The opinion of the court was delivered by: John D. Bates United States District Judge
The Secretary of the Department of Health and Human Services is responsible for administering Medicare. Plaintiffs are three associated Philadelphia hospitals - Hospital of University of Pennsylvania, Presbyterian Medical Center, and Pennsylvania Hospital - that seek judicial review of the Secretary's denial of payments associated with services the hospitals provided to certain Medicare recipients in fiscal years 1999 and 2000. The Medicare fiscal intermediary did not receive claims for these payments from plaintiffs in a timely fashion, and the Secretary determined that there was insufficient evidence to conclude that the claims were actually mailed by plaintiffs. Plaintiffs contend that they mailed claims for these payments to the intermediary and that, in any case, the Secretary failed to notify them of the timing requirements for mailing claims, making the deadlines invalid. Plaintiffs also contend that, notice aside, the time limits were improper.
This Court previously remanded this matter to the Secretary to explain why plaintiffs had sufficient notice of the time limits for filing these claims and why the time limits were proper. The Court also concluded that the basis of the Secretary's finding that plaintiffs did not show they actually mailed the claims was contrary to law and remanded for further examination of whether the claims were, in fact, mailed. In the meantime, the D.C. Circuit ruled in a similar case, Loma Linda Univ. Med. Ctr. v. Sebelius, 408 Fed. Appx. 383 (D.C. Cir. 2010), that hospitals were not put on notice of these deadlines.
On remand, the Secretary determined that plaintiffs, unlike Loma Linda, had notice of the deadlines and that the deadlines were proper. The Secretary also concluded that plaintiffs presented insufficient evidence that the claims were mailed and received. Plaintiffs then sought judicial review of the Secretary's decision. Now before the Court are the parties' cross-motions for summary judgment. For the reasons described below, the Court concludes that plaintiffs did not receive adequate notice of the relevant deadlines. Accordingly, plaintiffs' claims must now be processed and paid.
I. Statutory and Regulatory Background
a. Claims Under Medicare Parts A & C
The Secretary of the Department of Health and Human Services, through the Centers for Medicare and Medicaid Services ("CMS" or "Administrator"), administers the Medicare statute, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. The Medicare program is divided into several parts, of which Parts A and C are relevant here. Part A covers "inpatient hospital services" furnished to Medicare beneficiaries by participating providers, such as hospitals. 42 U.S.C. § 1395d(a)(1). CMS itself is directly responsible for the costs of Part A services. Id. To coordinate billing by and payment to hospitals under Part A, Medicare contracts with fiscal intermediaries (usually private insurance companies) pursuant to 42 U.S.C. § 1395h.*fn1
Medicare Part C was created by the Balanced Budget Act of 1997 ("BBA '97"). Under Part C, beneficiaries may receive Medicare benefits through private health insurance plans called "Medicareਚ≱" plans. See 42 U.S.C. § 1395w-21(a)(1). Such plans - referred to by the parties as "Medicare HMOs" - receive payment in advance from CMS for each enrollee and are then responsible for the costs of the enrollees' services. The Medicare HMOs themselves coordinate billing and payment with health care providers once services have been provided. See 42 U.S.C. § 1395mm(a).
Health care providers submit claims for services provided- either to fiscal intermediaries (for services provided under Part A) or to Medicare HMOs (for services provided under Part C) - and these claims are paid over the course of the year. At year-end, hospitals file cost reports with the fiscal intermediaries, which reconcile interim payments made over the course of the year with actual reimbursements due. See 42 C.F.R. § 405.1803. The fiscal intermediary makes a final determination, which is appealable to the Provider Reimbursement Review Board ("PRRB" or "Board"). 42 U.S.C. § 1395oo(a). The PRRB's decision is subject to further review by the CMS Administrator, and a hospital may seek review of the Administrator's decision in federal district court. See 42 U.S.C. § 1395oo(f).
To receive payment under Medicare Part A, hospitals submit claim forms (labeled "UB-92" forms) to their fiscal intermediaries. These claims are governed by the regulations set forth at 42 C.F.R. § 424.30 et seq.. Among the requirements are time limits for filing claims, which are codified at 42 C.F.R. § 424.44:
Basic limits. . . . [T]he claim must be mailed or delivered to the intermediary or carrier, as appropriate-
(1) On or before December 31 of the following year for services that were furnished during the first 9 months of a calendar year; and
(2) On or before December 31 of the second following year for services that were furnished during the last 3 months of the calendar year.
42 C.F.R. § 424.44(a).*fn2 The first regulation in the set, § 424.30 (entitled "Scope"), describes what claims the requirements apply to. Section 424.30 states: "This subpart sets forth the requirements, procedures, and time limits for claiming Medicare payments. Claims must be filed in all cases except when services are furnished on a prepaid capitation basis by a health maintenance organization (HMO), a competitive medical plan (CMP), or a health care prepayment plan (HCPP)." Medicare Part C services are "services [that] are furnished on a prepaid capitation basis by a health maintenance organization (HMO)."*fn3 Hence, claims that providers filed with HMOs for payment for services provided to Medicare Part C enrollees are exempted from the requirements. As explained in detail below, a key issue in this case is whether the regulatory exception, which clearly exempts claims filed with Medicare HMOs for services provided to Part C enrollees, also applies to claims filed with fiscal intermediaries for graduate medical education payments associated with the services provided to Part C enrollees.
b. Medical Education Payments
The Medicare program also pays teaching hospitals for certain costs related to graduate medical education. Medicare makes both an "indirect graduate medical education payment" ("IME") and a "direct graduate medical education payment" ("GME"). IME payments are intended to reimburse teaching hospitals providing services to Medicare beneficiaries for their higher-than-average operating costs. See 42 U.S.C. §§ 1395f(b), 1395ww(d). Medicare makes a payment for each Medicare beneficiary discharged by a hospital. See 42 U.S.C. §§ 1395ww(d), 1395w-21(i)(1). The per-discharge payment increases depending on the hospital's ratio of medical residents to beds - i.e., the higher the number of residents or the higher the number of discharges, the greater the IME payment. See 42 U.S.C. § 1395ww(d)(5)(B). The GME payment, on the other hand, is a payment intended to compensate teaching hospitals for the direct costs of graduate medical education incurred because of services provided to Medicare beneficiaries. 42 U.S.C. § 1395ww(h). The amount of the GME payment depends on the number of full-time residents and the Medicare "patient load." Hence, like the IME payment, the GME payment increases when the number of Medicare enrollees or the number of residents rises. See id. Both GME and IME payments, then, depend on the number of residents and the number of Medicare enrollees receiving services from a hospital.
Before the passage of BBA '97, only services provided to Medicare Part A or B beneficiaries were counted in calculating IME and GME payments. That is, the "per-discharge" multiplicand for IME payments did not include discharges of Part C Medicare HMO enrollees, and the "patient load" multiplicand for GME payments did not include Part C Medicare HMO enrollees. BBA '97, however, directed the Secretary to make additional IME and GME payments, phased in over five years, for services provided to Medicare HMO enrollees under Part C. See BBA '97 §§ 4622, 4624 (codified at 42 U.S.C. §§ 1395ww(d)(11), 1395ww(h)(3)(D)(I)).
II. Background and Prior Proceedings
Plaintiffs allege that they were improperly denied supplemental medical education payments by their intermediary, Mutual of Omaha, for the 1999 and 2000 fiscal years. See Hosp. of Univ. of Penn v. Sebelius, 634 F. Supp. 2d 9, 11 (D.D.C. 2009) ("HUP I"). After the fiscal intermediary denied payment, plaintiffs timely appealed to the PRRB. Id. at 11. Plaintiffs argued that, under the applicable regulations, the claims filing requirements do not apply to claims for supplemental medical education payments. See Administrative Record ("A.R.") at 59. Specifically, plaintiffs contended that the "timely filing guidelines" - that is, the deadlines - at 42 C.F.R. § 424.44 do not apply to claims for IME/GME payments for services provided to Medicare Part C enrollees. See id. Plaintiffs now also maintain that they never received adequate notice that the Secretary would apply the claims filing requirements to the supplemental medical education payments. See Compl. ¶ 71. Plaintiffs also argue that the application of the claims filing requirements to claims for supplemental education payments violates the Paperwork Reduction Act, 44 U.S.C. § 3501 et seq., because the Secretary did not seek OMB approval of the filing requirements. See Compl. ¶¶ 123-35. Finally, plaintiffs argued to the PPRB that whatever the resolution of the legal question, they had in fact complied with the filing requirements and deadlines of 42 C.F.R. § 424.44 by mailing appropriately coded UB-92s to their fiscal intermediary in a timely fashion. See A.R. at 59. Plaintiffs produced various forms of evidence in support of this claim to the PRRB at a hearing on May 15, 2007. See HUP I, 634 F. Supp. 2d at 12.
With respect to the legal issue, the Board agreed with plaintiffs that "[t]he claims in question . . . are specifically exempt from the requirements, procedures, and time limits" of 42 C.F.R. § 424. A.R. at 63. The Board explained that the regulations had not been changed after the enactment of BBA '97 and, by the text of the regulation, the exception at 424 C.F.R. § 434.30 applied, thereby exempting these claims from the requirements. See id. at 63-65. The Board therefore concluded that "the Intermediary improperly denied the Providers' submission of IME/[GME] claims for Medicare managed care enrollees due to untimely filing, and the Provider should be given the opportunity to support its claim for payment." Id. at 65. In considering the factual dispute, the PRRB wrote that "[t]he evidence in this case was conflicting" and that it "finds [plaintiffs'] evidence that it filed claims credible, but there is no evidence that the claims were proper for processing." Id. at 63. Nonetheless, the PRRB deemed the factual issue moot in light of its resolution of the legal issue. Id. One member of the PRRB dissented, finding that the regulatory exception did not apply and that plaintiffs had not provided sufficient evidence they mailed the claims. 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 while addressing the factual dispute only briefly. See A.R. at 7-17. Citing the PRRB dissent, the Administrator found that plaintiffs had not established that they had timely mailed UB-92s to the intermediary. Id. at 18. Plaintiffs then appealed to this Court for review.
The Court considered plaintiffs' original suit together with a similar case against the Secretary, Cottage Health Systems v. Sebelius, 631 F. Supp. 2d 80 (D.D.C. 2009). In Cottage Health, the Court assessed the plaintiff's allegation that it did not receive adequate notice that health care providers were required to file UB-92s directly with fiscal intermediaries for the IME/GME payments authorized by BBA '97. Id. at 95. The Court concluded that the Administrator's decision that the plaintiff had been notified of the requirement to file UB-92s with fiscal intermediaries was supported by substantial evidence. Id. The Court found that four documents - three issued by the Secretary to hospitals generally and a letter pertaining only to the Cottage Health plaintiff - supported the Administrator's decision with respect to notifying health care providers of the requirement to file UB-92s with fiscal intermediaries. Id. at 96. The three documents issued by the Secretary were a May 12, 1998 rule published in the Federal Register, a July 1, 1998 Program Memorandum (PM A-98-21), and a July 13, 1998 Medicare Bulletin. See id. at 95-96. The Court found that the Program Memorandum clearly explained that hospitals must submit UB-92s to fiscal intermediaries for the additional IME/GME payments. Id. at 96.
Although Cottage Health upheld the Secretary's determination with respect to notice to hospitals of the requirement to file UB-92s with intermediaries, the Court concluded that the Administrator had not explained in sufficient detail why the plaintiff was notified that the UB-92s must be filed within a specific time frame. Id. at 98-99. The Court noted that the Administrator "did not point to any rule or informal notice that explicitly incorporated the time limits." Id. at 98. Accordingly, the Court remanded to the Secretary "for further explanation as to whether the time limits from 42 C.F.R. §§ 424.30 and 424.44 apply, and if so, why." Id. at 99. The Court also remanded for the Administrator to address the argument that the Paperwork Reduction Act required OMB approval before the implementation of the claims filing requirements. See id. at 99-100.
In its prior decision involving the present parties (HUP I), the Court relied on Cottage Health for resolution of the legal issues. Noting that "the methods of providing notice to hospitals" of the filing requirements are "identical, with limited exception" to the notice considered in Cottage Health, the Court determined that the Administrator's rationale for finding that plaintiffs had notice that the time limits from § 424.44 applied was too cursory for reasoned review. HUP I, 634 F. Supp. 2d at 14.*fn4 The Court ...