HCA Health Services of Oklahoma, Inc. v. Shalala, 93-5113

• Decision Date: 01 July 1994
• Docket Number: No. 93-5113,93-5113
• Citation: 27 F.3d 614
• Parties: , 63 USLW 2039, 44 Soc.Sec.Rep.Ser. 638, Medicare & Medicaid Guide P 42,482 HCA HEALTH SERVICES OF OKLAHOMA, INC., Plaintiff-Appellant, v. Donna E. SHALALA, Secretary, Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 614

27 F.3d 614

307 U.S.App.D.C. 164, 63 USLW 2039,

44 Soc.Sec.Rep.Ser. 638,

Medicare & Medicaid Guide P 42,482

HCA HEALTH SERVICES OF OKLAHOMA, INC., Plaintiff-Appellant, v. Donna E. SHALALA, Secretary, Department of Health and Human Services, Defendant-Appellee.

No. 93-5113.

United States Court of Appeals District of Columbia Circuit.

Argued May 20, 1994.

Decided July 1, 1994.

Robert A. Klein, Washington, DC, argued the cause and filed the briefs for appellant.

Gerard Keating, Atty., Dept. of Health and Human Services, Washington, DC, argued the cause for appellee. With him on the brief were Frank W. Hunger, Asst. Atty. Gen., Eric H. Holder, Jr., U.S. Atty., Harriet S. Rabb, Gen. Counsel, Darrel J. Grinstead, Associate Gen. Counsel, Henry R. Goldberg, Deputy Associate Gen. Counsel, and William C. Bailey, Jr., Atty., Dept. of Health and Human Services, Washington, DC.

Before WALD, SILBERMAN and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

We uphold today the Secretary of Health and Human Services' ruling that when a fiscal intermediary reopens its original determination regarding the amount of reimbursement that a Medicare provider is to receive from the federal government under the Medicare program, 42 U.S.C. Secs. 1395-1395ccc (1988), a provider's appeal of that reopening to the Provider Reimbursement Review Board is limited to the specific issues revisited on reopening and may not extend further to all determinations underlying the original reimbursement decision for that financial year. We reject appellant's contentions that the statute and regulations compel a contrary conclusion and, accordingly, affirm the district court.

I. BACKGROUND

A. Statutory Framework

Under the Medicare statute ("Statute"), Title XVIII of the Social Security Act, Pub.L. No. 89-97, 79 Stat. 286, 291 (1965), as amended, 42 U.S.C. Secs. 1395-1395ccc (1988), healthcare providers are reimbursed by the Secretary of Health and Human Services ("Secretary") for the services they furnish to Medicare patients based on the lesser of their customary charge for, or reasonable cost of, those services. 42 U.S.C. Sec. 1395f(b)(1). Commonly, reimbursement is handled by fiscal intermediaries, such as private insurance companies, who make interim payments to providers on at least a monthly basis and determine at the close of the fiscal year whether such payments exceeded or fell short of the actual amount of reimbursement that the provider was due under applicable regulations. Id. at Secs. 1395g, 1395h, 1395x(v)(1)(A)(ii). Accordingly, a provider will submit an annual cost report to its fiscal intermediary who then issues a Notice of Program Reimbursement ("NPR") detailing the calculations of the amount of reimbursement under the Statute. The NPR is appealable within 180 days to the Provider Reimbursement Review Board ("Board") appointed by the Secretary pursuant to Sec. 1395oo (h). Id. at Sec. 1395oo (a).

When reviewing an NPR, the Board may modify any matter covered by the provider's cost report for the fiscal year at issue "even though such matter[ ] w[as] not considered by the intermediary in making such final determination." Id. at Sec. 1395oo (d). See also 42 C.F.R. Sec. 405.1869 (1992); Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399, 108 S.Ct. 1255, 99 L.Ed.2d 460 (1988). A decision by the Board is potentially subject to further review by the Secretary's delegate, the Deputy Administrator of the Health Care Financing Administration ("HCFA"). See 42 U.S.C. Sec. 1395oo (f)(1); 42 C.F.R. Sec. 1875; see also 42 C.F.R. Sec. 405.1842 (expedited review when Board has no authority to decide the issue). If left undisturbed, the Board's decision is reviewable, and if modified by the Secretary the latter's decision is reviewable in the district court in which the provider is located or in the District Court for the District of Columbia. 42 U.S.C. Sec. 1395oo (f)(1).

Under the regulations an intermediary may reopen an NPR within three years of issuance. 42 C.F.R. Sec. 405.1885. An intermediary's decision on reopening of an NPR is reviewable by the Board if such review is requested within 180 days. Id. at Secs. 405.1889 & 405.1841(a)(1) (as incorporated by Secs. 405.1835(a)(2) & 405.1889). The question we face here concerns the scope of that review.

B. History of Proceedings

Appellant HCA Health Services of Oklahoma, Inc. ("HCA" or "Hospital") owns and operates Presbyterian Hospital in Oklahoma City which provides health-care services to Medicare beneficiaries. HCA submits its cost reports to Blue Cross/Blue Shield of Oklahoma, the designated fiscal intermediary for the Hospital. On March 28, 1988, Blue Cross/Blue Shield of Oklahoma issued the NPR for the financial year ending September 30, 1985 ("FY 1985"), and HCA did not appeal that determination to the Board within the 180-day statutory period. On September 11, 1989, within the three-year limit for reopening program reimbursement determinations, the intermediary expressed its intention to revisit its FY 1985 reimbursement determination for HCA, in order (1) "[t]o add-in ownership costs for hospital occupied areas of [a specified building]," (2) "[t]o reduce bad debts by bad debt recoveries," and (3) "[t]o adjust the DRG [Diagnostic Related Group] amount." Joint Appendix ("J.A.") 65. Three months later, the intermediary notified HCA of its plan to reopen the cost report to adjust in addition for "[d]irect [g]raduate [m]edical [e]ducation [c]osts" for FY 1985. J.A. 67. In February of the following year it further indicated that it would reopen the FY 1985 cost report in order "[t]o disallow bad debts because Medicare accounts did not receive similar collection efforts at the collection agency as non-Medicare accounts." J.A. 79.

On January 31, 1991, and again on May 1, 1991, all within the 180-day time limit for requesting Board review of a reopening but well outside the 180-day period for seeking review of the original FY 1985 NPR, the Hospital appealed the revised NPR to the Board. However, the Hospital sought to appeal not only issues revisited in 1989, but also the intermediary's calculation of depreciation and bond defeasance costs which had been decided in the original NPR but never revisited since. J.A. 115. The Board held that because the time limit to appeal the original determination had expired, its jurisdiction was limited to reviewing "matters adjusted by the revised NPR" for which the 180-day appeals period had not yet expired. J.A. 44.

The Hospital filed suit challenging that determination, and the district court adopted the magistrate judge's recommendation upholding the Board's determination. HCA puts forth three arguments on appeal. First, it argues that pursuant to 42 U.S.C. Sec. 1395oo (a) the Board had jurisdiction not only over the matters revised on reopening but over all matters covered in the NPR because each concerns "the period covered by such report" and affects "the amount of total program reimbursement" for that financial year. Second, appellant argues that even if a partial revision of an NPR does not automatically permit an appeal of the entire NPR, once the Board asserts jurisdiction over the reopened aspects of the NPR, as it has done here, the statute and regulations confer jurisdiction upon the Board to review the entire NPR. Third, the Hospital asserts that the depreciation costs were implicitly revisited in 1989 in the course of reconsidering ownership costs. We reject appellant's first two arguments for reasons set forth below, and we do not address the third contention because it appears for the first time on appeal, i.e., it was not raised before the Board, the magistrate judge or the district court.

II. ANALYSIS

A. Standard of Review

We approach the Board's decision without deference to the district court's judgment and use the same standard applied by the district court in its original review. Marymount Hosp., Inc. v. Shalala, 19 F.3d 658, 661 (D.C.Cir.1994) (citing Biloxi Regional Medical Ctr. v. Bowen, 835 F.2d 345, 349 (D.C.Cir.1987)). Accordingly, we set aside the Board's decision only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or unsupported by substantial record evidence. 5 U.S.C. Sec. 706(2)(A) & (E). See 42 U.S.C. Sec. 1395oo (d) & (f)(1). In examining the Board's construction of the Secretary's duly promulgated regulations, ¹ "the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945). We then ask in addition whether the Board's reading of the regulations is consistent with the statutory scheme it implements. "[T]o the extent [the Board's interpretation is] based ... on the language of the Medicare [Statute] itself," we examine the decision with the appropriate deference due to an agency that has been charged with administering the Statute. Marymount Hospital, 19 F.3d at 661. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-45, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). Unless Congress has spoken to the particular issue at hand, we defer to the agency's interpretation whenever it is a permissible construction of the statute. Chevron, 467 U.S. at 842-44, 104 S.Ct. at 2781-82.

B. Board Review of an Intermediary's Decision on Reopening

1. Statutory Basis

42 U.S.C. Sec. 1395oo (a) confers a right upon the provider to "obtain a hearing [before the Board] with respect to ... [the provider's] cost report," if the provider is dissatisfied with the "final determination of the ... fiscal intermediary ... as to the amount of total program reimbursement due the provider ... for the period covered by such [filed cost] report," the amount in controversy is $10,000 or more, and the provider...