Alacare Home Health Services, Inc. v. Sullivan, 88-7784

• Decision Date: 09 January 1990
• Docket Number: No. 88-7784,88-7784
• Citation: 891 F.2d 850
• Parties: , Medicare & Medicaid Guide P 38,357 ALACARE HOME HEALTH SERVICES, INC., Plaintiff-Appellant, v. Louis W. SULLIVAN, Secretary of United States Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 850

891 F.2d 850

28 Soc.Sec.Rep.Ser. 128, Medicare & Medicaid Guide

P 38,357

ALACARE HOME HEALTH SERVICES, INC., Plaintiff-Appellant, v. Louis W. SULLIVAN, Secretary of United States Department of Health and Human Services, Defendant-Appellee.

No. 88-7784.

United States Court of Appeals Eleventh Circuit.

Jan. 9, 1990.

Joe R. Whatley, Jr., Cooper, Mitch, Crawford, Kuykendall & Whatley, Birmingham, Ala., for plaintiff-appellant.

F. Richard Waitsman, Office of Gen. Counsel, Dept. of Health and Human Services, Atlanta, Ga., Frank W. Donaldson, U.S. Atty., Marvin Neil Smith, Jr., Asst. U.S. Atty., Birmingham, Ala., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before TJOFLAT, Chief Judge, CLARK, Circuit Judge and SMITH ^*, Senior Circuit Judge.

CLARK, Circuit Judge:

In this case, appellant Alacare is appealing two decisions made by the Secretary of Health and Human Services that concern reimbursement to Alacare, a Medicare provider, of reasonable costs incurred in providing Medicare benefits. The Secretary decided, first, that certain office space costs incurred by Alacare in 1980 and 1981 were excessive and, therefore, would not be reimbursed; and second, that Alacare had failed to show "good cause" for its failure to meet a filing deadline for reconsideration The district court affirmed the Secretary's disposition of the first claim and found that it lacked jurisdiction to review the second claim. ¹ This court's jurisdiction to review the district court's order is based on 28 U.S.C. § 1291, but one of the issues to resolve is whether this court has jurisdiction over the good cause claim. Because we agree with the district court that the Secretary's decision to deny reimbursement for Alacare's 1980 and 1981 costs was not arbitrary or capricious, we affirm that portion of the district court's decision. With regard to the Secretary's decision that Alacare failed to show good cause for its failure to meet a filing deadline, we conclude, along with the district court, that the regulation adopted by the Secretary is inconsistent with the authority granted by Congress and cannot stand. Thus, the Secretary was without jurisdiction to review the late filing; since this court may review only final decisions rendered by the Secretary, this court also lacks jurisdiction to consider this issue.

by the Secretary of costs incurred in 1984.

STATUTORY BACKGROUND

The Medicare Act ² as part of its health insurance program provides for reimbursement of the reasonable costs for covered health care services rendered to beneficiaries by providers such as Alacare, 42 U.S.C. §§ 1395c and d; these reimbursements are normally paid directly to the providers pursuant to a procedure set out in 42 U.S.C. § 1395g. Providers enter into agreements with the Secretary to provide Medicare recipients with health care services, and to charge those recipients only for the statutorily mandated deductible and co-insurance amounts. For other charges, the provider receives payment solely from the Medicare Trust Fund, 42 U.S.C. § 1395cc(a).

The reimbursement program is administered by a fiscal intermediary who is appointed to act as an agent for the Secretary in reviewing claims and overseeing payments. ³ The intermediary is responsible for reviewing reimbursement claims and for determining the provider's actual reasonable costs according to cost accounting regulations promulgated by the Secretary. ⁴ Of particular importance to this litigation is the statutory requirement that the regulations "provide for the making of suitable adjustments where, for a provider of services for any fiscal period, the aggregate reimbursement produced by the methods of determining costs proves to be either inadequate or excessive." 42 U.S.C. § 1395x(v)(1)(A).

The intermediary makes payments to providers under a two phased procedure. The first phase consists of interim payments, based upon estimated costs, made to providers on a monthly basis; the second consists of subsequent adjustments, based upon actual costs, for overpayments and underpayments. 42 U.S.C. § 1395g and 42 C.F.R. §§ 413.60 and 413.64(f). At the close of the fiscal year, the fiscal intermediary makes a final determination of the provider's reimbursable costs; that determination is based on the provider's cost report which contains the provider's actual costs for the fiscal year. 42 C.F.R. §§ 413.60 and 413.20(b). The intermediary must analyze the cost report, conduct an audit if necessary, and furnish the provider with written notice of program reimbursement (NPR) setting forth the total amount of reimbursement due under the program. 42 C.F.R. § 405.1803. Such notice must explain If the provider is dissatisfied with the intermediary's determination and the amount in controversy is $10,000 or more, the provider may, within 180 days, request a hearing before the Provider Reimbursement Review Board (PRRB). 42 U.S.C. § 1395oo ; 42 C.F.R. § 405.1841(a). The PRRB has the power to affirm, modify, or reverse a final determination of the fiscal intermediary. 42 U.S.C. § 1395oo (d). Additionally, the PRRB may, upon a showing of good cause by the provider, grant a waiver of the 180 day filing deadline. 42 C.F.R. § 405.1841(b). Within 60 days after the PRRB renders its decision, the Secretary, acting through the Deputy Administrator of the Health Care Financing Administration, on his own motion, may reverse, affirm, or modify the PRRB's decision. 42 U.S.C. § 1395oo (f)(1); 42 C.F.R. § 405.1875. The district court has jurisdiction to review the final decision of the PRRB or the Deputy Administrator pursuant to the Medicare Act, 42 U.S.C. § 1395oo (f), and the Administrative Procedure Act, 5 U.S.C. § 701, et seq.

                how the intermediary reached its conclusions and detail any reasons why the program reimbursement differs from the provider's claim.   Id
                

FACTS

Alacare Home Health Services, Inc., (Alacare), a provider of health services under the Medicare program, 42 U.S.C. § 1395 et seq., brought this action against the Secretary of Health and Human Services to challenge two decisions of the Secretary. In the first decision, the Deputy Administrator of the Health Care Financing Administration denied Alacare's claim for increased Medicare reimbursement for space occupancy costs for fiscal years 1980 and 1981. Prior to 1980, Alacare occupied space in a building owned by an unrelated party. The cost of such space allowed by Medicare in 1979 was $13,782.00. In April 1980, Alacare moved its headquarters to a building owned by a related organization known as E & T Realty. E & T Realty is owned by the president of Alacare and his children. While Alacare and other related parties rented approximately 21.3% of the building, the majority of the remainder of the building remained unoccupied. As a result of the relocation, Alacare claimed space occupancy costs during 1980 of $41,796.00 and during 1981, of $47,658.00. Although there was a dramatic increase in space occupancy costs, the number of Alacare's patient visits and full-time equivalent ("FTE") employees remained relatively constant during 1979, 1980, and 1981.

Alacare's operations consist of approximately 4,000 square feet and 20-21 total personnel. This is an average of approximately 200 square feet per FTE. The intermediary determined that, based upon its experience with other home health agencies in Alabama, 4,000 square feet for 20-21 employees is excessive. The intermediary relied on a report issued by the Health Care Financing Administration setting forth recommendations of what it believed was reasonable space allowances for each employee by position description plus administrative space for items such as computers and storage. This test indicated that 3,074 square feet would adequately house Alacare's personnel and operations.

The intermediary also conducted a separate analysis based upon a survey of square foot allowances of other home health agencies. The survey included similar Alabama home health agencies. Square feet per FTE was used as a unit of comparison to eliminate any possible distortions caused by difference in the size of the agencies surveyed as reflected by the number of personnel surveyed. To further avoid distortions, the two providers with the highest and lowest square foot allowance per FTE were excluded from the calculations. The weighted average of the allowable space for the home health agencies in the survey was 116 square feet per FTE. Nevertheless, the intermediary allowed Alacare 150 square feet per FTE, the highest amount claimed and allowed for the providers in the survey. The "going rental rate" for commercial space in Alabama was then determined by interviewing real estate persons knowledgeable in local rental rates.

In the second decision, the Deputy Administrator dismissed Alacare's claim for increased Medicare reimbursement for space occupancy costs and transportation costs incurred during fiscal year 1984 for lack of jurisdiction. The intermediary issued Alacare's fiscal year 1984 Notice of Program Reimbursement, (NPR), on March 27, 1986. 42 U.S.C. § 1395oo (a)(3) and 42 C.F.R. § 405.1841(a) require any notice of appeal to the PRRB to be filed within 180 days of the issuance of the NPR. In this case, Alacare filed its notice 183 days later. 42 C.F.R. § 506.2852(b) allows PRRB to extend the time of filing an appeal "for good cause." In this case PRRB dismissed Alacare's appeal as not timely filed and for lack of jurisdiction. The Deputy Administrator also denied the appeal as untimely and for failure to demonstrate "good cause" for the late filing.

Alacare then filed this action in federal district court against the Secretary to challenge both decisions. On April 4, 1988, the Secretary filed an answer to the complaint. Subsequently both parties filed for Summary Judgment. On December 1, 1988, district court granted the Secretary's motion for Summary...