775 F.3d 470
1st Cir.2015Background
- Maine Medical Center claimed Medicare reimbursement for roughly $2.86 million in "bad debt" arising from crossover claims for dual-eligible (Medicare/Medicaid) patients for FY 2002–2003.
- CMS/Intermediary paid the Medicare portion and was required under a trading-partner arrangement to bill MaineCare (Maine's Medicaid) and obtain state remittance advices (RAs) showing liability or denial.
- Due to an MMIS technical anomaly from Nov. 2001–Aug. 2003, MaineCare did not process those crossover claims and did not issue RAs; Maine Medical did not seek the missing RAs until years later and instead used alternative documentation prepared with the Muskie Institute.
- The Intermediary denied reimbursement for lack of state RAs; the PRRB ruled for Maine Medical relying on a then-repealed PRM provision permitting alternative documentation, but the CMS Administrator reversed, enforcing the Secretary’s "must-bill" policy including an RA requirement.
- The Administrator and the district court held Maine Medical failed to meet two regulatory bad-debt criteria: (1) the debt was actually uncollectible when claimed, and (2) Maine Medical made reasonable collection efforts; the First Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Secretary's RA/billing requirement is owed substantial deference | The RA Requirement is an interpretive layer of internal manuals/memos and should get less deference; alternative documentation can satisfy rules | The RA/Billing Requirement is the Secretary's interpretation of 42 C.F.R. §413.89 and is entitled to substantial deference (Seminole Rock) | Court applies substantial deference and treats the must-bill/RA rule as generally permissible, subject to limited exceptions |
| Whether the Secretary’s enforcement was arbitrary given prior PRM language allowing alternative documentation | PRM-II §1102.3L (in effect during the cost years) permitted alternative documentation; denying that now is arbitrary, especially where state systems failed | The PRM waiver was invalidated/repealed and the Secretary reinstated the pre-1995 must-bill policy; no reliance here and exceptions are case-by-case | Court finds the policy shift does not preclude deference; Maine Medical waived some arguments and reliance facts do not compel relief |
| Whether Maine Medical met the regulatory bad-debt criteria without RAs (actually uncollectible; reasonable collection efforts) | Alternative Muskie documentation showed eligibility and assumed MaineCare liability = $0; meets criteria | Alternative docs failed to identify QMB vs non-QMB claims and did not provide claim-by-claim state liability; provider did not timely pursue RAs | Court upholds Secretary: alternative docs insufficient; provider failed to show contemporaneous state denial or reasonable, timely collection efforts |
| Whether a per se RA requirement is permissible | (Implicit) A per se RA rule is overbroad and inconsistent with regulations requiring "reasonable collection efforts" and sound business judgment | Secretary: a general RA requirement is a reasonable, administrable way to satisfy the regulation; exceptions possible | Court: general RA requirement is permissible and entitled to deference, but a rigid per se rule would not be upheld; here denial was not arbitrary or capricious |
Key Cases Cited
- Visiting Nurse Ass'n Gregoria Auffant, Inc. v. Thompson, 447 F.3d 68 (1st Cir. 2006) (administrative-review standards and deference discussion)
- Cmty. Hosp. of the Monterey Peninsula v. Thompson, 323 F.3d 782 (9th Cir. 2003) (invalidating a Secretariat waiver of the must-bill policy)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (U.S. 1994) (deference to agency interpretations of its own regulations)
- South Shore Hosp., Inc. v. Thompson, 308 F.3d 91 (1st Cir. 2002) (agency inconsistency and deference analysis)
- Good Samaritan Hosp. v. Shalala, 508 U.S. 402 (U.S. 1993) (agency interpretation and reliance concerns)
- Palms of Pasadena Hosp. v. Sullivan, 932 F.2d 982 (D.C. Cir. 1991) (cash-basis treatment of Medicare bad debts)