Body v. Blue Cross & Blue Shield , 156 F.3d 1098 ( 1998 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 95-6429
D. C. Docket No. 93-P-1508-S
UNITED STATES OF AMERICA,
Qui Tam for Frank E. Body,
Plaintiff-Appellant,
versus
BLUE CROSS AND BLUE SHIELD
OF ALABAMA, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Alabama
(June 26, 1998)
Before TJOFLAT and BIRCH, Circuit Judges, SMITH*, Senior Circuit
Judge.
_______________________________________
*Honorable Edward S. Smith, Senior U.S. Circuit Judge for the
Federal Circuit, sitting by designation.
TJOFLAT, Circuit Judge:
Frank E. Body appeals the district court’s dismissal of his
claim against Blue Cross and Blue Shield of Alabama (“BCBSA”) for
lack of subject matter jurisdiction. Body, a former employee of
BCBSA, brought suit as a qui tam relator under the False Claims
Act (“FCA”), 31 U.S.C. §§ 3729-33 (1994), alleging that BCBSA, in
its role as a fiscal intermediary for Medicare Part A claims in
Alabama, knowingly presented or caused to be presented false or
fraudulent claims to the United States government in violation of
31 U.S.C. § 3729(a). The district court held that 42 U.S.C. §
405(h) (1994), a provision of the Social Security Act1 made
applicable to the Medicare Act2 by 42 U.S.C. § 1395ii (1994),
operated as a bar to its subject matter jurisdiction over the
case, and therefore dismissed Body’s suit. Body appealed the
district court’s decision to this court. We disagree with the
district court’s interpretation of subsection 405(h), but affirm
the district court’s dismissal because we find that under 42
U.S.C. § 1395h(i)(3) (1994), BCBSA is immune from liability to
the United States for payments its officers certify and disburse
to Medicare beneficiaries.
In part I, we describe the factual and procedural background
of Body’s case. In part II, we explain why we disagree with the
1
42 U.S.C. § 301 et seq. (1994).
2
42 U.S.C. § 1395 et seq. (1994).
1
district court’s interpretation of subsection 405(h), analyzing
both the context within which the subsection is made applicable
to the Medicare Act, and the Supreme Court cases that have
construed it. In part III, we discuss the meaning and
applicability of subsection 1395h(i)(3), and explain why it
shields BCBSA from liability to the United States in the current
action.
I.
Frank E. Body was an employee of appellee Blue Cross and
Blue Shield of Alabama from 1973 to 1989. In addition to its
traditional role as a provider of medical insurance, BCBSA serves
as a fiscal intermediary for Medicare Part A in Alabama.3 In its
role as a fiscal intermediary, BCBSA processes and audits cost
reports from hospitals in Alabama, adjudicates disputed claims
for benefits from these health service providers, and issues
3
The Medicare program is administered by the Health Care
Finance Administration (the “HCFA”), part of the Department of
Health and Human Services (“HHS”). The program is authorized by
Title VIII of the Social Security Act, and is divided into two
parts. Part A of the Medicare program deals primarily with the
reimbursement of hospitals for costs that they incur treating
patients covered by Medicare, while Part B generally deals with
the reimbursement of providers for physicians’ services. Under
42 U.S.C. § 1395h(a), the Secretary of Health and Human Services
(the “Secretary”) can contract with public or private agencies or
organizations to serve as fiscal intermediaries in administering
Medicare Part A. Blue Cross and Blue Shield Association (“BCA”)
entered into such a contract with the Secretary. BCA then
subcontracted with BCBSA to serve as a fiscal intermediary for
Medicare in Alabama.
2
reimbursement payments to these hospitals for costs appropriately
incurred in the treatment of Medicare patients. BCBSA applies
provisions from a number of different sources to its
administration of Medicare Part A, including: 1) portions of
Title VIII of the Social Security Act governing Medicare; 2)
regulations contained in Title 42, Part 405 of the Code of
Federal Regulations; 3) provisions contained in the Provider
Reimbursement Manual (the “Manual”) issued by the HCFA; 4)
periodic “policy statements” from the HCFA; and 5) additional
guidance from BCA to its subcontractors, issued in the form of
Administrative Bulletins.
Body was employed as a senior auditor by BCBSA in 1984, and
was assigned to audit the 1983 cost reports of, among others,
Baptist Medical Centers (“Baptist”) and Carraway Methodist
Medical Center (“Carraway”). In the course of auditing the cost
reports of Baptist and Carraway, Body proposed a number of
adjustments to the hospitals’ reports based on his application of
Medicare regulations, provisions of the Manual, and guidelines
from BCA. In general, Body’s adjustments related to interest
expenses claimed on refunded capital debt (i.e., interest on
bonds issued, at least in part, to pay off an older bond issue)
and to interest earned on funded depreciation accounts (i.e.,
accounts containing funds set aside for future capital expenses).
BCBSA disagreed with a number of Body’s recommendations, and,
3
despite his protest, reversed his proposed adjustments.
Body contacted the Federal Bureau of Investigation in
January 1989 to report BCBSA’s reimbursements to Alabama
hospitals of interest costs that he felt were not authorized
under Medicare regulations. The FBI referred Body to the Office
of the Inspector General (“OIG”) of HHS, which initiated an
investigation of the allegations. The OIG investigated fourteen
adjustments proposed by Body and reversed by BCBSA. In its
report, dated September 1994, the OIG concluded that four of the
fourteen adjustments were “immaterial,” six were properly handled
by BCBSA, two of the adjustments had been reinstated by BCBSA
upon HCFA instruction, and the final two adjustments were
determined to be correctly handled by BCBSA after the HCFA issued
a policy clarification.
In August 1993, prior to the issuance of the OIG’s final
report, Body instituted this lawsuit for the United States as a
qui tam relator4 under the False Claims Act. Body alleges that
BCBSA has been reimbursing Alabama hospitals, in particular
Baptist and Carraway, for interest costs that are not chargeable
to Medicare. His complaint essentially reiterated the
4
The qui tam provision of the FCA permits, in certain
circumstances, suits by private parties (“relators”) on behalf of
the United States against anyone submitting a false claim to the
Government. See 31 U.S.C. §3730(b); Hughes Aircraft Co. v. U.S.
ex rel. Schumer, --- U.S. ---, ---, 117 S.Ct. 1871, 1874, 138
L.Ed.2d 135 (1997).
4
information that he provided to the OIG regarding BCBSA’s
handling of the 1983 cost reports of Baptist and Carraway, and
claimed that BCBSA continues to allow Medicare to be charged
unallowable interest expenses.5 Body asserted that the district
court had jurisdiction over his action pursuant to 31 U.S.C. §
3732(a).6
BCBSA moved the district court, inter alia, for summary
judgment on the ground that the court lacked subject matter
jurisdiction over Body’s complaint. BCBSA argued that subsection
3732(a) was simply a venue provision, and as a result, Body’s
claim depended upon general federal-question subject matter
jurisdiction under 28 U.S.C. § 1331 (1994). BCBSA argued further
that 42 U.S.C. § 405(h) acted as a bar to federal-question
jurisdiction for Body’s claims. The third sentence of subsection
5
Body’s complaint asserted that BCBSA had improperly
reimbursed other Alabama hospitals, in addition to Baptist and
Carraway, for costs not properly certifiable to Medicare. These
additional allegations are not discussed here, because they fail
under the same legal conclusion that precludes Body’s claims
against Baptist and Carraway.
6
Subsection 3732(a), entitled “False claims
jurisdiction,” states:
Actions Under Section 3730. – Any action under section
3730 may be brought in any judicial district in which
the defendant or, in the case of multiple defendants,
any one defendant can be found, resides, transacts
business, or in which any act proscribed by section
3729 occurred. A summons as required by the Federal
Rules of Civil Procedure shall be issued by the
appropriate district court and served at any place
within or outside the United States.
5
405(h) states:
No action against the United States, the [Secretary],
or any officer or employee thereof shall be brought
under section 1331 or 1346 of Title 28 to recover on
any claim arising under this subchapter.
42 U.S.C. § 405(h) (as made applicable to Medicare and modified
by 42 U.S.C. § 1395ii). In its April 28, 1995 opinion, the
district court agreed that subsection 405(h) deprived the court
of jurisdiction under section 1331 and found no other
jurisdictional provision, including subsection 3732(a), that
could save Body’s claims. The district court, therefore, granted
BCBSA summary judgment and ordered Body’s suit dismissed.7 Body
appeals the district court’s dismissal.
This court has jurisdiction to hear this appeal of the
district court’s final decision pursuant to 28 U.S.C. § 1291(1994). We review de novo the district court’s dismissal of
Body’s action for lack of subject matter jurisdiction. See
7
BCBSA raised the issue of subject matter jurisdiction
in a motion for summary judgment. Subject matter jurisdiction is
appropriately dealt with by means of a Federal Rule of Civil
Procedure Rule 12(b)(1) motion to dismiss, as noted by the
district court, and we will treat the district court’s summary
judgment ruling as a dismissal under Rule 12(b)(1). See Tuley v.
Heyd, 482 F.2d 590, 593 (5th Cir. 1973) (“It is a familiar
principle that the label a district court puts on its disposition
of a case is not binding on a court of appeals.”) (In Bonner v.
City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc),
this court adopted as binding precedent all decisions of the
former Fifth Circuit handed down prior to October 1, 1981.).
This court’s jurisdiction and our analysis of the legal question
raised on appeal are not affected by our treatment of the
district court’s action.
6
Plumbers & Pipefitters Local Union 72 v. John Payne Co., 850 F.2d
1535, 1537 (11th Cir. 1988).
II.
Body raises three issues in this appeal. First, he claims
that subsection 3732(a) of the False Claims Act contains an
independent grant of subject matter jurisdiction, and that
therefore his claim does not rely on either of the jurisdictional
provisions negated by subsection 405(h). Second, Body claims
that an action brought by a qui tam relator under the False
Claims Act qualifies as a “proceeding[] commenced by the United
States” within the meaning of 28 U.S.C. § 1345 (1994), again
avoiding the jurisdictional bar of subsection 405(h). Finally,
Body argues that the district court erred in finding that
subsection 405(h) was applicable to his action against BCBSA at
all. Because we find that the district court erred in holding
that subsection 405(h) applied to Body’s claims, we do not
address the first two issues.
The third sentence of subsection 405(h) clearly revokes
federal-question jurisdiction in the district courts under 28
U.S.C. § 1331 over all cases “arising under” the Medicare Act.
The threshold question for this court, then, is whether Body’s
claim “arises under” the Medicare Act and is therefore subject to
subsection 405(h). See Heckler v. Ringer, 466 U.S. 602, 615, 104
7
S.Ct. 2013, 2021, 80 L.Ed.2d 622 (1984) (“[T]o be true to the
language of the statute, the inquiry in determining whether §
405(h) bars federal-question jurisdiction must be whether the
claim ‘arises under’ the Act . . . .”).
Subsection 405(h) has been interpreted in many cases and by
many courts -- in the context of its application both to actions
arising under Social Security, for which it was originally
drafted, and to actions arising under Medicare. In fact, the
Supreme Court has discussed the scope of the subsection’s
jurisdictional preclusion in several significant opinions. All
of these cases, however, involved suits brought by beneficiaries8
against the United States or against a fiscal intermediary9 to
recover benefits not previously paid. As best as we can tell,
the application of subsection 405(h) to a False Claims Act
8
We use the term “beneficiaries” in this opinion to
denote the broad range of individuals and organizations that
either receive health services covered by Medicare or receive
payments from Medicare for providing health services to covered
persons; these include: physicians, physicians’ associations,
hospitals, nursing homes, and other health care providers. In
addition, when discussing the subsection’s application to actions
brought under the Social Security Act, we use the term
generically to refer to individuals receiving Social Security
benefits from the government.
9
We use this term here to include organizations that are
the equivalent of fiscal intermediaries; i.e., the organization
or agency responsible for determining eligibility for and amounts
of benefits under either Medicare Part A or Part B, and under the
Social Security Act. The organizations that administer Part B of
the Medicare Act, for instance, are referred to as “carriers.”
See 42 U.S.C. § 1395u(f) (1994).
8
action, brought by or for the United States against a fiscal
intermediary, to recover money improperly paid to Medicare
beneficiaries is a matter of first impression in the federal
courts. The relevance of this distinction to determining whether
a particular action “arises under” the Medicare Act becomes
apparent when one analyzes the role the subsection plays in the
broader context of administrative and judicial challenges to
Medicare determinations, as well as the Supreme Court’s decisions
interpreting the scope and application of subsection 405(h). In
part II.A, therefore, we describe the larger system for
administrative and judicial appeals of Medicare claims. In part
II.B, we discuss the Supreme Court’s decisions defining the
applicability of subsection 405(h) to actions “arising under”
both the Medicare Act and the Social Security Act. Finally, in
part II.C, we conclude that Body’s FCA claims do not “arise
under” the Medicare Act for purposes of subsection 405(h).
A.
On its face, the third sentence of subsection 405(h) plainly
reads as a broad exclusion of federal-question jurisdiction over
matters “arising under” the Medicare Act. That sentence,
however, neither exists nor operates in isolation. To understand
the actual scope of the subsection’s exclusive effect, therefore,
we must view the third sentence of subsection 405(h) both within
9
the context of the entire section 405 -- most of which is made
applicable to Medicare by sections 1395ff and 1395ii, see 42
U.S.C. § 1395ff(b)(1) (making subsections 405(b) and 405(g)
applicable to challenges to Medicare coverage and amounts
determinations); § 1395ii (making subsections 405(a), (d), (e),
(h), (i), (j), (k), and (l) applicable to the Medicare Act) --
and within the larger context of the subsection’s application to
appeals under the Medicare Act in general.
Section 1395ff, entitled “Determinations of Secretary,”
governs the ability of beneficiaries dissatisfied with
eligibility determinations or amount of benefits determinations
to obtain a hearing and judicial review. The section adopts by
reference the Social Security Act’s procedures for hearings and
appeals as defined in subsections 405(b) and 405(g),
respectively. See 42 U.S.C. § 1395ff(b)(1). Under subsection
405(g), a person dissatisfied with a decision of the Secretary of
Health and Human Services after a hearing10 may appeal the
decision to a United States district court. The subsection
contains a specific grant of jurisdiction to the district courts,
stating that “[s]uch action shall be brought in the district
10
The decisions of the Secretary will actually be made in
the first instance by fiscal intermediaries, followed by appeals
to either an administrative law judge or a Departmental Appeals
Board, or both. See 42 C.F.R. §§ 405.701-405.730 (1997)
(governing reconsideration and appeals of eligibility and amount
of benefits decisions under Medicare Part A).
10
court of the United States for the judicial district in which the
plaintiff resides, or has his principal place of business, or, if
he does not reside or have his principal place of business within
any such judicial district, in the United States District Court
for the District of Columbia.” 42 U.S.C. § 405(g).
Subsection 405(h), which immediately follows subsection
405(g), channels all challenges to eligibility and amount
determinations through the administrative and appeals process
provided in subsections 405(b) and 405(g). The full subsection
405(h) states:
The findings and decision of the [Secretary] after a
hearing shall be binding upon all individuals who were
parties to such hearing. No findings of fact or
decision of the [Secretary] shall be reviewed by any
person, tribunal, or governmental agency except as
herein provided. No action against the United States,
the [Secretary], or any officer or employee thereof
shall be brought under section 1331 or 1346 of Title 28
to recover on any claim arising under this subchapter.
42 U.S.C. § 405(h) (as made applicable to Medicare and modified
by section 1395ii). The first sentence of subsection 405(h)
makes the decisions of the Secretary of Health and Human Services
binding on all parties to the hearing. By its second sentence,
the subsection prevents “any person, tribunal, or governmental
agency” from reviewing the Secretary’s decision, “except as
herein provided” -- as “provided” by subsection 405(g) that is.
Finally, the third sentence removes federal-question jurisdiction
over any claim “arising under” the Medicare Act.
11
Taken alone, the third sentence of the subsection appears to
be a plenary revocation of federal-question jurisdiction for
Medicare-related cases. Taken in context, however, it is quite
clear that the provision is intended to prevent circumvention of
the administrative process provided for the adjudication of
disputes between Medicare beneficiaries and the government (or
agents of the government such as fiscal intermediaries). The
provision takes away general federal-question jurisdiction over
claims by Medicare beneficiaries, forcing them to pursue their
claims in a hearing under subsection 405(b) and then, if
necessary, in an appeal under the specific grant of jurisdiction
contained in subsection 405(g). Thus, the third sentence is the
final piece in an administrative scheme designed to give the
administrative process the first opportunity to resolve disputes
over eligibility or the amount of benefits awarded under the Act.
Nothing in subsection 405(h), however, or in the rest of
section 405, suggests that the third sentence of subsection
405(h) eliminates federal-question jurisdiction over all actions
implicating the Medicare Act, regardless of the availability --
or unavailability -- of administrative and judicial review within
the Medicare administrative scheme.11 Subsection 405(h) prevents
11
Although the Supreme Court has never addressed the
application of subsection 405(h) to a claim that could not be
brought administratively under section 405, and subsequently
appealed to a district court under subsection 405(g), the Court
has implied that subsection 405(g) -- with its concomitant
12
beneficiaries and potential beneficiaries from evading
administrative review by creatively styling their benefits and
eligibility claims as constitutional or statutory challenges to
Medicare statutes and regulations.12 It does not create two
classes of claims “arising under” Medicare: those that may be
brought administratively and then appealed under the grant of
jurisdiction in subsection 405(g), and those that are not subject
to administrative review and are therefore not reviewable at
requirement of administrative exhaustion -- provides federal
court jurisdiction over all claims for which subsection 405(h)
removes federal-question jurisdiction under section 1331. See
Heckler, 466 U.S. at 614-15, 104 S.Ct. at 2021 (“The third
sentence of 42 U.S.C. § 405(h) . . . provides that § 405(g), to
the exclusion of 28 U.S.C. § 1331, is the sole avenue for
judicial review for all ‘claim[s] arising under’ the Medicare
Act.” (emphasis added)) (citing Weinberger v. Salfi, 422 U.S.
749, 760-61, 95 S.Ct. 2457, 2464-65, 45 L.Ed.2d 522 (1975)).
This suggests that if administrative and judicial review is
unavailable under section 405, then federal-question jurisdiction
under section 1331 is not precluded by operation of subsection
405(h); the claim does not “arise under” Medicare.
12
For instance, the third sentence of the subsection
prevents potential beneficiaries from bringing actions for
declaratory and injunctive relief -- prior to filing for
reimbursement for a health service, or even prior to receiving a
health service at all -- that would direct the Secretary to
provide reimbursement for that particular health service. See
Ringer, 466 U.S. at 620-22, 104 S.Ct. at 2024-25 (explaining that
respondent Ringer’s action for declaratory and injunctive relief,
prior to the operation for which he ultimately wanted to be
reimbursed, was still barred by subsection 405(h) because Ringer
wants future payments for the operation that may only be pursued
“in the manner which Congress has provided”). Instead, the
beneficiary must obtain the health service and file an actual
claim for reimbursement. The beneficiary may then challenge the
offending regulation in her action challenging the denial of
reimbursement, obtaining judicial review only after
administrative exhaustion. See id. at 621-22, 104 S.Ct. at 2025.
13
all.13 Actions such as Body’s, which do not seek payment from
the government and could not be brought under section 405, are
therefore not barred by subsection 405(h).
As we illustrate in part II.B, the Supreme Court’s cases
involving subsection 405(h) further confirm our interpretation of
its purpose.
B.
The Supreme Court has analyzed the breadth and effect of
subsection 405(h) in its application to both the Social Security
Act and to Parts A and B of the Medicare Act. Generally, the
Court has given the provision a very broad reading, in an attempt
to reflect the intent of the drafters. See Heckler, 466 U.S. at
615, 104 S.Ct. at 2022 (noting that the Court “construed the
‘claim arising under’ language quite broadly” in Salfi, 422 U.S.
at 760-61, 95 S.Ct. at 2464-65). Although none of the Supreme
Court cases that have analyzed the scope and effect of section
405(h) have involved suits by the government against any of its
13
There is very little legislative history available on
subsection 405(h). Nowhere, however, is there any mention of
congressional intent to preclude federal-question jurisdiction
over claims other than those brought by beneficiaries challenging
the denial of benefits or eligibility for benefits. See S. Rep.
No. 89-404 (1965), reprinted in 1965 U.S.C.C.A.N. 1943, 1995
(describing appeals under the Medicare Act and noting, in
apparent reference to subsection 405(h), that “the remedies
provided by these review procedures shall be exclusive”); see
also discussion of Bowen v. Michigan Academy, 476 U.S. 667, 106
S.Ct. 2133, 90 L.Ed.2d 623 (1986), infra part II.B.
14
fiscal intermediaries, a close look at the rationale behind the
Court’s decisions construing the subsection is nonetheless
instructive. Our examination reveals that the Supreme Court’s
justification for broadly construing the “claims arising under”
language of subsection 405(h) is to prevent beneficiaries from
circumventing the administrative process by creatively styling
their benefits claims as collateral constitutional or statutory
challenges not “arising under” Medicare.
The first major Supreme Court case to analyze the operation
of subsection 405(h) was Weinberger v. Salfi, 422 U.S. 749, 95
S.Ct. 2457, 45 L.Ed.2d 522 (1975). In Salfi, a deceased wage
earner’s widow and stepchild challenged the constitutionality of
provisions of the Social Security Act requiring them to have had
a nine-month-long relationship with the deceased in order to
receive survivors’ benefits. See id. at 752-55, 95 S.Ct. at
2460-62.14 The three-judge district court held that the
duration-of-relationship requirement was unconstitutional. Id.
at 755, 95 S.Ct. at 2462. The district court found that it had
jurisdiction over the case under 28 U.S.C. § 1331, concluding
that subsection 405(h) was nothing more than a codification of
the doctrine of administrative exhaustion. Id. at 756-57, 95
14
Recall that subsection 405(h) is a provision of the
Social Security Act made applicable to Medicare by section
1395ii. See supra part II.A.
15
S.Ct. at 2462-63.15
On appeal, the Supreme Court found that the three-judge
district court had taken an “entirely too narrow” view of the
scope of subsection 405(h). The Court stated:
That the third sentence of § 405(h) is more than a
codified requirement of administrative exhaustion is
plain from its own language, which is sweeping and
direct and which states that no action shall be brought
under § 1331, not merely that only those actions shall
be brought in which administrative remedies have been
exhausted.
Id. at 757, 95 S.Ct. at 2463. The Court found more substantial
the claim that subsection 405(h) did not bar jurisdiction over
the widow and stepchild’s claim because their claim “arose under”
the Constitution rather than under the Social Security Act. Id.
at 760, 95 S.Ct. at 2464. But the Court found that the action,
although it indeed arose under the Constitution, also arose under
the Social Security Act because, “not only is it Social Security
benefits which appellees seek to recover, but it is the Social
Security Act which provides both the standing and the substantive
basis for the presentation of their constitutional contentions.”
Id. at 760-61, 95 S.Ct. at 2464 (emphasis added). Thus, the
Court held that subsection 405(h) barred resort to federal-
question jurisdiction under section 1331. Id. at 761, 95 S.Ct.
15The three-judge district court held further that
exhaustion in this case would be futile; thus the exhaustion
requirement, in its codified version at subsection 405(h), was
waived by the court. See Salfi v. Weinberger, 373 F.Supp. 961,
964 (N.D. Cal. 1974).
16
at 2464-65.
The Supreme Court explained, however, that its ruling under
subsection 405(h) did not bar the appellees from bringing their
constitutional challenges before a United States district court.
In fact, the Court noted that such a result would “raise[] a
serious constitutional question of the validity” of subsection
405(h). Id. at 762, 95 S.Ct. at 2465 (distinguishing Johnson v.
Robinson, 415 U.S. 361, 94 S.Ct. 1160, 39 L.Ed.2d 389 (1974), and
noting that such an “extraordinary” restriction on federal court
jurisdiction over a constitutional claim would require “clear and
convincing” evidence of congressional intent). The Court
concluded that the appellees could still pursue their
constitutional challenges through the administrative review
process provided for in 42 U.S.C. § 405, appealing the
Secretary’s final decision to the federal district court under
the explicit jurisdictional grant in subsection 405(g). See id.
at 762-64, 95 S.Ct. at 2465-66. In fact, the Court subsequently
held that it had jurisdiction over the appellees’ personal claims
under subsection 405(g) because they had previously exhausted
their administrative remedies. See id. at 762-67, 95 S.Ct. 2465-
68.
Body’s claim is distinguishable from Salfi for several
reasons. First, Body only has standing to bring this suit
through operation of the qui tam provisions of the False Claims
17
Act. See 31 U.S.C. § 3730(b)-(h). Second, the FCA arguably
provides the substantive basis of Body’s suit as well; although
BCBSA’s application of the Medicare rules and regulations clearly
would be determinative of whether false claims were, in fact,
submitted, Body’s claim is premised upon BCBSA’s alleged knowing
submission of fraudulent claims to the United States, and seeks
to recover civil penalties as well as treble damages authorized
by the FCA, not the Medicare Act. See 31 U.S.C. § 3729(a).16
Finally, and most importantly, Body’s suit could not go forward
under the administrative review provisions prescribed by section
405(g). Body would not have standing to challenge BCBSA’s
benefits determination under section 1395ff. His application to
the district court, therefore, represents his only avenue of
obtaining any forum for his claim, rather than a strategic
decision calculated at circumventing the administrative process.
The Court next analyzed the limited review provisions of the
Medicare Act in United States v. Erika, Inc., 456 U.S. 201, 102
S.Ct. 1650, 72 L.Ed.2d 12 (1982). The plaintiff in Erika brought
a constitutional challenge to the amount of certain reimbursement
16
The damages and penalties that Body seeks to recover
are quite different from the “benefits” sought by the appellees
in Salfi. Body seeks damages on behalf of the government
calculated as a multiple of benefits improperly paid out of
government funds because of BCBSA’s alleged fraud, as well as the
statutory penalties authorized by subsection 3729(a), rather than
reimbursement from the government for health services authorized
under Medicare.
18
determinations under Medicare Part B before the Court of Claims,
which held that it had jurisdiction under the Tucker Act. See
id. at 205, 102 S.Ct. at 1653. On appeal, the Supreme Court did
not address the proscriptive effect of subsection 405(h). See
id. at 206 n.6, 102 S.Ct. at 1653 (noting that the Court did not
reach the subsection 405(h) issue). The Court instead focused on
the terms of subsection 1395ff(b), which, prior to 1987,
explicitly provided for judicial review of eligibility
determinations under Parts A and B, and for amount of benefits
determinations under Part A, but “[c]onspicuously . . . fail[ed]
to authorize further review for determinations of the amount of
Part B awards.” Id. at 208, 102 S.Ct. at 1654.17
Although the statute omitted any reference to judicial
appeal of Part B amount determinations, it did not specifically
forbid judicial review of those determinations either. The Erika
Court found, however, that the legislative history demonstrated
that the omission of a right of individuals dissatisfied with
their Part B amount determinations to judicial review was more
than just congressional oversight. The Court held that the
17
Until 1987, subsection 1395ff(b) only provided for
review of Medicare Part B amount determinations in a hearing by
the carrier, the Part B equivalent of a fiscal intermediary. The
1986 amendments to the Medicare Act made Part B amount
determinations subject to judicial review, as provided by
subsection 405(g), to the same extent as Part A amount
determinations. See Omnibus Budget Reconciliation Act of 1986,
Pub. L. No. 99-509, § 9341, 100 Stat. 1874, 2037 (1986) (amending
section 1395ff).
19
history conclusively demonstrated that Congress intended no
judicial review for Part B amount determinations under 1395ff
because the amounts were expected to be much smaller than those
under Part A, “quite minor matters” that Congress feared might
overload the courts. See id. at 208-11, 102 S.Ct. at 1654-55(discussing unambiguous statements to that effect in Senate and
Conference Reports, as well as statements in the Congressional
Record). The Court found that the express language of section
1395ff and the section’s legislative history, taken together,
provided sufficient evidence that Congress did not intend for
amount determinations under Part B to be reviewable, and
therefore held that the Court of Claims had no jurisdiction. See
id. at 205-11, 102 S.Ct. at 1653-55.
Despite the fact that the Court’s decision in Erika was
premised on section 1395ff rather than on subsection 405(h), it
demonstrates the Supreme Court’s intent to respect the complex
administrative scheme designed by Congress to implement old-age
security programs: Medicare in Erika, and Social Security in
Salfi. The Erika Court was even willing to forego any judicial
review for beneficiaries dissatisfied with the amount of their
benefits under Part B, but only because Congress’ intent to
preclude such review was clear. In contrast, there is no
evidence that Congress, in making subsection 405(h) applicable to
Medicare (or enacting it as part of the Social Security Act, for
20
that matter), intended to eliminate federal-question jurisdiction
under section 1331 for FCA actions such as Body’s.
The Supreme Court analyzed the application of subsection
405(h) to the Medicare Act for the first time in Heckler v.
Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). In
Heckler, four persons brought constitutional and statutory
challenges against the policy of the Secretary of Health and
Human Services not to pay for a special type of surgery intended
to relieve respiratory distress, a type of surgery that had
previously been covered under Medicare Part A. See id. at 604-
07, 104 S.Ct. at 2013-18.18 The plaintiffs sought declaratory
and injunctive relief that would invalidate the Secretary’s
policy and compel her to instruct fiscal intermediaries to pay
for the surgery, without requiring claimants to pursue their
claims through the administrative process. Id. at 610-611, 104
S.Ct. at 2019. The district court dismissed their claims for
lack of jurisdiction, holding “that 42 U.S.C. § 405(g) with its
administrative exhaustion prerequisite provide[d] the sole avenue
for judicial review,” and that the plaintiffs had failed to
exhaust their administrative remedies. Id. at 611-12, 104 S.Ct.
18Judicial review of Medicare Part A amount
determinations was always available under section 1395ff(b),
following exhaustion of the administrative process and subject to
amount-in-controversy requirements. See 42 U.S.C. § 1395ff.
Only Part B amount determinations were unreviewable prior to
1986. See supra note 17 and accompanying text.
21
at 2019-20. The Ninth Circuit reversed. Id. at 612, 104 S.Ct.
at 2020.
The Supreme Court reversed the Ninth Circuit, finding that
the plaintiffs’ claims for declaratory and injunctive relief were
“inextricably intertwined” with their claims for benefits. Id.
at 614, 104 S.Ct. at 2021. The Court stated, “it makes no sense
to construe the claims of those three19 respondents as anything
more than, at bottom, a claim that they should be paid for their
BCBR surgery.” Id. Noting that it had construed the term
“arising under” broadly in Salfi, the Court concluded that the
plaintiffs’ “benefits” claims “arose under” Medicare and,
therefore, fell within the purview of subsection 405(h),
notwithstanding the fact that they sought injunctive and
declaratory relief rather than benefits. “Following the
declaration which respondents seek from the Secretary -- that
BCBR surgery is a covered service -- only essentially ministerial
details will remain before respondents would receive
reimbursement.” Id. at 615, 104 S.Ct. at 2022. Because the
plaintiffs had not yet pursued their claims through the
administrative process, the Court held that judicial review was
19
Unlike the other three, the fourth plaintiff had not
yet had the surgery but challenged the policy because, he
claimed, its existence precluded his having the surgery. Id. at
620, 104 S.Ct. at 2024. The Court dismissed the fourth
plaintiff’s claim as well because it, too, was “essentially one
requesting the payment of benefits for . . . surgery, a claim
cognizable only under § 405(g).” Id.
22
unavailable under subsection 405(g) and that subsection 405(h)
foreclosed the district court’s federal-question jurisdiction
under section 1331. See id. at 616-19, 104 S.Ct. at 2022-24.
Thus the district court’s dismissal was appropriate.
The Supreme Court discerned a cleverly concealed claim for
benefits behind the plaintiffs’ constitutional and statutory
challenges. As in Salfi, the Court found that section 405(g)
provided an adequate remedy for each of the plaintiffs,
concluding:
Although respondents would clearly prefer an immediate
appeal to the District Court rather than the often
lengthy administrative review process, exhaustion of
administrative remedies is in no sense futile for these
respondents, and they, therefore, must adhere to the
administrative procedure which Congress has established
for adjudicating their Medicare claims.
Id. at 619, 104 S.Ct. at 2024. Heckler provides clear evidence
that subsection 405(h) is meant to protect the integrity of the
Medicare administrative scheme, “to prevent ‘premature
interference with agency processes’ and to give the agency a
chance ‘to compile a record which is adequate for judicial
review.’” Id. at 619 n.12, 104 S.Ct. at 2024 (quoting Salfi, 422
U.S. at 765, 95 S.Ct. at 2466). That these justifications are
inapposite in a case such as Body’s, which is not cognizable in
the administrative scheme, aptly demonstrates why subsection
405(h) is inapplicable to claims brought against a fiscal
intermediary under the False Claims Act. A look at the most
23
recent Supreme Court case to address the application of
subsection 405(h) reinforces this view.
In Bowen v. Michigan Academy, 476 U.S. 667, 106 S.Ct. 2133,
90 L.Ed.2d 623 (1986), the Court reviewed a statutory challenge
to administrative regulations promulgated under Medicare Part B.
The challenged regulations provided for different benefits
payments for similar physicians’ services. The case presented
the Court with two issues. First, the Court considered whether
the pre-1987 version of 1395ff, which did not provide for
judicial review of amount determinations under Part B, see supra
note 17 and accompanying text, implicitly precluded judicial
review of a challenge to regulations controlling the amount of
benefits paid. Alternatively, the Court examined whether
subsection 405(h) worked as a bar to the district court’s
jurisdiction over such a challenge.
The Court began its analysis by noting the “strong
presumption that Congress intends judicial review of
administrative action,” Id. at 670, 106 S.Ct. 2135, a presumption
that may only be overcome by “a showing of ‘clear and convincing
evidence’ of a contrary legislative intent . . . .” Id. at 671,
106 S.Ct. at 2136 (quoting Abbott Labs. v. Gardner, 387 U.S. 136,
141, 87 S.Ct. 1507, 1511, 18 L.Ed.2d 681 (1967)).20 Turning to
20
The Court concluded that “[t]he presumption of judicial
review is, after all, a presumption, and like all presumptions
used in interpreting statutes, may be overcome by, inter alia,
24
the question of whether the omission of any specific
authorization of administrative or judicial review of Part B
amount determinations in section 1395ff impliedly precluded the
district court from hearing a challenge to the regulations, the
Court found that “[s]ection 1395ff on its face is an explicit
authorization of judicial review, not a bar.” Id. at 674, 106
S.Ct. at 2137. Contrasting a challenge to the administrative
regulations governing Medicare Part B with the claim brought in
Erika, the Court stated:
The reticulated statutory scheme, which carefully
details the forum and limits of review of “any
determination . . . of . . . the amount of benefits
under part A,” 42 U.S.C. § 1395ff(b)(1)(C) (1982 ed.,
Supp. II), and of the “amount of . . . payment” of
benefits under Part B, 42 U.S.C. § 1395u(b)(3)(C),
simply does not speak to challenges mounted against the
method by which such amounts are to be determined
rather than the determinations themselves.
Id. at 675, 106 S.Ct. at 2138 (omissions in original).
Therefore, the Court concluded, “those matters which Congress did
not leave to be determined in a ‘fair hearing’ conducted by the
carrier -- including challenges to the validity of the
Secretary’s instructions and regulations -- are not impliedly
insulated from judicial review by 42 U.S.C. § 1395ff.” Id. at
specific language or specific legislative history that is a
reliable indicator of congressional intent, or a specific
congressional intent to preclude judicial review that is ‘fairly
discernible in the detail of the legislative scheme.” Id. at
673, 106 S.Ct. at 2137 (quoting Block v. Community Nutrition
Institute, 467 U.S. 340, 349, 351, 104 S.Ct. 2450, 2456, 2457, 81
L.Ed.2d 270 (1984)) (internal quotation marks omitted).
25
678, 106 S.Ct. at 2140.
The Court next addressed the contention that the third
sentence of subsection 405(h) serves as a bar to federal-question
jurisdiction in the district courts over challenges to
administrative regulations governing Medicare Part B. First
noting the implausibility of Congress’ providing carrier review
of “trivial” amounts determinations while simultaneously denying
any review of “statutory and constitutional challenges to
regulations promulgated by the Secretary,” the Court concluded
again that Congress only intended to foreclose judicial review of
amount determinations when it promulgated subsection 405(h). Id.
at 678-80, 106 S.Ct. at 2140-41. “[M]atters which Congress did
not delegate to private carriers, such as challenges to the
validity of the Secretary’s instructions and regulations, are
cognizable in courts of law.” Id. at 680, 106 S.Ct. at 2141(emphasis added).21
21
Notably, the Supreme Court implicitly endorsed our view
that subsection 405(h) is intended to ensure that beneficiaries
do not evade the administrative process described in section 405,
rather than to establish a broad preclusion of federal-question
jurisdiction over all actions related to Medicare benefits, such
as Body’s claim under the FCA. To support its conclusion that
subsection 405(h) did not block the plaintiffs’ statutory
challenge to the Medicare regulatory scheme, the Court referred
to the legislative history of section 1395ff, specifically
Senator Bennett’s remarks connected to the 1972 amendments to
that section, wherein Bennett stated that the amendments were
meant to clearly demonstrate that Congress intended to preclude
judicial “review only of ‘amount determinations’ -- i.e., those
‘quite minor matters,’ remitted finally and exclusively to
adjudication by private insurance carriers in a ‘fair hearing.’”
26
Perhaps most clearly of the four Supreme Court cases
analyzing the jurisdictional limitations contained in the
Medicare Act, Bowen demonstrates that subsection 405(h), viewed
within the context in which it was drafted and made applicable to
Medicare, simply seeks to preserve the integrity of the
administrative process Congress designed to deal with challenges
to amounts determinations by dissatisfied beneficiaries, not to
serve as a complete preclusion of all claims related to benefits
determinations in general.
C.
In every case discussed in subpart B, the Supreme Court was
faced with a suit by a beneficiary -- a person or an organization
that wanted, ultimately, to receive money from the government for
health services. The Court scrutinized each plaintiff’s claim to
determine whether the plaintiff was simply seeking benefits, a
Id. at 680, 106 S.Ct. at 2141 (citing 118 Cong. Rec. 33992
(1972)(remarks of Senator Bennett)). From those remarks, the
Court inferred that subsection 405(h) was not intended to
preclude the district courts from hearing cases not cognizable
before carriers, presumably because the subsection’s role was
limited to ensuring that the hearing and appeal procedures under
section 405 were utilized. See id. at 680-81 & n.10, 106 S.Ct.
at 2141 (noting in footnote that “the legislative history
summarized in the preceding section speaks to provisions for
appeal generically, and is thus as probative of congressional
intent in enacting § 1395ii as it is of § 1395ff” (citations
omitted) (emphasis added)). Therefore, federal-question
jurisdiction was available for the plaintiffs’ statutory
challenge.
27
claim cognizable within the administrative scheme designed by
Congress, or was bringing a claim for which administrative review
was unavailable. Cleverly concealed claims for benefits, veiled
attempts to evade the sometimes tedious administrative process,
were dismissed, see Heckler, 466 U.S. at 626-27, 104 S.Ct. at
2027-28; Erika, 456 U.S. at 206-11, 102 S.Ct. at 1653-55; Cf.
Salfi 422 U.S. at 756-62, 95 S.Ct. at 2462-65 (finding that
subsection 405(h) blocked federal-question jurisdiction but that
the claimants had effectively exhausted their administrative
remedies and could pursue their claims under the jurisdictional
grant in subsection 405(g)), enabling the Secretary of Health and
Human Services to get the “first crack” at interpreting HHS rules
and regulations, as Congress intended. See Heckler, 466 U.S. at619 n.12, 104 S.Ct. at 2024; Salfi, 422 U.S. at 765, 95 S.Ct. at
2466. In the one instance in which a challenge from a potential
beneficiary was neither specifically prohibited by the Act nor
cognizable in the administrative process, the Supreme Court held
that subsection 405(h) did not, by its terms, bar federal-
question jurisdiction under section 1331. See Bowen, 476 U.S. at
678-681, 106 S.Ct. at 2140-41.
In sum, the Supreme Court has sought to prevent claimants
from circumventing the administrative framework designed by
Congress to execute the Medicare Act by creatively styling their
claims as collateral attacks not “arising under” Medicare and
28
thus not subject to subsection 405(h). The Supreme Court has not
sought, however, to extend the reach of subsection 405(h) to bar
claims that, although they may implicate benefits determinations,
are certainly not veiled claims for benefits by a disgruntled
beneficiary that could have, and should have, been pursued
administratively in the first instance.22
22
The district court in this case relied primarily on its
interpretation of the Seventh Circuit’s opinion in Bodimetric
Health Services, Inc. v. Aetna Life & Casualty, 903 F.2d 480 (7th
Cir. 1990), and that court’s interpretation of Supreme Court
precedent, in determining that Body’s claim “arose under” the
Medicare Act and was, therefore, subject to the jurisdiction-
stripping provision of subsection 405(h). The court of appeals
in Bodimetric, depending largely on its interpretation of the
Supreme Court’s decisions in Erika and Bowen, distinguished
between “two types of Medicare claims: challenges to the amount
of benefits to be paid[, which] are not reviewable, . . . [and]
challenges to the regulatory scheme under which the amount of
benefits is calculated[, which] are reviewable.” Bodimetric, 903
F.2d at 485.
The district court in the instant case found the logic of
Bodimetric quite persuasive. It held that Body’s claims “more
closely resemble[] a determination of benefits dispute,” and,
therefore, that “it [was] without subject matter jurisdiction
over the Complaint.” Although it is true that the issues in this
case are more closely related to benefits determinations than to
challenges to the regulatory scheme set up by the Secretary of
Health and Human Services (in fact, Body claims that BCBSA
misapplied valid regulations), the district court’s reliance upon
the Erika-Bowen distinction drawn in Bodimetric is misplaced.
At the time that Erika and Bowen were decided, the Medicare
Act did not provide for review of Part B decisions beyond a “fair
hearing” before the carrier administrating the program. The 1986
amendments to the Medicare Act made Part B claims reviewable to
the same extent as Part A claims. See supra note 17 and
accompanying text. Most courts considering the question,
including this court in American Academy of Dermatology v.
Department of Health & Human Services, 118 F.3d 1495 (11th Cir.
1997), have held that the 1986 amendments extinguished the
“amount/methodology distinction established in [Bowen v.]
Michigan Academy.” Id. at 1500; see, e.g., Martin v. Shalala, 63
29
We are not faced with a claim for benefits from a
dissatisfied Medicare beneficiary, nor are we faced with a claim
cognizable within the administrative framework provided in
section 405. We are faced with a claim by a former employee of a
fiscal intermediary alleging fraud against the United States
government. BCBSA would have us hold that subsection 405(h)
blocks the district court’s federal-question jurisdiction over
such a case (and that no other jurisdictional basis for the case
exists), and that, therefore, Body’s claim should be dismissed
for lack of subject matter jurisdiction. Dismissal of Body’s
F.3d 497, 502-03 (7th Cir. 1995) (“As a result of the 1986
Amendments . . . the Michigan Academy distinctions drawn between
‘amount of payment’ and ‘validity of the statute and regulations’
challenges are no longer meaningful or necessary.”); Farkas v.
Blue Cross & Blue Shield of Michigan, 24 F.3d 853, 860 (6th Cir.
1994) (rejecting argument that amount/methodology distinction is
“good law” and stating that 1986 amendments “deprived Michigan
Academy of lasting precedential value”); Abbey v. Sullivan, 978
F.2d 37, 41-43 (2d Cir. 1992) (amendments have relegated
distinction to irrelevance); National Kidney Patients Ass’n v.
Sullivan, 958 F.2d 1127, 1132-33 (D.C. Cir. 1992) (same). To hold
otherwise, the Erika-Bowen distinction would have to be applied
to challenges to the regulations and statutes governing Part A
claims as well (as the Seventh Circuit erroneously did in
Bodimetric), meaning Bowen, sub silentio, “overruled [Ringer and]
the entire line of Supreme Court cases that has [required
exhaustion and] denied direct federal-question jurisdiction to
claims under Part A.” American Academy, 118 F.3d at 1500(alterations in original) (quoting Farkas, 24 F.3d at 860).
We rely today on an entirely different distinction: the
distinction between a case brought by a beneficiary, who
ultimately wants funds from the government and may challenge
adverse decisions through the administrative process, and a case
brought by a qui tam relator under the False Claims Act, who
seeks to recover money erroneously paid by the government, a
claim not cognizable in the administrative scheme.
30
claim on that ground, however, would have an anomalous result:
the government could bring an FCA claim against BCBSA under the
jurisdictional grant in 28 U.S.C. § 1345, but the qui tam
provisions of the FCA would be rendered useless. The FCA’s
incentives for informed agents to monitor their employers and
bring suit for violations would thus be destroyed. We do not
believe that this result is either necessary or correct.
Although a number of benefits determinations are at issue in
this suit, and although treble damages under the FCA bear a
direct relation to the amount of overpayment of benefits, this
claim is simply not the type of claim that subsection 405(h) was
intended to prevent. Hence, we conclude that subsection 405(h)
does not bar federal-question jurisdiction over a claim brought
against a fiscal intermediary under the False Claims Act. Such a
claim, for purposes of subsection 405(h), arises under the False
Claims Act, not the Medicare Act, and federal-question
jurisdiction under section 1331 is available.
III.
Our inquiry does not end with our holding that subsection
405(h) is inapplicable to Body’s qui tam suit against BCBSA.
Notwithstanding the district court’s subject matter jurisdiction
over the matter, BCBSA argues that it is immune from suits of
this sort under 42 U.S.C. § 1395h(i)(3) (1994). Although the
31
district court did not address the subsection 1395h(i)(3)
immunity issue in its opinion dismissing the case, the issue was
raised by BCBSA and was briefed by both parties before this
court. We thus consider the issue as an alternative basis for
affirming the district court’s dismissal of the action. See
Bonanni Ship Supply, Inc. v. United States, 959 F.2d 1558, 1561
(11th Cir. 1992) (holding that “this court may affirm the
district court where the judgment entered is correct on any legal
ground regardless of the grounds addressed, adopted or rejected
by the district court”).
Subsection 1395h(i) has never been authoritatively construed
by the federal courts. This case, therefore, presents a matter
of first impression for this court.23 We do not interpret the
subsection in the abstract, however: Like subsection 405(h)
discussed in part II, subsection 1395h(i)(3) must be read and
understood in context.
First and foremost, subsection 1395h(i)(3) appears as part
of subsection 1395h(i), entitled “Liability of certifying and
disbursing officers designated under agreement for negligent,
etc. payments.” Subsection 1395h(i) reads:
23
To our knowledge, the subsection has only been cited by
one court since it was first enacted in 1965. See Mount Sinai
Hosp. of Greater Miami, Inc. v. Weinberger, 376 F.Supp. 1099,
1127 (S.D. Fla. 1974) (simply citing the subsection (then
denominated subsection 1395h(g)) for the proposition that its
limits on the liability of government agents and officers are a
departure from common law).
32
(1) No individual designated pursuant to an agreement
under this section as a certifying officer shall, in
the absence of gross negligence or intent to defraud
the United States, be liable with respect to any
payments certified by him under this section.
(2) No disbursing officer shall, in the absence of
gross negligence or intent to defraud the United
States, be liable with respect to any payment by him
under this section if it was based upon a voucher
signed by a certifying officer designated as provided
in paragraph (1) of this subsection.
(3) No such agency or organization [such as a fiscal
intermediary] shall be liable to the United States for
any payments referred to in paragraph (1) or (2).
42 U.S.C. § 1395h(i). Subsection 1395h(i)(1) limits the
liability of fiscal intermediary employees responsible for
certifying claims for payment from beneficiaries, protecting them
from liability for, in effect, mistaken (negligent)
certifications, while retaining the certifying officers’
individual liability for grossly negligent or fraudulent
certifications. Subsection 1395h(i)(2) similarly limits the
individual liability of the disbursing officers of fiscal
intermediaries for making mistaken or negligent payments, but
only if they do so based upon a certifying officer’s voucher, and
only in the absence of fraud or gross negligence.
In contrast to the limited immunity accorded to certifying
and disbursing officers, subsection 1395h(i)(3) broadly states
that the fiscal intermediaries themselves will not be liable to
the Government for any of the payments referred to in paragraphs
(1) and (2) -- that is, payments certified by certifying officers
33
and disbursed by disbursing officers. A clause limiting immunity
to payments not involving gross negligence or fraud is
conspicuously absent. When the language of a statute is
unambiguous, we are bound to give it its plain meaning, absent “a
clearly expressed legislative intent to the contrary.” United
States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69
L.Ed.2d 246 (1981) (quoting Consumer Prod. Safety Comm’n v. GTE
Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64
L.Ed.2d 766 (1980)); see also United States v. Grigsby, 111 F.3d
806, 816 (11th Cir. 1997). Subsection 1395h(i)(3) purports to
give fiscal intermediaries full immunity from liability for
payments that are certified by its certifying officers and issued
by its disbursing officers, and we are not persuaded that
Congress did not intend this immunity to extend to fraudulent
payments certified and disbursed to Medicare Part A providers.
Cf. Erika, 456 U.S. at 207-08, 102 S.Ct. at 1653-54 (finding that
Congress’ failure to grant judicial review of Part B amount
determinations in the pre-1986 version of 1395ff, while
simultaneously granting review of amount determinations under
Part A and of eligibility determinations under Parts A and B,
“provides persuasive evidence that Congress deliberately intended
to foreclose further review of such claims”).24
24
We are mindful of the brief statement in the Conference
Committee’s report that subsection 1395h(i)(3) is intended to
grant fiscal intermediaries “the same immunity from liability for
34
Our reading of the subsection is consistent with the broader
goals of section 1395h and the efficient administration of the
Medicare system. Fiscal intermediaries, such as BCBSA, function
much like an administrative agency. They “act on behalf of the
Secretary, carrying on for [her] the governmental administrative
responsibilities imposed by the [Medicare Act].” Sen. Rep. No.
404 (1965) reprinted in 1965 U.S.C.C.A.N. 1943, 1995 (adding that
“[t]he Secretary, however, would be the real party in interest in
the administration of the program”). In recognition of their
administrative role, the Medicare regulations require that
contracts with fiscal intermediaries “contain clauses providing
for indemnification with respect to actions taken on behalf of
HCFA,” 42 C.F.R. § 421.5(b) (1997), and the federal courts have
extended the doctrine of sovereign immunity to them. See
Matranga v. Travelers Ins. Co., 563 F.2d 677, 677-78 (5th Cir.
1977) (justifying extension of the doctrine because the United
States is the real party in interest); Peterson v. Blue
Cross/Blue Shield of Texas, 508 F.2d 55, 57-58 (5th Cir. 1975).
Rather than impose liability on fiscal intermediaries for the
vast amounts of federal money their agents certify and disburse
to Medicare providers, a task delegated by the HCFA, Congress
incorrect payments as would be provided their certifying and
disbursing officers.” H.R. Conf. Rep. No. 682 (1965), reprinted
in 1965 U.S.C.C.A.N. 2228, 2231. This brief and inconclusive
statement is insufficient to overcome the clear language of the
subsection.
35
established provisions providing for recoupment of overpayments
from the actual recipients of the funds. See 42 U.S.C. § 1395gg;
see also 42 C.F.R. §§ 405.301-405.378 (1997) (specifying method
for recouping overpayments from providers).
This system of allocating liability for erroneous Medicare
payments does not leave the government without any remedies for
punishing Medicare fraud. Not only can the government recoup
incorrect payments, it can certainly bring an FCA action against
the recipient of the funds if that recipient participated in the
scheme.25 The government could also bring an action against the
actual persons in the fiscal intermediary organization who
executed the fraudulent scheme -- the certifying officers and
disbursing officers who paid out the government’s money in
knowing contravention of Medicare guidelines. The government’s
inability to bring an FCA action against the intermediary does
not mean it will have no recourse to deep pockets either. By
allowing the government to require surety bonds for intermediary
employees, subsection 1395h(h) implicitly acknowledges that
fiscal intermediary employees handling the government’s cash will
25
We would imagine that provider complicity would be
evident in almost every instance where Medicare claims are
fraudulently certified and paid to providers. Otherwise, the
fiscal intermediary’s agents certifying and disbursing United
States Government funds are simply performing unacknowledged acts
of charity, because they cannot directly benefit from the
payments they have fraudulently certified and disbursed to
unwitting, albeit happily enriched, providers.
36
be in a position to pilfer. See 42 U.S.C. § 1395h(h).
Fiscal intermediary immunity from liability to the United
States for payments certified and disbursed by its officers in
the normal course of business also does not preclude the
government from seeking recourse against recalcitrant
intermediaries. Most obviously, the government can terminate the
contract of an intermediary if “the continuation of some or all
of the functions provided for in the agreement with the [fiscal
intermediary] is disadvantageous,” 42 U.S.C. § 1395h(g) (emphasis
added), much less if the government detects intentional
disobedience to Medicare rules and regulations. See also 42
C.F.R. §§ 421.120 (intermediary performance criteria), 421.122
(performance standards), 421.124 (intermediary’s failure to
perform efficiently and effectively), 421.126 (termination of
intermediary agreements) (1997). Fiscal intermediaries would
also be liable for any money pilfered directly by the
intermediary from government funds, such as government cash
illegally siphoned into the intermediary’s own accounts or
charges to the government for services the intermediary did not
perform, because its immunity extends only to payments to
Medicare beneficiaries certified by certifying officers and
disbursed by disbursing officers.26 Finally, if the government
26
Cf. United States ex rel. Flynn v. Blue Cross/Blue
Shield of Michigan,(D. Md. 1995). Flynn involved a settlement
agreement between the government and Blue Cross/Blue Shield of
37
discovered rampant fraud and abuse of Medicare by a fiscal
intermediary, we do not doubt that it could find sufficient civil
and criminal grounds to punish the fiscal intermediary and its
officers, and/or recoup any lost money. Cf. Flynn,(detailing
terms of massive settlement between BCBSM and the government for
BCBSM’s fraud).
Body’s action under the False Claims Act is premised upon
precisely the types of payments for which Congress provided the
fiscal intermediaries with immunity. There is nothing in Body’s
complaint to suggest that the payments were not made in the
normal course of reimbursing Alabama hospitals for costs
attributable to Medicare patients, that is, payments certified
and disbursed to the providers. In fact, it appears that Body
himself was the certifying officer.27 Although Body could argue
Michigan (“BCBSM”). Therefore, we do not cite the case for its
legal conclusions about liability under the FCA, because there
are none. The case does describe, however, the type of fiscal
intermediary fraud for which we do not believe section
1395h(i)(3) would provide immunity.
In Flynn, the government, by relator Darcy Flynn, brought an
FCA action against BCBSM because the intermediary was not
performing audits for which it was being paid by the government,
causing the government to pay BCBSM for phantom services, in
addition to costing the government money it would have recovered
had the audits been performed. Id. at *6. By the time of the
settlement, BCBSM was no longer either a fiscal intermediary or
carrier for Medicare in Michigan, and it agreed to pay the
government $27,600,000 to settle the claims. Id. at *8.
27
Body claims that his unnamed “superiors” ordered him to
certify the payments to Baptist and Carraway. If he were
actually coerced to certify the payments, and the payments were
fraudulent, those superiors may be liable under the FCA, because
38
that he does not seek to impose liability for “payments” as meant
in subsection 1395h(i)(3), but rather for statutory penalties and
treble damages for violations of the FCA, that argument would be
unavailing. We cannot ignore that Body’s suit would be premised
upon payments for which subsection 1395h(i)(3) provides BCBSA
immunity.28 Allowing Body to circumvent that immunity by appeal
to the False Claims Act would destroy the integrity of the system
that Congress designed. BCBSA, therefore, is immune from Body’s
suit.
IV.
For the foregoing reasons, we hold that the district court
erred in dismissing Body’s suit for lack of subject matter
jurisdiction. We also hold, however, that Body has not stated a
claim for which relief can be granted because, under 42 U.S.C. §
they would have essentially usurped his certifying function. We
express serious doubt, however, that Body (or the government)
could succeed on such a claim. The payments made to Alabama
hospitals were not concealed from the government; the Secretary
of Health and Human Services could have pursued the recoupment of
the money, but chose not to; and, even after the OIG
investigation, almost all of BCBSA’s determinations were upheld.
Given these facts, it is highly unlikely that Body could succeed
in proving that BCBSA, or any of its officers, defrauded the
United States government.
28
Body’s suit seeks recovery for the United States under
the qui tam provisions of the FCA, not recovery for Body
personally. Thus any argument subsection 1395h(i)(3) does not
apply because Body does not seek to impose liability “to the
United States” would be similarly unavailing.
39
1395h(i)(3), BCBSA is immune from liability to the United States
for the payments it made to Alabama hospitals.29 The district
court’s dismissal is thus
AFFIRMED.
29
We note briefly that given our holding that BCBSA is
immune from liability under subsection 1395h(i)(3), Body’s suit
is properly dismissed under Federal Rule of Civil Procedure Rule
12(b)(6), for failure to state a claim upon which relief can be
granted, rather than Rule 12(b)(1) for lack of subject matter
jurisdiction.
40