, affirmance, or modification by the Secretary is received. 97 Act of Oct. 26, 1974, Pub.L. No. 93-484, 88 Stat. 1459. 98 In 1980, Congress continued its trend toward broad judicial review, and added an entirely new authorization of review. Between the second and third sentences in subsection (f)(1), as amended in 1974, Congress inserted a method to bypass parts of the administrative process when challenging a Medicare regulation: 99 Providers shall also have the right to obtain judicial review of any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the [PRRB] determines (on its own motion or at the request of a provider of services as described in the following sentence) that it is without authority to decide the question, by a civil action commenced within sixty days of the date on which such determination is rendered. If a provider of services may obtain a hearing under subsection (a) and has filed a request for such a hearing, such provider may file a request for a determination by the [PRRB] of its authority to decide the question of law or regulations relevant to the matters in controversy (accompanied by such documents and materials as the [PRRB] shall require for purposes of rendering such determination).... [T]he determination shall be considered a final decision and not subject to review by the Secretary. 100 Omnibus Reconciliation Act of 1980, Pub.L. No. 96-499, Sec. 955, 94 Stat. 2599, 2647-48. As originally introduced, the new authorization of judicial review was included as a new subsection of Sec. 1395oo(f), H.R. 7972, 96th Cong., 2d Sess. Sec. 4 (1980); the enacted version was instead inserted within the existing Sec. 1395oo(f)(1). Both the introduced and enacted versions contained the explicit reference to Sec. 1395oo(a) as a prerequisite to judicial review of legal questions; neither version mentioned other subsections within Sec. 1395oo. 101 The intent of the amendment was to end pointless administrative litigation: 102 Under present law, a provider's dissatisfaction with a particular determination made by its fiscal intermediary on the basis of a regulation issued by the Secretary must first be brought to the [PRRB], even though the [PRRB] may not have the authority to reverse or overrule the regulation. (The [PRRB] has no authority, for example, to rule on the legality of the Secretary's regulations but it must, nonetheless, conduct a full review of the challenge.) The effect of this process has been to delay the resolution of controversies for extended periods of time and to require providers to pursue a time-consuming and irrelevant administrative review merely to have the right to bring suit in a U.S. District Court. Title VIII addresses this problem by giving medicare providers the right to obtain immediate judicial review in instances where the [PRRB] determines that it lacks jurisdiction to grant the relief sought. 103 H.R.Rep. No. 1167, 96th Cong., 2d Sess. 394, reprinted in 1980 U.S.Code Cong. & Admin.News 5526, 5757. Congressman Cecil Heftel, a proponent of the legislation, explained the amendment more forcefully: 104 Unfortunately, the sound intentions of Congress [in creating the PRRB] never have been effectuated, due primarily to fundamental weaknesses that were built into the statute. 105 Specifically, under current law providers may not seek judicial review of regulations or policies of [the Department of Health and Human Services (DHHS) ] until after the provider has gone through a long, tortuous process of preparing and filing cost reports; awaiting a decision by the fiscal intermediary; and appealing that decision to the PRRB, which must declare what everybody already knows--that the PRRB has no authority under law to decide issues regarding the validity of DHHS policies and regulations. Medicare (and thus all taxpayers) must pay a significant portion of the huge costs of conducting this needless, always fruitless litigation exercise. Our bill would change this situation by allowing the provider to obtain immediate judicial review in such cases--namely, those in which the PRRB has no authority to decide the case. 106 126 Cong.Rec. 22218 (1980). With the exception of modifications to clarify the time for appeal and to facilitate group appeals, Sec. 1395oo(f) has remained unchanged since the 1980 amendments. 49
107 As the legislative history reveals, 42 U.S.C. Sec. 1395oo(f) contains two separate and distinct grants of judicial review to Medicare providers. See Appendix I of this opinion. The first grant of review, contained in the first two sentences in the subsection, has its roots in the original establishment of the PRRB in the 1972 Medicare amendments. Originally limited to review of reversals by the Secretary of PRRB decisions, the grant of review was expanded in 1974 to include all decisions of the PRRB. By its terms, and in light of the legislative history, this grant of review refers to decisions of the [PRRB] and is affected by subsection (d), which defines the scope of the decision-making power of the PRRB. This grant of judicial review shall be designated in this opinion as the 1972 grant. 108 The second grant of judicial review, contained in the third through sixth sentences of subsection (f), was added by the 1980 amendments. The grant of review does not involve decisions of the PRRB, but rather permits review when the PRRB determines that it does not have the authority to make a decision about an issue. This second grant of review, designated the 1980 grant, explicitly incorporates the jurisdictional requirements of subsection (a), but makes no reference to subsection (d) or any other subsection. Furthermore, subsection (d) itself requires that decisions of the PRRB be based on a hearing before the PRRB; the 1980 grant of judicial review in subsection (f), however, directly dispenses with the hearing. In light of the language and legislative history of subsection (f), we hold that the 1980 grant of judicial review in that subsection does not concern decisions of the PRRB, and thus the provisions of subsection (d) concerning decisions of the PRRB are irrelevant to the 1980 grant of judicial review. To obtain judicial review under the 1980 grant of review, providers need only fulfill the requirements of subsection (a)--the only subsection incorporated into the language of the grant of review. Thus, in cases where the PRRB does not have the authority to decide a question of law or regulation, a provider can obtain judicial review by fulfilling the requirements of subsection (a) and petitioning for a determination under subsection (f) that the PRRB lacks the needed authority.
109 None of the cases cited by the Secretary undermine our conclusions. On the other hand, the cases cited by the hospitals that have found jurisdiction in similar cases do not utilize the same analysis as we have in this case. This is because most of the cases did not deal with challenges to regulations under the 1980 grant of judicial review, and none of the cases reviewed the full legislative history of 42 U.S.C. Sec. 1395oo. 110
111 The leading set of cases in this area is Athens Community Hospital v. Schweiker (Athens I), 686 F.2d 989 (D.C.Cir.1982), modified on rehearing Athens Community Hospital v. Schweiker (Athens II), 743 F.2d 1 (D.C.Cir.1984). In those opinions, the District of Columbia Circuit ruled that the PRRB was correct in refusing to exercise jurisdiction in a case where the providers failed to include certain taxes and stock option costs in their cost reports but four years later attempted to reopen the reports and claim reimbursement for them. The D.C.Circuit reasoned that, because the language of 42 U.S.C. Sec. 1395oo(d) suggests that the PRRB only has the power to review claims that were raised in the cost reports, the PRRB could not consider the hospitals claims (and thus the federal courts could not entertain the suits in question). 112 Athens I and II, however, are not directly instructive on the issue confronting this court. The Athens case was based on the 1972 grant of judicial review, not the 1980 grant that is at issue here. 50 In fact, the Athens cases involved cost years prior to 1980, and thus the second grant of judicial review, added to 42 U.S.C. Sec. 1395oo(f) in 1980, was not at all before the D.C.Circuit in those opinions. The focus of the Athens court was on subsection (d), which is relevant to the 1972 grant of judicial review, but not to the 1980 grant. See, e.g., Athens II, 743 F.2d at 9. The Athens cases simply do not consider the factual situation presented here, where self-disallowing hospitals challenged a regulation. Similarly, this court's opinion in North Broward involved an appeal under the 1972 grant of review, and the cost year challenged was 1977, before the creation by Congress in 1980 of the second grant of judicial review. 51 113 A number of other cases that plausibly support the Secretary's position also focus only on the 1972 grant of judicial review. In facts very similar to those in the Athens case, the Sixth Circuit upheld the PRRB's refusal to take jurisdiction. See Saline Community Hospital Association v. Secretary of Health and Human Services, 744 F.2d 517 (6th Cir.1984) (hospital failed to include claim for return on net-invested-equity capital in 1979 cost report). Three other cases involved a challenge to a provision in the Provider Reimbursement Manual, which is not a regulation promulgated by the Secretary. In those cases, the PRRB took jurisdiction over similar claims of other hospitals, and thus apparently had the authority to decide the issue (unlike with a challenge to a regulation). See Community Hospital of Roanoke v. Health and Human Services, 770 F.2d 1257 (4th Cir.1985); 52 St. Mary of Nazareth Hospital Center v. Schweiker, 741 F.2d 1447 (D.C.Cir.1984); University of Michigan Hospitals v. Heckler, 609 F.Supp. 756 (E.D.Mich.1985). 114 Only two opinions, recently issued by the Sixth Circuit, are directly analogous to this case. See Baptist Hospital East v. Secretary of Health and Human Services, 802 F.2d 860 (6th Cir.1986). That case involved a challenge by a self-disallowing hospital to a regulation regarding free health care to non-Medicare patients. The Baptist Hospital East court essentially required the hospitals to meet the terms of 42 U.S.C. Sec. 1395oo(d), even though a regulation was being challenged under the 1980 grant of review under Sec. 1395oo(f). See Bethesda Hospital v. Secretary of Health and Human Services, 810 F.2d 558, 562 (6th Cir.1987) (bound by but suggesting disagreement with Baptist Hospital East ). Baptist Hospital East, which conflicts with our holding in this case, relies heavily on Athens II and Saline, neither of which involved the 1980 grant of judicial review. Because the Baptist Hospital East opinion did not address the differences between the two grants of review, and did not analyze the legislative history of the relevant provisions, we decline to follow its reasoning. 53 115
116 At least two circuit courts, and a number of district courts, have rejected the holdings of the cases discussed above. The courts have not, however, utilized the same analysis as we have here. Again, this is because most (but not all) were faced with appeals arising out of the 1972 grant of judicial review. Most of these courts based their holdings on a broad interpretation of Sec. 1395oo(d), finding that the PRRB was not limited in its review to items raised in the cost reports. Those cases that involve the 1972 grant of review have been rejected by this court in North Broward. 117 In St. Mary of Nazareth Hospital Center v. Department of Health and Human Services, 698 F.2d 1337 (7th Cir.), cert. denied, 464 U.S. 830, 104 S.Ct. 107, 78 L.Ed.2d 110 (1983), the Seventh Circuit confronted the same jurisdictional issues as did the D.C.Circuit in Athens II, but reached the opposite result. On the issue of self-disallowance, the Seventh Circuit explicitly held that the PRRB could consider matters not raised to the intermediary. The St. Mary of Nazareth Hospital Center opinion involved the 1972, not 1980, grant of judicial review. Similarly, the First Circuit recently rejected the reasoning of the Athens II case, in a case involving the 1972 grant of review. See St. Luke's Hospital v. Secretary of Health and Human Services, 810 F.2d 325 (1st Cir.1987); see also Adams House Health Care v. Heckler, 604 F.Supp. 110 (N.D.Calif.1984); Our Lady of Lourdes Memorial Hospital v. Schweiker, 1982 Medicare & Medicaid Guide (CCH) p 32,154, at 10,561 (N.D.N.Y. July 26, 1982); Memorial Hospital v. Schweiker, 1981 Medicare & Medicaid Guide (CCH) p 31,603, at 9917 (M.D.Fla. Oct. 20, 1981). 118 Other than the Sixth Circuit cases discussed above, we have located one case addressing the self-disallowance question in the context of the 1980 grant of judicial review; the case involved the same malpractice insurance regulation at issue here, and is nearly identical to this case. See Alexandria Hospital v. Heckler, 660 F.Supp. 23 No. (E.D.Va. 1985), on remand from Bedford County Memorial Hospital v. Health and Human Services, 769 F.2d 1017 (4th Cir.1985), aff'g Alexandria Hospital v. Heckler, 586 F.Supp. 581 (E.D.Va.1984). The court ruled in favor of the hospitals and found federal jurisdiction, although not on the same grounds as we find jurisdiction. Like the courts considering appeals arising under the first grant of judicial review, Alexandria Hospital focused on 42 U.S.C. Sec. 1395oo(d), without considering the legislative history of Sec. 1395oo.
119 The clear language of the statute and the legislative history of the PRRB lead us to conclude that a self-disallowing provider need fulfill only 42 U.S.C. Sec. 1395oo(a) in order to be able to appeal to the federal courts under the 1980 grant of judicial review in Sec. 1395oo(f). By the terms of subsection (f), a self-disallowing hospital that meets the conditions of subsection (a) can request the PRRB to determine whether it has the authority over a challenge to a regulation. If the PRRB does not have the authority to grant relief to the provider, the provider can appeal to the federal courts. 54 120 This conclusion is supported by considering the alternative. Were we to hold that the PRRB (and therefore the federal courts) could not hear the self-disallowing hospitals' challenge to the 1979 rule, we would be ordering the Secretary to reimburse those hospitals under a rule that this court has declared null and void in the Lloyd Noland case. The Lloyd Noland court ruled that the 1979 rule was arbitrary and capricious under the Administrative Procedures Act. Although Lloyd Noland did not reach the question, every circuit court to consider the underlying legal validity of the 1979 rule has found that the rule violates the Medicare Act, 42 U.S.C. Sec. 1395x(v)(1)(A), and thus is illegal as well as being arbitrary and capricious. See Cumberland Medical Center v. Secretary of Health and Human Services, 781 F.2d 536, 538 (6th Cir.1986); Bedford County Memorial Hospital v. Health and Human Services, 769 F.2d 1017, 1023 (4th Cir.1985); Menorah Medical Center v. Heckler, 768 F.2d 292, 296 (8th Cir.1985); St. James Hospital v. Heckler, 760 F.2d 1460, 1470-72 (7th Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 229, 88 L.Ed.2d 228 (1985); Abington Memorial Hospital v. Heckler, 750 F.2d 242, 243 (3d Cir.1984), cert. denied, --- U.S. ----, 106 S.Ct. 180, 88 L.Ed.2d 149 (1985). This unanimous rejection of the 1979 rule strongly countenances against using the void rule to calculate the reimbursement of the five self-disallowing hospitals. 121 In this case, because there is no dispute that the five self-disallowing hospitals met the requirements of Sec. 1395oo(a) (or Sec. 1395oo(b) dealing with group appeals), we hold that the PRRB should have included those hospitals in its determination that it lacks the authority to decide the challenge to the medical malpractice insurance rule. Therefore these five hospitals are appropriately before the federal courts. We thus affirm the district courts' denials of the Secretary's motions to dismiss the claims of the self-disallowing hospitals.