F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 3 2004
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
HIGH COUNTRY HOME HEALTH,
INC.,
Plaintiff-Appellant,
No. 02-8096
v.
TOMMY G. THOMPSON, Secretary
of the United States Department of
Health and Human Services, and
DENNIS G. SMITH, Administrator of
the Centers for Medicare and Medicaid
Services, formerly known as the
Health Care Financing
Administration, *
Defendants-Appellees.
Appeal from the United States District Court
for the District of Wyoming
(D.C. No. 99-CV-173-J)
Charles F. MacKelvie, Chicago, Illinois, for Plaintiff-Appellant.
Nicholas Vassallo, Assistant United States Attorney (Matthew H. Mead, United
States Attorney, with him on the brief), Cheyenne, Wyoming, for Defendants-
Appellees.
*
Mr. Thompson and Mr. Smith, who are the successors in office of Donna
E. Shalala and Nancy-Ann Min DeParle, respectively, have been substituted as
parties pursuant to Fed. R. App. P. 43(c)(2).
Before SEYMOUR, HENRY, and McCONNELL, Circuit Judges.
McCONNELL, Circuit Judge.
The question presented is whether it was arbitrary or capricious for a
Medicare administrative tribunal to dismiss an appeal for failure to meet a filing
deadline. We conclude that it was not, and affirm the judgment of the district
court.
BACKGROUND
Petitioner, High Country Home Health, Inc. (“High Country”), is owned
and operated by a husband-and-wife duo, Reed and Marilyn Pedrick. During
fiscal years ending (“FYE”) in 1993, 1994, and 1995, Mr. Pedrick provided
physical therapy services to Medicare-covered patients in their homes. In
addition, he and his wife both spent substantial time working as administrators of
the company. Each year, the company filed for and received Medicare
reimbursements not only for the physical therapy visits, but also for the couple’s
administrative services. After further auditing, the fiscal intermediary that
processed the reimbursement requests, a division of Blue Cross/Blue Shield of
Alabama then known as Wellmark (“the Intermediary”), issued Notices of
Program Reimbursement (“NPRs”) for each of those fiscal years, stating that High
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Country had been overpaid and requiring it to recoup the overpayments. High
Country has been embroiled in litigation attempting to establish its right to the
alleged overpayments ever since. This appeal concerns a missed filing deadline
in an administrative appeal of the Intermediary’s revised NPR for FYE 1994.
The Intermediary’s initial NPR for FYE 1994 reduced the amount of High
Country’s physical therapy reimbursement but not its reimbursement for
administrative compensation. High Country appealed the physical therapy cost
determination, and on March 19, 1997, the Provider Reimbursement Review
Board (the “PRRB” or “Board”) decided that appeal. Then, on June 16, 1997, the
Intermediary reopened its 1994 NPR and issued a revised NPR finding that High
Country’s administrative compensation was also excessive.
High Country filed its appeal of the second 1994 NPR on July 2, 1997.
When High Country received its notice of hearing in December, the notice
specifically warned counsel that failure to meet the applicable deadlines would
result in dismissal, and that no further reminder would be sent. High Country’s
preliminary position paper was due to the Intermediary in early March, 1999, and
its final position paper was due to the Board by June 1, 1999.
There is a factual dispute over whether the preliminary position paper was
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ever filed, 1 but both sides agree that the final position paper was not timely filed.
In a letter dated June 23, the Board notified counsel for High Country that it was
dismissing the appeal. While that letter was in transit, on June 24, counsel for
High Country (having independently realized the mistake) sent in the position
paper, without any explanation for its lateness, by Federal Express overnight mail.
On June 28, counsel for High Country received notification of the Board’s
dismissal. The next day, he sent a letter requesting that the Board reopen the
dismissed appeal. After that request was rejected, he urged the Board to
reconsider in a second letter dated August 6, 1999. The Board curtly rebuffed his
arguments, noting that it is a party’s obligation to meet all relevant deadlines.
On appeal to the district court, High Country challenged both the Board’s
dismissal and the underlying revision to the 1994 NPR. The district court ruled
that it had jurisdiction only over the Board’s dismissal for untimeliness, and not
over the merits. It initially remanded for reconsideration because it concluded
that the Board’s strict application of the final position paper deadline was
1
Neither the Intermediary nor the Board has any record of receiving the
preliminary position paper, and on March 24, 1999, the Intermediary included
High Country’s appeal on a list of cases it recommended the Board to dismiss
because the preliminary papers had not been filed. The district court allowed
High Country to supplement the record with a FedEx airbill showing that
something was sent to the Board in December of 1997, as well as a cover letter to
the Board from the same month stating that the preliminary position paper was
enclosed and was also being sent to the Intermediary. There was no other
evidence confirming that the paper had in fact been sent to the Intermediary.
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probably based on a mistaken belief that High Country had already been
delinquent by failing to file its preliminary position paper. The Secretary moved
for reconsideration because the district court had decided that the preliminary
paper had been filed on the basis of evidence never presented to the Board. On
reconsideration, the district court vacated its previous order and upheld the
Board’s decision. This appeal followed.
DISCUSSION
I
High Country raises various objections to the Intermediary’s decision to
reopen the FYE 1994 determination. This Court’s jurisdiction, however, is
limited by 42 U.S.C. § 1395oo(f)(1):
Providers shall have the right to obtain judicial review
of any final decision by the Board, or of any reversal,
affirmance, or modification by the Secretary . . . .
There is only one “final decision by the Board” at issue in this appeal: the
dismissal for failure to timely file the final position paper. 2 Although that
2
In March of 1999, well before the June 1 deadline, High Country moved
for dismissal of the Intermediary’s reopening itself (because the reopening
violated proper procedures). In a one-page letter, the Board dismissed the
motion, stating that under applicable regulations, the Intermediary had “exclusive
jurisdiction” over the decision to reopen. See 42 C.F.R. 405.1885(c). The Board
concluded that it has jurisdiction only over final determinations reached by the
Intermediary. See 42 U.S.C. § 1395oo(a)(1)(A)(i). Accordingly, we need not
consider whether the letter dismissing High Country’s motion is subject to
judicial review.
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dismissal was not a decision on the merits, it is still a final decision subject to our
jurisdiction. UHI, Inc. v. Thompson, 250 F.3d 993 (6th Cir. 2001); see also Inova
Alexandria Hosp. v. Shalala, 244 F.3d 342, 347-48 (4th Cir. 2001); cf. Edgewater
Hosp., Inc. v. Bowen, 857 F.2d 1123, 1130-32 (7th Cir. 1988) (holding that
federal courts have jurisdiction to review PRRB dismissals for want of
jurisdiction). We review the Board’s dismissal under the standards set forth in
the Administrative Procedures Act, see 42 U.S.C. § 1395oo(f)(1), and will
therefore uphold the decision of the Board unless it was “arbitrary and
capricious,” see 5 U.S.C. § 706(2)(A).
II
As High Country points out in its brief, the Board is burdened by an
immense caseload, consisting of more than 11,000 claims each year. Especially in
such circumstances, procedural rules requiring timely filings are indispensable
devices for keeping the machinery of the reimbursement appeals process running
smoothly. Congress has given the Board “full power and authority” to make such
rules, see 42 U.S.C. § 1395oo(e), and the Board has chosen to exercise that
authority by setting strict deadlines. Its rules governing PRRB procedure at the
time of High Country’s default 3 contained this terse warning to providers: “If you
3
Since the Board’s decision in this case, the Board has deleted its
procedural rules from the Provider Reimbursement Manual and published them,
with some revisions, in a standalone document available on its website. The
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fail to submit your final position paper to the Board by the due date, the Board
may dismiss the appeal.” Provider Reimbursement Manual (“PRM”) § 2921.4E
(1993) (repealed 2000). 4
Strict procedural requirements like this one help manage a docket both by
encouraging timely filing and by allowing the adjudicator to ignore late or
improperly presented claims. But to a significant extent, these advantages are lost
if a deadline is applied inconsistently or subjected to second-guessing by higher
courts. If litigants know that they may be able to keep their claims alive despite
missing a deadline, the procrastinators and the perfectionists may well decide to
accept a chance of procedural default in return for another few days to improve
their substantive argument. This problem is exacerbated once the deadline has
procedures currently in effect are, if anything, even more strict than the ones that
applied to High Country. See, e.g., PRRB Instructions II(B)(II) (effective Mar. 1,
2002), at (last visited
Feb. 16, 2004) (“The Board will dismiss your appeal if you fail to submit your
final position paper by the Board’s deadline.” (emphasis added)); id. II(B)(I)
(noting that under the new rules, failure to meet the preliminary position paper
due date is also grounds for dismissal).
4
High Country contends that this is the text of the provision only after it
was “substantially amended” in August 1999 (although it erroneously refers to the
provision as PRM § 2924.4E). Reply Br. 9. It gives no further detail about the
alleged amendment, and its contention appears to be erroneous. According to
materials submitted by both parties, the provision remained unchanged from its
enactment in September of 1993 to its deletion in June 2000. Compare PRM §
2921.4E (1993), Appellees’ Supp. App. 32, with PRM § 2921.4E, reprinted in
Medicare and Medicaid Guide (CCH) ¶ 7704A at 2752 (2000), App. vol. 2. at
410.
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passed. Then, the likely sanction for late filing becomes a sunk cost, and the
price of an additional day to develop one’s substantive argument is only the
marginal increase in probability that the sanction will be imposed.
Of course, these costs should be balanced against the interest in remedying
substantive injustices despite procedural technicalities. See Inova, 244 F.3d at
348. But for every plaintiff whose substantive claim or reason for default leads
an adjudicator to excuse the default, ten less sympathetic plaintiffs are likely to
demand similar treatment. The danger is that the deadline, which is supposed to
help manage the burdens of a heavy caseload, will become a new (and less
productive) font of litigation: instead of focusing on timely raised substantive
claims, the adjudicator must expend resources on litigation about whether a
party’s excuse for missing the deadline was good enough, whether the deadline
has been applied consistently, and so forth. All of this counsels in favor of
applying our review of an administrative tribunal’s procedural rulings especially
sparingly.
III
When a party misses a deadline, it has several predictable avenues for
attempting to avoid the resulting penalty. It can argue that there is a valid excuse
for the tardiness; that some other filing should be deemed equivalent to the
missed filing, so that the deadline was actually satisfied; that the party had no
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proper notice of the deadline; or that the deadline itself is invalid or
inconsistently applied. High Country pursues all four strategies.
A
First, High Country argues that the PRRB should have excused its late
filing because of extenuating circumstances. It explains, as it did in its June 29
request for reinstatement, that the office manager of its legal counsel disappeared
in mid-June, 1999, apparently stealing computer equipment containing firm
records. While we may sympathize with counsel’s misfortune, we agree with the
Board that the theft cannot excuse missing a deadline that had expired two weeks
earlier. Besides the theft, High Country’s only explanation for its late filing was
that the office manager had apparently failed to docket several matters in the
weeks leading up to her departure. Counsel for High Country acknowledged that
“this may have been simple neglect or carelessness on her part,” but also
speculated that the office manager “may have acted to intentionally create exactly
this type of problem for our firm.” Request to Reinstate Case No. 97-2549, App.
vol. 2 at 13-14. Especially in light of the fact that High Country timely filed its
position paper for 1995, which was also due June 1, 1999, it was altogether
reasonable for the Board to discredit High Country’s hypothesis of selective
sabotage. High Country is left, then, with the excuse that the office manager
negligently failed to file the position paper on time – which is to say that High
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Country is left with no excuse at all, since High Country’s counsel is responsible
for his staff’s negligence. See Inova, 244 F.3d at 350-51 (upholding the Board’s
refusal to excuse a provider who missed the deadline because of an
“administrative oversight”); UHI, 250 F.3d at 997. Rejecting High Country’s
excuse was far from arbitrary or capricious.
B
In High Country’s second letter seeking reinstatement of its appeal, it
sought to “impress upon the Board” that the dismissal was “really an exercise of
‘form over substance.’” Request to Reconsider Denial of Reinstatement Request,
App. vol. 2 at 3. It argued that the Board and the Intermediary had adequate
notice of High Country’s arguments through (1) High Country’s preliminary
position paper, allegedly filed on December 30, 1997, and (2) parallel arguments
raised in High Country’s duly filed brief concerning FYE 1995. The Board
refused to reconsider, stressing that it had the power and authority to set
procedural rules, and that it was High Country’s responsibility to comply with
those rules. High Country renews its arguments on appeal.
High Country’s first argument depends on its disputed claim that it filed a
preliminary position paper in 1997, well over a year before the deadline. We need
not decide whether the paper was filed, however, because even assuming that it
was, we reject the argument that the Board must accept a preliminary position
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paper in lieu of a final one. At the time, the Provider Reimbursement Manual
provided as follows:
At the appropriate time, you prepare the provider’s draft
position paper and submit it to the intermediary. Within
60 days the intermediary sends you its position paper.
You then have 30 days to prepare your final position
paper, which you send to the intermediary and to the
Board.
PRM § 2921.4B (1993) (repealed 2000). Thus, the Board’s procedural rules
specifically contemplate two separate position papers, a preliminary one to be sent
to the intermediary, and a final one to be sent to the Board. This two-stage
process is not optional:
In order to assist the Board in its deliberations, you and
the intermediary prepare separate position papers. . . .
Each party is required to exchange position papers in
accordance with § 2921.4 and include, in their position
papers to the Board, a statement certifying that they
have been exchanged.
PRM § 2921.5 (1993) (repealed 2000). The Board’s two-stage process helps
ensure that the parties clearly identify the precise nature of their dispute, and
gives the Board the benefit of adversarial testing to expose flaws in superficially
sound arguments on either side of the controversy. 5
But if filing the preliminary position paper always satisfied the final
5
The Board’s new rules maintain the requirement of two separate position
papers. See PRRB Instructions II(B)(I)-(II) (effective Mar. 1, 2002).
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position paper requirement, there would effectively be no need to file a final
position paper. A provider could always satisfy the requirements by making sure
that it sent its preliminary position paper to both the Board and the fiscal
intermediary (as High Country claims to have done here). Thus, to accept High
Country’s argument as a general matter would be tantamount to abolishing the
requirement of two position papers. Because we cannot say that the requirement
of a second position paper responding to the Intermediary’s preliminary position
paper is arbitrary and capricious, we decline to invalidate that requirement
indirectly by excusing its violation. See St. Joseph Hosp. v. Shalala, No. 99 C
7775, 2000 WL 1847976 at *4 (N.D. Ill. Dec. 15, 2000) (rejecting an argument
similar to High Country’s).
Similar concerns lead us to reject High Country’s argument that the final
position paper was unnecessary because its arguments could be gleaned from
other reimbursement appeals dealing with similar issues and from the preliminary
list of issues for its appeal. The PRRB was under no duty to hunt around in the
record, let alone in the records for other cases, in an attempt to discern the nature
of High Country’s legal claims. Even assuming that such a hunt would have
provided the PRRB with the same information that would have been in the final
position paper (though this seems unlikely), that does not make the Board’s
dismissal arbitrary or capricious.
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C
High Country next argues that it did not receive proper notice of the
deadline and its associated penalty (dismissal). In its initial notice of hearing, the
Board set the June 1 deadline and included the following warning:
Failure of the Provider to submit its position papers by
the above deadlines will result in dismissal of the
appeal. . . . NOTE: NO FURTHER REMINDER
LETTER OR OTHER NOTICE WILL BE SENT
REGARDING THE DEADLINES FOR POSITION
PAPERS.
App. vol. 2 at 295. High Country wisely stops short of arguing that this warning
was unclear. Rather, it maintains that it was entitled to have its case governed by
a previous policy in effect until just days after its appeal was filed with the Board.
Under that policy, the Board sent parties a letter reminding them of the relevant
deadlines as the time of the hearing approached. On July 11, 1997, the Health
Care Financing Administration’s Office of Hearings gave notice that it was
abandoning that practice:
In the past, when the Board received a signed “List of
Issues”, it issued a “Notice of Hearing and Due Date for
Position Papers” (Notice), which placed an appeal on a
long-term calendar. The Board then sent a Reminder of
Hearing/Dismissal Warning (“Reminder”) letter
approximately one year before the long-term calendar
hearing month. Effective immediately for all new
appeals, the Board will no longer issue a separate
Reminder letter. The revised Notice now incorporates
language advising that if the parties miss the position
paper due dates, the Board will dismiss the case. There
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will be no reminders.
HCFA Office of Hearings Letter to Parties to PRRB Appeals (July 11, 1997),
Supp. App. to Appellant’s Reply Br. 1 (emphasis added).
In its Reply Brief, High Country claims that because it filed its appeal on
July 2, the appeal was not a “new appeal” as of July 11, so the agency acted
arbitrarily and capriciously in applying the new policy to it. We cannot agree. As
a textual matter, it is far from obvious that an appeal becomes an “old appeal”
before it is put on the calendar, especially on a docket in which hearings are
scheduled years after the appeal is filed. We think a more natural reading of the
announcement is that going forward, the Office of Hearings would give the
warning of dismissal in the initial scheduling letter instead of in a separate
reminder letter. The most plausible reason for continuing to send reminder letters
in “old appeals” is that the parties in those appeals had not been adequately
warned of the new procedures in their initial scheduling letter. As noted, High
Country received this warning, and thus was on notice that it would not receive a
reminder. Because there was no reason to refrain from applying the new policy in
appeals, like High Country’s, that were already filed but not scheduled, we hold
that it was reasonable for the Board to treat such appeals as “new appeals”
governed by the new policy.
The same considerations dispose of High Country’s related claim, based on
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Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988), that the change
in policy was impermissibly retroactive. In Georgetown, a unanimous Supreme
Court held that the Medicare Act did not give the Secretary of Health and Human
Services authority to change the substantive standards governing which costs
could be reimbursed after those costs were already incurred. The retroactive
change in Georgetown was troublesome because the providers could not “know in
advance the limits to Government recognition of incurred costs,” and so had no
“opportunity to act to avoid having costs that [were] not reimbursable.” Id. at 214
(quoting H.R. Rep. 92-231, at 83 (1971)). As Justice Scalia pointed out, this kind
of retroactive change to the law governing past conduct is entirely different from
a prospective change to the law that has future effects on arrangements made in
the past. See id. at 220 (Scalia, J., concurring) (“[T]here is no question that the
Secretary could have applied her new wage-index formulas to respondents in the
future, even though respondents may have been operating under long-term labor
and supply contracts negotiated in reliance upon the pre-existing rule.”). The no-
reminder policy was “retroactive” only in this second, weaker sense: although it
was applied to appeals that had been filed before the change, it set prospective
standards for the treatment of those appeals after July 11. Nothing about the
change affected the standards applicable to High Country’s actions previous to
July 11. Therefore, we see no Georgetown violation.
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D
Next, High Country weakly attempts to show that the PRRB has not applied
its deadline consistently. Its attempt fails. All but one of the cases it cites are
simply directions to reinstate dismissed cases pursuant to settlement agreements.
See Pinnacle Care Corp., Medicare & Medicaid Guide (CCH) ¶ 80,310 (HCFA
Adm’r Feb. 18, 1999); Rose Care Center–Swansea, Medicare & Medicaid Guide
(CCH) ¶ 80,309 (HCFA Adm’r May 12, 1999); White Mem’l Hosp., Medicare &
Medicaid Guide (CCH) ¶ 80,308 (HCFA Adm’r May 11, 1999). Such settlement
agreements have no precedential weight, and the mere fact that the Secretary has
settled other cases does not make it arbitrary and capricious for him not to settle
this one. The one actual decision cited by High Country was decided under a
standard considerably more liberal than the one that applied to High Country’s
appeal; that standard allowed dismissal “if it becomes evident that the provider
has abandoned its intention to have a hearing in the dispute.” Anaheim Gen.
Hosp., Medicare & Medicaid Guide (CCH) ¶ 40,709 (HCFA Adm’r May 22,
1992) (quoting the version of PRM § 2924.4 then in effect). By contrast, High
Country was governed by the standard set forth in the 1993 version of the PRM,
which threatened dismissal for a provider’s failure to meet a deadline regardless
of whether the provider intended to abandon the appeal. See PRM § 2921.4E
(1993). Because High Country does not cite a single decision in which the
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Board’s policy was not applied to someone in a similar situation to its own, it has
failed to call into question the Board’s evenhanded application of its own
procedural rules.
E
Finally, High Country repeatedly brings up its underlying complaints
against the Intermediary, arguing that the Intermediary violated various
procedural rules when it originally reopened the 1994 determination, and that the
Intermediary was collaterally estopped from proceeding with that reopening once
High Country prevailed on its 1993 claim in federal district court. These
arguments largely go to the merits, and given that the only final decision by the
Board is a dismissal for untimeliness, we have no occasion to consider the merits
of High Country’s underlying claims here. See Good Samaritan Hosp. Reg’l Med.
Ctr. v. Shalala, 85 F.3d 1057, 1062 (2d Cir. 1996); cf. Michigan Dep’t of Envtl.
Quality v. EPA, 318 F.3d 705, 708-09 (6th Cir. 2003).
Perhaps High Country can be read generously to argue that because the
Intermediary violated its procedural rules in reopening the cost report, there is
inequitable conduct estopping the Board from dismissing the appeal. But that
contention, too, must fail. It may be true that the Board cannot ignore its rules
and then arbitrarily hold High Country to the letter of the law. But it would
eviscerate the procedural rules of any appellate tribunal, including the Board, if
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error or inequity below precluded the tribunal from enforcing those rules. The
Board could have heard all of High Country’s complaints about the Intermediary’s
procedural and substantive mistakes if they had been timely presented, and when
they were not, the Board was under no obligation to consider the merits before
dismissing the claims on procedural grounds. See St. Joseph’s Hosp., 2000 WL
1847976 at 4 (“The Hospital missed a deadline, and its case was dismissed. We
do not find that the Board was under any obligation to consider any other facts.”).
CONCLUSION
For the foregoing reasons, the decision of the district court is AFFIRMED.
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