244 F.3d 342 (4th Cir. 2001), 00-1409, Inova Alexandria Hosp. v. Shalala

Docket Nº:00-1409
Citation:244 F.3d 342
Party Name:INOVA ALEXANDRIA HOSPITAL, Plaintiff-Appellant, v. DONNA E. SHALALA, Secretary,Department of Health and Human Services, Defendant-Appellee.
Case Date:March 26, 2001
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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244 F.3d 342 (4th Cir. 2001)



DONNA E. SHALALA, Secretary,Department of Health and Human Services, Defendant-Appellee.

No. 00-1409

United States Court of Appeals, Fourth Circuit

March 26, 2001

Argued: November 2, 2000

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Gerald Bruce Lee, District Judge.


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COUNSEL: ARGUED: Edith Sophia Marshall, POWERS, PYLES, SUTTER & VERVILLE, P.C., Washington, D.C., for Appellant. Janet Rehnquist, Assistant United States Attorney, Alexandria, Virginia, for Appellee. ON BRIEF: Helen F. Fahey, United States Attorney, Alexandria, Virginia, for Appellee.

Before WILLIAMS and MICHAEL, Circuit Judges, and Joseph F. ANDERSON, Jr., Chief United States District Judge for the District of South Carolina, sitting by designation.

Affirmed by published opinion. Judge Michael wrote the opinion, in which Judge Williams and Chief Judge Anderson joined.


MICHAEL, Circuit Judge:

Inova Alexandria Hospital (the Hospital) contested its Medicare reimbursement for 1994 by filing an administrative appeal with the Provider Reimbursement Review Board (the Board) of the U.S. Department of Health and Human Services (HHS). The Board dismissed the appeal because the Hospital failed to file certain papers on time. The Hospital then challenged the Board's dismissal by suing the Secretary of HHS in federal court. The district court reviewed the Board's dismissal decision on the merits and granted summary judgment to HHS. We are presented with two questions: (1) whether the Hospital is entitled to judicial review and (2) whether, if judicial review is available, the Board acted properly in dismissing the Hospital's administrative appeal. We conclude that the Hospital is entitled to judicial review, but after considering the merits we affirm the award of summary judgment to HHS.


The Hospital is a Medicare provider. To be reimbursed for the services it furnishes to Medicare beneficiaries, the Hospital submits an annual cost report to its fiscal intermediary (or paying agent), Trigon Blue Cross and Blue Shield (Trigon). As a fiscal intermediary Trigon acts under contract with the Secretary of HHS. See 42 U.S.C. S 1395h. This case arises out of Trigon's disallowance in August 1996 of a portion (about $290,000) of the Hospital's requested reimbursement for fiscal year 1994. In January 1997 the Hospital filed a timely appeal of Trigon's determination to the Board. (The appeal document was a request for a hearing before the Board. See 42 U.S.C. S 1395oo.) In July 1997 the Board sent a letter to the Hospital, with a copy to Trigon, setting forth a schedule for submission of position papers. The letter said that preliminary position papers were due by November 1, 1998, and final papers by February 1, 1999. In September 1997 the Board sent a reminder letter to the Hospital that repeated the briefing schedule and warned that failure to meet the deadlines would result in dismissal of the appeal.

The Hospital failed to file either a preliminary or a final position paper. The failure was due to internal confusion at the Hospital in the wake of a corporate acquisition, specifically, Inova Health System's acquisition of the Hospital, which occurred after the appeal was filed but before the position papers were due. David Eunpu, a hospital employee, was initially responsible for handling the appeal. After the acquisition many of Eunpu's duties changed, and he mistakenly assumed that someone else would be handling the appeal. Because the appeal remained Eunpu's responsibility, the Hospital failed to file the position papers. Because of this failure, the Board dismissed the Hospital's appeal. The Hospital requested that the Board reinstate the appeal on the grounds of innocent and inadvertent mistake, but the Board denied the request. The Board concluded that"

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administrative oversight is not a sufficient basis upon which to reinstate an appeal." The Hospital next requested that the Health Care Financing Administration (HCFA) review the Board's decision denying the appeal, but the HCFA declined to undertake any review.

The Hospital thereafter sued HHS in federal court, claiming that the Board's actions in dismissing and not reinstating the Hospital's administrative appeal were arbitrary and capricious, violated the Hospital's right to a hearing under the Medicare Act, and violated the Due Process Clause. The Hospital also asserted that the Board's rule regarding the dismissal of appeals is invalid because it was not promulgated under the APA's notice and comment procedure. HHS moved to dismiss for lack of jurisdiction, asserting that the Board's actions were discretionary and not subject to judicial review. In the alternative, HHS moved for summary judgment on the ground that the Board's actions were justified in the circumstances. As we read the district court's order, the court assumed jurisdiction and then granted summary judgment to HHS, concluding that the Board acted properly when it dismissed and refused to reinstate the Hospital's administrative appeal. The Hospital appeals the district court's order.


We turn first to the matter of jurisdiction. In district court and in its brief to us, HHS argued that the Hospital was not entitled to judicial review of the Board's decisions relating to the dismissal of the Hospital's administrative appeal. At oral argument, however, HHS conceded that judicial review is available and urged us to affirm on the merits. Although there is presently no objection to our jurisdiction, we nonetheless believe that the issue should be examined. See Sigmon Coal Co. v. Apfel, 226 F.3d 291, 299 (4th Cir. 2000) ("We are duty-bound to clarify our subject matter jurisdiction even if the parties do not [pursue] it as an issue.").

As the Supreme Court has instructed, "We begin with the strong presumption that Congress intends judicial review of administrative action." Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670 (1986). Indeed, the APA provides for review"except to the extent that (1) statutes preclude judicial review; or (2) agency action is committed to agency discretion by law." 5 U.S.C.S 701(a). This case involves the second exception, whether the agency's action is committed to its discretion by law. This exception to judicial review is a "very narrow one," reserved for "those rare instances where statutes are drawn in such broad terms that in a given case there is no law to apply." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410 (1971) (internal quotation marks omitted). There is no law to apply if "the statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion." Heckler v. Chaney, 470 U.S. 821, 830 (1985). In other words, judicial review is foreclosed if the "agency action of which plaintiff complains fails to raise a legal issue which can be reviewed by the court by reference to statutory standards and legislative intent." Strickland v. Morton, 519 F.2d 467, 470 (9th Cir. 1975). However, even if the underlying statute does not include meaningful (or manageable) standards, "regulations promulgated by an administrative agency in carrying out its statutory mandate can provide standards for judicial review." CC Distribs., Inc. v. United States , 883 F.2d 146, 154 (D.C. Cir. 1989) (internal quotation marks omitted).

Here, the Medicare Act provides the Board with broad authority to develop procedures for provider appeal hearings. Specifically, the Act grants to the Board "full power and authority to make rules and establish procedures, not inconsistent with the provisions of this subchapter or regulations of the Secretary, which are

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necessary or appropriate to carry out the provisions of this section." 42 U.S.C. S 1395oo(e).

Under this authority the Board adopted the following rule: "If [the provider] fail[s] to submit [a] final position paper to the Board by the due date, the Board may dismiss the appeal." See Provider Reimbursement Manual (PRM) S 2921.4E (1993).1

The question for us is whether there are manageable standards for judicial review of the Hospital's claims that the Board erred in dismissing the appeal for failure to file timely position papers. For starters, we clearly have manageable standards to review the Board's action in connection with three of the Hospital's claims: (1) that the Board violated the Due Process Clause, (2) that the Board violated the Hospital's right to a hearing under the Medicare Act, and (3) that the Board's dismissal rule is invalid because it was not promulgated under the APA's notice and comment procedure. We may review the Hospital's due process claim because it is well settled that even if agency action is committed to its discretion by law, a court may still determine whether the action is constitutional. See, e.g., Padula v. Webster, 822 F.2d 97, 101 (D.C. Cir. 1987); Garcia v. Neagle, 660 F.2d 983, 988 (4th Cir. 1981). This is because the Due Process Clause provides a manageable standard that allows for review. We may also review the Hospital's Medicare Act claim because the Act does not allow the Board to adopt rules or procedures that are inconsistent with the provisions of the Act. See 42 U.S.C.S 1395oo(e). Even if the Board purports to give itself complete discretion by rule to dismiss an appeal for failure to file a position paper, the Board's power to dismiss is nevertheless circumscribed by the provisions of the Medicare Act. Because the Hospital's Medicare Act claim turns on the scope of the Act, there is a judicially manageable standard for analyzing this claim. Likewise, we may review the Hospital's claim that the Board's rule regarding...

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