Grossmont Hospital Corporation v. Sylvia Mathews Burwell
418 U.S. App. D.C. 215
| D.C. Cir. | 2015Background
- Grossmont and four California hospitals provided services to Medicare–Medicaid dual eligibles from May 1, 1994 through June 30, 1998 and sought Medicare reimbursement for unpaid deductibles/coinsurance (bad debt).
- Medi‑Cal (California Medicaid) had ceased automatic payments in 1994 and later negotiated retroactive adjustments; some claims were not transmitted to or processed by Medi‑Cal due to systems errors.
- Hospitals did not timely present many missing claims to Medi‑Cal; they later submitted internal estimates to their Medicare fiscal intermediary, which refused to accept them.
- The Provider Reimbursement Review Board initially sided with Grossmont, but the Administrator for CMS reversed, applying a long‑standing "must bill" policy requiring providers to bill the state and obtain a state determination of payment responsibility before Medicare will reimburse bad debt.
- Grossmont sued; the district court upheld the Secretary’s decision on summary judgment. The D.C. Circuit affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Secretary’s mandatory state‑determination policy violates the 1987 bad‑debt moratorium | Grossmont: policy replaced an "alternative documentation" rule in effect at moratorium enactment and thus any change is barred | Secretary: issue waived because not raised administratively; Secretary defends must‑bill policy | Waived — court refused to consider on appeal because Grossmont failed to raise it before the agency |
| Whether applying the must‑bill/mandatory state determination policy was arbitrary and capricious here | Grossmont: Medi‑Cal’s lump‑sum payments and hospitals’ estimates provided equivalent determinations; Secretary’s refusal to accept estimates was arbitrary | Secretary: States are best source of eligibility/payment info; intermediaries and state determinations are required and refusal to accept estimates is reasonable | Not arbitrary or capricious — court defers to Secretary’s interpretation and upholds application |
| Whether an independent failure to bill Medi‑Cal supports denial of claims | Grossmont: argues lump‑sum payments show entitlement; billing formality should not bar recovery | Secretary: also relied on failure to bill as independent basis for denial | Affirmed — even if other grounds exist, failure to timely bill Medi‑Cal independently supports denial |
| Whether Joint Signature Memorandum 370 (JSM‑370) requires payment/"hold harmless" here | Grossmont: JSM‑370 permits reimbursement using alternative documentation and treats deleted PRM language as enforceable for pre‑2004 periods | Secretary: JSM‑370’s hold‑harmless does not apply because intermediary did not allow alternative documentation and the lump sums were based on state determinations | Held — JSM‑370 inapplicable; Secretary reasonably concluded hospitals did not meet its hold‑harmless conditions |
Key Cases Cited
- St. Luke’s Hosp. v. Thompson, 355 F.3d 690 (D.C. Cir.) (standard for reviewing Medicare reimbursement administrative decisions)
- Marymount Hosp., Inc. v. Shalala, 19 F.3d 658 (D.C. Cir.) (review under APA and substantial‑evidence standard)
- Nat’l Medical Enters. v. Shalala, 43 F.3d 691 (D.C. Cir.) (deference to agency interpretation of its own regulations)
- ExxonMobil Oil Corp. v. FERC, 487 F.3d 945 (D.C. Cir.) (issue‑exhaustion requirement before agency)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (Sup. Ct.) (agency interpretation of its own regulation entitled to controlling weight unless plainly erroneous)
- Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (Sup. Ct.) (standards on deference to agency interpretations)
- SEC v. Chenery Corp., 318 U.S. 80 (Sup. Ct.) (courts generally may not affirm agency action on a ground not relied on by the agency)
- Perez v. Mortgage Bankers Assn., 135 S. Ct. 1199 (Sup. Ct.) (discussion of deference doctrines to agency interpretations)