798 F. Supp. 2d 170
D.D.C.2011Background
- Genesis Health Ventures, Inc. sued Kathleen Sebelius to overturn a Board decision on FY1996 Medicare reimbursements for 30 skilled nursing facilities.
- The Board affirmed a fiscal intermediary’s disallowance of nursing administration costs allocated to therapy salaries, reducing reimbursements by about $390,685.
- Genesis had previously allocated nursing administration costs using nursing and therapy salaries, based on verbal approval from its prior intermediary (Aetna) starting in 1990.
- Veritus Medicare Services, the 1996 intermediary, deleted therapy salaries from the allocation basis, citing therapy as ancillary and requiring nursing admin costs to be allocated only by nursing salaries.
- Genesis appealed to the Board in 1998; the Board upheld the deletion in 2010, and CMS declined to review in March 2010, making the Board decision final.
- Genesis argues (i) §2313 requires only verbal approval or that the Board misread §2313, (ii) there was auditable documentation supporting therapy salaries, (iii) treatment of providers was inconsistent, and (iv) equitable estoppel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper interpretation of §2313 prior approval | Verbal approval suffices under §2313. | §2313 requires written request and formal written approval; no proper approval here. | Board’s interpretation upheld; no proper written approval, so Genesis cannot rely on verbal approval. |
| Auditable documentation to support allocation | Auditable docs beyond payroll were not required if prior approval existed. | Auditable documentation was required to show nursing administration served therapy; there was insufficient documentation. | Court agrees with Board; insufficient auditable documentation to support the allocation. |
| Consistency of Secretary’s treatment of providers | Secretary inconsistently allowed therapy-salaries allocation for some providers and not for Genesis. | Inconsistencies at the intermediary level do not bind the Secretary; each case can be treated on its own facts. | Court rejects claim of inconsistent treatment binding the Secretary. |
| Equitable estoppel against the government | Secretary is estopped due to reliance on verbal intermediary advice. | Estoppel requires reasonable reliance; here reliance on oral advice was unreasonable given §2313’s text. | Estoppel rejected; reliance deemed unreasonable. |
| Standard of review | APA standards support reversing the Board. | Court should defer to agency’s expertise and interpretation of Medicare rules. | Court grants defendant summary judgment; Board’s decision affirmed. |
Key Cases Cited
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (U.S. 1994) (reasonable costs determined with deference to agency interpretations)
- Marymount Hosp., Inc. v. Shalala, 19 F.3d 658 (D.C. Cir. 1994) (deference to Secretary’s interpretation of statute/regulations)
- Tenet HealthSystems HealthCorp. v. Thompson, 254 F.3d 238 (D.C. Cir. 2001) (highly technical regulatory programs require deference)
- Heckler v. Cmty. Health Servs. of Crawford Cnty., Inc., 467 U.S. 51 (U.S. 1984) (estoppel against the government is narrow; oral intermediary advice not binding)
- Catholic Health Initiatives v. Sebelius, 617 F.3d 490 (D.C. Cir. 2010) (deference and regulatory interpretation in Medicare costs)
- Mercy Catholic Med. Ctr. v. Thompson, 380 F.3d 142 (3d Cir. 2004) (estoppel defenses against government claims in Medicare context)
- Appalachian Reg'l Healthcare, Inc. v. Shalala, 131 F.3d 1050 (D.C. Cir. 1997) (agency decisions and consistency in Medicare interpretations)
- Independent Petroleum Ass'n of Am. v. Babbitt, 92 F.3d 1248 (D.C. Cir. 1996) (consistency and legitimate reasons for differing treatments)