Bethesda Hospital Association v. Bowen
| Decision Date | 04 April 1988 |
| Docket Number | No. 86-1764,86-1764 |
| Citation | 108 S.Ct. 1255,485 U.S. 399,99 L.Ed.2d 460 |
| Parties | BETHESDA HOSPITAL ASSOCIATION, et al., Petitioners v. Otis R. BOWEN, Secretary of Health and Human Services |
| Court | U.S. Supreme Court |
Under the Medicare program of the Social Security Act, a qualified provider of health care services, in order to obtain reimbursement from the Secretary of Health and Human Services for its cost of providing covered services to Medicare patients, must submit an annual cost report to a fiscal intermediary, usually a private insurance company acting as the Secretary's agent. The intermediary then audits the cost report and determines the amount of reimbursement due to the provider. The statute, 42 U.S.C. § 1395oo (1982 ed. and Supp. III), authorizes the provider to appeal to the Provider Reimbursement Review Board. The Board may affirm, modify, or reverse the intermediary's decision. The Secretary, either on his own motion or at the provider's request, may review the matter further, and a provider that remains dissatisfied with a final decision of the Board or Secretary may seek review in a federal district court. In their cost reports for 1980, petitioner providers, in apportioning malpractice insurance costs, followed a 1979 regulation of the Secretary that disallowed certain claims for malpractice insurance premium costs. Petitioners later filed a request for a hearing before the Board, challenging the validity of the malpractice regulation and seeking reimbursement for malpractice costs in accordance with the pre-1979 methodology. Because the amounts had been "self-disallowed" in the reports filed with the intermediary, however, the Board determined that it was without jurisdiction to hear petitioners' claims. In proceedings challenging the 1979 regulation, the District Court held that the Board should have exercised jurisdiction over the matter. The Court of Appeals reversed.
Held: The Board may not decline to consider a provider's challenge to a regulation of the Secretary on the ground that the provider failed to contest the regulation's validity in the cost report submitted to its fiscal intermediary. The plain language of § 1395oo (a) demonstrates that the Board had jurisdiction to entertain this action. There is no merit to the Secretary's contention that a provider's right to a hearing before the Board extends only to claims presented to a fiscal intermediary because the provider cannot be "dissatisfied" with the intermediary's decision to award the amounts requested in the provider's cost report. The submission of a cost report in full compliance with the unambiguous dictates of the Secretary's rules and regulations does not, by itself, bar the provider from claiming dissatisfaction with the amount of reimbursement allowed by those regulations. Providers know that, under the statutory scheme, the intermediary is confined to the mere application of the Secretary's regulations, that the intermediary is without power to award reimbursement except as the regulations provide, and that any attempt to persuade the intermediary to do otherwise would be futile. While the express language of § 1395oo (a) requires the conclusion reached here, that conclusion is also supported by the language and design of the statute as a whole. Neither the intermediary nor the Board has the authority to declare regulations invalid, but, as the predicate to the right of providers to obtain judicial review of an intermediary's action, the Board must first determine that it is without authority to decide the matter because the provider's claim involves a question of law or regulations. Pp. 403-408.
810 F.2d 558, reversed and remanded.
Leonard C. Homer, Baltimore, Md., for petitioners.
Andrew J. Pincus, New York City, for respondent.
Under the Medicare program, Title XVIII of the Social Security Act, 79 Stat. 291, 42 U.S.C. § 1395 et seq. (1982 ed. and Supp. III), certain qualified providers of health care services are reimbursed by the Secretary of Health and Human Services for the reasonable cost of providing covered services to Medicare beneficiaries. Each such provider submits a cost report at the end of the year to a fiscal intermediary, usually a private insurance company acting as an agent for the Secretary. The fiscal intermediary audits the cost report and issues a Notice of Program Reimbursement specifying the amount of reimbursement due to the provider and explaining any adjustments.
A provider may appeal the intermediary's final determination to the Provider Reimbursement Review Board and, under certain circumstances, may obtain a hearing from the Board. The Board is authorized to affirm, modify, or reverse intermediary decisions. The Secretary, either on his own motion or on request of the provider, may review the matter further, and any provider that remains dissatisfied with a final decision of the Board or Secretary may seek review in a United States district court. §§ 1395oo (a), (d), (f).
This case requires us to decide whether the Board may decline to consider a provider's challenge to one of the Secretary's regulations on the ground that the provider failed to contest the regulation's validity in the cost report submitted to its fiscal intermediary.
Petitioners Bethesda Hospital Association and Deaconess Hospital of Cincinnati are Ohio entities that operate hospitals in that State. Bethesda and Deaconess joined with some 27 other hospitals to challenge a 1979 regulation promulgated by the Secretary, which disallowed certain claims for malpractice insurance premium costs. We are not concerned here with the merits of the challenge to the 1979 regulation; rather, we must decide whether the Board had jurisdiction to consider the issue.
In their cost reports for 1980, petitioners followed the 1979 regulation in their apportionment of malpractice insurance costs and thereby effected, in the lexicon of the Medicare program, a "self-disallowance" of malpractice insurance costs in excess of those allowed by the 1979 regulation. Petitioners later filed a timely request for a hearing before the Board, challenging the validity of the malpractice regulation and seeking reimbursement for malpractice costs in accordance with the pre-1979 methodology. Because the amounts had been self-disallowed in the reports filed with the fiscal intermediary, however, the Board determined that it was without jurisdiction to hear petitioners' claims. The Board held, in essence, that a statutory condition to its jurisdiction had not been met, stating that its authority to grant hearings is limited to cases in which the provider is "dissatisfied with a final determination of the . . . fiscal intermediary," and reasoning that petitioners could not be dissatisfied when they had effected a self-disallowance of the claims. The District Court, in disagreement with the Board's reasoning, held that the Board should have exercised jurisdiction over the matter. Bethesda Hospital v. Heckler, 609 F.Supp. 1360, 1368 (SD Ohio 1985).
The Secretary appealed to the United States Court of Appeals for the Sixth Circuit, which reversed the District Court. The Court of Appeals stated that "[w]ere we considering this issue as a matter of first impression, we may well have reached a different conclusion as to the advisability of requiring submission of statutory and/or constitutional challenges to a private insurance company as a condition precedent to further administrative as well as judicial review of the Secretary's regulations." Bethesda Hospital v. Secretary of Health and Human Services, 810 F.2d 558, 562 (1987). The court found itself bound, however, by the decision of a prior panel in Baptist Hospital East v. Secretary of Health and Human Services, 802 F.2d 860 (1986), where it was held that the Board had properly "refused to exercise jurisdiction over those claims by providers who had self-disallowed reimbursement and had failed to challenge the Secretary's regulations before the fiscal intermediary." Bethesda Hospital v. Secretary of Health and Human Services, supra, at 561. We granted certiorari, 484 U.S. 813, 108 S.Ct. 64, 98 L.Ed.2d 28 (1987) to resolve a conflict among the Courts of Appeals.1 We now reverse.
The Secretary contends that the requirement that a provider be "dissatisfied with a final determination of . . . its fiscal intermediary" necessarily incorporates an exhaustion requirement. In the Secretary's view, a provider's right to a hearing before the Board extends only to claims presented to a fiscal intermediary because the provider cannot be "dissatisfied" with the intermediary's decision to award the amounts requested in the provider's cost report. Petitioners counter that it would have been improper, or at least irregular, to submit a claim for cost reimbursement in a manner prohibited by the regulations, and that...
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