Alvarado Hosp., LLC v. Price

• Citation: 868 F.3d 983
• Decision Date: 22 August 2017
• Docket Number: 2016-1356
• Parties: ALVARADO HOSPITAL, LLC, a Delaware Limited Liability Company, dba Alvarado Hospital Medical Center, Veritas Health Service, Inc., a California Corporation, dba Chino Valley Medical Center, Desert Valley Hospital, Inc., a California Corporation, dba Desert Valley Hospital, Prime Healthcare Centinela, LLC, a Delaware Limited Liability Company, dba Centinela Hospital Medical Center, Prime Healthcare—Encino Hospital, LLC, a Delaware Limited Liability Company, dba Encino Hospital Medical Center, Prime Healthcare Services—Garden Grove, LLC, a Delaware Limited Liability Company, dba Garden Grove Hospital Medical Center, Prime Healthcare Huntington Beach, LLC, a Delaware Limited Liability Company, dba Huntington Beach Hospital, Prime Healthcare La Palma, LLC, a Delaware Limited Liability Company, dba La Palma Intercommunity Hospital, Prime Healthcare Services—Low Buck LLC, a Delaware Limited Liability Company, dba Lower Bucks Hospital, Prime Healthcare Services—Montclair, LLC, a Delaware Limited Liability Company, dba Montclair Hospital Medical Center, Prime Healthcare Paradise Valley, LLC, a Delaware Limited Liability Company, dba Paradise Valley Hospital, Prime Healthcare Services—Roxborough, LLC, a Delaware Limited Liability Company, dba Roxborough Memorial Hospital, Prime Healthcare Services—San Dimas, LLC, a Delaware Limited Liability Company, dba San Dimas Community Hospital, Prime Healthcare Services—Shasta, LLC, a Delaware Limited Liability Company, dba Shasta Regional Medical Center, Prime Healthcare Services—Sherman Oaks, LLC, a Delaware Limited Liability Company, dba Sherman Oaks Hospital, Prime Healthcare Anaheim, LLC, a Delaware Limited Liability Company, dba West Anaheim Medical Center, Plaintiffs-Appellants v. Thomas E. PRICE, Secretary of Health and Human Services, in his capacity as the Secretary of the US Department of Health and Human Services, Defendant-Appellee
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

868 F.3d 983

ALVARADO HOSPITAL, LLC, a Delaware Limited Liability Company, dba Alvarado Hospital Medical Center, Veritas Health Service, Inc., a California Corporation, dba Chino Valley Medical Center, Desert Valley Hospital, Inc., a California Corporation, dba Desert Valley Hospital, Prime Healthcare Centinela, LLC, a Delaware Limited Liability Company, dba Centinela Hospital Medical Center, Prime Healthcare—Encino Hospital, LLC, a Delaware Limited Liability Company, dba Encino Hospital Medical Center, Prime Healthcare Services—Garden Grove, LLC, a Delaware Limited Liability Company, dba Garden Grove Hospital Medical Center, Prime Healthcare Huntington Beach, LLC, a Delaware Limited Liability Company, dba Huntington Beach Hospital, Prime Healthcare La Palma, LLC, a Delaware Limited Liability Company, dba La Palma Intercommunity Hospital, Prime Healthcare Services—Low Buck LLC, a Delaware Limited Liability Company, dba Lower Bucks Hospital, Prime Healthcare Services—Montclair, LLC, a Delaware Limited Liability Company, dba Montclair Hospital Medical Center, Prime Healthcare Paradise Valley, LLC, a Delaware Limited Liability Company, dba Paradise Valley Hospital, Prime Healthcare Services—Roxborough, LLC, a Delaware Limited Liability Company, dba Roxborough Memorial Hospital, Prime Healthcare Services—San Dimas, LLC, a Delaware Limited Liability Company, dba San Dimas Community Hospital, Prime Healthcare Services—Shasta, LLC, a Delaware Limited Liability Company, dba Shasta Regional Medical Center, Prime Healthcare Services—Sherman Oaks, LLC, a Delaware Limited Liability Company, dba Sherman Oaks Hospital, Prime Healthcare Anaheim, LLC, a Delaware Limited Liability Company, dba West Anaheim Medical Center, Plaintiffs-Appellants

v.Thomas E. PRICE, Secretary of Health and Human Services, in his capacity as the Secretary of the US Department of Health and Human Services, Defendant-Appellee

2016-1356

United States Court of Appeals, Federal Circuit.

Decided: August 22, 2017

Mark Steven Hardiman , Nelson Hardiman LLP, Los Angeles, CA, argued for plaintiffs-appellants. Also represented by John Alfred Mills, Jonathan Winsor Radke .

Benjamin M. Shultz , Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Michael S. Raab, Benjamin C. Mizer ; Sean Siekkinen , Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC; Eileen M. Decker , Office of the United States Attorney for the Central District of California, United States Department of Justice, Los Angeles, CA.

Before Prost, Chief Judge, NEWMAN and LOURIE, Circuit Judges.

Prost, Chief Judge.

Plaintiffs-Appellants Prime Hospitals¹ appeal from the order of the United States District Court for the Central District of California transferring their complaint under 28 U.S.C. § 1631 to the United States Court of Federal Claims. Prime Hospitals are seeking monetary relief for a breach of an alleged settlement agreement and, in the alternative, declaratory, injunctive, and mandamus relief from an alleged secret and illegal policy to prevent and delay Prime Hospitals from exhausting their administrative remedies.

Because Prime Hospitals' breach of contract claim is fundamentally a suit to enforce a contract and it does not arise under the Medicare Act, we hold that the Court of Federal Claims has exclusive jurisdiction over that claim under the Tucker Act, 28 U.S.C. § 1491. We also hold that the Court of Federal Claims does not have jurisdiction, however, over Prime Hospitals' alternative claims seeking declaratory, injunctive, and mandamus relief. Accordingly, we affirm the district court's transfer order in-part, reverse-in-part, and remand for further proceedings.

BACKGROUND

I

The Medicare program, which provides health insurance for the elderly and disabled, is administered by the United States Department of Health & Humans Services ("HHS") through its agency, the Center for Medicare & Medicaid Services ("CMS"). 42 U.S.C. §§ 1395 et seq. Medicare Part A covers hospital inpatient services and Medicare Part B covers outpatient services, including emergency room services for patients who do not require a hospital admission. See id. § 1395d, k. Under both Part A and Part B, providers submit individual claims for payment to private contractors who make an initial determination as to what payment, if any, should be made on the claim. See id. § 1395ff(a)(1)-(2). A provider dissatisfied with the initial determination can bring a challenge through an administrative appeals process provided under the Medicare Act. See id. § 1395ff(a)-(d).

A provider may first seek a redetermination by the private contractor. Id. § 1395ff(a)(3). If still dissatisfied, the provider may then seek reconsideration by an independent entity under contract with HHS. Id. § 1395ff(b)-(c), (g). If the provider is dissatisfied with the reconsideration decision, the provider may request a hearing before an administrative law judge. See id. § 1395ff(b)(1), (c)(3)(C)(ii), (d)(1). The Medicare Appeals Council, which is part of the Departmental Appeals Board within HHS, provides the final level of administrative review. Id. § 1395ff(d)(2).

A provider that obtains a final decision from the Medicare Appeals Council is entitled to judicial review of that decision. Id. §§ 405(g), 1395ff(b)(1)(A). Under § 405(g), the provider may file suit in district court, and the Act mandates that "[n]o findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as" provided under the Act. Id. §§ 405(h), 1395ii.

II

Prime Hospitals are sixteen acute care hospitals that are part of Prime Healthcare Services, Inc. and Prime Healthcare Foundation, a national healthcare system that owns and operates thirty-five for-profit and non-profit hospitals in ten different states. Prime Hospitals provide inpatient hospital services under Medicare Part A to patients covered under the Medicare program.

Prime Hospitals, like other Medicare providers, submit individual claims for payment to private contractors, who make initial reimbursement determinations for the inpatient hospital services provided. Prime Hospitals alleged that, although the private contractors generally processed and paid their individual claims, many of their claims for one-day inpatient stays (known as "short-stay claims") were subsequently subject to post-payment review and denied. In response, Prime Hospitals appealed the denials of these Medicare short-stay claims through the Medicare administrative appeal process.

Prime Hospitals alleged the audits of short-stay claims were not limited to Prime Hospitals but were part of a larger initiative that resulted in a substantial increase in hospital claim denials. As a result of this increase, Prime Hospitals alleged, CMS became overwhelmed by the number of hospital appeals of inpatient claim denials. Prime Hospitals' complaint states that these appeals caused "the number of appeals received ... to soar from 1,250 per week in January 2012 to more than 15,000 per week in December 2013. The yearly number of ... appeals more than quintupled from 59,600 appeals in 2011 to 384,151 appeals in 2013." J.A. 33.

In an effort to reduce the backlog of hospital appeals of Medicare short-stay claim denials and ease the administrative burden for all parties, CMS began offering health care providers the opportunity to resolve their eligible appeals through settlement. In its letter announcing the offer and corresponding settlement parameters, CMS indicated that it was proposing "to make a partial payment (68 percent of the net payable amount of the denied inpatient claim) in exchange for hospitals agreeing to the dismissal of any associated appeals and accept[ing] the settlement as final administrative and legal resolution of the eligible claims." J.A. 46. CMS subsequently explained in a letter to Congressman Kevin Brady that

[t]his settlement is intended to ease the administrative burden for all parties. The settlement offers an opportunity for the government to reduce the pending appeals backlog by resolving a large number of homogeneous claims in a short period of time. In addition, the settlement offers an opportunity for hospitals to obtain payment now for rendered services, rather than waiting a considerable amount of time with the associated risk of not prevailing in the appeals process.

J.A. 166.

Prime Hospitals alleged that, under its settlement offer, CMS agreed to pay all such Medicare short-stay appeal claims if a hospital accepted the offer of partial payment on or before October 31, 2014, by submitting (1) a spreadsheet of eligible claims to CMS by October 31, 2014, and (2) an executed copy of the CMS administrative settlement agreement. Prime Hospitals also alleged that "[s]ubject to checking the spreadsheets to ensure that the claims were eligible Short-stay Appeal Claims, CMS expressly and unconditionally agreed to execute the settlement agreement and process the eligible claims if the Prime Hospitals accepted its offer by timely submitting the spreadsheet and an executed settlement agreement." J.A. 34.

In particular, Prime Hospitals pointed to CMS's settlement agreement where it stated that "[u]pon receipt of an Agreement executed by the Hospital, CMS will determine whether the list of appeals furnished by the Hospital matches CMS's records at each level of the administrative appeals process," and, "[i]f so, CMS will execute the Agreement," and, "[i]f not, CMS and the Hospital will use their best efforts to work together to resolve promptly any discrepancies so that a match is achieved, at which time CMS will execute the Agreement." J.A. 56; see also J.A. 34.

Prime Hospitals alleged that, on or before October 31, 2014, they accepted CMS's offer by each submitting a spreadsheet of their eligible Medicare short-stay appeal claims and an executed CMS administrative...