Heckler v. Community Health Services of Crawford County, Inc

• Decision Date: 21 May 1984
• Docket Number: No. 83-56,83-56
• Citation: 81 L.Ed.2d 42,467 U.S. 51,104 S.Ct. 2218
• Parties: Margaret M. HECKLER, Secretary of Health and Human Services, Petitioner v. COMMUNITY HEALTH SERVICES OF CRAWFORD COUNTY, INC., et al
• Court: U.S. Supreme Court

467 U.S. 51

104 S.Ct. 2218

81 L.Ed.2d 42

Margaret M. HECKLER, Secretary of Health and Human Services, Petitioner

v COMMUNITY HEALTH SERVICES OF CRAWFORD COUNTY, INC., et al.

No. 83-56.

Supreme Court of the United States

Argued Feb. 27, 1984.

Decided May 21, 1984.

Syllabus

Under the Medicare program, providers of health care services are reimbursed for the reasonable cost of services rendered to Medicare beneficiaries and are required to submit annual cost reports which are audited to determine actual costs. The Secretary of Health and Human Services (Secretary) may reopen any reimbursement determination within a 3-year period and make appropriate adjustments. Respondent non-profit corporation (hereafter respondent), pursuant to its contract to provide home health care services under the Medicare program, received reimbursement through a fiscal intermediary, Travelers Insurance Cos. (Travelers). Respondent also received a federal grant under the Comprehensive Employment and Training Act (CETA), which authorized the use of federal funds to provide training and job opportunities for economically disadvantaged persons. This made it possible for respondent to take on additional personnel and to expand its home health care services. A regulation to prevent double reimbursement of providers' costs indicated that grants received by a provider to pay special operating costs must be subtracted from the reasonable costs for which the provider may be reimbursed under the Medicare program. Respondent asked Travelers whether the salaries of its CETA-funded employees who provided services to Medicare patients were reimbursable as reasonable costs under Medicare, and was orally advised by Travelers' Medicare manager that the CETA funds were "seed money" as defined in the Provider Reimbursement Manual to mean "[g]rants designated for the development of new health care agencies or for expansion of services of established agencies," and that therefore, even though the CETA employees' salaries constituted specific operating costs paid by a federal grant, they were reimbursable under the Medicare program. Relying on this advice, respondent included costs for which it was receiving CETA reimbursement in its cost reports for fiscal years 1975, 1976, and 1977, and received reimbursement for those sums. Eventually, however, Travelers, as it should have done previously, referred respondent's inquiry to the Department of Health and Human Services, and was formally advised that the CETA funds were not "seed money" and thus had to be subtracted from respondent's Medicare reimbursement. Travelers then reopened respondent's cost reports for the years in question and recomputed the reimbursable costs, determining that respondent had been overpaid $71,480. When Travelers demanded repayment of this amount, respondent filed suit in Federal District Court, but, after it had obtained temporary injunctive relief, the parties stipulated that the suit would be stayed pending administrative review. Thereafter, while rejecting the position that CETA funds were "seed money," the Provider Reimbursement Review Board found that the Secretary's right to recoup the 1975 overpayment was barred because Travelers had not given respondent a written notice of reopening within the 3-year limitation period, and accordingly reduced the amount in dispute. Respondent then filed another suit in the District Court seeking review of this determination. Consolidating the two suits, the court ruled in the Secretary's favor, rejecting respondent's claim that the Secretary ought to be estopped to deny that the CETA funds were "seed money" because of the representations of the Secretary's agent, Travelers. The Court of Appeals reversed, holding that the Government may be estopped by the "affirmative misconduct" of its agents and that Travelers' erroneous advice, coupled with its failure to refer the question to the Secretary, constituted such misconduct.

Held: The Government is not estopped from recovering the funds in question from respondent, since respondent has not demonstrated that the traditional elements of an estoppel are present with respect to either its change in position or its reliance on Travelers' advice. Pp. 59-66.

(a) The consequences of the Government's misconduct were not entirely adverse, since respondent did receive an immediate benefit as a result of the double reimbursement. Its detriment is the inability to retain money that it should never have received in the first place. Thus, this is not a case in which respondent has lost any legal right or suffered any adverse change in its status. Respondent cannot claim any right to expand its services to levels greater than those it would have provided had the error never occurred. Curtailment of operation does not justify an estoppel when the expansion of respondent's operation was achieved through unlawful access to federal funds. Respondent cannot raise an estoppel without proving that it would be significantly worse off than if it had never obtained the CETA funds in question. Pp. 61-63.

(b) The regulations governing the cost reimbursement provisions of Medicare should and did put respondent on ample notice of the care with which its cost reports must be prepared, and the care which would be taken to review them within the relevant 3-year period. Yet respondent prepared those reports on the basis of an oral policy judgment by an official who, it should have known, was not in the business of making policy. That is not the kind of reasonable reliance that would even give rise to an estoppel against a private party and therefore cannot estop the Government. Pp. 63-66.

698 F.2d 615 (3rd Cir.1983), reversed and remanded.

Kenneth S. Geller, Washington, D.C., for petitioner.

Raymond G. Hasley, Washington, D.C., for respondents.

Justice STEVENS delivered the opinion of the Court.

Under what is recognized for present purposes as an incorrect interpretation of rather complex federal regulations, during 1975, 1976, and 1977 respondent received and expended $71,480 in federal funds to provide health care services to Medicare beneficiaries to which it was not entitled. The question presented is whether the Government is estopped from recovering those funds because respondent relied on the express authorization of a responsible Government agent in making the expenditures.

I

Under the Medicare program, Title XVIII of the Social Security Act, 79 Stat. 291, as amended, 42 U.S.C. §§ 1395-1395vv, providers of health care services are reimbursed for the reasonable cost of services rendered to Medicare beneficiaries as determined by the Secretary of Health and Human Services (Secretary). § 1395x(v)(1)(A). Providers receive interim payments at least monthly covering the cost of serv- ices they have rendered. § 1395g(a). Congress recognized, however, that these interim payments would not always correctly reflect the amount of reimbursable costs, and accordingly instructed the Secretary to develop mechanisms for making appropriate retroactive adjustments when reimbursement is found to be inadequate or excessive. § 1395x(v)(1)(A)(ii).¹ Pursuant to this statutory mandate, the Secretary requires providers to submit annual cost reports which are then audited to determine actual costs. 42 CFR §§ 405.454, 405.1803 (1982). The Secretary may reopen any reimbursement determination within a 3-year period and make appropriate adjustments. § 405.1885.

The Act also permits a provider to elect to receive reimbursement through a "fiscal intermediary." 42 U.S.C. § 1395h; 42 CFR § 421.103 (1982). If the intermediary the provider has nominated meets the Secretary's requirements, the Secretary then enters into an agreement with the intermediary to have it perform those administrative responsibilities she assigns it. §§ 421.5, 421.110. These duties include receipt, disbursement, and accounting for funds used in making Medicare payments, auditing the records of providers in order to ensure payments have been proper, resolving disputes over cost reimbursement, reviewing and reconsidering payments to providers, and recovering overpayments to providers. §§ 421.100(b), (c), (e), (f), 421.120(e). The fiscal intermediary must also "serve as a center for, and communicate to providers, any information or instructions furnished to it by the Secretary, and serve as a channel of communication from providers to the Secretary." 42 U.S.C. § 1395h(a)(2)(A).

Respondent Community Health Services of Crawford County, Inc. (hereafter respondent), is a nonprofit corporation. In 1966 it entered into a contract with petitioner's predecessor, the Secretary of Health, Education, and Welfare, to provide home health care services to individuals eligi- ble for benefits under Part A of the Medicare program, 42 U.S.C. §§ 1395c to 1395i-2. Under the contract, respondent received reimbursement through a fiscal intermediary, the Travelers Insurance Cos. (Travelers).

In 1973 Congress enacted the Comprehensive Employment and Training Act (CETA), 87 Stat. 839, codified, as amended, at 29 U.S.C. § 801 et seq. (1976 ed. and Supp. V), and repealed, Pub.L. 97-300, 96 Stat. 1357, authorizing the use of federal funds to provide training and job opportunities for economically disadvantaged persons. In 1975 respondent began participating in the program, which reimbursed it for the salaries and fringe benefits paid to certain of its employees. CETA funds made it possible for respondent to take on additional personnel and to provide additional home health care services.

To prevent what would be in effect double reimbursement of providers' costs, one of the regulations concerning reasonable costs reimbursable under the Medicare program indicates that grants received by a provider in order to pay specific operating costs must be subtracted from the reasonable costs for which the provider may receive reimbursement.² After obtaining a CETA grant, respondent's administrator...