205 F.3d 493 (1st Cir. 2000), 99-1085, Mainegeneral Medical Center v. Shalala

Docket Nº:99-1085
Citation:205 F.3d 493
Case Date:March 08, 2000
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

Page 493

205 F.3d 493 (1st Cir. 2000)




No. 99-1085

United States Court of Appeals, First Circuit

March 8, 2000

Heard October 6, 1999

Page 494

William H. Stiles, with whom Skelton, Taintor & Abbott were on brief, for appellant.

Douglas Hallward-Driemeier, Attorney, U.S. Department of Justice, with whom David W. Ogden, Acting Assistant Attorney General, Jay P. McCloskey, United States Attorney, and Barbara C. Biddle, Attorney, U.S. Department of Justice, were on brief, for appellee.

Before Boudin, Circuit Judge, Cyr, Senior Circuit Judge, and Lynch, Circuit Judge.

Lynch, Circuit Judge.

This case concerns what recourse is available to a provider hospital that, although eligible to receive Medicare reimbursement for certain expenses, mistakenly fails to ask for that reimbursement in a timely manner. The Secretary of Health and Human Services reimburses hospitals and other organizations for services they provide to beneficiaries of the Medicare program, 42 U.S.C. § 1395 et seq. After the end of each fiscal year, a hospital must submit a cost report to a "fiscal intermediary," a private firm that processes claims for the Secretary. The intermediary reviews the cost report and issues a Notice of Provider Reimbursement (NPR), which indicates the reimbursement to which the provider is entitled. If a provider is dissatisfied with an NPR, it can appeal to the Provider Reimbursement Review Board (the Board). See 42 U.S.C. § 1395oo(a).

In its cost reports for 1993 and 1994, Kennebec Valley Medical Center (Kennebec), a hospital in Augusta, Maine, listed zero as its claim for bad debts reimbursable by Medicare. Reimbursable bad debts are uncollectible debts resulting from the failure of Medicare beneficiaries to pay deductible or coinsurance amounts. See 42 C.F.R. § 413.80(d). Mid-Maine Medical Center (Mid-Maine), a hospital in Waterville, Maine, similarly listed zero for reimbursable bad debts in its 1994 cost report. After the intermediary, Blue

Page 495

Cross and Blue Shield of Maine, issued NPRs for these three cost reports in July and September 1996, both Kennebec and Mid-Maine appealed to the Board. In their appeals, Kennebec and Mid-Maine raised several objections to the NPRs, including claims that they were entitled to reimbursement for Medicare-related bad debts despite having listed zero for them in their cost reports. Kennebec and Mid-Maine asserted that the claims for zero reimbursement were mistakes that they had discovered only after the NPRs had been issued.

The Board dismissed the bad debts issue from all three appeals for lack of statutory jurisdiction. The Board noted that Kennebec and Mid-Maine had not included the bad debts in the cost reports they had submitted to the intermediary. Therefore, the Board reasoned, the debts were not "matter[s] covered by [a] cost report as required by 42 U.S.C. § 1395oo(a), and the Board does not have jurisdiction." Because the Secretary declined to review the Board's decision, it became a final decision of the agency. See 42 U.S.C. § 1395oo(f)(1).


While their appeals were pending before the Board, Kennebec and Mid-Maine merged to form MaineGeneral Medical Center (MaineGeneral). After the Board dismissed the bad debts issue from the appeals, MaineGeneral filed three suits in the United States District Court for the District of Maine. The court consolidated the cases on August 12, 1998.

Both MaineGeneral and the Secretary filed motions for summary judgment. On October 15, 1998, the Magistrate Judge issued a Recommended Decision advising that the Secretary's motion be granted. The Magistrate Judge based his recommendation on his interpretation of 42 U.S.C. § 1395oo(a). That section sets out three prerequisites for an appeal to the Board: 1) the Medicare provider must be "dissatisfied with a final determination of . . . its fiscal intermediary . . . as to the amount of total program reimbursement due the provider"; 2) the amount in controversy must be $10,000 or more; and 3) the provider must appeal within 180 days of the intermediary's final determination. 42 U.S.C. § 1395oo(a). There was no dispute that MaineGeneral had satisfied the second and third requirements. The Magistrate Judge determined that MaineGeneral had failed to fulfill the first requirement, dissatisfaction with a final determination of the fiscal intermediary.

The Magistrate Judge's decision relied on dictum in Bethesda Hospital Ass'n v. Bowen, 485 U.S. 399 (1988). In Bethesda, the hospitals had deliberately omitted certain costs from their cost reports, knowing that they could not claim them under the existing regulations (and that the intermediary had no authority to change the regulations). See id. at 401. The hospitals later sought to challenge the regulations and claim the costs in a hearing before the Board. See id. The Secretary contended that the Board lacked jurisdiction over the claims because the hospitals could not be "dissatisfied" as required by § 1395oo(a) if the intermediary had simply awarded the amounts the hospitals had requested in their cost reports. See id. at 404. The Supreme Court concluded, however, that the hospitals "could claim dissatisfaction, within the meaning of the statute, without incorporating their challenge in the cost reports filed with their fiscal intermediaries." Id. at 405.

In discussing its holding, the Court observed:

[P]etitioners stand on different ground than do providers who bypass a clearly prescribed exhaustion requirement or who fail to request from the intermediary reimbursement for all costs to which they are entitled under applicable rules. While such defaults might well establish that a provider was satisfied with the amounts requested in its cost report and awarded by the fiscal intermediary,

Page 496

those circumstances are not presented here.

Id. at 404-05. The Magistrate Judge, agreeing with the Seventh Circuit that the above language "strongly suggests that a hospital that does not ask its intermediary to reimburse it for all of the costs for which it is entitled to be reimbursed cannot, on appeal to the Board, first ask for new costs," Little Co. of Mary Hosp. & Health Care Ctrs. v. Shalala, 24 F.3d 984, 993 (7th Cir. 1994), found that MaineGeneral's claim of zero for bad debts on its cost reports meant that it could not be "dissatisfied" with the intermediary's determination of the bad debts issue. Because MaineGeneral was not "dissatisfied," it failed to meet the first requirement of Board jurisdiction under § 1395oo(a). 1 The district court issued an order adopting the Magistrate Judge's recommendation and entered judgment in favor of the Secretary on December 9, 1998. This appeal followed.


Under the Medicare program, fiscal intermediaries make estimated payments to hospitals and other service providers throughout the year based on each institution's projected costs. See 42 U.S.C. § 1395g(a); 42 C.F.R. § 413.60(a), (c). Providers are required to submit a cost report after the end of each fiscal year. 2 See 42 U.S.C. § 1395g(a); 42 C.F.R. § 413.20(b). A cost report is a lengthy, complex document, sometimes three-quarters of an inch thick when completed. See Athens Community Hosp., Inc. v. Schweiker, 743 F.2d 1, 3 (D.C. Cir. 1984).

The intermediary reviews the cost report and requests further information from the provider as necessary. See 42 C.F.R. § 413.20(d)(2). A provider may file an amended cost report to correct material errors discovered after the filing of the original cost report. See Health Care Fin. Admin., Provider Reimbursement Manual, Part I § 2931.2(A) (1999). A provider may appeal to the Board an intermediary's refusal to accept an amended cost report that was submitted before the NPR was issued. See id. § 2926 app. A, ¶¶ B.3.

When the review of the cost report is complete, the intermediary issues an NPR, which indicates the total reimbursement for the year covered by the cost report and explains any adjustments the intermediary has made to costs claimed by the provider. See 42 C.F.R. § 405.1803. If the total reimbursement is higher than the estimated payments already made to the provider, the Secretary pays the deficiency; otherwise, the provider refunds any overpayment to the Secretary. See 42 C.F.R. §§ 405.1803(c), 413.60(c).

If a provider mistakenly omits something from its cost report and discovers the mistake after the NPR has been issued, it is not left without recourse. For up to three years after the intermediary has issued an NPR, a provider can request that the intermediary reopen and revise its determination. See 42 C.F.R. § 405.1885(a). Whether to grant this request to reopen is a matter for the intermediary's sole discretion; it is subject to neither administrative nor judicial review. See Your Home Visiting Nurse Servs., Inc. v. Shalala, 119 S.Ct. 930, 933-34 (1999). MaineGeneral did not request that the intermediary

Page 497

reopen its NPRs; instead, it appealed to the Board.


In St. Luke's Hospital v. Secretary of Health and Human Services, 810 F.2d 325 (1st Cir. 1987), this court addressed the question of whether the Board has the power to decide an issue that was not first raised before the intermediary. See id. at 326. We held that it does, and that the power is discretionary. See id. at 330, 332. We are bound by the St. Luke's decision if it is on point, unless it has been subsequently overruled or other exceptional circumstances apply. See Williams v. Ashland Eng'g Co., 45 F.3d 588, 592 (1st Cir. 1995). We think that St. Luke's is on point and remains good law. We hold, therefore, in accordance with St. Luke's, that the Board has statutory jurisdiction to hear MaineGeneral's claim, but that it is not required to hear it.

St. Luke's involved a dispute between a hospital...

To continue reading