Full Life Hospice v. Sebelius

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH February 26, 2013
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
FULL LIFE HOSPICE, LLC,
Plaintiff-Appellant,
v. No. 11-6242
KATHLEEN SEBELIUS, Secretary,
United States Department of Health
and Human Services,
Defendant-Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. NO. 5:11-CV-00030-R)
Submitted on the Briefs:
Mark S. Kennedy, Kennedy, Attorneys and Counselors at Law, Dallas, Texas, on
the brief for Appellant.
Tom Majors, Assistant United States Attorney, with Sanford C. Coats, United
States Attorney, Oklahoma City, Oklahoma, on the brief for Appellee.
Before TYMKOVICH, BALDOCK, and GORSUCH, Circuit Judges.
TYMKOVICH, Circuit Judge.
Full Life Hospice is a hospice care provider participating in the federal
Medicare program. Over a number of years, it provided hospice care services to
terminally ill Medicare beneficiaries and sought reimbursement for these services
from the Department of Health and Human Services (HHS). A fiscal
intermediary, acting on behalf of HHS, later contested some of these
reimbursements and demanded repayment of funds that it claimed were
distributed in excess of a spending cap.
Full Life then unsuccessfully challenged HHS intermediary’s determination
through an administrative appeal, which was denied as untimely. On appeal to
the district court, the court found no basis to excuse Full Life’s untimely
challenge. We agree with the district court that it lacked subject matter
jurisdiction because of Full Life’s failure to file a timely administrative appeal.
Accordingly, exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.
I. Background
A. Statutory and Regulatory Background
Medicare pays hospice care providers a predetermined amount for each day
a Medicare beneficiary receives hospice care. See 42 U.S.C. § 1395f(i)(1)(A).
This amount is subject to a spending cap. Id. § 1395f(2). HHS has adopted a
regulation, 42 C.F.R. § 418.309, to calculate the amount of this cap.
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The Medicare Act allows for challenges to regulations such as 42 C.F.R.
§ 418.309, but it establishes a specific procedure for bringing such claims.1 As is
relevant here, this process can begin with a hospice provider’s challenge to the
basis for a request for repayment made by an HHS fiscal intermediary. HHS uses
fiscal intermediaries to calculate, in accord with the relevant statutes and
regulations, the spending cap for a particular hospice provider within an
accounting year. See 42 U.S.C. §§ 1395h, 1395kk-1.
If the provider “is dissatisfied with a final determination” made by a fiscal
intermediary and the amount in controversy exceeds $10,000, the provider can
request a hearing on the matter with the Provider Reimbursement Review Board
(the Board). Id. § 1395oo(a)(1)(A)(i), (a)(2). A provider is required to file a
request for such a hearing with the Board “within 180 days after notice of the
intermediary’s final determination.” Id. § 1395oo(a)(3). Under limited
circumstances, the Board can extend the 180-day time period within which to
1
In fact, a number of Medicare providers have successfully challenged the
validity of 42 C.F.R. § 418.309, arguing that it contradicts the language of the
authorizing statute. See, e.g., Los Angeles Haven Hospice, Inc. v. Sebelius, 638
F.3d 644 (9th Cir. 2011); Lion Health Servs., Inc., v. Sebelius, 635 F.3d 693 (5th
Cir. 2011). HHS continues to defend the validity of this regulation, though HHS
has withdrawn an appeal before this court of a district court ruling that
invalidated this regulation. See Hospice of New Mexico, LLC v. Sebelius, 435 F.
App’x 749 (10th Cir. 2011). And HHS has issued a new rule on the spending cap
in light of these legal challenges. See Medicare Program; Hospice Wage Index
for Fiscal Year 2012, 76 Fed. Reg. 47,302, 47,308-10 (Aug. 4, 2011) (to be
codified at 42 C.F.R. pt. 418).
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challenge a fiscal intermediary’s final determination upon a “good cause showing
by the provider.” 42 C.F.R. § 405.1836(a). 2
The Medicare Act allows for a slightly different process for direct
challenges to HHS regulations. If the provider contesting a reimbursement
amount has filed a request for a hearing in accord with § 1395oo(a) (mentioned
above), the provider “may file a request for a determination by the Board of its
authority to decide the question of law or regulations relevant to the matters in
controversy.” 42 U.S.C. § 1395oo(f)(1). The parties both refer to this type of
request as expedited judicial review (EJR).
After a validly filed request for EJR, the Board “shall render such
determination [of its authority to rule on a matter] in writing within thirty days
after the Board receives the request and such accompanying documents and
materials, and the determination shall be considered a final decision and not
subject to review by the Secretary.” Id. § 1395oo(f)(1). If the Board fails to
render such a decision within the thirty-day period, “the provider may bring a
civil action [in United States District Court] (within sixty days of the end of such
2
The Board may find good cause “only if the provider demonstrates in
writing it could not reasonably be expected to file timely due to extraordinary
circumstances beyond its control (such as a natural or other catastrophe, fire, or
strike). . . .” 42 C.F.R. § 405.1836(b). This same regulation mandates that the
Board “may not grant a request for an extension under this section if . . . the
provider relies on a change in the law, regulations, [Centers for Medicare and
Medicaid Services] Rulings, or general CMS instructions (whether based on a
court decision or otherwise) or a CMS administrative ruling or policy as the basis
for the extension request.” Id. § 405.1836(c)(1).
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period) with respect to the matter in controversy contained in such request for a
hearing.” Id.
Finally, outside of the context of EJR, the Medicare Act requires that
“[p]roviders shall have the right to obtain judicial review of any final decision of
the Board, or of any reversal, affirmance, or modification by the Secretary, by a
civil action commenced within 60 days of the date on which notice of any final
decision by the Board or of any reversal, affirmance, or modification by the
Secretary is received.” 42 U.S.C. § 1395oo(f)(1). The statute further mandates
that “[a] decision of the Board shall be final unless the Secretary, on [her] own
motion, and within 60 days after the provider of services is notified of the
Board’s decision, reverses, affirms, or modifies the Board’s decision.” Id.
With the statutory and regulatory framework in mind, we turn to Full Life’s
challenge to HHS’s decision.
B. Procedural Background
A fiscal intermediary, acting on behalf of HHS, issued three notices
challenging the amount of Full Life’s reimbursements for hospice services on
September 25, 2008, May 27, 2009, and March 10, 2010. In these notices, the
fiscal intermediary informed Full Life that it had received reimbursements for
hospice care in excess of the amount permitted by 42 C.F.R. § 418.309. Full Life
started to repay the excess amount at some point shortly after receiving these
notices.
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Then, on November 24, 2010, Full Life filed an administrative challenge to
the notices. All three of the challenges came more than 180 days after Full Life
had received the notices from the fiscal intermediary. As explained in its
complaint, Full Life filed the appeals only after learning that other hospice
providers had successfully challenged the validity of § 418.309.
On January 7, 2011, although the Board had not rendered any decision on
Full Life’s appeals, Full Life filed suit in federal court raising a claim that
§ 418.309 was contrary to its authorizing statute. Several days later, on January
14, 2011, the Board issued three decisions on Full Life’s appeals, finding that
each appeal was not timely filed and that Full Life had not shown “good cause” to
excuse the late filing. The Board therefore concluded that it did not have
jurisdiction over Full Life’s appeals.
Meanwhile, in the district court, Full Life sought to amend its complaint.
In the original complaint, Full Life invoked 42 U.S.C. § 1395oo(f)(1) as one basis
for subject matter jurisdiction. In its proposed amended complaint, Full Life
alleged that the district court also had subject matter jurisdiction under a number
of other statutes, including (as is relevant here) the federal mandamus statute, 28
U.S.C. § 1361.
HHS then moved to dismiss Full Life’s amended complaint. The district
court granted HHS’s motion to dismiss, reasoning that because Full Life did not
adhere to the statutory scheme outlined in 42 U.S.C. § 1395oo(f)(1), it could not
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rely on the Medicare Act as a basis for subject matter jurisdiction. The district
court also determined that none of the other bases for subject matter jurisdiction
noted in the amended complaint in fact applied.
Full Life then moved for leave to amend its complaint to include attacks on
the Board’s three findings that Full Life had not demonstrated good cause in
filing late appeals. The district court denied this motion on the ground that it was
futile.
II. Analysis
Full Life challenges both the district court’s grant of the motion to dismiss
and its denial of the motion to amend. Full Life argues the court erred in failing
to find jurisdiction either under § 1395oo(f)(1) of the Medicare Act or under the
federal mandamus statute, 28 U.S.C. § 1361. Full Life also challenges the district
court’s denial of the motion to amend the complaint to expand its challenges to
HHS’s good cause determinations.
We address each of these claims in turn.
A. Subject Matter Jurisdiction
Full Life first challenges the district court’s finding that it lacked subject
matter jurisdiction under 42 U.S.C. § 1395oo(f)(1). “Our review of the district
court’s dismissal for lack of subject matter jurisdiction is de novo.” Marcus v.
Kansas Dep’t of Revenue, 170 F.3d 1305, 1309 (10th Cir. 1999) (citation
omitted). Further, “[b]ecause the jurisdiction of federal courts is limited, there is
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a presumption against our jurisdiction, and the party invoking federal jurisdiction
bears the burden of proof. . . . A court lacking jurisdiction cannot render
judgment but must dismiss the cause at any stage of the proceedings in which it
becomes apparent that jurisdiction is lacking.” Id.As we described above, § 1395oo(f)(1) limits the means by which we
review challenges to the determinations made by HHS fiscal intermediaries. Most
importantly, the statute requires that a provider must first obtain a hearing with
the Board. To obtain such a hearing, the provider must satisfy three prerequisites:
(1) the provider must be “dissatisfied” with a decision of a fiscal intermediary;
(2) the amount in controversy must exceed $10,000; and (3) the provider must
request a hearing “within 180 days after notice of the intermediary’s final
determination.” 42 U.S.C. § 1395oo(a).
Only after these preconditions are met does § 1395oo(f)(1) require the
Board to render “[a] determination in writing within thirty days after the Board
receives the [EJR] request.” Finally, if the Board fails to meet its statutory
obligations, “the provider may bring a civil action (within sixty days of the end of
such period) with respect to the matter in controversy contained in such request
for a hearing.” Id.
Full Life concedes that it did not file its requests for a hearing within the
180-day period mandated by the statute. Thus, Full Life cannot meet one of the
statutory preconditions for obtaining judicial review, and the district court rightly
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determined that § 1395oo(f)(1) could not serve as the basis for subject matter
jurisdiction.
Our conclusion here is bolstered by the Supreme Court’s recent decision
addressing § 1395oo(a). In Sebelius v. Auburn Regional Medical Center, 133
S. Ct. 817 (2013), a number of hospitals alleged that they had been under-
compensated by a fiscal intermediary because of the flawed calculations relied
upon by the intermediary in calculating the amount of a particular Medicare
reimbursement. The hospitals were only prompted to act after they learned the
Board had determined that the intermediary had used the same flawed
methodology in calculating the reimbursement for a different hospital. Similar to
Full Life, the hospitals in Auburn acted many years after the 180-day deadline for
appeal to the Board outlined in § 1395oo(a)(3). The Board therefore dismissed
the hospitals’ appeal as untimely and the federal district court dismissed the
hospitals’ subsequent complaint on the same ground. The Supreme Court
ultimately affirmed the judgment of the district court, determining that
§ 1395oo(a)(3) was nonjurisdictional in nature, that HHS could extend the 180-
day deadline for good cause, and that principles of equitable tolling did not apply
to § 1395oo.
Auburn only reinforces our conclusion that the district court correctly
dismissed Full Life’s complaint. Just like the hospitals in Auburn, Full Life
realized that it might have a basis to challenge the calculation of a fiscal
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intermediary. Yet Full Life made this realization after the time allowed for such
challenges had passed. Thus, like the hospitals in Auburn, Full Life’s challenge
is similarly time-barred.
Full Life resists this straightforward conclusion by suggesting that it would
contradict the reasoning of Bethesda Hospital Ass’n v. Bowen, 485 U.S. 399(1988); Minnesota Hospital Ass’n v. Bowen, 703 F. Supp. 780 (D. Minn. 1988);
and Affinity Healthcare Services, Inc. v. Sebelius, 746 F. Supp. 2d 106 (D.D.C.
2010). Full Life also relies on portions of the legislative history of § 1395oo, as
supportive of a different reading of § 1395oo.
None of these authorities persuades us to reach a different result. In the
cases Full Life cites, the provider had either timely appealed a decision of a fiscal
intermediary or the timing of the appeal was not in dispute. Similarly, the
legislative history Full Life references is silent on the scenario presented here:
where a provider has failed to timely appeal to the Board. 3
Finally, Full Life’s reliance on the mandamus statute, 28 U.S.C. § 1361, as
an alternative basis for jurisdiction also fails. “Mandamus relief is available to a
3
Full Life also cites to an unpublished district court order in which the
“court decline[d] to implicitly endorse an administrative ruling which intends to
continue using [42 C.F.R. § 418.309,] which courts have found invalid.” Hospice
Ctr. of Se. Okla., Inc. v. Sebelius, CIV-10-401-RAW, 2011 WL 2745914, at *1
(E.D. Okla. July 12, 2011). Again, regardless of the validity of 42 C.F.R.
§ 418.309, which is an issue we need not address here, the statutory scheme
outlined in § 1395oo(f)(1) is clearly valid and precludes review of Full Life’s
attack on the fiscal intermediary’s calculation of the reimbursement cap.
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plaintiff only if he has exhausted all other avenues of relief and only if the
defendant owes him a clear nondiscretionary duty.” Bartlett Mem’l Med. Ctr.,
Inc. v. Thompson, 347 F.3d 828, 835 (10th Cir. 2003) (internal quotations and
citation omitted). Full Life cannot show exhaustion because it could have
pursued alternative means—namely, in the statutory scheme created by §
1395oo(f)(1)—to obtain the relief it sought. See also Your Home Visiting Nurse
Servs., Inc. v. Sec’y of HHS, 132 F.3d 1135, 1141 (6th Cir. 1997), aff’d sub nom.,
Your Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449 (1999) (noting
that a provider’s failure to appeal a decision of a fiscal intermediary to the Board
“would preclude mandamus review of that determination”). The mandamus
statute therefore does not provide an alternative basis for jurisdiction.
In sum, the district court did not err in dismissing Full Life’s complaint.
B. Denial of Motion to Amend
Full Life also challenges the district court’s denial of the motion to amend
the complaint. The proposed amended complaint would have added a claim
challenging the Board’s determinations that Full Life had not demonstrated good
cause to excuse its untimely requests for EJR. The district court denied this
motion as futile in part because it determined that Full Life’s new claim would be
time-barred and did not relate back under Rule 15(c) of the Federal Rules of Civil
Procedure.
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While Rule 15 provides that leave to amend a complaint shall be freely
given when justice so requires, a district court may refuse to allow amendment if
it would be futile. See Anderson v. Suiters, 499 F.3d 1228, 1238 (10th Cir. 2007).
“A proposed amendment is futile if the complaint, as amended, would be subject
to dismissal.” Bradley v. Val-Mejias, 379 F.3d 892, 901 (10th Cir. 2004). As is
the case here, where leave was denied “based on a determination that amendment
would be futile, our review for abuse of discretion includes de novo review of the
legal basis for the finding of futility.” Cohen v. Longshore, 621 F.3d 1311, 1314
(10th Cir. 2010).
Under the Medicare statute, a provider may seek judicial review of any
final decision of the Board within sixty days of that decision being made. Here,
the Board made its decision that Full Life lacked good cause for a late appeal on
January 14, 2011. On May 11, 2011, over sixty days after the ruling from the
Board (and after the district court had dismissed its complaint for want of subject
matter jurisdiction), Full Life moved to amend its complaint and add challenges
to the Board’s good cause determinations.
Full Life’s claim would normally be time-barred by this statute of
limitations unless it related back to the original complaint. According to Federal
Rule of Civil Procedure 15(c)(1)(B), an amendment “relates back” to the date of
the original pleading if the “amendment asserts a claim . . . that arose out of the
conduct, transaction, or occurrence set out—or attempted to be set out—in the
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original pleading.” At the same time, an amendment does not relate back “when
it asserts a new ground for relief supported by facts that differ in both time and
type from those the original pleading set forth.” Mayle v. Felix, 545 U.S. 644,
650 (2005). A new pleading cannot relate back if the effect of the new pleading
“is to fault [the defendants] for conduct different from that identified in the
original complaint,” even if the new pleading “shares some elements and some
facts in common with the original claim.” United States ex rel. Miller v. Bill
Harbert Int’l Constr., Inc., 608 F.3d 871, 881 (D.C. Cir. 2010) (internal citation
and quotation marks omitted), cert. denied, 131 S. Ct. 2443 (2011); see also
Hernandez v. Valley View Hosp. Ass’n, 684 F.3d 950, 961 (10th Cir. 2012); 6A
Wright & Miller, Federal Practice and Procedure, § 1497 (3d ed. 2012).
Full Life argues its amendment fits into the definition of relation back
outlined in Rule 15 and that the district court therefore erred in denying Full
Life’s motion to amend. We disagree. Full Life’s original complaint raised
claims attacking the validity of 42 C.F.R. § 418.309. The allegations in this
complaint were premised on the fact that Full Life did not need to wait for any
ruling from the Board to bring suit in federal court.
In contrast, Full Life’s proposed amended claim was supported by facts that
differ in both “time and type” from the original pleadings. The new claim
attacked a procedural ruling of the Board, not a rulemaking from HHS. And the
new claim was premised on a fact not available at the time of the filing of the
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original complaint: namely, the adverse ruling on good cause, which was issued
by the Board after Full Life filed its original complaint. Thus, while the proposed
amended claim “shares some elements and facts in common with the original
claim,” the effect of the amended claim is to fault HHS for conduct unrelated to
allegations raised in the original complaint. 4
Accordingly, granting the amendment would have been futile because the
amended complaint would have been subject to dismissal as time-barred under the
180-day rule of 42 U.S.C. § 1395oo(f)(1).
III. Conclusion
Based on the foregoing analysis, we AFFIRM the judgment of the district
court.
4
The government suggests that 42 C.F.R. § 405.1836(e)(4) provides
another basis for finding that a motion to amend would be futile. This regulation
states: “A finding by the Board or the Administrator that the provider did or did
not demonstrate good cause for extending the time for requesting a Board hearing
is not subject to judicial review.” Although the district court reasoned that 42
C.F.R. § 405.1836(e)(4) precluded judicial review of the Board’s good cause
determinations, the government has provided no explanation as to the statutory
basis for this jurisdiction-stripping regulation. Moreover, we have previously
found similar regulations to be invalid because the limitations they impose on
judicial review were not delegated to the agency by Congress. See, e.g., Nagahi
v. I.N.S., 219 F.3d 1166 (10th Cir. 2000). In this case, however, we need not rule
on the validity of 42 C.F.R. § 405.1836(e)(4), as the district court correctly
determined that the proposed amendment did not relate back to the original
complaint for purposes of Rule 15.
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