U.S. v. California Care Corp.

Decision Date05 July 1983
Docket NumberNos. 82-4150,s. 82-4150
Citation709 F.2d 1241
PartiesUNITED STATES of America, Plaintiff-Appellee, v. CALIFORNIA CARE CORPORATION, dba Sunray East Convalescent Center, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. EL RIO DEVELOPMENT COMPANY dba Sunray North Convalescent Hospital, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. EUCLID CONVALESCENT CENTER, INC., Defendant-Appellant. to 82-4152.
CourtU.S. Court of Appeals — Ninth Circuit

Stephen A. Shefler, San Francisco, Cal., for plaintiff-appellee.

Louis E. Goebel, Goebel & Monaghan, San Diego, Cal., for defendant-appellant.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN and SNEED, Circuit Judges, and JAMESON *, District Judge.

SNEED, Circuit Judge:

This appeal is brought by three health care providers, Euclid Convalescent Center, California Care Corporation, and El Rio Development Company. Each of the providers operated a convalescent home in California in the late sixties and received funding under the Medicare Act, 42 U.S.C. Secs. 1395-1395rr. The government, following a lengthy administrative process, sued in the district court for return of payments advanced to the providers for the 1967, 1968, 1969, and 1970 cost-reporting years. The claimed overpayments exceeded one million dollars. The district court decided for the government and the providers appeal. We affirm.

I. THE ADMINISTRATIVE PROCEEDINGS AND THE QUESTIONS ON APPEAL

The last Medicare payment contested in this case was received by the providers more than ten years ago. We must decide whether they are entitled to continue to hold this and earlier payments while pursuing still more administrative proceedings. To decide this we must set forth the process that has brought the providers this far.

The extent of claimed overpayments to the providers was established in audits conducted by Blue Cross in 1972 and 1973. Blue Cross was the intermediary appointed by the Bureau of Health Insurance, then a division of the Department of Health, Education, and Welfare, to manage Medicare payments to the providers. As a fiscal intermediary, Blue Cross advanced per diem payments to the providers based on the latters' cost estimates. At the end of each cost-reporting year Blue Cross conducted a final audit and adjusted payments to reflect actual costs. 42 U.S.C. Secs. 1395f-1395h; 20 C.F.R. Sec. 405.454 (1975). 1 The providers had received notice of the audits for all three homes by June 15, 1973.

The attorney who represented the providers wrote Blue Cross on June 4, 1976, contesting every adjustment Blue Cross had made and asking to appeal. 2 He stated his

intent to assert on behalf of the provider any and all claims with regard to reopening for any purpose appeals with reference to final settlements or interim reports or anything else of any kind that may exist in the record so as to reinsure to the above facility its administrative remedies.

Blue Cross on June 8 requested specification of the date and amount of each contested payment as well as the attorney's statutory or regulatory support for resisting repayment. It also requested a response in twenty days and appended a copy of its Medical Provider Appeals Procedures, which would govern the appeal. Even though Blue Cross had not heard from the attorney it nevertheless granted his appeal request on July 20.

The attorney still did not respond. Blue Cross on August 6 informed him that it had to receive the information requested in its June 8 letter by August 24 or the appeal could be dismissed for abandonment. The attorney also missed this deadline. On September 1 Blue Cross notified him that the appeal would be dismissed unless it received the requested material within ten days or he demonstrated good cause for failing to produce it. This time the attorney responded with a general denial of all reimbursement adjustments, stating "[i]t is the position of my clients that we do not understand either the credits that were allowed in the audit nor the disallowances which came about in the audit."

An interlude of several months followed during which an accountant hired by the attorney of the providers examined the workpapers arising from the Blue Cross audit. This examination did not lead to a position paper. Blue Cross contacted the attorney on December 22 to give him a thirty-day deadline. When he did not respond Blue Cross on January 21, 1977, gave him ten days to submit a position paper. This request was renewed on February 16 and on March 9 Blue Cross gave the attorney a final deadline. This time he did respond, nine months after the June 8 letter. His response called the letters of Blue Cross an example of the "continuing and outrageous irresponsibility that is the other part of the record" and warned Blue Cross "to avoid essentially irrelevant argument." He did, however, agree to reconsider his position if Blue Cross made other records available. On March 26 he wrote again, asking to see more of Blue Cross' records and submitting a lengthy statement that listed the privileges he expected at trial This fifty-three page "position paper" did not contain the documentation or citations to governing law or regulations that Blue Cross had been requesting since June 8, 1976. Blue Cross nevertheless accepted the paper. It contacted Blue Cross of Southern California (the Plan) 3, which handled the providers' accounts, and asked it to prepare a response. The Plan, pointing out that the paper challenged over 400 items without citing the specific basis for dispute on any, claimed it could not proceed without a more detailed statement. Blue Cross asked the attorney to submit an expanded position paper. His answer was that the Plan, having rejected his initial figures, should bear the expense of preparing the position paper. He added that he found the Plan's past work neither "competent or clear," and asked for damages and attorney's fees for the "substantial" damage Blue Cross had imposed on his clients.

stated his opposition to "every position asserted by Blue Cross in its respective audits," and included a fifty-three page summary of disagreements with the Blue Cross audit.

By now it was July 17, 1977, some thirteen months after skirmishing commenced. In an attempt to speed up the appeal, Blue Cross arranged a prehearing conference. On November 29 Blue Cross, the providers' attorney, and the Plan met and agreed that the Plan would prepare a more detailed description of its adjustments for one of the three homes. The attorney would then respond and if the process led to resolution, the two other accounts would be handled similarly. On February 24, 1978, the Plan sent the attorney a computer printout showing all payments, with monthly billing details, for Euclid Convalescent Center. It also sent a paper reconciling these figures with the "remittance advices" on which Euclid had summarized its billing information.

This attempt to speed up the appeal did not work. The attorney complained that he could not work with any material not directly based on Euclid's cost reports and that the Blue Cross material, having "no relationship to the Provider's cost reports," was "simply and unqualifiedly 'garbage.' " The Plan, at Blue Cross' request, responded by explaining the relationship between its figures and the provider's cost reports. After additional prodding from Blue Cross, the attorney agreed that he would try to reconcile the figures.

He remained inactive, however. Blue Cross wrote on November 15 and again on December 22, 1978, asking for his reconciliation. Its December letter, which stated that in the absence of a response by January 8, 1979, the appeal would be treated as abandoned, finally elicited a reply. At this point, approximately nineteen months from the date the dispute arose, the attorney wrote that it had been impossible to reconcile the Plan's figures with his own and that he wanted to proceed to a hearing. Blue Cross agreed to so proceed, but on two conditions. The first was that the attorney focus on six major items of dispute; the second that he provide a statement of the law and regulations supporting his disagreement with the Blue Cross audits. He was given sixty days to produce this material. The attorney quickly rejected any limitation of issues and repeated his view that the burden was on the Plan to refute his figures. Blue Cross insisted that the attorney prepare a position paper; in return the attorney accused the hearing officer of bias. He did produce, however, a lengthy analysis of his figures for one home during one cost year to illustrate the position he intended to develop during the hearing. He again refused to consider the Plan's workpapers. The figures he provided were undocumented, with a number of adjustments containing no explanation.

Blue Cross, finding these papers inadequate, dismissed the appeal with prejudice on May 14, 1979. It noted that in three The providers appeal and assert that the statute of limitations barred the government's case, that the district court erred in holding that the providers had failed to exhaust their remedies, and that the district court abused its discretion in enforcing the stipulation made during the consideration of the cross-motions for summary judgment. Finally, they also argue that the district court considered inadmissible evidence and was influenced by ex parte contacts. We shall consider at the outset an issue of jurisdiction not addressed by the parties. Thereafter we will consider the limitations question and the issue arising from the stipulation. The remaining issues will then receive their turn.

years of discussion the providers' attorney had never produced a document referring to the law, regulations, or facts supporting his position. Almost a year...

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