Lead Opinion
OPINION
Southern Rehabilitation Group, P.L.L.C. and Dr. James Little brought this civil action to recover interest payments on Medicare claims voluntarily paid by the Secretary of the Department of Health and Human Services. On remand following an initial appeal, the district court held that the plaintiffs were not entitled to interest on the claims because the claims were not “clean” as required by the provision of the Medicare Act that authorizes interest payments. Accordingly, the court granted summary judgment to defendants. Because the district court’s decision cоrrectly applied the Medicare Act provision, and because the court did not commit any other error, we affirm.
This is the second appeal in this matter. See S. Rehab. Grp. v. Sec’y of HHS,
In 2001, Dr. James Little became the medical director of Southern Rehabilitation Group, P.L.L.C. Collectively, the provider generated approximately 10,000 Medicare claims per year, representing 70% of its patients. Relevant here are some 6,200 such claims, generated between 2001 and 2006. All of these claims were initially sent to a Medicare contractor, CIGNA, responsible for review and payment.
During the same period, plaintiffs were under a Progressive Corrective Action plan, which led CIGNA to order “prepayment medical review” on 100% of the claims. The prepayment review was conducted by a subcontractor. Prepayment medical review involves a contractor individually evaluating claims for errors or discrepancies and may require the provider to submit additional documentation, if necessary. See Medicare Program Integrity Manual, CMS Pub. #100-08, Ch. 3, §§ 3.2.3.1, 3.2.3.2.
During prepayment review, the subcontractor denied or down-coded many of the claims. A complex series of administrative proceedings followed as plaintiffs challenged these determinations. The relevant claims here are those 6,200 claims which remained unpaid or down-coded when the administrative review process had been exhausted. See S. Rehab. Grp.,
Accordingly, plaintiffs filed this civil action against the Secretary of the United States Department of Health and Human Sеrvices, in part seeking judicial review of the final agency decision and reimbursement for the 6,200 claims under 42 U.S.C. § 1395ff(b)(1).
Following this payment, the district court entered judgment for defendants on the remaining claims. In its opinion, the district court dismissed the claims for payment on the 6,200 claims as moot and denied plaintiffs’ request for interest payments because, according to the Medicare Claims Manual, interest payments were not authorized on claims initially processed to denial S. Rehab. Grp., P.L.L.C. v. Sebelius,
The plaintiffs claimed they were owed interest under the “clean claims” provision
(B)(i) The term ‘clean claim’ means a claim that has no defect or impropriety (including any lack of any required substantiating documentation) or particular circumstance requiring special treatment that prevents timely payment from being made on this claim under this part.
(ii) The term “applicable number of calendar days” means—
(V) 30 calendar days.
(C) If payment is not issued, mailed, or otherwise transmitted within [30 days] after a clean claim is received, interest shall be paid ... for the period beginning on the day after the required payment date and еnding on the date on which payment is made.
42 U.S.C. § 1395u(c)(2)(B) and (C).
The Secretary read the provision to be entirely inapplicable to claims initially processed to denial and paid only after judicial review, which would mean no interest was owed on the relevant claims. S. Rehab. Grp.,
Congress placed only two limitations on the payment of interest under the clean-claims provision. First, the claim must be clean, meaning it has “no defects or improprieties.” Second, if the claim is clean, interest is automatically due if the claim is not paid “within [30 days] after the ... claim is received.” That’s it. There are no further limitations in Congress’s express language.
Id. at 686 (internal citations omitted) (alterations in original).
The court found the Secretary’s interpretation unreasonable because excluding claims initially processed to denial “place[d] additional limitations” beyond the two named in the statute. Id. Thus, the court reversed the district court’s decision granting summary judgment to the Secretary on plaintiffs’ claims for interest and remanded for further proceedings.
The Secretary subsequently filed a motion for judgment on the pleadings. Her position was that prepayment review, to which the claims were subject, was a form of special treatment that exempted interest payments under the statute by making them not “clean.” Plaintiffs responded by arguing that this was not a proper interpretation of the statute and that the Secretary’s position was contrary to the Sixth Circuit’s earlier opinion.
The district court granted summary judgment for the Secretary. S. Rehab. Grp., P.L.L.C. v. Burwell,
II
The district court had jurisdiction to consider the relevant claims under 42 U.S.C. § 1395ff(b)(1)(A). and 42 U.S.C. § 405(g). See also S. Rehab. Grp.,
A
Plaintiffs argue that the district court considered arguments outside the scope of its mandate on remand. “When a case has been remanded by an appellate court, the trial court is bound to ‘proceed in accordance with the mandate and law of the case as established by the appellate court.’” Goldberg v. Maloney,
Plaintiffs assert thаt this court remanded to the district court for the limited purpose “to address whether interest was due on [the relevant] claims,” and that, instead, the court impermissibly considered arguments they allege the Secretary had waived: whether those claims were actually “clean:”
The relevant passage from the appellate court opinion is:
On summary judgment, it was the Secretary’s burden to show that no genuine issue of material fact exists as to plaintiffs’ claim for interest. But she cannot rely on her unreasonable interpretation of the clean-claims statute as a basis for summary judgment. In order to be entitled to summary judgment, she would presumably have to show that plaintiffs’ claims' were not clean claims denied outside of the 30-day window. On remand, the district court should address whether interest is due on some or all of the 6,200 claims for reimbursement that plaintiffs appropriately brought before the district court.
S. Rehab. Grp.,
That is exactly what happened. On remand, the Secretary endeavored to show the claims were not clean. The district court agreed with her position and granted summary judgment. S. Rehab. Grp., P.L.L.C.,
Further, despite plaintiffs’ contentions, the Secretary had not waived the argument that the relevant claims were not “clean” by failing to raise it in earlier proceedings. Indeed, the Secretary had included this position in a footnote on the first appeal. Case No. 12-5903, Doc. 006111645361, at 46, n.15 (“clean claims do not entail investigation or development by the Medicare contractor on a prеpayment basis”). But it was unnecessary at that stage for her to make this argument more fully. On the first appeal she was arguing that the “clean claims” provision did not apply to these claims whatsoever—the question of whether or not these claims were “clean” was entirely irrelevant to the Secretary’s initial position. See id. at 47. However, once this court rejected her reading and held the clean-claims provision did apply, she prudently turned her full attention to the now-dispositive argument which she had left aside—whether the claims were “clean.” See S. Rehab. Grp.,
Thus, the arguments made by the Secretary and considered by the district court were properly within the scope of remand.
B
Plaintiffs also challenge the district court’s procedural decision to sua sponte grant summary judgment on defendants’ post-remand Rule 12(b)(6) motion. Plaintiffs argue that this conversion denied them both notice and the opportunity for discovery as required by the Federal Rules of Civil Procedure.
Federal Rule of Civil Procedure 12(d) requires that, upon conversion of a motion to dismiss to one for summary judgment, parties need only be given a “reasonable opportunity to present all the material that is pertinent to the motion.” However, a district court may enter summary judgment sua sponte if the losing party is “afforded notice and reasonable opportunity to respond to all the issues to be considered by the court.” Shelby Cnty. Health Care Corp. v. S. Council of Indus. Workers Health & Welfare Trust Fund,
Our review is for abuse of discretion. Wysocki v. Int’l Bus. Mach. Corp.,
The district court’s decision to sua sponte convert the Rule 12(b)(6) motion into one for summary judgment was not an abuse of discretion. The district court’s final order had three necessary components. First, the clean-claims provision was read to mean a claim is not “clean” if it is subject to special treatment that prevents timely payment. S. Rehab. Grp., P.L.L.C.,
Not only did plaintiffs have the opportunity to respond to the relevant issues prior to the conversion, they effectively caused it. Plaintiffs attached an affidavit to their response to the Secretary’s post-remand motion. It was the inclusion of this affidavit—identifying the relevant claims and again confirming they were subject to prepayment medical review—that necessitated the court’s conversion of the motion. See Max Arnold & Sons, LLC v. W.L. Hailey & Co.,
C
This court reviews a decision to grant summary judgment de novo. Gribcheck v. Runyon,
1
Before considering the substance of the lower court’s interpretation of the statute, we dispose of what appears to be some friction between our initial reading of the “clean claims” provision and that adopted by the district court. Although this court had said that a “clean claim” means one with “no defects or improprieties” and went no further, the district court pointed out that the statute includes a category we failed to mention: claims involving “particular circumstances requiring special treatment that prevents timely payment.” S. Rehab. Grp., P.L.L.C.,
Nor does it contradict the substance of this court’s prior opinion. The necessary holding of that opinion was that the “clean claims” provision requires only two things for interest to attach: that claims are “clean” and that they are unpaid within a specified time after submission. It was not necessary for this court’s holding to determine what makes a claim “clean” under the provision. Thus, the district court correctly held that the clean-claims provision provides two categories of unclean claims: (1) those with defects or improprieties, or; (2) those subject to circumstances requiring special treatment that prevents timely payment. 42 U.S.C. § 1395u(c)(2)(B).
2
No interest is payable by the federal government except where Congress has expressly authorized it. Library of Congress v. Shaw,
The Secretary asserts that the 6,200 claims at issue are not clean as a matter of law and shе is therefore not authorized to pay interest on them. Under' the provision, a claim is “clean” unless it has “defects or improprieties” or it is “subject to particular circumstances requiring special treatment that prevents timely payment.” See id. The Secretary asserts that prepayment medical review constitutes special treatment preventing timely payments. The district court agreed. S. Rehab. Grp., P.L.L.C.,
We employ the usual tools of statutory interpretation to determine if prepayment medical review is a type of “special treatment that рrevents timely payment” under the clean-claims provision. We begin this analysis “by examining the language of the statute itself to determine if its meaning is plain.” Nat’l Air Traffic Controllers Ass’n v. Dep’t of Transp.,
The plain language of the statute supports a reading that claims subject to prepayment medical review are not “clean.” For a claim not to be clean under the relevant clause, two conditions must be satisfied. First, the claim must be “subject to particular circumstances requiring sрecial treatment.” 42 U.S.C. § 1395u(c)(2)(B). Second, that special treatment must “pre-vente ] timely payment.” Id.
Here, the provider was subject to an onerous Progressive Corrective Action plan under which all relevant claims were submitted to prepáyment medical review. While most Medicare claims are paid upon receipt, prepayment medical review is an error prevention program applying “to those services and items that pose the greatest financial risk to the Medicare program and that represent the best investmеnt of resources.” See Medicare Program Integrity Manual, CMS Publication #100-08, ch. 3, § 3.2.1. In other words, prepayment medical review is atypical.
Prepayment medical review delays payment. First, it seems almost too obvious to note that prepayment medical review, as particularized review of claims before payment, will delay it. See Medicare Program Integrity Manual, CMS Publication # 100-08, ch. 3, §§ 3.3.1, 3.3.1.1-2. Relatedly, prepayment review is conceptually distinct from post-payment review—an alternative treatment in which a contractor ensures proper billing only after payment. See id. at § 3.2. Finally, prepayment medical review includes various possibilities that, if triggered, would substantially delay processing. See e.g., id. at § 3.2.3.2 (providing 45 days for providers to respond to a request for additional documentation); id. at § 3.2.3 (requiring contractor to hold claims for 7-10 days upon notice of forthcoming unsoliсited documentation and then requiring a determination within 30 days of receiving that documentation).
In sum, under the statute’s plain meaning, claims subject to prepayment medical review are subject to particular circumstances requiring special treatment that prevents timely payment and are therefore not “clean” under the clean claims provision.
This reading is consistent with that adopted by other authorities. The Secretary’s interpretation has long been that “clean claims are defined as claims that do not require Medicare [сontractors] to investigate or develop them outside of their Medicare operations on a prepayment basis.” 73 Fed. Reg. 36522, 362526 (June 27, 2008). Likewise, the Seventh Circuit has read the clean-claims provision to mean that claims subject to prepayment medical review were not clean. See Ctr. for Dermatology & Skin Cancer, Ltd. v. Burwell,
Plaintiffs insist this is a factual issue. They contend that the Secretary must show that the claims themselves both required prepayment medical review and that medical review, of some specificity, actually took place. These factual findings are unnecessary under a fair reading of the statute. Indeed, reading the statute to require the Secretary to show prepayment medical review was required due to some characteristic of a claim itself would be to read-out the statute’s disjunctive language that makes a claim unclean if it either has a defect or impropriety or if it is subject to particular circumstances requiring special treatment. See 42 U.S.C. § 1395u(c)(2)(B). Despite plaintiffs’ contentions, the provision’s second category would be made meaningless if it required a finding that a claim had some characteristic necessitating individualized review—flaws in individual claims are already covered by the first category. Thus, in order for us to find the claims were not clean under a fair reading of the statute, the Secretary may merely show the claims were subject to a particular circumstance- requiring special treatment. In this case, the claims were subject to prepayment medical review—a particular circumstance requiring special treatment.
Finally, this interpretation of the statute does not unduly conflict with its purpose. As stated in our previous opinion, the interest authorization in the Medicare statute is meant to incentivize the prompt payment of claims. See S. Rehab. Grp.,
As the claims at issue were subject to prepayment medical review, they are not “clean” under the clean-claims provision and the Secretary owes no interest. Accordingly, the district court did not err in granting summary judgment for the Secretary.
V
For the foregoing reasons, we AFFIRM the decision of the district court.
Notes
. Reimbursement for the 6,200 claims made up only part of plaintiffs' complaint, but discussion of other claims has been left out of this background. See, S. Rehab. Grp.,
. The cоurt affirmed the district court's dismissal of plaintiffs’ other claims for lack of subject matter jurisdiction. See id. at 680, 683.
. Nor can the Secretary be said to have waived this argument because she voluntarily paid interest on some of the claims subject to prepayment medical review. It is not clear whether those interest payments were made because they were “clean claims” not paid after thirty days or because a different applicable provision of the Medicare statute applied. See, e.g., 42 U.S.C. § 1395l(j) (requiring payment of interest when a final determination is mаde that a claim was underpaid initially and the difference was not paid within 30 days of that determination). The fact that the Secretary made some interest payments on some claims does not mean she forfeited the right to challenge plaintiffs' entitlement to interest on other claims.
. Indeed, it would not be practical to implement medical review of all claims. See id. at § 3.2.1 (providing guidance for when medical review applies and noting that "the claims volume of the Medicare Program doesn't allow for review of every claim”); See also United States v. Sanet,
. We note, for the sake of clarity, that "prepayment medical review,” as applied, is both a "particular circumstance” and a “special
. Indeed, that prepayment medical review is atypical treatment is an essential element of our holding. Were the Secretary to submit all future Medicare claims from all providers to such review (say, in an attempt to avoid interest payments across-the-board), the treatment would no longer be "special” and would not fit within the exception to paying interest we find applies here.
Dissenting Opinion
Dissenting.
The majority’s opinion echoes the Secretary’s position, in the abstract, that a claim cannot be “clean” if it is “subject to a particular circumstance requiring special treatment.” (Op. at 11-12 & n.5, 14). This would be a sensible reading, were it not for the Secretаry’s explicit position that such a “particular circumstance” can be simply the Secretary’s assertion that a claim, category of claims, or claims from a particular provider, shall be subjected to such individualized review, and that no reason whatsoever need be supported, or even asserted. The distinction between “supported” and “asserted” is crucial, in that the Secretary’s position would be much stronger if it were only that the Secretary did not bear the burden of proving the necessity for such review in every instance. An alternative, and much lighter, burden would be the equivalent of the burden-shifting in McDonnell Douglas v. Green cases, e.g.,
Instead, the Secretary’s explicit position (which the majority does not advert to) is that the Secretary’s placing a claim or a category of claims under review prevents such claims from being “clean,” no matter the reason. The Secretary’s decision is still considerеd inviolate, when made for any reason or no reason—even, at the extreme, a discriminatory reason. See Def.’s Resp. in Opp’n to Pis.’ Mot. for Leave to File Second Am. Compl. 4 (“Even in extreme cases when an intentional and invidious motivation—e.g., racial discrimination—is alleged to be the reason that a practitioner’s Medicare claims are placed on prepayment review, there is no potential relief [by way of interest payment].”).
I cannot agree with such an extreme interpretation, or its sanctification by this court’s opinion, and I therefore respectfully dissent.