Title St. Francis Medical Center v. Shalala
Date 1994
By Alito
Subject Misc
Contents
Page 1
LEXSEE 32 F.3D 805
ST. FRANCIS MEDICAL CENTER, Appellant v. DONNA E. SHALALA, Secretary of the Department of Health and Human Services, BRUCE C. VLADECK, Administrator, Health Care Financing Administration; and JACK MARTIN, Chairman, Provider Reimbursement Review Board
No. 93-3405
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
32 F.3d 805; 1994 U.S. App. LEXIS 20754
March 2, 1994, Argued
August 9, 1994, Filed
SUBSEQUENT HISTORY: **1
Certiorari Denied March 20, 1995, Reported at: 1995
U.S. LEXIS 2014.
PRIOR HISTORY: ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 89-
02452).
LexisNexis(R) Headnotes
COUNSEL: STEPHEN P. NASH, ESQ., MELINDA J. ROBERTS, ESQ. (ARGUED), DAVID W. THOMAS, ESQ., JACQUELINE O. SHOGAN, ESQ., Nash and Company, 700 Westinghouse Building, Pittsburgh, PA
15222, Attorneys for Appellant.
FRANK W. HUNGER, Assistant Attorney General Civil Division, THOMAS W. CORBETT, JR., United States Attorney, PAUL J. BRYSH, Office of United States Attorney, 633 United States Post Office and Courthouse Building, Pittsburgh, PA 15219, BARBARA H. FISHER, Department of Health & Human Services, 6325 Security Boulevard, 500 East High Rise Building, Baltimore, MD
21207, GERARD KEATING (ARGUED), Department of Health & Human Services, Health Care Financing Division, 330 Independence Avenue, S.W., Washington, D.C. 20201, Attorneys for Appellees.
JUDGES: Before: SLOVITER, Chief Judge, ALITO, Circuit Judge, and PARELL, District Judge *
* The Honorable Mary Little Parell, United States District Court Judge for the District of New Jersey, sitting by designation.
OPINIONBY: ALITO
OPINION: *805 OPINION OF THE COURT
ALITO, Circuit Judge:
St. Francis Medical Center (SFMC) is a provider of health care services **2 covered under Part A of Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et. seq., which *806 is commonly known as the Medicare Act. SFMC appeals from a district court order dismissing its amended complaint for lack of jurisdiction under 28
U.S.C. § 1331. We affirm. I.
A. Before 1982, Medicare providers were reimbursed for the "reasonable cost" of covered services. See Sacred Heart Medical Ctr. v. Sullivan, 958 F.2d 537, 540 (3d Cir. 1992). "Under this regime, hospitals and other health care providers had little incentive to curb operating costs and render services more economically, for the federal government bore the financial burden of increases." Id.
(footnote omitted). "In 1982, Congress determined that the Medicare Program should be modified to provide hospitals with better incentives to render services more economically. Accordingly, in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) Congress amended the Social Security Act by imposing a ceiling on the rate of increase of inpatient operating costs recoverable by a hospital." Id. (footnote omitted). **3
"Under TEFRA, a hospital may receive no more than the 'target amount' of per patient costs." St. Francis Medical Ctr. v. Sullivan, 962 F.2d 1110, 1111 (3d Cir.
1992) (St. Francis I).
The statute provided: "'target amount' means with respect to a hospital for a particu-
32 F.3d 805, *806; 1994 U.S. App. LEXIS 20754, **3
Page 2
lar 12-month cost reporting period -- (i) in the case of the first reporting period for which this subsection is in effect, the allow- able operating costs of inpatient hospital ser- vices . . . recognized . . . for such hospital for the preceding 12-month cost reporting period." 42 U.S.C. § 1395ww(b)(3)(A). For each reporting period subsequent to the initial period, the target amount was in- creased by a specified percentage. Section
1395ww(b)(3)(A). Under this system, hospi- tals were obligated to absorb operating costs in excess of their target amounts, but they re- ceived bonuses if their operating costs were less than their targeted amounts. Section
1395ww(b)(1)(A).
Sacred Heart Medical Ctr., 958 F.2d at 540.
TEFRA also directed the Secretary to provide for ex- emptions from, and exceptions or adjustments to, the TEFRA limits (see 42 U.S.C. § 1395ww **4 (b)(3)(A)), and the Secretary has done so. Before 1991, 42 C.F.R. §
413.40(g) (1990), which bore the heading "Exceptions,"
permitted the Health Care Financing Administration
(HCFA) n1 to "adjust a hospital's operating costs . . . upward or downward" if the hospital could "show that it incurred unusual costs (in either a cost reporting period subject to the ceiling or the hospital's base period) due to extraordinary circumstances beyond its control" ( 42
C.F.R. § 413.40(g)(2) (1990)) or if the hospital had experi- enced a change in its "case mix" ( 42 C.F.R. § 413.40(g)(3)
(1990)). In addition, 42 C.F.R. § 413.40(h), which bore the heading "Adjustments," provided in pertinent part:
HCFA may adjust the amount of the operat- ing costs considered in establishing cost per case for one or more cost reporting periods, including both periods subject to the ceiling and the hospital's base period, to take into ac- count factors that could result in a significant distortion in the operating costs of inpatient hospital services.
42 C.F.R. § 413.40(h)(1) (1990).
n1 The Secretary has delegated consider- able administrative responsibility for the Medicare Program to the HCFA. See Sacred Heart Medical Ctr., 958 F.2d at 540 n.4.
**5
In 1991, these provisions were combined to form what is now 42 C.F.R. § 413.40(g) (1993). Under this provision, the HCFA "may adjust the amount of the operating costs considered in establishing the rate-of--increase ceiling for one or more cost reporting periods, including both periods subject to the ceiling and the hospital's base period, un- der the circumstances specified below." Subsequent pro- visions state that such adjustments may be granted for essentially the same reasons listed in the previous ver- sion of the regulations. See 42 C.F.R. § 413.40(g)(2)-(3)
(1993). n2
n2 These provisions state:
(2) Extraordinary circumstances. HCFA may make an adjustment to take into account unusual costs
(in either a cost reporting period subject to the ceiling or the hospital's base period) due to extraordinary circumstances beyond the hospital's control. These circumstances include, but are not limited to, strikes, fire, earthquakes, floods, or similar unusual occurrences with substantial cost effects.
(3) Comparability of cost reporting pe- riods -- (i) Adjustment for distortion. HCFA may make an adjustment to take into account factors that would result in a significant distortion in the operat- ing costs of inpatient hospital services between the base year and the cost re- porting period subject to the limits.
**6
*807 The Secretary now interprets 42 C.F.R. §
413.40(g) (1993) to mean that a provider may obtain two different types of "base period inpatient operating cost adjustments." Appellees' Br. at 7. According to the Secretary, the first type is "cost year-specific" and may raise a provider's target amount for the purpose of recov- ering that year's costs but not for the purpose of calcu- lating bonus payments. Id. at 7-9. The second type of adjustment, the Secretary explains, results in "a perma- nent adjustment to the base period inpatient operating costs used to calculate the TEFRA limit," and "any per- manent increase in the limit would come into play under the TEFRA bonus provision beginning only with the fis- cal year after the one for which any permanent base period relief is granted." Id. at 8-9. SFMC argues vigorously that the Secretary's recognition of this second type of ad-
32 F.3d 805, *807; 1994 U.S. App. LEXIS 20754, **6
Page 3
justment represents a recent change in position that was taken for purposes of litigation.
In 1983, Congress largely replaced the TEFRA system with a "prospective payment system" (PPS) (see Sacred Heart Medical Ctr., 958 F.2d at 540), but certain types of hospitals and hospital units **7 were excluded from the PPS. See 42 U.S.C. § 1395ww(b), and (d)(1)(A)-(B);
42 C.F.R. §§ 412.20(b), 412.22(b). Among the excluded units were distinct part rehabilitation units. See 42 U.S.C.
§ 1395ww(d)(1)(B); 42 C.F.R. §§ 412.23, 412.30.
B. SFMC operates a general acute-care hospital that includes a rehabilitation unit. For TEFRA purposes, the hospital's base period ended on June 30, 1985. During this period, SFMC's fiscal intermediary concluded that SFMC did not have a distinct part rehabilitation unit under the applicable regulations "since less than 75% of its patients required intensive rehabilitation. The intermediary termi- nated the provider as a distinct part rehabilitation unit and the Health Care Financing Administration . . . upheld that decision. To comply with the 75% rule, the Medical Center transferred some of its 'non-qualifying' patients from the rehabilitation unit to its acute care facility. This transfer was completed in the year ending July 30, 1986
. . . ." St. Francis I, 962 F.2d at 1112. Because this trans- fer was not completed until after the base **8 period ended, SFMC maintains,
certain "non-qualifying" patients were in- cluded on the original 1985 cost report for the Medical Center's rehabilitation unit, but then were transferred out of that unit by 1986. The absence of these "non-qualifying" patients from the group of patients treated by the unit in 1986 meant that the Medical Center's av- erage patient costs were higher in 1986 than the estimates of those costs derived from the
1985 base year cost report. In addition, the base year cost report did not include costs associated with a physical expansion project completed in 1986.
Id. at 1113.
SFMC sought relief under 42 C.F.R. § 413.40(g) and
(h) for the cost reporting period ending June 30, 1986. Although the intermediary recommended partial relief, the HCFA denied SFMC's requests. The HCFA concluded that SFMC's transfer of nonqualifying patients out of the rehabilitation unit after the base period did not constitute
"an extraordinary circumstance beyond the hospital's con- trol" but resulted from a "management decision" to claim the transferred patients as rehabilitation cases in the base year. App. at 24-25. The HCFA also concluded that **9
an adjustment was not warranted by the hospital's building program. Id. at 24-25. The HCFA noted that expansion is usually undertaken to accommodate "increased utiliza- tion," which in turn tends to "offset any impact on a target rate." Id. at 24. However, in SFMC's case, the HCFA ob- served, "while an expansion program was *808 being implemented, the size of the rehabilitation unit was being decreased." Id.
SFMC appealed to the Provider Reimbursement Review Board (PRRB), but the PRRB held that it lacked jurisdiction to hear the appeal because, among other things, SFMC had not satisfied the $10,000 amount-in-- controversy requirement in 42 U.S.C. § 1395oo(f). The PRRB wrote:
Under Section 1878(a) Title XVIII, Social
Security Act, as amended, 42 U.S.C. §
1395oo(a) , and 42 C.F.R. 405.1835 and
1841, a provider has a right to a hearing be- fore the Board with respect to costs claimed on a timely filed cost report if it is dissat- isfied with the final determination of the in- termediary . . ., and the amount in contro- versy is $10,000, or more, and the request for hearing was filed within 180 days of the
**10 date of the final determination . . . . The amount in controversy for the issues you wish to raise is less than $10,000. Since the above statutory requirement is a prerequisite to a provider's right to a hearing, the Board finds that it does not have jurisdiction over this appeal and hereby dismisses the appeal of the subject year.
App. at 32. n3
n3 While the PRRB denied jurisdiction over SFMC's claims for fiscal year 1985, it exercised ju- risdiction over SFMC's claims for fiscal year 1986. These claims were settled, and SFMC was granted reimbursement for its full inpatient operating costs for fiscal years 1986 through 1988. App. at 36, 46-
50; Appellant's Br. at 12. This reimbursement to- talled $1,117,355. App. at 37-38. With respect to bonus payments, the settlement stated:
The Provider agrees that no exception awarded under 42 C.F.R. 413.40(g) by virtue of this settlement or any HCFA decision related to the capital expan- sion program shall entitle the Provider to any TEFRA incentive payments or other payments in excess of final au-
32 F.3d 805, *808; 1994 U.S. App. LEXIS 20754, **10
Page 4
dited costs. The parties make no agree- ment with respect to the appropriate- ness of any TEFRA incentive pay- ments or other payments in excess of final audited costs should an ad- justment be awarded under 42 C.F.R.
413.40(h).
Id. at 39-40. SFMC subsequently dismissed its
1986 PRRB appeal. Id. at 259.
**11
SFMC then filed this action in district court. Asserting that the district court had jurisdiction under 42 U.S.C. §
1395oo(f), SFMC's complaint alleged that the PRRB had
"wrongfully declined jurisdiction" and that the fiscal in- termediary and the HCFA had erred in denying SFMC's requests "to amend and/or reopen its 1985 cost report." App. at 62. The complaint sought a declaration that the intermediary, the HCFA, and the PRRB had acted im- properly. Id. In addition, the complaint requested that the court order that SFMC be given permission to amend its
1985 cost report; that the intermediary, the HCFA, and the PRRB "recalculate SFMC's base year cost per dis- charge in accordance with its amended cost report"; and that SFMC be awarded "the sums due it pursuant to the amended cost report, together with interest thereon" and attorney's fees. Id. at 62-63.
The Secretary moved to dismiss the case for lack of jurisdiction, contending that SFMC had not met the
$10,000 amount-in--controversy requirement in 42 U.S.C.
§ 1305oo(f). The magistrate judge to whom the case had been referred rejected this argument **12 and there- fore recommended that this motion be denied and that the case be remanded to the PRRB. The magistrate judge did not find that SFMC was seeking to recover $10,000 or more for the cost reporting period at issue, i.e., the period ending on June 30, 1986. Instead, the magistrate judge concluded:
The PRRB attempts to isolate each year in- volved to determine whether it meets the
$10,000.00 requirement, but the claim re- quires the board to look at the years 1985 through 1988 as a whole because they are inextricably connected, since the base year is the foundation for a continuing inaccuracy in plaintiff's reimbursements from Medicare. Plaintiff easily meets the $10,000.00 juris- dictional amount as defined in 42 C.F.R. Section 405.1839(a)(2) for the years l986,
1987 and 1988, for which the TEFRA rate of increase limits are determined by the 1985
cost report. It is unreasonable and inefficient to require plaintiff to file annually for an ex- ception to the TEFRA limits when a recalcu- lation of the base year cost report, if proven to be inaccurate, would obviate the problem.
*809 App. at 71-72. The district court accepted the magistrate judge's recommendation.
On appeal, a divided **13 panel of our court reversed and held that SFMC had not satisfied the
$10,000 amount-in--controversy requirement. Noting that
"the 'amount in controversy' is defined by 42 U.S.C. §
1395oo(a)(1)(A)(i) as 'the amount of total program reim- bursement due to the provider for the items and services furnished to individuals for which payment may be made
. . . for the period covered by such report,'" the panel held that a single provider may not "aggregate claims over several cost reports in order to satisfy the amount in controversy requirement of § 1395oo(a)." St. Francis I,
962 F.2d at 1114, 1115 (emphasis supplied in St. Francis I). However, in response to SFMC's argument that the district court had jurisdiction under 28 U.S.C. § 1331, the panel remanded the case to the district court so that SFMC could petition for leave to amend its complaint to assert jurisdiction under that provision. 962 F.2d at 1117. In doing so, however, the panel made clear that it was not deciding whether SFMC's claims could "properly be asserted under this jurisdictional **14 provision." Id. at 1117 n.10.
On remand, SFMC was granted leave to file an amended two-count complaint that asserted jurisdiction under 28 U.S.C. § 1331. Count I of the amended com- plaint alleged:
The methodology, or lack of methodol- ogy, utilized by HCFA to deny to St. Francis Medical Center a base year adjustment (to achieve comparability between cost report- ing periods) has resulted in HCFA's impo- sition of improper and unreasonable reim- bursement ceilings (TEFRA Ceilings) upon the Medical Center's rehabilitation unit.
App. at 212. Count II alleged that SFMC's equal protec- tion rights had been violated because it had been treated differently from providers "whose post-base year costs for post-base year cost reporting periods . . . are undis- torted." Id. at 213. Counts I and II of the amended com- plaint sought essentially the same relief as SFMC's prior complaint. Id. at 213-15.
The defendants moved to dismiss, and the magistrate judge recommended that the motion be granted on the
32 F.3d 805, *809; 1994 U.S. App. LEXIS 20754, **14
Page 5
ground that 42 U.S.C. § 405(h) precluded the exercise of jurisdiction under 28 U.S.C. § 1331. **15 The district court agreed and dismissed the amended complaint. This appeal followed.
II.
Under the Medicare Act, 42 U.S.C. § 1395oo(f)(1), a provider has "the right to obtain judicial review of any fi- nal decision" of the PRRB by means of a civil action filed in district court. In St. Francis I, however, our court held that SFMC could not obtain judicial review under this pro- vision because it had not satisfied the $10,000 amount- in-controversy requirement of 42 U.S.C. § 1395oo(a). SFMC thus turned to 28 U.S.C. § 1331 as an alternative avenue for obtaining review, but SFMC's reliance on this provision raises other jurisdictional problems.
The Medicare Act, 42 U.S.C. § 1395ii, incorporates 42
U.S.C. § 405(b), which provides in relevant part: The findings and decision of the Secretary after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Secretary shall be reviewed by any per- son, tribunal, or governmental agency except
**16 as herein provided. No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.
42 U.S.C. § 405(h) (emphasis added). Therefore, if SFMC's amended complaint seeks "to recover on a claim arising under the Medicare Act ," this provision deprives the district court of jurisdiction under 28 U.S.C. § 1331. As the District of Columbia Circuit has noted, resolu- tion of this jurisdictional issue requires us to consider two lines of Supreme Court precedent: the "Salfi-Ringer line" and the "Erika-Michigan Academy line." See National Kidney Patients Ass'n v. Sullivan, 294 U.S. App. D.C.
269, 958 F.2d 1127, 1130 (D.C. Cir. 1992), cert. denied,
122 L. Ed. 2d 122, 113 S. Ct. 966 (1993). We will consider each of these lines separately.
*810 A. If the "Salfi-Ringer line" controls, the de- cision of the district court dismissing SFMC's complaint was clearly correct. In Weinberger v. Salfi, 422 U.S. 749,
45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975), **17 the Court considered an action brought on behalf of a class of persons who had been denied Social Security benefits pursuant to a provision of the Social Security Act that permitted a widow or stepchild to obtain benefits only if that claimant had become the wife or stepchild of the
deceased at least nine months before his death. A three- judge court held that this statutory requirement was un- constitutional, but the Supreme Court concluded that 42
U.S.C. § 405(h) deprived the lower court of jurisdiction to entertain the suit under 28 U.S.C. § 1331. The Court re- jected the proposition that section 405(h) merely requires exhaustion of administrative remedies (422 U.S. at 757), as well as the argument that the plaintiffs' claims arose under the Constitution rather than the Social Security Act. Id. at 760. The Court wrote:
It would, of course, be fruitless to con- tend that appellees' claim is one which does not arise under the Constitution, since their constitutional arguments are critical to their
**18 complaint. But it is just as fruitless to argue that this action does not also arise under the Social Security Act. For not only is it Social Security benefits which appellees seek to recover, but it is the Social Security Act which provides both the standing and the substantive basis for the presentation of their constitutional contentions. Appellees sought, and the District Court granted, a judgment di- recting the Secretary to pay Social Security benefits. To contend that such an action does not arise under the Act whose benefits are sought is to ignore both the language and the substance of the complaint and judgment. This being so, the third sentence of § 405(h) precludes resort to federal-question jurisdic- tion for the adjudication of appellees' consti- tutional contentions.
Id. at 760-61. The Court thus held that individuals wish- ing to challenge the duration-of--relationship requirement were required to proceed under 42 U.S.C. § 405(g) rather than under 28 U.S.C. § 1331. See 422 U.S. at 763-67.
**19
In Heckler v. Ringer, 466 U.S. 602, 80 L. Ed. 2d 622,
104 S. Ct. 2013 (1984), the plaintiffs were individuals who wanted Medicare to pay Part A benefits n4 for a surgical procedure known as bilateral carotid body resec- tion (BCBR). The Secretary through the HCFA adopted a policy that "no payment was to be made for Medicare claims arising out of the BCBR surgical procedure when performed to relieve respiratory distress." Id. at 607; see also id. at 608. Asserting jurisdiction based in part on
28 U.S.C. § 1331, the plaintiffs filed suit, contending that the Secretary's policy violated "constitutional due process and numerous statutory provisions." 466 U.S. at 610. The Supreme Court held, however, that jurisdiction under 28
U.S.C. § 1331 was not available, and the Court specif-
32 F.3d 805, *810; 1994 U.S. App. LEXIS 20754, **19
Page 6
ically rejected the distinction that the court of appeals had drawn between substantive and procedural **20 claims. 466 U.S. at 614-15. "To be true to the language of the statute," the Court wrote, "the inquiry in *811 determining whether § 405(h) bars federal-question juris- diction must be whether the claim 'arises under' the Act, not whether it lends itself to a 'substantive' rather than a
'procedural' label." 466 U.S. at 615.
n4 As we recently explained:
Medicare coverage is primarily di- vided into two parts. Part A covers all inpatient hospital expenses through an insurance plan. See 42 U.S.C.
§§ 1395c to 1395i-4. All Medicare- eligible patients receive this benefit. . .
.
Part B covers certain physician ser- vices, hospital outpatient services, and other health services not covered un- der Part A. See 42 U.S.C. §§ 1395j to 1395w-4(j). Part B coverage is not freely or automatically available to all Medicare-eligible patients. To obtain this coverage, Medicare-eligible pa- tients must first enroll in the Part B insurance program by paying insur- ance premiums ("Part B insurance pre- miums"). See §§ 1395o-1395s. Once this is done, the federal government pays 80% of the "reasonable costs" of outpatient hospital services and 80% of the "reasonable charges" for physi- cian services rendered to the insured. §
13051. The Part B patients themselves must pay the remaining 20% of the charges for the reasonable outpatient hospital services and physician ser- vices (co-payments or coinsurance), as well as an annual deductible. Id.;
§ 1395cc(a)(2)(A).
Pennsylvania Medical Soc'y v. Snider, No. 93-7775
(3d Cir. July 22, 1994), slip op. at 4.
**21
Turning to the case at hand, the Court concluded that the plaintiffs' "challenge to the Secretary's BCBR pay- ment policy ' arose under' the Medicare Act." 466 F.2d at
615 (brackets added). The Court found it inconsequential that the plaintiffs "sought only declaratory and injunctive relief and not an actual award of benefits as well" because
"following the declaration which respondents seek from the Secretary -- that BCBR surgery is a covered service -- only essentially ministerial details will remain before re- spondents would receive reimbursement." Id. Instead of invoking 28 U.S.C. § 1331 or the mandamus statute, the Court held, claimants wishing to challenge the Secretary's BCBR policy were required to proceed under 42 U.S.C.
§ 405(g). 466 U.S. at 617.
If Salfi and Ringer are controlling in this case, there can be little doubt that the district court lacked general federal-question jurisdiction. The Medicare Act provides
"both the standing and substantive basis" for SFMC's claims. Salfi, 422 U.S. at 761. **22 Moreover, SFMC
"sought . . . a judgment directing the Secretary to pay
Medicare benefits." Id.
Accordingly, under these precedents, SFMC's claim
"arises under" the Medicare Act for purposes of section
405(h). See Ringer, 466 U.S. at 615; Salfi, 422 U.S. at
760-61; In re Univ. Medical Ctr., 973 F.2d 1065, 1073 (3d
Cir. 1992); Abington Memorial Hosp. v. Heckler, 750 F.2d
242, 244 (3d Cir. 1984), cert. denied, 474 U.S. 863, 88 L. Ed. 2d 149, 106 S. Ct. 180 (1985). Under these precedents, it makes no difference that SFMC asserted constitutional and procedural claims. See Ringer, 466 U.S. at 615; Salfi,
422 U.S. at 761.
B. SFMC makes little attempt to distinguish Salfi or Ringer. Instead, SFMC relies on the Supreme Court's later decision in Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 90 L. Ed. 2d 623, 106 S. Ct.
2133 (1986), **23 which concerned a regulation gov- erning payments under Part B of the Medicare program. This regulation permitted carriers to establish separate prevailing charges for specialists and nonspecialists per- forming the same services. An association of physicians and several individual doctors challenged the regulation on constitutional and statutory grounds, but the Secretary contended that "Congress had forbidden judicial review of all questions affecting the amount of benefits payable under Part B of the Medicare program." Id. at 669. In mak- ing this argument, the Secretary relied on United States v. Erika, Inc., 456 U.S. 201, 72 L. Ed. 2d 12, 102 S. Ct. 1650
(1982), in which the Court had held that the Medicare Act precluded any judicial review of a carrier's decision concerning the amount awarded on a Part B claim. The Secretary also argued that 42 U.S.C. § 405(h) bolstered this conclusion.
The Supreme Court, however, disagreed. Beginning with
"the strong presumption that Congress intends judicial review of administrative action" **24 (476 U.S. at
670), the Court held that neither the Medicare Act nor
42 U.S.C. § 405(h) demonstrated with the requisite clar-
32 F.3d 805, *811; 1994 U.S. App. LEXIS 20754, **24
Page 7
ity that Congress intended to preclude all judicial review of "any action taken under Part B of the Medicare pro- gram." 476 U.S. at 673. The Court held that the portion of the Medicare Act governing review of Part B determi- nations, as interpreted in Erika, "simply does not speak to challenges mounted against the method by which such amounts are to be determined rather than the determina- tions themselves." Id. at 675 (emphasis in original). The Court then concluded that, whereas a carrier's decision concerning the amount of a Part B claim was not subject to any form of judicial review, those Part B matters that a carrier cannot decide -- "including challenges to the va- lidity of the Secretary's instructions and regulations" -- are not insulated from review under the Medicare Act. Id. at 678. **25
As for 42 U.S.C. § 405(h), the Court wrote that it would not "indulge the Government's *812 assump- tion that Congress contemplated review by carriers of
'trivial' monetary claims . . . but intended no review at all of substantial statutory and constitutional challenges to the Secretary's administration of Part B of the Medicare program." 476 U.S. at 680 (footnote omitted). The Court found insufficient evidence to show that Congress meant to take this "extreme position." Id.
In subsequent cases involving Part B of the Medicare pro- gram, we explained that "Erika and Michigan Academy define the ends of a continuum." American Ambulance Serv. v. Sullivan, 911 F.2d 901, 905 (3d Cir. 1990); see also Medical Fund-Phila. Geriatric Ctr. v. Heckler, 804
F.2d 33, 38 (3d Cir. 1986). We elaborated:
At one end are disputes over amount com- putations at issue in a particular case. At the other are disputes arising from the Secretary's rules, regulations and instructions which are applied by the Hearing Officer. A Hearing Officer is not **26 at liberty to disregard these rules. . . . "Matters which Congress did not delegate to private carriers, such as challenges to the validity of the Secretary's instructions and regulations, are cognizable in courts of law." Michigan Academy, 476
U.S. at 680, 106 S. Ct. at 2140-41 (emphasis in original).
American Ambulance Serv., 911 F.2d at 905.
Contrary to SFMC's argument, we do not believe that Michigan Academy supports its reliance on general fed- eral-question jurisdiction in this case. Michigan Academy concerned the availability of general federal-question ju- risdiction to review the validity of a Part B regulation.
Under Part B, a carrier cannot review the legality of such a regulation (see Michigan Academy, 476 U.S. at 675-76,
680) and, as Erika held, a carrier's determination of the amount of a Part B payment is not reviewable. Thus, if general federal-question jurisdiction had not been avail- able in Michigan Academy, the plaintiffs in that case would have had no avenue for challenging the validity of
**27 the regulation under which their payments were calculated.
By contrast, the Medicare Act provides avenues by which a provider seeking Part A payments may contest both the amount of its payments and the methods by which those payments are calculated. If the provider seeks review of a reimbursement determination and does not wish to chal- lenge a provision of the Act or regulations, it may, upon compliance with the jurisdictional requirements imposed by statute, take an appeal to the PRRB (see 42 U.S.C.
§ 1395oo(f)(1)). Alternatively, if the provider wishes to challenge a provision of the Act or a regulation, it may seek a determination by the PRRB that the Board lacks the authority to decide the question (see 42 U.S.C. §
1395oo(f)(1)) and then obtain judicial review. See Good Samaritan Hosp. v. Shalala, 124 L. Ed. 2d 368, 113 S. Ct. 2151, 2156 (1993); Bethesda Hosp. Ass'n v. Bowen,
485 U.S. 399, 401-02, 99 L. Ed. 2d 460, 108 S. Ct. 1255
(1988).
Since a provider seeking Part A payments has **28 these avenues of review available under the Medicare Act, the presumption that Congress did not intend to fore- close judicial review, which was central to the decision in Michigan Academy, is inapplicable. And in the absence of that presumption, we read 42 U.S.C. § 405(h), as incor- porated into the Medicare Act and as interpreted in Salfi and Ringer, to mean that SFMC may not assert its claim under 28 U.S.C. § 1331.
In Westchester Management Corp. v. United States HHS, 948 F.2d 279 (6th Cir. 1991), cert. denied, 118 L. Ed. 2d 543, 112 S. Ct. 1936 (1992), the Sixth Circuit con- sidered a case quite similar to the one before us. Noting that 42 U.S.C. § 1395oo(f)(1) provided "an avenue of ju- dicial review for the type of challenge that the provider asserted," the court stated that "the Michigan Academy exception applies only when there is no other avenue of judicial review." 948 F.2d at 282. The court continued: Congress has expressly provided for ju-
dicial **29 review of the type of claim that Westchester Management asserts, when the claim exceeds the $10,000 amount- in-controversy requirement. Congress cre- ated a special procedure by which a provider *813 that, unlike Westchester
32 F.3d 805, *813; 1994 U.S. App. LEXIS 20754, **29
Page 8
Management, is entitled to a Board hear- ing may demand that the Board determine whether it has authority to pass on a rele- vant legal question, such as the validity of an instruction of the Secretary. If it deter- mines that it lacks authority, the provider may proceed directly to court for judi- cial review of its legal challenge. See 42
U.S.C. § 1395oo(f)(1). If we were to accept Westchester Management's construction of Michigan Academy -- that there is always jurisdiction under 28 U.S.C. §§ 1331 and
1346 for challenges to instructions, rules, and regulations, but not for amount deter- minations -- this special procedure, created by 42 U.S.C. § 1395oo(f)(1), would become superfluous.
The better construction requires that Westchester Management pursue the exclu- sive jurisdictional grant within the Medicare Act. Its claim that it has no avenue of **30 judicial review is meritless; 42 U.S.C. §
1395oo(f)(1) provides an avenue of judicial review for the sort of challenge to the va- lidity of the Secretary's instructions that it raises. Westchester Management is, however, denied access to that avenue because it is unable to meet the amount-in--controversy requirement. There is no contention that Congress lacks the power to limit jurisdic- tion by prescribing minimum amount-in-- controversy requirements.
Id. at 282-83; see also Colonial Penn Ins. Co. v. Heckler, 721 F.2d 431, 436 (3d Cir. 1983); Frankford Hosp. v. Davis, 647 F. Supp. 1443, 1446-47 (E.D. Pa.
1986); Mount Sinai Medical Ctr. v. Sullivan, Medicare & Medicaid Guide (CCH) P 39,103 (D.D.C. Nov. 30, 1990). We find this analysis persuasive.
We note, moreover, that administrative remedies are now available for providers who believe that their base pe- riod operating costs are too low. Beginning in 1990, a provider may request a new base period. See 42 U.S.C.
§§ 1395ww(b)(4)(A)-(B) (Supp. 1993); 42 C.F.R. **31
§ 413.40(i). As previously noted (see pages 4-5, supra), a provider may also request a permanent base-period cost adjustment under 42 C.F.R. § 413.40(g). A denial of ei- ther of these requests may be appealed to the PRRB and is thereafter subject to judicial review under 42 U.S.C. §
1395oo(f)(1).
SFMC contends that these procedures are inadequate in its case. SFMC correctly notes that the granting of a new base period beginning in 1990 pursuant to 42 C.F.R.
§ 413.40(i) would not permit it to recover the bonus pay- ments that it believes it should have received prior to that date. As for a permanent base-period cost adjust- ment, SFMC argues that the Secretary has only recently recognized the availability of such relief. Indeed, SFMC charges that the Secretary previously took the position that no such relief was available and that the Secretary's current interpretation of the relevant regulations is simply a "convenient litigating position." The Secretary disputes these charges. But whether or not SFMC's charges are justified, we do not think they have a bearing on the avail- ability of jurisdiction under 28 U.S.C. § 1331, **32 for "Subject matter jurisdiction can never be created by estoppel." Rubin v. Buckman, 727 F.2d 71, 72 (3d Cir.
1984); see Insurance Corp. of Ireland v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 702, 72 L. Ed. 2d 492,
102 S. Ct. 2099 (1982).
SFMC also argues that, even now, while the Secretary acknowledges that a permanent base-period adjustment would apply in determining a provider's entitlement to TEFRA bonus payments in future years, the Secretary takes the position that such an adjustment would not apply in determining a provider's entitlement to bonus payments in the year in which permanent adjustment is granted. In other words, SFMC contends that the administrative pro- cedure may cause a provider to lose a year of incentive payments.
This argument does not persuade us that such a provider must be permitted to sue to recover these bonus payments under 28 U.S.C. § 1331. If such a provider has a substantive entitlement to these bonus payments under the Medicare Act, it is by no means clear to us that the provider could not obtain those payments in **33 an action under 42 U.S.C. § 1395oo(f)(1), irrespective of the regulations or the Secretary's interpretation *814 of them. On the other hand, if such a provider has no such entitlement, then obviously the Secretary's position causes the provider no harm. But in any event, even if the Secretary's position may by some means cause the provider to lose a year of bonus payments, that possibility is insufficient to persuade us that jurisdiction under 28
U.S.C. § 1331 must be recognized.
We have considered all of SFMC's remaining arguments, and we find them to lack merit. Accordingly, we will af- firm the decision of the district court dismissing SFMC's complaint.
Contents
Prev
Next
Last
