V.N.A. of Greater Tift County, Inc. v. Heckler

• Decision Date: 12 August 1983
• Docket Number: No. 82-8407,82-8407
• Citation: 711 F.2d 1020
• Parties: V.N.A. OF GREATER TIFT COUNTY, INC., a Georgia non-profit corporation, Plaintiff-Appellant, v. Margaret M. HECKLER * and Blue Cross and Blue Shield of Georgia/Columbus, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1020

711 F.2d 1020

2 Soc.Sec.Rep.Ser. 305

V.N.A. OF GREATER TIFT COUNTY, INC., a Georgia non-profit

corporation, Plaintiff-Appellant, v. Margaret M. HECKLER ^* and Blue Cross and Blue

Shield of Georgia/Columbus, Inc., Defendants-Appellees.

No. 82-8407.

United States Court of Appeals, Eleventh Circuit.

Aug. 12, 1983.

Rehearing and Rehearing En Banc Denied Oct. 7, 1983.

Joe R. Whatley, Jr., Birmingham, Ala., for plaintiff-appellant.

Gregory J. Leonard, Asst. U.S. Atty., Macon, Ga., F. Richard Waitsman, Asst. Regional Atty., Dept. of Health & Human Services, Atlanta, Ga., for defendants-appellees.

Appeals from the United States District Court for the Middle District of Georgia.

Before GODBOLD, Chief Judge, FAY and SMITH ^**, Circuit Judges.

EDWARD S. SMITH, Circuit Judge:

This appeal presents the efforts of a provider of medical services under the Medicare Act to obtain an injunction to restrain collection action on an alleged overpayment pending final administrative review. This appeal originally included a second case, Alabama Home Health Care v. Heckler, which presented the same legal issue on appeal but which has been dismissed as moot. ¹ The district court in the Alabama Home Health Care case granted the requested injunction, ² but the district court in this case dismissed the complaint for lack of jurisdiction. ³ On appeal, we must decide whether the All Writs Act empowers a district court, notwithstanding the preclusion of jurisdiction provision in the Medicare Act, 42 U.S.C. § 405(h), to enjoin the Secretary's suspension of reimbursement payments to a Medicare provider, before the provider has exhausted the administrative remedies required by the act to precede judicial review. We hold that the district court has the power to issue an injunction in certain extraordinary circumstances but that those circumstances are not presented in this case.

I.

A.

Under the Medicare program the Secretary of Health and Human Services (Secretary) reimburses providers of health services for certain medical items and services supplied to persons enrolled in the program. ⁴ Medicare coverage includes items and services supplied on a visiting basis to an eligible person's home. 42 U.S.C. § 1395x(m) (1976 & Supp. IV 1980). V.N.A. of Greater Tift County, Inc. (V.N.A.) provides these home health care services. It is a nonprofit corporation that derives virtually all of its income from reimbursement by the Medicare program. Possessing neither large cash reserves nor alternative sources of income, V.N.A. is largely dependent upon frequent reimbursement of all expenses in order to remain solvent.

Reimbursement of a provider by the Secretary is accomplished through a "fiscal intermediary," either a public or a private organization, which makes the initial determination of amount of reimbursement and handles the payments. 42 U.S.C. §§ 1395g, 1395h. V.N.A.'s intermediary was Blue Cross and Blue Shield of Georgia/Columbus, Inc. (Blue Cross).

To facilitate participation in the Medicare program by cash-poor providers like V.N.A., Congress has authorized a system of monthly interim payments by the intermediary. 42 U.S.C. § 1395g; 42 C.F.R. § 405.454 (1981). The interim payments are computed from interim rates which are established and adjusted quarterly and annually by the intermediary on the basis of quarterly and annual cost reports filed by the provider. 42 C.F.R. § 405.454. No reimbursement may be made unless the provider has supplied these reports and, on request, has provided all the information necessary to substantiate them. 42 U.S.C. § 1395g(a); 42 C.F.R. § 405.406. The provider, in other words, has the burden of substantiation. 42 C.F.R. § 405.453(a); Gosman v. United States, 573 F.2d 31, 36 n. 4, 215 Ct.Cl. 617 (Ct.Cl.1978).

Upon receipt of the cost report, the intermediary analyzes the report, audits it if necessary, and issues its determination of the proper amount that the provider should have been reimbursed during the period covered by the report. 42 C.F.R. § 405.1803(a). A provider who is dissatisfied with the intermediary's determination, and whose claim exceeds $10,000, has the right to review by the Provider Reimbursement Review Board (PRRB). 42 U.S.C. § 1395 oo; 42 C.F.R. § 405.1835. The PRRB is the final administrative remedy available to a provider (unless the Secretary on his own motion reviews the PRRB) and judicial review is based on its determination. 42 U.S.C. § 1395 oo(f).

The intermediary's determination that an overpayment has occurred provides the basis for immediate suspension of all or part of further payments to the provider. 42 C.F.R. § 405.1803(b). This suspension must be imposed by the intermediary and the suspension must continue until the overpayment is liquidated or an agreement is reached, notwithstanding any administrative appeal taken by the provider. 42 C.F.R. §§ 405.1803(b), 405.373(a). The PRRB has no power to stay the suspension while the case is pending before it; it can only end the suspension by overturning the intermediary's determination on the merits. 42 C.F.R. §§ 405.1869, 405.373(a)(3); see generally 42 C.F.R. §§ 405.1835-405.1875.

B.

Among the rules that the intermediary must apply in making its determination of amount of reimbursement is the related party principle. 42 C.F.R. § 405.427. Where a provider obtains services, facilities, or supplies from a related organization, it will be reimbursed only for the cost to that supplier or for the market price, whichever is lower. 42 C.F.R. § 405.427(c)(2). Two organizations are related when they are "to a significant extent * * * associated or affiliated," when one owns or controls the other, or when they have common ownership or control. 42 C.F.R. § 405.427(b).

A provider may obtain an exception to this rule if it "demonstrates by convincing evidence to the satisfaction of the fiscal intermediary" that the supplier is "a bona fide separate organization," that the supplier has a significant amount of business with unrelated organizations and operates in a competitive market, that the supplies are of a type normally obtained by a provider from a separate supplier, and that the supplier's prices are "in line with" the prices on the open market. 42 C.F.R. § 405.427(d).

In this case, the intermediary, Blue Cross, determined that a Medicare overpayment had occurred, $19,026 of which constituted overcharging by V.N.A.'s management firm, Health Care International, Inc. (HCI). Blue Cross found that HCI and V.N.A. were related because HCI had "effective control" over V.N.A.; accordingly, Blue Cross discounted the payments by V.N.A. to HCI. In its statement of reasons for its findings, Blue Cross noted that HCI had started up and capitalized V.N.A. and had recruited V.N.A.'s board of directors. The board had little involvement in the running of V.N.A.; HCI had almost entire administrative and financial control. The head administrator of V.N.A. was an HCI employee. HCI set all policies and provided professional training and guidance; it had sole control over all personnel--policies and individual actions--and custody of V.N.A.'s financial and statistical records. HCI had the authority to enter into contracts for V.N.A. and could enter transactions for up to $2,500 without board approval. This authority was exercised on some occasions to enter supply contracts with companies owned or partly owned by HCI.

V.N.A. does not contest these points but rather stresses that V.N.A. and HCI were formally separate organizations. V.N.A. has no stock, so there is no common ownership; there are no common directors, officers, or employees; and no one from HCI is on the V.N.A. Board of Advisors. V.N.A. demonstrates the independence of its board of directors by pointing out that it terminated its management contract with HCI. V.N.A.'s ultimate claim--that HCI's charges were not unacceptably high--is somewhat undercut, however, by its statement in terminating HCI that HCI's charges were "far out of line."

V.N.A. argued in its timely appeal to the PRRB that the Blue Cross determination of relatedness was erroneous.

II.

At the same time that it filed for review by the PRRB, V.N.A. filed suit in district court to enjoin the suspension of payments pending a PRRB decision. V.N.A. claimed that, as virtually all of its patients are in the Medicare program, the incorrect suspension of full payments will cause it irreparable harm. The Secretary objected that the district court was without jurisdiction to review the intermediary's decision before a PRRB decision had been rendered.

Judicial review of reimbursement determinations is limited by the Medicare Act. Not only does the act require that a provider exhaust its administrative remedies before suing, but it removes jurisdiction from the courts to review a reimbursement decision before a PRRB decision has been rendered. The Medicare Act, 42 U.S.C. § 1395ii, incorporates the preclusion provision in the Social Security Act, which reads in pertinent part:

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 sections 1331 [general federal question] or 1346 [United States as defendant] of title 28 to recover on any claim arising under this subchapter.

42 U.S.C. § 405(h) (1976). ⁵ This limits a provider to review through the procedure provided by the Medicare Act:

A decision of the Board shall be final unless the Secretary, on his own motion, and within 60 days after the provider of services is notified of the Board's decision, reverses, affirms, or modifies the Board's decision. Providers shall have the right to obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary, by a civil action commenced within 60 days of the date on which notice...