Hospital of the University of Pennsylvania v. Sebelius

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
HOSPITAL OF THE UNIVERSITY OF
PENNSYLVANIA, et al.,
Plaintiffs,
v. Civil Action No. 11-464 (JDB)
KATHLEEN SEBELIUS,
Secretary, U.S. Department of Health
and Human Services,
Defendant.
MEMORANDUM OPINION
The Secretary of the Department of Health and Human Services is responsible for
administering Medicare. Plaintiffs are three associated Philadelphia hospitals — Hospital of
University of Pennsylvania, Presbyterian Medical Center, and Pennsylvania Hospital — that
seek judicial review of the Secretary's denial of payments associated with services the hospitals
provided to certain Medicare recipients in fiscal years 1999 and 2000. The Medicare fiscal
intermediary did not receive claims for these payments from plaintiffs in a timely fashion, and
the Secretary determined that there was insufficient evidence to conclude that the claims were
actually mailed by plaintiffs. Plaintiffs contend that they mailed claims for these payments to the
intermediary and that, in any case, the Secretary failed to notify them of the timing requirements
for mailing claims, making the deadlines invalid. Plaintiffs also contend that, notice aside, the
time limits were improper.
-1-
This Court previously remanded this matter to the Secretary to explain why plaintiffs had
sufficient notice of the time limits for filing these claims and why the time limits were proper.
The Court also concluded that the basis of the Secretary's finding that plaintiffs did not show
they actually mailed the claims was contrary to law and remanded for further examination of
whether the claims were, in fact, mailed. In the meantime, the D.C. Circuit ruled in a similar
case, Loma Linda Univ. Med. Ctr. v. Sebelius, 408 Fed. Appx. 383 (D.C. Cir. 2010), that
hospitals were not put on notice of these deadlines.
On remand, the Secretary determined that plaintiffs, unlike Loma Linda, had notice of the
deadlines and that the deadlines were proper. The Secretary also concluded that plaintiffs
presented insufficient evidence that the claims were mailed and received. Plaintiffs then sought
judicial review of the Secretary's decision. Now before the Court are the parties' cross-motions
for summary judgment. For the reasons described below, the Court concludes that plaintiffs did
not receive adequate notice of the relevant deadlines. Accordingly, plaintiffs' claims must now
be processed and paid.
I. Statutory and Regulatory Background
a. Claims Under Medicare Parts A & C
The Secretary of the Department of Health and Human Services, through the Centers for
Medicare and Medicaid Services ("CMS" or "Administrator"), administers the Medicare statute,
Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. The Medicare program is
divided into several parts, of which Parts A and C are relevant here. Part A covers "inpatient
hospital services" furnished to Medicare beneficiaries by participating providers, such as
hospitals. 42 U.S.C. § 1395d(a)(1). CMS itself is directly responsible for the costs of Part A
-2-
services. Id. To coordinate billing by and payment to hospitals under Part A, Medicare contracts
with fiscal intermediaries (usually private insurance companies) pursuant to 42 U.S.C. § 1395h. 1
Medicare Part C was created by the Balanced Budget Act of 1997 ("BBA '97"). Under
Part C, beneficiaries may receive Medicare benefits through private health insurance plans called
"Medicare+Choice" plans. See 42 U.S.C. § 1395w-21(a)(1). Such plans — referred to by the
parties as "Medicare HMOs" — receive payment in advance from CMS for each enrollee and are
then responsible for the costs of the enrollees' services. The Medicare HMOs themselves
coordinate billing and payment with health care providers once services have been provided.
See 42 U.S.C. § 1395mm(a).
Health care providers submit claims for services provided— either to fiscal
intermediaries (for services provided under Part A) or to Medicare HMOs (for services provided
under Part C) — and these claims are paid over the course of the year. At year-end, hospitals file
cost reports with the fiscal intermediaries, which reconcile interim payments made over the
course of the year with actual reimbursements due. See 42 C.F.R. § 405.1803. The fiscal
intermediary makes a final determination, which is appealable to the Provider Reimbursement
Review Board ("PRRB" or "Board"). 42 U.S.C. § 1395oo(a). The PRRB's decision is subject to
further review by the CMS Administrator, and a hospital may seek review of the Administrator's
decision in federal district court. See 42 U.S.C. § 1395oo(f).
To receive payment under Medicare Part A, hospitals submit claim forms (labeled "UB-
92" forms) to their fiscal intermediaries. These claims are governed by the regulations set forth
at 42 C.F.R. § 424.30 et seq.. Among the requirements are time limits for filing claims, which
are codified at 42 C.F.R. § 424.44:
1
The Court will refer interchangeably to "Medicare," "the Secretary," "HHS," "CMS," and "the Administrator,"
since nothing hinges on the distinction between these labels.
-3-
Basic limits. . . . [T]he claim must be mailed or delivered to the intermediary or
carrier, as appropriate—
(1) On or before December 31 of the following year for
services that were furnished during the first 9 months of a calendar year; and
(2) On or before December 31 of the second following year for
services that were furnished during the last 3 months of the calendar year.
42 C.F.R. § 424.44(a). 2 The first regulation in the set, § 424.30 (entitled "Scope"), describes
what claims the requirements apply to. Section 424.30 states: "This subpart sets forth the
requirements, procedures, and time limits for claiming Medicare payments. Claims must be filed
in all cases except when services are furnished on a prepaid capitation basis by a health
maintenance organization (HMO), a competitive medical plan (CMP), or a health care
prepayment plan (HCPP)." Medicare Part C services are "services [that] are furnished on a
prepaid capitation basis by a health maintenance organization (HMO)." 3 Hence, claims that
providers filed with HMOs for payment for services provided to Medicare Part C enrollees are
exempted from the requirements. As explained in detail below, a key issue in this case is whether
the regulatory exception, which clearly exempts claims filed with Medicare HMOs for services
provided to Part C enrollees, also applies to claims filed with fiscal intermediaries for graduate
medical education payments associated with the services provided to Part C enrollees.
b. Medical Education Payments
The Medicare program also pays teaching hospitals for certain costs related to graduate
medical education. Medicare makes both an "indirect graduate medical education payment"
("IME") and a "direct graduate medical education payment" ("GME"). IME payments are
intended to reimburse teaching hospitals providing services to Medicare beneficiaries for their
2
The regulations have since been modified slightly.
3
The services "are furnished on a prepaid capitation basis by [an HMO]" because the Administrator prepays the
HMO a certain amount per capita — hence, on a "prepaid capitation basis."
-4-
higher-than-average operating costs. See 42 U.S.C. §§ 1395f(b), 1395ww(d). Medicare makes a
payment for each Medicare beneficiary discharged by a hospital. See 42 U.S.C. §§ 1395ww(d),
1395w-21(i)(1). The per-discharge payment increases depending on the hospital's ratio of
medical residents to beds — i.e., the higher the number of residents or the higher the number of
discharges, the greater the IME payment. See 42 U.S.C. § 1395ww(d)(5)(B). The GME
payment, on the other hand, is a payment intended to compensate teaching hospitals for the
direct costs of graduate medical education incurred because of services provided to Medicare
beneficiaries. 42 U.S.C. § 1395ww(h). The amount of the GME payment depends on the
number of full-time residents and the Medicare "patient load." Hence, like the IME payment, the
GME payment increases when the number of Medicare enrollees or the number of residents
rises. See id. Both GME and IME payments, then, depend on the number of residents and the
number of Medicare enrollees receiving services from a hospital.
Before the passage of BBA '97, only services provided to Medicare Part A or B
beneficiaries were counted in calculating IME and GME payments. That is, the "per-discharge"
multiplicand for IME payments did not include discharges of Part C Medicare HMO enrollees,
and the "patient load" multiplicand for GME payments did not include Part C Medicare HMO
enrollees. BBA '97, however, directed the Secretary to make additional IME and GME
payments, phased in over five years, for services provided to Medicare HMO enrollees under
Part C. See BBA '97 §§ 4622, 4624 (codified at 42 U.S.C. §§ 1395ww(d)(11),
1395ww(h)(3)(D)(I)).
II. Background and Prior Proceedings
Plaintiffs allege that they were improperly denied supplemental medical education
payments by their intermediary, Mutual of Omaha, for the 1999 and 2000 fiscal years. See
-5-
Hosp. of Univ. of Penn v. Sebelius, 634 F. Supp. 2d 9, 11 (D.D.C. 2009) ("HUP I"). After the
fiscal intermediary denied payment, plaintiffs timely appealed to the PRRB. Id. at 11. Plaintiffs
argued that, under the applicable regulations, the claims filing requirements do not apply to
claims for supplemental medical education payments. See Administrative Record ("A.R.") at 59.
Specifically, plaintiffs contended that the "timely filing guidelines" — that is, the deadlines — at
42 C.F.R. § 424.44 do not apply to claims for IME/GME payments for services provided to
Medicare Part C enrollees. See id. Plaintiffs now also maintain that they never received
adequate notice that the Secretary would apply the claims filing requirements to the
supplemental medical education payments. See Compl. ¶ 71. Plaintiffs also argue that the
application of the claims filing requirements to claims for supplemental education payments
violates the Paperwork Reduction Act, 44 U.S.C. § 3501 et seq., because the Secretary did not
seek OMB approval of the filing requirements. See Compl. ¶¶ 123-35. Finally, plaintiffs argued
to the PPRB that whatever the resolution of the legal question, they had in fact complied with the
filing requirements and deadlines of 42 C.F.R. § 424.44 by mailing appropriately coded UB-92s
to their fiscal intermediary in a timely fashion. See A.R. at 59. Plaintiffs produced various
forms of evidence in support of this claim to the PRRB at a hearing on May 15, 2007. See HUP
I, 634 F. Supp. 2d at 12.
With respect to the legal issue, the Board agreed with plaintiffs that "[t]he claims in
question . . . are specifically exempt from the requirements, procedures, and time limits" of 42
C.F.R. § 424. A.R. at 63. The Board explained that the regulations had not been changed after
the enactment of BBA '97 and, by the text of the regulation, the exception at 424 C.F.R. § 434.30applied, thereby exempting these claims from the requirements. See id. at 63-65. The Board
therefore concluded that "the Intermediary improperly denied the Providers' submission of
-6-
IME/[GME] claims for Medicare managed care enrollees due to untimely filing, and the Provider
should be given the opportunity to support its claim for payment." Id. at 65. In considering the
factual dispute, the PRRB wrote that "[t]he evidence in this case was conflicting" and that it
"finds [plaintiffs'] evidence that it filed claims credible, but there is no evidence that the claims
were proper for processing." Id. at 63. Nonetheless, the PRRB deemed the factual issue moot in
light of its resolution of the legal issue. Id. One member of the PRRB dissented, finding that the
regulatory exception did not apply and that plaintiffs had not provided sufficient evidence they
mailed the claims. Id. at 67-69.
The intermediary appealed to the Administrator pursuant to 42 U.S.C. § 1395oo(f). The
Administrator devoted most of his analysis to the legal question and reversed, concluding that
the § 424.44 requirements do apply to claims for supplemental medical education payments
while addressing the factual dispute only briefly. See A.R. at 7-17. Citing the PRRB dissent, the
Administrator found that plaintiffs had not established that they had timely mailed UB-92s to the
intermediary. Id. at 18. Plaintiffs then appealed to this Court for review.
The Court considered plaintiffs' original suit together with a similar case against the
Secretary, Cottage Health Systems v. Sebelius, 631 F. Supp. 2d 80 (D.D.C. 2009). In Cottage
Health, the Court assessed the plaintiff's allegation that it did not receive adequate notice that
health care providers were required to file UB-92s directly with fiscal intermediaries for the
IME/GME payments authorized by BBA '97. Id. at 95. The Court concluded that the
Administrator's decision that the plaintiff had been notified of the requirement to file UB-92s
with fiscal intermediaries was supported by substantial evidence. Id. The Court found that four
documents — three issued by the Secretary to hospitals generally and a letter pertaining only to
the Cottage Health plaintiff — supported the Administrator's decision with respect to notifying
-7-
health care providers of the requirement to file UB-92s with fiscal intermediaries. Id. at 96. The
three documents issued by the Secretary were a May 12, 1998 rule published in the Federal
Register, a July 1, 1998 Program Memorandum (PM A-98-21), and a July 13, 1998 Medicare
Bulletin. See id. at 95-96. The Court found that the Program Memorandum clearly explained
that hospitals must submit UB-92s to fiscal intermediaries for the additional IME/GME
payments. Id. at 96.
Although Cottage Health upheld the Secretary's determination with respect to notice to
hospitals of the requirement to file UB-92s with intermediaries, the Court concluded that the
Administrator had not explained in sufficient detail why the plaintiff was notified that the UB-
92s must be filed within a specific time frame. Id. at 98-99. The Court noted that the
Administrator "did not point to any rule or informal notice that explicitly incorporated the time
limits." Id. at 98. Accordingly, the Court remanded to the Secretary "for further explanation as
to whether the time limits from 42 C.F.R. §§ 424.30 and 424.44 apply, and if so, why." Id. at 99.
The Court also remanded for the Administrator to address the argument that the Paperwork
Reduction Act required OMB approval before the implementation of the claims filing
requirements. See id. at 99-100.
In its prior decision involving the present parties (HUP I), the Court relied on Cottage
Health for resolution of the legal issues. Noting that "the methods of providing notice to
hospitals" of the filing requirements are "identical, with limited exception" to the notice
considered in Cottage Health, the Court determined that the Administrator's rationale for finding
that plaintiffs had notice that the time limits from § 424.44 applied was too cursory for reasoned
-8-
review. HUP I, 634 F. Supp. 2d at 14. 4 The Court remanded to the Secretary for further
examination and explanation of whether plaintiffs received adequate notice of the time limits.
Id.With respect to the factual dispute present here but not in Cottage Health — whether
plaintiffs did, indeed, file UB-92s within the relevant time limits — the Court concluded that the
Administrator's exclusive focus on documentary evidence was "'not in accordance with the law.'"
Id. at 15 (quoting 5 U.S.C. § 706(2)(A)). The Court therefore vacated and remanded to the
Secretary to determine whether plaintiffs' testimonial and documentary evidence together was
sufficient to prove that the UB-92s were mailed to, and hence may be deemed received by, the
intermediary. Id. 5
Subsequently, the district court in Loma Linda ruled on a hospital's claim that it did not
receive notice of the deadlines for filing claims for IME/GME payments for Part C enrollees.
That court considered the same three documents from HHS — the May 12, 1998 rule, Program
Memorandum A-98-21, and the July 13, 1998 Medicare Bulletin — that this Court had
considered in Cottage Health and HUP I. See Loma Linda, 684 F. Supp. 2d at 52-53. The court
noted that "there is no language in any of those documents regarding time limits, nor is there any
mention of 42 C.F.R. § 424.44, the regulation governing deadlines for Part A claims." Id. at 53.
The court also noted that the Administrator did not "identify any other agency publication
informing hospitals that bills for []GME and IME costs associated with Medicare+Choice
4
The Court, as in Cottage Health, also affirmed the Secretary's determination that, time limits aside, hospitals
received notice of the need to file UB-92s. HUP I, 634 F. Supp. 2d at 13-14. Likewise, the Court remanded for
consideration of the Paperwork Reduction Act issue. Id. at 14.
5
With respect to whether the UB-92s, if mailed, were properly coded, the Court concluded that the Administrator
did not make a finding, leaving the Court with no decision to review, and instructed the Administrator to consider
the issue if she determined that plaintiffs had, in fact, presented sufficient evidence of mailing. HUP I, 634 F. Supp.
2d at 15-16.
-9-
enrollees were subject to Part A regulations generally or to the deadlines in 42 C.F.R. § 424.44 in
particular." Id.The Loma Linda court held that the Secretary "did not inform hospitals" that the Part A
time limits applied to claims for IME/GME payments for Part C enrollees and therefore "Loma
Linda's delay in filing is not a basis for rejecting the hospital's claims." Id. at 54, 56. In so
deciding, the court rejected the Secretary's "insist[ence] that Loma Linda knew of the deadline
for submitting the bills at issue here." Id. at 54. The Court also rejected the Administrator's
determination that the three documents from CMS "implicitly put Loma Linda on notice" and the
Administrator's reasoning that "requiring hospitals to submit UB-92 forms indicated that the Part
C medical education payments would fall under the Part A regulations." Id. The court stated
instead that "[a]s far as the Court can ascertain from the record before it, Loma Linda first
learned of the filing deadlines when it sought payment for unbilled claims and was informed by
the intermediary and CMS that the request was untimely." Id. 6 On appeal, the D.C. Circuit
affirmed the district court's grant of partial summary judgment in a short, per curiam opinion.
The court stated: "Appellee did not receive notice 'with ascertainable certainty,' Gen. Elec. Co.
v. EPA, 53 F.3d 1324, 1329 (D.C. Cir. 1995), of the billing deadline for seeking payment for
medical education costs associated with Medicare+Choice (Part C) inpatient days." Loma Linda,
408 Fed. Appx. 383. 7
III. Secretary's Remand Decision
6
In addition to not filing its claims for payment within the time limits, Loma Linda, unlike plaintiffs, was unable to
file all of its claims in UB-92 format. See Loma Linda, 684 F. Supp. 2d at 48. Loma Linda sought to receive
payment by reporting the information in alternative form, which the Administrator denied. See id. at 48-49, 50. On
review, the court, in addition to its finding regarding notice of the timeliness requirements, also concluded that the
Secretary did not sufficiently explain the rejection of Loma Linda's request to file in alternative form and remanded
to the Secretary for further explanation. Id. at 56-58.
7
The court also affirmed the district court with respect to requiring the Secretary to further consider Loma Linda's
"proposed alternative computation method." 408 Fed. Appx. 383.
-10-
On remand in the present case, the Administrator considered this Court's prior decisions,
Loma Linda, the record, and further arguments made by plaintiffs. The Administrator concluded
that the regulations at 42 C.F.R. § 424.30, et seq., including the relevant deadlines, apply to these
claims for IME/GME payments for Part C enrollees. See A.R. at 2504-2512. In reaching this
conclusion, the Administrator quoted the relevant language from 42 C.F.R. § 434.30: "Claims
must be filed in all cases except when services are furnished on a prepaid capitation basis by a
health maintenance organization (HMO), a competitive medical plan (CMP), or a health care
prepayment plan (HCPP)." Id. at 2504. The Administrator then stated:
The claims at issue are not for "services furnished on a prepaid capitation basis by
a health maintenance organization." The services are related to the IME/GME
teaching costs attributable to inpatient services provided to managed care
enrollees. The payment at issue has been specifically carved out of the Part C
capitation rates and is specifically being made to hospitals under the authority set
forth in Part A. The intent of the exclusion is to prevent the double payment for
the same service under Medicare fee-for-service (Parts A and B) and also under
Part C. A hospital (not a managed care organization) must submit claims in
conformity with 42 CFR 424.30, et seq., to be able to receive managed care
enrollees for the Part A IME and GME payments from its intermediary.
Id. The Administrator concluded that "the provision for this additional payment for managed
care enrollees is within [a] framework of a pre-existing methodology for IME/GME payments
under Medicare Part A and not under the exception at 42 CFR 424.30 provided for Medicare Part
C claims." Id. at 2509. The Administrator further stated that "[t]he requirement that a Provider
submit a claim UB-92 form cannot be separated from the requirement that it be filed within the
prescribed timeframes for such a form under 42 CFR 424.30, et seq[]." Id. at 2510. The
Administrator also stated that, "[a]mong other things, Congress specifically statutorily excluded
the payment under Part C, [and] Congress specifically included the payment under the Medicare
inpatient Part A section of the Medicare Act . . . ." Id. at 2511-12.
-11-
The Administrator also considered the notice issue. See id. at 2510-12. The
Administrator stated that "[t]o suggest that a provider might believe there are no deadlines would
be unwarranted" because "[t]hat is contrary to every provider's general practice and experience in
receiving payment under Medicare." Id. at 2510. The Administrator concluded that "the
teaching hospital community and its associations knew the filing of the UB-92 form was, like all
other claims, required to be done within the usual timeframes." Id. at 2511. The Administrator
wrote that the "irrefutable connection between using the UB92 form for payment and need to
timely file the form within the normal filing deadlines is evident in the November, 2, 1999
'Memorandum from the American Association of []Medical Colleges,'" which plaintiffs received
in November 1999. Id. The Administrator noted that the American Association of Medical
Colleges ("AAMC") memorandum "specifically indicates that claims for services rendered in
1998 must be filed by December 31, 1999." Id. Later in the Administrator's decision (though in
a discussion of whether plaintiffs had presented factual evidence of having mailed the claims, not
a discussion of notice), the Administrator also stated that plaintiffs' "upper management was
aware of the deadlines," citing the AAMC memorandum (as well as other documents that did not
actually reference the deadlines). A.R. at 2545. 8
The Administrator next considered the factual question of whether plaintiffs had, in fact,
presented sufficient evidence of mailing these claims to their fiscal intermediary. See A.R. at
2516-2548. The Administrator concluded that plaintiffs "did not present sufficient evidence to
trigger the presumption of mailing," largely because plaintiffs failed to present evidence that
items intended to be mailed actually reached the U.S. Postal Service from plaintiffs' facilities,
which the Administrator deemed an important gap in plaintiffs' evidence. See id. at 2542-47.
8
The Administrator also considered and rejected plaintiffs' legal argument involving the Paperwork Reduction Act.
See A.R. at 2512-16.
-12-
The Administrator also concluded, assuming arguendo that plaintiffs' provided evidence
"trigger[ing] the presumption of mailing," that the intermediary rebutted that presumption with
its evidence. See id. at 2547-48. 9
Finally, in a brief concluding paragraph, the Administrator distinguished Loma Linda
from the plaintiffs' situation. The Administrator stated:
First, the Administrator is reviewing this case pursuant to a specific remand order.
Second, each case is based on its own distinct factual record. For example, this
record shows that [plaintiffs] were aware of the deadline for filing claims as was
the larger community and that the instruction to file a UB92 claim was understood
to involve the deadlines for filing . . . [.] Third, the court has already made clear
that this case could be resolved on a narrower factual issue distinct from that
presented in the Loma Linda case based on whether the claims can be found to be
timely filed.
A.R. at 2549.
IV. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate when the
pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law." In a case involving review of a
final agency action under the Administrative Procedures Act, 5 U.S.C. § 706, however, the
standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing
the administrative record. See N.C. Fisheries Ass'n v. Gutierrez, 518 F. Supp. 2d 62, 79 (D.D.C.
2007). Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision
that is supported by the administrative record, whereas "the function of the district court is to
determine whether or not as a matter of law the evidence in the administrative record permitted
the agency to make the decision it did." See Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70
(9th Cir. 1985). Summary judgment thus serves as the mechanism for deciding, as a matter of
9
The Administrator also briefly considered whether the UB-92s were, if actually mailed, properly coded, and
concluded that the record would not support that conclusion. See A.R. at 2549.
-13-
law, whether the agency action is supported by the administrative record and otherwise
consistent with the APA standard of review. See Richards v. INS, 554 F.2d 1173, 1177 & n. 28
(D.C. Cir. 1977), cited in Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d
1060 (D.C. Cir. 2003).
Under the APA, a court may vacate an agency decision if it is "arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law" or if it is "unsupported by
substantial evidence." 5 U.S.C. §§ 706(2)(A), (E). Agency actions are entitled to much
deference, and the standard of review is narrow. See Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402, 416 (1971). The reviewing court is not permitted to substitute its judgment
for that of the agency. See id. That is, it is not enough for the agency decision to be incorrect —
as long as the agency decision has some rational basis, the court is bound to uphold it. See id.The court may only review the agency action to determine "whether the decision was based on a
consideration of the relevant factors and whether there has been a clear error of judgment." Id.V. Analysis
As described below, the Court finds that plaintiffs were not notified of the timing
requirements for the filing of IME/GME claims for Part C enrollees. Since the deadlines cannot
be enforced against plaintiffs without notice, the Court need not decide whether the deadlines
are, notice aside, actually proper under HHS regulations. Nonetheless, the regulations merit
some discussion to the degree that the regulatory text affects how much notice HHS must
provide of its interpretation of the regulations.
a. Administrator's Decision and Parties' Current Arguments
Plaintiffs assert that they did not receive adequate notice that the deadlines for filing
claims under Medicare Part A also applied to claims for the additional IME/GME payments
-14-
mandated by BBA '97 for Medicare Part C enrollees. See Pls.' Mem. in Supp. of Mot. for
Summ. J. [Docket Entry 11-1] ("Pls.' Mem.") at 13-16. Plaintiffs also contend that, even if they
were properly notified of the deadlines, the deadlines themselves are improper because they are
contrary to HHS regulations. See id. at 20-26. More specifically, plaintiffs contend that the
claims they filed fall within the exception to the regulations that applies "when services are
furnished on a prepaid capitation basis by a health maintenance organization." See id. at 21-23.
On remand, as explained above, the Administrator concluded that these claims do not
come under the regulatory exception. The Administrator also concluded that plaintiffs received
notice of the deadlines — or, more precisely, that "the teaching hospital community," which
includes the plaintiffs, "and its associations knew the filing of the UB-92 form was, like all other
claims, required to be done within the usual timeframes," A.R. at 2510, and that plaintiffs,
specifically, were "aware of the deadlines," A.R. at 2545.
The Secretary now argues both that the timing deadlines apply to these claims and that
plaintiffs had "actual notice" of them. With respect to whether the deadlines apply, the Secretary
quite appropriately echoes the Administrator's decision on remand. See Mem. of P. & A. in
Supp. of Def.'s Cross-mot. for Summ. J. and in Opp'n to Pls.' Mot. for Summ. J. [Docket Entry
12] ("Def.'s Cross-mot.") at 10-14. First, the Secretary explains that IME/GME payments under
Part A predated Medicare Part C and are based on a different methodology than Part C
payments, which are "capitated" payments that the Secretary makes to HMOs, not hospitals. Id.
at 11-12. Second, the Secretary argues that Congress specifically carved out IME/GME
payments from Part C, so the payments fall under Part A and are linked to the existing
methodology for filing Part A claims. Id. at 12-13. Third, the Secretary notes that the purpose of
the exception clause is to prevent double payment for the same service — that is, to prevent
-15-
hospitals from receiving payment both from fiscal intermediaries and from HMOs for services
provided to patients under Part C. Since hospitals receive payment for IME/GME costs only
from fiscal intermediaries and not from HMOs, applying the exception to claims for IME/GME
payments would not serve the purpose of the regulation. Id. at 31.
With respect to whether plaintiffs were notified of the deadlines, the Secretary's argument
now deviates somewhat from the Administrator's remand decision. To begin with, the Secretary
argues that plaintiffs waived their notice argument by failing to raise the notice issue in either the
initial proceedings at HHS or the initial suit in this Court and "conceded" at those times that they
were aware of the deadline. Def.'s Cross-mot. at 7-8. The Secretary notes that plaintiffs moved
for reconsideration of the Court's decision in HUP I in part because, according to plaintiffs, they
did not "frame their appeal" in terms of notice as the Cottage Health plaintiff had. Id. at 8 n.3;
see Pls.' Mem. of P. & A. in Supp. of Mot. for Recons. and Clarification at 4, HUP I (No. 08-
1665). Likewise, the Secretary notes that plaintiffs' original complaint in HUP I stated that
plaintiffs timely filed their claims after receiving warnings through "'the grapevine'" and from the
AAMC that the Secretary had decided to require hospitals to file these claims within the time
limits applicable for Part A claims. See Def.'s Reply to Pls.' Opp'n to Def.'s Cross-mot. for
Summ. J. [Docket Entry 17] at 3; see Compl. ¶¶ 69-70, HUP I (No. 08-1665).
Next, the Secretary argues that Loma Linda did not foreclose a finding that plaintiffs had
"actual notice" of the deadlines. See Def.'s Cross-mot. at 8-10. The Secretary notes that
plaintiffs, in their correspondence with the intermediary following the rejection of their claims,
did not claim ignorance of the timing rules but rather maintained that they complied with (in the
words of plaintiffs' employee) "the required deadline." Id. at 9 & n.5. Although the Secretary
concedes that the AAMC memorandum cannot serve as notice of the Secretary's interpretation
-16-
because it did not actually come from the Secretary, the Secretary contends that plaintiffs
themselves indicated that they understood from the AAMC memorandum "what the Secretary's
deadlines were." See id. at 10. At a motions hearing before the Court, counsel for the Secretary
also noted that the court in Loma Linda did not consider the AAMC memorandum in reaching its
conclusion that the Secretary "did not inform hospitals" of the deadlines, 684 F. Supp. 2d at 54;
counsel argued that the court might have come to a different conclusion if it had considered the
memorandum.
b. Agency Notice When Regulations Not Clear
There is a relationship between the need for agencies to notify regulated parties of
regulatory requirements and the text of the regulations that set out those requirements. When the
text of regulations administered by an agency is clear, the agency need not provide other notice
to regulated entities because the regulations themselves provide notice. See Gen. Elec. Co. v.
EPA, 53 F.3d 1324, 1329 (D.C. Cir. 1995) ("[W]e must ask whether the regulated party received,
or should have received, notice of the agency's interpretation in the most obvious way of all: by
reading the regulations."). But when regulations can reasonably be interpreted in a way other
than the agency does, the agency must give regulated entities notice before enforcing
requirements based on that interpretation. See Satellite Broad. Co., Inc. v. FCC, 824 F.2d 1, 3-4
(D.C. Cir. 1987). The D.C. Circuit has endorsed the "ascertainable certainty" standard for
providing fair notice of regulatory requirements: "If, by reviewing the regulations and other
public statements issued by the agency, a regulated party acting in good faith would be able to
identify, with 'ascertainable certainty,' the standards with which the agency expects parties to
conform, then the agency has fairly notified a petitioner of the agency's interpretation." General
-17-
Electric, 53 F.3d at 1329 (quoting Diamond Roofing Co v. OSHRC, 528 F.2d 645, 649 (5th Cir.
1976)).
In the Court's view, this case presents a situation that is arguably the reverse of the
situation in which clear regulations provide notice to regulated parties, because here the agency's
interpretation of its regulation may actually contradict the regulatory text. Of course, an agency's
interpretation of its own regulations is entitled to substantial deference, and the Court need not
and will not decide whether the Secretary's interpretation of the regulations is sustainable; that
question need not be reached if the Court finds that the agency loses on notice grounds. See
General Electric, 53 F.3d at 1329-30 (citing Gates & Fox v. OSHRC, 790 F.2d 154, 155 (D.C.
Cir. 1986)). Nonetheless, in the Court's view, when an agency's reading of the relevant
regulation is, to put the point mildly, quite strained, then the obligation on the agency to provide
adequate notice is at its peak, because a reasonable reader of the regulations could quite naturally
reach a conclusion contrary to that reached by the agency.
c. 42 C.F.R. § 424Under Medicare Part A, hospitals file UB-92s with fiscal intermediaries to receive "fee-
for-service" payments for the services provided to Medicare enrollees. By contrast, in order to
be paid for services provided to Medicare Part C enrollees, providers like plaintiffs file UB-92s
with HMOs. The claims that hospitals file with fiscal intermediaries for IME/GME payments
associated with Part C enrollees are so-called "no pay" UB-92s. The claims are "no pay" bills
because Medicare is not paying the hospitals for those services (as under the Part A "fee-for-
service" model). Plaintiffs have stated that they generated the "no pay" bills by photocopying the
original UB-92s (the "pay" bills, filed with HMOs) and then adding codes to distinguish them as
"no pay" bills. The question is whether these "no pay" bills, filed with fiscal intermediaries for
-18-
IME/GME payments relating to Part C services, are subject to the same regulatory requirements
as ordinarily apply to claims filed with fiscal intermediaries under Medicare Part A.
As indicated above, the Secretary's requirements for filing claims under Medicare Part A,
including the time limits, are set out at 42 C.F.R. § 424.30, et seq. 42 C.F.R. § 424.30 describes
what claims the requirements apply to: "This subpart sets forth the requirements, procedures,
and time limits for claiming Medicare payments. Claims must be filed in all cases except when
services are furnished on a prepaid capitation basis by a health maintenance organization
(HMO), a competitive medical plan (CMP), or a health care prepayment plan (HCPP)." Services
provided to Medicare Part C enrollees are "services [that] are furnished on a prepaid capitation
basis by a health maintenance organization." The regulation therefore effectively reads, in
relevant part: "Claims must be filed in all cases except when services are furnished" under Part
C.
On remand, the Administrator stated that "[t]he claims at issue are not for 'services
furnished on a prepaid capitation basis by a health maintenance organization.' The services are
related to the IME/GME teaching costs attributable to inpatient services provided to managed
care enrollees." A.R. at 2504. This statement is true, but it does not track the regulation's text.
The regulation does not except claims "for 'services furnished'" under Part C, as the
Administrator states. The Secretary's reading, then, rewrites the regulation's text as: "Claims
must be filed in all cases except when the claim is for services that are furnished on a prepaid
capitation basis by a health maintenance organization . . . ." But the regulation instead states that
"[c]laims must be filed in all cases except when services are furnished" under Part C (emphasis
added). And these claims were claims filed when (that is, in cases in which) services were
furnished to enrollees under Part C. They were not claims for those services, but the regulation
-19-
is written with reference to how the services are furnished, not what the claims being filed are
for.
The Court is not the first to make this point. The Provider Reimbursement Review
Board, in its initial review of this case, concluded that "the IME/[GME] payment arises from
'services . . . furnished on a . . . capitation basis,'" and that therefore the claims fall under the
exception to the § 424 requirements. See A.R. at 65. As the Board described, the regulations at
issue pre-date BBA '97 and simply were not crafted with an eye toward the present situation, in
which duplicate claims are filed with intermediaries in cases when services are furnished on a
prepaid capitation basis by an HMO and the Secretary has a separate payment obligation
associated with those services. See id. at 63-65. 10 Of course, as the Secretary correctly
indicates, the Administrator's decision, not the Board's, is the final decision of the agency. See,
e.g., Am. Med. Int'l, Inc. v. Sec'y of Health, Educ. and Welfare, 466 F. Supp. 605, 611 (D.D.C.
1979), aff'd, 677 F.2d 118 (D.C. Cir. 1981). Nonetheless, that the Board, with its substantial
Medicare expertise, read the regulations as requiring these claims to be exempted from the
requirements suggests that specialized knowledge of the subject matter does not change the
meaning of the regulation's plain text.
The Secretary has not really tried to dissuade the Court from concluding that her
interpretation is a rewriting of the regulatory text. The Secretary points out that IME/GME
services are not "services furnished on a prepaid capitation basis" by HMOs; instead they are
ongoing payments made by the Secretary, on the basis of a formula (not prepaid per capita). But,
10
The Board concluded that since the exception applied, not only the deadlines but also the underlying requirement
to file UB-92s with fiscal intermediaries was contrary to the regulations. See A.R. at 65. The Court previously
concluded that the Secretary did adequately notify hospitals of the requirement to file UB-92s. See HUP I, 634 F.
Supp. 2d at 13-14. Since the Court concludes that plaintiffs were not notified of the deadlines, and plaintiffs will
therefore receive the relief sought here (payment) through the processing and payment of their untimely claims, the
Court need not address whether, notice aside, the underlying requirement to file UB-92s was improper under the
regulations, as the Board concluded.
-20-
again, the regulatory exception is not based on what services the payment is being made for.
Rather, the regulation refers to "cases when services are furnished" under Part C, which is the
case for these claims. Indeed, the IME/GME claims are just recoded versions of the claims
earlier filed for services furnished under Part C.
Rather than focusing on the regulatory text, the Secretary instead focuses primarily on
how much sense it would make to apply the § 424 requirements to these claims. And, indeed,
her arguments for applying the requirements to these claims do make some sense. The "no pay"
claims are, from the perspective of filing and payment, no different from any other claims filed
with fiscal intermediaries, so it would be logical to apply the same rules, including timing
deadlines. Health care providers are accustomed to the rules; in fact, they are accustomed to
filing claims with these very forms (UB-92s) under these rules. Not applying the timing rules
could mean that health care providers can file claims whenever they want — not a particularly
reasonable state of affairs. Furthermore, the purpose of the exception clause in § 424.30 is to
prevent providers from inappropriately filing fee-for-service claims with fiscal intermediaries,
since claims for payment for the services are filed with HMOs. That purpose is not served by
including "no pay" claims in the exception, because such claims are only filed with
intermediaries. Finally, Congress instructed the Secretary to "carve out" IME/GME payments
from Part C, so it makes little sense for the treatment of the claims to differ because they are
associated with Part C services. And plaintiffs have not put forward much of a reason,
compelling or otherwise, why it makes sense for the requirements not to apply to these claims. 11
11
The closest plaintiffs have come to suggesting why the ordinary requirements ought not to apply to these claims
— although the argument is framed regarding plaintiffs' claims under the Paperwork Reduction Act, not the
interpretation of 42 C.F.R. § 424.30 — is that filing "no pay" UB-92s is repetitive and expensive. See Pls.' Mem. at
31-32. But, of course, this objection is to the requirement to file no pay UB-92s at all, not to the deadlines; plaintiffs
have not articulated any reason why, given the requirement to file "no pay" UB-92s, the regular deadlines should not
apply.
-21-
Of course, the Secretary could solve the problem simply by changing the regulation to
clearly express her interpretation, but she has not done so. More to the point here, the Court
need not resolve this apparent tension between the plain meaning of the regulatory text and a
reading that would make more sense as a matter of policy and accordance with the statute. Since
the Court will decide the case on notice grounds, it need not determine whether the Secretary's
interpretation is sustainable on the basis of the substantial deference owed to HHS in interpreting
its own regulations. What is clear is that, given how the regulations read, the Secretary was
obliged to provide fair notice to regulated parties about how she was interpreting the regulations
— an interpretation at odds with the literal language of § 424.30. The regulations themselves
certainly do not provide such notice. On the contrary, a regulated entity relying on the
regulations would likely come to the opposite conclusion, making notice from the Secretary of
paramount importance.
d. Notice
This Court has already concluded that the Secretary gave hospitals, including plaintiffs,
notice of the requirement to file with their fiscal intermediaries "no pay" UB-92s for Medicare
Part C enrollees in order to receive IME/GME payments. See HUP I, 634 F. Supp. 2d at 13-14;
Cottage Health, 631 F. Supp. 2d at 95-97. This notice came in the form of a July 1, 1998
Program Memorandum that "clearly stated that 'hospitals must submit a claim' for the additional
IME/GME payments 'to the hospitals' regular intermediary in UB-92 format.'" Cottage Health,
631 F. Supp. 2d at 96 (quoting Program Memorandum). This memorandum, however, contained
no mention of the deadlines that the Secretary now insists accompanied the use of the UB-92s.
The district court in Loma Linda considered the same documents issued by the Secretary and
concluded that hospitals did not receive notice of the timing deadlines. 684 F. Supp. 2d at 56.
-22-
The D.C. Circuit affirmed that determination, concluding that Loma Linda "did not receive
notice 'with ascertainable certainty.'" 408 Fed. Appx. 383.
Regarding notice, the only difference between this case and Loma Linda is the AAMC
memorandum. That memorandum did indicate that the relevant deadlines applied to these
claims. It stated: "This memorandum is to remind you that December 31, 1999 is the deadline
for submitting Medicare+Choice shadow claims to your fiscal intermediary for purposes of
receiving [GME] or [IME] payments for the period January-September, 1998." A.R. at 2511.
The memorandum did not come from HHS, nor did it reference any official HHS source for this
statement. Plaintiffs agree that they received the memorandum in November 1999 and attempted
— successfully, they maintain — to file "no pay" claims by year-end. 12
The question for the Court is whether the receipt of the AAMC memorandum, and
plaintiffs' action to conform their conduct to it, requires a different determination than that
reached in Loma Linda. 13 The parties agree, as does the Court, that the sole fact that the AAMC
sent the memorandum and plaintiffs received it is insufficient to provide notice, since the AAMC
is a third party, not the Secretary's agent. See Gates & Fox, 790 F.2d at 156-57 (finding
inadequate notice when warning "came not from OSHA but from the general contractor's safety
inspector, and was therefore not an authoritative interpretation of the regulation"). Rather, the
Secretary maintains that what distinguishes this case from Loma Linda is that plaintiffs here
"knew" or "understood" the deadlines, indicating that they had "actual notice" of them. In other
words, since plaintiffs gathered, from the AAMC memorandum, that the deadlines applied and
12
More precisely, plaintiffs indicate that staff was instructed to file "no pay" UB-92s beginning in February 1998,
and then performed a "massive search of records and bill[ing]" (by their account, a "rebilling") after receiving the
AAMC memorandum in November 1999. See A.R. at 2522-23, 2527.
13
The district court in Loma Linda stated that CMS "did not inform hospitals" (plural) of the decision to apply the
Part A regulations to claims for IME/GME payments associated with Part C enrollees. See 684 F. Supp. 2d at 54.
On the other hand, the D.C. Circuit framed its affirmance in terms of "[a]ppellee" — that is, Loma Linda
specifically. 408 Fed. Appx. 383. To what degree these locutions were purposeful is not clear.
-23-
took action as such, plaintiffs were not prejudiced by the fact that the Secretary did not actually
inform them of the deadlines. By contrast, Loma Linda concluded that "neither the
Administrator's decision nor the Secretary's filings to this Court identify any evidence in the
record that Loma Linda was aware of the deadline for filing." 684 F. Supp. 2d at 55.
The Administrator's decision on remand in this case suggests unacceptable non-
acquiescence to Loma Linda — i.e., to D.C. Circuit law. The Administrator incorporated the
AAMC memorandum into her analysis not as an indication that these plaintiffs, specifically,
understood the timing requirements, but rather as evidence that hospitals generally did so — the
very conclusion rejected by Loma Linda. The Administrator thus wrote that the "irrefutable
connection between using the UB92 form for payment and need to timely file the form within the
normal filing deadlines is evident in" the AAMC memorandum. A.R. at 2511. And the
Secretary reiterated that "the teaching hospital community and its associations knew the filing of
the UB-92 form was, like all other claims, required to be done within the usual timeframes." Id.
at 2511. The Court finds this language objectionable. A court of this district, affirmed by the
D.C. Circuit, has explicitly ruled that there was no "irrefutable connection" between using UB-
92s and the timing deadlines. The Administrator's stubborn repetition of this argument is
unacceptable.
The Secretary has tried to rehabilitate the Administrator's statements by pointing out that
the courts in Loma Linda might have reached a different conclusion had the record in that case
contained the AAMC memorandum. Fair enough, but that is not quite what the Administrator
said on remand. The D.C. Circuit has already considered the Administrator's contention that the
use of UB-92s notified hospitals of the deadlines. The Administrator lost that argument in Loma
Linda.
-24-
In any case, the Court will consider the Secretary's present argument that plaintiffs had
"actual notice" because they "knew" of the relevant deadlines, even though the Administrator did
not base her remand decision on this specific reason. See Dickson v. Sec'y of Def., 68 F.3d
1396, 1404 (D.C. Cir. 1995) ("A reviewing court will 'uphold a decision of less than ideal clarity
if the agency's path may reasonably be discerned.'") (quoting Bowman Transp., Inc. v. Arkansas-
Best Motor Freight Sys., 419 U.S. 281 (1974)). To be fair, the Administrator did note, albeit
elsewhere in her decision, that plaintiffs, specifically, were "aware of the deadlines." A.R. at
2524.
The issue, then, is whether plaintiffs' "knowledge" of the relevant deadlines constitutes
"actual notice" from the Secretary. The Secretary relies on cases from the notice-and-comment
rulemaking context indicating that "even if the agency has not given notice in the statutorily
prescribed fashion, actual notice will render the error harmless." Small Refiner Lead Phase-
down Task Force v. EPA, 705 F.2d 506, 549 (D.C. Cir. 1983) (citing Sierra Club v. Costle, 657
F.2d 298, 355, 360, 398-99 (D.C. Cir. 1981)). The Secretary notes that plaintiffs, in
correspondence with the fiscal intermediary about these claims (in 2003), referred to "the
required deadline" for filing the claims; plaintiffs then stated that they "received notification
from the [AAMC]" that the claims "had to be submitted by December 31, 1999." Def.'s Cross-
mot at 9-10; see A.R. at 893.
Plaintiffs rely principally on General Electric for the proposition that "notice must be
provided either from the face of the regulations or by other 'statements issued by the agency.'"
Pls.' Mem. in Opp'n to Def.'s Cross-mot. and in Reply to Def.'s Opp'n to Pls.' Mot. for Summ. J.
[Docket Entry 16] at 6 (quoting General Electric, 53 F.3d at 1329). In the "ascertainable
certainty" passage from General Electric cited by the D.C. Circuit in Loma Linda, the court
-25-
focused the inquiry on whether the agency had "fairly notified" regulated parties through its
"regulations and other public statements." General Electric, 53 F.3d at 1329. Plaintiffs have also
cited several cases in which the D.C. Circuit's language similarly implies that notice must come
from the agency itself. See, e.g., Trinity Broad. of Fl., Inc. v. FCC, 211 F.3d 618, 628 (D.C. Cir.
2000) ("We thus ask whether 'by reviewing the regulations and other public statements issued by
the agency a regulated party acting in good faith would be able to identify, with ascertainable
certainty, the standards with which the agency expects parties to conform . . . .'") (quoting
General Electric, 53 F.3d at 1329). However, plaintiffs do not cite any cases that explicitly
consider and reject the Secretary's position that "actual notice" can be based on what the
regulated party knew or understood from sources other than the agency.
In the Court's view, General Electric did consider what the regulated party "knew," but
that consideration took place within a larger discussion of what the agency itself said. General
Electric examined at some length the relevant regulations and indications given by the agency
about how it was interpreting the regulations. See 53 F.3d at 1330-33. The court also briefly
considered the government's argument that the regulated party received "actual notice" of the
regulatory requirements. See id. at 1333. In a short few sentences, the court did consider the
conduct of the regulated party without any obvious reference to a statement by the agency,
before concluding that the party's conduct did not indicate it "knew" of the agency's
requirements. See id. ("While GE sought a permit for that alternative, its decision to do so does
not mean that it knew EPA required a permit for distillation in itself."). Nonetheless, the bulk of
the "actual notice" discussion focused on a letter sent by the agency itself, as well as GE's
response to the letter. See id.-26-
On the whole, the Court finds that plaintiffs did not receive adequate notice that the
deadlines at 42 C.F.R. § 424.44 applied to the filing of these claims. Loma Linda concluded that
hospitals were not informed by the Secretary's own statements that the deadlines applied to
claims for IME/GME payments for Part C enrollees. Although the Secretary is not wrong that
this determination was made without consideration of the AAMC memorandum, the Court does
not believe that simply adding this document changes the conclusion reached in Loma Linda.
The AAMC memorandum was generated by a third party on the basis of the very statements that
Loma Linda found inadequate to provide notice. The AAMC memorandum did not cite (or
otherwise purport to rely on) anything from the Secretary that actually indicated that the
deadlines would apply. The fact that a third party discerned — on the basis of statements that
did not themselves give notice — what the Secretary would conclude is simply not enough to
change the notice determination.
Hence, Loma Linda's holding — that hospitals generally were not notified by the
Secretary of these deadlines — maintains its force on the present record. The Court must still
consider, however, whether these plaintiffs, specifically, received "actual notice" of the
deadlines. On that question, the Court rejects the Secretary's argument that the evidence that
plaintiffs "knew" or "understood" the deadlines means that they received "actual notice" of the
rules.
The Secretary is conflating plaintiffs' understanding of the regulatory requirements with
"actual notice" from the Secretary. The very concept of "notice" of a regulatory requirement is
that the government has appropriately informed the regulated community before penalizing it for
noncompliance. The cases cited by the Secretary stand most clearly for the proposition that an
agency need not give notice in a particular manner, rather than the proposition that notice can be
-27-
inferred from a regulated party's conduct without actual notification by the agency. See Small
Refiner, 705 F.2d at 549 ("Our cases recognize that even if the agency has not given notice in the
statutorily prescribed fashion, actual notice will render the error harmless. . . . As a general rule,
EPA must itself provide notice of a regulatory proposal.") (first emphasis added). These cases
are from the notice-and-comment rulemaking context, in which the need for notice from an
agency is different from when the agency is penalizing a regulated party on the basis of a
regulatory requirement that was not clear. All the statements from the D.C. Circuit describing
the "ascertainable certainty" standard in this context use the word "notice" to refer to what the
agency itself told the regulated party or, relatedly, what the regulated party concluded from the
agency's own statements.
In General Electric, the court inquired into whether the plaintiff had received "actual
notice" by considering whether the plaintiff had been able to glean the agency's expectations
from what the agency itself said or whether the plaintiff had been specifically notified by the
agency in some manner other than how the general public had been informed. See 53 F.3d at
1333. There is no evidence in the record here either that plaintiffs were able to glean the
Secretary's conclusion from what the Secretary actually said or that the Secretary informed
plaintiffs specifically. Rather, plaintiffs' "knowledge" of the Secretary's expectations came from
a third party's interpretation of the Secretary's own inadequate statements. Again, that the
AAMC interpreted the Secretary's statements in a particular way and informed plaintiffs of that
interpretation cannot alter the fact that the notice given by the Secretary was inadequate. On the
basis of what the Secretary herself said, the AAMC might well have been incorrect that the
deadlines applied. Indeed, a straightforward reading of the regulations would suggest that the
-28-
AAMC was, in fact, wrong. And nothing from the Secretary expressed a contrary interpretation
of the language of the exception in § 424.30.
To be sure, the Secretary has a valid point that plaintiffs were not obviously prejudiced
by the Secretary's failure to give notice. Plaintiffs contend that they submitted these claims
within the deadline upon receiving the AAMC memorandum in November 1999, and it is not
clear what, if anything, plaintiffs would have done differently if they had been notified by the
Secretary herself. There is a sense, then, that plaintiffs are benefitting from CMS's mistake when
that mistake did not actually harm them. On the other hand, there also seems to be little question
that plaintiffs actually did provide services to these enrollees under Medicare Part C and that,
therefore, they are entitled to these payments so long as they complied with the applicable
procedural requirements. If the Secretary wishes to enforce procedural requirements strictly, she
must provide notice to regulated parties what those requirements actually are, especially when,
as here, the Secretary's own regulations suggest that the requirements do not apply. Having
failed to provide adequate notice, the Secretary's error is not excused simply because plaintiffs
attempted to submit their IME/GME claims by the deadline, particularly when the Secretary is
strictly enforcing the regulatory procedural requirements against plaintiffs.
In sum, the Secretary did not provide adequate notice to plaintiffs that the timing
requirements of 42 C.F.R. § 424.44 applied to their claims for IME/GME payments for enrollees
treated under Medicare Part C. Loma Linda established that the Secretary did not provide
hospitals generally with notice that the timing deadlines applied. The only relevant difference
between the present situation and Loma Linda is that here plaintiffs received a memorandum
from a third party indicating that the relevant deadlines applied. Absent any communication
whatsoever from HHS, this third party memorandum is insufficient to provide adequate notice to
-29-
plaintiffs, regardless of how plaintiffs reacted to or understood that memorandum. The need for
clear notice from the Secretary is especially acute here because the agency's interpretation is at
odds with relevant regulatory language. Hence, plaintiffs did not receive notice of the filing
deadlines with "ascertainable certainty," General Electric, 53. F.3d at 1329, and the Secretary's
denial of payment to plaintiffs was invalid.
VI. Factual Determination and Plaintiffs' Other Claims
In addition to the timing issue, plaintiffs' complaint alleges that the requirement to file
"no pay" UB-92s violates the Paperwork Reduction Act, 44 U.S.C. § 3501 et seq., because the
Secretary did not receive OMB approval for this requirement. See Compl. ¶¶ 123-35; see also
Pls.' Mem. at 30-33. In theory, this claim is not mooted by the Court's finding that plaintiffs did
not receive adequate notice of the timing requirements, since plaintiffs still need to file UB-92s
for 1999 and 2000 even if the deadlines do not apply. In practice, however, the relief actually
sought by plaintiffs —setting aside the Secretary's decision denying plaintiffs' IME/GME
payments for fiscal years 1999 and 2000 and requiring payment of those sums, see Compl. at 28-
29 — will be effectuated based on the Court's resolution of the notice issue with respect to the
timing deadlines. The Court therefore will not reach the Paperwork Reduction Act claim. 14
Likewise, the Court need not address the Administrator's factual determination that these claims
were not actually timely filed.
VII. Conclusion
14
Plaintiffs' contention that applying the filing requirements to these claims is inconsistent with 42 C.F.R. § 424could be construed as an argument against the underlying requirement to file UB-92s. See Pls.' Mem. at 20-26.
Further consideration of this issue is not necessary, however, for the same reason that further consideration of the
Paperwork Reduction Act issue is unnecessary. Plaintiffs also argue that even if their UB-92s had validly been
rejected as untimely, they would still be entitled to IME/GME payments based on the principle that cost report
settlements must utilize the "best available data." See Pls.' Mem. at 26-30. It seems that this argument is primarily
directed at the timing requirement (rather than the underlying need to file UB-92s), and so is made moot by the
Court's determination that plaintiffs did not receive adequate notice of the timing requirement.
-30-
HHS regulations do not clearly require hospitals to file claims for supplemental medical
education expenses associated with Medicare Part C enrollees within the ordinary time frames
for filing Part A Medicare claims through fiscal intermediaries. Given the unclear dictates of the
regulations, and upon consideration of the record in this case, the Secretary did not provide
plaintiffs with adequate notice that the deadlines applied. The Secretary's decision denying
plaintiffs these payments is therefore invalid and the case will be remanded to the Secretary for
processing and payment of plaintiffs' fiscal years 1999 and 2000 IME/GME claims. 15 A separate
order has been issued on this date.
/s/
JOHN D. BATES
United States District Judge
Dated: March 20, 2012
15
Although plaintiffs' complaint also sought recovery of attorneys' fees and costs, see Compl. ¶¶ 144-50, the Court
is not presently inclined to grant such relief. If plaintiffs still wish to pursue recovery of fees and costs, they may
file a motion to that effect, and the Court will consider the issue further at that time.
-31-