Your Home Visiting Nurse Services, Inc. v. Shalala

PETITIONER:Your Home Visiting Nurse Services, Inc.
RESPONDENT:Shalala
LOCATION:Kimberley Thompson’s Apartment

DOCKET NO.: 97-1489
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 525 US 449 (1999)
ARGUED: Dec 02, 1998
DECIDED: Feb 23, 1999

ADVOCATES:
Diana L. Gustin – Argued the cause for the petitioner
Lisa Schiavo Blatt –
Lisa S. Blatt – Argued the cause for the respondent

Facts of the case

Your Home Visiting Nurse Services, Inc. provides home health care services to Medicare beneficiaries. Under the Medicare Act, providers seeking reimbursement for covered health services submit a yearly cost report to a fiscal intermediary, usually a private insurance company. The intermediary then issues a Notice of Program Reimbursement (NPR) determining the provider’s reimbursement. The Act allows the provider up to 180 days to appeal a reimbursement determination to the Provider Reimbursement Review Board. The provider also has up to three years to ask the intermediary to reopen a determination of the Board. Your Home Visiting Nurse submitted cost reports for 1989 to its intermediary and did not appeal the reimbursement decision. However, within three years Your Home Visiting Nurse asked its intermediary to reopen its 1989 reimbursement determination on the ground that “new and material” evidence demonstrated entitlement to additional compensation. The intermediary denied the request. Your Home Visiting Nurse appealed the denial to the Board, which dismissed the appeal on the ground that lacked it jurisdiction to review an intermediary’s refusal to reopen a reimbursement determination. Your Home Visiting Nurse then brought action in Federal District Court, seeking review of the Board’s dismissal and of the intermediary’s refusal to reopen. The District Court agreed that the Board lacked jurisdiction to review the refusal to reopen. Moreover, it rejected Your Home Visiting Nurse’s contention that the federal-question statute or the mandamus statute gave the District Court jurisdiction to review the intermediary’s refusal directly. Subsequently, the court dismissed the complaint. The Court of Appeals affirmed.

Question

Can Medicare-reimbursed health care providers appeal a fiscal intermediary’s refusal to reopen previous reimbursement decisions?

William H. Rehnquist:

We’ll hear argument next in Number 97-1489, Your Home Visiting Nurse Services v. Donna E. Shalala.

We’ll wait just a minute.

Ms. Gustin.

Diana L. Gustin:

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

Petitioner is here today to complain about an insurance company.

In this case the insurance company is a fiscal intermediary serving as the agent for the Government, reviewing medicare cost reports, making determinations about allowable cost, and also making decisions about whether or not the cost report may be reopened.

In this case, the petitioner, a home health agency, discovered new and material evidence after the initial period for requesting appeal, and therefore made a request for a reopening of the cost report.

The intermediary, the insurance company, denied the request to reopen, considered this a final determination, and then we filed an appeal for review of that final agency action at the Provider Reimbursement Review Board.

The review board declined to accept the case, stating it did not have jurisdiction to review the refusal to reopen.

The district court upheld the jurisdictional decision of the board and the Sixth Circuit also upheld the district court, which brings us here today.

We would like to begin with the statement that there is a presumption that there will be judicial review of final agency action, and this presumption is noted in the Court’s decision of Bowen v. Michigan Academy of Family Physicians, where the Court’s opinion started with saying, we begin with a strong presumption that Congress intends judicial review of administrative action.

William H. Rehnquist:

Well, but you had one round of judicial… of administrative review here, didn’t you, with the right to appeal to the district court?

Diana L. Gustin:

We had an opportunity, a chance to make a request for an appeal, but based upon the information that we had at that time, an appeal was not sought, but when we discovered new and material evidence which we believe shows that the intermediary violated its own regulations, upon discovery of the new and material evidence, we believe that gives us the right to request the reopening, and if that reopening is unlawfully withheld, we sought review, and so it’s the review of the refusal, which is final agency action, which we are seeking.

Antonin Scalia:

Ms. Gustin, you know, there has to be an end to litigation at some point, and I thought the normal rule is, when there’s a final judgment, you can come back and say, you know, there are new circumstances, but whether to open for that reason is discretionary.

The Administrative Procedure Act has an exception for judicial review for matters committed to agency discretion by law, and I have always thought that it’s committed to agency discretion whether to reopen a closed case.

They always can, but I don’t think anybody has a right to it.

Diana L. Gustin:

Well–

Antonin Scalia:

And if they decide not to, that’s the end of the matter.

Diana L. Gustin:

–Your Honor, in this Court’s decision in ICC v. Brotherhood of Locomotive Engineers, which was decided in 1977, this Court held that a refusal to reopen which was based upon new and material evidence should have some sort of review, because otherwise–

Ruth Bader Ginsburg:

Ms. Gustin, the statute in that case provided for removal.

I mean, for reopening.

Diana L. Gustin:

–That is–

Ruth Bader Ginsburg:

Here, as I understand it, the statute says nothing.

The statute says, get your act together in 180 days.

The Secretary then said, yeah, I’ll provide for reopening, but it’s going to be just this one shot, no review.

Diana L. Gustin:

–Well–

Ruth Bader Ginsburg:

So how can you compare a case where Congress said, you have a right to reopen, to a case where Congress made no such provision.

Diana L. Gustin:

–Well, first of all, I think that there is a statutory provision within the medicare statute which requires reopening.

Ruth Bader Ginsburg:

And which one is that?

Diana L. Gustin:

And that would be section 1395x(v)(1)(A), clause (ii).

Antonin Scalia:

But that refers to reopening when the year’s books have finally been closed so that you could tell what the actual charges were, and the Secretary gave you that opportunity, didn’t she?

Diana L. Gustin:

Well, whether or not that refers to just a year-end book-balancing I think has not been decided by this Court, but in fact the Secretary uses that reopening process for more than simply a year-end book-balancing to compare estimated cost with actual cost, and so we would say first of all to Justice Ginsburg’s question, there is statutory authority for a reopening within that.

Secondly–

Ruth Bader Ginsburg:

But if we read the statute to say what it does, it provides for the year-end adjustment, and that’s all it provides for, then you don’t have any such argument.

Diana L. Gustin:

–If you read the statute that way, but I would impress upon the Court that in this case in particular the Secretary used the reopening process beyond that year-end book-balancing period, and the Secretary routinely uses the reopening process beyond that simple year-end–

Antonin Scalia:

The reopening process.

What Justice Ginsburg’s suggesting is that there are two reopening processes.

One is the statutory requirement for reopening, and the other is the normal discretion that any agency has, but a nonreviewable discretion, to reopen a closed matter if it thinks it to be a good idea.

Diana L. Gustin:

–Well, I don’t think that there… that it’s clearly stated that Congress wanted a… an unreviewable, completely insulated final agency action, and I think that the decision in Michigan Academy talks at great length about the fact that the presumption to judicial review is so important that we cannot just think that Congress meant something not to be reopened that it requires–

Antonin Scalia:

But you can come back 10 years later, even after you’ve gotten this review.

Let’s assume we find for you here.

Then you find something else, 10 years later, and you come back again and you ask the Secretary to reopen.

She says, get out of here, it’s 10 years later.

You have judicial review of that again, right?

Diana L. Gustin:

–I believe that is correct, Your Honor.

Antonin Scalia:

Well–

Diana L. Gustin:

As the Ninth Circuit held–

–Life is too short for this kind of thing.

Diana L. Gustin:

–First of all, in regard to the 10-year time frame that you put on that, I think that that would only apply in cases where there was fraud or abuse alleged, because there’s normally a 3-year time period to request a reopening, and the Secretary–

Suppose the Secretary said, I’m going to withdraw that regulation.

Forget it.

I’ll stick with what Congress wrote, there is no right to reopen, period.

You do it within 80 days, and if you don’t have your act together by then, it’s tough luck.

Diana L. Gustin:

–Well, I think that having your act together is really the problem here, because it wasn’t a matter of whether or not we had our act together.

It was a matter of information that the intermediary had or had access to that we did not have access to, and this–

So perhaps Congress was mistaken in making the period 180 days.

But that was Congress’ period.

Diana L. Gustin:

–I think Congress was not mistaken, but I think that Congress had the section that I referenced earlier, 1395x(v)(1)(A), clause (ii), which allows for corrective retroactive adjustments when a provider is either underpaid or overpaid, and that’s been a part of the act from the beginning, but I think that the–

Yes, but we already understand that if that is… has the narrow meaning that seems to have been given to it by this Court it isn’t across-the-board reopening.

Diana L. Gustin:

–Well, in the Court’s decision that discussed that provision of the statute, whether or not the book-balancing occurred at… within the 180 days, which would be the narrow meaning, was not really discussed in terms of the time period for the retroactive corrective adjustments, and to the contrary–

No, I’m focusing on what can be covered, not the time, what can be covered by that explicit statutory provision, and I thought that provision was confined to the annual overlook of the month-by-month.

Diana L. Gustin:

–Well, I don’t believe that that provision should be confined to that and, indeed, it’s not in practicality.

As I stated in this case, beyond that 180-day time period, this cost report was reopened, because we had discovered that a nurse did not have an appropriate license, so we reported that to the intermediary, and then the costs for the visits had to be reduced, and so the narrow view of the year-end book-balancing happening only to do that balancing between interim payments and final payments–

Who reopened in that case?

Diana L. Gustin:

–The intermediary reopened.

Yes, and I gather that’s essentially what your position is.

The intermediary can reopen.

Diana L. Gustin:

Yes.

The Secretary can reopen.

Diana L. Gustin:

Yes.

It’s only fair that you should be allowed to.

Diana L. Gustin:

Yes, because if we discover wrongful acts that unfairly deprived us of reimbursement to which we were entitled under the act, then we should also be allowed to claim the recovery.

That’s an argument in fairness and in equity, but you have a statute to deal with.

Diana L. Gustin:

Yes.

And regulations to deal with, and–

Diana L. Gustin:

And we believe that the statute itself at 1395oo clearly states that Congress intended that we have an appeal process after a final determination, and that that language is clear, a final determination, and it is only through the Secretary’s interpretation of that phrase to mean one, and only one kind of a final determination, that she prohibits or restricts our ability to obtain review.

And so we believe under the Chevron test the plain meaning of the statute must govern first of all.

A final determination is what Congress said, and we have a final determination, and indeed it makes sense that final determinations of this nature should proceed–

–My notion of a final determination is a final decision on the merits of the claim.

A final decision was entered.

It doesn’t become unfinal because you’ve moved to reopen it.

You know, after a certain amount of time a judgment becomes a final judgment.

Thinking of civil litigation, you can move, say under 60(b), but you still have a final judgment.

Diana L. Gustin:

–That’s correct, Your Honor, but under 60(b) courts have held in the Sixth Circuit that a refusal to grant the relief sought under 60(b) when there is no new and material evidence can be reviewed, but only as to whether or not there was an abuse of discretion, because otherwise–

Yeah, and it could be reviewed here, too, if Congress… Congress had provided for reopening and said, and it’s reviewable.

Diana L. Gustin:

–Well, I believe that Congress provided for review by stating that a final determination as to total program reimbursement can be reviewed if you take the appropriate steps, and the refusal to reopen is a final determination as to program reimbursement, so I believe that we meet the definition under the statute itself, and I believe that that’s also where the presumption to judicial review comes back, because the statutory language I believe is clear.

But if you believe you must interpret the language in the statute, then the burden is upon the Secretary by clear and convincing proof to show that Congress did not want judicial review, and there is no language in the congressional history which states that they considered whether or not there would be a reopening process and that that should be totally and completely up to the discretion of the insurance company employee.

We don’t even have a governmental entity reviewing the request to reopen.

We have private insurance companies that contract with the Government, and we don’t know anything about the individuals who are making these decisions, so we would be leaving within the discretion of one person decisions that could be worth millions of dollars to hospitals.

I don’t think there’s anything in the Congressional Record to indicate that they wanted that to be the case, and–

But you have the right to review these decisions before it becomes final, do you not?

Diana L. Gustin:

–You… based upon what you know at that time, and I think it’s important to understand that my client and other providers should surely have the right to rely upon the intermediary to act lawfully and to give us the information that they are making the decision upon, but when they don’t give us the information, or give us the wrong information, whether it is intentional or by mistake, and we discover it later, that we should have a right to request a reopening.

But think… you know, this is a tremendously complicated and extensive system, and these matters have to come to an end sooner or later.

Diana L. Gustin:

Exactly, and I think the 3-year period within which you can request a reopening is an appropriate time period to expect the provider to act, unless, for example, there is fraud or intentional wrongdoing, which I mentioned, and there’s no time period under the regulation for requesting reopening in that case.

What if somebody else thinks 3 years is not enough, and petitions the Secretary to make it a 6-year reopening period, and the Secretary says no?

Diana L. Gustin:

Well–

I assume that would be appealable on your theory of the world.

The Secretary has made a final determination that she will not extend the 3-year period to 6 years.

Diana L. Gustin:

–I think the Secretary has the right to make rules that are considered reasonable, and whether or not someone could make the argument that a 6-year period was not a reasonable–

That’s the argument.

Diana L. Gustin:

–interpretation of the statute.

This person is in good faith and really thinks 3 years is unreasonable, wants 6 years, so that person should have a right to appeal the Secretary’s–

Diana L. Gustin:

That would be–

–final determination–

Diana L. Gustin:

–I think that would be–

–not to make it 6 years.

Diana L. Gustin:

–a different question than what we’re dealing with here–

I know it’s a different question, but–

Diana L. Gustin:

–and I think different points of law apply to that, and that would be whether or not the 6-year period was a reasonable interpretation of the statute, as well–

–No, that’s not the point of law.

The point of law is whether it’s a final determination.

That’s the point of law at issue here.

That’s a final determination just as this is.

Diana L. Gustin:

–But a final determination–

I will not extend it to 6 years.

Diana L. Gustin:

–But the final determination we’re referring to here is the one that’s laid out in the statute, which is as to the amount of total program reimbursement covered by the cost report.

No, it isn’t.

No.

Diana L. Gustin:

The 6-year–

The final determination at issue here is whether she will reopen the determination she’s already made.

That’s the final determination.

She says no.

Diana L. Gustin:

–The final–

She says no, I will not reopen.

Diana L. Gustin:

–Yes, and we say that the final determination when she says she will not reopen is one which goes to the total amount of program reimbursement, which is what the statute defines–

No more so than in my hypothetical.

This person who wants 6 years has found something else beyond the 3-year period which will affect the total amount of reimbursement to which he was entitled.

Diana L. Gustin:

–Well, that case is not before the Court, Your Honor–

[Laughter]

–and I really don’t know how to answer that in terms of how it applies to this argument.

Of course you know how to answer it.

You have to answer it that yes, it’s reviewable because it’s a final determination.

Diana L. Gustin:

Well then it’s reviewable because it’s a final determination as to the total amount of program reimbursement, but we have a regulation here.

This regulation concerning the 3-year time period was before this Court most recently with regard to the graduate medical education reaudit regulation, and there the Secretary argued successfully and very strongly that the 3-year period was what was important, but with regard–

But then that again, I mean, that was a case where the Secretary came back within 3 years.

Diana L. Gustin:

–Yes.

And I… as far as I can see, you are basically complaining about an asymmetrical statute where the Secretary can reopen in 3 years and you can’t, and–

Diana L. Gustin:

Well, we’re complaining–

–I can understand that you think that that’s not fair.

What I have a hard time seeing is how you make… turn everything into a final determination, never mind that we have had a final, the equivalent of a final adjudication on the merits of the claim.

Diana L. Gustin:

–I think it’s important, Your Honor, to focus upon the abuse of discretion that is possible in deciding whether or not a final determination can be more than simply the first notice of program reimbursement letter that you receive.

Maybe it could be, but the Secretary says it isn’t, right?

Diana L. Gustin:

The Secretary–

All right.

So that’s the… if it’s not a final determination within the meaning of 1395oo–

Diana L. Gustin:

–Yes.

–you’re out of luck.

Diana L. Gustin:

If the Secretary–

Unless you’re going to go under mandamus.

Is that basically–

Diana L. Gustin:

–Well, Federal question jurisdiction.

–Federal question jurisdiction, you have a statute that specifically says, no action shall fall under Federal question jurisdiction unless you go through 1395oo.

Diana L. Gustin:

I believe that–

Doesn’t it say that specifically?

Diana L. Gustin:

–It says that specifically, Your Honor, but–

All right.

So if we follow that, you’re out of luck, unless it’s 1395oo, and you’re not in 1395oo unless it’s a final determination.

Am I right?

Diana L. Gustin:

–Well, there are alternative arguments, which were presented, and I think that under Federal question jurisdiction as an alternative, if you’re not allowed to use the 1395oo administrative procedure–

Right.

Diana L. Gustin:

–in the normal route, and if you have raised a claim that is collateral to the underlying amounts of the benefit claim, then Federal question jurisdiction is appropriate, as it was in Bowen v. Michigan Academy.

But what do we do about the statement, no action against the United States Commissioner of Social Security or any officer or employee shall be brought under section 1331?

Diana L. Gustin:

On any claim.

To cover on any claim arising under this title.

Do you have a claim arising under this title?

Diana L. Gustin:

Well, we believe that on any claim is like a term of art, and that means a claim of benefits, but if we claim that there is an abuse of discretion, if we claim that the intermediary acted unlawfully, violated its own regulations, that that is a collateral issue, just like in Bowen v. Michigan Academy.

The statute or the regulation, I mean, which–

I have to decide, do you have a claim, or are you trying to bring a claim under the title?

If I answer that question, I think you are, suppose hypothetically… yeah, you are.

You’re trying to bring a claim.

You’re trying to get some money from them.

That’s what it means.

If I believe that–

Diana L. Gustin:

–Uh-huh.

–Then are you out of luck?

Diana L. Gustin:

No.

Unless you have a final determination, and they say you don’t, but you say you do.

Diana L. Gustin:

Yes.

And so for you to win on that, you have to show not only are they wrong, they’re just really unreasonable.

Is that right?

Diana L. Gustin:

I… that they’re wrong, they’re unreasonable, and they’re violating their own… their own regulations, and–

Alright.

Now… now, to focus on that, what is unreasonable about saying, these things have to come to an end?

Diana L. Gustin:

–Well, there are two collateral claims that were raised.

One was the collateral claim that their refusal to reopen and no judicial review is unreasonable, all right.

Then the second collateral issue that was raised was the fact that the owner’s compensation is required to be in accordance with comparable institutions, and that they had, or had access to a salary survey which had a salary range which was much higher than what they were applying to the petitioner, and therefore they were not applying owner’s compensation in accordance with their own regulation, and so that was a violation of that regulation.

A collateral claim, too, asking for additional owner’s compensation, a claim that they didn’t do it right, and if they violated that regulation or other regulations, or a regulation is found invalid, then we believe that’s a collateral claim, not about the–

I have trouble with your description of that as a collateral claim.

Your claim… you have one claim.

That is, you’re entitled to more reimbursement.

You have a number of reasons why the procedure should allow you to do this.

Diana L. Gustin:

–Uh-huh.

But to slice up pieces of your argument in support of your claim for reimbursement and call each one of those a separate claim doesn’t make a whole lot of sense.

Diana L. Gustin:

Well, there are arguments in the alternative, Your Honor, because first and foremost we believe that the statute itself allows us judicial review, or some type of review process for abuse of discretion, and we only turn to section 1331 for Federal question jurisdiction and then posit the claim itself as collateral to that normal appeals process as an alternative view, an alternative way of looking at this, because we believe there must be some kind of review, because Congress did not prohibit review of this final agency action and, indeed, when–

I think… I think that’s what perhaps bothers some of us, is that in your view any time you come in, whether it’s, you know, 6 months after the final order or 2 years after the final order, and say I want a reopening, that becomes a new final order, and I really don’t think the presumption of review that you’re talking about extends that far.

Diana L. Gustin:

–I don’t think that the broader reading of any time you come in is applicable here, and I don’t think it’s necessary to view this case in those terms.

I think it’s appropriate to have a reasonable time period to limit the reopening, just like it’s appropriate for Congress to say, the dollar amount in controversy for your claim must be 10,000.

Yes, but there–

Diana L. Gustin:

I think there’s a procedural–

–There Congress has said, you have to have 10,000 or whatever it is, but Congress has not provided any period for reopening.

Diana L. Gustin:

–No, but I think the Secretary has filled that gap with her regulation, and I think that’s an appropriate time period, and the Secretary uses that time period and has relied upon it and convinced this Court that millions of dollars can be recovered from hospitals within that 3-year time period under the graduate medical education regulation in Regions Hospital.

And I think that Congress wanted the providers to stand on an even footing with the Secretary in regard to these corrective retroactive adjustments, and that’s why the language in the statue says that providers or the Secretary may have corrective retroactive adjustments when the provider’s payments have been excessive or when they have been underpaid.

Congress gave us either situation, but the Secretary’s reading turns that system upside down and makes it so that the Secretary only has that right, because we have no right to correct the Secretary’s action if we cannot have review of a refusal, and therefore the most abusive situations may go uncorrected if the Secretary’s system is allowed to stand.

Intermediary insurance company employees could intentionally decide not to reopen because they don’t like the particular provider.

They could have a system of covering up information, and as long as they kept that information hidden for 180 days, we’d have no recourse.

We talk about final–

What was the nature of the reimbursement that you say you were entitled to and didn’t get?

It was a little fuzzy to me.

Diana L. Gustin:

–The nature of the reimbursement was owner’s compensation.

The owners who operate the home health agency are entitled to compensation, and the regulation says that the compensation should be in accordance with comparable institutions.

And you made that claim initially and were turned down.

Diana L. Gustin:

I beg your pardon?

You made a claim for the owner’s compensation originally.

Diana L. Gustin:

It was on the cost report.

It was claimed on the cost report.

Yes, and it was denied, and you didn’t appeal it.

Diana L. Gustin:

And an adjustment was made, and no appeal was taken.

It was not… it wasn’t denied in full, denied in part.

They gave you lower compensation.

Diana L. Gustin:

Lower compensation.

You just claimed that the rate should have been higher.

Diana L. Gustin:

Yes, because it should have been based upon the salary survey for chain operations, because this was a chain operation.

The salary survey that they used was for one individual agency, and that range was, like, 28 xx 58–

Well, you had… you knew that there were chain operations–

Diana L. Gustin:

–Yes.

–and individual operations.

Why, when you were reduced in the amount you claim, didn’t you make that argument, we’re like the chains?

Diana L. Gustin:

Well, we had reported as a chain.

We did not know that the intermediary had the salary survey for chain operations which established a salary range between 71,000 and 98,000 dollars.

That salary range was not applied to these petitioners.

Instead, a much lower salary range for an individual agency was applied.

This information about the salary survey was within the intermediary’s knowledge.

It was not within our knowledge.

They did not tell us that they had this other salary survey and that it was being used against us, and we believe that they should have, and that that was a violation of the law because they should have told us everything that they were basing their adjustment on, and we have a right to rely upon the intermediary doing the right thing, doing the–

Maybe you have a cause of action against the intermediary.

Diana L. Gustin:

–Well, we don’t have a–

That’s the agency here.

Diana L. Gustin:

–I don’t think we have a cause of action against the intermediary because they’re the agent for the Government, and the cause of action is supposed to be brought against the principal, because they’re responsible for what their agent does and, indeed, it’s the Government and their position that they don’t have to allow any type of review of the intermediary’s action, which keeps us from getting the appropriate amount of compensation, and if we could prove this unlawful action, then failing to reopen would be an abuse of discretion, and then we would have the–

How did you find this out later rather than earlier?

Why couldn’t you have found it out sooner?

Diana L. Gustin:

–Well, the discovery process that would be available would only happen if you filed a normal appeal process and started down the normal route with Provider Reimbursement Review Board, and then, even if we had done that and asked the question, there’s no guarantee that they would have then told the truth, and–

But you didn’t do it.

You didn’t do it, so–

Diana L. Gustin:

–No, we didn’t do it.

–You’re saying, we could have done it, but we didn’t do it, and now, later on, we want to do it.

Diana L. Gustin:

No–

That’s essentially–

Diana L. Gustin:

–We’re saying, based upon the information that we had, we–

–But you could have gotten… if you appealed to the PRR, whatever–

Diana L. Gustin:

–PRRB.

–You could have then had discovery, and so–

Diana L. Gustin:

And we may or may not have found out the information then, because they may have said, no, we don’t have the survey–

–But you said we’re not going to bother using the remedy that Congress did provide.

That is, in 180 days you can pursue this.

You didn’t… because you said, well, maybe you would have failed.

I don’t–

Diana L. Gustin:

–I think that your concern actually shifts the whole question of finality into the other realm in which all providers who were denied reimbursement for any reason would have to file an appeal within 180 days, or know that even if they discovered wrongful action on the part of intermediary there’s no recourse.

Even if the law was changed and if regulations were determined invalid after the 180 days, there would have been no recourse.

–But you haven’t given a reason why you didn’t have a perfectly adequate remedy for your case within the 180 days.

You said, well, before you got to the board you would not have had discovery, but then you would have had discovery.

Diana L. Gustin:

We would have had discovery, but–

In other words, she’s saying, that is not this case, the hypothetical that you–

Diana L. Gustin:

–Oh.

But this case–

–I’m turning the tables for once, you know.

[Laughter]

Diana L. Gustin:

–Yes.

That is not this case, but this case stands for more than just this case, because every provider will be bound by the ruling that comes out of this Court, and so I think it’s important to understand the ramifications of the decision that you make, and the situation might not be like this case, and it might be that the intermediary has intentionally covered up evidence, and then on the 181st day comes out and announces we hid this from you.

You have to consider perhaps we should have not take your case and waited for such a case.

Diana L. Gustin:

Well, I believe that the facts in our case are sufficient for this Court to decide, because I think it is wrong for the intermediary to have a salary survey that they know about that we do not know about and not use it when they’re required to do so under law.

Diana L. Gustin:

I think that’s certainly a strong enough case for this Court, and the only way that we discovered this is when we hired a CPA who had represented other clients and had seen the salary survey used for those other clients, so by independent means we discovered this.

The intermediary may never have told us.

We may never have been able to find out that they were doing this, and I think that’s the problem with the situation here.

The intermediary and its employees can do anything, and as long as we don’t know about it for 180 days, they can violate any law, and if they refuse to reopen, there is no recourse for the–

It’s not a perfect world.

Diana L. Gustin:

–It’s not a perfect world.

There has to be an end of litigation.

You could say in any case that new evidence comes up later and we can start relitigating all over again.

Diana L. Gustin:

But we’re… we’re satisfied to do this within the confines of the Secretary’s regulation on reopening, the 3-year period.

Thank you, Ms. Gustin.

Diana L. Gustin:

Thank you.

Ms. Blatt, we’ll hear from you.

Lisa Schiavo Blatt:

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

The Secretary has reasonably construed the Medicare Act not to require administrative review of an intermediary’s decision refusing to reopen under the Secretary’s regulations.

The text of section 1395oo(a) gives providers a right to an evidentiary hearing before the board if they are dissatisfied with the final determination as to the amount of their total program reimbursement.

That language refers to the intermediary’s annual substantive reimbursement determination–

So this perhaps presumably happens about once a year?

Lisa Schiavo Blatt:

–Yes.

For each cost period there is an NP… a notice of amount of program reimbursement, which is referred to as the NPR, and it’s clear that the language… both sides concede this, petitioner concedes this, that that is a final determination as to the amount of–

Now, the statutes don’t refer to any reopening right.

Lisa Schiavo Blatt:

–That’s correct.

But the Secretary has nonetheless promulgated a regulation allowing an application for reopening.

Lisa Schiavo Blatt:

That’s correct.

Within 3 years.

Lisa Schiavo Blatt:

That’s correct.

And what provision of the statute does the Secretary look to for authority to even have such a regulation?

Lisa Schiavo Blatt:

The Secretary has relied on her general rule-making authority to promulgate that, which is in section 1302 and 1395hh, and at least the D.C. Circuit and the Ninth Circuit have held that the Secretary’s general rule-making authority is the statutory basis for the reopening regulation.

–reopening were granted within the discretion referred to by the Secretary, would there be an appeal right from that–

Lisa Schiavo Blatt:

If there’s a–

–decision?

If it’s reopened and a decision is made, then that would trigger some new appeal right?

Lisa Schiavo Blatt:

–Yes, with respect to the matters revised, so if there’s a correction–

Uh-huh.

Lisa Schiavo Blatt:

–and obviously if the… what happened in the Regions case, if there was a request for recoupment, then there’s 180 days to challenge the actual change.

What if there’s no correction?

What if, in one of those rare cases where the Secretary reopens in order not to… not for her benefit, but for the benefit of a claimant, she finds nonetheless against the claimant, then would that determination be appealable?

Lisa Schiavo Blatt:

The Secretary’s position, as reflected in the manual, and as in the regulation, is that there has to be an actual correction or an adjustment to the cost report.

It’s rare, but it does happen, where there’ll be a notice of reopening issued, a reconsideration, and yet no change.

It’s been the Secretary’s–

Sort of a one-way appeal, where she loses… well, let’s see.

Where there’s an adjustment… where there is an adjustment… if there’s an adjustment upward, no one would have an interest in appealing, right?

If there’s an adjustment downward, the claimant can appeal.

Lisa Schiavo Blatt:

–That’s correct, although if there’s just a partial adjustment upward, the Secretary has construed or has permitted an appeal in that situation.

A partial, I suppose.

Lisa Schiavo Blatt:

A partial adjustment.

That way the claimant doesn’t get everything that he or she wants.

Would that be a final order?

Lisa Schiavo Blatt:

The regulations give the providers a right to challenge that as a new substantive reimbursement determination, and it’s actually a revised NPR that’s issued, and they can challenge the matters that got revised, or that were revised.

I know you say they can challenge it, but is it in your view a final order?

Lisa Schiavo Blatt:

It’s consistent with the language of a final determination as to the amount of total program reimbursement.

It’s under oo?

You think it comes under–

Lisa Schiavo Blatt:

Yes.

It’s under oo(a)(1)(A)(i).

–So that if there is a reopening, a discretionary reopening, and there’s an adjustment, the order providing for the adjustment is a final determination, but if there’s no adjustment, it’s not a final determination.

Lisa Schiavo Blatt:

That’s correct.

There’s… the Secretary has rationally distinguished and said, if there’s just a mere refusal to alter or reconsider a prior determination there’s no right to an evidentiary hearing before the board.

No, but we’re assuming… I’m assuming there has been a 3-week evidentiary hearing, a lot of findings of fact, and everything else, but the net result is, no adjustment.

Lisa Schiavo Blatt:

Right.

It’s–

That’s not a final determination.

Lisa Schiavo Blatt:

–It wouldn’t be an evidentiary hearing.

It’s just before the intermediary.

The intermediary would review it, and then not make–

Right.

Okay.

Yes.

Lisa Schiavo Blatt:

–That has been the Secretary’s position thus far.

I mean, that’s not what happened in this case.

There’s no–

Of course, that is not this case, you would–

–No.

–have to say, right.

[Laughter]

Lisa Schiavo Blatt:

–There’s no question that there is not a… that there was no reopening here.

Do you think the Secretary could issue a regulation authorizing review in that situation?

Lisa Schiavo Blatt:

In this case, or–

Well, either the no-adjustment case or this case, either one.

Lisa Schiavo Blatt:

–I think it’s possible.

I don’t think the most–

Would it be consistent with the statute?

Lisa Schiavo Blatt:

–Yes.

I think it’s not the most natural reading, to read a mere refusal to reconsider a prior determination a new final determination as to the total amount, but I think the statute’s ambiguous, and the Secretary could articulate a reasonable rationale to justify that result.

The question here, of course, is whether the Secretary reasonably construed the statute not to require a full-blown evidentiary hearing, and we think that language supports that for two… basically two reasons, and that is because it is the Secretary’s regulations, not the Medicare Act itself, that provides the opportunity to seek reopening, and we think it does further the interest of administrative finality.

And this Court reached a quite similar conclusion in the Califano v. Sanders case, when the Court held that there was no judicial review for refusals to reopen social security benefit determinations, and the Court said that for two reasons.

One was the opportunity to reopen was afforded solely by the Secretary’s regulations and not the Social Security Act, and a contrary reading would frustrate Congress’ intent to impose a specific time limit on the review of the initial decision.

And this complaint about an anomaly with reopening under the Medicare Act is no different under the Social Security Act.

The claimants are permitted the opportunity to seek reopening, and it may or may not get granted but there’s no right of review and, of course, the Commissioner of Social Security can institute reopening, and if there’s a change in the benefits, then only the claimant will get review.

Ms. Blatt, what would happen under the current regulations if the Secretary reopens and says, we reimbursed them too much and we want to recoup part of it, and then the provider says, well, you also underpaid us, so we want to offset the underpayment against the excess payment.

Did the Secretary allow that kind of a defensive set-off if the Secretary initiates the reopening?

Lisa Schiavo Blatt:

Reopening is what’s known in the… it’s issue-specific, and so if it’s on that issue, I imagine… I’m not positive of this… that there is that kind of give-and-take.

But if it’s on a discrete issue–

Lisa Schiavo Blatt:

If it’s not on the same issue, then they need to formally request a reopening on that issue, and then the intermediary would consider it based on the criteria.

–And if it says no–

Lisa Schiavo Blatt:

If it says no, it’s not reviewable, no, and the review process would be issue-specific, and only if there was an adjustment would that be subject to–

–How do you respond to the essential fairness argument that’s made that the Secretary has given herself 3 years to reopen and if she loses she can get review, but the providers get this nonreviewable order that they’re stuck with.

Lisa Schiavo Blatt:

–Right.

In addition to this being no different than the Social Security Act, which, by the way, I think is quite significant and governs all medicare beneficiaries on whose behalf these hospitals are providing the services as well as physicians who provide services, they’re governed by the same regime–

They reopen only the issue there and not the whole determination?

I mean, I… it’s bad enough as Justice Ginsburg describes it, but it really gets unfair when you say the Secretary does reopen, but only reopens for this one issue, and even though you may have things on the other side, you can’t bring them in.

That is really unfair.

Lisa Schiavo Blatt:

–They can bring them in, and they can request reopening–

Yes, but she–

Lisa Schiavo Blatt:

–as 3 years–

–But she can say no, and there’s no review for it.

Lisa Schiavo Blatt:

–That’s right, and I don’t think there would be any difference under the Social Security Act.

That’s also an issue-by-issue thing.

Lisa Schiavo Blatt:

Yes.

It’s… the way the… the way the process works, you’re only entitled to an administrative hearing before an ALJ if there’s an actual change in the benefits, and there’s no review if there’s simply a denial.

The other reason why, that there’s not an irrational balance is that this is a 120 billion dollar program, and there are, as we said in our acquiescence to the petition in this case, a backlog of 10,000 cases before the board, and it takes over 3 years just to get a hearing on initial challenges to… on challenges to the initial NPR’s, and it’s just… it would be an enormous administrative as well as financial burden on the system to open this up to any refusal to reconsider a prior determination.

Presumably the petitioner’s argument would extend to refusals to reconsider, refusals to reopen, and so forth and so on.

You’d have 3 years after any kind of decision, and that would be a new final determination under that reading, and the Secretary has rationally cut it off.

And as I recall you also make the fairness argument that the Secretary gives herself 3 years, but the Secretary needs 3 years–

[Laughter]

–more than an individual applicant does because she has a few more things to do.

Lisa Schiavo Blatt:

The simple truth of the matter is, the Secretary administers this program… there are 38 intermediaries… and has no access to the hospital’s records.

The hospital, on the other hand, are by and large very sophisticated entities, and they’re actually very good about appealing within the 180 days.

They have 6 months to appeal.

This case is particularly instructive, because here the petitioner protested the 50,000 dollars that’s at issue here on the cost report.

This was a red flag that the provider was going to appeal, and as far as we could tell, there is no reason why the provider did not appeal.

Lisa Schiavo Blatt:

As far as the way the petitioner’s brief was structured is, the petitioner did appeal cost years prior to 1989–

You’re talking about the brief before the board, or the brief here.

Lisa Schiavo Blatt:

–I think it’s the brief… the blue brief on the merits in this Court–

In this Court.

Lisa Schiavo Blatt:

–says the petitioner discovered the salary survey in the course of appealing prior years, and in all events the petitioner appealed in 1987, it appealed 4 or 5 years after 1989, and could have sought discovery.

There’s no reason to presume bad faith on the intermediary with respect to production.

And again, like I said, there’s just no reason that the provider didn’t appeal in this case.

If I could also turn to clause (ii), if I could refer to it that way, and that’s 1395x(v)(1)(A)(ii), which this Court referred to as clause (ii) in the Good Samaritan case, we think that that… that this decision squarely forecloses any argument that clause (ii) is the basis for reopening and requires a reopening procedure.

What the Court held in Good Samaritan was that clause (ii) is ambiguous, and it upheld the Secretary’s narrow reading as a year-end, and the Court several times referred to it as a year-end book-balancing accounting reconciliation, and that’s… that would reconcile the amounts paid to the provider during the year that were simply estimates, pre-audit, periodic payments with the amount that the NPR determined to be allowable.

And that’s… actually, if you look at the NPR in this case, it shows that reconciliation, and I think it’s on page… I think it’s… it’s page 36 of the joint appendix, so this is how the Secretary administers the program.

This is how the regulations work.

A reopening procedure is something entirely distinct from that.

It’s a substantive redetermination, or at least a request to redetermine what had been reimbursable.

If I could also address the issue that these are private insurance companies, these are intermediaries making the decision, these are the Secretary’s agents and they do act under her close oversight and supervision, and we think it’s also significant that intermediaries are nominated by the providers themselves, and if there’s some suspicion that the intermediary is biased or unfair the provider is always free to request a change in the intermediary, or not nominate the intermediary.

There’s simply no allegation in this case that intermediaries act distinctively with bad faith with respect to reopening as opposed to any other initial decision and, of course, the provider and all hospitals have the opportunity to challenge the initial underlying determination within the 6-month time period.

Then if I could also address the question of Section 1331 jurisdiction, in addition to the plain language of section 405(h), the third sentence, which forecloses any action arising under the Medicare Act, this Court in Heckler v. Ringer and again in Weinberger v. Salfi made clear that the Court was not going to look at procedural labels or substantive labels, but would look at whether the standing and substantive basis for the claim arises under the Medicare Act.

And so I’m not sure the provider… the provider in this case talks about a collateral challenge.

That’s not from any decision… that doesn’t come from any decision of this Court.

The only exception, of course, is the Michigan Academy decision and that was dealing… a far cry from this situation.

There was no review whatsoever of the Secretary’s regulations under part B, and part A, which involves this case as well, now, as part B, providers are free to raise any kind of challenge before the board and under the part A and part B beneficiary side, the administrative law judge, and in the courts.

They can bring both amount challenges to their benefits, as well as any kind of facial challenge to a regulation, and so we just don’t think the Michigan Academy exception or distinction has any relevance to this case, when there was a full right of review.

And again, I would also remind the Court about the Sanders decision where, under the Social Security Act, there is no right of review, and the Court made clear in that case that 1331 was… excuse me, that section 405(h) barred jurisdiction, Federal question jurisdiction under section 1331.

Then if I could just finally address mandamus, the mandamus aspect of this, which the petitioner also relies on, we think mandamus is barred by the second sentence of section 405(h), but in all events there is no basis for seeking mandamus relief in this case.

The two challenges are, of course, the refusal to reopen, and then the underlying complaint about the owner’s compensation.

Both of those require discretion on the part of the intermediary.

The regulations are in the manual.

It’s plain on its face that the decision whether to reopen is discretionary, and certainly the question about whether costs are reasonable and allowable under the statute also requires the exercise of discretion.

And as to the underlying claim about entitlement to reimbursement, certainly there’s no question that the petitioner failed to exhaust its administrative remedies by not appealing within the time frame.

If there are no further questions, that completes my argument.

William H. Rehnquist:

Thank you, Ms. Blatt.

William H. Rehnquist:

The case is submitted.

The honorable court is now adjourned until Monday next at ten o’clock.