Visiting Nurses Assoc. v. Shalala

• Decision Date: 17 May 2000
• Docket Number: No. 99-3494,99-3494
• Parties: (7th Cir. 2000) VISITING NURSES ASSOCIATION OF SOUTHWESTERN INDIANA, INC., and VISITING NURSES HEALTH CARE, INC., Plaintiffs-Appellants, v. DONNA E. SHALALA, Secretary, United States Department of Health & Human Services, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 352

213 F.3d 352 (7th Cir. 2000)

VISITING NURSES ASSOCIATION OF SOUTHWESTERN INDIANA, INC., and VISITING NURSES HEALTH CARE, INC., Plaintiffs-Appellants, v. DONNA E. SHALALA, Secretary, United States Department of Health & Human Services, Defendant-Appellee.

No. 99-3494

In the United States Court of Appeals For the Seventh Circuit

Argued February 25, 2000

Decided May 17, 2000

Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 99 C 1260--David F. Hamilton, Judge.

Before BAUER, RIPPLE and MANION, Circuit Judges.

RIPPLE, Circuit Judge.

The appellants, two providers of health care services in southern Indiana, sought an injunction that would halt the Government's efforts to recoup overpayments made to them through the Medicare program. The district court held that the service providers had failed to state a claim because the statutory section under which they sought relief did not allow providers to seek a waiver of their liability to the Government. The district court also determined that, even if a waiver was permitted by the statute, the service providers could not obtain relief because they were not "without fault" within the meaning of the statute. We agree that the service providers have failed to state a claim upon which relief can be granted. Therefore, for the reasons set forth in the following opinion, we affirm the judgment of the district court.

I BACKGROUND

The Visiting Nurses Association of Southwestern Indiana of Evansville, Indiana ("VNA"), and Visiting Nurses Health Care, Inc. of Anderson, Indiana ("VNHC"), collectively "the Providers," have both participated in the Medicare program for about 30 years. As certified providers of home health services to Medicare beneficiaries, VNA and VNHC are required to provide services to homebound patients. The Providers periodically receive reimbursement from the Government through interim payments. These interim payments are based on the provider's estimated reimbursable costs. At the end of the year, a calculation is made of the provider's actual allowable costs for the previous year. If the provider was overpaid or underpaid, adjustments are made to future payments. Interim payments may also be adjusted during the fiscal year if the provider and its fiscal intermediary decide that the payments do not reflect the provider's actual costs. According to the statute, these payments to providers are made for the benefit of the ultimate beneficiary. See 42 U.S.C. sec. 1395gg(a).

In 1997, Congress enacted the Balanced Budget Act. See Pub. L. 105-33, 111 Stat. 251. One of its provisions altered the reimbursement scheme for providers such as VNA and VNHC.¹ Under the new reimbursement program, the Providers would receive the least of: (1) the provider's actual cost per visit; (2) a capped amount of cost per visit; or (3) a cap on payment for services based on an annual aggregate per-beneficiary limit ("PBL"). The PBL is determined by the Health Care Financing Administration ("HCFA"), a unit of the Department of Health and Human Services. The new PBL capped the amount of annual payments to home health providers for all services provided to any beneficiary, regardless of the level of or cost of services provided. In promulgating the PBL, the HCFA acknowledged that it would create hardship for home health care providers. Nonetheless, the HCFA warned providers not to discriminate against individual Medicare beneficiaries based on their status as program enrollees.

Both VNA and VNHC anticipated a 15% reduction in Medicare funding in the wake of the Balanced Budget Act, and undertook significant cost- cutting measures. On June 1, 1998, VNA was advised of a PBL for Indiana and Kentucky patients of $2,663.93, and for Illinois patients of $2,471.69. That same day, VNHC was advised of its PBL of $3,895.78. Both providers had underestimated the severity of the funding cuts. The Providers' interim payments had not been adjusted downward at the beginning of the time period covered by the benefit reductions, and, thus, when the benefit reductions were announced, the Providers were faced with a situation in which they had been substantially overpaid. The HCFA informed VNA in early 1999 that its overpayment liability for the 1998 fiscal year was $4,094,039. In December 1998, VNHC received notice of a projected overpayment of $860,593 for the 1998 fiscal year; it was later assessed an additional overpayment of $83,350.

The Providers sought relief under 42 U.S.C. sec. 1395gg, a section of the Social Security Act governing Medicare payments. They claimed that under that section they were entitled to a waiver of overpayment liability. This claim for a waiver was first rejected by the regional Medicare fiscal intermediary, Palmetto Government Benefits Administration. Subsequently, the HCFA and the Secretary of the Department of Health and Human Services ("the Secretary") declined to grant relief. The Providers then brought this action in the district court, seeking an injunction that would prevent the Secretary from recouping the overpayments.

The district court held that sec. 1395gg did not contemplate waivers of overpayments in aggregate reimbursements to health care providers but, rather, existed solely to allow waivers for individual beneficiaries. Therefore, it explained, the Providers' action could not succeed. The court then found that, even if the Providers could bring an action under sec. 1395gg, it would fail on the merits because that section requires those seeking its protection to be without fault. The district court found that the Providers were not without fault, because they could have estimated their PBL long before they were actually informed of the specific amount, and then could have reduced their expenditures to achieve compliance with the limits they ultimately received. Although the court acknowledged that the Providers had not committed any waste or fraud, and that requiring the Providers to repay the overpayments could be devastating to them, it declined to grant injunctive relief because the Providers had shown no likelihood of success on the merits. After their request for a preliminary injunction was denied, the Providers offered no further arguments, and their case was dismissed for failure to state a claim upon which relief could be granted.

II DISCUSSION

We review de novo the district court's dismissal. See Massey v. Helman, 196 F.3d 727, 732 (7th Cir. 1999); Grzan v. Charter Hosp., 104 F.3d 116, 119 (7th Cir. 1997). In our review, we draw all reasonable inferences in the plaintiffs' favor. See Massey, 196 F.3d at 732; Grzan, 104 F.3d at 119. We shall affirm the dismissal only if the plaintiffs would not be entitled to relief under any set of facts that could be proved consistent with the allegations. See Massey, 196 F.3d at 732.

When a Medicare provider is overpaid, the Secretary has the authority to attempt to recoup the overpayment. See 42 C.F.R. sec. 405.371(a)(2). When such an attempt occurs, the provider from whom money is being recouped is given an opportunity for rebuttal. See 42 C.F.R. sec.sec. 405.373(a)(2), 405.374(a). If a provider is dissatisfied with the ultimate result of the administrative proceedings, it may file a civil action in the district court. See 42 U.S.C. sec. 1395oo(f); Homewood Prof'l Care Ctr. v Heckler, 764 F.2d 1242, 1245 (7th Cir. 1985). The Secretary had not yet instituted recoupment proceedings under these regulations against the Providers when they brought their claim for injunctive relief. Instead, the Providers, prior to the institution of any recoupment proceedings, brought this action, arguing that the text of 42 U.S.C. sec. 1395gg itself allows for a waiver of overpayment liability.² The district court characterized the action as one of pure statutory interpretation; the Providers were seeking only a determination of their rights under sec. 1395gg. Neither party contests that assessment.³

Our sole task is therefore to determine whether sec. 1395gg may be the basis of the relief sought by the Providers. "As with all issues of statutory interpretation, the appropriate place to begin our analysis is with the text itself, which is the most reliable indicator of congressional intent." Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 1324-25 (7th Cir. 1997) (citations omitted). We may also look to the agency's interpretation of this statutory language because "a reasonable interpretation of a statute by the agency responsible for its administration is entitled to great deference by the judiciary." Martin v. Pav- Saver Mfg. Co., 933 F.2d 528, 530 (7th Cir. 1991). Finally, we shall consider the role of this statutory language within the broader statutory scheme. "It is a 'fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the statutory scheme.'" Food & Drug Admin. v. Brown & Williamson Tobacco Co., 120 S. Ct. 1291, 1301 (2000) (quoting Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 809 (1989)).

A. Section 1395gg

The Providers argue that the text of sec. 1395gg allows for the waiver of overpayment liability for providers. As discussed above, the Providers receive reimbursements from the Medicare program. Subsection 1395gg(a) explains that these reimbursement payments are treated as payments to the individual Medicare beneficiaries:

Any payment under this subchapter to any provider of services or other person with respect to any items or services furnished any individual shall be regarded as a payment to such individual.

42 U.S.C. sec. 1395gg(a). Subsection 1395gg(b) then says that when overpayments are made, the Secretary may seek to recover those overpayments. As the statute states: Where--

1.more than the correct amount is paid under this subchapter to a provider of services or other person for items or services furnished an...