U.S. v. Gravette Manor Homes, Inc.

• Decision Date: 27 February 1981
• Docket Number: No. 80-1442,80-1442
• Citation: 642 F.2d 231
• Parties: UNITED STATES of America, Appellant, v. GRAVETTE MANOR HOMES, INC., and Hall Enterprises, Inc., d/b/a Gravette Medical Center, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 231

642 F.2d 231

UNITED STATES of America, Appellant, v. GRAVETTE MANOR HOMES, INC., and Hall Enterprises, Inc. d/b/a Gravette Medical Center, Appellees.

No. 80-1442.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 13, 1981.

Decided Feb. 27, 1981.

Wendy M. Keats, Alice Daniel, Asst. Atty. Gen., Washington, D. C., Larry P. McCord, U. S. Atty., Fort Smith, Ark., Anthony J. Steinmeyer, Patricia G. Reeves, Attys., Civil Division, U. S. Dept. of Justice, Washington, D. C., for appellant.

Jimmy Eaton, Charles S. Embry, Jr., Pine Bluff, Ark., for appellees.

Before HEANEY, ROSS and ARNOLD, Circuit Judges.

ARNOLD, Circuit Judge.

These actions were filed by the United States under 28 U.S.C. § 1345 to recover overpayments to two Medicare providers. These consolidated cases are before this Court on appeal by the United States from a final judgment of the district court. On cross-motions for summary judgment, that court ruled that all but one of the government's claims were barred by the six-year statute of limitations in 28 U.S.C. § 2415(a). We reverse.

The essential facts in these cases are not in dispute. The United States filed these suits to recover overpayments made to defendants while defendants were providing services under the Medicare program. 42 U.S.C. §§ 1395 et seq. Defendants were two skilled nursing facilities in Gravette, Arkansas. The program provides for reimbursement of participating hospitals and nursing homes by the Department of Health and Human Services (formerly the Department of Health, Education, and Welfare) for the reasonable costs of services provided to the elderly. Pursuant to 42 U.S.C. § 1395h, Arkansas Blue Cross and Blue Shield had been designated as the fiscal intermediary through which defendants were reimbursed for the reasonable cost of covered medical services.

The parties have stipulated to the following facts. Both Gravette Manor Homes and Hall Enterprises have discontinued their participation in the Medicare program. Hall participated in the Medicare program (Part A-Hospital Insurance Program) from July 1, 1966, to July 1, 1971. Gravette participated in the same program from January 1, 1967, to October 1, 1970. During these periods of time both defendants furnished services to Medicare beneficiaries and were entitled to reimbursement for the reasonable cost of such services under 42 U.S.C. § 1395(b). Both Gravette and Hall received interim payments on at least a monthly basis from the intermediary, Arkansas Blue Cross and Blue Shield.

Defendants were required to furnish cost reports to the intermediary each year in order that the intermediary might determine how much was properly due defendants under the Medicare program. 42 C.F.R. §§ 405.406, 405.454. The intermediary was required to make a retroactive adjustment at the end of each cost-reporting period to bring the interim payments into conformity with the amount properly payable to defendants for actual services furnished to program beneficiaries.

The intermediary determined that Hall was overpaid by $13,950.00 during its years of participation in the program, and that Gravette Manor Homes was overpaid by $16,178.00. Both sides agree that the statute of limitations to be applied in these cases is set forth in 28 U.S.C. §§ 2415 and 2416. The only issue to be determined is whether these claims of the United States for Medicare overpayments are barred by limitations.

Reimbursement to providers is governed by a series of regulations found in 42 C.F.R. §§ 405.401 et seq. The reimbursement scheme is premised on the assumption that the providers will be advanced funds periodically to cover their estimated costs and that adjustments must be made later when analysis of their reports reveals the actual cost of covered services. Interim payments are subject to retroactive adjustment. Springdale Convalescent Center v. Mathews, 545 F.2d 943 (5th Cir. 1977). There are actually three times of payment or adjustment: ¹ the interim payments during the fiscal year, which are made not less than monthly; the initial retroactive adjustment made as soon as the annual cost report is filed; and the final determination made after a later audit, if any is required. This procedure is described in part in 42 C.F.R. § 405.454(f)(2):

(2) In order to reimburse the provider as quickly as possible, an initial retroactive adjustment will be made as soon as the cost report is received. For this purpose, the costs will be accepted as reported unless there are obvious errors or inconsistencies subject to later audit. When an audit is made and the final liability of the program is determined, a final adjustment will be made.

The sole question at issue in this case is at what point in this reimbursement process the liability of the parties becomes sufficiently fixed to cause the applicable statute of limitations to begin to run.

In relevant part, the applicable statute reads:

(a) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues ....

28 U.S.C. § 2415. Section 2416 tolls the limitations period under certain circumstances:

For the purpose of computing the limitations periods established in section 2415, there shall be excluded all periods during which

(c) facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances....

The government contends that no right of action accrued until a final determination of liability had been made by the intermediary and a Notice of Program Reimbursement had been sent to defendants. ² Defendants contend that the statute should run from the date of the completion of the audit for each of the years in question. The district court held that the "cause of action for recoupment of Medicare overpayments accrued when the audit was completed. On that day, the plaintiff reasonably should have known whether it had a cause of action for recoupment of overpayments for the calendar year in question."

Generally a right of action accrues when the occurrence of the final significant event necessary to create the claim. On the other hand, "the period of limitations does not always begin on the date of the wrong." United States v. One 1961 Red Chevrolet Impala Sedan, 457 F.2d 1353, 1358 (5th Cir. 1972). In the present case, the overpayments to Gravette and Hall were actually made during the fiscal years 1967-1970, when the nursing homes received interim reimbursement payments. No one argues, however, that the statute should run from the date of payment. ³

After examination of the relevant regulations and statutes and the record in this case, we choose to follow the reasoning of United States v. Graham, 471 F.Supp. 123 (S.D.Tex.1979), which held that the government's cause of action accrues with the making of the final retroactive adjustment, referred to in note 2 above as the final determination, which sets the exact amount of overpayment or underpayment due from or to a provider. Although in many cases the government (through its agent, the intermediary) may know at the completion of the audit that some overpayment may have been made, the exact amount due from the provider, if any, is not set until the official of the intermediary who has the authority to approve and certify the yearly audits has done so. Significant changes may be made in this final determination, involving either corrections of the amount due for the year in question, or revisions with respect to other years, either prior or subsequent.

Under the regulatory procedures promulgated pursuant to 42 U.S.C. § 1395g, the amount of the overpayment or underpayment is not determined until "an audit is made and the final liability of the program is determined." 42 C.F.R. § 405.454(f)(2). The date of the audit and the date of the final determination of liability are not necessarily the same. In the present case, final determination of liability was not made until the audits were reviewed by G. Alex Smith, the official at Arkansas Blue Cross and Blue Shield with the authority to review and approve audits and make overpayment determinations. According to the interrogatories and affidavits filed in this case, ⁴ Mr. Smith reviewed and approved the audits of Gravette's cost reports on July 8, 1972, and reviewed and approved Hall's audits on February 25,...