Doctors Nursing & Rehab. Ctr. v. Sebelius

• Decision Date: 16 July 2010
• Docket Number: No. 09-2226.,09-2226.
• Citation: 613 F.3d 672
• Parties: DOCTORS NURSING & REHABILITATION CENTER, Plaintiff-Appellant, v. Kathleen SEBELIUS, Secretary of Health and Human Services, United States Dept. of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

613 F.3d 672

DOCTORS NURSING & REHABILITATION CENTER, Plaintiff-Appellant,

v.Kathleen SEBELIUS, Secretary of Health and Human Services, United States Dept. of Health and Human Services, Defendant-Appellee.

No. 09-2226.

United States Court of Appeals,Seventh Circuit.

Argued Dec. 10, 2009.

Decided July 16, 2010.

COPYRIGHT MATERIAL OMITTED.

Ari J. Rosenthal, Attorney (argued), Naperville, IL, for Plaintiff-Appellant.

Michael S. Raab, Attorney, Joshua P. Waldman, Attorney (argued), Department of Justice, Washington, DC, for Defendant-Appellee.

Before POSNER, MANION, and HAMILTON, Circuit Judges.

MANION, Circuit Judge.

After Doctors Nursing & Rehabilitation Center, a nursing home in Salem, Illinois, sued the Secretary of Heath and Human Services, claiming that Medicare underpaid it for certain services provided to Medicare beneficiaries, the agency decided to reopen its administrative proceedings and reconsider the nursing home's claims. The district court dismissed the suit, reasoning that the agency's reopening eliminated the prerequisite final decision and stripped the court of jurisdiction. Because we hold that the agency may not reopen its proceedings after judicial review begins without permission from the court, we reverse.

I.

The underlying payment dispute involves the rate at which Medicare reimburses skilled nursing facilities for pulse-oximetry tests-a routine and non-invasive means of testing oxygen levels in the blood. Medicare reimburses nursing facilities in one of two ways. When a beneficiary's entire stay is covered by Medicare Part A, which provides coverage for in-patient hospital and other institutional care services, Medicare generally pays a per diem rate to the facility. When the stay is not covered under Part A, Medicare reimburses some covered services on a per procedure basis under its Part B supplemental insurance. Since 1999, this per procedure rate has declined significantly-abruptly at first in 2000 and gradually each year since. All of the disputed payments in this case were properly made on a per procedure basis, but the nursing home believes that the reductions in the per procedure rate were unlawful.

The nursing home first presented its claims through the agency's administrative channels. It filed its claims, as required, with its “fiscal intermediary” (the private contractor responsible for paying Medicare claims in nursing facilities), which determined the applicable fee schedule and paid the nursing home according to the rates therein.

Believing that the proper reimbursement rate for its services was several times the amount indicated in the fee schedule, the nursing home asked for a “redetermination” from its fiscal intermediary. When a fiscal intermediary receives a request for redetermination, it must decide whether the contested issue was an “initial determination” or simply a rote application of a scheduled rate. Only initial determinations are subject to administrative review and eventually a hearing. Believing that the issue involved a rote application of the physician fee schedule payment rate and that the nursing home was challenging the rate itself, the fiscal intermediary decided that the nursing home's payment did not involve an “initial determination” and denied the redetermination request.

When its redetermination request failed, the nursing home again followed the prescribed administrative procedure and asked the Qualified Independent Contractor (the contractor that handles appeals from the fiscal intermediary) for a “reconsideration” of the fiscal intermediary's dismissal of the redetermination request. That Qualified Independent Contractor affirmed the fiscal intermediary's dismissal and informed the nursing home the decision was “final and not subject to any further review.”

The nursing home then sued, complaining that the agency had underpaid it for the pulse-oximetry tests by illegally reducing the rate under the applicable fee schedule. In the meantime, however, the agency decided that its contractors had erred in terminating the administrative review process. It concluded that the nursing home was entitled to additional process before the agency and sought to reopen its administrative proceedings. The agency filed a motion to dismiss arguing that the district court should dismiss the case for lack of jurisdiction because there was no longer a final decision to review. The district court dismissed the case for want of jurisdiction. The nursing home appeals.

II.

A.

The nursing home argues that the agency may not divest the courts of jurisdiction simply by unilaterally reopening its proceeding after the lawsuit was filed: if there was a final decision that provided subject matter jurisdiction at the time the lawsuit was filed, the agency may not disturb that jurisdiction. ¹

We review a dismissal for lack of subject matter jurisdiction de novo. Evers v. Astrue, 536 F.3d 651, 656 (7th Cir.2008). Jurisdiction over suits involving claims for payment under the Medicare Act arises under 42 U.S.C. § 1395ff(b)(1)(A), which adopts by reference the judicial review provisions applicable to the Social Security Administration at 42 U.S.C. § 405(g). Section 405(g), in turn, provides for judicial review of any “final decision ... made after a hearing.”

To be sure, there was no such “final decision ... made after a hearing” in this case. But contrary to the Secretary's suggestion, that fact has no effect on our jurisdiction: it is well established that the agency may waive the hearing requirement under § 405(g). See Mathews v. Eldridge, 424 U.S. 319, 328-30, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). Judicial review is permitted when there is a lack of additional administrative review, whether due to exhaustion or waiver. ² So we will simply refer to the Qualified Independent Contractor's dismissal of the nursing home's reconsideration request, which was “final and not subject to further review” and by which the agency waived any requirement of exhaustion of additional administrative remedies, as the agency's final decision.

The nursing home argues that the general rule is that subject matter jurisdiction is determined at the time of filing. The Secretary responds that so long as the agency has authority under its regulations, it may reopen its administrative proceedings. And she asserts that once it reopens the proceedings, there is no longer a “final decision” for the courts to review and any suit based on the earlier decision must be dismissed for want of jurisdiction. Because this argument is not based on anything unique to the Medicare regulatory context, the Secretary effectively would have us hold that an agency may always divest the courts of jurisdiction with post-filing reopening and reconsideration, notwithstanding the traditional rule that jurisdiction is determined at the time of filing.

We have never specifically considered this question of whether the agency can reopen a Medicare claim and thereby destroy federal jurisdiction. For three reasons, however, we hold that when a suit is filed under § 405(g), the agency may not divest the federal courts of jurisdiction by unilaterally reopening its administrative proceedings.

First, the general rule is that “[w]e analyze jurisdiction based on the events at the time the case is brought.” Hukic v. Aurora Loan Services, 588 F.3d 420, 427 (7th Cir.2009) (citing Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004)). So we presume that the general rule applies here. It is true, as the agency points out, that the rule is primarily encountered when determining the prerequisites of diversity jurisdiction. E.g., id.; Smith v. Widman Trucking and Excavating, Inc., 627 F.2d 792, 799 (7th Cir.1980). But the rule is not so limited. See, e.g., Laborers' Pension Fund v. Pavement Maint., Inc., 542 F.3d 189, 194 (7th Cir.2008) (“If jurisdiction exists at the outset of a suit, subsequent procedural events will not divest the court of that original jurisdiction.”).

Second, Congress has specifically spoken on the issue of when and how the agency can reopen its administrative proceedings after judicial review begins. The sixth sentence of § 405(g) allows the court “on motion of the [agency] made for good cause shown before the [agency] files [its] answer, [to] remand the case to the [agency] for further action.” ³ While this provision addresses only the court's power to remand, and not the agency's own authority to reopen its proceedings, it assumes that an agency may not disrupt federal jurisdiction on its own. Otherwise, the remand authority in § 405(g) would serve no purpose: the agency would never need to ask the court for a remand. By specifying the procedure for remand, Congress has limited the agency's authority under § 1395ff(b)(1)(G) to reopen and revise a prior determination.

Finally, determining whether a final decision exists at the time of filing comports with the normal procedures of appellate review. Ordinarily, when one tribunal properly takes a case on appeal, the inferior tribunal transfers authority over the case. Gao v. Gonzales, 464 F.3d 728, 729 (7th Cir.2006). Thus, the majority rule (accepted by this circuit) is that while a district court may consider a motion for relief from a judgment under Federal Rule of Civil Procedure 60, and even deny the motion, while an appeal is pending, it must request permission from the appellate court to grant the motion. Washington v. Bd. of Educ., 498 F.2d 11, 16 (7th Cir.1974); see also Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure, § 2873. Otherwise, a district court could eliminate a final judgment, and with it federal appellate jurisdiction. This precisely parallels the rule that Congress established with § 405(g): the inferior tribunal (the agency) must request permission from the appellate tribunal before it reopens its final decision. ⁴

The Secretary argues that we have...