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Edgewater Hospital Inc. v. Bowen

decided: September 15, 1988.

THE EDGEWATER HOSPITAL, INC., PLAINTIFF-APPELLEE,
v.
OTIS R. BOWEN, M.D., SECRETARY OF HEALTH AND HUMAN SERVICES, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 85 C 5866 -- Harry D. Leinenweber, Judge.

Cummings and Flaum, Circuit Judges, and Grant, Senior District Judge.*fn*

Author: Grant

GRANT, Senior District Judge.

Edgewater Hospital requested a hearing from the Provider Reimbursement Review Board to review the fiscal intermediary's disallowance of certain Medicare reimbursements. When the Board denied the request for lack of jurisdiction, the hospital filed suit in district court against the Secretary of Health and Human Services. The district court granted the hospital's motion for summary judgment. The Secretary appeals that determination. For the reasons stated below, we affirm in part and reverse and vacate in part.

FACTS

1. Medicare Reimbursement Procedures

Appellee, The Edgewater Hospital, Inc. [Edgewater], is a qualified provider of Medicare services. The Medicare Program (Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. (1982 ed. and Supp. III)) reimburses such a provider for authorized health care services given to qualified elderly and disabled patients. Although the Secretary of Health and Human Services administers the Program, private "fiscal intermediaries" functioning as the Secretary's agent (42 U.S.C. § 1395h) are responsible for reviewing the claims submitted by a provider. In the case herein, Blue Cross/Blue Shield of Illinois [BCBS] was the fiscal intermediary for Edgewater Hospital.

The reimbursement procedures are statutorily established. The provider submits a cost report covering a twelve-month period to the fiscal intermediary for reimbursement of the "reasonable cost" of services rendered to Medicare patients. 42 C.F.R. § 405.1801(b). After analyzing and auditing the cost report, the intermediary issues a Notice of Program Reimbursement [NPR] which specifies the allowed and disallowed Medicare expenses and sets forth the total amount of reimbursement due the provider. 42 C.F.R. § 405.1803.

A dissatisfied provider may appeal the intermediary's final determination by requesting a hearing, in writing, before the Provider Reimbursement Review Board [PRRB or Board], within 180 days of the issuance of the Notice of Program Reimbursement. 42 U.S.C. § 1395oo(a). The PRRB has the power to affirm, modify, or reverse decisions of a fiscal intermediary. 42 U.S.C. § 1395oo(d). If the provider is dissatisfied with the Board's final decision, it may seek review in the United States District Court.*fn1 42 U.S.C. § 1395oo(f).

2. Edgewater Hospital's Medicare Claims

The facts in this case are not in dispute. Edgewater claimed Medicare reimbursement for its fiscal year ending March 31, 1983, by submitting a cost report to its fiscal intermediary BCBS. On February 15, 1984, BCBS issued a Notice of Program Reimbursement specifically disallowing four items. By letter of February 23, 1984, Edgewater requested that the intermediary reconsider the four disallowances. BCBS responded on March 22, 1984, with a letter to Edgewater stating its reasons for not changing three of the disallowed claims but granting Edgewater's fourth disputed claim. On March 30, 1984, BCBS sent Edgewater a second Notice of Program Reimbursement, stating that it was the "Revised and Final Settlement of Reopened Cost Report," with the recalculated adjustment for the one item allowed after reconsideration.

On September 26, 1984, Edgewater sent a notice of appeal to the Board, seeking a hearing on two of the denied adjustments. The appeal was filed within 180 days of the issuance of the second Notice of Program Reimbursement, but outside the time period if calculated from the first Notice. The Board notified Edgewater by letter of May 1, 1985, that the hospital's review request was denied for the reason that, the appeal not having been filed within 180 days of the first Notice, the Board lacked jurisdiction pursuant to 42 U.S.C. § 1395oo(a).

3. Court Disposition: Edgewater Hospital v. Bowen, 664 F. Supp. 1128 (N.D. Ill. 1986).

On June 25, 1985, Edgewater filed a complaint against the Secretary of Health and Human Services in district court, seeking judicial review of the Board's decision and claiming deprivation of property without due process of law. Edgewater and the Secretary filed cross-motions for summary judgment.

The magistrate to whom the motions had been referred recommended that the district court grant Edgewater's motion for summary judgment, deny the Secretary's motion, and order the Board to consider Edgewater's claims. 664 F. Supp. at 1131. Relying on St. Joseph's Hospital of Kansas City v. Heckler, 786 F.2d 848 (8th Cir. 1986), the magistrate noted that a "final decision" for purposes of judicial review includes the Board's decision that a provider has failed to satisfy the threshold requirements of section 1395oo(a). Id. The magistrate also rejected the D.C. Circuit cases upon which the Secretary relied, Athens Community Hospital, Inc. v. Schweiker, 240 U.S. App. D.C. 1, 743 F.2d 1 (D.C. Cir. 1984) and St. Mary of Nazareth Hospital Center v. Schweiker, 239 U.S. App. D.C. 288, 741 F.2d 1447 (D.C. Cir. 1984), in two ways. First, he concluded that they were inapposite to the facts herein, since they concerned claims not included in the original cost reports, claims raised after the NPR was issued. Second, even though Athens stated that "only the matters revised are open to review," 743 F.2d at 8, "Edgewater had no notice that the items claimed . . . would not be revised until the second NPR of March 30, 1984 or at least until the letter of March 22, 1984, from the intermediary." Id. Because the intermediary considered Edgewater's four disputed claims in its March 22, 1984 letter, "it would defeat the 'salutory [sic] purposes' of section 1395oo(f) to begin the 180-day appeal period [before] the second NPR was issued on March 30, 1984." Id.

The district court adopted the magistrate's report and recommendation. Id. at 1129. It found that both notices were entitled "Notice of Program Reimbursement," and that both contained the provision that the health care provider could request a Board hearing within 180 days of the Notice. Further, the second one was also designated the "Revised and Final Settlement of Reopened Cost Report." Since Edgewater filed its appeal within 180 days of the second Notice, in accordance with its directive, the court held that "the Secretary is estopped from claiming that the plaintiff was required to appeal within 180 days of the first NPR." The district court granted plaintiff's motion for summary judgment and ordered the Board hearing; it did not address the plaintiff's constitutional due process claims.

Issues

Before the court are three disputes concerning "finality": (1) Which NPR was the "final determination" under § 1395oo(3) that triggered the 180-day period for filing an appeal to the PRRB; (2) Was the PRRB's decision that it lacked jurisdiction a "final decision of the Board" which gives providers the right to judicial review; and (3) Was the district court's decision "final and appealable" to this court. In other words, we are faced with jurisdictional problems at every level of determination. The Secretary has also raised two other issues: whether a Medicare intermediary's revisions to a cost report are "issue specific," so that only revised cost items may be appealed; and whether the district court's estoppel order was appropriate.

Because appellate jurisdiction must be found before other issues can be considered, we begin this analysis with resolution of this court's right to review the district court's ruling.

Analysis

A. Appellate Jurisdiction

Appellee Edgewater challenges this court's jurisdiction over the district court's judgment in the "Jurisdictional Summary" of its brief:

The March 2, 1987 judgment was a judgment in Appellee's favor as to one of two counts in the Complaint. The district court expressly refused to decide the issues raised by Count II of the Complaint. The judgment order contains no express determination that there is no just reason to delay as required by Fed. R. Civ. P. 54(b). The judgment is therefore not final.

Following Edgewater's analysis, therefore, we must conclude that, if the disposition is not final, it is not appealable to this court and must be dismissed.

We begin by recognizing that the district court's ruling was the granting of plaintiff's motion for summary judgment and the denial of defendant's cross-motion for summary judgment. Because that holding completely and succinctly ends the litigation, the judgment is final and appealable. Homemakers North Shore, Inc. v. Bowen, 823 F.2d 174, 174 (7th Cir. 1987). Appellee asserts, however, that the judgment was only partial, and that the district court did not comply with the requirements of Rule 54(b) in order to allow this appeal of the first count alone.

The constitutional claim in Edgewater's second count was deprivation of property without due process of law. Alleging the same background and facts in both counts, Edgewater contends in its first count that it is entitled to a hearing before the PRRB on the second NPR issued on March 30, 1984, and in its second count that the denial of its request for a hearing constituted a taking of Edgewaters's property without due process of law.

Both the magistrate and the district judge acknowledged that plaintiff had raised constitutional claims in its complaint. In his Report and Recommendation, Magistrate Balog stated, "Because I recommend the court to order the PRRB to hold a hearing on these claims, I make no findings of plaintiff's constitutional claims. . . ." 664 F. Supp. at 1131. Judge Leinenweber's Order contains similar language: "Since the court orders the PRRB to hold a hearing on claims 5 & 13, no findings will be made on plaintiffs constitutional claims." 664 F. Supp. at 1129.

Had the district court intended to enter a partial final judgment under Rule 54(b), withholding action of one request but disposing of another, the rule would have required express findings on the matter in order to create "finality" and hence appellate jurisdiction. Foremost Sales Promotions, Inc. v. Director, Bureau of Alcohol, Tobacco and Firearms, 812 F.2d 1044, 1046 (7th Cir. 1987). However, it was clearly not the intention of either the magistrate or the district judge to set aside that due process determination for a later date. In fact, the court's mandate of a hearing by the Board was the very due process of law being sought by plaintiff.*fn2

Moreover, this case does not fall within the purview of Rule 54(b) because, as the court below implicitly recognized, it does not contain multiple claims. "Claims are not separate for Rule 54(b) purposes if the facts they depend on are largely the same, or, stated otherwise, if the only factual differences are manor." Minority Police Officers Assoc. v. City of South Bend, 721 F.2d 197, 201 (7th Cir. 1983). When there is a substantial factual overlap regarding an issue that is essential to a determination of both claims, the claims are not separate. ODC Communications Corp. v. Wenruth Investments, 826 F.2d 509, 512 (7th Cir. 1987). Such is the case herein. Both counts of the complaint allege the same set of facts that are essential to the determination. Moreover, the claimant could not recover separately on the due process claim, since it rests on the Board's denial of its jurisdiction. See Minority Police Officer Assoc., 721 F.2d at 200, citing Local P-171, Amalgamated Meat Cutters v. Thompson Farms Co., 642 F.2d 1065, 1070 (7th Cir. 1981) (claims cannot be separate if the claimant could not recover separately on each claim). The district court did not consider the issues segregable, and we agree. There was thus no need for meeting the Rule 54(b) requirements.

However, our jurisdictional issue is not yet settled. Not only did the district court make a summary judgment determination; it also ordered the PRRB to hold a hearing on Edgewater's claims. We sua sponte must question whether the district court's mandate to the Board was a final and appealable determination. See Clift v. International Union U.A.W., 818 F.2d 623, 626 (7th Cir. 1987).

This court has recently determined that, although an order compelling arbitration is ordinarily not final because much remains to be done, it may be final if it terminates all proceedings in the district court. Soo Line Railroad Company v. Escanaba & Lake Superior Railroad Company, 840 F.2d 546, 548 (7th Cir. 1988) (district court granted summary judgment but also ordered arbitration of certain claims). We clarified a distinction between a court's order compelling arbitration and its remand of the case for arbitration in United Steelworkers v. Aurora Equipment Co., 830 F.2d 753 (7th Cir. 1987), which found that the district court's remand to the agency for further proceedings was not a final judgment for purposes of appeal.

But we think it possible to distinguish between an order to arbitrate and a remand to the arbitrator, having due regard for the advisability of minimizing appeals that disrupt and delay arbitrations. The order to arbitrate thrusts the defendant into a forum not of his choice, for what may prove to be protracted and costly proceedings; and the merits of the order are independent of what those proceedings might bring to light. Such an order is different from an order of remand designed (as in this case) to clarify the record before judicial review of the arbitration can proceed to final judgment. The situation is no different in practical terms than if the district court had remanded an administrative order for clarification or amplification. The argument against piecemeal review is at least as strong in the arbitration context as in the administrative-review context, and we therefore conclude that the district court's order was not final.

830 F.2d at 754.

That carefully honed distinction, suitable for some circumstances, has however not created an axiom in this circuit that an order of remand is never final. For example, analysis of specific statutory provisions led this court to conclude in Daviess County Hospital v. Bowen, 811 F.2d 338 (7th Cir. 1987) that a remand may be final under the Medicare Act. After acknowledging that an order remanding a case to an administrative agency for further proceedings is ordinarily not a "final decision" subject to immediate appeal under 28 U.S.C. § 1291, we nevertheless found that a remand to the Provider Reimbursement Review Board for further proceedings was a final decision when considered in light of the applicable Medicare statute. A thoughtful yet pragmatic examination of section 1395oo(f)(1) led the court to hold that the district court's order was clearly "final" as to the Secretary of Health and Human Services because the Secretary otherwise would be barred from raising this issue in any court review proceedings that follow the administrative remand.

Appeals to district courts from PRRB orders are governed by 42 U.S.C. § 1395oo(f)(1), which allows the Secretary to modify those orders but provides for judicial review only if it is initiated by Medicare providers. If this case were returned to the PRRB now and the PRRB determined that a certain sum should be reimbursed in accordance with the district court's order, the Secretary would be unable to appeal the PRRB's action and therefore would be barred from presenting his claim that the Hospital has no right to any reimbursement. In other words, dismissal of this appeal would "have the practical effect of denying later review." United Steelworkers of America v. Union Railroad Co., 648 F.2d 905, 909 (3rd Cir. 1981). The district court's order was "final" to the Secretary because it would result in no further proceeding from which the Secretary could appeal. Accordingly, we conclude that this court has jurisdiction over this appeal under 28 U.S.C. § 1291.

811 F.2d at 342.

In the case now pending before us, the district court found for the provider and against the Secretary, and issued an order rather than a remand for further proceedings. The hearing ordered by the court concerns the merits of Edgewater's claims rather than its right to be heard on the claims. Any appeal arising from the hearing will concern those issues and will be brought as a new suit. In practical terms, the district court finally determined the specific issue of jurisdiction and returned the case to the proper forum for a determination of the provider's entitlements. We find that the district court's order was thus final to the Secretary.

Under these circumstances, we hold that the district courts summary judgment decision and order that the PRRB conduct a hearing is a "final decision" subject to immediate appeal. Therefore this appellate court has jurisdiction pursuant to 28 U.S.C. § 1291. Accord Tallahassee Memorial Regional Medical Center v. Bowen, 815 F.2d 1435, 1443 n. 12 ...


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