Sebelius, Secretary of Health and Human Services v. Auburn Regional Medical Center

• [Question(s) presented]
• [Issue(s)]
• [Facts]
• [Discussion]
• [Analysis]

Issue

May a hospital challenge a reimbursement payment outside of the legal filing deadline because of fairness concerns?

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Facts

In the early 1980s, Medicare implemented a prospective payment system to reimburse hospitals for inpatient operating costs. The Center for Medicare & Medicaid Services (CMS) determines the distribution of these payments by using a nationally uniform rate. Hospitals may be eligible for additional compensation, through what is called a disproportionate share hospital (DSH) payment, if they treat a large number of low-income individuals. Whether a hospital is eligible for a DSH payment depends upon its “DSH percentage,” which the CMS calculates using a variety of factors.

From 1993 to 1996, CMS miscalculated the DSH percentage, resulting in lower payments to qualifying hospitals. In 1996, a group of hospitals filed claims with the Provider Reimbursement Review Board (PRRB) to recover full payments with correctly calculated rates. The hospitals acknowledged that although the deadline for appealing Medicare payments passed, the limitation should be equitably tolled, or extended for fairness reasons. The hospitals asserted that tolling should be allowed because CMS knowingly and unlawfully failed to disclose that they had miscalculated the DSH percentage.

The PRRB dismissed the hospitals’ claim, stating that it did not have the authority to toll the statute and thus could not decide the claim. The hospitals appealed to the United States District Court for D.C., which ruled that it lacked power to hear the case. The District Court reasoned that because the hospitals sued after the deadline passed, the PRRB could not issue a "final decision" that a court could review under 42 U.S.C. 1395oo(f). Additionally, the District Court found that the hospitals failed to prove that Congress intended to allow equitable tolling for PRRB appeals. Reversing the decision of the District Court, the United States Circuit Court of Appeals for the D.C. Circuit found that the PRRB’s decision was a “final decision” that a court had power to review. Also, the Court of Appeals held that equitable tolling applies unless Congress expressly states otherwise in a law. . On remand, the District Court was to decide whether equitable tolling should be extended in this particular case. Sebelius’s request for a rehearing was denied on December 20, 2011. The petition for certiorari to the Supreme Court was granted on June 25, 2012.

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Discussion

The dispute in this case is whether a hospital may challenge an underpayment for treating low-income individuals under the Medicare Act if the hospital challenges the reimbursement after the 180-day deadline for challenging repayment has passed. Petitioner Sebelius argues that the Medicare Act entitles her, as the Secretary of Health and Human Services, to determine when the filing period may be equitably tolled, or extended for fairness reasons. In addition, she argues that the presumption for equitable tolling does not apply to administrative agency action. In contrast, Respondents Auburn Regional Medical Center and other hospitals (collectively “Auburn”) argue that there is a general presumption for equitable tolling when it comes to federal filing deadlines. Auburn maintains that giving Sebelius sole authority for extending the 180-day deadline removes the power of hospitals to challenge underpayments. This case will affect the caseload of the Provider Reimbursement Review Board (PRRB) and its timeliness in reimbursing hospitals that treat low-income individuals.

The Future of Quality Care

The American Hospital Association (AHA) filed a brief on behalf of the hospitals, arguing that ruling for Sebelius would harm the operations of hospitals. AHA highlights the precarious position hospitals that serve low-income populations are in. Auburn notes that hospitals rely on Medicare reimbursements to treat a significant number of low-income individuals who otherwise would be barred from accessing medical services. According to AHA, hospitals get reimbursed on average for only 92 cents of every dollar spent on Medicare patients. AHA argues that not allowing equitable tolling of statutes like these would cheat hospitals out of payments for services faithfully performed, hurting their ability to serve especially vulnerable patients.

Sebelius responds that allowing equitable tolling of this statute would unduly strain the already scarce resources of the PRRB, which in turn would create claim-backlogs throughout the agency. Sebelius notes that reimbursement payments made many years ago would be open to new arguments as to why they should be re-evaluated. According to Sebelius, there are already 200 hospitals filing claims that rely upon the DC circuit’s decision: Thus, a holding for Auburn will clog the courts with challenges to old PRRB decisions, forcing the agency to expend scarce resources on challenges that were filed too late. To Sebelius, allowing a court to extend the deadline will slow the entire agency machinery, causing hospitals to wait longer for reimbursement payments. In addition, Sebelius notes that investigation of these claims would involve finding records that may not exist and attempting to recreate memories that may have faded.

Agency Expertise vs. Judicial Protection

Sebelius argues that the complexity of Medicare highlights the necessity to rely on the expertise of her agency with respect to the 180-day filing period for challenging Medicare reimbursements to hospitals. Sebelius emphasizes the highly technical nature of the Medicare system and argues that the delegation of authority to her specialized agency by Congress was the result of that complexity. To Sebelius, allowing a court to intervene in the administrative procedures of the PRRB would cut into the power that Congress granted to the PRRB.

AHA responds that Congress intended for the administrative agency to be subject to review by the courts to keep agencies accountable for their actions. According to AHA, fairness concerns are jeopardized if the Center for Medicare and Medicaid Services (CMS) fails to discover an error in its internal processes 181 days after the payment is made, and then denies a hospital its right to relief. To AHA, Congress not only expects agencies to obey their mandates but also relies on the courts to step in when those mandates are not followed.

The outcome of this case will likely affect the scope of hospital reimbursements. If the Supreme Court affirms the D.C. Circuit’s decision, hospitals may be tempted to review their records from prior years more carefully in order to uncover any potential underpayments. Such action could result in a sluggish administrative response as the caseload would increase, but may be necessary in order for hospitals to continue providing services to low-income individuals effectively.

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Analysis

The case poses the question whether the 180-day period for filing an appeal of Medicare payments is subject to equitable tolling. Petitioner Secretary of Health and Human Services Kathleen Sebelius (Sebelius) argues that administrative law restricts courts from imposing additional requirements on an administrative agency and that courts must defer to regulations of administrative agencies. Additionally, Sebelius claims that the language and history of the Medicare Act, 42 U.S.C. 1395oo(a)(3), show that Congress did not intend to allow a court to equitably toll or extend the deadline in the law. In contrast, Respondents, a group of medical centers led by Auburn Regional Medical Center (Auburn), argue that the language and purpose of the law show that the 180-day deadline does not prevent the court from hearing this kind of challenge. Auburn also argues the 180-day deadline operates like other deadlines that are subject to equitable tolling. Arguing against Auburn, John F. Manning (Manning), an attorney that the U.S. Supreme Court appointed to this case, contends that the language, context, and structure of the law show that the 180-day deadline limits the power of the Provider Reimbursement Review Board (PRRB) to hear cases and so is the kind of deadline that cannot be extended for any reason.

Sebelius Argues that Principles of Administrative Law Prevent Judicial Intervention

Petitioner Sebelius argues that equitable tolling cannot apply to the 180-day deadline because the administrative regulations governing extensions are neither arbitrary nor capricious. Sebelius notes that, as Secretary, she allows extensions beyond the 180 days only for “good cause” and only within three years. Sebelius claims that the three-year period and good-cause requirements are not arbitrary or capricious and so merit deference from the courts. Additionally, Sebelius notes that, as Secretary, she enjoys exclusive discretion over administrative procedures, thus preventing a court or other administrative board from adding its own procedures and extensions that could subvert her discretion. According to Sebelius, the PRRB has held in previous cases that it has no general power of equitable tolling, and that it can impose its own procedures only if consistent with the secretary’s regulations.

Additionally, Sebelius argues that Congress did not intend to grant equitable tolling of the 180-day deadline. Sebelius argues a presumption for equitable tolling has applied to procedures of federal courts but not the procedures of administrative agencies. Additionally, Sebelius argues that a court’s power to equitably toll the deadlines of Title VII or tax laws does not imply that a court may also equitably toll the deadline of an administrative agency. According to Sebelius, Congress intended to protect the exclusive authority of administrative agencies to fashion regulations for managing the complex Medicare system. Further, Sebelius argues that Auburn’s contention relies on a presumption that opposes basic principles of administrative law. As Sebelius argues, had Congress intended to remove power from the secretary and the PRRB, Congress would have explicitly granted courts the power to restrain the discretion of administrative agencies. To Sebelius, there is nothing in the Medicare law that shows that Congress intended to uproot basic tenets of administrative law.

Auburn Argues that Equitable Tolling Applies to 180-day Filing Deadline

Auburn argues that the 180-day deadline is the kind that a court may extend for reasons of fairness. Auburn Medical argues the 180-day deadline does not define the scope of authority for the PRRB and instead targets the processing of claims. Auburn argues that the purpose of this claim-processing rule is to promote the smooth administration of reimbursement—not to bar reimbursement claims. According to Auburn, the filing deadlines in bankruptcy proceedings, Title VII discrimination suits, and Trading with the Enemy suits, are all claim-processing rules and are similar to the 180-day deadline here. Additionally, Auburn notes that sections of the law pertaining to the 180-day deadline do not characterize the deadline as a limit on the power of the PRRB. Pointing to the language of the law, Auburn argues that the section uses terms that describe the rights of individuals to process claims and lacks terms that are used to describe and circumscribe authority.

Moreover, Auburn argues that the language of the 180-day deadline confirms the presumption to provide equitable tolling. According to Auburn, unless there is strong evidence to the contrary, Congress likely intended to follow the tradition of treating the 180-day deadline as it treats other claim-processing rules and so allowed equitable tolling here. Distinguishing between language that would insist on the rigidity of the deadline, Auburn points to the absence of words that would prohibit extending the deadline—e.g., the absence of the phrase “in no event” within subsection (a)(3) which sets the 180-day deadline. Further, Auburn argues that in addition to lacking rigid language against equitable tolling, the Medicare Act lacks a replacement for the general application of equitable tolling to the 180-day deadline. Finally, Auburn contends that equitable tolling is necessary here to fulfill a central purpose of the Medicare law to properly compensate Medicare centers.

John F. Manning Argues that 180-Day Filing Deadline Limits the Power of PRRB

John F. Manning, an attorney that the Supreme Court appointed for this case, argues that the 180-day deadline is a rule that limits the power of the PRRB and so cannot be extended by a court by equitable tolling. According to Manning, this 180-day deadline creates an outer boundary of cases that the PRRB may hear and so defines the agency itself. In contrast to the arguments of Auburn, Manning claims that Congress intended that this 180-day deadline limit the power of the PRRB rather than merely facilitate the processing of claims. Manning argues that although Congress did not use the word “jurisdictional” to describe the 180-day deadline in the Medicare Act, Congress wrote the deadline in jurisdictional terms, preventing the PRRB from hearing certain classes or kinds of claims. Manning further shows that the Medicare Act includes the 180-day deadline with other requirements that limit the power of the PRRB—for example, rules regarding the appropriate subjects of claims and who may bring them.

Additionally, Manning argues that the Medicare Act as a whole shows that Congress intended the 180-day deadline to limit the power of the PRRB. According to Manning, in addition to the 180-day deadline for challenging reimbursements, the Medicare Act imposes strict requirements on hospitals for filing initial reimbursement claims. To Manning, the Medicare Act treats the filing restrictions as it does the 180-day deadline—as defining the power of the PRRB. Further, Manning contrasts the 180-day deadline for hospitals to challenge a Medicare reimbursement with a 60-day deadline for an individual to challenge a Medicare payment: Whereas the Medicare Act allows flexibility for individuals to file claims and explicitly grants discretion to the secretary to extend the deadline, the Medicare Act does not do so for the 180-day deadline. To Manning, had Congress intended to allow equitable tolling for both deadlines, the language describing each deadline should be the same or similar and would lack the fundamental differences that the deadlines have in the current Medicare Act.

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Conclusion

The Supreme Court’s decision will determine if hospitals may bring claims for alleged underpayments, if equitable considerations are satisfied, outside of the 180-day filing period for review of Medicare payments. The decision will center on whether a presumption for equitable tolling applies to this deadline in the Medicare Act. This case will determine if hospitals can bring claims from outside of the filing period requirement if they find discrepancies in payments, which could be from decades prior. Such activity may clog the administrative machinery but may also be necessary for hospitals to continue offering quality services to low-income individuals.

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