Visiting Nurse Ass'n Gregoria Auffant v. Thompson

• Decision Date: 08 May 2006
• Docket Number: No. 04-2721.,04-2721.
• Citation: 447 F.3d 68
• Parties: VISITING NURSE ASSOCIATION GREGORIA AUFFANT, INC., Plaintiff, Appellant, v. Tommy G. THOMPSON, in his capacity as Secretary of the United States Department of Health and Human Services; Ruben J. King-Shaw, Jr., as the Deputy Administrator and Chief Operating Officer of the Centers for Medicare and Medicaid Services; United Government Services, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

447 F.3d 68

VISITING NURSE ASSOCIATION GREGORIA AUFFANT, INC., Plaintiff, Appellant, v. Tommy G. THOMPSON, in his capacity as Secretary of the United States Department of Health and Human Services; Ruben J. King-Shaw, Jr., as the Deputy Administrator and Chief Operating Officer of the Centers for Medicare and Medicaid Services; United Government Services, Defendants, Appellees.

No. 04-2721.

United States Court of Appeals, First Circuit.

Heard November 10, 2005.

Decided May 8, 2006.

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Héctor J. Pérez Rivera and Carlos R. Pastrana-Torres, with whom Goldman, Antonetti & Córdova, P.S.C., were on brief, for appellants.

Maryalice Kozak, Assistant United States Attorney, with whom José M. Pizzaro-Zayas, Assistant United States Attorney, and H.S. García, United States Attorney, were on brief, for appellees.

Before TORRUELLA and LIPEZ, Circuit Judges and GIBSON,^* Senior Circuit Judge.

LIPEZ, Circuit Judge.

Medicare, a health insurance program, is administered by the Secretary of Health and Human Services through the Centers for Medicare and Medicaid Services. The Secretary is entrusted by the Medicare Act with the authority to issue regulations that are necessary for the administration of the health insurance program. Under the Act, providers are reimbursed the lesser of their charges or their reasonable costs incurred in providing covered services to Medicare beneficiaries. 42 U.S.C. § 1395f(b). The Act requires the Secretary to promulgate regulations to interpret "reasonable costs".

This case involves a challenge to the applicability of interpretive regulations adopted by the Secretary that provide for the reimbursement of "necessary and proper" costs related to patient care under the Medicare program. The case also raises a related issue involving the timing of the Secretary's decision denying reimbursement of the costs at issue in this case. We affirm the district court's ruling affirming the decision of the Secretary.

I.

A. Factual and Procedural Background

Plaintiff-Appellant Visiting Nurse Association Gregoria Auffant, Inc. ("Plaintiff" or "VNA") is a non-profit corporation organized and existing under the laws of the Commonwealth of Puerto Rico.¹ For the time period at issue here, VNA was a Home Care Medicare provider within the meaning of the Medicare Act, 42 U.S.C. § 1395, et seq. Plaintiff owns three subsidiary providers in the Medicare program: VNA Hato Rey, VNA Bayamón, and VNA Carolina. Defendant-Appellee Tommy G. Thompson was the Secretary of the Department of Health and Human Services.² Defendant-Appellee Ruben J. King-Shaw, Jr. is the Deputy Administrator and Chief Operating Officer of the Centers for Medicare and Medicaid Services ("CMS"). King-Shaw (the "Administrator") signed the CMS decision at issue here. Defendant-Appellee United Government Services ("UGS"), the intermediary between Medicare and Plaintiff, conducted the initial review of Plaintiff's cost reports discussed below.

In July 1994, VNA instituted a Deferred Compensation Plan ("Plan" or "DCP") for its employees pursuant to which VNA paid a deferred "salary differential" for each employee participating in the Plan. Plaintiff claimed these contributions to the Plan as costs on its Medicare cost reports for fiscal years 1994-1997. UGS reviewed Plaintiff's cost reports for those fiscal years, determined that the Plan did not comply with Medicare rules and regulations, and disallowed reimbursement of costs in the amount of $353,521.³

Plaintiff appealed UGS's decision to the Provider Reimbursement Review Board ("PRRB" or the "Board"), which held a hearing on November 19, 2001. On August 9, 2002, the Board reversed UGS's decision. The Board concluded that VNA was entitled to reimbursement for its contributions to the Plan, finding that: (1) UGS never informed VNA that the Plan was invalid; (2) VNA used outside advisors and consultants to establish the Plan; (3) the Plan's terms were contained in the personnel by-laws; and (4) VNA created the Plan intending it to be a permanent arrangement. In summary, the Board reversed UGS's decision on the grounds that the Plan was in "substantial compliance" with the provisions of the Medicare Provider Reimbursement Manual ("PRM" or the "Manual"); and any non-compliance of the Plan from the requirements set forth in the Manual was de minimus.

On August 16, 2002, pursuant to 42 C.F.R. § 405.1875, which provides specifically for appeals from decisions of the Board, UGS requested a review of the Board's decision, alleging that the decision was contrary to the rules and standards contained in the Manual. On August 26, 2002, the Administrator notified the parties of its intention to review the Board's decision. VNA was also notified that the Administrator would issue his decision, which constitutes the Secretary's final decision, within sixty (60) days of VNA's receipt of the Board's decision.

On October 8, 2002, the Administrator reversed the decision of the Board, finding that the Plan did not qualify as a formal DCP. Specifically, the Administrator found that VNA had not deposited its contributions with an appropriate funding agent; the Plan was contingent rather than permanent in nature; and the Plan did not meet the requirements for Medicare reimbursement as a formal DCP for the 1994-97 period. On October 10, 2002, the Administrator's decision was sent to VNA by certified mail.

On December 3, 2002, VNA requested review of the Administrator's decision in federal district court pursuant to the Administrative Procedures Act ("APA"), 5 U.S.C. §§ 701-06. VNA eventually moved for summary judgment; Defendants opposed the motion and submitted a cross-motion for summary judgment. On September 30, 2004, the district court issued an order denying VNA's summary judgment motion and granting Defendants' motion, affirming the decision of the Secretary. This appeal followed.

B. Standard of Review

We review a district court's grant of summary judgment de novo. Dominguez-Cruz v. Suttle Caribe, Inc., 202 F.3d 424, 428 (1st Cir.2000). However, "this rubric has a special twist in the administrative law context." Associated Fisheries of Maine, Inc. v. Daley, 127 F.3d 104, 109 (1st Cir.1997). "Because the APA standard affords great deference to agency decisionmaking and because the Secretary's action is presumed valid, judicial review, even at the summary judgment stage, is narrow." Id. Pursuant to 42 U.S.C. § 1395oo(f)(1), judicial review of the reimbursement decision is governed by the standards detailed in the APA. Thus, we may only set aside agency actions, findings, and conclusions if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or "unsupported by substantial evidence". 5 U.S.C. § 706(2). Substantial evidence means "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). Additionally, in the situation here, the district court acts as an intermediate appellate court. Therefore, "when reviewing agency action, we apply the same legal standards that pertain in the district court and afford no special deference to that court's decision." Associated Fisheries, 127 F.3d at 109.

Furthermore, "[w]here Congress has entrusted rulemaking and administrative authority to an agency, courts normally accord the agency particular deference in respect to the interpretation of regulations promulgated under that authority." South Shore Hosp., Inc. v. Thompson, 308 F.3d 91, 97 (1st Cir.2002); see also Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945). "Courts withhold such deference only when the agency's interpretation of its regulation is plainly erroneous or inconsistent with its language." South Shore Hosp., 308 F.3d at 97 (internal citations and quotation marks omitted). "In situations in which the meaning of regulatory language is not free from doubt, the reviewing court should give effect to the agency's interpretation so long as it is reasonable, that is, so long as the interpretation sensibly conforms to the purpose and wording of the regulations." Martin v. Occupational Safety & Health Review Comm'n, 499 U.S. 144, 150-51, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991)(internal citations and quotation marks omitted).

However, pronouncements in manuals like the PRM, which do not have the force of law, are entitled to less deference than an interpretation arrived at after a formal adjudication or notice-and-comment rulemaking. See Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (explaining that administrative interpretations receive Skidmore deference rather than Chevron deference). We proceed with these standards in mind.

II.

A. Timing of the Decision of the Administrator for the Centers for Medicare and Medicaid Services

42 U.S.C. § 1395oo(f)(1) states in relevant part that "[a] decision of the [PRRB] 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 [PRRB]'s decision." In turn, 42 C.F.R. § 405.1875(g) states in relevant part:

(1) If the Administrator has notified the parties and CMS that he or she has decided to review a [PRRB] decision, the Administrator will affirm, reverse, modify or remand the case.

(2) The Administrator will make this decision within 60 days after the provider received notification of the [PRRB] decision and will promptly mail a copy of the decision to each party and to CMS.

Both the statute and the regulations implementing the statute require the Administrator — who acts with the authority of the Secretary — to conduct and conclude his review of a Board decision within a 60-day period. VNA asserts that the Administrator failed to make his decision within...