Girling Health Care, Inc. v. Shalala

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