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Hospital of University of Pennsylvania v. Sebelius

July 10, 2009


The opinion of the court was delivered by: John D. Bates United States District Judge


Three Philadelphia hospitals -- Hospital of University of Pennsylvania, Presbyterian Medical Center, and Pennsylvania Hospital (collectively, "plaintiffs") -- have filed suit against the Secretary of the U.S. Department of Health and Human Services ("the Secretary"). Plaintiffs seek judicial review of the Secretary's decision to deny them certain supplemental medical education payments authorized by the Balanced Budget Act of 1997 ("BBA '97"), Pub. L. No. 105-33, 111 Stat. 251. Now before the Court are the parties' cross-motions for summary judgment.

Plaintiffs' claims fall into two general categories: a legal question and a factual dispute. The legal question is whether they had adequate notice of claims filing requirements for the supplemental medical education payments authorized by BBA '97. As the parties have recognized, this precise question was presented to this Court in a different case, Cottage Health System v. Sebelius, Civ.A.No. 08-0098. See Pls.' Mem. at 3; Sec'y's Mem. at 12 n.6. The Court recently resolved cross-motions for summary judgment on this issue in that case, see July 7, 2009 Memorandum Opinion [dkt. ent. # 32] ("Cottage Health Opinion"), and will apply the same principles to resolve the legal question here.

The factual dispute, however, is unique to this case. Plaintiffs have contended at every stage of the proceedings that even if they had notice of the claims filing requirements for the supplemental medical education payments, and even if the time limits from 42 C.F.R. § 424.44 apply, they have in fact satisfied those requirements by timely filing UB-92 forms with their intermediary. The Secretary counters that plaintiffs have not proven that they filed UB-92 forms. The Court focuses the analysis that follows on this factual dispute.


Plaintiffs allege that they were improperly denied supplemental medical education payments by their intermediary for the 1999 and 2000 fiscal years. Am Compl. ¶¶ 3-4. They timely appealed to the Provider Reimbursement Review Board ("PRRB"), the first-level agency review available to health care providers dissatisfied with Medicare reimbursement decisions made by Medicare intermediaries. See 42 U.S.C. § 1395oo(a). Plaintiffs argued that they never received adequate notice of claims filing requirements for the supplemental medical education payments, and the PRRB agreed. See Administrative Record ("A.R.") at 65.*fn2

Plaintiffs also contended that whatever the resolution of the legal question -- i.e., the adequate notice issue -- they had in fact complied with the filing requirements and deadlines of 42 C.F.R. § 424.44. They produced various forms of evidence in support of this claim to the PRRB at a hearing on May 15, 2007, including several witnesses who testified that UB-92 forms were timely mailed to the intermediary. See, e.g., A.R. at 343 (testimony of Mark Reynolds). Plaintiffs also presented documentary evidence showing that accounting staff had been instructed to submit UB-92s to the intermediary for the supplemental medical education payments. See, e.g., id. at 842 (memorandum from Nancy Booth reminding accounting staff to submit UB-92s to the intermediary); see generally id. at 59 (PRRB's summary of plaintiffs' evidence). The intermediary denied that it had timely received UB-92s from plaintiffs and argued that plaintiffs' evidence was insufficient to prove otherwise. See id. at 60. But the intermediary did not present any witnesses or submit any evidence showing that it had not timely received the UB-92s.

In considering the factual dispute, the PRRB wrote:

The evidence in this case was conflicting, in that [plaintiffs] argued that they submitted manual claims in calendar years 1999 and 2000, and the Intermediary asserts that they never received them. The Board finds [plaintiffs'] evidence that it filed claims credible, but there is no evidence that the claims were proper for processing. However, the Board majority finds that whether [plaintiffs] filed the claims for processing prior to the timely filing deadlines set forth in 42 C.F.R. § 424.44 is moot.

Id. at 63. The PRRB deemed the factual issue moot because it found in favor of plaintiffs on the legal question -- the PRRB found that the filing deadlines from 42 C.F.R. § 424.44 were inapplicable to claims for supplemental medical education payments. Id. at 65. One member of the PRRB dissented. See id. at 67-69.

The intermediary appealed to the Administrator pursuant to 42 U.S.C. § 1395oo(f). The Administrator devoted most of his analysis to the legal question and reversed, concluding that the § 424.44 requirements do apply to claims for supplemental medical education payments. In a single paragraph of his seventeen-page decision, the Administrator addressed the factual dispute as well. A.R. at 18. Citing the PRRB dissenter's opinion, the Administrator found that plaintiffs had not established that they had timely mailed UB-92s to the intermediary. Id. Accordingly, the Administrator reversed. Plaintiffs then appealed to this Court for review.


Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In a case involving review of a final agency action under the Administrative Procedures Act, 5 U.S.C. § 706, however, the standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing the administrative record. See North Carolina Fisheries Ass'n v. Gutierrez, 518 F. Supp. 2d 62, 79 (D.D.C. 2007). Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the administrative record, whereas "the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." See Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70 (9th Cir. 1985). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richards v. INS, 554 F.2d 1173, 1177 & n. 28 (D.C. Cir. 1977), cited in Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d 1060 (D.C. Cir. 2003).

Under the APA, a court may vacate an agency decision if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or if it is "unsupported by substantial evidence." 5 U.S.C. §§ 706(2)(A), (E). Agency actions are entitled to much deference, and the standard of review is narrow. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). The reviewing court is not permitted to substitute its judgment for that of the agency. See id. That is, it is not enough for the agency decision to be incorrect -- as long as the agency decision has some rational basis, the court is bound to uphold it. See id. The court may ...

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