University of Cincinnati v. Secretary of Health and Human Services, 85-3651

• Decision Date: 15 January 1987
• Docket Number: No. 85-3651,85-3651
• Citation: 809 F.2d 307
• Parties: 37 Ed. Law Rep. 66, 16 Soc.Sec.Rep.Ser. 137, Medicare&Medicaid Gu 36,019 UNIVERSITY OF CINCINNATI, d/b/a University Hospital, Plaintiff-Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 307

809 F.2d 307

37 Ed. Law Rep. 66, 16 Soc.Sec.Rep.Ser. 137,

Medicare&Medicaid Gu 36,019

UNIVERSITY OF CINCINNATI, d/b/a University Hospital, Plaintiff-Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellant.

No. 85-3651.

United States Court of Appeals, Sixth Circuit.

Argued April 25, 1986.

Decided Jan. 15, 1987.

Donetta D. Wiethe, Asst. U.S. Atty., Cincinnati, Ohio, Susanne M. Lee (argued) Office of the General Counsel, U.S. Dept. of Health & Human Service, Washington, D.C., for defendant-appellant.

Peter L. Cassady (argued), Cincinnati, Ohio, for plaintiff-appellee.

Before MERRITT and JONES, Circuit Judges, and THOMAS, ^* Senior District Judge.

WILLIAM K. THOMAS, Senior District Judge.

The Board of Trustees of the University of Cincinnati operates University Hospital (Hospital). Hospital is a provider of services under the Medicare Act, 42 U.S.C. Secs. 1395 et seq. The controversy between the Hospital and the Secretary involves the Provider Reimbursement Review Board's (Board or PRRB) denial of jurisdiction to hear an appeal of the Hospital relating to three annual cost reports filed by the Hospital with its fiscal intermediary, Blue Cross Association-Blue Cross of Southwest Ohio.

Pursuant to 42 U.S.C. Sec. 1395oo (f), Hospital brought a civil action to obtain judicial review of the Board's denial of jurisdiction. The United States District Court for the Southern District of Ohio granted summary judgment for the University of Cincinnati, plaintiff-appellee. The district court declared that "the Provider Reimbursement Review Board has jurisdictional authority for the 1979, 1980 and 1981 cost years concerning the self-disallowed costs of the interns' and the residents' education and related overhead in connection with the Family Practice Clinic and Central Psychiatric Clinic issues." The Secretary appeals the district court's final judgment for the plaintiff.

On or about October 30, 1979, October 30, 1980, and October 30, 1981 the Hospital, as a provider of hospital services, filed its cost reports as required by the Medicare Act and regulations thereunder, "reporting that it had incurred certain expenses reimbursable under the Medicare Act" during the fiscal years ending mid-1979, mid-1980, and mid-1981. The Hospital reported in each of the cost reports the expenses, described by the district court, for which no Medicare reimbursement was sought, because the Hospital "mistakenly believed them to be non-reimbursable." ¹

The Secretary's fiscal intermediary thereafter engaged in audits and carried on negotiations with the Hospital. On September 30, 1982 the Intermediary issued a Notice of Program Reimbursement (NPR) for each of the cost years in question.

The Hospital, on March 25, 1983, filed a request for hearing before the Provider Reimbursement Review Board for the fiscal years here in question. 42 U.S.C. Sec. 1395oo (a), hereafter discussed, makes provision for establishment of the Provider Reimbursement Review Board and authorizes a provider of services "which has filed a required cost report within the time specified in regulations" to obtain a hearing "with respect to such cost report" by the Board. As the text set forth in the margin discloses, ² section 1395oo (a) provides for appeals to the Board only by providers. The section does not grant a fiscal intermediary the right to appeal to the Board. Nor would it make any sense to allow such an appeal. After all, it is the final determination of the intermediary which has passed on the provider's cost report that is the subject of an appeal to the Board. The Board may only consider such a determination when a provider has properly brought an appeal from such determination.

I.

A.

Before analyzing the question of the Board's jurisdiction over providers' appeals, the court needs to note the standard of review applied by the trial court in its consideration of the case below. That same standard of review must likewise control this court's analysis of the jurisdictional question.

42 U.S.C. Sec. 1395oo (f) specifies that a civil action for judicial review of a final decision of the Board "shall be tried pursuant to the applicable provisions under Chapter 7 of title 5 [the Administrative Procedure Act], notwithstanding any other provisions in section 405 of this title." Under the Administrative Procedure Act's standard of review, the decision of the Secretary or Board may be set aside only if it is " 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' 5 U.S.C. Sec. 706(2)(A) (1976)." Richey Manor, Inc. v. Schweiker, 684 F.2d 130, 133-34 (D.C.Cir.1982); Home Health Services v. Schweiker, 683 F.2d 353, 356 (11th Cir.1982).

Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. 467 U.S. 837, 842-843, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984), considering the principles a court must follow in reviewing "an agency's construction of the statute which it administers," declares that if "the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency must give effect to the unambiguously expressed intent of Congress." However, if the court determines that the "statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute."

Further, in Securities Industry Association v. Board of Governors, 468 U.S. 137, 142-43, 104 S.Ct. 2979, 2983, 82 L.Ed.2d 107 (1984), the Court has made clear that "deference is not to be a device that emasculates the significance of judicial review." Rather, judicial deference to an agency's interpretation of a statute "only sets 'the framework for judicial analysis; it does not displace it.' " Id. at 143, 104 S.Ct. at 2983. (quoting United States v. Vogel Fertilizer Co., 455 U.S. 16, 24, 102 S.Ct. 821, 827, 70 L.Ed.2d 792 (1982), quoting United States v. Cartwright, 411 U.S. 546, 550, 93 S.Ct. 1713, 1716, 36 L.Ed.2d 528 (1973)). A reviewing court "must reject administrative constructions of [a] statute, whether reached by adjudication or by rulemaking, that are inconsistent with the statutory mandate or that frustrate the policy that Congress sought to implement." Securities Industry Association, 468 U.S. at 143, 104 S.Ct. at 2983 (quoting Federal Election Commission v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 32, 102 S.Ct. 38, 42, 70 L.Ed.2d 23 (1981)).

B.

Mindful of these principles of judicial review, we must decide whether the Provider Reimbursement Review Board's jurisdictional interpretation of section 1395oo is "based on a permissible construction of the statute," or, on the other hand, is "inconsistent with the statutory mandate" or "frustrate[s] the policy that Congress sought to implement."

In its decision, the Provider Reimbursement Review Board found as follows:

[T]here is no jurisdictional authority for the 1979, 1980 and 1981 cost years concerning the self-disallowed costs of the interns' and residents' education and related overhead in connection with the Family Practice Clinic and Central Psychiatric Clinic issues because the Provider failed to set forth any claim for the disputed cost in any of the filed cost reports or make any overt disclosure of a disagreement for this issue.

In a supplemental explanation for denial of jurisdiction the Board, in part, stated:

The jurisdictional requirements to secure a Board hearing are set forth in 42 U.S.C. section 1395oo(a) and (b). ³

Although the Board refers to "jurisdictional requirements," section 1395oo (a), set forth supra note 2, does not expressly use the word "jurisdiction." Omission of the word jurisdiction permits a search for intended jurisdictional requirements in the legislative history of section 1395oo.

The original House Bill, with few Senate amendments, became law on October 30, 1972. The House Bill, as approved by the Senate, provided for the establishment of a Provider Reimbursement Review Board. The report of the House Ways and Means Committee thus described the new procedure Any provider of services which has filed a timely cost report may appeal an adverse final decision of the fiscal intermediary with respect to the period covered by such a report to the Board where the amount in controversy is $10,000 or more.

H.R. Rep. No 231, 92d Cong., 2d Sess., reprinted in 1972 U.S. Code Cong. & Admin. News 4989, 5094. The House Report further stated its belief that "it is desirable to prescribe in law a specific procedure for settling disputed final determinations applying to the amount of program reimbursement" (emphasis added). Id. The Conference Report indicates that "the Senate amendment modified the House Bill by introducing two additional situations which could serve as "a basis for provider appeals" from final decisions of the fiscal intermediary. H.R. Conf.Rep. No 1605, 92d Cong., 2d Sess., reprinted in 1972 U.S. Code Cong. & Admin.News 5370, 5388. In speaking of "a basis for provider appeals," the Conference Report ⁴ makes clear that the new procedure was to be an appellate process and that to obtain an appeal the provider must satisfy the statutory basis for the appeal.

The statute itself, in section 1395oo (a), declares that the provider must file "a required cost report," and submit "such reports ... as the Secretary may require." Thus, the statute makes the submission of a "required cost report" a condition precedent for a provider to obtain a Board hearing.

In writing this mandate into the Medicare Act, Congress was aware that the Secretary had adopted various regulations governing a provider's submission of cost reports. Nothing in the statute suggests that Congress intended to disturb such regulations. Rather, Congress mortised together the new statutory language and the existing regulations. ⁵

42 C.F.R. Sec. 405.406(b), ⁶ adopted by the Secretary in 1966, ⁷ required providers of services to file...