Brae Loch Manor Health Care Facility v. Thompson

• Decision Date: 29 August 2003
• Docket Number: No. 01-CV-6023L.,01-CV-6023L.
• Citation: 287 F.Supp.2d 191
• Parties: BRAE LOCH MANOR HEALTH CARE FACILITY; Nor Loch Manor Health Care Facility; Elcor Health Services, Inc.; Harding Nursing Home; Maplewood Nursing Home; Nortonian Nursing Home; Palatine Nursing Home; Pontiac Nursing Home; Sunset Nursing Home, Plaintiffs, v. Tommy G. THOMPSON, Secretary of the United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — Western District of New York

287 F.Supp.2d 191

BRAE LOCH MANOR HEALTH CARE FACILITY; Nor Loch Manor Health Care Facility; Elcor Health Services, Inc.; Harding Nursing Home; Maplewood Nursing Home; Nortonian Nursing Home; Palatine Nursing Home; Pontiac Nursing Home; Sunset Nursing Home, Plaintiffs, v. Tommy G. THOMPSON, Secretary of the United States Department of Health and Human Services, Defendant.

No. 01-CV-6023L.

United States District Court, W.D. New York.

August 29, 2003.

Jeffrey J. Calabrese, Harter, Secrest and Emery LLP, Rochester, NY, Thomas G. Smith, Harter, Secrest and Emery LLP, Rochester, NY, for Plaintiffs.

Christopher V. Taffe, United States Attorney Office, Rochester, NY, for Defendant.

DECISION AND ORDER

LARIMER, District Judge.

Under the Medicare insurance program, established by Title XVIII of the Social Security Act ("the Act"), the federal government reimburses providers of medical services to the aged and disabled, for the reasonable costs of medical services provided, subject to maximum permissible reimbursement amounts. 42 U.S.C. § 1395f(b)(1); § 1395x(v)(1)(A). Although Congress provided for payment of reasonable costs, the method for determining those costs was left to the Secretary of Health and Human Services ("HHS"). By statute, Congress authorized the Secretary to prescribe methods to be used for determining the reasonable costs of providing services. 42 U.S.C. § 1395x(v)(1)(A). In the Act, Congress provided general guidelines but left the details to the Secretary to establish the appropriate costs necessary for the "efficient delivery of needed health services." Id.

The Secretary of Health and Human Services has promulgated extensive regulations and manuals implementing the Medicare program. The regulations require that the medical provider, in this case, the skilled nursing home, submit cost reports that are audited on behalf of the Secretary and the Administrator of the Health Care Facility Administration ("HCFA") by the providers' fiscal intermediary, in this case, Empire Medicare Services. After that review, the fiscal intermediary issues a Notice of Program Reimbursement ("NPR") to the provider which delineates the amount that the Medicare program will reimburse the provider for services rendered during that fiscal year.

If the provider is dissatisfied with that calculation, there is an appellate procedure culminating in a final appeal to the Administrator of HCFA. The Administrator may also, on his own initiative, review determinations made concerning reimbursement. If still aggrieved, the provider may seek judicial review from the Administrator's final decision, which constitutes the final decision of the Secretary, in United States District Court. 42 U.S.C. § 1395oo(f)(1).

Plaintiffs are nine separate skilled nursing home facilities who provide medical services to aged and disabled patients covered by Medicare. They seek judicial review of the final decision of the Administrator of HCFA, entered November 20, 2000. In that decision, the Administrator rejected both plaintiffs' claims for reimbursement for certain physical therapy services and the methodology for seeking such reimbursement. The Administrator's decision reversed the decision of the Provider Reimbursement Review Board ("PRRB"), the first-level appellate tribunal, that had ruled in favor of plaintiffs.

Plaintiffs contend that the final decision of the Administrator is arbitrary and capricious and contrary to the Act and the rules and regulations promulgated by the Secretary. The matter is before the Court on the parties' cross-motions for judgment on the pleadings.

STANDARDS FOR JUDICIAL REVIEW

The Act (§ 1395oo[f][1]) does provide for judicial review of the final decision of the Secretary. In this case, the final decision was rendered by the Administrator of HCFA. It is important to recognize, though, the appropriate scope of judicial review. Judicial review of these matters is not de novo. Under 42 U.S.C. § 1395oo(f)(1), this Court may review and set aside a final decision of the Secretary pursuant to the Administrative Procedure Act ("APA") if it is "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). In its review, the Court must give deference to an agency's decision because the agency has "greater familiarity with the ever-changing facts and circumstances surrounding the subjects regulated." Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 866, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

The Congressional intent expressed in the governing statute must be given full effect if Congress "has explicitly resolved the issue." Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778. If that intent is ambiguous or Congress has not spoken on the issue, however, then this Court must respect the Administrator's interpretation of the statute as long as that interpretation is permissible. Id.; Nutritional Health Alliance v. FDA, 318 F.3d 92, 97 (2d Cir. 2003) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000)); see also New York & Pub. Serv. Comm'n of N.Y. v. FCC, 267 F.3d 91, 103 (2d Cir.2001) (deferring to the agency's "reasonable interpretation of the statute it administers"); Conn. Hosp. Ass'n v. Weicker, 46 F.3d 211, 219 (2d Cir.1995) (holding that "an agency's interpretation of a statute that the agency administers is entitled to considerable deference and a court may not substitute its own reading unless the agency's interpretation is unreasonable"); Schulte v. Apfel, 2000 WL 362025 at *13 (W.D.N.Y. 2000) (Elfvin, J.) (holding that "[the interpretations made by the Commissioner of Social Security] are afforded substantial deference and will not be disturbed provided they are reasonable and consistent with the statute").

Deference to the interpretation may be especially appropriate where an agency is charged with administering a "`complex and highly technical regulatory program,' in which the identification and classification of relevant `criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns.'" Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); see Rye Psychiatric Hosp. Ctr., Inc. v. Shalala, 52 F.3d 1163, 1168 (2d Cir.1995), cert. denied, 516 U.S. 913, 116 S.Ct. 299, 133 L.Ed.2d 205 (1995) (upholding the Secretary's decision in administering a complex program for hospitals exempt from the Medicare prospective payment scheme); accord In re NextWave Pers. Communications, Inc., 200 F.3d 43, 58 (2d Cir.1999).

Additionally, the Administrator's decision may be challenged if it is "unsupported by substantial evidence." 5 U.S.C. § 706(2)(E) (1989). Substantial evidence has been defined by the Supreme Court as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). If the Secretary's findings are supported by substantial evidence, then a reviewing court must give deference to those findings. See Adventist Living Ctr.'s, Inc. v. Bowen, 881 F.2d 1417, 1420-21 (7th Cir.1989) (holding that the factual findings and interpretation of regulations of the Secretary [of HHS] deserve deference unless unsupported by substantial evidence). Furthermore, the Court must not substitute its judgment for that of the Secretary's simply because the Court might have reached a different conclusion from the evidence. Home Health Serv.'s of the United States v. Schweiker, 683 F.2d 353, 356 (11th Cir.1982) (holding that a court does not have the power to substitute its judgment for that of the agency if the agency's findings are supported by substantial evidence); see generally NLRB v. Nev. Consol. Copper Corp., 316 U.S. 105, 106-07, 62 S.Ct. 960, 86 L.Ed. 1305 (holding that "if the findings of the Board are supported by evidence the courts are not free to set them aside even though the Board could have drawn different inferences"); Brooklyn Hosp. v. Schweiker, 596 F.Supp. 326, 329 (E.D.N.Y.1984) (holding that a court "may not substitute its own judgment for that of the Secretary solely because the court might have arrived at a different decision").

The burden of persuasion rests with the providers to establish that they are entitled to reimbursement under the Medicare program. Friedman v. Sec'y of Dept. of HHS, 819 F.2d 42, 45 (2d Cir. 1987) (holding that "a claimant nevertheless has the burden of proving entitlement to Medicare benefits"); Keefe v. Shalala, 71 F.3d 1060, 1062 (2d Cir.1995); see Arruejo v. Thompson, 2001 WL 1563699 at *9 (E.D.N.Y. July 3, 2001); Morton v. Heckler, 586 F.Supp. 110, 111 (W.D.N.Y. 1984) (Elfvin, J.).

The issues in this appeal, and before the Secretary, related to reimbursement for physical therapy provided to residents of the affected nursing homes. Although "physical therapy" may appear to be self-defining, under the complex regulations governing Medicare reimbursement, some types of therapy are covered and reimbursable and some are not. In simplest terms, the decision of the Administrator was that certain items which the providers denominated as physical therapy and reimbursable as an auxiliary cost should not have been classified as such and, therefore, reimbursement for those services was disallowed. Specifically, the Administrator determined that certain therapy services provided by aides did not qualify as "physical therapy" services which are reimbursable under Part B of Medicare.

There are two areas of coverage under Medicare, Part A and Part B. Medicare Part A, is an insurance benefit program available to those 65 and older and the disabled and covers in-patient charges. Medicare Part B provides out-patient coverage to those eligible for benefits under Part A, who pay (or have paid on their behalf) premiums for this type of medical insurance.

In this case, all nine of ...