Mesquite Community Hospital v. Leavitt, No. 3:2007cv01093 - Document 24 (N.D. Tex. 2008)
Court Description: Memorandum Opinion and Order: The final decision of the Secretary denying Medicare reimbursement is affirmed in all respects. (see order) (Signed by Magistrate Judge Jeff Kaplan on 9/5/2008) (axm) Modified on 9/8/2008 (caw).
Download PDF
<![CDATA[
COURT DISTRICT IN THE LTNITED STATES TEXAS DISTRICT OF NORTHERN DALLASDIVISION MESQUITECOMMUNITY HOSPITAL Plaintiff. VS. NO. 3-07-CV-r093-BD of MICHAEL O. LEVITT, Secretary Department Health of the United States andHumanServices Defendant. MEMORANDUM OPINION AND ORDER judicial review of a final decision the of Hospitalseeks Plaintiff MesquiteCommunity for bad ("HHS") denying reimbursement certain Medicare of Secretary HealthandHumanServices decision affirmed. is herein, hearing the stated debts.For thereasons I. Plaintiff operatesan acute-carehospital that provides servicesto Medicare beneficiaries. (Plf. Compl. at2,J[5). Health careproviders,like plaintiff, participatein Medicareby enteringinto an agreementwith HHS andthe Departmentof Health and Human ServicesCenterfor Medicare and ("CMS"), which administers Medicareprogram. See42 U.S.C. $ l395cc. the Medicaid Services act Entities known as fiscal intermediaries as agentsof CMS in making paymentsfor servicesto PartA,r hospitals providers./d. $ 1395h; also42 C.F.R.$ 421.100.UnderMedicare see Medicare are required to file a cost report with their intermediariesat the end of the fiscal year which reflects I The Medicare statutecontains two main parts. Part A, commonly known as "Hospital InsuranceBenefits," skilled nursingcare,and home healthagency paymentfor primary institutionalcaresuchas hospitalization, authorizes provided by hospitalsand other institutionsor agencies.See42 U.S.C. $$ 1395c-1395i-4.Part B authorizes services and other medicalbenefits. Seeid $$ 1395j-1395w-4. for medical insurance coveredphysicianservices supplemental The instantcaseimplicatesonly Medicare Part A. thenmakes see actualcostsincurred. 42 C.F.R.$ 413.64; also id. 5 413.24. The intermediary with the to basedupon the cost report in accordance adjustments provider reimbursement 42 promulgated thereunder. U.S.C.$ 13959; statute regulations and requirements theMedicare of see also42 C.F.R. 421.100. $ a At thecloseofthe 2000fiscalyear,plaintiff submitted costreportto its fiscalintermediary, to for CareFirstof Maryland,Inc., seeking,inter alia, reimbursement certaindebtsattributable (Tr. beneficiaries. at 277-512). owedby Medicare amounts and unpaiddeductibles co-insurance in because approximately and Theintermediary audited report disallowed the $263,006.00 baddebts returned uncollectible. as agency hadnotbeen and weresent anoutside collection to those accounts Reimbursement Review (See Compl.at6,l21).2 Plaintiffappealed decision theProvider that to Plf. Medicare debts bad eventhough claimed "properly Board("PRRB"),whichheldthatthehospital to then agency."(Tr. at 33). Theintermediary appealed werestill with thecollection theaccounts the the the CMS Administrator,who reversed PRRB ruling and reinstated original adjustment represents final the oftheCMSAdministrator disallowing baddebts.(ld. at2-12).Thedecision the districtcourt. to of decision the Secretary HHS andis subject judicialreviewby a federal of il. in with case reimbursement is conducted accordance the Judicialreviewin a Medicare Act Procedures ("APA"), 5 U.S.C.$ 701,et seq. See42 standards forth in the Administrative set Cir. 1995). F.3d220,221(5th HospitalDist.v. Shalala,64 HarrisCounty U.S.C.g 1395oo(f1(l); decision only if it is "arbitrary, the a Underthosestandards, districtcourtmayoverturn Secretary's by with law, or unsupported substantial not capricious, abuseof discretion, in accordance an 2 For the cost reportingperiod at issue,Medicarebad debtreimbursement was limited to 600 of the allowable which is 60% of plaintiff seeksreimbursement $157,804.00, of amount. See 42 C.F.R. $ 413.89(h). Therefore, (SeePlf . Compl. at 6,121). $263,006.00. HaruisCountyHospitalDist.,64F.3dat22l.Inaddition, evidenceontherecordtakenasawhole." the court must defer to the Secretary'sinterpretation of the Medicare statute and its attendant interpretationof Medicare regulationsis given'controlling weight regulations. Id. "The Secretary's unless it is plainly enoneous or inconsistentwith the regulation."' Id., quoting ThomasJffirson 405 (1994)' Universityv. Shalala,5l2 U.S. 504, 512, ll4 S.Ct.2381,2386, 129L.F,d.zd A. underTitle XVIII of the Social Security Act,42 U.S.C. The Medicareprogram,established programfor the elderly and disabled. See42 $ 1395et seq.,is a federallyfunded healthinsurance HHS, Medicare Secretaryof U.S.C.gg 1395c,1395j,1395k.Underregulationspromulgatedbythe for beneficiariesare responsible paying a portion of the cost of certainhealth care servicesin the form of deductiblesand co-inswance. See 42 C.F.R. $$ 409.80-409.83. Deductible and coare insurance obligationsthat are not paid by Medicarebeneficiaries deemedto be "bad debts." .Id $ 4l2.ll5(a). Medicare providers are reimbursedfor bad debts to prevent the costs of covered patientsor their payors. 1d. $ 413.89(d). servicesfrom being shiftedto non-Medicare A Medicare provider may be entitled to reimbursementfor bad debts if: (1) The debt [is] relatedto coveredservicesand derived from amounts; deductibleand coinsurance (2) collectionefforts that reasonable The provider [can] establish were made; (3) The debt was actually uncollectible when claimed as worthless;and (4) Sound businessjudgment establishedthat there was no likelihood of recovery at arrytime in the future. collection effort," a provider's effort to collect 1d $ al3.S9(e). To be considereda "reasonable and Medicaredeductibles co-insurance "mustbe similarto theeffort theproviderputsforth to collect Manual patients," ^See CMS ProviderReimbursement amountsfrom non-Medicare comparable to in agency addition or in lieu of ("PRM") $ 310.3Sucheffortsmay include"useof a collection contacts."/d. $ 310.A. If a debt and telephone personal billings,follow-upletters, subsequent collectionefforts,it may be deemed and remainsunpaid after 120daysof reasonable customary of the of this Id. uncollectible. $ 310.2.Notwithstanding presumption noncollectibility, Secretary all regulations requirethe providerto cease to the HHS, throughCMS, interprets applicable bad debt. The as to collectioneffortsas a precondition claimingunpaidobligations Medicare provides rules, and source ofguidelines interpretative Manual("IM"), another Intermediary Medicare that: books l2l daysafter If the bad debtis written-off on the provider's agency, the the dateof the bill andthenturnedoverto a collection bad amountcannotbe claimedasa Medicare debton the dateof the be claimedas a Medicarebad debt only after the write-off. It can effirt. its completes collection agency collection datedJune11, 1990further added).A CMS policymemorandum IM $ 4198 at2-59(emphasis the clarifies baddebtpolicy: collectioneffort hasbeencompleted, [U]ntil a provider'sreasonable including both in'houseefforts and the use of a collection agency,a Medicarebad debt may not be reimbursedas uncollectible. This is in accordwith the fourth criterion in[42 C.F.R. $ aI3.89(e)], which provides that an uncollectedMedicare accountcannotbe considered an allowable Medicare bad debt unless sound businessjudgment establishedthat there is no likelihood of recovery at anytime in the future. Wehave always believedthat, clearly, there is a likelihood of recoveryfor an occountsent to a collection agencyand that claiming t The PRM is an extensive of informal interpretive intermediaries guidelines andpoliciespublishedto assist set 2008 WL F.3d -, and providers in implementing the Medicare regulations. SeeCommunity Care, LLC v. Leavitt, v. quotingv. Battle CreekHealth Systems Leavitt,498 F.3d 401, 404 (6th Cir. 2894700 at* | n.2 (5th Cir. 1u1.29,2008), 2007). However, the PRM rules "do not have the force and effect of law and are not accorded that weight in the MemorialHospital,5l4 U.S. 87,99,1l5 S.Ct. 1232,1239,131L.Ed.2d process."Shalalav. Guernsey adjudicatory (lees). 106 of a Medicarebad debt at thepoint of sendingthe accountto the qgency policy in IPRM $$ 308& wouldbe contraryto thebaddebt 31 0 1 . with our position, when we had been Therefore,in accordance we informed of such situations, had advisedregionaloffices and is not beclaimed whilean account at the othersthata baddebtcould collectionagency. added). Guide1990(emphases & n38,623CCH Medicare Medicaid B. the because The fiscal intermediarydenied plaintiffs claim for Medicare reimbursement accountsat issuewere sent to an outside collection agencyand there was no evidencethe accounts . had been recalled or the collection efforts had ceased (SeeTr. at 24). Indeed,during the audit process, plaintiff admitted that the delinquent accounts had not been retumed by the collection decision plaintiff contendsthat the Secretary's agency. (ld. at 1052-53,1054-55). Nevertheless, it constitutesan abuseof discretionbecause is contraryto PRM $ 310.2 and imposesadditional in that requirements are not present 42 C.F.R.$ 413.89(e).4 These sameargumentswere consideredand rejectedby the Sixth Circuit Court of Appeals v. in Battle Creek Health Systems Leavitt,498 F.3d 401 (6th Cir.2007). In that case,a Medicare provider wrote-off certain debts that were at least 120 days old, including debts that had been referredto an outsidecollection agency. The fiscal intermediaryconcludedthat the accountssent to the collection agency,which had not beenreturnedto the provider as uncollectible,did not meet "th[e] debtshad never been determinedto be of the requirements 42 C.F.R. $ 413.89(e)because a In a letter to the court dated August 19, 2008, plaintiff suggeststhat Foothill Hospital-Morris L. Johnston Memorial v. Leqvitt,558 F.Supp.2dI (D.D.C. 2008), supportsits position and has "significantbearingon this case." had violated42 U.S.C. $ 1395f,known asthe "Bad in The issuepresented Foothill Hospital waswhetherthe Secretary the of Debt Moratorium," by denying a claim for reimbursement unpaid debtsbecause delinquentaccountshad been referred to an outside collection agency. Unlike the provider in Foothill Hospital, plaintiff makes no argument concerningthe Bad Debt Moratorium in this case. werewritten to and collectioneffortscouldbe expected continueafterthe accounts uncollectible to "the off." BattleCreek,498F.3dat 406. According the intermediary, fact thatthe baddebts the that constituted evidence [theprovider]did notconsider accounts agency at remained acollection at or to be worthless thattherewasno likelihoodof recovery anytime in the future." /d. The CMS the and that upheld decision thedistrictcourtaffirmed.Onappeal, SixthCircuitheld Administrator Id.at411. The thattheSecretary'sinterpretationofsection4l3.8g(e)was"eminentlyreasonable." courtwrote: because Plaintiffs'debtsdid not meetthe criteria for reimbursement the debtsat issuewere being servicedby a collection agencywhen claimedas worthless. The very fact thatacollection agencywas still attempting to collect the bad debts at issueindicatesthat thesedebts had not yet been determinedto be "actually uncollectible when that "[s]ound claimed as worthless" and certainly contraindicates judgment established that there was no likelihood of business and (a). recoveryatanytime in the tuture." 42 C.F.R' $ a13.89(e)(3) its until the collectionagencycompletes Thesecriteriacannotbe met collection effort and returns the debts to plaintiffs as uncollectible. determinedproperly,the languagein PRM Moreover, asthe Secretary $ 310.2 is discretionaryin nature ("may be deemed"),rather than mandatory. [Citations omitted]. Thus, application of the presumption is not inevitable in every instance due to the mere passageof 120 days following a provider's use of reasonable collection efforts. rd. In an attempt to distinguish Battle Creek,plaintiff arguesthat unlike the Medicare provider policy to determinewhethera debt is collectible. Under this in that case,it follows an established policy: (l) plaintiff employsin-housecollection efforts for the first 90 daysthe accountis due; (2) for days9}-l2},plaintiff placesthe accountwith a collection agencyto seeif it can be collected; (3) the collection agencysendsreportsonthe accountsto plaintiff on, or shortly after, the l20th day, detailingcollection activitiesand account status;and (4) plaintiff compares the report to the outstanding Medicare accountsto determineif the account is collectableor if collection efforts should be continued before declaring the account as a bad debt. (SeePlf. MSJ Br. at 9-10). Thus,plaintiff arguesthat its policies differ from thosein Battle Creek becauseit considers"actual data concerningthe collectibility of accountsbefore declaring such employedby plaintiff, the issue of accountsuncollectible." (Id. at 10). Regardless the procedures the Secretaryabused his discretion in denying on judicial review remains the same--whether of for Medicare reimbursement bad debtsthat were still in the possession an outside collection agency. Asin Battle Creek,the Secretarydeterminedthat an accounthas somevalue as long as the provider permits a collection agencyto continue its collection efforts. Only when the provider collectionefforts is the accountdeemeduncollectible. Plaintiff has recallsthe accountand ceases failed to establish that such an interpretationof 42 C.F.R. $ 413.89(e) is plainly elroneous, orcontraryto law. SeeBattle Creek,498F.3d at4ll-13. inconsistentwiththeMedicareregulations, CONCLUSION The Secretary'sfinal decision denying Medicare reimbursementfor bad debts incurred by plaintiff during the 2000 fiscal year is neither arbitrary nor inconsistentwith the governingMedicare evidence. Accordingly, the decision is affirmed in all regulationsand is supportedby substantial respects. SO ORDERED. DATED: September 2008. 5, JUDGE MAGISTRATE STATES
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
