Grossmont Hosp. Corp. v. Burwell, 12-5411
|07 August 2015
|GROSSMONT HOSPITAL CORPORATION, DOING BUSINESS AS SHARP GROSSMONT HOSPITAL, ET AL., APPELLANTS v. SYLVIA MATHEWS BURWELL, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, APPELLEE
|U.S. Court of Appeals — District of Columbia Circuit
Appeal from the United States District Court for the District of Columbia
Robert L. Roth argued the cause for appellants. With him on the briefs was John R. Hellow.
Sydney Foster, Attorney, U.S. Department of Justice, argued the cause for appellee. With her on the brief were Ronald C. Machen, Jr., U.S. Attorney at the time the brief was filed, and Michael S. Raab, Attorney. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.
Before: MILLETT, Circuit Judge, and EDWARDS and SENTELLE, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge SENTELLE.
SENTELLE, Senior Circuit Judge: Appellants, California hospitals, sought reimbursement under the Medicare program for so-called "bad claims." Payment was denied because the claims were submitted to Medicare without first being submitted to the State of California for a determination of any payment responsibility it may have for the claims. The appellants were denied relief in administrative proceedings. The district court affirmed. We affirm the district court.
The Medicare program pays for certain medical care provided primarily to eligible elderly and disabled persons. Under the program, when a hospital participating in the program incurs costs in providing services to a Medicare patient, those costs are borne in part by the patient through the payment of deductibles and co-insurance. See 42 U.S.C. § 1395e; 42 C.F.R. § 409.80 et seq. Generally, the remaining costs are reimbursed by the Medicare program to the hospital through fiscal intermediaries, which are typically private insurance companies. See 42 U.S.C. § 1395h (2000). The Medicaid program is a cooperative federal-state program to provide medical care for eligible low-income individuals. The program is jointly funded by federal and state governments. In order for a state to qualify for federal funding, the Secretary of Health and Human Services (hereinafter "Secretary") must approve the state's Medicaid plan, which sets out, inter alia, covered medical services. See 42 U.S.C. §§ 1396a, 1396b.
Some patients are eligible for both Medicare and Medicaid (known as "dual eligibles"). When this occurs Medicare is the primary payor. State Medicaid plans often mandate that thestate Medicaid agency pay for part or all of the Medicare deductibles and coinsurance amounts incurred in connection with treating these dual eligibles. But if under its Medicaid plan a state is not obligated to pay such deductibles or coinsurance amounts, then these amounts can be included as "bad debt" under Medicare, and thus qualify as reimbursable to the hospital by the federal government. Pursuant to agency regulations, for a bad debt to be reimbursable the hospital must, inter alia, be able to establish that reasonable collection efforts were made.
Prior to 1994, California's Medicaid plan, known as MediCal, provided for payment of dual eligibles' Medicare deductibles and co-insurance. On May 1, 1994, however, MediCal unilaterally decided to stop making these payments. In 1996, the Secretary and Medi-Cal reached an agreement under which Medi-Cal's payments for Medicare deductibles and coinsurance would continue, subject to a payment ceiling and retroactive to May 1, 1994. However, for a period of years after this agreement was reached Medi-Cal continued to automatically set its payment responsibility for dual eligibles to zero. Consequently, in 1998 the Secretary and California reached another agreement under which Medi-Cal would reprocess all claims made between May 1994 and March 1999.
Appellants Grossmont Hospital Corporation and four other California hospitals (hereinafter "Grossmont" or "the hospitals") provided certain health services to dual eligibles for the relevant time period, May 1, 1994, through June 30, 1998. During this time, Grossmont's fiscal intermediary and Medi-Cal implemented a system that was intended to automatically transmit from the intermediary to Medi-Cal all of Grossmont's claims for payment of dual eligibles' deductibles and coinsurance. However, the system did not always work properly, and consequently some of Grossmont's claims were not transmitted to Medi-Cal. After Medi-Cal reprocessed the claimsin its system for May 1994 through March 1999, it issued lump-sum payments in 1999, including to Grossmont. Grossmont subsequently realized that some of its claims were not included in its lump-sum payments. One of the hospitals sent the state a letter concerning the missing claims and a few telephone calls were made to the state, but there is no evidence in the administrative record that the hospitals took any other steps to obtain state determinations of payment responsibility for the missing claims. Grossmont eventually produced its own estimates of the missing claims. Grossmont submitted these estimates to its intermediary, seeking payment, but the intermediary determined that such documentation was not appropriate. In 2006, Grossmont sent a letter to the state with a request to process an attached sample of the missing claims, but the state denied the request because the claims were not submitted in a timely manner.
Grossmont appealed the intermediary's determination to the Provider Reimbursement Review Board (hereinafter "Board"). The Board reversed the intermediary's determination, concluding that the intermediary had sufficient information to determine the amounts that Medi-Cal was not obligated to pay. Joint Appendix ("JA") 58-70.
The Secretary, through the Administrator for the Centers for Medicare and Medicaid Services, then reviewed the Board's decision. The Secretary reversed the Board's decision, observing that under a longstanding policy Medicare would not reimburse a hospital for dual eligibles' unpaid deductible and co-insurance amounts unless the hospital first billed the state Medicaid agency ("must bill policy") and obtained a determination from the state of its payment responsibility ("mandatory state determination"). Here, the Secretary concluded, there had been no state determination made on the missing claims and therefore the claims were not reimbursable.
Grossmont then appealed the Administrator's decision to the district court. The parties cross-moved for summary judgment. In a thorough Memorandum Opinion, Grossmont Hosp. Corp. v. Sebelius, 903 F. Supp. 2d 39 (D.D.C. 2012) ("Grossmont I"), the district court granted the Secretary's motion for summary judgment, affirming the Secretary's decision that the claims were not reimbursable.
Grossmont now appeals the district court's decision.
We review the district court's grant of summary judgment de novo and review the Secretary's decision under the standard of the Administrative Procedure Act. See, e.g., St. Luke's Hosp. v. Thompson, 355 F.3d 690, 693-94 (D.C. Cir. 2004). We may set aside the Secretary's decision only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or "unsupported by substantial evidence in the administrative record." 5 U.S.C. § 706(2)(A), (E); Marymount Hosp., Inc. v. Shalala, 19 F.3d 658, 661 (D.C. Cir. 1994). The Secretary's interpretation of her own regulations is entitled to "substantial deference" and "must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (internal quotation marks omitted).
Grossmont argues that the mandatory state determination policy violates the bad debt moratorium; that the Secretary's refusal to pay Grossmont's claims based on the mandatory state determination policy is arbitrary and capricious; and thatGrossmont's claims must be paid under Joint Signature Memorandum 370.
Grossmont questions the validity of the mandatory state determination policy. According to Grossmont, the longstanding policy of the Secretary was an "alternative documentation" policy, under which hospitals had the burden to show that they were entitled to the Medicare bad debts claimed, but were not required to submit bills to the state Medicaid program. Grossmont contends that the alternative documentation policy was confirmed in 1995 when the Secretary issued instructions in the Provider Reimbursement Manual, Part II § 1102.3L, which stated that hospitals can document a state's obligation for bad debts by supplying either a Medicaid remittance advice form or alternative documentation of the state's lack of responsibility for payment.
Even though § 1102.3L was deleted by the Secretary in 2003, it is Grossmont's contention that the alternative documentation policy was in effect for the relevant time period, i.e., May 1994 through June 1998. It was not until a case decision in 2000, Grossmont asserts, that the Secretary sought for the first time to impose a mandatory state determination policy to limit the "alternative documentation" policy. See California Hospitals 91-91 Outpatient Crossover Bad Debts Group v. Blue Cross and Blue Shield Association/Blue Cross of California/Blue Cross of Omaha/ Aetna Life Insurance Company, Adm. Dec. (Oct. 31, 2000), JA 254-265. Grossmont argues that this attempt in 2000 to limit the application of the long-standing alternative documentation policy to the hospitals' claims must be rejected as a violation of the statutory bad debt moratorium. The moratorium was enacted by Congress in 1987 and prohibits making any change to any policy in effect at thetime of its enactment with respect to bad debt payments. See Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, § 4008(c), 101 Stat. 1330. In short,...
To continue readingRequest your trial