824 F.3d 968
10th Cir.2016Background
- Caring Hearts, a Medicare home-health provider, was audited and CMS demanded repayment of over $800,000, finding some patients not "homebound" or services not "reasonable and necessary."
- CMS applied regulatory and policy standards that were adopted after the services were rendered (2008), including narrowed homebound definitions and new documentation requirements (2010+), which the agency conceded were prospective only.
- Under the controlling (earlier) regulations and CMS’s prior interpretations, several patients (e.g., an immobile, wheelchair-bound 85-year-old) likely qualified as homebound and the therapy/nursing services met prevailing medical standards.
- Caring Hearts sought relief under 42 U.S.C. § 1395pp, which waives repayment when providers did not know and could not reasonably have known charges were improper; CMS denied relief, reasoning providers should have known their conduct was unlawful under later rules.
- The Tenth Circuit vacated the agency decision and remanded, holding CMS applied the wrong (post-dating) law and therefore could not sustain a penalty or reject the § 1395pp defense on that basis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CMS could deny § 1395pp relief because provider "knew or should have known" services were improper when CMS relied on regulations adopted after the services. | Caring Hearts: CMS applied later, prospective rules; under contemporaneous regs and CMS's own prior interpretation providers lacked notice and are entitled to § 1395pp relief. | CMS: Providers should have known statutory/homebound and documentation standards; later regulations and prior litigation positions put providers on notice. | Court: CMS applied the wrong law; denial unsustainable. Vacated and remanded. |
| Proper interpretation of "homebound" status for 2008 services (statute vs. later regulatory gloss). | Caring Hearts: Statute and prior regs support a reading that a patient who cannot leave home without a supportive device is homebound; second sentence of statute is hortatory. | CMS: Statute requires both inability to leave even with device and that leaving requires considerable and taxing effort (consistent with later regs). | Court: Multiple textual clues and prior CMS interpretation made Caring Hearts' reading reasonable; CMS cannot rely on later regulatory narrowing to deny relief. |
| Whether CMS could rely on post-2008 documentation regulations to find therapy/skilled-nursing not "reasonable and necessary." | Caring Hearts: Contemporaneous § 409.44(c)(2)(i) required conformity with accepted medical practice, not the later detailed documentation standards; provided care satisfied medical standards. | CMS: Documentation requirements (adopted 2010) show provider should have known their notes were insufficient. | Court: CMS cited and relied on regulations that did not exist in 2008; cannot sustain denial based on post-dating rules. |
| Whether § 1395pp permits waiver for mistaken homebound determinations. | Caring Hearts: § 1395pp(a)(1) and (g)(1)(A) expressly cover errors about whether an individual "is or was not confined to his home." | CMS: § 1395pp only applies to reasonable-and-necessary and custodial-care disputes, not homebound status. | Court: Statute includes homebound errors; CMS's narrower reading is incorrect. |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (framework for reviewing agency statutory interpretations)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (court may uphold agency only on grounds the agency relied upon)
- Lax v. Astrue, 489 F.3d 1080 (10th Cir. 2007) (review requires correct legal standards and substantial evidence)
- Sandoval v. Aetna Life & Casualty Ins. Co., 967 F.2d 377 (10th Cir. 1992) (failure of substantial evidence or mistake of law can be arbitrary and capricious)
- Danti v. Lewis, 312 F.2d 345 (D.C. Cir. 1962) (agency action arbitrary when based on standards that did not exist at application time)
- Gatson v. Bowen, 854 F.2d 379 (10th Cir. 1988) (EAJA fees may be granted where agency position not substantially justified)
- Estate of Smith v. O'Halloran, 930 F.2d 1496 (10th Cir. 1991) (EAJA and substantial-justification standards)
- Dep't of Transportation v. Ass'n of American Railroads, 135 S. Ct. 1225 (2015) (discussion of separation-of-powers concerns arising from agency rulemaking)