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Little Company of Mary Hospital v. Sebelius

November 24, 2009


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06-C-6430-Wayne R. Andersen, Judge.

The opinion of the court was delivered by: Flaum, Circuit Judge.


Before POSNER, FLAUM, and ROVNER, Circuit Judges.

In 2003, plaintiff-appellant, Little Company of Mary Hospital (Little Company), requested that their assigned Medicare financial intermediary (Intermediary) reopen and reconsider several issues in Little Company's cost report from 1998. When the Intermediary reopened only one of the challenged issues, Little Company appealed all of the challenged issues to the Provider Reimbursement Board (PRRB). The PRRB dismissed the appeal of the non-reopened issues. Little Company appealed the PRRB's dismissal to the district court. The district court granted summary judgment in favor of the defendant-appellee, the Secretary of Health and Human Services (Secretary). This appeal follows. For the reasons set forth below, we affirm the district court's grant of summary judgment.

I. Background

A. The Medicaid Reimbursement Process

Hospitals that participate in the Medicare program must enter into a provider agreement with the U.S. Department of Health and Human Services to receive Medicare reimbursement. Those hospitals participating in the Medicare program that serve a disproportionate share of low income patients are entitled to a Disproportionate Share Hospital (DSH) payment adjustment. The DSH payment adjustment requires the calculation of the disproportionate patient percentage. The disproportionate patient percentage is the sum of the Medicaid Fraction*fn1 and the Supplemental Security Income (SSI) Fraction.*fn2 See 42 U.S.C. § 1395ww(d)(5)(F)(vi).

When filing for reimbursement from the Medicare program, the provider must first file an annual cost report with an assigned Intermediary. The Intermediary then conducts an audit, accounts for interim payments to the provider, and issues an initial "notice of program reimbursement" (NPR). The provider may appeal the initial NPR to the PRRB within 180 days if at least $10,000 is at issue. 42 U.S.C. § 1395oo(a). Upon appeal, the Secretary's delegate, the Administrator of the Centers for Medicare and Medicaid Services (CMS), may review the decision of the PRRB. If the provider is dissatisfied with the decision of the PRRB and the CMS Administrator, the provider may request that a federal district court review the decision. 42 U.S.C. § 1395oo(f)(1).

When a provider does not file a timely appeal of the initial NPR, the NPR is considered finalized. 42 C.F.R. § 405.1807 (2009). However, under 42 C.F.R. § 405.1885(a) (2004) -a set of regulations separate from those governing*fn3 the appeals process discussed above-the Intermediary may reopen specific findings on matters at issue within three years of the initial NPR based on a request by the provider or on its own initiative. At the close of the reopening, the Intermediary issues a revised NPR on the specific issues reopened. The parts of the NPR that the Intermediary did not reopen remain finalized in the initial NPR. With regards to the specific issues reopened, the provider has the rights of appeal discussed above.

42 C.F.R. § 405.1889 (2009).

B. The Medicaid Reimbursement Process In This Case

Little Company is a hospital that participates in the Medicare program and is entitled to a DSH payment adjustment. On September 12, 2000, Little Company's assigned Intermediary issued an initial NPR for Little Company's cost reporting period ending June 20, 1998. The NPR was finalized when Little Company failed to appeal to the PRRB or the CMS Administrator within 180 days. On September 5, 2003, Little Company submitted a request for reopening of the finalized 1998 NPR regarding the calculation of the Medicaid Fraction and the SSI Fraction. Shortly after this request, on November 3, 2003, an email exchange occurred between two employees of the Intermediary regarding Little Company's 1998 cost report. The email stated, "Chris, I just realized that there are only Primary, Secondary and HMO supports. Can you please send supports for the SSI Eligible Days as well? Thank you, Mark K."

Almost exactly a year after this email exchange, on November 11, 2004, the Intermediary issued a Notice of Reopening. The Notice of Reopening stated:

In accordance with this Regulation, we have determined that your cost report will be reopened for the following reason(s): The Intermediary notes that the Provider has requested a reopening to include Medicaid Additional Eligible Days ...

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