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From Health Law Daily, July 21, 2014

PRRB dismissal of appeal reflects Medicare “unfeeling bureaucracy”: court

By Michelle L. Oxman, JD, LLM

The Provider Reimbursement Review Board (PRRB) and the HHS Secretary improperly dismissed a hospital’s appeal of the intermediary’s Notice of Program Reimbursement (NPR) concerning its cost report for fiscal year (FY) 2005 for failure to file a preliminary position paper by the deadline. The PRRB’s action was arbitrary, capricious and unsupported by substantial evidence within the meaning of 5 USC sec. 706 because the PRRB failed to address the hospital’s argument that the PRRB had scheduled the due dates for the position papers in related appeals involving FYs 2002, 2003 and 2004 after the deadline initially set for the position paper for FY 2005. The order setting the revised schedule impliedly repealed the earlier deadlines for FY 2005. The hospital had no reason to believe that the previous deadline for FY 2005 remained effective. Therefore, the court granted the hospital judgment as a matter of law (University of Chicago Medical Center v Sebelius, July 18, 2014, Shadur, M).

History of the litigation. The University of Chicago Medical Center (UCMC) had filed appeals of the NPRs for FYs 1996 through 2007; all appeals involved the same issue. The FY 1996 appeal went forward, and the others were held in abeyance pending the outcome. In 2010, the FY 1996 appeal was resolved by a decision of the Court of Appeals for the Seventh Circuit. The PRRB then scheduled the preliminary and final position papers and the hearings for the remaining eight appeals simultaneously. According to that schedule, UCMC’s final position papers were due June 1, 2013. The PRRB subsequently notified UCMC and the intermediary that the hospital’s preliminary position paper or a joint scheduling order would be due January 1, 2013.

Because the NPR for each FY depends in part upon the final NPRs for the two preceding years, UCMC, with the intermediary’s consent, proposed a sequential schedule for the eight appeals, which addressed the final, but not the preliminary, position papers. The PRRB adopted that schedule.

The scheduling conflict. The revised schedule did not mention the January 1 deadline and did not address due dates for the preliminary position papers. As a result, the deadline for the intermediary’s preliminary position paper for FY 2002 fell one month after the deadline for its final position paper for that year. The intermediary, National Government Services (NGS), contacted the PRRB and was eventually instructed to file the preliminary position paper as originally scheduled. However, neither NGS nor the PRRB conveyed this information to UCMC.

The dismissal. UCMC did not file a preliminary position paper for FY 2005 by January 1, 2013. In late April, the PRRB dismissed the FY 2005 appeal for failure to file the position paper. UCMC requested reinstatement of the appeal, but the PRRB denied the request, stating that there had never been any overlap between the due dates for the preliminary and the final position papers.

The court’s reasoning. The court discussed the purposes of preliminary position papers generally and of the revised schedule. First, the preliminary position paper is intended to inform the other party of a party’s initial position and to foster the orderly processing of the case. The revised schedule was adopted for the stated purpose of allowing the parties to resolve the appeals sequentially and to have sufficient time to exchange documents in an orderly manner.

The court noted that the PRRB completely failed to consider the effect of the revised deadlines for FY 2002 on the resolution of the FY 2005 appeal, despite UCMC’s prominent discussion of that argument in its request for reinstatement. Therefore, the dismissal was not based upon substantial evidence and was also arbitrary, capricious, and not in accordance with the law. In addition, the court noted that the agency’s action reinforced the reputation of the Medicare program as system as an “unfeeling bureaucracy.”

The case number is 13 C 4742.

Attorneys: Ronald S. Connelly (Powers Pyles Sutter & Verville, PC) for The University of Chicago Medical Center, The. Assistant U.S. Attorney, U.S. Attorney’s Office, for Kathleen Sebelius, Secretary, U.S. Department of Health and Human Services.

Companies: The University of Chicago Medical Center; U.S. Department of Health and Human Services

MainStory: TopStory IPPSNews CMSNews IllinoisNews

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