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Hillcrest Riverside, Inc. v. Sebelius

January 12, 2010

HILLCREST RIVERSIDE, INC., PLAINTIFF,
v.
KATHLEEN SEBELIUS, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT.



The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Re Document Nos.: 12, 14

MEMORANDUM OPINION DENYING THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; GRANTING THE DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This matter comes before the court on the plaintiff's motion for summary judgment and the defendant's cross-motion for summary judgment. On September 30, 2008, the Provider Reimbursement Review Board ("PRRB") of the Department of Health and Human Services issued an administrative ruling that required the plaintiff, the former owner and operator of a hospital in Tulsa, Oklahoma, to repay approximately $2.5 million to the Medicare program. The plaintiff commenced this action challenging the PRRB's decision under the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq. Because the court affirms the PRRB's decision, it denies the plaintiff's motion for summary judgment and grants the defendant's cross-motion for summary judgment.

II. BACKGROUND

A. The Medicare Program

Medicare provides health insurance to the elderly and disabled. See 42 U.S.C. §§ 1395-1395cc. The program entitles an eligible beneficiary to have payment made on his or her behalf for the care and services rendered by participating hospitals, termed "providers." See id. Providers, in turn, are reimbursed by insurance companies, known as "fiscal intermediaries," that have contracted with the Medicare administrator, the Centers for Medicare and Medicaid Services ("CMS"). See 42 U.S.C. § 1395h; 42 C.F.R. § 413.20. The fiscal intermediary determines the amount of reimbursement due to the provider under Medicare law, including regulations published by CMS. See 42 U.S.C. § 1395h; 42 C.F.R. § 413.20.

Providers obtain reimbursement by submitting cost reports showing the costs they incurred during the previous fiscal year and the portion of those costs to be allocated to Medicare. See 42 C.F.R. § 413.20. After receiving a provider's cost report, the fiscal intermediary may review and audit the report before determining the total amount of reimbursement to which the hospital is entitled. See id. § 405.1803. The fiscal intermediary memorializes its determination in a Notice of Program Reimbursement ("NPR"). Id. The fiscal intermediary may reopen and revise a cost report within three years after the date of the NPR. Id. § 405.1885.

In submitting cost reports, providers may be reimbursed for patient care as well as for certain "add-ons." Am. Compl. ¶ 22. For teaching hospitals, Medicare law provides an add-on for indirect medical education ("IME") costs.*fn1 See 42 U.S.C. § 1395ww(d)(5)(B). One variable used to calculate the IME costs to be allocated to a provider is the number of full-time equivalent ("FTE") interns and residents who were trained at the hospital in that fiscal year. See id. A high FTE count yields a correspondingly high IME payment for the hospital. See id.

As part of the Balanced Budget Act of 1997, Congress capped the amount that providers could be reimbursed for their IME costs. See id. More specifically, the Act provided that for cost reporting periods beginning on or after October 1, 1997, teaching hospitals would be limited to the number of IME FTEs "for the hospital's most recent cost reporting period ending on or before December 31, 1996" for the purpose of calculating IME payments. See id. In other words, the IME FTE count from the hospital's 1996 cost reporting period established the cap to be applied to IME FTE payments in subsequent years.*fn2 See Am. Compl. ¶¶ 22-23.

B. Factual and Procedural History

1. Cost Report for Fiscal Year 1996

After receiving the cost report for fiscal year 1996 filed by the Tulsa Regional Medical Center ("the hospital"), the fiscal intermediary, Blue Cross of Oklahoma ("Blue Cross") issued an NPR on November 30, 2000. See id. ¶ 27; Pl.'s Mot. for Summ. J. ("Pl.'s Mot.") at 6; Def.'s Cross-Mot. for Summ. J. & Opp'n to Pl.'s Mot. ("Def.'s Cross-Mot.") at 7. Worksheet E of the 1996 cost report referred to Workpaper M-7-2, which, while not itself included in the 1996 cost report, indicated that the cost report's IME FTE count, which was used to compute the 1996 reimbursement determination, was 88.14. See Def.'s Cross-Mot. at 7-8, Pl.'s Mot. at 5-6, Pl.'s Opp'n to Def.'s Cross-Mot. & Reply in Support of Pl.'s Mot. ("Pl.'s Reply") at 5. Meanwhile, Worksheet S-3, which was included in the 1996 cost report, listed an IME FTE count of 107.00. Pl.'s Mot. at 6; see also Def.'s Cross-Mot. at 9.

The defendant maintains, and representatives of the plaintiff who testified at the PRRB hearing agreed, that the 107.00 IME FTE count listed on Worksheet S-3 was erroneous: it represented the hospital's direct Graduate Medical Education ("GME") FTE count, not its IME FTE count. Admin. R. at 130 (Tr. of PRRB Hrg. Test. of Pl.'s Witness John Kellner at 60); Id. at 151 (Tr. of PRRB Hrg. Test. of Pl.'s Witness Pam Madole at 143-44). The parties disagree, however, on whether the 1996 cost report was based ...


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