Opinion ID: 560346
Heading Depth: 3
Heading Rank: 2

Heading: Alleged Incompatibility with the Act

Text: 24 The process of reviewing initial payment claims requires particularized decisions concerning (1) coverage (was an item or service medically necessary for this person?) and, if not covered, (2) waiver (which is unavailable when the parties knew or should have known that something was not covered). The beneficiary has a right of review for payment denials based on either of these questions, and the statute specifies that a provider shall have the same rights that an individual has for review of Part A denials. See Sec. 1395pp(d). Much of appellants' statutory argument amounts to a collection of snippets from the Act and its history using the word individual, though most of the time the term seems to act as a synonym for person or beneficiary rather than as an antonym for group or class. The real question, however, relates not to the choice of particular words but more generally whether the same rights to individualized factual determinations and an opportunity to challenge specific denials are at stake on post-payment review. 25 Some of the provisions in the statute cited by appellants for their incompatibility argument, such as putting beneficiaries on notice that their claims were denied (for purposes of imputing knowledge for future waiver determinations), see Sec. 1395pp, or seeking repayment from a beneficiary when the provider is not available, see Sec. 1395gg, are simply not implicated in this case. Indeed, both of these provisions inure to the Department's benefit and presumably could be waived by HHS. In any event, all that the statute requires is notification in cases where the providers knew or should have known of non-coverage and HHS decides to indemnify the individual beneficiary for any payments they made to the provider. See Sec. 1395pp(b) ([T]he Secretary shall notify such individual of the conditions under which indemnification is made....). These appeals do not involve indemnification (providers were paid directly for services they rendered to beneficiaries), and nothing in the Act requires that a provider already deemed to have knowledge of non-coverage be given notice of such a non-coverage determination for purposes of imputing knowledge in the future. 26 A subsequent amendment to the Act added Sec. 1395h(j), which provides in pertinent part that, when a claim for home health services is denied, the fiscal intermediary shall furnish the provider and the individual with respect to whom the claim is made with a written explanation of the denial.... Pub.L. 100-203, Sec. 4032, 101 Stat. 1330-76 (1987) (applicable to claims received on or after January 1, 1988). Though apparently broader than the notice requirements of Sec. 1395pp in effect at the time, the new provisions only cover initial claim denials, see Sec. 1395h(j)(1), or reconsiderations of such denials, see Sec. 1395h(j)(2), without ever mentioning reconsiderations of approvals. Furthermore, section 1395pp(a), which required notification of both the provider and beneficiary in cases where non-coverage was waived, only applies when neither party was already on notice and therefore would not be relevant in cases such as these where the provider is later deemed to have had the requisite knowledge of non-coverage. 27 Nor are the providers' rights to seek reimbursement from beneficiaries implicated in these cases. The legislative history accompanying Sec. 1395pp recognized that in cases where the beneficiary knew or should have known of non-coverage, liability would remain with the beneficiary and the provider could ... exercise his rights under State law to collect for the services furnished.... S.REP. No. 1230, 92d Cong., 2d Sess. 294 (1972). For purposes of the original claims approvals here, the beneficiaries were deemed to be without knowledge of any non-coverage. The revised waiver determinations on post-payment review only applied to the providers. See HCFA Ruling 86-1, at 8-9. Under these circumstances, a provider would have no right to seek reimbursement for subsequently denied claims from the beneficiary unless the provider could show that the beneficiary (including any outside the sample) was previously informed that he was receiving noncovered services. See id. Furthermore, even if the provider could show that the beneficiaries of payment claims denied without review also had the requisite knowledge (notwithstanding the provider's implicit representation that such knowledge was lacking when the claim was initially submitted), providers are constrained in their ability to charge patients for services subsequently deemed to be non-covered. See Sec. 1395cc(a)(1)(B) (providers must agree not to seek reimbursement from patients for services that HHS decides are not covered more than three years after original notice of payment, and the Secretary may reduce this statute of limitations to one year if circumstances warrant). 28 Appellants also contend that sample adjudication vitiates their rights to appeal. Unlike the notice requirements discussed above, the statute makes no apparent distinction between pre-payment and post-payment review when setting out an individual's right to appeal an adverse determination. A beneficiary's right to appeal extends to any determination with which an individual is dissatisfied. See 42 U.S.C. Sec. 1395ff(b). As noted previously, Sec. 1395pp(d) accords providers the same rights as individuals. The issue, then, is whether the right to appeal initial claim denials is fully transferable to denials on post-payment review, or whether a right to dispute denials in the sample and challenge the statistical validity of the extrapolation suffices to protect the interests of providers. Appellants fill in this crucial gap in their position by relying on a supposed concession by HHS that, in appellants' words, a provider's rights are the same whether the claim is being adjudicated at the time it is submitted or upon post-payment review. However, HHS made no such concession, noting only that its sample adjudication procedure afforded providers the same protections and right to challenge denials in the sample group, not that the rights were equally applicable to all post-payment denials. Nothing in the statute appears to require case-by-case review of all claims on post-payment review. At best, congressional intent on the matter is ambiguous. 29 The question is what determination was made in these cases that could be subject to appeal. As HCFA explained in its ruling, [s]ampling only creates a presumption of validity as to the amount of an overpayment which may be used as the basis for recoupment. The burden then shifts to the provider to take the next step. Ruling 86-1, at 11. A provider might first of all object to a coverage or waiver determination as to a claim in the sample, and HCFA's sample adjudication scheme permitted such challenges. In fact, the providers in these cases were able to successfully challenge many of the denied sample claims, thereby reducing their projected overpayment liability. Secondly, a provider may also take issue with the statistical validity of an extrapolation from the sample, and this right was also available in the proceedings below. Although they repeatedly emphasize that the sample sizes were too small, appellants failed to make any such objections to the statistical validity of the extrapolation in the proceedings below. Instead, the providers argued that the entire scheme is unauthorized because their right to appeal specific claim denials has been foreclosed. 30 Sample adjudication is not, however, a determination that some particular, though unidentified claims outside the sample should have been denied; instead, it is a monetized estimate of the scope of a provider's overcharges derived from a sample. To the extent that appellants were dissatisfied with that adverse determination, they were given an ample opportunity to challenge its basis. This is not to say that the providers were prohibited from raising challenges based on particular claims in the non-sample universe. For instance, as explained previously, a provider is permitted to identify individual beneficiaries of claims not in the sample who were on notice that the claims involved non-covered services and to then directly bill those beneficiaries. Furthermore, in an effort to challenge the accuracy of the extrapolation, a provider could separately present evidence of a different random sample from the universe of claims that yields a lower rate of denials or prove that the projection is not a true estimate of the rate of denials in the non-sample universe. For instance, if a sampling projection estimated 100% denials in the non-sample universe, a provider could demonstrate that one or more of those unreviewed claims was proper. 31 Even when a provider is not able to invalidate the statistical validity of the sample audit, if the extrapolation has improperly invalidated any number of correct claims, the provider could always appeal the determination by establishing the validity of all or a sufficient number of its actual claims to demonstrate that the HHS projection is factually impossible of correctness. Obviously, where thousands of claims are involved,, this would impose a daunting burden on the provider, but the alternative urged by appellants imposes an equally daunting burden on the agency. It is not apparent to us that the regulatory scheme becomes invalid simply because it requires the protesting provider rather than the agency to bear the burden. 32 Appellants also claim that the Department's interpretation of the statute is not entitled to deference because it conflicts with HHS regulations and policy statements. They contend that the regulations implementing Part A, see 42 C.F.R. Secs. 405.701-.750 (1989), clearly require individual factual determinations and administrative review in making coverage denials. When initial determinations of non-coverage and no waiver are made on payment claims, the provider is entitled to written notice stat[ing] in detail the basis for the determination. 42 C.F.R. Sec. 405.702. At the request of an aggrieved party, initial payment denials can be reconsidered (Sec. 405.710), and providers are entitled to the same procedural rights on reconsideration, including a written statement (Sec. 405.716) and administrative review (Sec. 405.720). Again, to the extent that the regulations and other agency pronouncements reiterate the requirement for case-by-case review at the initial payment stage, they do not address the question of post-payment sample audits for recouping overpayments. 33 HHS emphasizes that sample adjudication is a long-standing practice, utilized at least since 1972. Indeed, internal manuals clearly contemplate just such a procedure. For example, the Medicare Intermediaries Manual, brought to the district court's attention by the plaintiffs, provides that 34 [t]he decision to conduct a sample study of a provider's claims constitutes a reopening of all determinations.... Send a notice to the provider as soon as possible explaining: the reason for the study (e.g., possible over-utilization of services); the period to which the results will apply; the sampling procedure, including the method used to select the sample and a statement that the sample findings will be projected to the entire population of claims. 35 Medicare Intermediaries Manual, Sec. 3799.5. Furthermore, the regulations governing the collection and compromise of claims for over-payments against providers appear to draw a distinction between pre-payment and post-payment review in defining the scope of the right to appeal. See 42 C.F.R. Sec. 405.374(j) (Any action taken by HCFA under this section regarding the compromise of an overpayment claim ... is not an initial determination for purposes of the appeal procedures under, inter alia, 42 C.F.R. Secs. 405.702-.730.). Appellants are thus unable to demonstrate that the sample adjudication procedure used in these cases was incompatible with either the statute or Department regulations. Thus, we cannot say that the Secretary's interpretation of his authority under the Act is unreasonable.