Hospital Ass'n v. Secretary of Health & Human ServicesHospital Ass'n v. Secretary of Health & Human Services
This аction concerns the amount of Medicare reimbursement owed to appellee hospitals, providers of services to Medicare beneficiaries, for the cost of malpractice insurance premiums in cost years 1980 through 1982.
I.
Background
The Medicare Act, Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq., provides for reimbursement to Medicare providers of the “reasonable cost” of treating Medicare patients. Id. § 1395f(b)(1) (1982). The Secretary issues regulations establishing the methodologies by which the “reasonable cost” will be calculated. Id. § 1395x(v)(l)(A) (Supp. III 1985). In turn, a fiscal intermediary initially determines the amount of reimbursement due, setting forth that amount in a written notice for each cost period. See id. §§ 1395h(a), 1395g (1982); 42 C.F.R. § 405.-1803 (1986).
In the present action, the appellee hospitals challenged the amount of their Medicare reimbursement for the cost of malpractice insurance premiums in the cost years 1980-82, and the validity of the 1979 regulation used to compute that amount. On a motion for summary judgment by the Secretary, the district court found the 1979 rule invalid, noting that numerous circuit courts had reached the same conclusion.
Although the district court found for the hospitals on those counts of their complaint pertaining to cost years 1980-82, it dismissed Count IV of the complaint, in which the hospitals had sought relief for cost years 1983-86. Because the hospitals had not obtained final administrative decisions on their claims for those years, the court held that it lacked subject matter jurisdiction. See 42 U.S.C. § 1395oo(f)(1) (Supp. III 1985).
In April 1986, a few days after the district court’s decision, the Secretary promulgated a nеw regulation setting forth yet another methodology for reimbursing the cost of malpractice insurance premiums. 51 Fed.Reg. 11,142 (April 1, 1986) (interim final rule); see 52 Fed.Reg. 9833 (March 27,
II.
1. Mootness
The hospitals, in their complaint, challenged as invalid the 1979 rule, which had been used to calculate the amount of reimbursement due the hospitals for mаlpractice insurance premium costs. The Secretary maintains that the validity of the 1979 rule was thus the only legal issue raised by the complaint and that since the 1979 rule is now superseded by the 1986 rule, the case is moot.
We do not agree. The “matter in controversy” as to which the hospitals sought judicial review, see 42 U.S.C. § 1395oo (f)(1), is not the 1979 rule as such but rather the amount owed as reimbursement of malpractice insurance costs under the Medicare Act, which provides for reimbursement of “reasonable cost.” See 42 U.S.C. §§ 1395f(b), 1395x(v)(1)(A). The hospitals’ contention that they are entitled to a specific sum of money, as calculated under the pre-1979 reimbursement rule, remains a live issue and one in which the hospitals have a legally cognizable interest. See Powell v. McCormack,
2. Jurisdictional Statute
The Secretary contends that we must dismiss for lack of subject matter jurisdiction under the relevant statute, 42 U.S.C. § 1395oo (f)(1).
The prerequisites for judicial review of an intermediary’s determination on a Medicare Act claim are straightforward. Under section 1395 oo, a provider which has filed a cost report with its fiscal intermediary has a right to a hearing before the Provider Reimbursement Review Board (“Board”) if dissatisfied with the intermediary’s “final determination” of “the amount of total program reimbursement due.” 42 U.S.C. § 1395oo (a)(1)(A)(i) (Supp. III 1985).
All of these prerequisites to judicial review have been met. The hospitals were dissatisfied with the amount of reimbursement determined to be owing by the intermediary and sought and obtained a deter
The Secretary does not contest that, in light of this procedural history, there was a “final decision” sufficient to provide the district court with jurisdiction at the time this action was commenced, but argues that the statute also requires a final decision regarding application of the 1986 Rule to their malpractice insurance costs. But there is nothing in the language of section 1395oo(f)(l) to indicate that it requires, not only a final deсision on a claim, but also a final decision under a regulation that the Secretary now says should have been applied. We conclude that the contentions here concerning the allegedly improper method by which the claims were determined merely raise questions of law “relevant to the matters in controversy” and do not affect jurisdiction. See 42 U.S.C. § 1395oo (f)(1); 5 U.S.C. § 706 (1982).
3. Scope of Review
Having jurisdiction, we consider now the scope of permissible judicial review. That scope of review clearly permits consideration of what regulation should properly be applied to the hospitals’ claims, and of whether the 1986 rule, alleged to be applicable, is valid and may be retroactively applied. See Administrative Procedure Act, 5 U.S.C. § 706 (scope of judicial review includes decision of all relevant questions of law to extent necessary to decision and when presented); Abington Memorial Hospital v. Heckler, supra,
While we agree that it is the Secretary who must first apply the 1986 rule if that rule is applicable, the initial determination of the validity of the rule involves resolution only of questions of law. See F.P.C. v. Pottsville Broadcasting Co.,
Given all this, we conclude that the validity of the 1986 rule should be determined in this action, prior to a remand to the Secretary.
4. Count IV
In Count IV of the complaint, the hospitals alleged that under current Medicare Act statutes, the hospitals’ reimbursement for cost years 1983-86 will be based in part on the amount of their reimbursable costs for 1982. See 42 U.S.C.A. § 1395ww(b), (d) (West Supp.1987); see generally Charter Medical Corp. v. Bowen,
An unwaivable jurisdictional requirement under section 1395oo (f)(1) is that a claim have been presented to the Secretary. See Rhode Island Hospital v. Califano, supra,
Even assuming, arguendo, that the hospitals could not, in administrative proceedings, obtain the reimbursement that they contend is due for 1983-86, that would not obviate the need for prеsentation of their claims to the Secretary. Because the 1983-86 claims have not been presented to the Secretary, Count IV was properly dismissed. See Charter Medical Corp. v. Bowen,
Judgment vacated and case remanded; cross-appeal dismissed.
Notes
. A “cost year" is a twelve month period which, in the case of the appellee hospitals, began on October 1 and ended on September 30 of each year. Such cost reporting periods are identified by the calendar year in which they end, e.g., cost year 1980 ended September 30, 1980.
. For example, If Medicare patients constituted 30% of routine patient days at a hospital, Medicare would reimburse the hospital for 30% of the portion of general аdministrative costs that were allocated to the inpatient routine area. See 52 Fed.Reg. 9834 (March 27, 1987).
. For example, if Medicare patients received 10% of malpractice awards to the provider’s patients in a given year, Medicare would reimburse the provider for 10% of its malpractice insurance premiums. If a provider had no malpractice loss experience during a certain period, reimbursement would be based оn a national ratio of malpractice losses paid to Medicare patients compared to malpractice losses paid to all patients. See 52 Fed.Reg. 9834 (March 27, 1987).
. See Cumberland Medical Center v. Secretary of Health and Human Services,
. Under the 1986 rule, a provider’s malpractice insurаnce premium costs are divided into two components. The "administrative component,” which accounts for 8.5% of total premium cost, is included in the provider’s general administrative costs, and is apportioned on the basis of the provider’s Medicare utilization rate. See 52 Fed.Reg. 9835 (March 27, 1987). The “risk component,” which comprises the remaining 91.5% of total premium cost, is apportioned on the basis of a formula that takes intо account the individual provider's Medicare utilization rate as well as the national Medicare malpractice loss ratio and the national Medicare utilization rate. See id.
. The Secretary argues also that even if we affirm the district court's judgment that the hospitals are entitled to reimbursement under the methodology used prior to 1979, we should reverse that judgment insofar as it awarded specific monetary damages and rеmand for recalculation by the Secretary under the pre-1979 methodology. The Secretary explains that, contrary to the apparent understanding of the district court, there has not been a stipulation as to the amounts that would be due were the pre-1979 methodology employed. The hospitals join in the Secretary’s request, on the same ground. We conclude that in the event it is ultimately determined that reimbursement should be calculated under the pre-1979 methodology, see discussion infra, the action should be remanded to the Secretary for such recalculation, which is essentially an administrative function. See F.P.C. v. Idaho Power Co.,
. The cases cited by the Secretary to support the claim of mootness are readily distinguishable. In those cases, unchallenged superseding regulations had cured alleged defects in prior, challenged, regulations and monetary relief was not in issue. See, e.g., Natural Resources Defense Council, Inc. v. N.R.C.,
. Section 1395oo(f)(l) provides:
____Providers shall have the right to obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary____ Providers shall also have the right to obtain judicial review of any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines ... that it is without authority to decide the question____ If a provider of services may obtain a hearing under subsection (a) of this section and has filed a request for such a hearing, such provider may file a request for a determination by the Board of its authority to decide the question of law or regulations relevant to the matters in controversy____ The Board shall render such determination in writing ... and the determination shall be considered a final decision and not subject to review by the Secretary—
Federal question jurisdiction, 28 U.S.C. § 1331 (1982), is barred by section 205 of the Social Security Act, 42 U.S.C. § 405(h) (Supp. III 1985), which is made applicable to the Medicare Act by 42 U.S.C. § 1395Ü (Supp. III 1985). See Rhode Island Hospital v. Califano,
. Among other requirements set forth in section 1395oо for review by the Board is that the amount in controversy, in the case of group appeals, be over $50,000. 42 U.S.C. § 1395oo (b) (1982). The Secretary argues that as a result of promulgation of the 1986 rule we lack jurisdiction because the amount in controversy may be less when the methodology of the 1986 rule is applied than it was when the methodology of the 1979 rule was used. The argument is without merit because it is not disputed that the amount-in-controversy requirеment was met at the time the action was commenced. See 14A Wright, Miller & Cooper, Federal Practice and Procedure § 3702, at 28-29 (2d ed. 1985) (amount in controversy is determined as of date of commencement of action in federal court).
. Or by the Secretary, in the event the Secretary reverses, modifies or affirms the Board’s decision. 42 U.S.C. § 1395oo (f)(1).
. The provider may request the determination or the Board may make such a determination on its own motion. 42 U.S.C. § 1395oo (f)(1). The determination is a "final decision” and not subject to review by the Secretary. Id.
. Section 1395oo(f)(l) specifies that:
____ Providers shall also have the right to obtain judicial review of any action of the fiscal intermediary which involves a question of law or regulations relevant to the matters in controversy whenever the Board determines ... that it is without authority to decide the question____ (emphasis added).
. In finding that the scope of review includes the issue of thе validity of the 1986 rule, we concur with the Sixth Circuit, which on essentially identical facts determined that it had jurisdiction to address the validity of the rule’s retroactive application. See Mason General Hospital v. Secretary of Health and Human Services,
. Richardson v. Wright,