OSF Healthcare System v. Sullivan
| Decision Date | 27 April 1993 |
| Docket Number | No. 92-1172.,92-1172. |
| Citation | 820 F. Supp. 390 |
| Parties | OSF HEALTHCARE SYSTEM, d/b/a Saint James Hospital, Plaintiff, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant. |
| Court | U.S. District Court — Central District of Illinois |
Kurt L. Hudson, Chicago, IL, for plaintiff.
Gerard A. Brost, Asst. U.S. Atty., Peoria, IL (Donna Morros Weinstein, Chief Counsel, Lauren S. Ruby, Asst. Regional Counsel, Dept. of Health & Human Services, Chicago, IL, of counsel), for defendant.
Pending before the Court is Defendant's Motion for Summary Judgment and Plaintiff's Cross-Motion for Summary Judgment. For the reasons set forth below, Plaintiff's Motion is granted in part and remanded in part; Defendant's Motion is denied. This case is remanded to the Secretary of Health and Human Services for further proceedings pursuant to this Order.
Plaintiff, an Illinois not-for-profit corporation, is located in Pontiac, Illinois and does business in the State of Illinois. At all times relevant hereto, the Plaintiff has operated an acute care hospital and has been qualified and entitled to payment from the federal Medicare Program as a provider of hospital and related health care services. This Court has jurisdiction over this matter pursuant to 42 U.S.C. § 1395oo(f)(1), which allows a healthcare provider to file suit in the federal district court of the judicial district in which the provider is located within 60 days following receipt of a final decision by the Provider Reimbursement Review Board ("Board").
On February 13, 1986, the OSF Healthcare System, doing business as Saint James Hospital ("St. James"), filed suit against the Secretary of Health and Human Services ("Secretary") in the U.S. District Court for the Central District of Illinois seeking to reverse a decision of the Acting Deputy Administrator of the Healthcare Financing Administration, which held that Saint James Hospital was not entitled to exemption from routine cost limitations as a sole community hospital ("SCH") for fiscal year 1980. As a "sole community hospital," Plaintiff is entitled to have a greater share of its actual costs of providing health care services reimbursed under the Medicare Program.
On January 8, 1987, a Stipulation of Settlement was filed in that case wherein the Secretary agreed to recognize Saint James as a SCH and directed the Fiscal Intermediary, Blue Cross-Blue Shield Association ("Intermediary") to pay adjusted amounts due and interest to Saint James for fiscal year 1980 in accordance with the Deputy Administrator's decision.
Prior to the settlement in the suit addressing fiscal year 1980, St. James filed its cost reports for fiscal years 1985 and 1986 in February of 1987. The Intermediary declined to grant SCH status when it issued Notices of Program Reimbursement ("NPRs") in response to those cost reports on October 15, 1987 and April 4, 1988, respectively. In the meantime, on January 21, 1988, the Secretary determined that St. James would remain a SCH for fiscal years 1981, 1982 and 1983.
The hospital appealed to the Board from the NPRs issued for fiscal years 1985 and 1986 on April 5, 1988 and September 29, 1988 or October 19, 1988, respectively. These cases were later consolidated by the Board. While these cases were pending before the Board, the Intermediary issued a revised NPR for fiscal year 1985 on August 17, 1989, recognizing the hospital as a SCH and reimbursing the hospital for the additional costs qualified for reimbursement pursuant to the hospital's SCH status. There is no evidence in the record which indicates that a revised NPR was issued for fiscal year 1986 granting SCH status to St. James. However, on September 1, 1989, the Intermediary paid the hospital approximately $636,000, the equivalent of reimbursements due to St. James as a SCH for fiscal years 1985 and 1986 (R. 52, 162, Plaintiff's Exhibits 1 and 2). No interest in connection with the reimbursements was paid.
After St. James was reimbursed for fiscal years 1985 and 1986, the parties entered a stipulation with the Board clarifying that (1) the issue of St. James's status as a SCH for these reporting years was resolved, and (2) the only remaining issue on appeal was the interest claimed on the reimbursements. On February 12, 1992, the Board dismissed the hospital's appeal. The Board determined that it did not have jurisdiction over the interest issue as interest is not "income or cost" for the purposes of determining reimbursement for Medicare services provided.
The Board's determination that it lacked jurisdiction to hear Plaintiff's appeal regarding the interest issue constitutes a final decision reviewable by this Court. 42 U.S.C. § 1395oo(f)(1);1 42 C.F.R. § 405.1842(h)(1). Judicial review in this matter is governed by 5 U.S.C. § 706, which requires that an agency action be affirmed unless arbitrary and capricious, contrary to law, or unsupported by substantial evidence.
On February 12, 1992, the Board found:
that the payment of interest in this case is not within the jurisdiction of the Board. A provider has a right to a hearing only from the final determination of the Intermediary, 42 C.F.R. § 1835(a)(1).2 The final determination of the Intermediary is defined as "a determination of the amount of total program reimbursement due the provider ... following the close of the provider's cost report period, for items and services furnished to beneficiaries for which reimbursement may be on a reasonable cost basis under Medicare for the period covered by the cost report." 42 C.F.R. § 405.1801(a)(1).3 The statute states that "no interest awarded pursuant to paragraph 42 U.S.C. § 1395oo(f) (2) shall be deemed income or cost for the purposes of determining reimbursement due providers ..." 42 U.S.C. § 1395oo(f)(3). Thus, interest is not income or cost for the purposes of determining reimbursement and cannot be considered to be part of a final determination appealable to the Board. Since this is the only issue under appeal in the case and the Board lacks jurisdiction over it, the Board hereby dismisses the case.
The Secretary argues that the Board does not have jurisdiction over an interest claim because jurisdiction is limited to final determinations of the Fiscal Intermediary per 42 C.F.R. § 405.1803, 1801(a)(3), 42 U.S.C. § 1395oo(a)(1) and 42 C.F.R. § 405.1833(a). Although a Stipulation of Settlement signed January 8, 1987 recognized St. James as a sole community provider with respect to fiscal year 1980 and awarded reimbursement and interest accordingly, the stipulation did not affect fiscal years subsequent to 1980.
Secondly, the Secretary argues that even if this Court determines that the Board had jurisdiction, Plaintiff is still not entitled to interest because: (1) the 1985 and 1986 Intermediary determinations for those fiscal years never came under judicial review as required by 42 U.S.C. § 1395oo(f), and (2) interest to a prevailing party on judicial review is not considered income or cost for the purposes of determining reimbursement and therefore the Board does not have jurisdiction over disputes about interest. 42 U.S.C. § 1395oo(f)(3). See Board's February 12, 1992 decision.
The Secretary argues that the doctrine of sovereign immunity limits Plaintiff's rights to interest on claims for Medicare reimbursement to that which is expressly authorized by statute. Tucson Medical Center v. Sullivan, 947 F.2d 971, 979 (D.C.Cir.1991). The limited waiver of sovereign immunity is found at 42 U.S.C. § 1395oo(f) which accords interest to a provider who prevails in court as to an intermediary determination directly challenged in federal court. The Secretary argues that the Intermediary determinations regarding fiscal years 1985 and 1986 were never directly challenged in federal court. See Riley Hospital and Benevolent Association v. Bowen, 804 F.2d 302 (5th Cir.1986).
St. James argues that the Board has jurisdiction over its appeal on the interest issue because the Board may review reimbursable claims even if they were not specifically claimed for reimbursement or adjusted by the Intermediary. See Bethesda Hospital Asso. v. Bowen, 485 U.S. 399, 108 S.Ct. 1255, 99 L.Ed.2d 460 (1988); National Medical Enterprises, Inc. v. Sullivan, 1990 WL 169276, *1 (C.D.Cal.1990). Plaintiff also introduces a policy argument that if the Board did not have jurisdiction over such an issue, there would be no administrative review available for determinations regarding interest under § 1395g(d). This would contravene the strong presumption that Congress intended judicial review of administrative action. National Medical Enterprises, 1990 WL 169276, *3, citing Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 670, 106 S.Ct. 2133, 2136, 90 L.Ed.2d 623 (1986); Oregon on behalf of Oregon Health Sciences University v. Bowen, 854 F.2d 346, 350 (9th Cir.1988).
Finally, Plaintiff disagrees with the Board's interpretation of 42 U.S.C. § 1395oo(f)(3)4 and clarifies that this section was promulgated to prevent providers who must pay interest from claiming it as a cost on subsequent cost reports. Likewise, judicially awarded interest was not intended to be characterized as income on subsequent reports. Therefore, § 1395oo(f)(3) prevents fiscal intermediaries from offsetting this interest income against other interest expenses claimed by providers. See 42 C.F.R. § 413.153 and HCFA Pub. 15-A, § 202 (...
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