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United States v. Robert's Nursing Home Inc.

June 30, 1983

UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
v.
ROBERT'S NURSING HOME, INC. AND ROBERT W. BURTON, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Southern District of Indiana, Evansville, Division. No. EV 78-C-26 -- Gene E. Brooks, Judge.

Author: Nichols

Before POSNER, NICHOLS,*fn* and COFFEY, Circuit Judges.

NICHOLS, Circuit Judge. This action was filed pursuant to 28 U.S.C. § 1345 by the United States on February 23, 1978, to recover amounts allegedly overpaid to appellees, defendants below, Robert's Nursing Home, Inc., and Robert W. Burton (appellees), from January 1, 1967 through May 31, 1970, while appellees were participating as a provider of services in the Medicare program. 42 U.S.C. § 1395 et seq. The district court entered judgment in favor of the appellees, concluding that the United States was barred from recovery in this matter by the statute of limitations. We affirm.

Under the Medicare program, appellees agreed to provide services to the elderly in return for reimbursement by the Department of Health and Human Services (Department) (formerly the Department of Health, Education and Welfare) for the reasonable costs of such services. 42 U.S.C. § 1395f(b). Pursuant to an agreement under 42 U.S.C. § 1395h, appellees were reimbursed by Mutual Hospital Insurance, Inc., a/k/a Blue Cross and Blue Shield of Indiana, the designated fiscal intermediary. In order to alleviate possible cash flow problems for a provider, the intermediary is required to make interim payments to a provider "not less often than monthly" and prior to any audit of the cost reports of the provider. 42 U.S.C. § 1395g; 20 C.F.R. § 405.454 (20 C.F.R. § 405 later recodified at 42 C.F.R. § 405). Although these interim payments are intended to "approximate the actual costs as nearly as is practicable," overpayments and underpayments by the intermediary to the provider are anticipated.

A provider of services is required to submit annual cost reports to the intermediary.20 C.F.R. § 405.406. On the evidence of such reports, the intermediary compares the total amount of reimbursement due the provider with the total interim payments made, and determines the amount of overpayment or underpayment made to the provider, if any, for the period reflected in the cost report. After this comparison, an initial retroactive adjustment is made "as soon as the cost report is received," subject to later audit. "When an audit is made and the final liability of the program is determined, a final adjustment will be made." 20 C.F.R. § 405.454(f). Thus, this regulatory scheme allows interim payments to be made based on estimated costs but provides that the final liability of the provider and the government under the program will not be determined until an audit of the cost reports of the provider is completed.

Appellees filed cost reports for periods ending December 31, 1967, June 30, 1968, and June 30, 1969. No cost reports were filed for periods ending December 31, 1969, and May 30, 1970. Appellees assert that the intermediary and its accountants informed them that they did not have to file cost reports for the latter two periods, thus waiving the filing requirement. By letter dated December 14, 1970, however, the intermediary notified the appellees that all interim payments received during the periods for which no cost reports were filed were now deemed overpayments and immediately due and payable. The test of this letter states:

We have not received your cost reports for the periods ending December 31, 1969, and May 31, 1970.

On September 28, 1970, * * * you agreed to submit the reports to our office by October 31, 1970.

Since the reports have not been received, and in accordance with Social Security Administration regulations, all payments you have received from Medicare since the first day of the prior reporting period are now deemed overpayments. This gives an aggregate total due the program $218,094.99 and is arrived at as follows:

Claims Overpayments $62,997.99

Audited 12/31/67 Cost Report 84,768.00

Audited 6/30/68 Cost Report 25,431.00

(includes ...


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