Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA )
MOUNTAIN STATES HEALTH )
ALLIANCE, )
)
Plaintiff, )
) v. ) Civil Action No. 13-641 (RDM) )
SYLVIA M. BURWELL, )
Secretary, U.S. Department of Health )
and Human Services, )
)
Defendant. )
) MEMORANDUM OPINION
Under the governing regulations, a Medicare provider is entitled to reimbursement for unpaid deductibles and copayments—referred to as “Medicare bad debt”—but only if certain requirements are met. Among other things, the regulations require that the provider establish that it has engaged in “reasonable collection efforts” before declaring a debt uncollectible. 42 C.F.R. § 413.89(e). That requirement is further explicated in section 310 of the Provider Reimbursement Manual, which specifies that, in order to qualify as a “reasonable collection effort, a provider’s effort must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients.” Center for Medicare and Medicaid Services Pub. 15-1, § 310 (2003). The Provider Reimbursement Manual further states that “[w]here a collection agency is used, Medicare expects the provider to refer all uncollected patient charges of like amount to the agency without regard to class of patient,” that is, without regard for whether the charges were incurred by a Medicare or non-Medicare patient. Id. § 310.A.
This case involves a challenge to the application of these rules in a decision by the Secretary of Health and Human Services (“Secretary”) [1] denying Plaintiff reimbursement for unpaid Medicare bad debt for the cost reporting periods ending June 30, 2004 and June 30, 2005. Mountain States Health Alliance 05 Bad Debt–Passive Collection CIRP Grp. v. BlueCross BlueShield Ass’n/Cahaba Gov’t Benefits Adm’rs, LLC , PRRB Dec. No. 2013-D6 (Mar. 4, 2013) (“Board Decision”), AR 6-18. [2] Plaintiff, Mountain States Health Alliance, is the owner of two acute care hospitals (“Providers”) in Tennessee. For the reporting periods at issue, the Providers first engaged in in-house collection efforts without distinguishing between Medicare and non- Medicare accounts. To the extent those efforts failed, they then referred the debts to an outside, “primary” collection agency—again, without distinguishing between Medicare and non- Medicare accounts. But to the extent that second round of efforts also failed, they adopted different approaches for Medicare and non-Medicare accounts. For non-Medicare accounts, the Providers sent all but those where the patient was bankrupt, deceased with no estate, incarcerated, or a charity to a “secondary” collection agency. In contrast, they declared all of the remaining Medicare bad debt “uncollectible” and, on that basis, sought reimbursement under the Medicare program.
The Secretary denied reimbursement on the ground that the Providers did not use similar efforts to collect Medicare and non-Medicare bad debt and, in particular, continued to employ collection agencies to pursue certain non-Medicare debt, but not Medicare debt. Dissatisfied *3 with that result, Plaintiff brought this action, alleging that (1) section 310 of the Provider Reimbursement Manual constitutes a “legislative rule,” which the Secretary failed to adopt pursuant to the required notice and comment procedures, (2) the Secretary failed to “list” section 310 in the Federal Register, as required by statute, (3) the Secretary’s decision departed from Medicare policy in place on August 1, 1987, and thus violated the congressionally-mandated “Bad Debt Moratorium,” and (4) the Secretary’s decision was, in any event, arbitrary and capricious. See Dkt. 16 at 20, 26.
The matter is now before the Court on cross-motions for summary judgment. For the reasons explained below, the Court GRANTS in part and DENIES in part Plantiff’s motion for summary judgment, Dkt. 16, DENIES the Secretary’s cross-motion for summary judgment, Dkt. 17, VACATES the Board’s decision, and REMANDS for further proceedings consistent with this Memorandum Opinion. A separate Order accompanies this decision.
I. BACKGROUND
A. Statutory And Regulatory Background
1. The Medicare Provider Reimbursement System
The Medicare program provides healthcare for the elderly and disabled. 42 U.S.C. §§ 1395 et seq . Participating health care providers collect deductibles and coinsurance amounts directly from Medicare patients and are reimbursed for other costs through the Medicare program.
As relevant here, providers are reimbursed for various direct and indirect “reasonable costs.” See generally 42 C.F.R. Part 413; 42 U.S.C. § 1395x(v)(1)(A). The provider bears the burden of supplying information establishing that the costs for which it seeks reimbursement are “reasonable costs” eligible for reimbursement under the relevant regulations. See, e.g. , 42 C.F.R. *4 § 413.24(a). Providers file annual cost reports, which are reviewed by private administrative contractors authorized by the Center for Medicare and Medicaid Services (“CMS”). See 42 U.S.C. § 1395h; 42 C.F.R. § 413.24(f). During the years at issue here, these private contractors were called “fiscal intermediaries.” See 42 U.S.C. § 1395h (2000). Intermediaries evaluate the annual cost reports under the Secretary’s regulations and informal guidance, particularly the Provider Reimbursement Manual, which includes the Secretary’s “guidelines and policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services.” See CMS Pub. 15-1, Part I, Forward, (2003) (hereinafter “PRM”). The intermediary determines the amount of reimbursement to which the provider is entitled and issues a “Notice of Program Reimbursement.”
A provider that is dissatisfied with an intermediary’s reimbursement determination may appeal to the Provider Reimbursement Review Board (“the Board”). See 42 U.S.C. § 1395oo(a); 42 C.F.R. §§ 405.1835, 405.1837. The Board is bound by the Secretary’s regulations and “shall afford great weight to interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice established by CMS,” including the PRM. See 42 C.F.R. § 405.1867. The provisions in the PRM, however, “do not have the force and effect of law and are not accorded that weight in the adjudicatory process.” Shalala v. Guernsey Mem. Hosp. , 514 U.S. 87, 99 (1995).
A Board decision becomes the final decision of the Secretary unless the CMS Administrator, acting on the Secretary’s behalf, elects to review it. 42 U.S.C.
§ 1395oo(f)(1); 42 C.F.R. § 405.1875(a)(1). A provider that is dissatisfied with the Secretary’s final decision may seek judicial review in federal district court. 42 U.S.C. § 1395oo(f)(1).
2.
Medicare Bad Debt
Uncollected Medicare deductibles and coinsurance amounts are collectively referred to as
“Medicare bad debt.”
See, e.g.
,
Abington Crest Nursing & Rehab. Ctr. v. Sebelius
,
Under the governing regulations, providers seeking reimbursement for Medicare bad debt must demonstrate that the debt satisfies four criteria:
(1) The debt must be related to covered services and derived from deductible and coinsurance amounts.
(2) The provider must be able to establish that reasonable collection efforts were made.
(3) The debt was actually uncollectible when claimed as worthless.
(4) Sound business judgment established that there was no likelihood of recovery at any time in the future.
42 C.F.R. § 413.89(e); see Principles for Reimbursable Costs, 31 Fed. Reg. 14808, 14813 (Nov. 22, 1966) (final rule). This case involves the second requirement, “reasonable collection efforts.” Neither the regulation nor the Medicare Act defines “reasonable collection efforts,” but the Secretary has provided her interpretation in section 310 of the PRM. That provision explains that “[t]o be considered a reasonable collection effort, a provider’s effort to collect Medicare deductible and coinsurance amounts must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients.” PRM § 310. Section 310 further *6 explains that if a provider elects to refer its non-Medicare accounts to a collection agency, the provider must similarly refer its Medicare accounts of “like amount”:
Where a collection agency is used, Medicare expects the provider to refer all uncollected patient charges of like amount to the agency without regard to class of patient. The ‘like amount’ requirement may include uncollected charges above a specified minimum amount. Therefore, if a provider refers to a collection agency its uncollected non-Medicare patient charges which in amount are comparable to the individual Medicare deductible and coinsurance amounts due the provider from its Medicare patient, Medicare requires the provider to also refer its uncollected Medicare deductible and coinsurance amounts to the collection agency.
PRM § 310.A. Section 310 was last revised in 1983. See Dkt. 26-1 (HCFA Transmittal No. 246, Feb. 1981); Dkt. 26-2 (HCFA Transmittal No. 278, Jan. 1983).
3.
The “Bad Debt Moratorium”
In 1987, Congress enacted legislation to “freeze” the Secretary’s Medicare bad debt
reimbursement policies.
Hennepin Cnty. Med. Ctr. v. Shalala
,
The language “criteria for indigency determination procedures, for record keeping, and for determining whether to refer a claim to an external collection agency ” was added in 1988, a year after the original enactment of the Bad Debt Moratorium. Pub. L. No. 100-647, tit. VIII, § 802 (emphasis added). The 1988 conference report explains that Congress made this amendment because it was “concerned about [further] recommendations made by the Inspector General of HHS subsequent to August 1, 1987, and actions which may be taken by the Secretary in response to those recommendations, regarding the bad debt collection policies followed by certain hospitals.” H.R. Rep. No. 100-1104 (1988) (Conf. Rep.), reprinted in 1988 U.S.C.C.A.N. 5048, 5337. The conference report further explains that the amended provision was not “intend[ed] to preclude the Secretary from disallowing bad debt payments based on regulations, PRRB decisions, manuals, and issuances in effect prior to August 1, 1987.” Id. Rather,
[t]he conferees wish to clarify that the Congress intended that the actions of fiscal intermediaries occurring prior to August 1, 1987 to approve explicitly a hospital’s bad debt collection practices, to the extent such action by the fiscal intermediary was consistent with the regulations, PRRB decisions, or *8 program manuals and issuances, are to be considered an integral part of the policy in effect on that date, and thus not subject to change.
Id .
In 1989, Congress again amended the Bad Debt Moratorium, this time to provide that “[t]he Secretary may not require a hospital to change its bad debt collection policy if a fiscal intermediary, acting in accordance with the rules in effect as of August 1, 1987, . . . has accepted such policy before that date, . . .” Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101- 239, tit. VI, § 6023, 103 Stat. 2167. Because Plaintiff does not contend that its policy was approved by a fiscal intermediary before 1987, this particular aspect of the Moratorium is not at issue here. The Bad Debt Moratorium ended on October 1, 2012. See Pub. L. No. 112–96, tit. III, § 3201(d), 126 Stat. 192, reprinted at 42 U.S.C. § 1395f note.
B. Factual Background
Plaintiff owns and operates Providers Johnson City Medical Center and Indian Path Medical Center, two acute care facilities in Tennessee that provide Medicare services. AR 10. During the two years at issue in this case, 2004 and 2005, Plaintiff’s hospitals had a policy of treating the accounts of Medicare and non-Medicare patients similarly for approximately one year. The accounts were first subjected to in-house collection efforts for six months. See AR 13, 15. The accounts were then referred to a primary collection agency. See id. After six months of unsuccessful collection efforts at the primary collection agency, however, the Medicare and non- Medicare accounts were sent in different directions. The non-Medicare accounts were sent to a secondary collection agency, with the exception of accounts deemed “uncollectible” due to bankruptcy, death, incarceration, or charitable status. AR 12, 15, 81, 86, 95. In contrast, all the Medicare accounts were returned to the Providers and written off as Medicare bad debts, *9 without regard for the amount of the account, the status of the patient, or other individualized considerations. AR 12, 13, 15, 85. [3]
When the Providers sought reimbursement for the cost reporting years ending on June 30, 2004 and June 30, 2005, the fiscal intermediary excluded approximately $700,000 in Medicare bad debts. AR 19. The intermediary’s auditor acknowledged that one of the Providers “perform[ed] a thorough collection effort[ ] on all payor types prior to sending the bad debts to a primary collection agency. The primary agency also perform[ed] thorough collection efforts on all payor types.” AR 336-39. Nonetheless, the intermediary disallowed the Medicare bad debts because the Providers had referred non-Medicare accounts to a secondary collection agency, but had not referred Medicare accounts of like amount, and therefore had not satisfied the “reasonable collection efforts” requirement set forth in the relevant regulation, 42 U.S.C. § 413.89(e). AR 10-13.
Plaintiff timely appealed to the Board on behalf of each Provider. AR 12. The Board held a hearing on the consolidated appeals, at which it heard testimony from Plaintiff’s corporate director of reimbursement and a representative from Plaintiff’s collection agency. AR 64- 111, 66. Plaintiff argued that the Providers satisfied all the requirements imposed by the regulation regarding “reasonable collection efforts,” 42 U.S.C. § 413.89(e), as interpreted by section 310 of the PRM. Plaintiff contended that the Providers had subjected Medicare and non- Medicare accounts to identical collection efforts for at least a year, see AR 10-11, including submitting all accounts to a first collection agency, id. , and that the Providers exercised good *10 business judgment in discontinuing their efforts to collect the Medicare accounts after a year because those accounts are on average smaller and more difficult to collect, id . Plaintiff argued that this policy satisfied section 310’s requirement that “similar” collection efforts be expended with respect to a provider’s Medicare and non-Medicare accounts. See id. Plaintiff also argued that to the extent the Secretary’s policy required more, that policy violated the Bad Debt Moratorium because, prior to the Moratorium, the Secretary had reimbursed Medicare bad debt even where providers referred only non-Medicare accounts to collection agencies. See AR 11- 12.
The Board affirmed the fiscal intermediary’s denial of reimbursement. AR 13-18. It agreed with the intermediary that Plaintiff’s hospitals had failed to satisfy the “reasonable collection efforts” requirement, see AR 14, 17, explaining that “[t]he key principle . . . for determining whether a provider’s efforts to collect Medicare deductible and coinsurance amounts is ‘reasonable’ is that such efforts are ‘similar’ to the provider’s efforts to collect ‘comparable’ amounts from non-Medicare patients,” AR 14. Furthermore, where a provider uses a collection agency, “CMS requires providers to refer all uncollected patient charges of ‘like amount’ to the collection agency without regard for class of patient.” AR 15.
The Board emphasized that the Providers did not decide whether to refer a given Medicare account “based on the actual documented collectability of the individual account ( e.g ., bankrupt or deceased patient) or on a global threshold amount by which Medicare and non- Medicare accounts were referred alike.” AR 16. Instead, “[t]he record reflects that . . . for delinquent Medicare accounts, the Providers made a single global decision not to refer [Medicare] accounts to the secondary collection agency based on attributes believed by the Providers to generally exist across Medicare accounts as a whole,” i.e ., “that the Medicare *11 population on average is retired and not gainfully employed, is not necessarily going to borrow money, is living off retirement and social security income, presents difficulty with regards to pursuing property liens and wage garnishments, and has no regard for a lower credit score.” AR 16 (emphasis in original). The Board concluded that the exclusion of the Medicare accounts “on a global basis” from referral to the secondary collection agency “did not comply with the regulatory requirement that reasonable collection efforts were made.” AR 17.
The Board also concluded that the Secretary’s policy did not violate the Bad Debt Moratorium. AR 16-17. Plaintiff argued that three prior Board decisions construed section 310 to impose a requirement for like treatment of Medicare and non-Medicare accounts, but had not imposed the type of categorical rule applied by the intermediary. According to Plaintiff, by applying an inflexible rule, the intermediary had changed the governing bad debt policy in violation of the Moratorium. In response, the Board explained that the three administrative decisions cited by Plaintiff applied the bad debt reimbursement policy in effect for cost years prior to January 1983. AR 16. Because section 310 was revised in January 1983, and because it was the revised version of section 310 that was in effect when the Moratorium was enacted in August 1987, the Board concluded that the pre-1983 decisions were “not relevant to the Bad Debt Moratorium issue.” Id. The Board also concluded that a fourth administrative decision, rendered in 1996, was not illustrative of the Secretary’s policy in August 1987, because it was issued after the effective date of the Bad Debt Moratorium and, in any event, relied on the three decisions applying the pre-1983 policy, which the Board had already concluded were irrelevant. AR 16-17.
When the CMS Administrator declined to review the Board’s decision, it became the
final decision of the Secretary. Plaintiff timely appealed to this Court, the parties filed cross-
*12
motions for summary judgment, and, on May 5, 2015, the Court heard oral argument. The Court
then directed the parties to submit copies of the HHS Inspector General Report cited in
Foothill
Hospital v. Leavitt
,
II. STANDARD OF REVIEW
Pursuant to the Medicare Act, 42 U.S.C. § 1395oo(f)(1), this Court reviews the final
decision of the Secretary under the applicable provisions of the Administrative Procedure Act
(“APA”), 5 U.S.C. §§ 701
et seq.
The Court will set aside the Secretary’s decision only if it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A);
Thomas Jefferson Univ. v. Shalala
,
The Court affords “substantial deference” to the Secretary’s views with respect to the
Medicare Act and her implementing regulations.
Thomas Jefferson Univ.
,
III. ANALYSIS
As explained above, the Medicare Act authorizes reimbursement of “reasonable costs”
incurred by providers.
See
42 U.S.C. §§ 1395f(b)(1), 1395x(v)(1)(A). “Congress,” moreover,
“has given the Secretary considerable discretion to promulgate cost-reimbursement regulations
that give meaning to the term ‘reasonable costs.’”
Villa View Cmty. Hosp., Inc. v. Heckler
, 728
F.2d 539, 540 (D.C. Cir. 1984) (per curiam);
see also Guernsey Mem. Hosp.
,
Plaintiff first argues that PRM section 310 is invalid because it is a legislative rule that was promulgated without satisfying APA notice and comment procedures. Plaintiff also argues that the Secretary cannot rely on section 310 because it was not “listed” in the Federal Register, *14 as required by statute. Next, Plaintiff argues that the Secretary’s policy departs from the policy in effect on August 1, 1987, and therefore violates the Bad Debt Moratorium. Finally, Plaintiff contends that even if section 310 is valid, the disallowance of the Providers’ Medicare bad debt was arbitrary and capricious. The Court will address each argument in turn.
A. Is Section 310 A Legislative Rule?
Plaintiff’s first argument is that section 310 is invalid because it is an improperly
promulgated legislative rule. Legislative rules (also called “substantive rules”) are subject to the
APA’s notice-and-comment requirements. 5 U.S.C. § 553;
see also
42 § U.S.C.
1395oo(f)(1). In contrast, interpretive rules, which “are ‘issued by an agency to advise the public
of the agency’s construction of the statutes and rules which it administers[,]’ . . . do not carry the
force and effect of law, and they need not be promulgated pursuant to notice and comment
procedures under the APA.”
Ass’n of Flight Attendants-CWA v. Huerta
,
Legislative rules are those that “grant rights, impose obligations, or produce other
significant effects on private interests.”
Batterton v. Marshall
,
“The court’s inquiry in distinguishing legislative rules from interpretative rules ‘is
whether the new rule effects a substantive regulatory change to the statutory or regulatory
regime.’”
Mendoza
,
As an initial matter, the Court can readily conclude that section 310’s status as a provision in the PRM is not dispositive. Rather, as the parties recognize, the Supreme Court and the Court of Appeals have upheld some PRM provisions as valid interpretive rules, while rejecting others as improperly promulgated legislative rules. Determining where each of these precedents lies on the “hazy continuum” between legislative and interpretive rules, id. , provides substantial guidance regarding the proper characterization of section 310.
In
Guernsey Memorial Hospital
, the Supreme Court considered whether section 233 of
the PRM constituted a legislative rule or an interpretive rule.
Similarly, in
National Medical Enterprises v. Shalala
, the Court of Appeals held that
section 2203 of the PRM, which “solely sets forth the agency’s interpretation of the term
‘ancillary’ as it relates to hospitals’ charging practices,” “falls well within the interpretive end of
the spectrum.”
The Court of Appeals reached a similar conclusion in
Sentara-Hampton General
Hospital v. Sullivan
, which considered whether section 226 of the PRM was a legislative or
interpretive rule.
In contrast, in
CHI
the Court of Appeals struck down section 2162.2.A.4 of the PRM as
an invalidly promulgated legislative rule.
The question before the Court, then, is whether section 310 is closer to the PRM provisions upheld in Guernsey , National Medical , and Sentara-Hampton or the provision struck down in CHI . Plaintiff, not surprisingly, argues that section 310 is more like the PRM provision struck down in CHI . As already noted, in CHI , the Court of Appeals invalidated the challenged manual provision, which articulated a “detailed—and rigid—investment code,” because “there [was] no way” that code could have resulted from “an interpretation of ‘reasonable costs’”. 617 F.3d at 494-95; see id. at 494 n.3. The Court further explained that when the underlying language “‘consists of vague and vacuous terms’” like “‘fair and equitable,’” “‘just and reasonable’” and “‘in the public interest,’” “‘the process of announcing propositions that specify applications of those terms is not ordinarily one of interpretation, because those terms in themselves do not supply substance from which the propositions can be derived.’” 617 F.3d at 495 (quoting Robert A. Anthony, “Interpretive” Rules, “Legislative” Rules, and “Spurious” Rules: Lifting the Smog , 8 A DMIN . L.J. A M . U. 1, 6 n.21 (1994)). Plaintiff argues that “reasonable collection efforts,” like “reasonable costs,” is a “vague and vacuous” phrase with many possible meanings, and accordingly, the referral requirement is not an interpretation of that phrase. See Dkts. 16-1 at 24; 19-1 at 9-15, 17.
The Court is not persuaded that the phrase “reasonable collection efforts” is inherently
too vague for interpretation. The “reasonable cost” language at issue in
CHI
, in contrast to the
language at issue here, was the statutory lodestar for the entire Medicare reimbursement system.
Deriving the overall Medicare cost reimbursement system based on a concept as tenuous
as reasonableness is far different than clarifying what constitutes a “reasonable collection effort.”
When considered in light of the actual PRM language at issue here, moreover, this is all the more
evident. An action is “reasonable” if it is “rational,” “equitable, fair, [or] just.”
See
W EBSTER ’ S
N EW I NT ’ L D ICTIONARY 2074 (2d ed. 1945). Yet, here, all that section 310 says is that, where a
provider concludes that it is “rational” to use a collection agency to continue to pursue unpaid
non-Medicare debt, it is equally “rational” for the provider do the same for Medicare debt of a
like amount. The notion that a “reasonable effort” should be measured by the effort that the
provider would take, and has taken, when its own finances are at stake—as opposed to the public
fisc—does not require a leap of logic or any creativity beyond the usual process of interpretation.
It merely requires application of the common-sense principle that it is “reasonable” to treat like
cases alike.
Univ. Health Servs. v. HHS
,
The step, moreover, from the
regulatory requirement
that a provider engage in
“reasonable collection efforts” to the
clarification
that a provider who uses a collection agency to
pursue non-Medicare debt should do the same when pursuing similar Medicare debt is, if
anything, less substantial than the interpretive moves in
Guernsey
,
National Medical
, and
Sentara-Hampton.
PRM section 233, at issue in
Guernsey
, construed “the statutory ban on
cross-subsidization and the regulatory requirement that only the actual cost of services rendered
to beneficiaries during a given year be reimbursed,”
CHI
also differs from the present case—as well as
Guernsey
,
National Medical
, and
Sentara-Hampton
—in another, significant respect. The PRM provision at issue in
CHI
, among
other highly-technical specifications, set a specific numerical limit on the percentage of an
*22
offshore captive insurance company’s assets that could be invested in equity securities. 617 F.3d
at 495. Relying on Judge Henry Friendly’s observation that an agency is typically legislating
when it articulates a rule in “numerical terms” that are not themselves derived from the statute or
record, the Court of Appeals concluded that “the sort of detailed—and rigid—investment code
set forth in” the PRM was in “no way an interpretation of ‘reasonable costs.’”
Id.
at 495-96.
The Seventh Circuit reached a similar conclusion in
Hoctor v. United States Department of
Agriculture
,
Here, had the Secretary adopted a rule of debt collection that required the provider to send ten letters, two weeks apart, in 18 point type, with at least three containing a threat of litigation, these observations might apply. But section 310 does not resemble the type of detailed code provision Judge Friendly envisioned or that was at issue in CHI or Hoctor . Unlike the “rigid” and “detailed” “investment code” at issue in CHI , or the eight-foot-fence requirement at issue in Hoctor , PRM section 310 does not impose a fixed numerical value taken from a wide range of equally plausible values. To the contrary, it is the provider that decides whether use of a collection agency is economically prudent and the number of months such collection efforts should be pursued, and section 310 merely requires that the provider treat the collection of debt *23 inuring to the benefit of the government as favorably as it treats the collection of debt inuring to its own benefit.
Plaintiff’s reliance on
United States v. Picciotto
,
The Court agrees with Plaintiff that the regulatory “reasonable collection efforts”
requirement does not “compel” the Secretary’s interpretation. But the agency’s interpretation
need not follow inexorably from the underlying text in order for the interpretation to be
“logically justifie[d].”
See CHI
,
Finally, Plaintiff argues that section 310 cannot be interpretive because it represents “a
hard, bright-line cut-off that brooks no dissent.” Dkt. 16-1 at 25. Under this theory, if section
310 were merely an interpretive rule, it could not operate in a categorical manner; the Secretary
would be obliged to make discretionary exceptions when justified by the facts of the case.
Plaintiff cites no support for this proposition, and the Court is not aware of any. But, in any
event, PRM provisions, although entitled to great weight, “do not have the force and effect of
law and are not accorded that weight in the adjudicatory process.”
Guernsey Mem. Hosp.
, 514
U.S. at 99;
see also
42 C.F.R. § 405.1867. Moreover, as noted above, the Secretary is generally
free to amend section 310 without engaging in notice and comment rulemaking, so long as the
new interpretation is also consistent with the statute and regulations.
Perez
, 135 S. Ct. at
1208-09;
Guernsey
,
This is not to say, however, that section 310—like other interpretive rules contained in
the PRM—does not serve an important, and at times dispositive, function. It represents the
Secretary’s considered interpretation of the “reasonable collection efforts” regulation, and that
regulation does have binding legal effect. The fact that section 310 might thus establish the
Secretary’s current “bright-line” test for whether certain costs are reimbursable, however, does
not mean that section 310 is a legislative rule. To the contrary, many interpretive rules are at
times outcome determinative, and the Court of Appeals has recognized that even a “bright-line”
*25
rule can be interpretive.
See Am. Mining Cong.
,
The Court, accordingly, agrees with the Secretary that section 310 is an interpretive rule, not a legislative rule and thus was not subject to the notice and comment requirement of the APA.
B. Was The Secretary Required To List Section 310 In The Federal Register?
Plaintiff further argues that, even if properly treated as an interpretive rule, section 310 is
ineffective because it was not included in a list published in the Federal Register. Dkt. 16-1
at 26. The Medicare Act requires the Secretary to “publish in the Federal Register, not less
frequently than every 3 months, a list of all manual instructions, interpretative rules, statements
of policy, and guidelines of general applicability,” excluding those published in accordance with
notice and comment and those “previously published in a list under this subsection.” OBRA,
Pub. L. No. 100-203, § 4035(c), 101 Stat. 1330-78,
codified at
42 U.S.C. § 1395hh(c)(1).
Applying this provision in
Chippewa Dialysis Services v. Leavitt
,
The Court is not persuaded that the publication requirement applies to section 310. It is
well settled that statutes are generally not given retroactive effect absent an express indication
otherwise.
See, e.g.
,
United States v. St. Louis, S.F. & T.R. Co.
,
Plaintiff argues that Congress must have intended section 1395hh(c)(1) to have retroactive effect, since the provision provides that the Secretary need not list published regulations or materials that “have not been previously published in a list under this subsection.” 42 U.S.C. § 1395hh(c)(1)(B). According to Plaintiff, if the publication requirement were not retroactive, the quoted language would constitute surplusage. The Court does not agree. Without the “previously published” language, section 1395hh(c)(1)(B) would have a very different meaning. It would require the Secretary to publish “a list of all ” of her informal guidance every three months— i.e ., a cumulative list of all guidance promulgated since the statute was enacted. The “previously published” language clarifies that the list need not be cumulative; it may omit both published regulations and previously published informal rules and guidance. Plaintiff objects that the language cannot serve this purpose because a cumulative list *27 requirement would be absurd. Although perhaps excessive, it is not clear why that reading would be absurd, since Plaintiff’s reading would require the Secretary’s first list to include prior guidance many decades old. And even if it is absurd, Congress might have included the “previously published” language just to be certain. Given that Congress drafted the statute against a backdrop including a presumption against retroactivity, the Court is convinced that the Secretary’s reading is the better one.
The Court of Appeals had no occasion in
Chippewa
to consider whether the publication
requirement was retroactive, because the challenged standard was derived from data collected
after section 1395hh(c)(1) was enacted.
See
The next question presented is whether the statutory Bad Debt Moratorium precluded the
Board from giving the collection agency requirement in PRM section 310 the strict construction
that it applied here. Plaintiff contends that the interpretation applied below differs markedly
from the Board’s pre-1987 construction of the same requirement and that, accordingly, the
decision is contrary to the Bad Debt Moratorium. In support of this contention, Plaintiff relies on
the Court of Appeals for the Sixth Circuit’s unpublished decision in
Detroit Receiving Hospital
v. Shalala
,
The Bad Debt Moratorium was adopted in the wake of proposals from the HHS Inspector
General to make sweeping changes regarding the recovery and reimbursement of Medicare bad
debt, in particular, “either eliminating bad debt reimbursement entirely or attempting to recoup
the costs by garnishing the Social Security checks of debtors.”
Hennepin Cnty.
,
Following adoption of the Moratorium, however, the Inspector General “continued to
urge closer scrutiny of bad debt requests.”
Hennepin Cnty.
,
In its final form, the Moratorium declares that, “[i]n making payments to hospitals” under Medicare,
the Secretary . . . shall not make any change in the policy in effect on August 1, 1987, with respect to payment under [the Medicare program] to providers of service for reasonable costs relating to unrecovered costs associated with unpaid deductible and coinsurance amounts incurred under such title (including criteria for what constitutes a reasonable collection effort, including criteria . . . for determining whether to refer a claim to an external collection agency ). The Secretary may not require a hospital to change its debt collection policy if a fiscal intermediary, in accordance with the rules in effect as of August 1, 1987, with respect to criteria for . . . determining whether to refer a claim to an external collection agency, has accepted such policy before that date, and the Secretary may not collect from the hospital on the basis of an expectation of a change in the hospital’s collection policy.
42 U.S.C. § 1395f note (emphasis added).
The parties agree that PRM section 310 existed in its present form prior to August 1, 1987, and that its requirement to refer Medicare and non-Medicare accounts of like amount for collection was part of the policy frozen in place by the Moratorium. The parties also agree that the Secretary’s “August 1, 1987 ‘policy’ as a whole” included administrative decisions applying section 310’s referral requirement. Dkt. 29 at 7; see also 1988 U.S.C.C.A.N. at 5337. [6] The parties disagree, however, about whether the strict interpretation of section 310 espoused by the Secretary and applied in this case constitutes a departure from how section 310 was interpreted and applied before the Moratorium took effect. The Secretary maintains that, with exceptions not relevant here, section 310 was applied in the same manner before and after the Moratorium took effect. Plaintiff, in contrast, argues that the Secretary’s approach to the referral of Medicare bad debt to collection agencies underwent a fundamental change: according to Plaintiff, before the Moratorium took effect, the requirement that a provider that refers non-Medicare accounts to a collection agency also refer Medicare accounts to a collection agency was not treated by the Secretary as a hard and fast rule, but rather permitted a provider to demonstrate on a case-by- case basis that the referral of the Medicare bad debt did not make sound business sense. After the Moratorium took effect, however, Plaintiff contends that the policy shifted and became inflexible. If non-Medicare accounts were referred to a collection agency, the provider was required to refer Medicare bad debt as well, regardless of whether there was a reasonable *31 prospect of recovery. Plaintiff contends that this shift in policy violated the Bad Debt Moratorium.
Plaintiff relies on three Board decisions predating the Moratorium, all of which concluded that “reasonable collection efforts” were made despite the providers’ referral of only non-Medicare accounts to collection agencies. See Cincinnati Gen. Hosp. v. BCBSA/BCBS of Sw. Ohio , PRRB Dec. No. 81-D52 (May 29, 1981) (addressing cost reporting period ending in 1977), AR 188-193; Reed City Hosp. v. BCBSA/BCBS of Mich. , PRRB Dec. No. 86-D67 (Feb. 20, 1986) (addressing cost reporting period ending in 1982), AR 183-86; St. Francis Hosp. & Med. Ctr. v. BCBSA/Kan. Hosp. Servs. Ass’n, Inc. , PRRB Dec. No. 86-D21 (Nov. 12, 1985) (addressing cost reporting periods ending in 1980 through 1983), AR 195-202, aff’d in relevant part without opinion by HCFA Admin. Dec. (Jan. 8, 1986), AR 204-06. Plaintiff argues that in each of these decisions, the Board “allowed sound business judgment to trump the manual’s requirement to refer Medicare accounts to a collection agency,” Dkt. 19-1 at 23, and that these decisions demonstrate that the Secretary’s pre-Moratorium policy required referral of Medicare accounts only where it was not inconsistent with the provider’s “sound business judgment,” id. Plaintiff contends that the approach to section 310 applied by the Board in this case marked a shift in policy from these flexible pre-Moratorium decisions.
Plaintiff made this argument before the Board, which rejected Plaintiff’s contention. AR 16-17.
1. The Board’s Decision
Because the CMS Administrator declined to review the Board’s decision, AR 1-2, its decision constitutes the final decision of the Secretary for purposes of this action. As noted above, the Board considered the Providers’ Bad Debt Moratorium argument, but concluded that *32 no change in policy occurred. According to the Board, “[t]he requirements at issue in [the Providers’ administrative] appeal regarding reasonable collection efforts are clearly not new law or policy.” AR 16. Thus, in the Board’s view, nothing in its decision implicated the Bad Debt Moratorium.
The Board’s analysis is cursory. In two sentences it distinguished the three pre- Moratorium precedents relied upon by Plaintiff ( Cincinnati General , Reed City , and St. Francis ), concluding that they are “not relevant to the Bad Debt Moratorium issue” because they applied versions of section 310 that were superseded by the 1983 version that is at issue here. AR 16. The Board explained that the pre-1983 versions of section 310 treated Medicare and non- Medicare bad debt “differently . . . because of a prohibition against using or threatening court action to collect Medicare bad debts.” Id. The Board also cited to the HCFA Administrator’s 1996 decision in Dodge County , id. n.35, which provides a slightly more expansive explanation for why the Board concluded that the three pre-Moratorium decisions were inapposite, see Dkt. 16-3 at 1-8. There, the Administrator considered the same question presented here, and, like the Board did here, declined to rely on the three precedents because they were based on “an earlier version of the PRM.” Id. at 7. Dodge County explained that the prior rule prohibiting collection agencies from threatening to bring suit against Medicare beneficiaries “prevented providers from affording identical treatment for both Medicare and non-Medicare accounts as reflected in the [three] cited cases.” Id. Because the prohibition on the use or threat of litigation was eliminated in 1983, it became possible at that point to treat Medicare and non-Medicare bad debt on equal terms. Id. ; see Dkt. 26-2.
Two other aspects of the Board’s decision in this matter warrant brief mention. First, although the Board’s decision in Dodge County was reversed by the Administrator’s decision, *33 the Board’s decision here nonetheless goes on to distinguish that decision. AR 17. It simply noted, however, that Dodge County was decided in 1996, “well after” the effective date of the Bad Debt Moratorium and observed that the 1996 decision relied on the three precedents that it had just concluded were irrelevant. Id. Second, after concluding that Cincinnati General , Reed City , and St. Francis could all be distinguished, the Board went on to apply section 310 in categorical terms, without recognizing an exception for futile or unsound collection efforts. Id. On this basis, the Board denied the Providers’ claim for bad debt reimbursement.
2. APA Review
“The Board’s decision . . . is entitled to considerable deference from a reviewing court.”
Marymount Hosp. v. Shalala
,
Notwithstanding this deferential standard of review, the Court concludes that the Board’s decision is not supported by the legal and factual record. Before turning to the difficulties with the Board’s decision, the Court notes that the Board was entirely correct to reject Plaintiff’s reliance on the Cincinnati General Hospital decision. That decision addressed a claim for reimbursement for the reporting period ending on June 30, 1977. AR 188. As that decision correctly explains, the version of section 310 applicable at that time required “only that a reasonable collection effort should be made by a provider, applying sound business judgment.” AR 191. That “instruction” was dropped in 1978, when section 310 was revised to require “that the collection effort must be similar to the effort the provider puts forth with regard to non- Medicare patients.” Id. (emphases added).
The Board’s finding that Reed City and St. Francis did not address the question presented here, however, is on shakier ground. Those decisions applied the 1981 version of section 310. Like the present version, the 1981 version of section 310 explained that “[w]here a collection *35 agency is used, Medicare expects the provider to refer all uncollected patient charges of like amount to the agency without regard to class of patient.” Dkt. 26-1 at 2 (HCFA Transmittal No. 246, Feb. 1981). However, unlike the version at issue here, the 1981 version included a second paragraph based on the then-existing prohibition on using the threat of litigation to recover Medicare bad debt. The additional paragraph explained:
It is not the intent of the Medicare bad debt principle that court action be threatened or taken before these uncollected amounts can be reimbursed under this principle. The provider should instruct the collection agency not to use, or threaten to use, court action to collect the Medicare deductible and coinsurance amounts. However, where a collection agency refuses to accept Medicare accounts under the above Medicare restriction on legal action . . . referral of unpaid Medicare deductible and coinsurance amounts is not required. Where referral to a collection agency is not made because of either of these restrictions, this does not, however, relieve the provider of the responsibility to put forth a reasonable collection effort as defined above.”
Id. at 2; see also id. at 1 (explaining that the 1981 version “permit[s] providers to meet the reasonable collection effort requirements in situations where unpaid Medicare [debts] are not referred to a collection agency that refuses to accept Medicare referrals because of the prohibition against threatening legal action”). The prohibition on legal action was rescinded for cost reporting years beginning on or after January 15, 1983. See Dkt. 26-2 at 1 (HCFA Transmittal No. 278, Jan. 1983) (explaining that the 1983 version “eliminate[d] the restriction against using or threatening court action to collect bad debts from Medicare beneficiaries”).
The Board’s decision here rested on the premise that the flexible approach applied in Reed City and St. Francis is attributable to the additional paragraph in the 1981 version of section 310. AR 16. This paragraph was effective during the years at issue in Reed City and St. Francis , but it was eliminated in 1983, well before the Moratorium took effect. In the Board’s view, when the paragraph prohibiting threats of legal action was deleted, the flexible *36 approach reflected in Reed City and St. Francis no longer applied. As explained below, the Court is unpersuaded.
In Reed City , it was undisputed that “[o]nly non-Medicare bad debts were sent to the collection agency.” AR 184. The provider argued that it was still entitled to reimbursement for Medicare bad debt because “its recovery rate would have been negligible due to the highly indigent population of its service area.” Id. In support of this assertion, the provider pointed to evidence that it referred Medicare bad debt to the collection agency following the disallowance, “with virtually insignificant results.” Id. The provider made no reference to the ban on threats of litigation, instead relying exclusively on the asserted indigency of the relevant population, and arguing that “Medicare bad debts . . . are allowable when reasonable in-house collection efforts are made.” Id.
The fiscal intermediary responded to the provider’s argument by making the same argument the Board adopted here and that the Secretary presses in this action: section 310 requires that “similar collection efforts” be made for Medicare and non-Medicare accounts. Id. Since the provider did not treat those accounts alike, the fiscal intermediary asserted that the provider’s claim was properly disallowed. AR 185. The intermediary, moreover, noted two additional facts that undercut the Board’s efforts to distinguish Reed City based on the prohibition against threats of litigation in the 1981 version of section 310. First, the 1981 version of section 310 provided that “[t]he provider should instruct the collection agency not to use, or threaten to use, court action to collect the Medicare [bad debt],” and that “where a collection agency refuses to accept Medicare accounts under the above Medicare restriction on legal action . . . referral of [Medicare bad debt] is not required.” Dkt. 26-1 at 2. Second, as noted in Reed City , there was “no evidence” “to show that the collection agency refused to accept Medicare” *37 accounts and there was “no evidence” that the provider even notified the collection agency that it would have been prohibited from threatening litigation against Medicare beneficiaries. AR 184. Thus, not only did the provider in Reed City decline to rely on the prohibition on litigation as support for its position, it apparently could not have done so: there was no evidence that it had complied with the relevant requirements or that the collection agency would have declined to pursue the Medicare bad debt on that basis.
Finally, the Board’s analysis in Reed City makes no mention of the restriction on legal action. Without elaboration, the Board merely found that “the provider’s collection policies reflect that it maintained reasonable collection efforts on Medicare accounts deemed uncollectible as required” by the regulations, and that “[t]he [i]ntermediary, in fact, concurs that the in-house collection efforts were acceptable and appropriate.” AR 185. In short, the plain language of the Reed City decision shows that it was based on a flexible view of the “reasonable collection efforts” requirement, and there is no evidence that it was based, as the Board concluded here, on the prohibition on the threat of legal action.
Likewise, there is no evidence that the St. Francis decision was based, even in part, on the prohibition on the threat of legal action against Medicare beneficiaries. As in Reed City , the provider made no reference to this prohibition. It simply argued that it was justified in not referring Medicare bad debt to a collection agency because there was little prospect of successful recovery on Medicare accounts. AR 198-99. As in Reed City , the intermediary responded that reimbursement was “properly disallowed because the provider’s collection efforts for non- Medicare and Medicare uncollected amounts were not consistent.” AR 199. Echoing the Secretary’s argument here, the intermediary asserted “that the provider’s collection efforts were not reasonable because the non-Medicare uncollectable accounts were referred to an outside *38 collection agency for further collection attempts while the Medicare uncollectable accounts were not similarly referred but were written off as bad debts.” Id.
Without making any reference to the prohibition on the threat of litigation, the Board found that the provider’s efforts met “the reasonable effort requirements” in the Secretary’s regulations. AR 200. The Board explained, in terms that Plaintiff asserts should apply equally here, that “[i]t is reasonable to write off bad debts when their pursuit would be too costly.” AR 201. The Board went on to note, moreover, that the futility of an effort to recover Medicare bad debt through the collection agency was evidenced by fact that the provider used “a collection agency for the fiscal years ending 1983 and 1984, but did not recover amounts from” its Medicare bad debts. AR 201. Significantly, by 1984 the prohibition on the threat of litigation had been lifted, yet the Board made no reference to this fact.
Thus, in both cases relied upon by Plaintiff, the providers referred non-Medicare bad debt to collection agencies, but not Medicare bad debt. In both cases, the intermediaries disallowed reimbursement based on section 310, and the providers argued on appeal that their claims should have been allowed because the prospect of recovery was negligible. Neither provider made reference to the prohibition on the threat of litigation. In both cases, the intermediaries, moreover, continued to press their position that section 310 required disallowance due to the disparate treatment of non-Medicare and Medicare bad debt. And, in both cases, without making any reference to the prohibition on the threat of litigation, the Board allowed the claims because the providers had made reasonable collection efforts.
To be sure, courts generally defer to an agency’s interpretation of its own precedents.
Entergy Servs
.,
Nor has the Secretary proffered any additional evidence that the decision here was
consistent with the Board’s pre-Moratorium bad debt policy. The Court, for example, requested
that the parties attempt to locate the briefs in
St. Francis
to see if they might shed further light on
that decision, but they were unable to do so.
[7]
The Secretary suggests that two additional
administrative decisions—
Scotland Memorial Hospital v. Blue Cross and Blue Shield
Association
,
The Court thus concludes that the inflexible interpretation of section 310 endorsed by the
Secretary and applied by the Board represents an impermissible change from the more flexible
pre-Moratorium policy reflected in
Reed City
and
St. Francis
. The Board’s decision is entitled to
substantial deference.
See, e.g.
,
Marymount Hosp.
,
3. Alternative Grounds
The Secretary argues that even if the Court concludes that the Secretary’s policy violates the Bad Debt Moratorium, it should nonetheless affirm on the alternative ground that Plaintiff would lose even under the standard applied in Reed City and St. Francis . See Dkt. 17-4 at 22. The Court agrees that even though the Secretary’s pre-Moratorium policy permitted occasional exceptions, and therefore she is obligated to provide similar exceptions in the years at issue here, that does not mean Plaintiff has demonstrated its entitlement to such an exception. As Plaintiff acknowledges, even under the standard applied in the Reed City and St. Francis decisions, it was the provider’s burden to present evidence that the continued “pursuit” of Medicare bad debt “would ‘be too costly’”. Dkt. 16-1 at 33 (quoting St. Francis , AR 201).
Plaintiff contends that it made the required showing, but the Board disregarded its evidence. Dkt. 16-1 at 33; Dkt. 19-1 at 27-28 (“The Board, as the trier of fact, never had the opportunity to opine on the persuasiveness of [Plaintiff’s] testimony because it applied the Secretary’s ‘hard and fast’ referral rule”); AR 12 (“the Providers contend that the record evidence, statistics, and testimony presented in this matter show that the Providers’ accounts were uncollectible when claimed as worthless and that sound business judgment established that there was no likelihood of recovery in the future”). According to Plaintiff, the evidence in the administrative record shows that (1) beginning in December 2006, the Providers referred *43 Medicare accounts to a secondary collection agency and observed a collection rate of only a few percent, see Dkt. 16-1 at 33; AR 168; (2) at the secondary collection stage, the average balance of the non-Medicare accounts (approximately $3000) was six times larger than the average balance of the Medicare accounts (approximately $500), see AR 99, 168, 170; (3) due to “litigation costs” of $187.50 per account plus attorney’s fees, “the cost of pursuit” of a $500 account “outweighs any recovery,” see Dkt. 19-1 at 13; AR 97; (4) many collection techniques, such as garnishment, are less effective on Medicare accounts due to the demographic characteristics of Medicare beneficiaries, see Dkt. 16-1 at 28; AR 96-97; and (5) the average payment on a Medicare account was less than 65% of the average payment on a non-Medicare account, see AR 99, 168, 170. Based on these factors, Plaintiff contends that further collection efforts would have been futile.
In response, the Secretary argues that Plaintiff’s claim “is not bolstered by the types of evidence that the [Board] . . . held persuasive” in St. Francis and Reed City , Dkt. 17-4 at 23, because “Plaintiff failed to produce persuasive evidence that the referral of its Medicare accounts for external collection would not have been cost effective,” id. In both decisions, the providers offered evidence that, following the cost years at issue, they began referring Medicare accounts to the collection agencies, without success. In St. Francis , the intermediary’s auditor confirmed that “no amounts were recovered from the Medicare beneficiaries” for one of those years, AR 198, while in Reed City , the provider contended that referral of the Medicare accounts had “virtually insignificant results,” AR 184. Here, however, the administrative record includes testimony that the recovery rate for Medicare accounts at the secondary collections level “may be equal to or slightly higher than the non-Medicare” recovery rate. AR 105; see AR 11. It also appears that between December 2006 and March 2011, the secondary collection agency *44 recovered almost a quarter of a million dollars on Providers’ Medicare accounts. AR 99, 168. Plaintiff argues that this represents a return of only three cents on the dollar, see AR 99, 168; Dkt. 19-1 at 13, 27, but the return appears roughly comparable to (and maybe better than) the return on Providers’ non-Medicare accounts, see AR 99, 100, 170. Even if Plaintiff is correct that the cost of pursuing a $500 account outweighs the potential recovery, see AR 97, the same ought to be true of any $500 account, not just Medicare accounts; Plaintiff does not appear to have offered evidence relating to the prospect of recovery from larger Medicare accounts. The Secretary argues, moreover, that Plaintiff relies on generalizations about Medicare accounts as a group and did not provide sufficient information to establish that the collection rate attributed to the Providers’ Medicare accounts “represented the collection rate for Medicare accounts that were similar in amount to the non-Medicare accounts referred to secondary collection agencies.” Dkt. 17-1 at 24 (emphasis added). [10] Finally, to the extent Plaintiff relies on Cincinnati General , see Dkt. 16-1 at 34; Dkt. 19-1 at 22, the Court has already concluded that the Board correctly distinguished that decision.
“‘[W]ith limited exception, the law does not allow [the reviewing court] to affirm an
agency decision on a ground other than that relied upon by the agency.’”
Grossmont Hosp.
Corp.
,
D. Was The Denial Of Reimbursement Arbitrary And Capricious?
Finally, Plaintiff argues that even if the Secretary’s policy does not violate the Bad Debt Moratorium, the denial of reimbursement in this case was arbitrary and capricious. Dkt. 16- 1 at 35-38. Plaintiff contends, inter alia , that the Providers complied with the literal requirements of PRM section 310, the Board’s decision is not supported by the factual record, and the referral policy applied here is unfair. See id. Because the Court concludes that remand is appropriate, it need not reach these arguments. On remand, the Board should apply the more flexible pre-Moratorium approach reflected in Reed City and St. Francis in order to determine whether the Providers engaged in “reasonable collection efforts” notwithstanding their differential treatment of Medicare and non-Medicare bad debt.
IV. CONCLUSION
For the reasons set forth above, the Court concludes that the Secretary’s denial of reimbursement was unreasonable because the rigid policy applied by the Board is inconsistent with the more flexible approach applied prior to the Bad Debt Moratorium. Accordingly, the Court GRANTS in part and DENIES in part Plantiff’s motion for summary judgment, Dkt. 16, DENIES the Secretary’s cross-motion for summary judgment, Dkt. 17, VACATES the Board decision, and REMANDS for further proceedings consistent with this Memorandum Opinion.
An appropriate Order will issue separately. /s/ Randolph D. Moss
RANDOLPH D. MOSS United States District Judge Date: September 10, 2015
Notes
[1] The action was originally brought against Secretary Kathleen Sebelius. Pursuant to Federal Rule of Civil Procedure 25(d), however, Secretary Burwell is automatically substituted for Secretary Sebelius.
[2] Citations are to the administrative record (“AR”). Dkt. 21.
[3] After the fiscal intermediary denied reimbursement of the Providers’ Medicare bad debts for the cost years ending in 2004 and 2005, the Providers changed their policies and began referring Medicare accounts to a secondary collection agency in 2006. AR 84.
[4] A policy statement is another type of non-legislative rule.
See Ass’n of Flight Attendants-CWA
v. Huerta
,
[5] In the alternative, the Secretary argues that she satisfied section 1395hh(c)(1)’s publication
requirement by “publish[ing] in the Federal Register, . . . a list” that included section 310. She
cites the first list published pursuant to section 1395hh(c)(1), which included brief descriptions
of her pre-existing guidance materials and stated that “The Provider Reimbursement Manual
provides instructions for determining the amount of reimbursement for providers of services
participating in the Medicare program.”
[6] As provided in PRM section 2927, “[d]ecisions by the Administrator are not precedents for
application to other cases. A decision by the Administrator may, however, be examined and an
administrative judgment made as to whether it should be given application beyond the individual
case in which it was rendered. If it has application beyond the particular provider, the substance
of the decision will, as appropriate, be published as a regulation, HCFA Ruling, manual
instruction, or any combination thereof so that the policy (or clarification of policy having a basis
in law and regulations) may be generally known and applied by providers, intermediaries, and
other interested parties.”
See also Cmty. Care
,
[7] The Court thanks the parties for their efforts.
[8] The Court notes that the provider in Reed City cited the Board’s decision in Scotland Memorial Hospital as support for the proposition that “Medicare bad debts and collection fees are allowable when reasonable in-house collection efforts are made.” AR 184. As already noted, however, the provider did not argue that the pre-1983 prohibition against litigation justified its failure to refer Medicare accounts, and the Board ruled in the provider’s favor without mentioning the Board’s or the Deputy Administrator’s decision in Scotland . See AR 185.
[9] If the exception contemplated in the additional paragraph of the 1981 version is strictly
construed, it is not clear that it actually applied in
Lakewood Hospital
, because it does not appear
that the collection agencies affirmatively refused the provider’s request to pursue Medicare bad
debts; the intermediary in that case asserted that there was “no evidence” that the collection
agencies had refused to comply with the prohibition on legal action.
[10] Not all non-Medicare accounts were referred to the secondary collection agency; accounts deemed uncollectible due to factors such as bankruptcy, death, or charity status were not referred. AR 95. The administrative record does not indicate how many non-Medicare accounts were deemed uncollectible or what the values of those accounts were.