The opinion of the court was delivered by: OBERDORFER
Under legislation that applies to cost reporting periods beginning on or after October 1, 1983, Medicare will continue to reimburse medical education and capital costs under the "reasonable cost" system. 42 U.S.C. § 1395ww(a)(4). Inpatient operating costs, however, will be paid for on the basis of prospectively determined rates. See 42 U.S.C. § 1395ww(d). Under the prospective payment system (PPS), Medicare will pay hospitals for inpatient operating costs based on a standard national rate for each discharge, adjusted for the complexity of each hospital's case mix. 42 U.S.C. §§ 1395ww(d)(1)(A)(iii), (3).
The plaintiffs in these consolidated cases
are not-for-profit hospitals, each of which submitted a cost report on its "base year," a prior cost reporting year which provides one of the two elements from which prospective rates are calculated by a fiscal intermediary. Plaintiffs' fiscal intermediaries refused to use a wage index that included federal government hospital data in calculating plaintiffs' base year costs for the "hospital-specific portion" of PPS. The intermediary for each plaintiff issued a Notice of Base Period Costs and Target Amount for each plaintiff's first PPS year. See Plaintiff's Motion for Summary Judgment in Tucson v. Heckler, C.A. No. 84-2437, Exhibit 12 (hereinafter "Plaintiffs' Exhibit"). The Notice stated that
the target amount is final and not subject to any change after the beginning of your fiscal year under the prospective payment system.
Id. at 2. Each plaintiff appealed the intermediary's determination to the PRRB. See Plaintiffs' Exhibit 13.
The Board, relying on Health Care Financing Administration Ruling (HCFAR) 84-1,
declined to accept the plaintiffs' hearing requests. See Plaintiffs' Exhibit 4. According to HCFAR 84-1, an intermediary's estimation of a hospital's base year costs under the PPS is not final and therefore is not reviewable until after an intermediary has issued an NPR. As a result, the plaintiffs will not be able to obtain Board review of what is supposed to be a prospective rate of payment until after the intermediary makes a final determination as to reimbursement for a particular year -- nearly two and a half years after the commencement of the PPS year.
The plaintiffs challenge HCFAR 84-1 on the ground that it is inconsistent with 42 U.S.C. § 1395 oo (a), the statute that governs PRRB appeals. Plaintiffs also argue that the ruling is inconsistent with the Secretary's other regulations, which provide that an intermediary's prepayment determination is "final." The plaintiffs seek a declaratory judgment that HCFAR 84-1 is invalid and that the Board has jurisdiction over plaintiffs' appeals under the PPS. For relief, plaintiffs seek an order remanding the dispute to the PRRB so that it can consider the merits of plaintiffs' challenges.
There is a threshold question of this Court's jurisdiction. Defendant challenges it on the theory that the Board's action is not final and therefore not reviewable. Plaintiffs contend that the Board's refusal to take jurisdiction of the appeal is itself a final decision that may be reviewed under section 1395 oo.
Despite the strict limits on judicial review of Medicare reimbursement decisions,
plaintiffs prevail on this issue because they seek review only of the jurisdiction decision, not of the substantive claims to be argued before the PRRB. The Court may, under these circumstances, properly exercise jurisdiction over the plaintiffs' appeal from the PRRB's refusal to take ...