HEALTHEAST BETHESDA LUTHERAN HOSPITAL AND REHABILITATION CENTER, A Minnesota Nonprofit Corporation, Appellee, v. Donna E. SHALALA, Secretary of Health and Human Services, Appellant.
No. 97-4389.
United States Court of Appeals, Eighth Circuit.
Submitted Nov. 18, 1998. Decided Dec. 23, 1998.
164 F.3d 415 | 59 Soc.Sec.Rep.Ser. 618
Anne M. Lobell, U.S. Department of Justice, argued (Scott R. McIntosh, on the brief), for Appellant.
Donald S. Franke, Minneapolis, MN, argued, for Appellee.
Before BEAM, MAGILL, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
MORRIS SHEPPARD ARNOLD, Circuit Judge.
1. The Medicare program reimburses hospitals for interest payments on “necessary” loans to the extent that such payments exceed income on the hospitals’ investments. See
2. HealthEast, a St. Paul, Minnesota, hospital, borrowed money in 1980, 1982, and 1984 and included interest payments on the loans in its annual cost reports. The fiscal intermediary reimbursed HealthEast for the interest payments until it audited HealthEast‘s cost reports for 1985. The intermediary reported that its audit showed that portions of each of the 1980, 1982, and 1984 loans were unnecessary. It then reopened HealthEast‘s cost reports for 1984 through 1987 pursuant to the three-year reopening regulation and excluded from reimbursement any payments for interest on the portions of the loans that it had determined were unnecessary.
3. HealthEast claimed interest payments on these same loans for 1988. The intermediary again found that portions of each of the 1980, 1982, and 1984 loans were unnecessary and excluded from reimbursement the interest payments on those portions. HealthEast appealed to the Provider Reimbursement Review Board (PRRB), which reversed the intermediary‘s determination and held that the intermediary had violated the three-year limit on reopening by considering in its evaluation for 1988 whether the 1980, 1982, and 1984 loans were necessary.
4. The intermediary appealed the PRRB‘s decision to the Secretary of Health and Human Services, who reversed and remanded the case to the PRRB on the ground that there was no reopening because the reimbursement amounts for the interest payments in 1980, 1982, and 1984 were not disturbed. When the PRRB reaffirmed its earlier determination that the intermediary‘s decision with respect to the interest payments was improper, the Secretary reversed the PRRB again. (In practice, the Administrator of the Health Care Financing Administration acts for the Secretary, see
5. HealthEast sought judicial review in the district court, claiming that the Secretary had erred in interpreting the reopening regulation, that the loans were necessary in any event, and thus that the relevant interest payments should be reimbursed. HealthEast and the Secretary then filed cross-motions for summary judgment.
6. The district court ruled for the Secretary with respect to the 1984 loan, finding the portion at issue to be unnecessary and holding that the associated interest payments should not be reimbursed. HealthEast did not appeal this ruling, and we are therefore no longer concerned with the 1984 loan.
7. With respect to the 1980 and 1982 loans, the Secretary argued that the reopening regulation did not apply, because the regulation limits reopening only with respect to “intermediary determinations,” which are defined as the final determinations of the amount a hospital will be reimbursed. See
8. The Secretary appeals, and we reverse in part the judgment of the district court and remand the case for further proceedings.
9. An agency‘s interpretation of its own regulation must be given “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Bowles v. Seminole Rock and Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945); see also Stinson v. United States, 508 U.S. 36, 45, 113 S.Ct. 1913, 123 L.Ed.2d 598 (1993), and Gardebring v. Jenkins, 485 U.S. 415, 430, 108 S.Ct. 1306, 99 L.Ed.2d 515 (1988). HealthEast contends, however, that no such deference is warranted here, because the interpretation of the reopening regulation in question does not require technical expertise. In support of this proposition, HealthEast cites Thomas Jefferson University v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994), which states that “broad deference is all the more warranted when, as here, the regulation ... ‘require[s] significant expertise and entail[s] the exercise of judgment grounded in policy concerns,’ ” quoting Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697, 111 S.Ct. 2524, 115 L.Ed.2d 604 (1991). Although deference may be “all the more warranted,” Thomas Jefferson University, 512 U.S. at 512, in highly technical cases, it does not follow that it is not warranted in other cases where an agency interprets its own regulation. The Secretary‘s interpretation of the reopening provision is thus entitled to “controlling weight unless it is plainly erroneous,” Seminole Rock, 325 U.S. at 414.
10. The reopening regulation states that a “determination of an intermediary ... may be reopened with respect to findings on matters at issue in such determination ... within 3 years.” See
11. An “intermediary determination” is defined as “a determination of the amount of total reimbursement due the provider ... for the period covered by the cost report.” See
12. It would make no sense to say that an intermediary determination, as the relevant regulation defines that term, could be reopened “with respect to” predicate factual questions that do not alter the total reimbursement amount. If, however, “matters at issue” are understood to be individual cost items, the alteration of which would necessarily change the total reimbursement determination, it would make sense to say that a determination could be reopened “with respect to” them. We therefore hold that the Secretary‘s interpretation of the reopening regulation is not “plainly erroneous or inconsistent with regulation,” Seminole Rock, 325 U.S. at 414. We believe, in fact, that the Secretary‘s interpretation is the only interpretation logically consistent with the regulatory language.
II.
13. The district court ruled, and HealthEast contends on appeal, that the Secretary is precluded from making an argument based on the definition of “intermediary determination” contained in
14. Mayo and other cases that adhere to this proposition rely principally on Securities and Exchange Commission v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943), which involved the review of an administrative decision in which an agency failed to make necessary factual findings. Although the Court did state that “[t]he grounds upon which an administrative order must be judged are those upon which the record discloses that its action was based,” id. at 87, the Court also explicitly limited that ruling to cases in which an agency fails to make a necessary determination of fact or policy. Id. at 88. We have recognized this aspect of Chenery since Mayo was decided. See, e.g., Arkansas AFL-CIO v. Federal Communications Commission, 11 F.3d 1430, 1440 (8th Cir.1993), (en banc) (plurality opinion, with two additional judges concurring implicitly on this point). The case before us does not involve an alleged failure on the part of the Secretary to make a necessary finding of fact or policy.
15. Even if the Secretary were precluded from making legal arguments different from those relied on earlier, the Secretary has not done so here. Both of the Secretary‘s earlier decisions in this case clearly stated that no reopening had occurred because the intermediary did not seek to alter its final determinations for 1980, 1982, or 1984. The district court seems to have been concerned with whether the Secretary cited the regulatory definition of “intermediary determination” in reaching that result, but this is not the relevant inquiry. The reopening regulation applies only to “determinations of intermediaries,” and the Secretary reasoned that there was no reopening of such a determination because the total reimbursement amount was not altered. There would have been no change in the substance or logic of the reasoning of the Secretary‘s earlier decisions if they had specifically noted that a relevant regulation defined “determination of an intermediary” as the final reimbursement decision. In short, the Secretary makes no new argument on appeal; the Secretary simply directs our attention to more particular legal support for the decisions made below.
III.
16. Finally, HealthEast argues that the Secretary is collaterally estopped from challenging the necessity of HealthEast‘s 1980 and 1982 loans by the intermediary‘s initial decisions to reimburse HealthEast. Collateral estoppel applies, HealthEast asserts, because the Secretary had “an adequate opportunity to litigate,” United States v. Utah Construction and Mining Co., 384 U.S. 394, 422, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), the necessity of the loans in the three years after the intermediary‘s initial decisions.
17. The Supreme Court, in its many cases on this issue, has never ruled that the passage of time triggers collateral estoppel. Instead, it has consistently required “actual and adversarial litigation.” Regions Hospital v. Shalala, 522 U.S. 448, 118 S.Ct. 909, 918, 139 L.Ed.2d 895 (1998). The Court in Regions Hospital made it clear that “an intermediary‘s determination in an [NPR], without a hearing before the PRRB on the reasonableness of the costs,” is not sufficient “actual ... litigation” for collateral estoppel to apply. Id. Here, the issue of the necessity of HealthEast‘s loans was not litigated prior to the litigation before us with respect to 1988. The district court therefore erred in ruling that the Secretary is collaterally estopped from finding the 1980 and 1982 loans unnecessary.
IV.
18. For the reasons stated, we reverse in part the judgment of the district court and remand the case for consideration of the necessity for the 1980 and 1982 loans.