Court Opinion

ID: 185463
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:32:24+00
Date Added: 2024-06-11T17:26:16.107045
License: Public Domain

257 F.3d 807 (D.C.Cir. 2001)
Monmouth Medical Center, Appellantv.Tommy G. Thompson, Secretary,  Department of Health and Human Services, Appellee
No. 00-5109, 00-5110
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 23, 2001Decided July 27, 2001

Appeals from the United States District Court  for the District of Columbia (No. 98cv01228) (No. 98cv01229)
Robert L. Roth argued the cause and filed the briefs for  appellants.
Gerard Keating, Attorney, U.S. Department of Health &  Human Services, argued the cause for appellee.  With him on the brief were David W. Ogden, Assistant Attorney General,  Anthony J. Steinmeyer, Attorney, Wilma A. Lewis, U.S.  Attorney at the time the brief was filed, Harriet S. Rabb,  General Counsel, U.S. Department of Health & Human Services, and Henry R. Goldberg, Deputy Associate General  Counsel.
Before:  Edwards, Williams and Sentelle, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge:

1
Plaintiff-appellants Monmouth  Medical Center and Staten Island University Hospital are  acute-care facilities that receive payments under Medicare  Part A for services to Medicare beneficiaries.  Since 1983, the  Secretary of Health and Human Services has made payments  to cover hospital operating costs for inpatient care under the  Prospective Payment System ("PPS"), which reimburses according to a uniform national rate schedule.  See 42 U.S.C.   1395ww(d).  The two hospitals, because they serve a disproportionate share of low-income Medicare recipients, are  eligible for "disproportionate share hospital" ("DSH") adjustments to their PPS payments.  See 42 U.S.C.   1395ww(d)(5)(F).  Monmouth and Staten Island sought the  aid of the district court in an attempt to have their fiscal year  ("FY") 1993 and FY 1994 DSH payments recalculated, asserting jurisdiction under 42 U.S.C.  1395oo(a)(1)(a), 28 U.S.C.   1331, and 28 U.S.C.  1361.  The district court decided that  the hospitals failed to follow the statutorily mandated procedure for appealing their payments, that 42 U.S.C.  1395ii  precluded other review, and that, accordingly, it lacked subject matter jurisdiction.  We reverse.

2
*  *  *

3
The Secretary of HHS has delegated authority to administer the Medicare Act to the Health Care Financing Administration ("HCFA").1  Determinations of payment amounts are  in turn often delegated to fiscal intermediaries, generally private insurers that manage the payments for the Secretary. See 42 U.S.C.  1395h.  Estimated payments are made periodically and an annual accounting is done by the intermediary  in the form of a Notice of Provider Reimbursement ("NPR")  based on a cost report submitted by the provider after the  close of each fiscal year.

4
The Medicare Act has detailed instructions on the procedures for seeking review of payment determinations.  Under  42 U.S.C.  1395oo(a)(1)(A) a dissatisfied provider may appeal two types of "final determinations" to the Provider  Reimbursement Review Board ("Board").  Clause (i) covers a  fiscal intermediary's final reimbursement decision, commonly  the NPR, and clause (ii) covers a final determination of the  Secretary regarding payments under 42 U.S.C. §§ 1395ww(b)  or (d), including the DSH payments.  Appeals are to be filed  within 180 days of notice of the final determination.  Id.   1395oo(a)(3).  In either case, the decision of the Board is  then reviewable by filing in district court within 60 days of  notice of the decision, or by the Secretary's own motion.  Id.   1395oo(f).  Section 1395ii generally forecloses other avenues of review by incorporating the review-limiting provision  of the Social Security Act, 42 U.S.C.  405(h):

5
The findings and decision of the [Secretary of HHS] after a hearing shall be binding upon all individuals who were parties to such hearing.  No findings of fact or decision of the [Secretary of HHS] shall be reviewed by any person, tribunal, or governmental agency except as herein provided.  No action against the United States, the [Secretary of HHS], or any officer or employee thereof shall be brought under section 1331 or 1346 of title 28 to recover on any claim arising under this subchapter.

6
42 U.S.C.  405(h).

7
The Secretary's regulations provide three additional channels of administrative review.  Under 42 CFR  405.1841(b),  a late-filed request for Board review may be considered by  the Board, provided that good cause is shown and the request  is filed no more than three years after the NPR.  The regulations also provide two possibilities for the reopening of  a determination, again with a three-year limit.  42 CFR   405.1885(a) provides for reopening, at the discretion of the  decisionmaker, on the motion of the provider.  Subsection (b)  of that same regulation, which ultimately controls here, mandates reopening in one special circumstance.  It directs that  the decision

8
shall be reopened and revised by the intermediary if ... the [HCFA] notifies the intermediary that such determination or decision is inconsistent with the applicable law, regulations, or general instructions issued by the [HCFA].

9
42 CFR  405.1885(b) (emphasis added).

10
Under the statute authorizing DSH adjustments, eligibility  for and calculation of the payment require the summing of  two fractions.  The numerator of one of these fractions calls  for the number of inpatient days of patients who "were  eligible for medical assistance under a State plan [i.e., Medicaid]."  42 U.S.C.  1395ww(d)(5)(F)(vi)(II) (emphasis added). The Secretary promulgated a regulation on how to make the  calculation and has repeatedly amended it.  See 42 CFR   412.106 (1993) (version in force when original DSH calculations were made).  At the same time, the Secretary published  an interpretation of that rule in the Federal Register as part  of the notice and comment rulemaking implementing the PPS. See 51 Fed. Reg. 16,772, 16,777 (May 6, 1986);  51 Fed. Reg.  31,454, 31,460 (September 3, 1986).  Reading "who were  eligible" as " 'who (for such days) were eligible' " the Secretary declared that "Medicaid covered days will include only  those days for which benefits are payable."  51 Fed. Reg. at  16,777/2-3 (emphasis added).  This interpretation had the  effect of reducing payments by limiting adjustments for patients who were "eligible" for Medicaid benefits under the  natural reading of the word, but who, because of a particular  state's program, were not receiving such benefits on a given  day.

11
Neither hospital timely availed itself of the right to appeal  the NPRs in question.  But other providers did.  The Secretary's interpretation fared poorly, being struck down in four  of our sister circuits.  See Cabell Huntington Hosp. v. Shalala, 101 F.3d 984 (4th Cir. 1996);  Legacy Emanuel Hosp. &  Health Ctr. v. Shalala, 97 F.3d 1261 (9th Cir. 1996);  Deaconess Health Serv. Corp. v. Shalala, 83 F.3d 1041 (8th Cir.  1996);  Jewish Hosp., Inc. v. Secretary of Health and Human  Services, 19 F.3d 270 (6th Cir. 1994).  In light of these  decisions, the Administrator of HCFA issued a ruling that  rescinded the Secretary's challenged interpretation nationwide.  See Health Care Financing Administration Ruling  97-2 (February 27, 1997) ("HCFAR 97-2").  The ruling established a new interpretation more favorable to hospitals,  providing that Medicaid-eligible days would be counted  "whether or not the hospital received payment for those  inpatient hospital services."  Id.  The new interpretation was  to be effective in the month of its publication and applied to  all as yet unsettled cost reports and all cases in which  "jurisdictionally proper" appeals were still pending.  See id. The ruling explicitly foreclosed retrospective application: "We will not reopen settled cost reports based on this issue." Id.  Like all such rulings, HCFAR 97-2 was issued without  notice or opportunity for comment.

12
The hospitals nonetheless sought recalculation of their  DSH payments, filing with their intermediaries for reopening  well within the three years required by  405.1885.  Their  respective intermediaries denied the requests, citing HCFAR  97-2.  Both hospitals also sought Board review in attempts to  satisfy the jurisdictional requirements of 42 U.S.C.  1395oo. They filed their appeals within 180 days of the publication of  HCFAR 97-2, but the intermediaries objected that the trigger event was each hospital's NPR, not HCFAR 97-2.  In  response, the hospitals invoked  405.1841(b), which allows  extension of the time limit for "good cause."  They argued  that the delay was unavoidable because they could not have  anticipated HCFAR 97-2's refusal to grant reopening.  In  separate letters to the providers, the Board stated that "your  rationale for late filing does not constitute good cause" and  that it lacked jurisdiction to hear the appeals.  Both hospitals  sought review in the district court.  We review the district court's jurisdictional determination de novo.  See Moore v.  Valder, 65 F.3d 189, 196 (D.C. Cir. 1995).  Although we  eventually conclude that we have jurisdiction under 42 U.S.C.   1361, we must first examine all other possible avenues of  relief to ensure that the hospitals have fully exhausted those  which were available.

13
*  *  *

14
The hospitals first invoke the jurisdiction of the district  court under 42 U.S.C.  1395oo(f) to review the Board's denial of their appeals.  Having acknowledged that their  appeals were untimely with respect to the NPRs, they frame  the appeals here as challenges to the reopening prohibition in  HCFAR 97-2.  At issue is whether the Board could properly  consider such an attack.  As noted above, clause (i) of   1395oo(a)(1)(A), the prerequisite for district court jurisdiction under  1395oo(f), gives the Board jurisdiction to review  final reimbursement determinations by intermediaries.  But  it appears that neither of the hospitals attacked its intermediary's non-reopening decision in its appeal to the Board, and  an HCFA Ruling is not the action of an intermediary.  Staten  Island did not even request reopening until three months  after it sought Board review.  And Monmouth, while it tried  for reopening before making its appeal to the board, made  absolutely no mention of its intermediary or its reopening  request in its appeal to the Board.

15
Clause (ii), which applies to final determinations of the  Secretary regarding a provider's PPS calculations, brings  jurisdiction no nearer.  In Washington Hosp. Center v. Bowen, 795 F.2d 139 (D.C. Cir. 1986), we determined that a preNPR challenge could be brought where the Secretary had  firmly established "the only variable factor in the final determination as to the amount of payment under  1395ww(d)."  Id. at 147.  There the Secretary had determined the individual hospitals' "target amount," the erstwhile variable factor,  thereby fixing their payment amounts under the PPS.  Even  after concluding, as we do below, that HCFAR 97-2 triggered  mandatory reopening under  405.1885(b), we fail to see how  an attempt by the Secretary to establish a general policy  against reopening in any way resembles a final determination "as to the amount of payment," the only kind of determination for which clause (ii) creates a right of appeal to the  Board.  The hospitals argue that the blanket application of  the ruling is irrelevant, because it directly affects their claims  specifically.  That may be true, but the ruling does not itself  either establish or alter their "disproportionate patient percentage" or the amount of payment they receive under PPS.

16
Our conclusion that the hospitals' appeals to the Board fit  neither clause (i) nor clause (ii) is at least consistent with, if  not required by, the Supreme Court's recent opinion in Your  Home Visiting Nurse Services, Inc. v. Shalala, 525 U.S. 449  (1999).  In that case, the Court reviewed a discretionary  decision under  405.1885(a) not to reopen a clause (i) determination, finding that such a refusal did not itself qualify as a  clause (i) determination.  It relied on Califano v. Sanders,  430 U.S. 99 (1977), in which it held that judicial review is not  available for the Secretary's decision not to reopen a claim for  benefits under the Social Security Act.  Sanders, the Court  pointed out, relied in turn on two factors:  "that the opportunity to reopen a benefit adjudication was afforded only by  regulation and not by the Social Security Act itself;  and that  judicial review of a reopening denial would frustrate the  statutory purpose of imposing a 60-day limit on judicial  review of the Secretary's final decision."  Your Home, 525  U.S. at 454.  The Your Home Court also concluded that the  absence of Board review would not deprive petitioners there  of a suitable opportunity for " 'retroactive corrective adjustment[ ]' " because they had an initial opportunity to appeal  their NPRs, plus a chance to secure discretionary reopening  by the intermediary.  Id. (citing 42 U.S.C.   1395x(v)(1)(A)(ii)).

17
One might argue that where a provider is seeking reopening under  405.1885(b), the Sanders concern about the finality of decision is lessened, inasmuch as such cases will be  relatively few in number;  they arise only if the HCFA  informs intermediaries that a prior decision or set of decisions  is inconsistent with applicable law.  But it would still remain unclear how this distinction would change the character of the  reopening decision itself from "not a final determination" to  "final determination."  And of course it should make no  difference if the analysis arises out of clause (i) or clause (ii). In any event, we reserve our own final determination on this  issue for a case in which it is more clearly presented;  here  HCFAR 97-2 can in no way be mistaken for a final determination for the purposes of judicial review under §§ 1395oo(a)  & (f).

18
The hospitals nonetheless argue that our opinion in Washington Hospital Center and the HCFA's application of it in  National Medical Enterprises Malpractice PPS Group Appeal, Case No. 87-5050G, HCFA Adm. Dec. (Oct. 5, 1988),  together compel the interpretation that clause (ii) creates a  right to Board review 180 days after the "issuance, modification, or invalidation of a HCFAR."  App. Open. Br. at 48. They do no such thing.  Washington Hospital Center held  invalid HCFAR 84-1, which had barred appeal of PPS determinations until after an NPR was issued.  Providers in  National Medical Enterprises sought Board review for their  payments in the wake of that case, but submitted their appeal  more than 180 days from the issuance of our decision.  The  Administrator's decision did indeed suggest that a more  timely appeal would have been successful, but that conclusion  was dependent on the peculiar operation of HCFAR 84-1,  which had previously operated as a bar on properly filed  appeals of right.  See National Medical Enterprises at 3.  In  the absence of HCFAR 97-2 the hospitals would not have had  recourse to the Board, as they have already acknowledged.

19
The hospitals next seek jurisdiction under 28 U.S.C.  1331  for review of the reopening preclusion in HCFAR 97-2.  Such  review could not be more plainly off limits under 42 U.S.C.   405(h), which explicitly withholds  1331 jurisdiction for  "any claim arising under this title."  The Supreme Court has  consistently interpreted this phrase broadly, such that jurisdiction is barred when " 'both the standing and the substantive basis for the presentation' of the claims" is the Medicare  Act.  Heckler v. Ringer, 466 U.S. 602, 615 (1984) (quoting  Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975)).  Thus, in Ringer, the Court declared that plaintiffs seeking to overturn  an HCFA ruling that would limit their recovery for a particular type of surgery could do so only in the context of the  statutorily authorized process for review.  This applied with  equal force to the plaintiff who had not yet undergone the  surgery and therefore had, as yet, no claim for reimbursement.  See id. at 620.  That the plaintiffs there were not  seeking a specific monetary award was irrelevant.  The ultimate goal for those plaintiffs, as for the hospitals here, was  the recovery of additional sums under the Medicare Act.  See  id. at 615-16.

20
The hospitals make a plausible argument that jurisdiction  may be had under the limited exception to  405(h) carved  out by Bowen v. Michigan Academy of Family Physicians,  476 U.S. 667 (1986), as interpreted by Shalala v. Illinois  Council on Long Term Care, Inc., 529 U.S. 1 (2000).  In  Michigan Academy the Court, concluding that Congress had  incorporated  405(h) mutatis mutandis into the Medicare  Act, allowed a challenge to certain Medicare procedural regulations, reading  405(h) as limiting review of determinations  but not of "the Secretary's instructions and regulations."  476  U.S. at 680.  Illinois Council, however, clarified "Michigan  Academy as holding that  1395ii does not apply  405(h)  where application of  405(h) would not simply channel review through the agency, but would mean no review at all." 529 U.S. at 19.  The hospitals here argue that, because they  no longer have jurisdictionally valid claims before the Board  and because HCFAR 97-2 would not in any event apply to  them if they did, they will never have the opportunity to  challenge that ruling.  That seems like a plausible outcome. But despite the intermediaries' reliance on HCFAR 97-2, the  ruling is separate from their denials of reopening, and under  the Secretary's regulations, only the intermediaries have the  jurisdiction to reopen.  42 C.F.R  405.1885(c).  Jurisdiction  to review the ruling would do nothing to provide jurisdiction  over the intermediaries' denials, which would stand unchanged and no longer susceptible to automatic reopening,  given the expiration of the three-year period for reopenings  under  405.1885(b).

21
The hospitals lastly seek mandamus jurisdiction under 28  U.S.C.  1361 and relief ordering the intermediaries to reopen their determinations.  The Supreme Court has on several occasions expressly reserved the question of whether   1361 jurisdiction is precluded by  405(h).  See Your  Home, 525 U.S. at 456-57 n.3;  Ringer, 466 U.S. at 616-17. But this court has previously determined that  1361 jurisdiction is not barred, see Ganem v. Heckler, 746 F.2d 844, 85052 (D.C. Cir. 1984), joining the virtual unanimity of circuit  courts.  See, e.g., Burnett v. Bowen, 830 F.2d 731, 737-38  (7th Cir. 1987);  Belles v. Schweiker, 720 F.2d 509, 511-13 (8th  Cir. 1983).  Of course, to maintain an action under  1361, a  plaintiff must both exhaust available remedies and show a  clear non-discretionary duty.  Ringer, 466 U.S. at 616-17.

22
Neither party questions our ability to provide relief in the  absence of the intermediaries as parties to this lawsuit, but  we note that their non-joinder does not undermine our jurisdiction.  The intermediaries are agents of the Secretary  charged with the relevant duties under the Medicare Act and  its regulations, and, as such, they may properly be bound by a  writ of mandamus against the Secretary.  See United States  ex rel. Rahman v. Oncology Associates, 198 F.3d 502, 511  (4th Cir. 1999);  Fed. R. Civ. P. 65(d).

23
The hospitals argue that 42 CFR  405.1885(b) was triggered by HCFAR 97-2 and that the intermediaries therefore  had a non-discretionary duty to reopen their determinations. The Secretary responds that the choice of whether or not to  advise providers that a regulation is "inconsistent with the  applicable law" is committed to the non-reviewable discretion  of the Secretary.  But the issue is not whether we may  review the choice to advise or not advise as to consistency  with applicable law;  it is whether the Secretary, acting  through the HCFA Administrator, in effect announced a  finding of inconsistency (even while purporting to veto reopening).

24
To be sure, HCFAR 97-2 studiously avoided using the  magic words "inconsistent with the applicable law," and instead called the earlier interpretation "contrary to the applicable law in four judicial circuits."  HCFAR 97-2.  The  Secretary argues that HCFAR 97-2 merely "acquiesced prospectively," in the interests of national uniformity, without  actually admitting its illegality.  But HCFAR 97-2 also purports to change an existing interpretation, and under the law  of this circuit altering an interpretive rule (interpreting an  agency regulation) requires notice and opportunity for comment unless, of course, the original interpretation was invalid  and therefore a nullity (as discussed below).

25
The Medicare Act places notice and comment requirements  on the Secretary's substantive rulemaking similar to those  created by the APA.  See 42 U.S.C.  1395hh(b);  5 U.S.C.   553(b).  We have not had an opportunity to decide whether  the Medicare Act requirement of notice and comment for  "changes [of] a substantive legal standard" creates a more  stringent obligation than the APA or whether it somehow  changes the dividing line between legislative and interpretive  rules.2  But it seems fair to infer that, as the Medicare Act  was drafted after the APA,  1385hh(c)'s reference to "interpretive rules" without any further definition adopted an exemption at least similar in scope to that of the APA.  See  Warder v. Shalala, 149 F.3d 73, 79 n.4 (1st Cir. 1998).  We  see no reason to explore the possibility of a distinction here,  as HCFAR 97-2 appears to have none of the indicia that  would lead us to think it a legislative rule under the APA. See, generally, American Mining Congress v. Mine Safety &  Health Admin., 995 F.2d 1106, 1108-12 (D.C. Cir. 1993).  In  the absence of HCFAR 97-2 or its predecessor interpretation, there would still be an "adequate legislative basis for ...  agency action."  Id. at 1112.  The definition of eligible inpatient days is merely an "elucidation of rights and duties  created by Congress" and the Secretary's legislative rule. Health Ins. Ass'n of America, Inc. v. Shalala, 23 F.3d 412,  423 (citing American Mining Congress, 995 F.2d at 1109-10).

26
But characterization as an interpretive rule does not relieve  the Secretary of notice and comment requirements when a  valid interpretation exists.  In Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579, 586 (D.C. Cir. 1997), we  concluded that:  "Once an agency gives its regulation an  interpretation, it can only change that interpretation as it  would formally modify the regulation itself:  through the  process of notice and comment rulemaking."  See also Alaska  Professional Hunters Ass'n v. Federal Aviation Administration, 177 F.3d 1030, 1033-34 (D.C. Cir. 1999);  Shell Offshore  Inc. v. Babbitt, 238 F.3d 622, 629 (5th Cir. 2001).  Here, a  valid rule interpreting a regulation was clearly in play, and it  was modified by HCFAR 97-2.

27
The new interpretation established by HCFAR 97-2 would  therefore be unlawful absent notice and comment rulemaking,  unless the original interpretation was itself invalid.  See  Dixon v. United States, 381 U.S. 68, 74 (1965) ("A regulation  which ... operates to create a rule out of harmony with the  statute, is a mere nullity.") (internal citations omitted).  As a  general rule, it is for the courts to determine whether or not a  regulation is invalid.  But as four circuits had already done  so, it certainly can't have been improper for the Secretary to  concede the invalidity nationally.  See Independent Petroleum Ass'n of America v. Babbitt, 92 F.3d 1248, 1260 n.3 (D.C.  Cir. 1996).

28
Concluding that the Secretary did in fact give notice of the  interpretation's inconsistency with applicable law, we also find  that  405.1885(b) imposed a clear duty on intermediaries to  reopen DSH payment determinations for the hospitals.  The  portion of HCFAR 97-2 that conflicts with that duty is simply  a nullity.  In addition, we think it insignificant that, because  of the Secretary's own three year limitation, reopening would  not be available if sought today.  Although mandamamus is  classified as a legal remedy, its issuance is largely controlled  by equitable principles.  See Duncan Townsite Co. v. Lane,  245 U.S. 308, 312 (1917).  Since both hospitals were within the three-year mark when they made their requests for  reopening, they are entitled to the reopening that was due  them at that time.  Cf. Burnett v. Bowen, 830 F.2d 731, 73641 & n.7 (7th Cir. 1987).

29
The Secretary argues that the hospitals have failed to  exhaust their remedies, because they failed to file proper  appeals of their NPRs under  1395oo(a).  But that fact is  hardly relevant here.  The question is whether they have  done all they can to vindicate their right to reopening.  We  have already shown above how all other avenues of relief are  either foreclosed or futile.

30
Finally, the Secretary half-heartedly suggests that the  hospitals may have waived mandamus jurisdiction by failing  to specify  1361 as one of the bases for jurisdiction until  their response to the Secretary's motion to dismiss.  But the  Secretary does not contend (apart from the arguments rejected above) that the hospitals failed to allege sufficient facts to  support their mandamus claim, the essential test for legal  sufficiency.  See Richardson v. U.S., 193 F.3d 545, 549 (D.C.  Cir. 1999).  Nor does the Secretary argue that the government was in any way prejudiced by the trustees' failure to list   1361 in their complaints.  The government has at best  identified a procedural failing that would easily have been  remedied by a request to amend the complaints that in no  way affects our authority to consider issuance of a writ.  See  Caribbean Broadcasting System, Ltd. v. Cable & Wireless  P.L.C., 148 F.3d 1080, 1083-84 (D.C. Cir. 1998);  Fed R. Civ.  P. 15(a).  Indeed courts can treat certain requests for mandatory injunctions as petitions for a writ of mandamus, see, e.g.,  National Wildlife Federation v. U.S., 626 F.2d 917, 918 n.1  (D.C. Cir. 1980), and habeas petitions as ones for mandamus,  see, e.g., United States ex rel. Schonbrun v. Commanding  Officer, 403 F.2d 371, 374 (2d Cir. 1968);  Long v. Parker, 390  F.2d 816, 818-819 (3d Cir. 1968).

31
Accordingly, the judgment of the district court is reversed  and the case remanded for further proceedings consistent  with this opinion.

32
So ordered.

Notes:

1
 HCFA was recently renamed and became the Centers for  Medicare & Medicaid Services.  We will continue to use the designation HCFA in this opinion to maintain consistency with the  record below.

2
 Although no explicit exception to those requirements is made for  "interpretive rules," an exception is implicit in the provision for  periodic publication for such rules, see 42 U.S.C.  1395hh(c), and  courts generally have assumed the exception.  See Health Ins.  Ass'n of America, Inc. v. Shalala, 23 F.3d 412, 422-23 (D.C. Cir.  1994).