Girling Health Care, Inc. v. Shalala ( 1996 )


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  •                       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