Heckler v. Community Health Services of Crawford Cty., Inc.

RESPONDENT: Community Health Services of Crawford Cty., Inc.
LOCATION: Clifford Residence

DOCKET NO.: 83-56
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 467 US 51 (1984)
ARGUED: Feb 27, 1984
DECIDED: May 21, 1984

Kenneth Steven Geller - on behalf of Petitioner
Raymond G. Hasley - on behalf of Respondents

Facts of the case


Media for Heckler v. Community Health Services of Crawford Cty., Inc.

Audio Transcription for Oral Argument - February 27, 1984 in Heckler v. Community Health Services of Crawford Cty., Inc.

Warren E. Burger:

We will hear arguments first this morning in Heckler against Community Health Services.

Mr. Geller, you may proceed whenever you're ready.

Kenneth Steven Geller:

Thank you, Mr. Chief Justice, and may it please the Court:

This case involves a dispute over the appropriate amount of federal financial reimbursement due a provider of medical services under the Medicare program.

The Secretary of Health and Human Services and the district court concluded that reimbursement of the amount at issue was clearly precluded by the Medicare Act and the governing regulations.

The Court of Appeals, on the other hand, held that the Government was estopped from relying on those statutes and regulations and must instead provide reimbursement contrary to law.

We have sought certiorari because the Court of Appeals' decision is inconsistent with the repeated holdings of this Court that the Government may not be equitably estopped from enforcing the law.

Respondent Community Health Services is a provider of health care under Part A of the Medicare program.

Under Part A, the Federal Government, acting through private insurance companies, called fiscal intermediaries, reimburses providers for the reasonable costs of providing necessary medical services to Medicare beneficiaries.

Congress set up a system under Medicare in which intermediaries make interim payments to providers on a monthly basis for the estimated cost of furnishing services, and then the providers' annual cost reports are audited later to determine the actual costs incurred and corrective adjustments are then made to account for overpayments or underpayments.

In 1975 CHS began to receive grant funds from the Federal Government under the Comprehensive Employment and Training Act, or CETA, and the purpose of these grants was to provide job training and employment opportunities for unemployed workers.

During the next several years, CHS hired a number of CETA workers and used the federal CETA grant funds to pay their salaries and fringe benefits.

In addition, when CHS filled out its Medicare cost reports for the years in question it included the salaries it paid to the CETA workers as a reasonable cost attributable to the Medicare program.

CHS did not, however, offset against those costs the amount of the federal CETA funds it received to pay those salaries.

The obvious result of this bookkeeping was that CHS got reimbursed twice by the Federal Government for a single group of expenses, once by CETA and then again by Medicare.

Not surprisingly, this double reimbursement was plainly contrary to Medicare regulations, which prohibit the inclusion in a provider's cost reports of expenses covered by so-called restricted grant funds, such as CETA.

In fact, the published regulations expressly state that if restricted grant funds such as CETA funds were not offset from a provider's expenses, the provider would receive reimbursement for the same expenses twice, and that of course is precisely what happened here.

Now, CHS included the salaries of the CETA workers in its cost reports, but did not deduct the corresponding CETA grant in part because the representative of its fiscal intermediary, Travelers Insurance Company, orally informed CHS on several occasions that the CETA grant did not have to be offset.

Travelers appears to have given CHS this erroneous advice by misreading the Secretary's so-called CETA grant was not.

In 1977, after CHS again asked Travelers if the CETA grants fell within the seed money exception, Travelers decided to ask the Department of Health and Human Services for its advice on the matter.

A month later HHS advised Travelers that the CETA grants did not fall within the seed money exception and that the grants therefore should have been offset on CHS' cost reports for the years in question.

Travelers then reopened CHS' cost reports for 1975 to 1977, as the statute required it to do, and determined that CHS had received overpayments in the amount of some 63,000.

Community Health Service sought administrative and judicial review of the intermediary's determination, and after an evidentiary hearing both the Provider Reimbursement Review Board, which is the expert administrative agency, and the district court agreed with the Secretary that the amount spent on the salaries of CETA workers was plainly not reimburseable under the Medicare Act because CHS had already recovered those expenses from its CETA grant.

The district court also rejected CHS' argument that the Secretary should be estopped from recovering the erroneous overpayments.

The district court found that CHS had not acted reasonably in relying on the intermediary's advice and that there was no evidence that the intermediary or the Secretary had been guilty of any misconduct.

As I mentioned a moment ago, a divided panel of the Court of Appeals reversed the district court's judgment.

The Court of Appeals did not find that the payments CHS had received for the CETA workers were in fact reimbursable under the Medicare Act.

Instead, the court held that the Government should be estopped from enforcing the governing Medicare statutes and regulations to recover the misspend funds because of what it termed the affirmative misconduct of the intermediary in giving CHS erroneous legal advice.

Now, the decision of the Court of Appeals in this case is impossible to square with the repeated pronouncements of this Court on the issue of estoppel.

The Court has consistently held, from the earliest days of the nation to as recently as two terms ago in Schweiker versus Hansen and last term in INS versus Miranda, that the Federal Government cannot be equitably estopped by the actions of its employees from enforcing public laws.