Saint Vincent Health Center v. Shalala

• Citation: 937 F. Supp. 496
• Decision Date: 22 December 1995
• Docket Number: Civil Action No. 92-373 Erie.
• Parties: SAINT VINCENT HEALTH CENTER, Plaintiff, v. Donna E. SHALALA, Secretary, Department of Health and Human Services; Bruce Vladeck, Administrator, Health Care Financing Administration; and Richard C. Rinschler, Director, Provider Audit, Blue Cross of Western Pennsylvania, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

937 F. Supp. 496

SAINT VINCENT HEALTH CENTER, Plaintiff, v. Donna E. SHALALA, Secretary, Department of Health and Human Services; Bruce Vladeck, Administrator, Health Care Financing Administration; and Richard C. Rinschler, Director, Provider Audit, Blue Cross of Western Pennsylvania, Defendants.

Civil Action No. 92-373 Erie.

United States District Court, W.D. Pennsylvania.

December 22, 1995.

Melinda J. Roberts, Stephen P. Nash, Jacqueline O. Shogan, Ann G. Mathias, and David W. Thomas, Nash & Company, Pittsburgh, PA, for plaintiff.

Robert R. Leight, Pietragallo, Bosick & Gordon and Paul E. Skirtich, United States Attorney's Office, Pittsburgh, PA, for defendants.

MEMORANDUM

McLAUGHLIN, District Judge.

Plaintiff Saint Vincent Health Center ("SVHC") operates a hospital in Erie, Pennsylvania. It brings this action to compel a reopening of the notices of program reimbursement ("NPRs") by which it was reimbursed under the Medicare program for services provided in certain units of the hospital during fiscal years 1986, 1987, 1988, and 1989. Defendants include the Secretary of Health and Human Services ("Secretary"), an official of the Health Care Financing Administration ("HCFA"), and an official of Blue Cross of Western Pennsylvania ("Blue Cross"). SVHC asserts that this Court has jurisdiction over this action under 42 U.S.C. § 1395oo and 28 U.S.C. §§ 1331, 1361, and 1367. Defendants have moved to dismiss or, in the alternative, for summary judgment. For the reasons that follow, this motion will be granted and this action will be dismissed.

I. BACKGROUND

A. Statutory and Regulatory Framework¹

This action arises under Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395ccc (the "Medicare Act"), which establishes Medicare health insurance for the elderly and the disabled. HCFA, a division of the Department of Health and Human Services ("HHS"), administers the Medicare program. Medicare has two main parts: Part A, which provides insurance for inpatient institutional services, home health services, and post-hospital services, id. at §§ 1395c to 1395i-4, and Part B, which covers physician, outpatient hospital, and various other health services, id. at §§ 1395j to 1395w-4.

A hospital or skilled nursing facility may participate in Part A of the Medicare program by entering into a "provider agreement" with the Secretary. Id. at § 1395h. Under these agreements, participating providers, such as SVHC, give care to persons covered by Medicare and seek reimbursement from private insurance companies ("fiscal intermediaries"), such as Blue Cross, that act as agents of the Secretary. The fiscal intermediaries are in turn reimbursed by HCFA. Id.; 42 C.F.R. Part 421.

Prior to 1982, Medicare provided Part A reimbursement to providers on the basis of either the "reasonable cost" of furnishing covered services to Medicare beneficiaries or the hospital's customary charge for a particular service, whichever was lower. 42 U.S.C. § 1395f(b)(1). A different methodology was adopted from 1982 to 1983 under the Tax Equity and Fiscal Responsibility Act of 1982 "(TEFRA") § 101, Pub.L. No. 97-248, 96 Stat. 324, 331-36. Since October 1, 1983, however, reimbursement for most Medicare services has been provided under the Prospective Payment System ("PPS"), under which hospitals are reimbursed for their treatment of Medicare beneficiaries on the basis of prospectively determined national and regional rates, rather than the reasonable operating costs of each institution. See 42 U.S.C. § 1395ww(d).

However, certain hospitals and distinct part units of hospitals — generally, psychiatric or rehabilitation hospitals or units or other hospitals and units with long patient stays — are exempted from PPS and are still reimbursed under the TEFRA system. Id. at § 1395ww(d)(1)(B); 42 C.F.R. Part 412, Subpart B. Under TEFRA, a hospital's or unit's reimbursement is determined by reference to a "target amount." A base year amount is calculated by dividing the hospital's or unit's allowable inpatient operating costs for the year preceding its TEFRA designation by the total number of discharges. 42 C.F.R. § 413.40(b)(1), (c)(2). The base year amount is then increased by a percentage to obtain the target amount for each subsequent year. 42 U.S.C. § 1395ww(b). Costs in excess of the target amount are not fully reimbursed. However, should the provider's actual cost fall below the target amount, the provider receives some portion of this difference. 42 C.F.R. § 413.40(d).

In order to receive reimbursement under Part A, a provider must file an annual cost report with its fiscal intermediary, detailing the services rendered to Medicare patients during the year. 42 C.F.R. § 413.20. The intermediary analyzes the report and issues a "notice of program reimbursement" ("NPR"), which sets forth the total amount of reimbursement due the provider and lists the individual expenses allowed and disallowed. Id. at 405.1803.

A provider may appeal a decision of the intermediary to HCFA's Provider Reimbursement Review Board ("PRRB") no more than "180 days after notice of the intermediary's final determination" if the amount in controversy is at least $10,000 and

(1) such provider —

(A)(i) is dissatisfied with a final determination of the organization serving as its fiscal intermediary pursuant to section 1395h of this title as to the amount of total program reimbursement due the provider for the items and services furnished to individuals for which payment may be made under this subchapter for the period covered by the report, or

(ii) is dissatisfied with a final determination of the Secretary as to the amount of the payment under subsection (b) or (d) of section 1395ww of this title,

(B) has not received such final determination from such intermediary on a timely basis after filing such report, where such report complied with the rules and regulations of the Secretary relating to such report, or

(C) has not received such final determination on a timely basis after filing a supplementary cost report, where such cost report did not so comply and such supplementary cost report did so comply.

Id. at § 1395oo(a). The PRRB may then conduct a hearing and reverse, affirm, or modify the decision of the intermediary. Id. at § 1395oo(d). The Secretary may then, on her own motion, review the PRRB decision. Id. at § 1395oo(f)(1). The final determination, whether of the PRRB or of the Secretary, is then subject to review in an appropriate United States district court. Id.

Under 42 U.S.C. § 1395ii, district court actions under the Medicare Act are limited in the same manner that 42 U.S.C. § 405(h) limits actions under chapter II of Social Security Act:

No findings of fact or decision of the Secretary shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.

Id. at § 405(h).

A hospital or unit reimbursed under TEFRA may request an adjustment to its base year amount or target amounts. Id. at § 1395ww(b)(4); 42 C.F.R. § 413.40(e). This request "may be made upon receipt of the intermediary's notice of amount of program reimbursement (NPR) and must be made no later than 180 days after the date on the intermediary's NPR for the cost period for which the hospital requests an adjustment." 42 C.F.R. § 413.40(e)(1). The decision whether to grant this request is then made by HCFA or by the intermediary if it has been delegated to do so. It is then subject to review by the PRRB and the courts in a manner similar to that for the original NPR. Id. at § 413.40(e)(2)-(5).

Finally, the Secretary has promulgated reopening regulations whereby a determination of an intermediary may be reconsidered. A request to reopen must be made within three years of the date of notice of the intermediary determination unless "it is established that such determination or decision was procured by fraud or similar fault of any party to the determination or decision." Id. at 405.1885(a), (d). An NPR changed pursuant to reopening is subject to review in the same manner as an original NPR. Id. at § 1889.

B. Procedural History

Among the units at SVHC are a drug & alcohol unit, a psychiatric unit, and a rehabilitation unit. Medicare reimbursed SVHC under TEFRA for services provided in FYs 1986 to 1989 in the rehabilitation and psychiatric units and for services provided in FYs 1987 to 1989 in the drug & alcohol unit. The base year for the psychiatric and rehabilitation units was FY 1985; the base year for the drug & alcohol unit was FY 1986. These base year costs were used in determining Part A reimbursements for the three units for FYs 1986 to 1989.

SVHC alleges that the calculation of these base year levels and their subsequent use in determining TEFRA target amounts led to insufficient reimbursement for these units for FY 1986 to 1989. It seeks a total of $1,340,259 in additional reimbursement. Amended Complaint at ¶ 53. SVHC identifies several problems with the amounts. First, SVHC alleges that, as a result of a correction to its cost reports directed by Blue Cross, the base year amount for its psychiatric unit was not representative of the unit's actual costs and was not an appropriate guideline for determination of Medicare reimbursement for the unit in FYs 1986 to 1989. Id. at ¶¶ 32-33. Second, SVHC alleges that certain mental health service costs that should have been allocated to the drug & alcohol and psychiatric units in FY 1986 were instead allocated to the rehabilitation unit, resulting in an improperly low base-year amount for the drug & alcohol unit and improper reimbursement amounts for the other two units during that fiscal year. Id. at ¶ 34. Third, SVHC alleges a general increase in patient acuity and comorbidity.

The NPR for FY 1986 was issued on August...