St. Luke's Hosp. v. Secretary of Health and Human Services

• Decision Date: 03 February 1987
• Docket Number: No. 86-1602,86-1602
• Court: U.S. Court of Appeals — First Circuit
• Parties: , 16 Soc.Sec.Rep.Ser. 206, Medicare&Medicaid Gu 36,044 ST. LUKE'S HOSPITAL, Plaintiff, Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant, Appellant.

Page 325

810 F.2d 325

55 USLW 2428, 16 Soc.Sec.Rep.Ser. 206,

Medicare&Medicaid Gu 36,044

ST. LUKE'S HOSPITAL, Plaintiff, Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant, Appellant.

No. 86-1602.

United States Court of Appeals, First Circuit.

Argued Nov. 13, 1986.

Decided Feb. 3, 1987.

Stuart I. Silverman, Dept. of Health and Human Services, with whom Richard Willard, Asst. Atty. Gen., Washington, D.C., William F. Weld, U.S. Atty., Boston, Mass., Ronald E. Robertson, Gen. Counsel, and Ann T. Hunsaker, Chief Counsel, Washington, D.C., were on brief for defendant, appellant.

Mitchell H. Kaplan with whom Mark A. Borreliz, Christopher M. Jedrey and Choate, Hall & Stewart, Boston, Mass., were on brief for plaintiff, appellee.

Before CAMPBELL, Chief Judge, TIMBERS, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

BREYER, Circuit Judge.

Hospitals that provide Medicare services receive reimbursement from the Government in an amount determined by a private insurance company (called a "fiscal intermediary") based upon the insurance company's examination of a cost report that the hospital has given it. Should a hospital believe that an intermediary has made a mistake, it is entitled to ask a government body, called the Provider Reimbursement Review Board (PRRB), to review the intermediary's decision. The legal issue before us concerns the proper interpretation of a statute that describes the Board's powers on review. The statute says 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).

The question before us is whether this statute grants the Board the power to order reimbursement for costs identified in the cost report, but as to which the hospital did not specifically ask the intermediary for reimbursement. Put more broadly, the question is whether the statute gives the Board the power to decide a new issue raised for the first time before it. We believe that the statute does give the Board this power. We also believe, however, that the Board need not exercise that power. Whether, or when, it will do so is basically up to the Board (or up to the Department of Health and Human Services, of which the Board is a part). Because the District of Columbia Circuit has taken a contrary view of the matter, Athens Community Hospital v. Schweiker, 743 F.2d 1 (D.C.Cir.1984) (Athens II ); see also University of Cincinnati v. Secretary of Health and Human Services, 809 F.2d 307 (6th Cir.1987); North Broward Hospital District v. Bowen, 808 F.2d 1405 (11th Cir.1987); Baptist Hospital East v. Secretary of Health and Human Services, 802 F.2d 860, 863-66 (6th Cir.1986); Community Hospital of Roanoke Valley v. Health and Human Services, 770 F.2d 1257, 1261-63 (4th Cir.1985) (following Athens II ), we shall explain our reasoning in some detail.

I.

The Appellee, St. Luke's Hospital, provides some of its patients with services covered by Medicare. The Government reimburses St. Luke's for the cost of providing these services, including a pro rata portion of its total fixed costs. St. Luke's, like most Medicare providers, receives its reimbursements through a fiscal intermediary. See 42 U.S.C. Sec. 1395h.

The reimbursement procedure under which St. Luke's operated at all times relevant here works roughly as follows: The intermediary initially estimates the hospital's likely annual Medicare costs, and it pays the hospital that estimated amount on a monthly basis. Within three months after the end of the fiscal year, the hospital, by then having determined its actual costs, submits to the intermediary a "cost report" on the closed fiscal year. This "cost report" is typically several hundred pages long. It lists both Medicare-reimbursable costs and other, nonreimbursable costs, with the hospital indicating which costs Medicare is to reimburse. After reviewing the report, the intermediary decides whether, or the extent to which, it agrees with the hospital's analysis, and it sends the hospital a Notice of Program Reimbursement (NPR) embodying its decision. If the total reimbursement due (as stated in the NPR) differs from the total estimated payments already made, the intermediary pays, or the hospital pays back, the difference.

Should a hospital disagree with the intermediary, it can obtain review of the intermediary's decision by filing with the Provider Reimbursement Review Board, "within 180 days after notice of the intermediary's final determination," a request for "a hearing with respect to [the] cost report." 42 U.S.C. Sec. 1395oo (a). The Board will then hold a formal administrative hearing, at which the hospital has the statutory rights "to be represented by counsel, to introduce evidence, and to examine and cross-examine witnesses." 42 U.S.C. Sec. 1395oo (c). The Board's decision is to be "based upon the record made at [the] hearing," a record that may contain both "the evidence considered by the intermediary" (presumably the cost report) and new evidence. 42 U.S.C. Sec. 1395oo (d). As previously mentioned, the Board has the statutory 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 ... even though such matters were not considered by the intermediary in making such final determination." Id. (emphasis added). The Secretary of Health and Human Services, in turn, may reverse, affirm, or modify any Board decision, and the hospital may "obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary." 42 U.S.C. Sec. 1395oo (f).

After the close of its 1978 fiscal year, St. Luke's filed a cost report for that year with its intermediary. It claimed (among other things) certain sick leave expenses. The intermediary denied reimbursement for those expenses, and St. Luke's appealed that denial, along with denials of various other items, to the Board. While its appeal for 1978 was pending, St. Luke's had to file its cost report for fiscal year 1979. This time, St. Luke's did not ask the intermediary for reimbursement for the sick leave expense item; rather, it included the sick leave expense item on a page in its cost report called Worksheet A-8, which lists expenses for which reimbursement is "self-disallowed." St. Luke's now says it put the item on that page because it knew that the intermediary would not permit reimbursement for it, as the intermediary had just disallowed the same kind of cost only a few months earlier. St. Luke's later appealed several aspects of the intermediary's fiscal year 1979 determination; St. Luke's included in its appeal a request for reimbursement for the sick leave item.

The Board consolidated the 1978 and 1979 appeals. It issued its decision in early 1984. It held that the intermediary should have reimbursed St. Luke's for the sick leave item in 1978. It did not, however, require the intermediary to reimburse St. Luke's for that same item for 1979, nor did it give its reason for the difference in treatment. The Deputy Administrator of the Health Care Financing Administration, acting under a delegation of authority from the Secretary of HHS, then reversed the Board's decision that the 1978 sick leave item was reimbursable. St. Luke's sought judicial review for both years in federal district court. And, the court, reversing the Administrator, held that the Board was right on the merits; the Government should have reimbursed St. Luke's for the sick leave item in 1978. 632 F.Supp. 1387, 1390-91 (D.Mass.1986). The court also said that "the Board has jurisdiction to hear" the hospital's appeal in respect to the same sick leave item in 1979, the year in which St. Luke's "self-disallowed" that item in its cost report. Id. at 1391-94. The Secretary of HHS now appeals only this last determination, arguing that 42 U.S.C. Sec. 1395oo (d) denies the Board the power to decide any issues not first raised before the intermediary.

II.

The precise question before us is whether the Secretary's legal view of the relevant statute is correct. Does the Board lack the legal power to consider the hospital's 1979 sick leave claim, a claim (1) in respect to a cost item mentioned in the cost report, (2) which cost report was properly before the Board on review, but (3) which claim was not specifically raised before the intermediary? We believe the Board did possess the legal power to consider this claim, though whether or not the Board should have exercised that power is for the Board to decide. Indeed, the Board may decide that its power to consider matters not specifically raised before the intermediary, like many similar powers of courts and agencies, should be exercised only sparingly.

We base this conclusion on the following considerations. First, the statute specifically states that the Board has this power. It says that the "Board shall have the power ... to make ... other revisions on matters covered by [the] cost report ... even though such matters were not considered by the intermediary...." The statute does not say that the Board must consider matters not considered by the intermediary. But, it does says the Board may it can, it has the "power" to do so. The Board might decide to limit such consideration to unusual instances; indeed, it might do so explicitly in exercising its "full power ... to make rules ... appropriate to carry out" its tasks. 42 U.S.C. Sec. 1395oo (e). But, the statute's language indicates that Congress basically left it up to the Board to decide when, or whether, it should hear claims not raised before the intermediary.

Second, the...