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LITTLE CO. OF MARY HOSP. & HEALTH CARE CTRS. v. SH

July 20, 1993

LITTLE COMPANY OF MARY HOSPITAL AND HEALTH CARE CENTERS, Plaintiff,
v.
DONNA E. SHALALA,1 Secretary of Health and Human Services, and WILLIAM TOBY, JR., as Acting Administrator of the Health Care Financing Administration, Defendants.


PLUNKETT


The opinion of the court was delivered by: PAUL E. PLUNKETT

Little Company of Mary Hospital and Health Care Centers ("Little Company") has been a Medicare participating provider since 1966. Sometime in the early 1980s, Little Company developed a computer program to assist it in computing its Medicare billings. Unfortunately for Little Company, computers are only as good as the information programmed into them. In this case, someone forgot to tell the computer to bill Medicare for certain covered procedures according to new higher rates. As a result Little Company billed Medicare for 88 hospital discharges at a rate lower than the permitted higher rates.

 Little Company discovered its computer error after it had submitted its bill and after the time for filing adjustments had run. This mistake left Little Company over $ 259,000 out of pocket. Upon discovering its costly mistake, Little Company notified its fiscal intermediary by letter. Citing the regulation requiring that requests for adjustment be made within 60 days of the original cost report, the intermediary denied Little Company's request for an upwards adjustment. Little Company timely appealed this denial to the Provider Reimbursement Review Board ("the Board"); however, it fared no better on appeal, for that too was dismissed for want of jurisdiction.

 Unable to obtain the relief to which it felt itself entitled through the administrative process, Little Company filed two suits in this Court pursuant to 42 U.S.C. § 1395oo(f)(1), alleging that the Board's finding that it lacked jurisdiction over the hospital's appeal was arbitrary, capricious, and otherwise not in accordance with the law. The first suit, which was based on 51 discharges made prior to fiscal year 1989, was assigned to our colleague Judge Ann C. Williams and has since been dismissed; the second (ours) is based on the remaining 37 discharges that occurred in fiscal year 1989.

 The Secretary of the United States Department of Health and Human Services ("the Secretary"), named here as a defendant, filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). Little Company responded to this motion and filed a motion for summary judgment. For the reasons that follow, we grant Defendant's motion and deny that of the Plaintiff.

 Background2

 Part A of the Medicare program (established in Title XVIII of the Social Security Act) provides insurance for inpatient hospital services and related post-hospital nursing facility or home health care furnished to eligible beneficiaries receiving social security retirement or disability benefits. 42 U.S.C. §§ 1395c-1395i-4. Private fiscal "intermediaries", who act under contract, pay for covered services directly to the "provider of services" (e.g., a hospital) according to certain reimbursement criteria set by statute and regulation. Id. §§ 1395f(b), 1395h.

 Providers of services seek reimbursement from Medicare pursuant to the Prospective Payment System ("PPS"). Under this system, payment is made from prospectively fixed standard rates payable on a per discharge basis. Pub. L. 98-21 (April 7, 1983), § 601, amending 42 U.S.C. § 1395ww. The PPS payment made for a given patient's stay is based on a code assigned to that stay. This code is called a "diagnosis-related group" or DRG and is assigned according to a variety of factors including the primary and secondary (if any) diagnosis, age, and sex of the patient.

 In order to receive payment, the provider of services submits to its fiscal intermediary a claim form for the discharge listing (inter alia) a diagnosis and procedure codes from the International Classification of Diseases, 9th Clinical Revision ("ICD-9"). The intermediary processes the provider's claim form by running it through a computer program that assigns a DRG to the stay based on the information submitted and then computes the amount due. This amount due is computed pursuant to a formula. *fn3"

 After this processing is complete the intermediary sends the hospital a statement indicating the DRG assigned to each inpatient stay. Once a DRG code has been assigned a stay "a hospital has 60 days after the date of the initial notice of the initial assignment . . . to request a review of that assignment." 42 C.F.R. § 412.60(d)(1).

 In our case, Little Company had its own computer program that assigned DRG codes according to the ICD-9 information fed it. Little Company's program ostensibly was to assign discharges appropriate DRG codes, recognize reimbursable discharges by DRG code, and then produce claim forms for those discharges. Little Company would then forward these claims forms to its fiscal intermediary for further processing.

 Unfortunately, Little Company's computer program failed to recognize certain changes in DRG reimbursements. Prior to October 1987, Medicare reimbursed hospital providers for very few DRG codes based on ICD-9 codes greater than 86.99. In October 1987, Medicare expanded its reimbursement in this range, and thus covered more DRGs associated with over 86.99 ICD-9 codes. Little Company apparently failed to input this change into its computers, and as a consequence its computers continued to assign lower-yielding DRG codes to these procedures. Due to this error, Little Company included in its fiscal year 1989 claims forms approximately 37 in-patient hospitalizations at lower paying DRG assignments than they were actually entitled.

 In September 1989 Little Company recognized its mistake with respect to these 37 discharges and to 51 other discharges from an earlier period. Soon thereafter Little Company contacted its Peer Review Organization ("PRO") (which performs medical review functions under Medicare and also must approve any revision to an initial DRG assignment under 42 C.F.R. § 412.60(d) (2)) requesting a revision of the DRG assignment for these 88 hospitalizations. *fn4" On February 26, 1990, the PRO wrote to Little Company explaining that it had determined that the hospital had failed to meet the 60-day deadline specified in 42 C.F.R. § 412.60(d)(1) ("Section 412.60") for filing requests for revisions and that, in any event, requests for DRG assignment revisions must be made in the first instance to the hospital's fiscal intermediary. Little Company subsequently sought a revision from its fiscal intermediary; however, the intermediary also denied the hospital's request citing the 60-day limitations period.


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