Athens Community Hosp., Inc. v. Schweiker, s. 81-1807

• Decision Date: 28 August 1984
• Docket Number: Nos. 81-1807,81-1814,s. 81-1807
• Citation: 743 F.2d 1,240 U.S.App.D.C. 1
• Parties: , 6 Soc.Sec.Rep.Ser. 305, Medicare&Medicaid Gu 34,113 ATHENS COMMUNITY HOSPITAL, INC., et al. v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Appellant. HOSPITAL CORPORATION OF AMERICA, A Tennessee Corporation v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Appellant. . On Petition for Rehearing
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1

743 F.2d 1

240 U.S.App.D.C. 1, 6 Soc.Sec.Rep.Ser. 305,

Medicare&Medicaid Gu 34,113

ATHENS COMMUNITY HOSPITAL, INC., et al. v. Richard S. SCHWEIKER, Secretary of Health and Human

Services, Appellant.

HOSPITAL CORPORATION OF AMERICA, A Tennessee Corporation v. Richard S. SCHWEIKER, Secretary of Health and Human

Services, Appellant.

Nos. 81-1807, 81-1814.

United States Court of Appeals District of Columbia Circuit.

On Petition for Rehearing.

Decided Aug. 28, 1984.

Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 79-00616 and 80-01553).

Susanne M. Lee, Atty. Dept. of Health and Human Services, Washington, D.C., with whom Juan A. del Real, Gen. Counsel, Lynne K. Zusman, Deputy Gen. Counsel and Henry R. Goldberg, Atty., Dept. of Health and Human Services, Washington, D.C., were on the brief, for appellants. Kenneth M. Raisler, Valerie K. Schurman and Royce C. Lamberth, Asst. U.S. Attys., Washington, D.C., also entered appearances for appellants.

James C. Pyles, Washington, D.C., with whom Robert A. Klein, Washington, D.C., was on the brief, for appellees. Patrick K. O'Hare, Washington, D.C., also entered an appearance for appellees.

Before ROBINSON, ^* Chief Judge, BORK, Circuit Judge, and LARSON, ^** Senior District Judge for the United States District Court of Minnesota.

Opinion for the Court filed by Circuit Judge BORK.

BORK, Circuit Judge:

These consolidated actions were brought by a group of hospitals seeking reimbursement under the Medicare program for certain income tax and employee stock option costs incurred in the provision of health care. In our initial opinion, we upheld the decision of the Provider Reimbursement Review Board ("PRRB" or "Board") that it did not have jurisdiction over the hospitals' challenge to the intermediary's refusal to reimburse the hospitals for those costs. Athens Community Hospital, Inc. v. Schweiker, 686 F.2d 989 (D.C.Cir.1982). We held that where the costs had not been claimed and the narrow grounds for reopening the intermediary's determination were not satisfied, the PRRB could not consider new claims, even in the context of an otherwise perfected and proper appeal from the original reimbursement decision. Our decision was based on the language of 42 U.S.C. Sec. 1395 oo(d) (1982) limiting the PRRB's review on appeal to "matters covered by [the original] cost report." 686 F.2d at 995, quoting 42 U.S.C. Sec. 1395 oo(d) (1976). The Hospital Corporation of America ("HCA"), the appellees, petitioned for rehearing, contending, inter alia, that "[o]nce a provider's cost report is before the Board," the PRRB has jurisdiction to consider "any matters which relate to the cost report even if such matters were not specifically claimed or shown on the cost report." Supplemental Brief for Appellees on Petition for Rehearing at 6-7. After requesting two more rounds of briefing, we now issue this opinion modifying our original opinion in part.

I.

Illuminating this intricate issue of statutory construction has taxed the resources of two panels of this court and many lawyers. Counsel for each party have briefed this issue at least four times. We appreciate counsels' untiring efforts to make clear what we have found to be a very difficult problem mired in a complex regulatory scheme. After considering various options, we have finally arrived at what we think is the most tenable reading of the statute. That reading is to a certain extent different from the one we adopted in our original opinion. Before describing the alternative readings and their relative merits, however, some background is necessary.

A.

Hospitals are entitled to reimbursement from the government for the actual, reasonable costs of furnishing care to Medicare beneficiaries. 42 U.S.C. Sec. 1395cc(a)(1) (1982); 42 U.S.C. Sec. 1395x(v)(1)(A) (1982). Central to this reimbursement process--and the focus of the entire review procedure--is the annual cost report submitted by "providers" of Medicare services to "fiscal intermediaries." ¹ Fiscal intermediaries are generally private insurance companies that contract with the Secretary of Health and Human Services to act as the Secretary's agent for the purpose of reviewing claims and awarding reimbursement. 42 U.S.C. Sec. 1395h (1982). Here, the intermediary was Blue Cross and Blue Shield of Tennessee, Inc.

The cost report itself is a lengthy document consisting of numerous schedules, worksheets, and supplemental worksheets. We are informed that a cost report, when completed, is approximately three-quarters of an inch thick. Supplemental Brief for Appellants in Saint Mary of Nazareth Hospital Center at 7. Providers list on the worksheets costs that are added into the final figure for which they request reimbursement as well as many costs that are disclosed for the purpose of calculation only. For example, Worksheet A, entitled "Reclassification and Adjustment of Trial Balance of Expenses," lists several "nonreimbursable cost centers." As appellees admit, "it is clear that a provider does not claim reimbursement for all costs identified in a cost report." Second Supplemental Brief for Appellees on Petition for Rehearing at 7. ²

Intermediaries review and audit the cost reports and then notify providers of the amount they believe the providers should be reimbursed by a Notice of Program Reimbursement ("NPR"). In the NPR the intermediary explains any audit adjustments made to the provider's cost report. 42 C.F.R. Sec. 405.1803 (1983). Any provider that has filed a timely cost report "may obtain a hearing with respect to such cost report" if that provider

is dissatisfied with a final determination of the organization serving as a fiscal intermediary ... as to the amount of total program reimbursement and due the provider for the items and services furnished to individuals for which payment may be made....

42 U.S.C. Sec. 1395oo(a)(1)(A) (1982). ³ The appeal is heard by the PRRB, which is created by section 1395oo. The PRRB's jurisdiction--the crux of the dispute here--is set out in section 1395oo(d), which provides:

A decision by the Board shall be based upon the record made at [a] hearing, which shall include the evidence considered by the intermediary and such other evidence as may be obtained or received by the Board, and shall be supported by substantial evidence when the record is viewed as a whole. The Board shall have the power to affirm, modify, or reverse a final determination of the fiscal intermediary with respect to a cost report and to make any other revisions on matters covered by such cost report (including revisions adverse to the provider of services) even though such matters were not considered by the intermediary in making such final determination.

42 U.S.C. Sec. 1395oo(d) (1982).

The regulations amplify the relevant procedures. Cost reports must be submitted within three months of the end of the accounting period involved, subject to a thirty-day extension. 42 C.F.R. Sec. 405.453(f)(2) (1983). Amendments "to revise cost report information which has previously been submitted ... may be permitted or required as determined by the [Health Care Financing Administration]." Id. Sec. 405.453(f). ⁴ The intermediary must base its reimbursement calculations on the cost report, id. Sec. 405.1803, and the scope of the PRRB's review of intermediary decisions is described in language that tracks the portion of section 1395oo(d) giving the PRRB the power to alter the intermediary's final determination "with respect to a cost report and to make any other modifications on matters covered by such cost report." See 42 C.F.R. Sec. 405.1869 (1983).

B.

The facts of this case are not in dispute and are set out in greater detail in our initial opinion. Athens, 686 F.2d at 991-92. Briefly, appellees, the Hospital Corporation of America ("HCA") and 33 hospitals owned by HCA timely filed cost reports for 1973 and 1974. It is undisputed that these cost reports did not include requests for reimbursement of certain stock option costs or federal income taxes. Petition for Rehearing at 7-8; Complaint p 20. After receiving an NPR, HCA filed a timely appeal with the PRRB challenging a number of adjustments made by the intermediary to the 1973 cost report. Four years later, in 1978, prior to the PRRB's decision on appeal, HCA sought to amend its 1973 and 1974 cost reports to include stock option costs and federal income taxes. The intermediary treated HCA's request as one to reopen and denied it in a decision entitled "Notice of Refusal to Reopen." HCA then sought to appeal this decision to the PRRB, not by filing a de novo appeal but rather by seeking to add these issues to the already-pending appeal. As stated above, the PRRB held that it lacked jurisdiction to review the new claims.

II.

Section 1395oo(d), the statute at issue here, can best be thought of as embodying two separate jurisdictional grants. First, the PRRB has "the power to affirm, modify, or reverse a final determination of the fiscal intermediary with respect to a cost report." 42 U.S.C. Sec. 1395oo(d) (1982). Second, the PRRB has the power "to make any other revisions on matters covered by such cost report (including revisions adverse to the provider of services) even though such matters were not considered by the intermediary in making such final determination." Id. Jurisdiction exists if the terms of either of these two clauses are satisfied. Each grant can be read a number of different ways. The most restrictive definition, which we arguably adopted in our original opinion, limits PRRB jurisdiction to items specifically claimed in the cost report. This reading does not consider an intermediary as having made a "final determination" over which the PRRB has jurisdiction unless the provider has expressly requested reimbursement for a cost. As to the second jurisdictional grant, a cost would not be considered a "matter covered by [the original] cost report," and the...