Davita, Inc. v. United States

• Decision Date: 28 March 2013
• Docket Number: No. 11-297C,11-297C
• Parties: DAVITA, INC., Plaintiff, v. UNITED STATES OF AMERICA, Defendant.
• Court: U.S. Claims Court

DAVITA, INC., Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

No. 11-297C

United States Court of Federal Claims

Filed: March 28, 2013

Tucker Act, 28 U.S.C. § 1491(a);

Subject-Matter Jurisdiction; Contract

Disputes Act, 41 U.S.C. §§ 601-12;

Contracts for Hospital Care and

Medical Services in Non-Department

Facilities, 38 U.S.C. § 1703; 38 C.F.R. §

17.56; Authorizations; Money-

Mandating Regulation; Failure to State

a Claim upon Which Relief Can Be

Granted.

Bobby R. Burchfield, Paul M. Thompson, and Matthew M. Leland, McDermott Will & Emery, 600 Thirteenth Street, NW, Washington, D.C. 20005, for Plaintiff.

Stuart F. Delery, Jeanne E. Davidson, Martin F. Hockey, Jr., and John Sinclair Groat, United States Department of Justice, Civil Division, Post Office Box 480, Ben Franklin Station, Washington, D.C. 20044, for Defendant. Dennis Foley, Carrie Parish, and Ogochukeu Ekwuabu, Department of Veterans Affairs, of Counsel.

OPINION AND ORDER

WILLIAMS, Judge.

In this action, Plaintiff, Davita, Inc., ("DaVita") brings two claims. In Count I of its complaint, Plaintiff claims that the Department of Veterans Affairs ("VA") underpaid it for dialysis services under a regulatory scheme -- not under a contract -- by failing to pay the rates mandated by 38 C.F.R. § 17.56. In Count II, Plaintiff claims that the VA paid it less than contractually mandated amounts for dialysis services it provided under a 2009 contract. Plaintiff does not seek monetary relief in its contract claim but rather a declaratory judgment that "the VA is required to pay DaVita in accordance with the Contract for all covered services provided . . . ." Am. Compl. 14.

This case comes before the Court on Defendant's motion to dismiss Plaintiff's first amended complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of Federal Claims ("RCFC"). Defendant argues that the Court lacks jurisdiction overCount I because Plaintiff's claim sounded in contract but Plaintiff failed to submit a claim to a contracting officer as required by the Contract Disputes Act ("CDA"), 41 U.S.C. §§ 7101-09. In the alternative, Defendant contends that 38 C.F.R. § 17.56 cannot serve as a basis for jurisdiction because it is not money-mandating. In addition, Defendant contends this regulation was invalid from March 2005, until it was amended in February 2011, because it was not promulgated in accordance with the Administrative Procedure Act's notice and comment requirements. With respect to Count II, Defendant contends that the Court lacks CDA jurisdiction because Plaintiff failed to present a certified claim for a sum certain to the contracting officer. Further, Defendant argues Plaintiff failed to state a claim upon which relief can be granted because the Court cannot provide the relief Plaintiff seeks. Because the Court finds that it has jurisdiction over both counts and can provide the requested relief, Defendant's motion to dismiss is DENIED.

Background¹

The Solicitation and Contract Award

On March 31, 2009, the VA issued a pre-solicitation notice seeking proposals for dialysis services for VA beneficiaries within eight Veteran Integrated Service Networks. These eight networks are geographically-based health care systems with medical centers, outpatient clinics, and nursing homes. The United States and its territories are divided into 23 such networks. The notice provided that the procurement would be conducted pursuant to the Federal Acquisition Regulation ("FAR") Parts 12 and 15.

On July 1, 2009, the VA issued Request for Proposals ("RFP") number VA-791-09-RP-0007. DaVita submitted a proposal, and the VA awarded DaVita the contract, effective October 9, 2009. The contract was an indefinite delivery, indefinite quantity ("IDIQ") contract, and the contract period was to run from the date of award through September 30, 2010, with four one-year options. The minimum total was $30,000 and the maximum $1.2 million (inclusive of the base and all option years), and the contract contained 10 pages of fee schedules for services to be provided within each of the eight Veteran Integrated Service Networks. See Am. Compl., Ex. A, App. 6-15.

Additionally, the contract delineated the process for ordering services under the contract as follows:

B.2 SPECIAL CONTRACT REQUIREMENTS

Under the authority of Public Law 104-262 and 38 USC 8153, the contractor agrees to provide Health Care Resources in accordance with the terms and conditions stated herein, to furnish to and at the Department of Veterans Affairs Medical Center, the services and prices specified in the Section entitled Schedule of Supplies/Services of this contract.. . .

3. ORDERING PROCEDURES

Orders will be placed by the [Veterans Affairs Medical Center] via an authorization to the contracted facility that is closest in proximity to the Veteran[']s place of residence, the Veteran[']s preference, and/or per clinical direction of the VA patient's physician or treatment provider (this includes VA social workers).

. . .

3.3 Orders will be placed via authorization.

3.4 Orders placed under this contract will contain the following information:

3.4.1 Date of Order.

3.4.2 Authorization number.

3.4.3 Patient information including diagnosis code and modality.

3.4.4 Authorization time period.

3.4.5 Dialysis Treatment Center Location and company name

3.4.6 Timely filing claims submission requirements

3.4.7 Address location for [Electronic Data Interchange] submission and paper claims

3.4.8 Originating facility of authorization

Am. Compl., Ex. A, App. 18. Furthermore, the contract provided that "[a]ll delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control." Am. Compl., Ex. A, App. 39. Disputes were to be handled under the Contract Disputes Act of 1978, as amended (41 U.S.C. §§ 601-613), and FAR 52.233-1.

The Legal Regime Governing Dialysis Services Provided By Non-VA Facilities

The VA has the authority to contract with nongovernmental facilities to furnish medical services to veterans. 38 U.S.C. § 1703 (2006). VA regulations and directives of the Veterans Health Administration ("VHA")² govern the VA's arrangements with non-VA health care providers. The VA may use individual authorizations when there is infrequent demand for such care or services. Id. The VA has applied this regulation specifically to dialysis services, andissued a directive stating: "[b]ecause dialysis care must be provided on an ongoing, long-term basis, it generally should be authorized under a contract rather than on a fee for service basis." Am. Compl., Ex. B, App. 55 (VHA Directive 2007-025, Attach. A, ¶ 2(c)). When a contract is in effect, "the contracted agreement amount is to be paid." Am. Compl., Ex. B, App. 56 (VHA Directive 2007-025, Attach. A, ¶ 2(f)). "In the absence of a contract, payment of authorized non-VA dialysis treatment is assigned as provided by 38 CFR § 17.56 . . . ." Am. Compl., Ex. B, App. 56 (VHA Directive 2007-025, Attach. A, ¶ 2(e)).

If the VA does not have a contract covering the health services a veteran requires, the VA issues an authorization to the veteran, who then presents the authorization to a health care service provider such as DaVita. Payment is governed by 38 C.F.R. § 17.56. Administrative assistants at approximately 150 VA Medical Centers issue the authorizations to veterans. Section 17.56 of Title 38 of the Code of Federal Regulations applies to services provided without a contract, pursuant to authorizations. The version of § 17.56 effective from 2000 until March 6, 2005, provided:

Payment for non-VA physician services associated with outpatient and inpatient care provided at non-VA facilities.

(a) Except for anesthesia services, payment for non-VA physician services associated with outpatient and inpatient care provided at non-VA facilities authorized under § 17.52 or made under § 17.120 of this part, shall be the lesser of the amount billed or the amount calculated using the formula developed by the Department of Health & Human Services, Health Care Financing Administration (HCFA) under Medicare's participating physician fee schedule for the period in which the service is provided . . . . This payment methodology is set forth in paragraph (b) of this section. If no amount has been calculated under Medicare's participating physician fee schedule or if the services constitute anesthesia services, payment for such non-VA health care professional services associated with outpatient and inpatient care provided at non-VA facilities . . . shall be the lesser of the actual amount billed or the amount calculated using the 75th percentile methodology set forth in paragraph (c) of this section; or the usual and customary rate if there are fewer than 8 treatment occurrences for a procedure during the previous fiscal year.

. . .

(c) Payment under the 75th percentile methodology is determined for each VA medical facility by ranking all occurrences (with a minimum of eight) under the corresponding code during the previous fiscal year with charges ranked from the highest rate billed to the lowest rate billed and the charge falling at the 75th percentile as the maximum amount to be paid.

(d) Payments made in accordance with this section shall constitute payment in full. Accordingly, the provider or agent for the provider may not impose any additional charge for any services for which payment is made by VA.

38 C.F.R. § 17.56 (2000).

In February 2005, the VA amended 38 C.F.R. § 17.56, Payment for Non-VA Physician and Other Health Care Professional Services Associated With Either Outpatient or Inpatient Care Provided at Non-VA Facilities. 70 Fed. Reg. 5926-01 (Feb. 4, 2005). The rule change primarily concerned the establishment of an Alaska-specific methodology for reimbursement. At the same time, the VA also made what it characterized as "[a] number of technical changes of a non-substantive nature," including...