156 F.3d 1098 (11th Cir. 1998), 95-6429, United States v. Blue Cross and Blue Shield of Alabama, Inc.

Docket Nº:95-6429.
Citation:156 F.3d 1098
Party Name:UNITED STATES of America, Qui Tam for Frank E. BODY, Plaintiff-Appellant, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, INC., Defendant-Appellee.
Case Date:June 26, 1998
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1098

156 F.3d 1098 (11th Cir. 1998)

UNITED STATES of America, Qui Tam for Frank E. BODY,

Plaintiff-Appellant,

v.

BLUE CROSS AND BLUE SHIELD OF ALABAMA, INC., Defendant-Appellee.

No. 95-6429.

United States Court of Appeals, Eleventh Circuit

June 26, 1998

Page 1099

James L. Feldesman, Michael B. Glomb, Melissa M. Thomson, Feldesman, Tucker, Leifer, Fidell & Bank, Washington, DC, for Plaintiff-Appellant.

Michael Robinson, Civil Division, Douglas N. Letter, U.S. Dept. of Justice, Washington, DC, for Amicus.

Cary Dickinson Tynes, James L. Priester, Birmingham, AL, Warren Jay DeVechio, Kenneth M. Bruntel, Ramona E. Romero, Crowell & Moring, Washington, DC, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before TJOFLAT and BIRCH, Circuit Judges, and SMITH [*], Senior Circuit Judge.

TJOFLAT, Circuit Judge:

Frank E. Body appeals the district court's dismissal of his claim against Blue Cross and Blue Shield of Alabama ("BCBSA") for lack of subject matter jurisdiction. Body, a former employee of BCBSA, brought suit as a qui tam relator under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-33 (1994), alleging

Page 1100

that BCBSA, in its role as a fiscal intermediary for Medicare Part A claims in Alabama, knowingly presented or caused to be presented false or fraudulent claims to the United States government in violation of 31 U.S.C. § 3729(a). The district court held that 42 U.S.C. § 405(h) (1994), a provision of the Social Security Act 1 made applicable to the Medicare Act 2 by 42 U.S.C. § 1395ii (1994), operated as a bar to its subject matter jurisdiction over the case, and therefore dismissed Body's suit. Body appealed the district court's decision to this court. We disagree with the district court's interpretation of subsection 405(h), but affirm the district court's dismissal because we find that under 42 U.S.C. § 1395h(i)(3) (1994), BCBSA is immune from liability to the United States for payments its officers certify and disburse to Medicare beneficiaries.

In part I, we describe the factual and procedural background of Body's case. In part II, we explain why we disagree with the district court's interpretation of subsection 405(h), analyzing both the context within which the subsection is made applicable to the Medicare Act, and the Supreme Court cases that have construed it. In part III, we discuss the meaning and applicability of subsection 1395h(i)(3), and explain why it shields BCBSA from liability to the United States in the current action.

I.

Frank E. Body was an employee of appellee Blue Cross and Blue Shield of Alabama from 1973 to 1989. In addition to its traditional role as a provider of medical insurance, BCBSA serves as a fiscal intermediary for Medicare Part A in Alabama. 3 In its role as a fiscal intermediary, BCBSA processes and audits cost reports from hospitals in Alabama, adjudicates disputed claims for benefits from these health service providers, and issues reimbursement payments to these hospitals for costs appropriately incurred in the treatment of Medicare patients. BCBSA applies provisions from a number of different sources to its administration of Medicare Part A, including: 1) portions of Title VIII of the Social Security Act governing Medicare; 2) regulations contained in Title 42, Part 405 of the Code of Federal Regulations; 3) provisions contained in the Provider Reimbursement Manual (the "Manual") issued by the HCFA; 4) periodic "policy statements" from the HCFA; and 5) additional guidance from BCA to its subcontractors, issued in the form of Administrative Bulletins.

Body was employed as a senior auditor by BCBSA in 1984, and was assigned to audit the 1983 cost reports of, among others, Baptist Medical Centers ("Baptist") and Carraway Methodist Medical Center ("Carraway"). In the course of auditing the cost reports of Baptist and Carraway, Body proposed a number of adjustments to the hospitals' reports based on his application of Medicare regulations, provisions of the Manual, and guidelines from BCA. In general, Body's adjustments related to interest expenses claimed on refunded capital debt (i.e., interest on bonds issued, at least in part, to pay off an older bond issue) and to interest earned on funded depreciation accounts (i.e., accounts containing funds set aside for future capital expenses). BCBSA disagreed with a number of Body's recommendations, and, despite his protest, reversed his proposed adjustments.

Body contacted the Federal Bureau of Investigation in January 1989 to report BCBSA's reimbursements to Alabama hospitals

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of interest costs that he felt were not authorized under Medicare regulations. The FBI referred Body to the Office of the Inspector General ("OIG") of HHS, which initiated an investigation of the allegations. The OIG investigated fourteen adjustments proposed by Body and reversed by BCBSA. In its report, dated September 1994, the OIG concluded that four of the fourteen adjustments were "immaterial," six were properly handled by BCBSA, two of the adjustments had been reinstated by BCBSA upon HCFA instruction, and the final two adjustments were determined to be correctly handled by BCBSA after the HCFA issued a policy clarification.

In August 1993, prior to the issuance of the OIG's final report, Body instituted this lawsuit for the United States as a qui tam relator 4 under the False Claims Act. Body alleges that BCBSA has been reimbursing Alabama hospitals, in particular Baptist and Carraway, for interest costs that are not chargeable to Medicare. His complaint essentially reiterated the information that he provided to the OIG regarding BCBSA's handling of the 1983 cost reports of Baptist and Carraway, and claimed that BCBSA continues to allow Medicare to be charged unallowable interest expenses. 5 Body asserted that the district court had jurisdiction over his action pursuant to 31 U.S.C. § 3732(a). 6

BCBSA moved the district court, inter alia, for summary judgment on the ground that the court lacked subject matter jurisdiction over Body's complaint. BCBSA argued that subsection 3732(a) was simply a venue provision, and as a result, Body's claim depended upon general federal-question subject matter jurisdiction under 28 U.S.C. § 1331 (1994). BCBSA argued further that 42 U.S.C. § 405(h) acted as a bar to federal-question jurisdiction for Body's claims. The third sentence of subsection 405(h) states:

No action against the United States, the [Secretary], 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.

42 U.S.C. § 405(h) (as made applicable to Medicare and modified by 42 U.S.C. § 1395ii). In its April 28, 1995 opinion, the district court agreed that subsection 405(h) deprived the court of jurisdiction under section 1331 and found no other jurisdictional provision, including subsection 3732(a), that could save Body's claims. The district court, therefore, granted BCBSA summary judgment and ordered Body's suit dismissed. 7 Body appeals the district court's dismissal.

This court has jurisdiction to hear this appeal of the district court's final decision pursuant to 28 U.S.C. § 1291 (1994).

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We review de novo the district court's dismissal of Body's action for lack of subject matter jurisdiction. See Plumbers & Pipefitters Local Union 72 v. John Payne Co., 850 F.2d 1535, 1537 (11th Cir.1988).

II.

Body raises three issues in this appeal. First, he claims that subsection 3732(a) of the False Claims Act contains an independent grant of subject matter jurisdiction, and that therefore his claim does not rely on either of the jurisdictional provisions negated by subsection 405(h). Second, Body claims that an action brought by a qui tam relator under the False Claims Act qualifies as a "proceeding[ ] commenced by the United States" within the meaning of 28 U.S.C. § 1345 (1994), again avoiding the jurisdictional bar of subsection 405(h). Finally, Body argues that the district court erred in finding that subsection 405(h) was applicable to his action against BCBSA at all. Because we find that the district court erred in holding that subsection 405(h) applied to Body's claims, we do not address the first two issues.

The third sentence of subsection 405(h) clearly revokes federal-question jurisdiction in the district courts under 28 U.S.C. § 1331 over all cases "arising under" the Medicare Act. The threshold question for this court, then, is whether Body's claim "arises under" the Medicare Act and is therefore subject to subsection 405(h). See Heckler v. Ringer, 466 U.S. 602, 615, 104 S.Ct. 2013, 2021, 80 L.Ed.2d 622 (1984) ("[T]o be true to the language of the statute, the inquiry in determining whether § 405(h) bars federal-question jurisdiction must be whether the claim 'arises under' the Act....").

Subsection 405(h) has been interpreted in many cases and by many courts--in the context of its application both to actions arising under Social Security, for which it was originally drafted, and to actions arising under Medicare. In fact, the Supreme Court has discussed the scope of the subsection's jurisdictional preclusion in several significant opinions. All of these cases, however, involved suits brought by beneficiaries 8 against the United States or against a fiscal intermediary 9 to recover benefits not previously paid. As best as we can tell, the application of subsection 405(h) to a False Claims Act action, brought by or for the United States against a fiscal intermediary, to recover money improperly paid to Medicare beneficiaries is a matter of first impression in the federal courts. The relevance of this distinction to determining whether a particular action "arises...

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