Girling Health Care, Inc. v. Shalala , 85 F.3d 211 ( 1996 )

United States Court of Appeals,
Fifth Circuit.
No. 95-50794
Summary Calendar.
GIRLING HEALTH CARE, INC., Plaintiff-Appellant,
v.
Donna E. SHALALA, Secretary, Department of Health and Human
Services, in her Representative Capacity; United States Department
of Health and Human Services, Defendants-Appellees.
June 13, 1996.
Appeal from the United States District Court for the Western
District of Texas.
Before GARWOOD, WIENER and EMILIO M. GARZA, Circuit Judges.
PER CURIAM:
In this appeal from the district court's affirmance of the
denial by Defendant-Appellee Donna E. Shalala, Secretary,
Department of Health and Human Services (hereafter, Secretary), of
reimbursement of Medicare costs claimed by Plaintiff-Appellant
Girling Health Care, Inc., Girling challenges the propriety of the
district court's use of the summary judgment mechanism when
reviewing a decision of an administrative agency. Girling also
asserts the absence of substantial evidence to support the
Secretary's decision. As this appeal involves a "complex and
highly technical regulatory program,"1 we write somewhat more
extensively here than we might otherwise have when affirming a
district court's summary judgment disposition of such an agency
1
See Thomas Jefferson University v. Shalala, --- U.S. ----,
----, 114 S.Ct. 2381, 2387, 129 L.Ed.2d 405 (1994).
1
case. For the reasons hereinafter set forth, we affirm the
district court's summary judgment affirming the Secretary's
decision and dismissing Girling's action.
I
FACTS AND PROCEEDINGS
A. Background
This case arises under the Medicare Act.2 Medicare home
health care agencies,3 such as Girling, are reimbursed by the
Medicare program through private organizations acting as "fiscal
intermediaries"4 under contract with the Secretary. Under the
Medicare Act, the Secretary prescribes methods for determining a
provider's "reasonable cost" of providing services to Medicare
beneficiaries.5
The fiscal intermediary determines the provider's reasonable
cost based on an annual cost report submitted by the provider.6
The provider is notified of the intermediary's determination in a
written notice known as a "notice of program reimbursement"
2
42 U.S.C. § 1395 et seq. See Sta-Home Health Agency, Inc.
v. Shalala, 34 F.3d 305, 307 & nn. 1-2 (5th Cir.1994) (additional
background on the Medicare review process concerning a home
health agency).
3
42 U.S.C. § 1395x(o )(1) (West 1992).
4
In this case, the intermediaries are Blue Cross of Iowa and
Prudential; Blue Cross succeeded Prudential on December 31,
1988.
5
See 42 U.S.C. § 1395x(v)(1)(A) (West 1992).
6
In this case, Prudential used a Provider Statistical and
Reimbursement report ("PS & R") to adjust Girling's reimbursement
amount. The parties concede that this PS & R is not in the
record or otherwise available.
2
("NPR").
A provider that is dissatisfied with an intermediary's
determination is entitled to a hearing before the Provider
Reimbursement Review Board ("PRRB") if (1) the amount in
controversy is $10,000 or more, and (2) the provider makes a
request within 180 days following the date on which the NPR was
mailed to the provider.7 The PRRB's decision may be reversed,
affirmed, or modified by the Secretary.8 The district court has
jurisdiction to review a final reimbursement decision by the PRRB
or the Secretary under the Administrative Procedure Act.9 The
Administrator's reversal of the PRRB's decision in this case
constitutes the final decision of the Secretary.10
B. Operable Facts
Girling's Memphis, Tennessee, sub-unit submitted its cost
report for the 1986 fiscal year to Prudential, its fiscal
intermediary, on November 6, 1986. On November 5, 1987, Prudential
issued its NPR finding that Girling owed the Medicare program
$31,591. Girling appealed the decision to the PRRB, contesting
Prudential's failure to include a number of reimbursable costs and
charges.
7
42 U.S.C. § 1395oo(a); 42 C.F.R. §§ 405.1835(a);
405.1841(a) (1995).
8
42 U.S.C. § 1395oo(f). This review is performed by the
Administrator of the Health Care Financing Administration
("HCFA").
9
5 U.S.C. § 701 et seq.
10
42 C.F.R. § 405.1875.
3
On April 11, 1988, Prudential informed Girling that it had
"ordered" a detailed listing of paid claims (a PS & R11), which
would be forwarded to Girling so that it could identify any
discrepancies. On July 11, 1988, Prudential wrote to Girling and
explained that on April 29, 1988, Prudential had sent the PS & R of
paid claims for fiscal years 1986 and 1987 to Girling but that
Prudential had never received Girling's analysis of that report.
Prudential requested that Girling submit its reconciliation by July
29, 1988, so that Prudential could analyze the disputed claims
prior to terminating its role as intermediary on January 1, 1989.
The record contains a letter dated July 28, 1988, indicating
Girling's intent to forward its reconciliation to Prudential;
however, the address on the forwarding letter does not include a
city or state. Nothing in the record indicates that Girling's
reconciliation was ever received by Prudential. On August 9, 1988,
Prudential again wrote to Girling and referred to Girling's being
"in the process of identifying the discrepancies in your records
and ours." Prudential never issued a report concerning Girling's
reconciliation; neither did Prudential furnish its successor, Blue
Cross of Iowa, a copy of the PS & R or other supporting information
concerning the reimbursement dispute with Girling.
The PRRB held a hearing on November 30, 1993. On May 24,
1994, the PRRB issued a decision reversing Prudential's
11
A report containing all Medicare charges reported by the
Provider that is compiled quarterly and produced by the
Intermediary as part of the reimbursement process. See Medical
Rehabilitation Services, P.C. v. Shalala, 17 F.3d 828, 835 (6th
Cir.1994).
4
disallowance of the reimbursement costs. The PRRB found that
Girling had submitted "sufficient evidence" to show that the PS &
R was flawed and that Girling should not be prejudiced by
Prudential's failure to transfer the documentation to Blue Cross of
Iowa. The PRRB also determined that Girling had timely submitted
reconciliation data to Prudential.
The Administrator of the HCFA reviewed and reversed the
decision of the PRRB, finding that Girling had not presented
sufficient evidence to show that the cost amounts from the PS & R
used by Prudential were inaccurate. The Administrator held that
Girling's "reconstructed" data, which was retrieved with only
limited success from Girling's archived computer billing records,
failed to meet the requirements of 42 C.F.R. § 413.20. The
Administrator's decision was the final decision of the Secretary.12
Girling filed the instant suit in the district court, seeking
reversal of the Secretary's decision. Girling contends that it had
submitted adequate data for reimbursement, but that the Secretary
had "ignored evidence before the PRRB." The Secretary and Girling
each moved for summary judgment. In its motion, Girling contended
that the Secretary had made an arbitrary decision to deny
reimbursement, which decision was not supported by substantial
evidence, and that the Secretary had conducted an overly broad
review of the PRRB's decision. Concluding that the Secretary's
review of the PRRB's decision was not limited and that the
Secretary's decision was supported by substantial evidence, the
12
See 42 C.F.R. § 405.1875.
5
district court granted the Secretary's motion for summary judgment,
and Girling timely appealed.
II
ANALYSIS
A. Summary Judgment Standard
Despite having filed its own motion for summary judgment,
Girling argues to us that the summary judgment mechanism used by
the district court is inconsistent with the standards for judicial
review under the Administrative Procedure Act. Citing Olenhouse v.
Commodity Credit Corp.,13 Girling argues—for the first time on
appeal14—that the district court should have reviewed Girling's
summary judgment motion under the Federal Rules of Appellate
Procedure and that such review would have required the district
court to "examine[ ] the entire administrative record." Girling
insists that the district court's failure to examine the entire
record is the "only logical conclusion" that can be distilled from
the district court's grant of summary judgment in favor of the
Secretary.
This argument is frivolous. As more fully explained below,
the district court properly focused on whether the Secretary's
decision is supported by substantial evidence in the administrative
record. In addition, Olenhouse is factually distinguishable and
logically inapplicable. In Olenhouse, the Tenth Circuit addressed
13
42 F.3d 1560, 1579 (10th Cir.1994).
14
A determination whether the plain-error standard applies
is unnecessary, as the argument advanced is not supported by the
cited case law and is otherwise frivolous.
6
an instance in which the district court went beyond the
administrative record to decide the administrative case before it,
leading the appeals court to hold that summary judgment was an
inappropriate mechanism for deciding administrative cases.15 Here,
the district court did not go beyond the administrative record;
neither is that the basis for Girling's contention that the summary
judgment standard is inappropriate. On the contrary, Girling
contends that the district court did not delve deeply enough into
the administrative record, not that the district court reviewed
matters not considered by the Secretary which were outside of the
record.
We have consistently upheld, without comment, the use of
summary judgment as a mechanism for review of agency decisions.16
Our practice is supported by the commentators.
The summary judgment procedure is particularly appropriate in
cases in which the court is asked to review or enforce a
decision of a federal administrative agency. The explanation
for this lies in the relationship between the summary judgment
standard of no genuine issue as to any material fact and the
nature of judicial review of administrative decisions....
[T]he administrative agency is the fact finder. Judicial
review has the function of determining whether the
administrative action is consistent with the law—that and no
more.17
As Girling presents no compelling argument for changing this
15
See Olenhouse, 42 F.3d at 1579-80.
16
See Sun Towers, Inc. v. Heckler, 725 F.2d 315, 317, 325-26
(5th Cir.1984); Baker v. Bell, 630 F.2d 1046, 1054 (5th
Cir.1980).
17
10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE: Civil 2d § 2733 (1983) (internal quotations
and footnotes omitted; emphasis added).
7
practice, we decline the invitation to do so.
B. The Secretary's Decision
We will not reverse the Secretary's decision unless it is
arbitrary, capricious, an abuse of discretion, not in accordance
with law, or unsupported by substantial evidence on the record
taken as a whole.18 Substantial evidence is " "more than a mere
scintilla. It means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.' "19
Girling argues that the district court's decision was not
based on a "thorough" discussion of the decision by the PRRB and
the subsequent reversal of that decision by the Secretary. The
expertise of the PRRB and the HCFA Administrator are deemed
equivalent, even when the latter reverses the former.20
Girling contends that the district court erred by not
reviewing the PRRB's decision that Girling had provided adequate
records. Although deemed equal in expertise with the PRRB, the
Secretary nevertheless has the option of making the final decision,
and hers is the only one that is subject to judicial review.21
18
5 U.S.C. § 706; See Sierra Medical Center v. Sullivan,
902 F.2d 388, 390-91 (5th Cir.1990); Sun Towers, 725 F.2d at
325-26.
19
Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420,
1427, 28 L.Ed.2d 842 (1971) (citation omitted).
20
Sun Towers, 725 F.2d at 326; Homan & Crimen, Inc. v.
Harris, 626 F.2d 1201, 1205 (5th Cir.1980), cert. denied, 450
U.S. 975, 101 S.Ct. 1506, 67 L.Ed.2d 809 (1981).
21
See Homan, 626 F.2d at 1205 ("the ultimate decision of the
agency is controlling."); 42 U.S.C. § 1395oo(f)(1) (West 1992)
("A decision of the Board shall be final unless the Secretary ...
reverses, affirms, or modifies the Board's decision.").
8
Congress charged the Secretary with the primary
responsibility for interpreting the cost reimbursement provisions
of the Medicare Act, so courts accord particular deference to her
interpretation of Medicare legislation.22 Courts are required to
"give substantial deference to an agency's interpretation of its
own regulations."23 Therefore, "unless an "alternative reading is
compelled by the regulation's plain language or by other
indications of the Secretary's intent at the time of the
regulation's promulgation,' " we must defer to the Secretary's
interpretation.24
The provider bears the burden of maintaining financial
records and statistical data sufficient for proper determination of
costs payable under the program.25 The Secretary found that, under
the applicable regulations, Girling bore the burden of verifying
the data used in computing allowable costs, and that Girling had
failed to carry that burden. The Secretary is not permitted to
issue payments to a provider unless the provider "has furnished
such information as the Secretary may request in order to determine
the amounts due...."26 "The principles of cost reimbursement
22
Batterton v. Francis, 432 U.S. 416, 425, 97 S.Ct. 2399,
2405, 53 L.Ed.2d 448 (1977); Sun Towers, 725 F.2d at 325-26.
23
Thomas Jefferson, --- U.S. at ----, 114 S.Ct. at 2386(citations omitted).
24
Thomas Jefferson, --- U.S. at ----, 114 S.Ct. at 2386(citations omitted).
25
42 C.F.R. § 413.20(a).
26
42 U.S.C. § 1395g(a) (West 1992).
9
require that providers maintain sufficient financial records and
statistical data for proper determination of costs payable under
the program."27 These financial records must be "capable of
verification by qualified auditors" and "in sufficient detail to
accomplish the purposes for which it is intended."28 A provider's
own cost accounting system is "only the first step in the ultimate
determination of reimbursable costs."29 Another step in the
ultimate determination of reimbursable costs involves the
intermediary's PS & R.
As part of the reimbursement process, intermediaries are
required to report all Medicare charges submitted by a
provider along with any reimbursement for those charges in
Provider Statistical and Reimbursement Reports ("PS & R
reports"), compiled quarterly. Intermediaries must use these
reports to check amounts on a provider's annual cost report.
Intermediaries must also send the provider a Provider Summary
Report for the PS & R reports used by the intermediary. The
provider is then afforded the opportunity to furnish proof
that the summary is inaccurate. If the provider fails to show
any inaccuracies, the intermediary will then rely on the PS &
R report to adjust the charges reported in the provider's cost
report.30
Intermediaries, such as Prudential and Blue Cross of Iowa, have
been directed by the Secretary to use the information in the PS &
R "unless the provider furnishes proof that inaccuracies exist."31
In an attempt to prove the PS & R information inaccurate,
27
42 C.F.R. § 413.20(a).
28
42 C.F.R. § 413.24(a), (c).
29
Shalala v. Guernsey Memorial Hosp., --- U.S. ----, ----,
115 S.Ct. 1232, 1236, 131 L.Ed.2d 106 (1995).
30
Medical Rehabilitation Services, 17 F.3d at 835.
31
MEDICARE INTERMEDIARY MANUAL ("MIM") § 2242.
10
Girling proffered a billing transmittal log that could not be
reconciled because the period for reprocessing had expired.
Girling also provided claims information that it had reconstructed
from a computer billing log. Girling did not contest that the
period for reprocessing had expired; rather it explained that it
was unable to reconstruct all of the billing information for the
pertinent period from the computer tapes. Regarding the accuracy
of Girling's information, a controller for Girling stated that
"[w]e were unable to locate a couple of periods during the year[.]
[A]s well, some of the data on the tapes was damaged and therefore
unretrievable." As noted by the district court, the sum of the
evidence provided to Prudential by Girling in an effort to rebut
the PS & R consisted of four pages titled "FY 1986
Reconciliations."
Moreover, an audit coordinator for Blue Cross of Iowa
testified before the PRRB that the information provided by Girling
was insufficient to enable an intermediary to determine the number
of allowable home visits, and that there was no way to reconcile
the claims. Failure to provide records susceptible of being
audited allows the Secretary to deny reimbursement. Thus Girling's
failure to submit documentation to enable the intermediary to
determine Medicare charges accurately is sufficient cause for
reliance on the PS & R Reports. The Secretary's decision to rely
on the PS & R Reports, rather than on Girling's recreated and
admittedly incomplete data, is supported by substantial evidence.
As the regulations and MIM § 2242 place the burden of maintaining
11
records on the provider, the Secretary's decision not to relieve
Girling of the burden was neither arbitrary nor capricious. For
the foregoing reasons, the summary judgment of the district court
is, in all respects,
AFFIRMED.
12