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Oakland Physicians Medical Center v. Azar

United States District Court, District of Columbia

September 13, 2018

ALEX M. AZAR, [1] Defendant.




         To appeal, or not to appeal? That is the question Plaintiff Oakland Physicians Medical Center faced in the fall of 2014, after a Medicare administrative contractor (“MAC”) issued two Notices of Program Reimbursement (“NPR”) for the fiscal years ending in 2010 and 2011, which Plaintiff viewed as under-reimbursing it for eligible Medicare costs. How and when Plaintiff could have challenged those determinations is at issue in this case.

         The Medicare statute gives a dissatisfied provider the right to appeal a MAC's final decision to the Provider Reimbursement Review Board, so long as that provider files a request for review “within 180 days after notice of the intermediary's final determination.” 42 U.S.C. § 1395oo(a)(3). Medicare regulations, however, confer some discretion on the Board to extend the 180-period. If the provider files the request for review no more than three years from the date of the NPR and can show “good cause” for the delay in filing, the Board “may” exercise jurisdiction over the appeal. 42 C.F.R. § 405.1836(b)-(c). The regulations define “good cause” to mean “extraordinary circumstances beyond [the provider's] control (such as a natural or other catastrophe, fire, or strike).” Id. § 405.1836(b).

         Plaintiff did not file a request for Board review within 180 days of the 2010 and 2011 NPRs. Instead, Plaintiff moved the MAC to reopen those decisions-a request that the MAC initially granted. But months later, the MAC shut the door on the prospect of a correction by closing the reopenings. In doing so, the MAC found that Plaintiff had contracted away its right to challenge the reimbursement decisions by virtue of a settlement that Plaintiff had reached with the Centers for Medicare and Medicaid Services (“CMS”). Stunned by the MAC's about face, Plaintiff scrambled and filed appeals with the Board, arguing that Plaintiff had good cause to file beyond the 180-day period. The Board disagreed. It refused to extend the 180-day filing period, finding that Plaintiff's decision not to appeal from the 2010 and 2011 NPRs was within its control and therefore Plaintiff had not met the good-cause standard.

         Plaintiff now asks this court for two types of relief. First, Plaintiff asks the court to reverse the Board's no “good cause” determination. Second, it asks the court to order the MAC to “complete the reopenings.” The court declines to do either. The court concludes, contrary to Defendant's argument, that it has jurisdiction to review the Board's refusal to extend the filing deadline, but ultimately finds that the Board's decision that Plaintiff failed to show good cause was neither arbitrary and capricious nor contrary to law. As to Plaintiff's request to compel the MAC to complete the reopenings, the court lacks jurisdiction to do so. Accordingly, for the reasons that follow, the court grants Defendant's Motion for Summary Judgment and denies Plaintiff's Motion for Summary Judgment.


         A. Statutory and Regulatory Background

         The Medicare Act, 42 U.S.C. § 1395 et seq., establishes a federal health insurance program for the disabled and the elderly. A hospital or other provider of medical services participates in the Medicare program under a “provider agreement” with the Secretary of Health and Human Services (“HHS”), the named Defendant in this case. Id. § 1395cc. Part A of the Medicare program provides insurance for participating hospitals and pays them for covered medical services furnished to Medicare-eligible individuals. Id. §§ 1395c to 1395i-4.

         Since 1983, Medicare has reimbursed hospitals for covered services through a prospective payment system. Id. § 1395ww(d); see also UMDNJ-Univ. Hosp. v. Leavitt, 539 F.Supp.2d 70, 71-72 (D.D.C. 2008). Under this system, Medicare payments to hospitals are made using predetermined flat rates for each of more than 450 diagnosis-related groups of treatments and services. See generally 42 C.F.R. § 412 et seq. Among the add-ons to a hospital's reimbursement are the costs associated with graduate medical education. See 42 U.S.C. § 1395ww(d)(5)(B)(iv)(II); id. § 1395ww(h). Reimbursement for such costs is determined in part based on a provider's three-year rolling average of full-time equivalent residents. See Id. § 1395ww(h)(4)(G)(i); 42 C.F.R. § 413.79(d)(3).

         CMS, the sub-agency of HHS that administers the Medicare program, uses “Medicare administrative contractors, ” or “MACs, ” to calculate and disburse reimbursement amounts. See 42 U.S.C. § 1395kk-1. After the close of each fiscal year, a Medicare provider submits to the MAC an annual cost report that sets out in detail the covered services rendered by the provider to Medicare-eligible patients. 42 C.F.R. §§ 413.20(c), 413.24(f). The MAC then reviews the cost report, audits items in the report if necessary, and issues a written Notice of Program Reimbursement, or “NPR, ” containing its determination as to the total amount owed to the provider for Medicare-covered services provided for the year in question. See 42 C.F.R. § 405.1803.

         Providers that are dissatisfied with the reimbursement amounts awarded by a MAC have a way to seek redress. The first level of review is to file an appeal, also known as a request for hearing, with the Provider Reimbursement Review Board. The prerequisites to Board review are set forth in 42 U.S.C. § 1395oo(a). As relevant here, that statute states that a provider of services may obtain a hearing before the Board if the provider:

(1)(A)(i) is dissatisfied with a final determination of the organization serving as its fiscal intermediary . . . as to the amount of total program reimbursement due the provider . . . for the period covered by such [cost] report, . . .
(2) the amount in controversy is $10, 000 or more, and
(3) such provider files a request for a hearing within 180 days after notice of the intermediary's final determination . . . .

42 U.S.C. § 1395oo(a); see also 42 C.F.R. § 405.1835. As to the last of the three requirements- requesting a hearing within 180 days after notice of the final determination-the Supreme Court has held that the timeliness requirement is not a jurisdictional limitation, but a claims-processing rule. See Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145, 153-56 (2013). Nevertheless, missing the 180-day deadline can have severe consequences. Medicare regulations provide that if the Board receives a request for hearing “after the applicable 180-day time limit, ” the appeal generally “must be dismissed by the Board.” 42 C.F.R. § 405.1836(a); see also Id. § 405.1840(a)(2)

(requiring the Board to review the timeliness of a request for hearing).

         All is not totally lost if a provider misses the 180-day filing deadline, but a provider in that circumstance faces a steep uphill climb to secure Board review. Medicare regulations provide that the Board “may extend the time limit upon a good cause showing by the provider.” Id. § 405.1836(a). “Good cause” is defined quite narrowly: “The Board may find good cause to extend the time limit only if the provider demonstrates in writing it could not reasonably be expected to file timely due to extraordinary circumstances beyond its control[.]” Id. § 405.1836(b). The regulation provides as examples of good cause “natural or other catastrophe, fire, or strike.” Id. The provider's request for a good-cause extension must be filed within a “reasonable time, ” and in no event three years after the issuance of the MAC decision that is the subject of the appeal. Id. § 405.1836(b), (c)(2).

         If, after Board review, a provider remains dissatisfied, it may proceed to a second level of review in federal court. As pertinent here, the Medicare statute authorizes “judicial review of any final decision of the Board” by a federal court if the action is filed “within 60 days of the date on which notice of any final decision by the Board . . . is received.” 42 U.S.C. § 1395oo(f)(1). The Medicare regulations, however, purport to remove a Board denial of a “good cause” extension from the reach of a federal court. Specifically, the regulations provide that “[a] finding by the Board . . . that the provider did or did not demonstrate good cause for extending the time for requesting a Board hearing is not subject to judicial review.” 42 C.F.R. § 405.1836(e)(4). As will be seen, whether that regulation squares with the Medicare statute's allowance of judicial review of “any final decision of the Board” is a threshold question in this case.

         The Medicare regulations provide one additional avenue to correct a MAC reimbursement determination: going back to the source. A provider can ask the MAC to reopen its reimbursement determination. See Id. § 405.1885(a)(1). Such a request must be made within three years. See Id. § 405.1885(b)(2)(i). In turn, a MAC may readdress a specific factual or legal finding that arose in the cost report that the provider requests be reopened. See Id. § 405.1885(a)(1). And, importantly for this case, a reopening may address a specific factual or legal finding that “first arose in or was first determined for a cost reporting period that predates the period at issue . . ., and once determined, was used to determine an aspect of the provider's reimbursement for one or more later cost reporting periods.” Id. § 405.1885(a)(1)(iii). A reopening “may” result in a revision of the specific finding challenged, but there is no guarantee that a MAC will do so. See Id. § 405.1885(a)(4).

         The Medicare regulations also address the interplay between a request for reopening and an appeal to the Board. Importantly, the regulations state that “[a] request to reopen does not toll the time in which to appeal an otherwise appealable determination or decision.” Id. § 405.1885(b)(2)(ii) (emphasis added). Furthermore, “[a] reopening by itself does not extend appeal rights.” Id. § 405.1887(d). If a MAC reopens a determination but refuses to revise it, that decision is not subject to further administrative review. See id.; cf. Id. § 405.1885(a)(5) (providing only that a “revised determination or decision” is appealable); id. § 405.1889(b)(1) (stating that “only those matters that are specifically revised” are within the scope of an appeal). A non-revised portion of a cost report may not be appealed, even if other portions are revised and appealable. See Id. § 405.1887(d); id. § 405.1889(b)(2) (“Any matter that is not specifically revised (including any mater that was reopened but not revised) may not be considered in any appeal of the revised determination or decision.”). And, lastly, the Medicare regulations provide, and the Supreme Court has confirmed, that the decision of a MAC not to reopen an NPR is not subject to judicial review. See Id. § 405.1885(a)(6); Your Home Visiting Nursing Servs. v. Shalala, 525 U.S. 449, 454-58 (1999).

         B. Factual Background

         Plaintiff Oakland Physicians Medical Center, which operates as Pontiac General Hospital, is an acute care inpatient hospital located in Pontiac, Michigan. Compl., ECF No. 1, ¶¶ 1, 19. Plaintiff runs an accredited residency program in family medicine. Id. ¶ 48; Answer, ECF No. 9, ¶ 48. For years, Plaintiff has sought and received reimbursement from Medicare for direct and indirect eligible costs associated with operating this program. Compl. ¶ 48; Answer ¶ 48.

         On October 17, 2014, the MAC issued to Plaintiff an NPR for the fiscal year ending 2010. Administrative R., ECF No. 24 [hereinafter AR], at 87. A month later, on November 17, 2014, the MAC issued to Plaintiff an NPR for 2011. AR 1. As to both the 2010 and 2011 NPRs, Plaintiff believes that it did not receive reimbursement for the full amount of eligible costs associated with its residency program during those years. Compl. ¶ 51. That underpayment, according to Plaintiff, resulted from an error made by the MAC with respect to the 2009 NPR. See Id. ¶¶ 50-51. Recall that reimbursement for resident education is calculated in part based on a provider's three-year rolling average of full-time equivalent (“FTE”) residents. See 42 U.S.C. § 1395ww(h)(4)(G)(i); 42 C.F.R. § 413.79(d)(3). For 2009, the MAC eliminated 100% of Plaintiff's FTE count for purposes of determining Plaintiff's residency program-associated costs due to insufficient documentation. Compl. ¶ 50; Answer ¶ 50. The MAC's elimination of the FTE count in the 2009 NPR adversely affected not only the reimbursements for that fiscal year, but also for the two subsequent fiscal years, 2010 and 2011, because of ...

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