Court Opinion

ID: 768808
Source: CourtListenerOpinion
Date Created: 2012-04-18 09:14:20+00
Date Added: 2024-06-11T08:52:31.044829
License: Public Domain

213 F.3d 352 (7th Cir. 2000)
VISITING NURSES ASSOCIATION OF  SOUTHWESTERN INDIANA, INC.,  and VISITING NURSES HEALTH CARE, INC.,    Plaintiffs-Appellants,v.DONNA E. SHALALA, Secretary, United States  Department of Health & Human Services,    Defendant-Appellee.
No. 99-3494
In the  United States Court of Appeals  For the Seventh Circuit
Argued February 25, 2000
Decided May 17, 2000

Appeal from the United States District Court  for the Southern District of Indiana,  Indianapolis Division.  No. 99 C 1260--David F. Hamilton, Judge.
Before BAUER, RIPPLE and MANION, Circuit Judges.
RIPPLE, Circuit Judge.

1
The appellants, two  providers of health care services in southern  Indiana, sought an injunction that would halt the  Government's efforts to recoup overpayments made  to them through the Medicare program. The  district court held that the service providers  had failed to state a claim because the statutory  section under which they sought relief did not  allow providers to seek a waiver of their  liability to the Government. The district court  also determined that, even if a waiver was  permitted by the statute, the service providers  could not obtain relief because they were not  "without fault" within the meaning of the  statute. We agree that the service providers have  failed to state a claim upon which relief can be  granted. Therefore, for the reasons set forth in  the following opinion, we affirm the judgment of  the district court.

I    BACKGROUND

2
The Visiting Nurses Association of Southwestern  Indiana of Evansville, Indiana ("VNA"), and  Visiting Nurses Health Care, Inc. of Anderson,  Indiana ("VNHC"), collectively "the Providers,"  have both participated in the Medicare program  for about 30 years. As certified providers of  home health services to Medicare beneficiaries,  VNA and VNHC are required to provide services to  homebound patients. The Providers periodically  receive reimbursement from the Government through  interim payments. These interim payments are  based on the provider's estimated reimbursable  costs. At the end of the year, a calculation is  made of the provider's actual allowable costs for  the previous year. If the provider was overpaid  or underpaid, adjustments are made to future  payments. Interim payments may also be adjusted  during the fiscal year if the provider and its  fiscal intermediary decide that the payments do  not reflect the provider's actual costs.  According to the statute, these payments to  providers are made for the benefit of the  ultimate beneficiary. See 42 U.S.C. sec.  1395gg(a).

3
In 1997, Congress enacted the Balanced Budget  Act. See Pub. L. 105-33, 111 Stat. 251. One of  its provisions altered the reimbursement scheme  for providers such as VNA and VNHC.1 Under the  new reimbursement program, the Providers would  receive the least of: (1) the provider's actual  cost per visit; (2) a capped amount of cost per  visit; or (3) a cap on payment for services based  on an annual aggregate per-beneficiary limit  ("PBL"). The PBL is determined by the Health Care  Financing Administration ("HCFA"), a unit of the  Department of Health and Human Services. The new  PBL capped the amount of annual payments to home  health providers for all services provided to any  beneficiary, regardless of the level of or cost  of services provided. In promulgating the PBL,  the HCFA acknowledged that it would create  hardship for home health care providers.  Nonetheless, the HCFA warned providers not to  discriminate against individual Medicare  beneficiaries based on their status as program  enrollees.

4
Both VNA and VNHC anticipated a 15% reduction in  Medicare funding in the wake of the Balanced  Budget Act, and undertook significant cost-  cutting measures. On June 1, 1998, VNA was  advised of a PBL for Indiana and Kentucky  patients of $2,663.93, and for Illinois patients  of $2,471.69. That same day, VNHC was advised of  its PBL of $3,895.78. Both providers had  underestimated the severity of the funding cuts.  The Providers' interim payments had not been  adjusted downward at the beginning of the time  period covered by the benefit reductions, and,  thus, when the benefit reductions were announced,  the Providers were faced with a situation in  which they had been substantially overpaid. The  HCFA informed VNA in early 1999 that its  overpayment liability for the 1998 fiscal year  was $4,094,039. In December 1998, VNHC received  notice of a projected overpayment of $860,593 for  the 1998 fiscal year; it was later assessed an  additional overpayment of $83,350.

5
The Providers sought relief under 42 U.S.C. sec.  1395gg, a section of the Social Security Act  governing Medicare payments. They claimed that  under that section they were entitled to a waiver  of overpayment liability. This claim for a waiver  was first rejected by the regional Medicare  fiscal intermediary, Palmetto Government Benefits  Administration. Subsequently, the HCFA and the  Secretary of the Department of Health and Human  Services ("the Secretary") declined to grant  relief. The Providers then brought this action in  the district court, seeking an injunction that  would prevent the Secretary from recouping the  overpayments.

6
The district court held that sec. 1395gg did not  contemplate waivers of overpayments in aggregate  reimbursements to health care providers but,  rather, existed solely to allow waivers for  individual beneficiaries. Therefore, it  explained, the Providers' action could not  succeed. The court then found that, even if the  Providers could bring an action under sec.  1395gg, it would fail on the merits because that  section requires those seeking its protection to  be without fault. The district court found that  the Providers were not without fault, because  they could have estimated their PBL long before  they were actually informed of the specific  amount, and then could have reduced their  expenditures to achieve compliance with the  limits they ultimately received. Although the  court acknowledged that the Providers had not  committed any waste or fraud, and that requiring  the Providers to repay the overpayments could be  devastating to them, it declined to grant  injunctive relief because the Providers had shown  no likelihood of success on the merits. After  their request for a preliminary injunction was  denied, the Providers offered no further  arguments, and their case was dismissed for  failure to state a claim upon which relief could  be granted.

II
DISCUSSION

7
We review de novo the district court's  dismissal. See Massey v. Helman, 196 F.3d 727,  732 (7th Cir. 1999); Grzan v. Charter Hosp., 104 F.3d 116, 119 (7th Cir. 1997). In our review, we  draw all reasonable inferences in the plaintiffs'  favor. See Massey, 196 F.3d at 732; Grzan, 104 F.3d at 119. We shall affirm the dismissal only  if the plaintiffs would not be entitled to relief  under any set of facts that could be proved  consistent with the allegations. See Massey, 196 F.3d at 732.

8
When a Medicare provider is overpaid, the  Secretary has the authority to attempt to recoup  the overpayment. See 42 C.F.R. sec.  405.371(a)(2). When such an attempt occurs, the  provider from whom money is being recouped is  given an opportunity for rebuttal. See 42 C.F.R.  sec.sec. 405.373(a)(2), 405.374(a). If a provider  is dissatisfied with the ultimate result of the  administrative proceedings, it may file a civil  action in the district court. See 42 U.S.C. sec.  1395oo(f); Homewood Prof'l Care Ctr. v. Heckler,  764 F.2d 1242, 1245 (7th Cir. 1985). The  Secretary had not yet instituted recoupment  proceedings under these regulations against the  Providers when they brought their claim for  injunctive relief. Instead, the Providers, prior  to the institution of any recoupment proceedings,  brought this action, arguing that the text of 42  U.S.C. sec. 1395gg itself allows for a waiver of  overpayment liability.2 The district court  characterized the action as one of pure statutory  interpretation; the Providers were seeking only a  determination of their rights under sec. 1395gg.  Neither party contests that assessment.3

9
Our sole task is therefore to determine whether  sec. 1395gg may be the basis of the relief sought  by the Providers. "As with all issues of  statutory interpretation, the appropriate place  to begin our analysis is with the text itself,  which is the most reliable indicator of  congressional intent." Bass v. Stolper,  Koritzinsky, Brewster & Neider, 111 F.3d 1322,  1324-25 (7th Cir. 1997) (citations omitted). We  may also look to the agency's interpretation of  this statutory language because "a reasonable  interpretation of a statute by the agency  responsible for its administration is entitled to  great deference by the judiciary." Martin v. Pav-  Saver Mfg. Co., 933 F.2d 528, 530 (7th Cir.  1991). Finally, we shall consider the role of  this statutory language within the broader  statutory scheme. "It is a 'fundamental canon of  statutory construction that the words of a  statute must be read in their context and with a  view to their place in the statutory scheme.'"  Food & Drug Admin. v. Brown & Williamson Tobacco  Co., 120 S. Ct. 1291, 1301 (2000) (quoting Davis  v. Michigan Dept. of Treasury, 489 U.S. 803, 809  (1989)).

A.  Section 1395gg

10
The Providers argue that the text of sec. 1395gg  allows for the waiver of overpayment liability  for providers. As discussed above, the Providers  receive reimbursements from the Medicare program.  Subsection 1395gg(a) explains that these  reimbursement payments are treated as payments to  the individual Medicare beneficiaries:

11
Any payment under this subchapter to any  provider of services or other person with respect  to any items or services furnished any individual  shall be regarded as a payment to such  individual.

12
42 U.S.C. sec. 1395gg(a). Subsection 1395gg(b)  then says that when overpayments are made, the  Secretary may seek to recover those overpayments.  As the statute states:    Where--

13
1.more than the correct amount is paid under  this subchapter to a provider of services or  other person for items or services furnished an  individual and the Secretary determines (A) that,  within such period as he may specify, the excess  over the correct amount cannot be recouped from  such provider of services or other person, or (B)  that such provider of services or other person  was without fault with respect to the payment of  such excess over the correct amount . . .  . . . .

14
proper adjustments shall be made, under  regulations prescribed (after consultation with  the Railroad Retirement Board) by the Secretary,  by decreasing subsequent payments--

15
(3)  to which such individual is entitled under  subchapter II of this chapter or under the  Railroad Retirement Act of 1974, as the case may  be . . . .

16
42 U.S.C. sec. 1395gg(b) (citation omitted).

17
Under some circumstances, however, the Secretary  should waive the recoupment of overpayments  discussed in sec. 1395gg(b). Subsection 1395gg(c)  sets forth the situations in which such waiver  should occur:

18
There shall be no adjustment as provided in  subsection (b) of this section (nor shall there  be recovery) in any case where the incorrect  payment has been made . . . with respect to an  individual who is without fault . . . if such  adjustment (or recovery) would defeat the  purposes of subchapter II or subchapter XVIII of  this chapter or would be against equity or good  conscience.

19
42 U.S.C. sec. 1395gg(c).4 The providers argue  that these sections do not apply only to  individuals, but also to providers. Thus, they  claim, these sections may entitle them to a  waiver. However, as further detailed below, sec.  1395gg addresses only the rights of individual  beneficiaries, not those of providers. Therefore,  the Providers cannot be granted the relief they  seek.

1.  Subsection 1395gg(a)

20
The Providers read sec. 1395gg(a) to vest  providers with the same rights as individuals. In  fact, it does quite the contrary. Subsection  1395gg(a) states: "Any payment under this  subchapter to any provider of services or other  person with respect to any items or services  furnished any individual shall be regarded as a  payment to such individual." What this means is  that regardless of who receives the payment in  the first instance--the provider or the  individual--the payment is, in legal effect, a  payment to the individual. Therefore, the rights  created by this section must be the individual's  rights, whether or not they received their  benefits from a pass-through. Consequently, we  cannot adopt the Providers' proffered  interpretation.

2.  Subsection 1395gg(b)

21
Subsection 1395gg(b)(3) dovetails with sec.  1395gg(a). Adjustments to payments made under  sec. 1395gg(b) are to payments "to which such  individual is entitled." 42 U.S.C. sec.  1395gg(b)(3) (emphasis added). The entitlement to  payments under sec. 1395gg(b) is the  individual's, not the provider's.

22
The language of sec. 1395gg(b)(1) also indicates  that Congress did not intend to create any rights  for providers. As set out above, sec.  1395gg(b)(1) allows adjustments to be made to  payments where:

23
more than the correct amount is paid under this  subchapter to a provider of services or other  person for items or services furnished an  individual and the Secretary determines (A) that,  within such period as he may specify, the excess  over the correct amount cannot be recouped from  such provider of services or other person, or (B)  that such provider of services or other person  was without fault with respect to the payment of  such excess over the correct amount . . . .

24
42 U.S.C. sec. 1395gg(b)(1). The language merely  creates prerequisites for the adjustments in  payments to the individual beneficiaries.  Subsection 1395gg(b)(1)(A) allows the Secretary  to recover money from individuals directly if she  cannot recover it from the provider of  services.5 According to sec. 1395gg(b)(1)(B),  if the provider of services was without fault in  the overpayment, adjustment may be made to the  individual's payment. These subsections, sec.  1395gg(b)(1)(A) and (B), set forth the conditions  precedent that must be satisfied before recovery  from an individual may be undertaken; they do not  create any entitlement to funds on the part of  the providers.

3.  Subsection 1395gg(c)

25
a.

26
Because the only adjustment contemplated by sec.  1395 gg(b) is an adjustment of payments to  individuals, no waiver under sec. 1395gg(c) is  possible for these providers. Subsection  1395gg(c) explicitly applies only to the waiver  of "adjustment[s] as provided in subsection (b)  of this section." 42 U.S.C. sec. 1395gg(c). The  adjustments made to the payments is, as we have  stated, an adjustment only to the payments to the  individual, and no rights of the providers are  implicated by that adjustment.

27
Even if sec. 1395gg(b) could apply to providers,  meaning that sec. 1395gg(c) also could apply to  providers, the language of sec. 1395gg(c)  precludes waiver based on the provider's lack of  fault. The waiver clause only applies when "an  incorrect payment has been made . . . with  respect to an individual who is without  fault."6 42 U.S.C. sec. 1395gg(c) (emphasis  added). We cannot accept the Providers' argument  that "individual," in this context, means  "individual or provider." The language of sec.  1395gg consistently refers to individuals and  providers as separate entities. Indeed, in sec.  1395gg(b), Congress specifically refers to  providers of services who are without fault,  whereas here the reference is to individuals  without fault. Thus, "individual" in sec.  1395gg(c) cannot mean "individual or provider."

28
b.

29
The regulations promulgated by the Secretary  support the distinction between "individual" and  "provider" rights. It has long been recognized  that courts should accord considerable weight to  an executive department's construction of a  statutory scheme it is entrusted to administer.  See Chevron, U.S.A., Inc. v. Natural Resources  Defense Council, 467 U.S. 837, 844 (1984); City  of Chicago v. Federal Communications Comm'n, 199 F.3d 424, 429 (7th Cir. 1999). This is  particularly true when Congress has specifically  delegated authority to the Secretary to construe  the statute. See United States v. Morton, 467 U.S. 822, 834 (1984); Batterton v. Francis, 432 U.S. 416, 425 (1977); Haywood v. North Am. Van  Lines, 121 F.3d 1066, 1069 (7th Cir. 1997). This  statute delegates to the Secretary the authority  to "prescribe such regulations as may be  necessary to carry out the insurance programs"  under the subchapter that includes sec. 1395gg.  See 42 U.S.C. sec. 1395hh(a); St. Francis Hosp.  Ctr. v. Heckler, 714 F.2d 872, 878 (7th Cir.  1983). In this case, the Providers have not  argued that the Secretary's regulations are  contrary to the statute.7

30
Two aspects of the recoupment regulations  confirm the distinction between individual and  provider rights outlined above. First, the  Secretary has developed two different regulatory  schemes for determining and recouping  overpayments from individuals and providers.  Compare 42 C.F.R. sec.sec. 405.350-59  (individuals) with id. at sec.sec. 405.370-78  (providers). If the overpayment was to an  individual, the Secretary may seek an adjustment  pursuant to 42 C.F.R. sec. 405.352, which applies  "[w]here an individual is liable for an incorrect  payment." Id. If the Secretary proceeds against  the provider, however, she must act pursuant to  42 C.F.R. sec. 405.371(a), which says that:

31
Medicare payments to providers and suppliers, as  authorized under this subchapter (excluding  payments to beneficiaries), may be--    . . . .

32
(2)  Offset or recouped, in whole or in part, by  an intermediary or a carrier if the intermediary,  carrier, or HCFA has determined that the provider  or supplier to whom payments are to be made has  been overpaid.

33
Id. The existence of separate regulatory schemes  for recoupment from individuals and providers  makes it clear that the two acquire separate  rights under the statute.

34
In addition, the regulations set forth different  "waiver" procedures for individuals and  providers. The provision allowing individuals to  seek waivers of overpayments, 42 C.F.R. sec.  405.355, tracks the language of sec. 1395gg(c):

35
(a)  The provisions of sec. 405.352 may not be  applied and there may be no adjustment or  recovery of an incorrect payment . . . in any  case where such incorrect payment has been made  with respect to an individual who is without  fault, or where such adjustment or recovery would  be made by decreasing payments to which another  person who is without fault is entitled as  provided in section 1870(b) of the Act where such  adjustment or recovery would defeat the purpose  of title II or title XVIII of the Act or would be  against equity and good conscience. . . .    (b)  Adjustment or recovery of an incorrect  payment (or only such part of an incorrect  payment as may be determined to be inconsistent  with the purposes of Title XVIII of the Act)  against an individual who is without fault shall  be deemed to be against equity and good  conscience if the determination that such payment  was incorrect was made subsequent to the third  year following the year in which notice of such  payment was sent to such individual.

36
42 C.F.R. sec. 405.355 (emphasis added). There  can be no question that the issue of "fault"  raised here is fault only on the part of the  individual, not fault on the part of the  provider. See 20 C.F.R. sec. 404.507 ("'Fault' as  used in 'without fault' (see [20 C.F.R.] sec.  404.506 and 42 C.F.R. sec. 405.355) applies only  to the individual.").

37
A different procedure is used for providers who  seek to block the recoupment of overpayments.  When a recoupment from a provider is sought  pursuant to 42 C.F.R. sec. 405.371(a)(2), the  intermediary or carrier seeking recoupment must  "[g]ive the provider or supplier an opportunity  for rebuttal in accordance with sec. 405.374." 42  C.F.R. sec. 405.373. Under sec. 405.374, the  intermediary or supplier must give notice of when  the recoupment will go into effect, and then  "must give the provider or supplier an  opportunity, before the . . . recoupment takes  effect, to submit any statement (to include any  pertinent information) as to why it should not be  put into effect on the date specified in the  notice." 42 C.F.R. sec. 405.374.

38
When one compares the "waiver" procedures for  individuals to that for providers, the  differences are evident. The procedure for  individuals does, in fact, "waive" rights to  recoupment of overpayments to which the Secretary  is otherwise entitled; 42 C.F.R. sec. 405.355  prohibits the Secretary from seeking an  "adjustment or recovery of an incorrect payment .  . . with respect to an individual who is without  fault." By contrast, the procedure for providers  is more appropriately characterized as a  remonstrance provision. It identifies the process  that the Secretary must follow in seeking  recoupment and that the provider must follow in  contesting that determination. The procedure,  however, does not contain any waiver of the  Secretary's rights; the regulations do not set  forth circumstances under which the Secretary is  prohibited from seeking recoupment. Noticeably  absent from the procedure for providers is any  discussion of "fault" on the part of the  provider.

39
The existence of separate regulatory recoupment  schemes for individuals and providers makes it  clear that 42 U.S.C. sec. 1395gg(c)'s waiver  provision for an "individual who is without  fault" applies only to individuals. The statute  and the regulations consistently differentiate  between individuals and providers. As well, the  recoupment schemes for individuals and providers  bear little resemblance to one another.  Therefore, the regulations confirm that waiver of  overpayment liability for providers is not  contemplated by sec. 1395gg(c).

B.  The Statutory Structure

40
A comparison of sec. 1395gg to other provisions  of the Medicare statute also persuades us that,  when Congress intended to give providers a  remedy, it did so explicitly. In 42 U.S.C. sec.  1395oo, Congress established a Provider  Reimbursement Review Board, whose powers include  the authority to hear appeals from providers  dissatisfied with the amount of money they have  received. See 42 U.S.C. sec. 1395oo(a)(1)(A). No  appeals process for providers is discussed in  sec. 1395gg.

41
In 42 U.S.C. sec. 1395pp, Congress specifically  allows providers to exercise the rights of  individuals under certain sections of the statute  "after the Secretary determines that the  individual will not exercise such rights under  such sections." 42 U.S.C. sec. 1395pp(d). The  list of sections under which providers may  exercise the rights of individuals does not  include sec. 1395gg. Section 1395pp demonstrates  that when Congress intended for providers to  exercise the rights of individuals, it created a  mechanism for them to do so. It also shows that  Congress did not intend for providers to exercise  the rights of individuals under 42 U.S.C. sec.  1395gg because the mechanism allowing for the  exercise of individual rights by providers does  not apply to that section. That this mechanism  does not apply to 42 U.S.C. sec. 1395gg is a  strong indication that Congress did not intend  for providers to exercise the rights granted to  individuals under that section.8

Conclusion

42
For the foregoing reasons, the judgment of the  district court is affirmed.9

Affirmed

Notes:

1
 Challenges to the new reimbursement scheme as  unconstitutional have been rejected. See Vermont  Assembly of Home Health Agencies v. Shalala, 18 F. Supp. 2d 355 (D. Vt. 1998); Greater Dallas Home  Care Alliance v. United States, 10 F. Supp. 2d 638  (N.D. Tex. 1998). The Providers have not raised  such an argument here.

2
 The Secretary argued to the district court that  any relief should wait until the Secretary had  been given a chance to pursue regulatory  remedies:    VNA and VNHC have brought this action solely to  avoid repaying overpayments due and to recover  overpayments already returned arising out of  their 1998 Medicare cost reports. The final  settlement of those cost reports has not yet been  completed. Any challenges to those cost reports  should be done in accordance with the  administrative remedies provided by the Medicare  Act.    R.19 at 14.

3
 We thus have no occasion to consider whether the  Providers may be able to obtain waiver of their  overpayment liability through the regulations  promulgated by the Secretary. We also do not  address the central question faced by the Fifth  Circuit in Mount Sinai Hosp. of Greater Miami,  Inc. v. Weinberger, 517 F.2d 329 (5th Cir. 1975),  that sec. 1395gg did not abrogate the Secretary's  common-law right to recoup overpaid funds from  providers. See id. at 345.

4
 This section is described elsewhere in the  statute as providing a mechanism for a waiver of  recoupment. See 42 U.S.C. sec. 1395 gg(d) ("No  certifying or disbursing officer shall be held  liable for any amount certified or paid by him to  any provider of services or other person where  the adjustment or recovery of such amount is  waived under subsection (c) of this section.")  (emphasis added). See also Zinman v. Shalala, 67 F.3d 841, 853 & n.1 (9th Cir. 1995) (describing  sec. 1395gg(c) as a waiver clause).

5
 Accord Mount Sinai, 517 F.2d at 340 (describing  sec. 1395gg(b) as permitting "a narrow category  of recovery from beneficiaries").

6
 In the alternative, it may apply when the  adjustment would be made by decreasing payments  to which another person who is without fault is  entitled. See 42 U.S.C. sec. 1395gg(c). The  Providers have not argued that this language is  applicable to their claim.

7
 Because this is not a challenge to a regulatory  scheme, 42 U.S.C. sec. 405(h) is not a bar to  federal question jurisdiction, as it was in  Shalala v. Illinois Council on Long Term Care,  Inc., 120 S. Ct. 1084 (2000). See also Chaves  County Home Health Serv., Inc., 931 F.2d 914  (D.C. Cir. 1991) (challenge to Medicare  regulatory scheme).

8
 The Second Circuit has noted the distinction  between the two different kinds of waiver  contemplated by sec. 1395gg and sec. 1395pp:
When there is a denial of coverage, there may be  no recovery or recoupment from an individual who  is "without fault" in accepting benefits later  denied. 42 U.S.C. sec. 1395gg. Providers may also  obtain a waiver of liability for coverage of  individual claims where they neither knew nor had  reason to know that services rendered constituted  noncovered care. 42 U.S.C. sec. 1395pp(a).    Kraemer v. Heckler, 737 F.2d 214, 216 (2d Cir.  1984).

9
 Because we hold that Congress created no rights  for providers under sec. 1395gg, we need not  address the issue of whether there was any  "fault" on the part of the Providers.