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April 3, 1998

DONNA E. SHALALA, Secretary of Health and Human Services, in her official capacity, BRUCE C. VLADECK, Administrator, Health Care Financing Administration, in his official capacity, and RICHARD C. RINSCHLER, Director, Provider Audit and Settlement, Blue Cross of Western Pennsylvania, in his official capacity, Defendants.

The opinion of the court was delivered by: VAN ANTWERPEN


 Van Antwerpen, J.

 April 3, 1998


 Plaintiff Ashland Regional Medical Center ("Ashland") seeks judicial review of a final determination of the Provider Reimbursement Review Board ("PRRB" or the "Board") of the Health Care Financing Administration ("HCFA") denying jurisdiction over Ashland's appeals from the Blue Cross of Western Pennsylvania's (a fiscal intermediary) decision refusing to reopen prior years' Medicare reimbursement claims to allow retroactive recognition of Ashland's status as a Medicare Dependent Small Rural Hospital ("MDH"). Plaintiff asks this court to remand this case to the PRRB for a hearing on the merits of retroactively declaring Ashland a MDH. Alternatively, Plaintiff argues that because the PRRB's administrative record is incomplete, this case must be remanded to the PRRB with directions to develop a complete record and to provide a full and satisfactory explanation of its decision.

 Pursuant to a stipulation of the parties approved by the court on February 10, 1998, Plaintiff and Defendants have agreed that there are no issues of material fact and have filed cross-motions for summary judgment. For the reasons discussed below, we will grant the Defendants' Motion for Summary Judgment and deny the Summary Judgment Motion filed by the Plaintiff.

 II. FACTS *fn1"

 Ashland is a provider of inpatient hospital services which receives reimbursement for the cost of providing those services to Medicare beneficiaries, pursuant to Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. (the "Medicare Act"). Under the Medicare Act, private insurance companies, like Blue Cross of Western Pennsylvania ("Blue Cross" or the "Intermediary"), act as intermediaries for the Secretary of Health and Human Services and determine the amount of reimbursement that providers are due. Providers, like Ashland, are paid under a prospective payment system ("PPS"). In lay terms, this means that hospitals are paid for their services to Medicare patients according to predetermined schedules of national and regional rates, and not according to the actual costs or charges.

 In 1989, Congress amended the Medicare Act to create a new category of hospitals known as "Medicare dependent small rural hospitals" ("MDHs"). MDHs can potentially receive two adjustments to its Medicare reimbursement. First, an MDH can receive a special payment adjustment to its PPS payments. 42 U.S.C. § 1395ww(d)(5)(G)(I). Second, a MDH can also receive an adjustment known as "the MDH volume adjustment." 42 U.S.C. § 1395ww(d)(5)(G)(iii). The bottom line is that a hospital classified as a MDH will receive more money for its services than the same hospital if it were not classified as a MDH.

 A hospital must meet a number of criteria to be classified as a MDH, however the only criterium important for this case is that the hospital have fewer than 100 beds. Federal regulations specify the manner by which hospitals should calculate the number of beds applicable to this requirement. According to the regulations, the number of beds are calculated "by counting the number of available bed days during the cost recording period, not including beds assigned to newborns, custodial care, and excluding distinct part hospital units, and dividing that number by the number of days in the cost reporting period." 42 C.F.R. § 412.105(b)(1992).

 In order to receive Medicare reimbursements, hospitals submit cost reports to intermediaries who analyze and, if necessary, audit the report. The intermediary applies the Medicare reimbursement policies in effect for the cost reporting period and issues the final determination of Medicare reimbursement for the final year which is set forth in a Notice of Program Reimbursement ("NPR").

 If a provider is dissatisfied with any aspect of the reimbursement provided in the NPR, it can request a hearing before the PRRB. In order to qualify for PRRB review, the amount in controversy must be at least $ 10,000 and the provider must submit a hearing request within 180 days of the initial NPR. 42 U.S.C. §§ 1395oo(a),(b). The appeal of a provider's MDH status must be made during the course of the usual appeal of the NPR. If the jurisdictional prerequisites are met and the PRRB has the authority to decide the matter at issue, see 42 C.F.R. §§ 405.1839, 405.1867, then the PRRB may hold a hearing and issue a decision that is potentially subject to further review by the Administrator of the HCFA. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1875. Thereafter, the statute allows for appeal to a U.S. District Court. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1877. In order to obtain judicial review of the agency decision, whether issued by the PRRB or the HCFA Administrator, the provider must file an action within 60 days after being notified of the final decision. 42 U.S.C. §§ 405(h), 1395(ii), 1395oo(f)(1).

 Separate from the statutory administrative and judicial appeals process, the Secretary's regulations provide for reopening of final reimbursement determinations. If a provider does not timely appeal the specific determination included in the initial NPR, then the cost report is considered final. The regulations permit, however, reopening a cost report to make limited corrections on otherwise final reimbursement determinations. An intermediary's determination "may be reopened with respect to findings on matters at issue" either on a motion of the intermediary or the provider, provided that the reopening request is made within three years of the finalization of the specific cost report determination included in the NPR. 42 C.F.R. § 405.1885(a).

 An intermediary is required to reopen a decision in certain situations not at issue in this case. 42 C.F.R. § 412.1885(b). Otherwise, according to the Board's position, an intermediary's decision to reopen a case is discretionary. Under PRM regulations, "whether or not the intermediary will reopen a determination, otherwise final, will depend on whether new and material evidence has been submitted, or a clear and obvious error was made, or the determination is found to be inconsistent with the law, regulations and rulings, or general instructions." PRM § 2931.2, reprinted in CCH Medicare and Medicaid Guide P 7738 ("PRM").

 The regulations specifically provide that when reopening is granted, a provider has the right to appeal the result of the reopening to the PRRB. 42 C.F.R. § 412.1889. However, if the fiscal intermediary denies a reopening request, the regulations do not authorize an appeal to the PRRB, but instead provide that "jurisdiction for reopening a determination or decision rests exclusively with the administrative body that rendered the last determination or decision." 42 C.F.R. § 412.1885(c). Thus, the PRM states that "[a] provider has no right to a hearing on a finding by an intermediary or hearing officer that a reopening or correction of a determination or decision is not warranted." PRM § 2931.1.

 PRM § 2931.2 also gives the intermediary discretion to permit a provider to file an amended cost report in limited circumstances. However, according to the Board, "once a cost report is filed, the provider is bound by its elections." Generally, "a provider may not file an amended cost report to avail itself of an option it did not originally elect." PRM § 2931.2. An intermediary's refusal to permit a provider to amend a cost report falls under the scope of the reopening regulations, Westchester General Hospital v. Blue Cross and Blue Shield Association/Blue Cross of Florida, CCH Medicare and Medicaid Guide P 45,181 at 53,489 (HCFA Administrator Decision 1997), and is not a reviewable decision. Bon Secours Heartlands Home Health Agency v. Blue Cross and Blue Shield Association/Blue Cross and Blue Shield of Maryland, CCH Medicare and Medicaid Guide P 41,690 at 37,337 (HCFA Administrator Decision 1993).

 At issue in this case are Ashland's reimbursement claims involving three fiscal years ending ("FYE")February 14, 1992, June 30, 1992, and June 30, 1993. Ashland took over the operation of the former Ashland State General Hospital ("ASGH") from the Commonwealth of Pennsylvania on or about February 15, 1992. When filing cost reports with Blue Cross for the above three time periods, Ashland followed its predecessor's practice of listing the number of licensed beds instead of the average number of beds available. This led Ashland to report that it had more than 100 beds. Ashland asserts, however, that the number of beds actually available throughout these three time periods was always less then 100 beds. Thus, because of the hospital's bed reporting errors, Blue Cross determined that Ashland was not entitled to MDH status. Had Ashland been declared a MDH, it would have received an extra estimated $ 1,530,870 for FYE 2/14/92, an extra estimated $ 910,514 for FYE 6/30/92 and an extra $ 2,987,561 for FYE 6/30/93. All told, Ashland's reporting error cost the hospital an estimated $ 5,428,945 in Medicaid reimbursements.

 In March of 1994, Ashland became aware that it qualified as an MDH, after learning that a similarly situated hospital had obtained MDH classification, retroactively, by counting the number of available beds instead of the number of licensed beds. Ashland contacted both the HCFA and Blue Cross on or about April 1994 and requested recognition of its status as a MDH for the current cost reporting period, as well as retroactive recognition for the three prior reporting periods. Ashland claimed that it could substantiate that the hospital maintained less than 100 beds during the relevant times. Based on evidence submitted by Ashland, HCFA's region office confirmed that Ashland maintained less than 100 beds and recognized that Ashland qualified as a MDH for FYE 1994. Plain. Ex. A.

 Meanwhile on June 23, 1994 and November 22, 1995, based on the cost reports originally submitted by Ashland, Blue Cross issued Notices of Program Reimbursement ("NPR") for the hospital for FYE's 2/14/92, 6/30/92 and 6/30/93 which did not provide for Ashland's reimbursement as an MDH. Administrative Record ("A.R.") at 7-31, 110-23, 272-98. Nevertheless, Ashland continued to press for retroactive MDH status. HCFA, however, indicated that it could not verify Ashland's status as an MDH retroactively and directed the hospital to Blue Cross for a determination whether the prior cost reports might be reopened to allow Ashland to amend the number of beds reported. A.R. at 76. HCFA stated that the Intermediary would have to decide whether the cost reports could be reopened and whether amended cost report information could be accepted. Id.

 Ashland then requested that the Intermediary reopen the NPRs by a October 13, 1994 letter. Answer at P 17. *fn2" Blue Cross examined the hospital's cost reports from 1991 through 1994 to determine whether the hospital's square feet had been changed in the reports. A.R. at 78-79. The Intermediary also visited Ashland to examine the number of beds available to substantiate the change in square feet reported in the 1994 report (which was substantially different from those reported in the three prior cost reports). Id. ; Answer at P 20. However, according to the Plaintiff, the Intermediary refused to complete the review process by allowing Ashland to offer additional substantiation of its MDH claims. A.R. at 79. And, Blue Cross decided not to reopen any of the cost reports from prior years. Id.

 On December 14, 1994, Ashland filed requests for appeal with the Board based on Blue Cross's refusal to reopen the NPRs to allow Ashland's cost reports to be amended to reflect the hospital's MDH status. A.R. at 108-09, 195-96; Plain. Ex. C. The Intermediary, through a February 23, 1995 memo, informed the Board of its opinion that the Board lacked jurisdiction over the Intermediary's refusal to reopen the NPRs. A.R. at 90. The Board directed Ashland to submit position papers responding to the Intermediary's challenge to the Board's jurisdiction over the matter. Ashland complied with the Board's request by filing briefs and exhibits. A.R. at 38-88, 124-75, 299-350. The Intermediary did not file any position papers on the issue, beyond its February 23rd letter.

 On August 5, 1996, the Board notified Ashland and the Intermediary that HCFA had misplaced the files for the cases at issue. A.R. at 93. The Board requested Ashland to submit copies of its initial appeal requests, the Intermediary's final determination being appealed and its position papers. The Intermediary was requested to supply copies of any documentation it previously sent regarding these cases so that the files could be reconstructed. Id. According to the Plaintiff, the material submitted by the Intermediary amounts to only 12 pages out of the 366 page reconstructed ...

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