United States Court of Appeals,
Fifth Circuit.
No. 94-20822.
HARRIS COUNTY HOSPITAL DISTRICT, Plaintiff-Appellee,
v.
Donna E. SHALALA, Secretary of Health, and Human Services,
Defendant-Appellant.
Sept. 19, 1995.
Appeal from the United States District Court for the Southern
District of Texas.
Before WISDOM, DUHÉ, and BARKSDALE, Circuit Judges.
WISDOM, Circuit Judge:
The defendant/appellant, the Department of Health and Human
Services, seeks review of the district court's decision that its
disallowance of the Harris County Hospital District's bad debt
claim is contrary to the law. We AFFIRM the decision of the
district court.
I.
Harris County Hospital District (Hospital),
plaintiff/appellee, supplies Medicare services to patients in the
Houston area and is, therefore, a provider under the Medicare Act.
As a provider, the Hospital is entitled to reimbursement for
certain expenses from the Department of Health and Human Services
(HHS). Blue Cross/Blue Shield of Texas (BCBS) acts as an
intermediary between the Hospital and the HHS and audits the
Hospital's requests for reimbursements.
In 1989, BCBS disallowed the Hospital's claim for
reimbursement of "bad debts," or uncollected copayments, in the
amount of $1,168,022 for the fiscal year of 1988. This
disallowance was based on a determination by BCBS that the Hospital
had not complied with all of the requirements of Medicare in
properly verifying the indigency of patients who were not held
responsible for regular Medicare copayments. Specifically, the
BCBS concluded that the Hospital failed to consider assets in
determining indigency as required by § 312 of the Provider
Reimbursement Manual. Currently, the appellant also contends that
the Hospital failed to verify patients' statements of income and
failed to reevaluate patients in a timely fashion.
The Hospital appealed to the Provider Reimbursement Board
(PRRB), arguing that BCBS had previously accepted its policies on
establishing patient indigency and any attempt to impose a
different policy would violate the Omnibus Budget Reconciliation
Act of 1989 (OBRA). The PRRB reversed the decision of BCBS and
held in favor of the Hospital. This decision was reversed by the
Health Care Financing Administration (HCFA), which manages Medicare
and, therefore, represented the final decision of the Secretary of
HHS. The Hospital then sought review of the decision of the HHS in
the United States District Court for the Southern District of
Texas. The district court reversed the decision of the HHS and
held in favor of the Hospital. The HHS currently appeals that
decision.
II.
A. Standard of review
Our review of the decision of the Secretary is limited by the
Administrative Procedure Act.1 On review, "[t]he district court,
and this court, ... may overturn the Secretary's decision only if
it is arbitrary, capricious, an abuse of discretion, not in
accordance with the law, or unsupported by substantial evidence on
the record taken as a whole".2 In addition, this Court must defer
to the Secretary's interpretation of Medicare legislation and its
attendant regulations. The Secretary's interpretation of Medicare
regulations is given "controlling weight unless it is plainly
erroneous or inconsistent with the regulation".3 And if, as here,
a statute is involved and its meaning is unambiguous, this Court
must give effect to the intent of Congress.4
B. The Hospital's reimbursement claim
The district court reversed the decision of the Secretary
because it determined that the OBRA prohibited the Secretary's
disallowance of the Hospital's reimbursement claim for bad debts.
In addition, the district court concluded that the Hospital had
complied with all Medicare regulations and, therefore, there was no
basis upon which to disallow the Hospital's reimbursement claim.
On appeal, the Secretary challenges both of these conclusions.
The Secretary argues that BCBS's disallowance of the
1
5 U.S.C. § 706 et seq.
2
Brackenridge Hospital v. Heckler, 753 F.2d 1307, 1313 (5th
Cir.1985) (quoting Sun Towers, Inc. v. Schweiker, 694 F.2d 1036
(5th Cir.1983)).
3
Sta-Home Home Health Agency, Inc. v. Shalala, 34 F.3d 305,
308 (5th Cir.1994) (quoting Thomas Jefferson University v.
Shalala, --- U.S. ----, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)).
4
Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694
(1984).
Hospital's reimbursement claim does not violate the OBRA. The OBRA
provides, in pertinent part:
The Secretary may not require a hospital to change its bad
debt collection policy if a fiscal intermediary, in accordance
with the rules in effect as of August 1, 1987, with respect to
criteria for indigence determination procedures, record
keeping, and determining whether to refer such a claim to an
external collection agency, has accepted such policy before
that date, and the Secretary may not collect from the hospital
on the basis of an expectation of a change in the hospital's
collection policy.
Based on this statute, the Hospital argues, and the district court
agreed, that the Secretary's disallowance of the hospital's claim
was "not in accordance with the law".5
On appeal, the Secretary argues that BCBS never formally
accepted the Hospital's policy on determining indigency. Without
formal acceptance, the Secretary argues, OBRA does not apply. In
response, the Hospital argues that BCBS did accept its policy by
reimbursing the Hospital for bad debts incurred in previous years
while the current policy was in place. Specifically, the Hospital
was reimbursed for $1,109,843 in bad debts for 1985 and $2,909,973
in bad debts for 1986. Each year before reimbursement, the BCBS
completed a detailed audit of the reimbursable expenses filed by
the Hospital. In addition, the Hospital points out that there is
no method of formal acceptance provided by Medicare legislation or
regulations. The Hospital insists that BCBS accepted the
Hospital's policy when it agreed to reimburse bad debt expenses in
previous years.
A similar argument was discussed by the United States District
Court for the District of Minnesota in Hennepin County Medical
5
Administrative Procedure Act, 5 U.S.C. § 706.
Center v. Shalala.6 In Hennepin, a hospital sought judicial review
of the Secretary's decision to disallow the hospital's
reimbursement claim for bad debts. The hospital argued that the
Secretary's action, in the light of the intermediary's previous
acceptance of the hospital's policies on establishing indigency,
violated the OBRA.7 The Hennepin court held that when the
intermediary audited the hospital's reimbursement claims and then
repaid the hospital for unpaid copayments, the intermediary
accepted the hospital's policies within the meaning of the OBRA.8
The court stated that "[t]o suggest that the approval of bad debt
policies and procedures by the Intermediary and reimbursement of
costs incurred in accordance with those policies did not constitute
acceptance of those policies is to reject the clear meaning of the
words of the statute in favor of a more strained construction".9
We agree. The Hennepin court's conclusion is based on a fair
reading of the statute. The OBRA's prohibition against forcing a
change in hospital policy is triggered by the intermediary's
acceptance of the hospital's existing policies before August 1,
1987. The term "acceptance" is not defined and the statute
includes no specific requirements for acceptance. We hold that
BCBS's previous repayment of the Hospital's claim for reimbursement
of bad debts after an investigation and audit constitutes
acceptance under the OBRA. Since this acceptance occurred before
6
1993 WL 546591 (D.Minn.).
7
Id. at *3.
8
Id.
9
Id.
August 1, 1987, the Secretary cannot now attempt to force the
Hospital to change its policies by disallowing its claim for
reimbursement. Thus, the district court correctly determined that
the Secretary's action was contrary to law because it violated the
OBRA. We need not address the issue of whether the Hospital
complied with all Medicare regulation because violation of the OBRA
provides a sufficient basis for affirming the district court's
judgment in favor of the Hospital.10
III.
We AFFIRM the decision of the district court because we agree
that the Secretary's action violated the OBRA.
10
The Secretary also argues that even if BCBS accepted the
Hospital's policies, that acceptance cannot excuse violations of
the applicable guidelines and regulations. That interpretation
of the OBRA, however, is inconsistent with its language. The
clear intent of Congress was to prevent the HHS from forcing
hospital-providers to change their policies regarding indigency
determinations by withholding reimbursement for bad debts.