Jordan Hospital, Inc. v. Shalala

United States Court of Appeals
For the First Circuit

No. 01-1614

JORDAN HOSPITAL, INC.,

Plaintiff, Appellant,

v.

DONNA E. SHALALA, ETC., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before

Selya, Circuit Judge,

Stahl, Senior Circuit Judge,

and Lynch, Circuit Judge.

Bruce A. Singal, with whom Paul M. Barrett, William C.
Athanas, and Donoghue, Barrett & Singal, P.C., were on brief for
appellant.
Anita Johnson, Assistant United States Attorney, with whom
James B. Farmer, United States Attorney, was on brief for
appellee.
January 10, 2002
 STAHL, Senior Circuit Judge. Plaintiff-Appellant,

Jordan Hospital, Inc. ("Jordan"), filed this lawsuit challenging

the dismissal of its request for reclassification into a

neighboring geographic region. Success in obtaining

reclassification would have entitled Jordan to an additional

$1.8 million in Medicare reimbursements for the fiscal year in

question. The district court dismissed Jordan's complaint for

lack of subject matter jurisdiction under 28 U.S.C. § 1331, and

Jordan now appeals.

First, Jordan disputes the district court's conclusion

that judicial review of this administrative decision is

precluded by law. Second, Jordan challenges the validity of the

implementing regulations underlying the reclassification

process, see 42 C.F.R. § 412 et seq., as inconsistent with the

statutory scheme set forth in 42 U.S.C. § 1395ww, and alleges

that its procedural due process rights have been violated.

Finally, Jordan posits that the district court erred because the

statutory deadline for filing a reclassification application is

subject to the doctrine of equitable tolling. Finding all of

Jordan's arguments meritless, we affirm.

I.

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 Jordan, a participating provider in the Medicare

program,1 is located in Plymouth, Massachusetts, but has

regularly applied, under the prospective payment system ("PPS"),

for reclassification to the Barnstable-Yarmouth (Cape Cod) area.

Under the PPS, reimbursement rates are determined by using

factors that include (1) the average standardized amount of

allowable individual hospital inpatient operating costs, and (2)

the area wage index applicable to the hospital.

Reclassification allows a hospital to utilize the standardized

operating costs or wage index, or both, of a neighboring region

if higher than the prevailing rate in its own geographic area,

to calculate its prospective reimbursement. A hospital

requesting reclassification must submit average hourly wage

("AHW") data obtained from the Health Care Financing

Administration ("HCFA") hospital wage survey, which is "used to

construct the wage index in effect for prospective payment

purposes during the fiscal year prior to the fiscal year for

which the hospital requests reclassification." 42 C.F.R. §

412.230(e)(2)(i)(A). The criteria for obtaining wage index

reclassification are set forth in 42 C.F.R. § 412.230(e), and

include, inter alia, a requirement that the hospital's AHW be at

1Medicare provides for the payment of inpatient hospital
and other health services furnished to eligible aged and
disabled individuals. See 42 U.S.C. § 1395 et seq.

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least 108% of the AHW of the hospitals in the area in which the

hospital is located, and the hospital's AHW be at least 84% of

the AHW of hospitals in the area to which it seeks to be

redesignated. Id. § 412.230(e)(1).

Prior to the promulgation of the final PPS rates for

an upcoming fiscal year, HCFA is required to adjust the rates to

incorporate the effects of any reclassifications that have been

approved. The agency's initial task is to recompute the wage

index for such year. Once the necessary wage index adjustments

have been completed, the agency must ensure that the effects of

the reclassification process are "budget neutral."2

Pursuant to 42 U.S.C. § 1395ww(d)(10), the Medicare

Geographic Classification Review Board ("Board") is authorized

to rule on applications submitted by hospitals seeking

reclassification to an adjacent geographical area. A hospital

seeking reclassification for a fiscal year must submit its

application to the Board "not later than the first day of the

13-month period ending on September 30 of the preceding fiscal

year." Id. § 1395ww(d)(10)(C)(ii). The Board is required to

render its decision on the application "not later than 180 days

2The "budget neutrality" principle requires that HCFA make
any adjustments necessary to ensure that the aggregate payments
to be made under the PPS as a result of any reclassifications
are equal to the aggregate payments that would have been made
absent these reclassifications. 42 U.S.C. § 1395ww(d)(8)(D).

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after [this] deadline . . . ." Id. § 1395ww(d)(10)(C)(iii)(I).

If dissatisfied with the Board's decision, a hospital has 15

days to appeal the decision to the Administrator of HCFA, who is

required to issue a decision on the appeal "not later than 90

days after the appeal is filed." Id. §

1395ww(d)(10)(C)(iii)(II). HCFA's decision, which becomes the

final decision of the Secretary of Health and Human Services

("HHS"),3 "shall be final and shall not be subject to judicial

review." Id.

Jordan filed its application for reclassification, for

wage-index purposes, to the Cape Cod Massachusetts Metropolitan

Statistical Area ("Cape Cod MSA") for Fiscal Years (“FYs”) 1998

and 1999 in a timely manner and these requests were approved by

the Board. As a result, Medicare reimbursed Jordan for those

fiscal years according to the wage-index value calculated for

the Cape Cod MSA rather than that of Jordan's own geographic

area. However, Jordan did not timely file a request for

3
Although the statute states that the Secretary of Health
and Human Services (“Secretary”) shall hear any appeals from
adverse decisions by the Board, the Secretary has delegated this
function to the Administrator of HCFA. See 55 Fed. Reg. 36,766
(1990), as amended June 4, 1991 (“The Secretary has delegated
this authority to the HCFA Administrator in cases in which an
unsuccessful hospital appeals the MGCRB's decision. Thus, in
these cases the Administrator's review is the final Department
review of MGCRB decisions provided for in section
1886(d)(10)(C)(iii)(II) of the Act.”); see also 57 Fed. Reg.
39,826 (1992).

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reclassification to the Cape Cod MSA for FY 2000 by the

statutory September 1, 1998 deadline because the hourly wage

data published in the July 31, 1998 Federal Register indicated

that Jordan did not qualify.

As it turned out, the wage data published in the July

31, 1998 Federal Register had been incorrectly calculated

because the Cape Cod Hospital had submitted inaccurate wage data

to HCFA. Upon learning of this error, Jordan filed a

reclassification application for FY 2000 on August 23, 1999,

almost a year after the expiration of the statutory filing

deadline and 24 days after the publication of the final PPS

rates for FY 2000. On August 24, 1999, the Board dismissed

Jordan's application on the basis that the request was untimely,

rendering Jordan ineligible to receive the additional $1.8

million in Medicare program reimbursement to which it would have

been entitled had it been reclassified. Jordan appealed, and

the HCFA Administrator affirmed the dismissal on September 28,

1999. On October 7, 1999, Jordan requested that the

Administrator amend her decision, but this request was denied on

October 12, 1999.

On April 7, 2000, after exhausting all administrative

remedies, Jordan filed a complaint in the district court,

alleging a violation of its due process rights under the Fifth

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and the Fourteenth Amendments, and seeking a declaration that

HCFA's rules and regulations are invalid, both facially and as

applied to it. On August 18, 2000, the defendants filed a Rule

12(b)(1) motion to dismiss on the ground that the district court

lacked subject matter jurisdiction under 28 U.S.C. § 1331. On

March 21, 2001, the district court granted the defendants'

motion. Jordan filed a timely notice of appeal.

II.

We review de novo a district court's dismissal for lack

of subject matter jurisdiction. Corrada Betances v. Sea-Land

Serv., Inc., 248 F.3d 40, 44 (1st Cir. 2001).

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 A.

Defendants argued, and the district court agreed, that

Jordan's claim was barred by the "no review" provision of the

Medicare Act, 42 U.S.C. § 1395ww(d)(10)(C)(iii)(II), which

specifically states that "[t]he decision of the [Administrator]

shall be final and shall not be subject to judicial review." On

appeal, Jordan contends that § 1395ww(d)(10)(C)(iii)(II), when

examined in conjunction with related statutes and regulations,

does not bar its claim, emphasizing the fact that there is a

"strong presumption that Congress intends judicial review of

administrative action." Bowen v. Mich. Acad. of Family

Physicians, 476 U.S. 667, 670 (1986).

This presumption, however, is not irrebuttable, and can

be overcome when specific statutory language or legislative

history indicates otherwise, or where congressional intent to

preclude judicial review is "'fairly discernible' in the detail

of the legislative scheme." Id. at 673 (quoting Block v. Cmty.

Nutrition Inst., 467 U.S. 340, 349, 351 (1984)). To prove that

Congress has shielded administrative decisions from judicial

scrutiny, an agency must show by “clear and convincing evidence”

that this was Congress’s intent. Abbott Labs. v. Gardner, 387

U.S. 136, 141 (1967) (internal quotations omitted). Jordan

insists that HCFA has not satisfied this heavy burden. We

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disagree. The unequivocal language of the "no review" provision

clearly indicates that Congress intended to preclude judicial

review of this matter. Section 1395ww(d)(10)(C)(iii)(II)

explicitly provides that reclassification decisions "shall not

be subject to judicial review." By using such plain and

unambiguous language, Congress made its intent perfectly clear.

Furthermore, the rationale for nonreviewability is eminently

logical. First, HCFA's strict, yet manageable, deadlines ensure

that each hospital's classification for a fiscal year is firmly

in place in time to allow HCFA to make any necessary wage index

revisions and budget neutral adjustments. See 62 Fed. Reg.

45,966, 45,987 (1997). Second, adherence to these strict dates

allows HCFA to publish the rates in final form sixty days prior

to the start of a fiscal year. See 56 Fed. Reg. 25,458, 25,466

(1991) ("[C]ongress specified these very tight time frames in

order to ensure that the effects of reclassifications could be

reflected in the new standardized amounts and wage index values

. . . that go into effect on October 1 of each year.").

Subjecting the Administrator's untimeliness decision to judicial

review would frustrate this expressly articulated congressional

interest in finality, which is particularly crucial for planning

purposes.

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 In a further attempt to bypass the "no review"

provision, Jordan posits that there is a material difference

between "decisions" on the merits and "dismissals" of

applications for untimeliness, rendering "dismissals" reviewable

even though all other "decisions" are immune from judicial

scrutiny. We reject Jordan's attempt to draw a meaningful

distinction between these two terms. In the section outlining

the procedures for obtaining administrative review of an adverse

ruling by the Board, the regulations offer the right to appeal

either a Board “decision” on the merits, or a “dismissal” for

untimeliness, to the Administrator. See 42 C.F.R. § 412.278(a)

(“A hospital . . . dissatisfied with the MGCRB's decision

regarding its geographic designation may request the

Administrator to review the MGCRB decision. (A hospital . . .

may also request that the Administrator review the MGCRB's

dismissal of an application as untimely filed or incomplete, as

provided in § 412.256(d).)”). A decision by the Administrator

issued pursuant to § 412.278(a) is a "final Departmental

decision . . . . not subject to judicial review." Id. §

412.278(f)(3). Consequently, there is no basis for any

distinction between the terms “dismissal” and “decision.”

Moreover, we note as a policy matter that the distinction Jordan

proposes would not only disrupt HCFA’s efforts to review

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applications promptly but would also undermine its ability to

publish final payment rates under the PPS in a timely manner.

Accordingly, we find that Jordan is precluded from seeking

judicial review of the dismissal of its application for

redesignation.4

4 Jordan also alleges that it is entitled to judicial
review of its claim under the Administrative Procedure Act, 5
U.S.C. § 701 et seq. ("APA"). "In the absence of a contrary
statutory provision, the APA entitles a person aggrieved by a
final agency action to judicial review . . . ." Conservation
Law Found., Inc. v. Busey, 79 F.3d 1250, 1260-61 (1st Cir. 1996)
(citing inter alia 5 U.S.C. § 702). The APA does not, however,
provide “an independent source of subject matter jurisdiction.”
Id. In this case, § 1395ww clearly precludes judicial review of
these types of administrative decisions, and the regulations are
consistent with that mandate. Therefore, the APA does nothing
to bolster Jordan’s position.

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 B.

In the face of this clear congressional mandate against

review, Jordan lodges a constitutional challenge, arguing that

its procedural due process rights were violated because it was

denied an opportunity to be heard on the merits of its

reclassification application. More specifically, Jordan alleges

that HCFA's publication of erroneous information gave it

inadequate notice of its eligibility, thus causing Jordan to

file late. Defendants, on the other hand, claim that Jordan has

merely attempted to "cloak" its statutory argument with a

constitutional one, and insist that, although a gate-closing

statute may not preclude consideration of a colorable

constitutional claim, a party may not avoid an unambiguous no

judicial review provision simply by asserting a challenge

"cloaked in constitutional terms." Sugrue v. Derwinski, 26 F.3d

8, 11 (2d Cir. 1994).

To prevail on its procedural due process claim, Jordan

must show both that it had a recognized liberty or property

interest, 5 and was deprived of that interest without adequate

5
To date, no federal court has decided whether a physician
who provides Medicare services has any type of property interest
in receiving payment for those services. The Second Circuit has
suggested, in cases involving state Medicaid providers, that
some form of property interest may exist under these
circumstances. See Tekkno Labs. v. Perales, 933 F.2d 1093,
1099-1100 (2d Cir. 1991) (Oakes, C.J., concurring) (suggesting

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notice or a meaningful opportunity to be heard. Mathews v.

Eldridge, 424 U.S. 319, 332-35 (1976). Assuming, without

deciding, that Jordan has a legitimate property interest in

receiving reimbursement payments,6 we must then determine whether

Jordan raises a colorable constitutional claim. We find that it

has not.

HCFA's regulatory scheme provides hospitals with a

meaningful opportunity to be heard on reclassification, and

accords them sufficient procedural protections. HCFA's

publication of erroneous data, while unfortunate, did not

deprive Jordan of its rights. HCFA takes significant steps to

insure that the wage data obtained from hospitals subject to PPS

are reasonably accurate. See 63 Fed. Reg. 25,576, 25,587

(1998); 63 Fed. Reg. 40,954, 40,966-74 (1998) (discussing the

development of the FY 1999 wage index). Jordan could not

that Medicaid provider has a property interest in reimbursement
for Medicaid services already performed) (quoting Oberlander v.
Perales, 740 F.2d 116, 120 (2d Cir. 1984)); but see Yorktown
Med. Lab., Inc. v. Perales, 948 F.2d 84, 89 (2d Cir. 1991)
(holding Medicaid provider did not have property interest in
payments under Medicaid Act or New York Department of Social
Service regulations for claims that were pending investigation).
6
But see Painter v. Shalala, 97 F.3d 1351, 1358 (10th Cir.
1996) ("Although [a physician] may have a recognizable property
interest in receiving payment in accordance with the fee
schedule . . . there is nothing in the Medicare Act which would
have led a reasonable physician to believe that he might be
entitled to a greater payment than was outlined in the
Secretary’s fee schedule.”).

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realistically have assumed that the wage index information would

always be accurate, and that if an error were found, it would be

remedied in time to permit a reclassification request. Cf. Your

Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 455-

56 (1999) ("given the administrative realities . . . . [t]he few

dozen fiscal intermediaries often need three years within which

to discover overpayments in the tens of thousands of

[reimbursement determinations] that they issue"). If anyone is

to "blame" in this case, it would seem to be Cape Cod Hospital

for reporting incorrect data, rather than HCFA. Accordingly, we

find that Jordan’s constitutional challenge to the reimbursement

scheme was properly rejected by the district court.

C.

Lastly, Jordan asserts that the court should rely upon

equitable tolling principles to excuse its tardiness. Jordan

relies heavily upon Bowen v. City of New York, 476 U.S. 467

(1986), a class action challenging an internal policy of the

Secretary of Health and Human Services that had resulted in the

denial or termination of the class members' benefits.

Specifically, the Court addressed the issue of whether equitable

tolling applied to save the claims of class members that had

been filed outside the 60-day time limit as provided for by 42

U.S.C. § 405(g). Id. at 480. The Court found that equitable

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tolling was permissible in that case because it would be fully

consistent with the overall congressional purpose (i.e.,

ensuring that disabled citizens received their benefits), and

that tolling would promote the interests of both the claimants

and the government. Id. at 480-81.

Bowen, however, does not bear the weight of Jordan's

argument in this case. First, the statute in Bowen mandated the

action be filed "within sixty days . . . or within such further

time as the Secretary may allow." Id. at 472 n.3. Although the

statute in this case afforded Jordan a longer time to file an

application for reclassification, it did not provide for

discretionary extensions, except for "good cause." 42 C.F.R. §

412.256(c)(2). Jordan still would have had to submit its

application by September 1 to be eligible for any discretionary

extension for good cause, which it did not do. Second, while

the statutory language in Bowen expressed Congress's clear

intent to allow tolling in some cases, in this case tolling

would be antithetical to the accomplishment of the statute's

objectives. Congress apparently found it preferable to allow an

occasional unfairness in an individual case to go unaddressed in

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order to maintain a more workable hospital reclassification

process as a whole.7

An examination of two pivotal Supreme Court decisions

further reinforces our view that equitable tolling would be

inappropriate here. In Irwin v. Dep't of Veterans Affairs, 498

U.S. 89 (1990), the Court considered the timeliness of an

employee's lawsuit charging his government employer with

discrimination, in violation of Title VII of the Civil Rights

Act of 1964, 42 U.S.C. § 2000e et seq. In considering Irwin’s

claims, the Court made clear that the "same rebuttable

presumption of equitable tolling applicable to suits against

private defendants should also apply to suits against the United

States." Irwin, 498 U.S. at 95-96. The Court reached this

decision after determining that a rule making equitable tolling

applicable to both public and private defendants alike was

“likely to be a realistic assessment of legislative intent as

7
We note that Cape Cod Hospital's reporting mistakes may,
in fact, have erroneously rendered Jordan eligible for
reclassification in FY 1999. Consistent with its interest in
finality, however, HCFA has apparently not attempted to recover
any excessive reimbursements paid to Jordan for that year.
Jordan's underpayment in FY 2000 would seem to compensate
somewhat for any windfall it enjoyed in FY 1999.

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well as a practically useful principle of interpretation.” Id.

at 95.8

In United States v. Brockamp, 519 U.S. 347 (1997), the

Supreme Court reviewed the case of a taxpayer who had submitted

an administrative refund claim several years after the

applicable filing period set forth in § 6511 of the Internal

Revenue Code of 1986 had elapsed. The Court considered whether,

under Irwin, the statutory filing deadline could be extended for

an "equitable" reason, which in the petitioner's case was the

fact that his mental disability had caused the delay. Id. at

348. The Court concluded that, in contrast with its generosity

for Title VII claims, Congress did not intend for the "equitable

tolling" doctrine to apply to § 6511's time limitations for

filing tax refund claims. Id. at 352-53. The Court noted that

§ 6511 sets forth its time limitations in a highly detailed and

technical manner, reiterates them several times in different

ways, imposes substantive limitations, and delineates explicit

exceptions to its basic time limits, and equitable tolling is

not included among them. Id. at 350-52.

8
The Court ultimately ruled, however, that equitable
tolling was inappropriate in Irwin’s case because his late
filing was caused by “what [was] at best a garden variety claim
of excusable neglect.” Irwin, 498 U.S. at 96.

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 Likewise, in this case, there are strong reasons to

believe that Congress did not want the equitable tolling

doctrine to apply. First, the statute states in an "unusually

emphatic form," id. at 350, that a "hospital requesting a change

in geographic classification . . . for a fiscal year shall

submit its application to the Board not later than the first day

of the 13-month period ending on September 30 of the preceding

fiscal year." 42 U.S.C. § 1395ww(d)(10)(C)(ii). Nothing in

this language can be construed as creating or even inferring an

implied equitable tolling exception. Irwin, 498 U.S. at 352;

see also Becton Dickinson & Co. v. Wolckenhauer, 215 F.3d 340,

350 (3d Cir. 2000) ("the emphatic, non-permissive nature of the

[statutory] language . . . suggests that the time limitation at

issue cannot be equitably tolled"). We find it implausible that

Congress would have wanted the courts to expand the statute's

limitation period whenever equitable concerns were present. See

United States v. Beggerly, 524 U.S. 38, 48 (1998) ("Equitable

tolling is not permissible where it is inconsistent with the

text of the relevant statute."). Second, §

1395ww(d)(10)(C)(iii)(I) requires the Board to decide a

reclassification request within a strict 180-day time frame in

order to avoid eroding HCFA's ability to incorporate the final

rates into the wage-index revisions and budget-neutral

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adjustments. Reading an "equitable tolling" exception into the

statute would also create "serious administrative problems" for

the agency. Brockamp, 519 U.S. at 353. Therefore, we conclude

that equitable tolling is not available to Jordan in this case.

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 III.

For the foregoing reasons, we affirm the district

court's dismissal of Jordan’s complaint for lack of subject

matter jurisdiction.

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