Hospital of University of Pennsylvania v. Leavitt ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
HOSPITAL OF UNIVERSITY OF
PENNSYLVANIA, et al.,
Plaintiffs,
v. Civil Action No. 08-1665 (JDB)
KATHLEEN SEBELIUS,1 Secretary, U.S.
Department of Health and Human
Services,
Defendant.
MEMORANDUM OPINION
Three Philadelphia hospitals -- Hospital of University of Pennsylvania, Presbyterian
Medical Center, and Pennsylvania Hospital (collectively, "plaintiffs") -- have filed suit against the
Secretary of the U.S. Department of Health and Human Services ("the Secretary"). Plaintiffs seek
judicial review of the Secretary's decision to deny them certain supplemental medical education
payments authorized by the Balanced Budget Act of 1997 ("BBA '97"), Pub. L. No. 105-33, 111
Stat. 251. Now before the Court are the parties' cross-motions for summary judgment.
Plaintiffs' claims fall into two general categories: a legal question and a factual dispute.
The legal question is whether they had adequate notice of claims filing requirements for the
supplemental medical education payments authorized by BBA '97. As the parties have
recognized, this precise question was presented to this Court in a different case, Cottage Health
1
Former Secretary of the Department of Health and Human Services Michael O. Leavitt
was named as the original defendant in this case. Pursuant to Federal Rule of Civil Procedure
25(d), the Court automatically substitutes the current Secretary of the Department of Health and
Human Services, Kathleen Sebelius, as the defendant.
System v. Sebelius, Civ.A.No. 08-0098. See Pls.' Mem. at 3; Sec'y's Mem. at 12 n.6. The Court
recently resolved cross-motions for summary judgment on this issue in that case, see July 7, 2009
Memorandum Opinion [dkt. ent. # 32] ("Cottage Health Opinion"), and will apply the same
principles to resolve the legal question here.
The factual dispute, however, is unique to this case. Plaintiffs have contended at every
stage of the proceedings that even if they had notice of the claims filing requirements for the
supplemental medical education payments, and even if the time limits from 42 C.F.R. § 424.44apply, they have in fact satisfied those requirements by timely filing UB-92 forms with their
intermediary. The Secretary counters that plaintiffs have not proven that they filed UB-92 forms.
The Court focuses the analysis that follows on this factual dispute.
BACKGROUND
Plaintiffs allege that they were improperly denied supplemental medical education
payments by their intermediary for the 1999 and 2000 fiscal years. Am Compl. ¶¶ 3-4. They
timely appealed to the Provider Reimbursement Review Board ("PRRB"), the first-level agency
review available to health care providers dissatisfied with Medicare reimbursement decisions
made by Medicare intermediaries. See 42 U.S.C. § 1395oo(a). Plaintiffs argued that they never
received adequate notice of claims filing requirements for the supplemental medical education
payments, and the PRRB agreed. See Administrative Record ("A.R.") at 65.2
Plaintiffs also contended that whatever the resolution of the legal question -- i.e., the
adequate notice issue -- they had in fact complied with the filing requirements and deadlines of 42
2
The Court set out the relevant statutory and regulatory background in the Cottage Health
Opinion at 2-5 and does not repeat it here.
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C.F.R. § 424.44. They produced various forms of evidence in support of this claim to the PRRB
at a hearing on May 15, 2007, including several witnesses who testified that UB-92 forms were
timely mailed to the intermediary. See, e.g., A.R. at 343 (testimony of Mark Reynolds). Plaintiffs
also presented documentary evidence showing that accounting staff had been instructed to submit
UB-92s to the intermediary for the supplemental medical education payments. See, e.g., id. at 842
(memorandum from Nancy Booth reminding accounting staff to submit UB-92s to the
intermediary); see generally id. at 59 (PRRB's summary of plaintiffs' evidence). The intermediary
denied that it had timely received UB-92s from plaintiffs and argued that plaintiffs' evidence was
insufficient to prove otherwise. See id. at 60. But the intermediary did not present any witnesses
or submit any evidence showing that it had not timely received the UB-92s.
In considering the factual dispute, the PRRB wrote:
The evidence in this case was conflicting, in that [plaintiffs] argued
that they submitted manual claims in calendar years 1999 and
2000, and the Intermediary asserts that they never received them.
The Board finds [plaintiffs'] evidence that it filed claims credible,
but there is no evidence that the claims were proper for processing.
However, the Board majority finds that whether [plaintiffs] filed
the claims for processing prior to the timely filing deadlines set
forth in 42 C.F.R. § 424.44 is moot.
Id. at 63. The PRRB deemed the factual issue moot because it found in favor of plaintiffs on the
legal question -- the PRRB found that the filing deadlines from 42 C.F.R. § 424.44 were
inapplicable to claims for supplemental medical education payments. Id. at 65. One member of
the PRRB dissented. See id. at 67-69.
The intermediary appealed to the Administrator pursuant to 42 U.S.C. § 1395oo(f). The
Administrator devoted most of his analysis to the legal question and reversed, concluding that the
§ 424.44 requirements do apply to claims for supplemental medical education payments. In a
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single paragraph of his seventeen-page decision, the Administrator addressed the factual dispute
as well. A.R. at 18. Citing the PRRB dissenter's opinion, the Administrator found that plaintiffs
had not established that they had timely mailed UB-92s to the intermediary. Id. Accordingly, the
Administrator reversed. Plaintiffs then appealed to this Court for review.
STANDARD
Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate when the
pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law." In a case involving review of a
final agency action under the Administrative Procedures Act, 5 U.S.C. § 706, however, the
standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing
the administrative record. See North Carolina Fisheries Ass'n v. Gutierrez, 518 F. Supp. 2d 62, 79
(D.D.C. 2007). Under the APA, it is the role of the agency to resolve factual issues to arrive at a
decision that is supported by the administrative record, whereas "the function of the district court
is to determine whether or not as a matter of law the evidence in the administrative record
permitted the agency to make the decision it did." See Occidental Eng'g Co. v. INS, 753 F.2d 766,
769-70 (9th Cir. 1985). Summary judgment thus serves as the mechanism for deciding, as a
matter of law, whether the agency action is supported by the administrative record and otherwise
consistent with the APA standard of review. See Richards v. INS, 554 F.2d 1173, 1177 & n. 28
(D.C. Cir. 1977), cited in Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d
1060 (D.C. Cir. 2003).
Under the APA, a court may vacate an agency decision if it is "arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law" or if it is "unsupported by
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substantial evidence." 5 U.S.C. §§ 706(2)(A), (E). Agency actions are entitled to much
deference, and the standard of review is narrow. See Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402, 416 (1971). The reviewing court is not permitted to substitute its judgment
for that of the agency. See id. That is, it is not enough for the agency decision to be incorrect -- as
long as the agency decision has some rational basis, the court is bound to uphold it. See id. The
court may only review the agency action to determine "whether the decision was based on a
consideration of the relevant factors and whether there has been a clear error of judgment." Id.ANALYSIS
I. Legal Question -- Adequate Notice
The legal question presented is whether providers (like plaintiffs) received
adequate notice of claims filing requirements for the supplemental medical education payments
authorized by BBA '97. In particular, plaintiffs argue that they never received notice of claims
filing requirements, that the Secretary's method of providing notice was inadequate, and that the
supplemental medical education payments were exempted from the requirements and deadlines of
42 C.F.R. § 424.44. See Pls.' Mem. at 30-34. Plaintiffs also contend that the intermediary failed
to consider the "best available evidence," see id. at 34-39, and that the claims filing requirements
as interpreted by the Secretary violate the Paperwork Reduction Act, see id. at 40-43.
The Court addressed these exact same arguments in the identical procedural posture in
Cottage Health. See Cottage Health Opinion at 21-31; see also Pls.' Mem. at 30 ("rely[ing] on and
incorporat[ing] herein the legal arguments advanced in the briefs in support of summary judgment
before this Court for the provider in Cottage Health System."); Sec'y's Mem. at 12 n.6 (stating that
to the extent plaintiffs incorporate the briefing in Cottage Health, "the Secretary hereby
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incorporates the arguments she advanced in that case"). First, the Court determined that the
Secretary had published non-conflicting notice of the claims filing requirements. Id. at 22-25. In
particular, the July 1, 1998 Program Memorandum "clearly stated that 'hospitals must submit a
claim to the hospitals' regular intermediary in UB-92 format.'" Id. at 23 (quoting Program
Memorandum).3 Next, the Court held that the Program Memorandum was a permissible method
of providing notice to hospitals of the claims filing requirements. Id. at 25-26.
As to whether the 42 C.F.R. § 424.44 deadlines applied to the claims for supplemental
medical payments, however, the Court granted summary judgment in favor of the plaintiff. The
Court determined that the Administrator's rationale for finding that the plaintiff had notice that the
time limits from § 424.44 applied was too cursory to allow for reasoned review. Id. at 26-29. The
Court noted that the plaintiff's "best available evidence" arguments might carry more weight if
plaintiff never received notice of the deadlines for filing the UB-92 forms with the intermediary.
Id. at 26. Accordingly, the Court remanded the case to the Secretary for further examination and
explanation of whether hospitals had received notice of the time limits for filing the UB-92s.
The Court also remanded the case to the Secretary for further explanation as to the
plaintiff's arguments under the Paperwork Reduction Act. Id. at 29-31. The Court noted that the
Administrator had not addressed these arguments, which are potentially meritorious. Id.
The Court will not repeat this same analysis here. As the parties have recognized, the
arguments presented are the same as in Cottage Health, so the outcome should be the same. See,
3
The Court considered four possible documents that provided the Cottage Health plaintiff
notice of the claims filing requirement. Three of the four, including the July 1 Program
Memorandum, applied equally to all hospitals. The fourth, a letter from the fiscal intermediary to
the plaintiff, was specific to the Cottage Health plaintiff. The letter simply underscored the
Court's determination that the plaintiff had notice but did not drive the Court's conclusion.
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e.g., Pls.' Mem. at 3. The material facts -- i.e., the methods of providing notice to hospitals -- are
identical, with limited exception, and hence, the holding applies to both cases. Accordingly, for
the reasons explained above and in greater detail in the Court's Cottage Health Opinion, each
party's motion for summary judgment will be granted in part and denied in part.
II. Factual Dispute
The factual dispute here has two components: whether UB-92s were in fact mailed to the
intermediary and whether the UB-92s were properly coded for processing. If the Administrator's
finding that UB-92s were not mailed is supported by substantial evidence, then, of course, the
Court need not address the second component, since if the UB-92s were never mailed, then their
coding is immaterial.
A. Whether UB-92s Were Timely Mailed
Plaintiffs submitted testimonial evidence that UB-92s were timely mailed to the
intermediary as well as documentary evidence that circumstantially makes the same point.
Plaintiffs did not, however, provide direct documentary evidence showing that UB-92s were in
fact sent to the intermediary. For example, plaintiffs did not proffer mailing logs or proof of
receipt.4 The intermediary did not present any testimony that UB-92s were not received, but
argued that plaintiffs' showing was nonetheless insufficient. The PRRB found plaintiffs' evidence
"credible" but deemed the factual dispute moot. A.R. at 63.
Citing the dissenting PRRB member's opinion, the Administrator found that only one
witness -- from one of the three hospitals -- testified with direct knowledge that UB-92s had been
4
Plaintiffs argue that they did not have proof of receipt because the intermediary insisted
on receiving the UB-92s via first-class mail instead of certified mail or courier. See Pls.' Mem. at
24.
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mailed to the intermediary. Id. at 18. Moreover, "[n]o documentary evidence was submitted to
demonstrate that the claims were manually filed." Id. The Administrator found the lack of direct
documentary evidence critical because hospitals are required to keep UB-92s for five years. Id.
This finding did not, as plaintiffs contend, reverse the PRRB's credibility determination. See Pls.'
Mem. at 25-30. Instead, the Administrator decided that even if the evidence in the record was
credible, it was insufficient as a matter of law to show that the UB-92s were in fact sent to the
intermediary. See A.R. at 18.
The question, then, is whether the Administrator's decision to disregard plaintiffs'
testimonial and circumstantial evidence, and to require direct documentary proof instead, was in
accordance with the law. To be sure, direct documentary proof, if available, is among the most
incontrovertible forms of evidence. But courts have long held that proof of receipt may be
established circumstantially by proof of mailing. See Hagner v. United States, 285 U.S. 427, 430
("The rule is well settled that proof that a letter properly directed was placed in a post office
creates a presumption that it reached its destination in usual time and was actually received by the
person to whom it was addressed.") (citing Rosenthal v. Walker, 111 U.S. 185, 193 (1884)). Nor
is direct documentary proof necessary to establish proof of mailing -- "proof of procedures
followed in 'the regular course of operations' gives rise to a strong inference that it was properly
addressed and mailed." In re Cendant Corp. Prides Lit., 311 F.3d 298, 304 (3d Cir. 2002)
(quoting Godfrey v. United States, 997 F.2d 335, 338 (7th Cir. 1993)).
Hence, the Administrator's focus on the lack of documentary evidence was "not in
accordance with the law." See 5 U.S.C. § 706(2)(A). But this Court will not determine in the first
instance whether the testimonial and documentary evidence submitted by plaintiffs is sufficient to
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prove that the UB-92s were mailed to, and hence may be deemed received by, the intermediary
under the legal principles explained in the preceding paragraph. That is a determination for the
Secretary to make first. Accordingly, the Administrator's determination will be vacated and
remanded to the Secretary for further consideration.
B. Whether UB-92s Were Properly Coded
Remand is unnecessary, however, if the Administrator also determined that the UB-92s
were improperly coded and if his determination was supported by substantial evidence. The
Secretary points out that the PRRB found that "there is no evidence that the claims were proper
for processing." See A.R. at 63. But the PRRB deemed this issue to be moot. Id. Moreover, the
PRRB's factual finding is not before the Court for review -- instead, the Court must focus on
whether the Administrator's findings were proper.
The Administrator's factual findings are set out in a single paragraph of his seventeen-page
decision. See id. at 18. Most of that paragraph is devoted to whether the UB-92s were in fact
mailed to the intermediary. The following two sentences are the only portions of the paragraph
that address the coding issue:
Th[e] witness testified that she was not sure whether the claims
were properly filed with both of the required codes (04 & 69).
and
There was no testimony by any employees of the other two
[hospitals] with direct knowledge as to whether claims were mailed
and whether the mailing included the required codes 04 and 69.
Id. Indeed, the Administrator did not address the coding issue in his conclusion, "find[ing] that
the Intermediary properly declined, as untimely, to accept all of the electronic claims made after
the applicable timeframe for filing." Id.
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Axiomatically, a court cannot determine whether an agency decision is in accordance with
the law or supported by substantial evidence if the agency did not decide anything. Here, the
Administrator did not decide that the UB-92s were improperly coded -- the sentences excerpted
above merely characterize portions of the evidentiary record. As plaintiffs would have it, the
Administrator in fact mischaracterized the record, which contains, for example, testimony from
one of plaintiffs' billing supervisors, Mark Reynolds, that the proper billing codes were used on
the UB-92s sent to the intermediary. See id. at 343-44 (explaining that beginning in May 1998
plaintiffs used the proper billing codes on the UB-92s sent to the intermediary). In any event,
because the Administrator did not make a finding that the UB-92s sent to intermediaries were
improperly coded, this Court has no decision to review. Accordingly, if on remand the Secretary
finds that the UB-92s were mailed to the intermediary, she shall also examine and determine
whether those forms were properly coded to receive the supplemental medical education payments
at issue here.
CONCLUSION
With respect to the Administrator's decision that plaintiffs did not comply with claims
filing requirements in order to receive the supplemental IME and GME payments authorized by
BBA '97, each party's motion will be granted in part and denied in part. The Administrator's
decision that plaintiff had notice that claims were to be submitted to the fiscal intermediary, and
that notice and comment rulemaking was unnecessary for this kind of interpretive rule, was
supported by substantial evidence and was not arbitrary or capricious. But the Administrator did
not provide an adequate explanation as to why plaintiff had sufficient notice of the time limits for
filing claims. Nor did the Administrator address plaintiff's claims under the PRA, which are
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sufficiently colorable to have warranted explanation. Accordingly, this case shall be remanded to
the Secretary for resolution of these issues.
The case shall also be remanded to the Secretary for further determination as to whether
UB-92 forms were mailed to, and received by, the intermediary. The Administrator's finding that
plaintiffs had provided insufficient proof of mailing and receipt of the UB-92s was not in
accordance with the law. A separate Order accompanies this opinion.
SO ORDERED.
/s/
JOHN D. BATES
United States District Judge
Dated: July 10, 2009
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