OTIS R. BOWEN, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS V. TALLAHASSEE MEMORIAL REGIONAL MEDICAL CENTER, ET AL. No. 87-380 In the Supreme Court of the United States October Term, 1987 The Solicitor General, on behalf of the Secretary of Health and Human Services and the Administrator, Health Care Financing Administration, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Eleventh Circuit in these consolidated cases. Petition for a Writ of Certiorari to the United States Court of Appeals for the Eleventh Circuit PARTIES TO THE PROCEEDING In addition to the petitioner named in the caption, William Roper, Administrator, Health Care Financing Administration, /*/ was a defendant in the district courts and is a petitioner in this Court. In addition to the respondents named in the caption, the following were plaintiffs in the district courts and are respondents in this Court: Parkway Medical Center; Palm Beach Gardens Community Hospital; Clearwater Community Hospital; Amisub of Florida; Baptist Hospital of Miami; Abbey Hospital and Medical Center; Bascom Palmer Eye Institute; Bethesda Memorial Hospital; Boca Raton Community Hospital; Broward General Medical Center; Cedars Medical Center; Doctors General Hospital; Doctors Hospital of Lake Worth; Florida Keys Memorial Hospital; Florida Medical Center; Highlands General Hospital; Holy Cross Hospital, Inc.; Imperial Point Medical Center; Jackson Memorial Hospital; James Archer Smith Hospital; Larkin General Hospital; Los Olas General Hospital; Martin Memorial Hospital; Mercy Hospital, Inc.; North Broward Hospital; Palm Beach-Martin County Medical Center; Pembroke Pines General Hospital; Walker Memorial Hospital; Jay Hospital; Jackson Hospital; Gadsden Memorial Hospital; Doctor's Memorial Hospital; Santa Rosa Hospital; Shands Teaching Hospital and Clinic. TABLE OF CONTENTS Question Presented Parties to the Proceeding Opinions below Jurisdiction Statutes involved Statement Argument Conclusion OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-64a) is reported at 815 F.2d 1435. The opinion of the United States District Court for the Southern District of Florida on the motions for summary judgment (App., infra, 65a-72a) is reported at 614 F. Supp. 564. That court's opinion on the motions to dismiss, its final judgment, and its opinion on the motion for reconsideration (App., infra, 73a-80a, 81a-83a, 84a-85a) are unreported. The opinion and final judgment of the United States District Court for the Northern District of Florida (App., infra, 86a-92a) are unreported. The opinion of the Provider Reimbursement Review Board (App., infra, 93a-100a) is unreported. JURISDICTION The judgment of the court of appeals (App., infra, 101a-102a) was entered on May 5, 1987. On July 28, 1987, Justice White extended the time for filing a petition for a writ of certiorari to and including September 2, 1987. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTES INVOLVED The relevant provisions of the Medicare statute are set forth at pages 103a-106a of the appendix to this petition. QUESTION PRESENTED Whether the Provider Reimbursement Review Board may consider a health care provider's claim that it is entitled to reimbursement under the Medicare statute for a particular cost when the provider failed to seek reimbursement for that cost from its fiscal intermediary and did not otherwise reserve before the intermediary its right to seek reimbursement for that cost. STATEMENT 1. At the time of the events at issue in this case, all "providers" of health care services to Medicare beneficiaries were reimbursed by the Secretary of Health and Human Services on an annual basis for the "reasonable cost" of those health care services (42 U.S.C. (& Supp. III) 1395f(b), 1395x(u) and (v)(1)(A)). /1/ Over the course of the year, the Secretary made payments to a provider based upon an estimate of the amounts owed to the provider. 42 U.S.C. 1395g; 42 C.F.R. 413.60. At the end of the year, the provider submitted a claim for reimbursement in the form of a "cost report." See 42 U.S.C. (& Supp. III) 1395f(a); 42 C.F.R. 413.20(a) and (b), 413.24(f). /2/ The cost report is "a lengthy document consisting of numerous schedules, worksheets, and supplemental worksheets. * * * (A) cost report, when completed, is approximately three-qurters of an inch thick" (Athens Community Hospital, Inc. v. Schweiker, 743 F.2d 1, 3 (D.C. Cir. 1984)). Providers list on the worksheets cost items for which they do not seek reimbursement because those cost items supply background information that supports the provider's cost claims. The cost report is submitted to the provider's "fiscal intermediary" for review. /3/ The intermediary audits the cost report and issues a Notice of Program Reimbursement specifying the total amount of reimbursement due to the provider and explaining any adjustments to the costs claimed by the provider. See 42 C.F.R. 405.1803. /4/ If a provider has timely filed its cost report and is "dissatisfied with (the intermediary's) final determination * * * as to the amount of total program reimbursement due the provider" or has not received a final determination on a "timely basis," the provider "may obtain a hearing with respect to such cost report" before the Provider Reimbursement Review Board (PRRB) (42 U.S.C. (& Supp. III) 1395oo(a)(1); see also 42 C.F.R. 405.1835). /5/ The PRRB is authorized by statute (42 U.S.C. 1395oo(d)) to affirm, modify, or reverse a final determination of the fiscal intermediary with respect to a cost report and to make any other revisions on matters covered by such cost report (including revisions adverse to the provider of services) even though such matters were not considered by the intermediary in making such final determination. The Board's decision is final unless the Secretary reverses, affirms, or modifies the decision within 60 days. The Board's decision -- or the Secretary's modified decision, if any -- is subject to judicial review in federal district court pursuant to the Administrative Procedure Act. 42 U.S.C. (& Supp. III) 1395oo(f)(1); 42 C.F.R. 405.1875, 405.1877. The statute establishes a second, more expeditious route into court in certain circumstances. A provider may obtain direct judicial review of "any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines * * * that it is without authority to decide the question." 42 U.S.C. (& Supp. III) 1395oo(f)(1); see also 42 C.F.R. 405.1842). /6/ 2. Respondents all are certified as providers of health services under the Medicare program. The substantive issue in this case in the courts below was the validity of a regulation promulgated by the Secretary in 1979, which established the level of Medicare reimbursement for medical malpractice insurance costs. Thirty respondents "ignored the 1979 rule and filled out their cost reports (for fiscal years covered by the 1979 rule) as if it did not exist," claiming reimbursement for malpractice insurance costs under the pre-1979 rule; the fiscal intermediaries disallowed the claims to the extent they exceeded the reimbursement permitted under the 1979 rule. App., infra, 10a. Five respondents, Santa Rosa Hospital, Jackson County Hospital, Shands Teaching Hospital and Clinic, Mercy Hospital, and Abbey Hospital and Medical Center, followed the 1979 rule in seeking reimbursement for medical malpractice costs, and did not request reimbursement at the higher, pre-1979 rate. These hospitals thus "self-disallowed" medical malpractice costs to the extent those costs exceeded the reimbursement permitted under the 1979 rule. App., infra, 10a-11a. The court of appeals observed that "(b)ecause (these hospitals) did not file under the pre-1979 rule * * * their fiscal intermediaries did not need to adjust their cost reports downward to bring them into conformity with the 1979 rule. Thus, the (Notices of Program Reimbursement) for these five hospitals did not reflect any adjustments or denials of claims" (id. at 11a). All of the hospitals sought review of the intermediaries' determinations before the Provider Reimbursement Review Board. With respect to the 30 hospitals that had raised the malpractice insurance reimbursement issue before their intermediaries, the Board concluded that it was appropriate to authorize direct judicial review of the matter pursuant to 42 U.S.C. (& Supp. III) 1395oo(f)(1) because there were no factual matters in dispute and the Board did not have authority to determine the validity of the 1979 regulation. See App., infra, 10a-12a. The Board concluded that it lacked jurisdiction over the claim of the five hospitals that failed to raise the malpractice reimbursement issue before their intermediary (App., infra, 93a-100a). It observed that "the malpractice issue was not raised in the Provider's cost report(s); nor have any amended cost report(s) been accepted by the Intermediary on this issue; nor have any Notices of Program Reimbursement (NPR's) included any denials or adjustments of cost(s) pertaining to the subject issue" (id. at 93a). The Board stated that "(w)ithout any notice of a claimed cost on a cost report, the intermediary is precluded from considering the matter and making any final determination for that particular item which especially applies to self-disallowed costs. The intermediary's final determination is a statutory prerequisite for Board (or judicial) jurisdiction. Thus, the Board's jurisdiction flows from the intermediary's (Notice of Program Reimbursement) with respect to the filed cost report, and the disputes arising from costs claimed in the cost report" (App., infra, 95a). "When the provider files a cost report, the particular cost must be claimed therein or (the provider must) state its claim and disclose its position on an issue so the intermediary can consider and make a final determination which was not done in this case. This is essential to Board jurisdiction" (id. at 96a). The hospitals sought judicial review in two district courts, the United States District Court for the Southern District of Florida and the United States District Court for the Northern District of Florida. See App., infra, 65a-80a, 86a-92a. Both courts invalidated the 1979 rule regarding reimbursement for medical malpractice insurance costs (id. at 65a-72a, 89a-90a). The courts reversed the Board's determination regarding the scope of its jurisdiction. They concluded that "(t)here is no statutory requirement that in the course of filing the 'cost report' * * * a provider must also 'raise an issue'"; a claim is "within the jurisdiction of the Board" as long as the cost was listed in the cost report. Id. at 77a-78a; see also id. at 88a. 3. The court of appeals upheld the district courts' conclusion that the five self-disallowing hospitals are entitled to challenge the 1979 rule (App., infra, 1a-64a). /7/ The court of appeals found that the statutory provision relevant to this question is 42 U.S.C. (& Supp. III) 1395oo(f)(1), the provision of the Medicare statute that addresses judicial review. The court observed that the first right to judicial review set forth in Section 1395oo(f)(1) relates to review of "decisions of the (PRRB)" (App., infra, 52a (emphasis in original)). The availability of review under this provision is therefore "affected by (42 U.S.C. 1395oo(d)), which defines the scope of the decisionmaking power of the PRRB" (ibid.). The second grant of judicial review authorizes expedited judicial review of "any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines * * * that it is without authority to decide the question" (42 U.S.C. (& Supp. III) 1395oo(f)(1)). The statute states that "(i)f a provider of services" is entitled to a hearing before the Board under 42 U.S.C. (& Supp. III) 1395oo(a), it may place before the Board a request for immediate judicial review. The court of appeals stated that the provision for expedited judicial review "does not involve decisions of the PRRB, but rather permits review when the PRRB 'determines' that it does not have the authority to make a decision about an issue"; the court concluded that the statutory limitations upon the Board's authority to issue a decision altering the Notice of Program Reimbursement are irrelevant in ascertaining the availability of judicial review under this portion of the statute (App., infra, 53a (emphasis in original)). The court stated that "in cases where the PRRB does not have the authority to decide a question of law or regulation, a provider can obtain judicial review by fulfilling the requirements of (Section 1395oo(a)) and petitioning for a determination * * * that the PRRB lacks the needed authority" (ibid.). The court indicated that the provider need not raise a reimbursement claim before its intermediary in order to satisfy these requirements (id. at 53a, 58a-61a). /8/ Judge Edmondson dissented with respect to the self-disallowance issue (App., infra, 63a-64a). He observed that expedited judicial review is available as to "'any action of a fiscal intermediary which involves a question of law or regulation relevant to the matters in controversy'" (id. at 63a, quoting 42 U.S.C. (& Supp. III) 1395oo(f)(1) (emphasis added by Judge Edmondson)). Judge Edmondson stated that "(t)he five 'self-disallowing' hospitals in this case never requested their fiscal intermediary for reimbursement under the pre-1979 malpractice rule. Instead, they requested the lesser reimbursement available under the 1979 rule" (id. at 64a). Thus "the fiscal intermediary took no action with respect to the 'self-disallowing' hospitals' claims (now advanced to (the court of appeals)) for excess reimbursement available under the pre-1979 rule"; and, "(i)n the absence of such action by the fiscal intermediary, federal courts lack jurisdiction to review the self-disallowing hospitals' claims" (ibid. (footnote omitted)). ARGUMENT The question presented in this case is the same as the question presented in Bethesda Hospital Ass'n v. Bowen, petition for cert. pending, No. 86-1764. /9/ Although the legal reasoning of the court below differs somewhat from that employed by the court of appeals in Bethesda Hospital Ass'n, the court of appeals here acknowledged (App., infra, 56a) that its holding conflicts with the holding in Bethesda Hospital Ass'n. /10/ At bottom, the question in both cases is whether the Medicare statute requires a provider to raise a reimbursement claim before the intermediary in order to obtain further administrative or judicial review. For the reasons stated in our response (at 7-11) to the petition for a writ of certiorari in Bethesda Hospital Ass'n, we believe that the court of appeals in that case correctly held that a provider must raise a reimbursement claim before its intermediary in order to obtain further review of that claim. Because of the conflict among the courts of appeals and the importance of the issue, however, we have suggested that the Court should grant the petition for a writ of certiorari in Bethesda Hospital Ass'n. CONCLUSION The petition for a writ of certiorari should be held and disposed of as appropriate in light of the disposition of Bethesda Hospital Ass'n v. Bowen, petition for cert. pending, No. 86-1764. Respectfully submitted. DONALD B. AYER Acting Solicitor General /11/ AUGUST 1987 /*/ Carolyne K. Davis was Administrator of the Health Care Financing Administration at the time the complaints were filed. Her successor is automatically substituted as a petitioner by operation of Rule 40.3 of the Rules of this Court. /1/ These cases concern payments under "Part A" of the Medicare statute, which provides coverage for "the costs of hospital, related post-hospital, home health services, and hospice care" (42 U.S.C. 1395c). /2/ The report is due three months after the end of the provider's fiscal year. The provider may obtain a 30-day extension of the due date for "good cause." 42 C.F.R. 413.24(f)(2). /3/ The intermediary, which is generally a private insurance company, is an entity that, pursuant to a contract with the Secretary, acts as the Secretary's agent in reviewing the provider's claims and determining the amount of reimbursement owed to the provider. See 42 U.S.C. (& Supp. III) 1395h; 42 C.F.R. 421.3, 421.100-421.128. /4/ The reimbursement award specified in the Notice of Program Reimbursement is compared to the Secretary's payments to the provider. Any deficiency is paid by the Secretary and any overpayment is repaid by the provider. 42 C.F.R. 405.1803(c), 413.60. /5/ Review by the PRRB is available only if the amount in controversy is $10,000 or more and the provider's request for a hearing is timely filed (42 U.S.C. (& Supp. III) 1395oo(a)(2) and (3)). /6/ A final decision may be reopened by the intermediary, the Board, or the Secretary in certain circumstances. See 42 C.F.R. 405.1885. /7/ With respect to the substantive challenge to the 1979 reimbursement rule, the court upheld the district courts' invalidation of the rule and rejected the Secretary's contention that a rule promulgated in 1986 applied retroactively to the hospitals' claims. The court concluded that the hospitals are entitled to reimbursement under the pre-1979 rule. App., infra 20a-43a. /8/ The court noted that another panel of the Eleventh Circuit had concluded in North Broward Hospital District v. Bowen, 808 F.2d 1405 (1987), petition for cert. pending, No. 86-1986, that the Board lacked jurisdiction over reimbursement claims that had not been raised before the intermediary. The court of appeals here explained that the different results were attributable to the difference between the two types of judicial review available under Section 1395oo(f)(1). App., infra, 44a-45a. /9/ We have served petitioner's counsel with a copy of our response to the petition in Bethesda Hospital Ass'n. /10/ The court below acknowledged that the Provider Reimbursement Review Board may authorize a provider to seek expedited judicial review only if the provider's request for a hearing is properly before the Board pursuant to 42 U.S.C. (& Supp. III) 1395oo(a). By holding that the five self-disallowing hospitals are entitled to judicial review of their claims here, the court concluded that the requirements of Section 1395oo(a) may be satisfied even though a provider fails to raise its claim before the intermediary. The courts of appeals that have found presentation of the claim to the intermediary to be a condition precedent to further review have interpreted Section 1395oo(a) in precisely the opposite manner. See our response (at 3) in Bethesda Hospital Ass'n. Moreover, the statutory provision relied upon by the court below authorizes expedited judicial review of an "action of the fiscal intermediary" (42 U.S.C. (& Supp. III) 1395oo(f)(1)); the court below found this requirement satisfied despite the absence of any action by the intermediary with respect to respondents' self-disallowed reimbursement claims. In Bethesda Hospital Ass'n, by contrast, the court of appeals concluded that the statute authorizing the Board to review a "final determination of the fiscal intermediary" (42 U.S.C. 1395oo(d)) requires the presentation of a reimbursement claim to the intermediary as a condition precedent to Board action. These conflicting interpretations of the parallel statutory language plainly rest upon different views of the administrative review scheme established by the Medicare statute. /11/ The Solicitor General is disqualified in this case. APPENDIX