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Argument preview: Hospitals, money, and missing a deadline

After the 10 a.m. Tuesday release of one or more opinions, the Supreme Court will hold one hour of oral argument on an issue affecting hundreds of hospitals that treat the poor who are elderly or disabled: a question of a grace period to file late claims for Medicare reimbursement from the federal government.  In Sebelius v. Auburn Regional Medical Center (docket 11-1231), the Court will hear three differing arguments from three lawyers.  Arguing for the federal government, with twenty minutes of time, will be Deputy Solicitor General Edwin S. Kneedler.  Arguing next, with ten minutes of time, will be Harvard law professor John F. Manning of Cambridge, Mass., appointed by the Court as an amicus to argue a position different from those of the opposing sides.  Arguing for eighteen hospitals, with thirty minutes, will be Robert L. Roth of the Washington office of the law firm of Hooper, Lundy & Bookman.


Ordinarily, when someone wants to file a legal claim, they usually have to do so it when it is fresh, or nearly so, so that it gets resolved before situations change or memories fade.  Sometimes, though, when such deadlines seem too harsh, they are relaxed, for what are deemed to be good reasons.  The Supreme Court has spent years trying to sort out when deadlines are binding, and when they can be interrupted for a time as a matter of fairness.  Such an interruption is called, technically, “equitable tolling.” The Justices return to that inquiry in a case that has the potential to cost the federal government “enormous amounts” of money, perhaps reaching into the billions of dollars, to pay for what the government considers stale legal claims.

This dispute is over the huge federal program of Medicare, a federal-state cooperative program that provides health insurance for tens of millions of patients who are elderly or disabled.  There are more than 30,000 health care institutions taking part in the program, and they are reimbursed for the costs of the care they deliver.  Among those providers are more than 6,100 hospitals.  How many of them will be allowed to ask for higher reimbursements than they had received, if the hospitals win the case before the Justices, is an open question.  The federal agency that processes claims for added reimbursement has a backlog in excess of 6,800 cases, so a hospital victory could be immense, dollar-wise.

When a hospital, clinic, or nursing home treats a Medicare patient, the government pays it in advance, through a financial contractor, under standardized formulas.  At the end of each year, a provider can ask for added payments based on actual cost data on what was spent treating those patients.  A request for more money is submitted to a financial contractor acting as the channel for federal Medicare reimbursement.

The case before the Court involves this system, as it applies specifically to a hospital that is designated as one with a high patient load of low-income individuals.  It gets what is called a “DSH adjustment,” meaning it is entitled to a higher level of pay because it is a “Disproportionate Share Hospital.”   Four years ago, a federal judge in Washington decided that the DSH adjustment formula which federal contractors were using was too low, because it left out many patients, thereby skewing the reimbursements that hospitals could get.  That ruling came in the case of a hospital in Springfield, Massachusett, Baystate Medical Center v. Leavitt.   Many hospitals began lining up to take advantage of that ruling.

Under federal law, if a Medicare provider is dissatisfied with what the financial contractor decides on reimbursement, it can file an appeal to a federal agency, the Provider Reimbursement Board, a five-member panel with the authority to uphold or change a reimbursement award.  The provider, though, has only 180 days, under federal Medicare law, to file such an appeal after being told by the financial contractor what its reimbursement would be.   Many hospitals did not meet that deadline, claiming later that they had not been informed either by the government or their financial contractor that the DSH adjustment formula was skewed.  They only learned of it from the court ruling in the Baystate Medical case, they said.

Hospitals then asked the Reimbursement Board to let them appeal even though they were doing so beyond the six-month deadline.  Some of the claims go back as far as 1987.  The Board ruled that it had no power to relax the deadline, noting that it was an administrative agency, not a court, and thus it lacked the authority that courts ordinarily have to allow “equitable tolling” of a filing deadline.

There is an additional wrinkle in this process.  Although there is a six-month deadline for a hospital to file an appeal with the Reimbursement Board, the Department of Health and Human Services has adopted a regulation that allows a request to file an appeal beyond the deadline, for a “good cause.” An extension of the deadline must be sought within three years after getting the financial contractor’s initial reimbursement calculation.   The hospitals in this case did not try to get the deadline extended.

After the Reimbursement Board said it could not “toll” the deadline, a group of hospitals sued in federal district court in Washington.  The district judge agreed that the 180-day deadline could not be interrupted, since it was in the Medicare law and the Reimbursement Board did not have the authority to relax it.  The U.S. Court of Appeals for the D.C. Circuit overturned that ruling last year.  It ruled that the 180-day appeal filing deadline can be interrupted when it would be unfair not to give hospitals more time, and it ordered the district judge to hear the hospitals’ plea for more time to contest their own reimbursements.  It relied, partly, upon the fact that the government had issued its own regulation allowing “good cause” exceptions to the filing deadline.

Petition for Certiorari

The federal government took the case on to the Supreme Court in April, raising the single question of whether the 180-day filing deadline for Medicare reimbursement appeals to the Reimbursement Board could be interrupted.  It argued that the court of appeals was wrong, that the ruling was “unprecedented in the nearly 40-year existence of the Board,” that it was in conflict with rulings by other appeals courts and Supreme Court precedent, and that it would “impose a substantial administrative and financial burden on the Medicare program.”

The concept of “equitable tolling,” the petition asserted, simply does not apply to an administrative proceeding before an agency like the Board.   It is unlike any private lawsuit in a court, because the work of the Board is based upon an “exceedingly complex substantive and procedural framework.”  Congress laid out the appeal process for Medicare reimbursement, the Department argued, long before the Supreme Court had even applied “equitable tolling” in court cases against the federal government.

But even if there is a “presumption” that there should be “equitable tolling,” the petition contended, it is unavailable in this case because Congress wrote a flat deadline without any “basis for judicially fashioned exceptions.”   And, the petition went on, the HHS Secretary’s own regulation for relaxing the deadline for “good cause” is very limited, and would not be available in this case anyway.  By contrast, the Department said, the court of appeals had fashioned “an open-ended equitable tolling regime.”   That regime, it added, would allow “tens of thousands of sophisticated Medicare-provider recipients to evade the carefully circumscribed and clear limits” of the law and government regulations.

The eighteen hospitals involved in this case, led by Auburn Regional Medical Center of Auburn, Washington, a part of Universal Health Services, Inc., urged the Justices not to hear this case, defending the ruling of the court of appeals as a “straightforward application” of Supreme Court precedents.  HHS, the petition argued, is not challenging those precedents, but is objecting to the ruling of the court of appeals simply because “those precedents potentially preserve a claimant’s right to be paid what the government owes where the claimant has been induced or tricked by the government’s misconduct into allowing the filing deadline to pass.”

The response contended that there is actually no conflict in the appeals courts on the issue, that there is no basis for excluding tolling of deadlines for filing by federal administrative agencies, that the sheer size of the Medicare program is not a sufficient justification for taking away the option of an interrupted deadline, and that the Secretary’s own regulations on “good cause” relaxation of the deadline show that there is no administrative problem in doing so.

The brief also noted that the Secretary does allow for an interruption if a Medicare payment decision was “procured by fraud or similar default,” including “deliberate concealmeant of information.”  The latter, this filing contended, is “the very misconduct that the hospitals alleged occurred here.”

The Court granted review on June 25.  About a month later, on July 23, the Court selected Harvard law professor John F. Manning to file a brief and make an oral argument, as amicus, for a position going beyond even the government’s contention: that is, that the 180-day filing deadline before the Reimbursement Board as specified by Congress in the Medicare law “may not be extended for any period.”   It is quite common for the Court, when the parties do not present the full range of alternative arguments, to name a neutral lawyer to help out in that regard.

Briefs on the Merits

The government’s brief began with what it called “the most fundamental point” (and the one it obviously considered its strongest): that the 180-day filing deadline cannot be relaxed by a federal court.  On that, it noted, it and Professor Manning as the Court-appointed amicus agree.  It then moved on — in contrast to Professor Manning’s argument — to defend the creation of an exemption for the Secretary of HHS.

On the fundamental point, the government’s merits brief stressed the same basic argument that it had made in its petition for review: the presumption that a court can relax a filing deadline for “equitable” reasons simply does not fit in an administrative agency regime, particularly one that is as complex as the one involving review of the Medicare reimbursement formula.  The tone of the brief on that point, though, is so strong as to suggest that, if the government can win on that point, it is willing to sacrifice the regulation that the Secretary can relax the filing deadline.

If the Court were to conclude that the Secretary can allow no extensions whatsoever, the brief said, that would certainly be an argument in favor of the basic point: no court could do so.  What the Secretary has going for an element of discretion, the brief said, was the normal deference that the courts will give to a federal agency in interpreting its own authority, the Secretary’s role at the center of the entire administative edifice of Medicare management, and the fact that Congress for more than forty years has acquiesced in the Secretary having that discretion.

Along the way in arguing against court imposition of an open-ended interruption of the filing deadline, the Department brief once again portrayed the rush of hospitals to take advantage of the Baystate decision on the flawed adjustment formula.  This lawsuit, the brief noted, “is only the first of more than a dozen” such lawsuits in the Washington court, “on behalf of approximately 200 hospitals for more than 2,000 fiscal years.”   The caseload at the Reimbursement Board, according to the brief, now includes claims by about 450 providers in more than eighty cases.

As part of the brief’s defense of leaving the Secretary with discretion to relax the deadline, it said that the Secretary at one point actually thought about eliminating any extensions, but at least has narrowed the circumstances in which she will agree to such an interruption.  The Secretary, it added, has been rigorous in enforcing the three-year time limit for seeking a relaxation.

The eighteen hospitals’ brief on the merit combines legal arguments with a strongly worded assault on the integrity of the HHS, suggesting that leaving providers with only a chance to ask the Secretary to relax a deadline would be putting them at the mercy of the very agency that “has knowingly concealed its own known errors.”

“The government,” the brief said accusingly, “fights to have its cake and eat it too, defending a one-way, inequitable tolling rule under which the Secretary is eternally free to reopen and recoup overpayments based on fraud or similar fault by the provider, without any showing of due diligence, while depriving diligent providers hurt by agency misconduct of any realistic opportunity to obtain the payments that Congress promised it would pay….An agency cannot, through regulations, help itself out of the very review of its own actions that Congress ordered.”

The Reimbursement Board, the hospitals’ filing contended, is where Medicare providers should be allowed to go to gain “meaningful review and correction of erroneous agency determinations.  To allow the agency’s affirmative concealment of known errors to defeat the very review designed to remediate such errors in the first place would stand congressional purpose on its head.”

On the legal side of their argument, the hospitals argued that there is no basis for treating the Medicare law’s 180-day filing deadline as a hard-and-fast jurisdictional rule for the Board, and there is no basis for excluding an agency like the Board from the “fundamental tenets of administrative law” that a party with interests at stake have a right to challenge determinations that harm those interests.

Professor Manning, given the simplest task of the three sides — arguing that 180 days means 180 days, period — filed a merits brief that relied heavily upon the concept that, in the Medicare law, that deadline defines the jurisdiction of the Reimbursement Board, and is thus not subject to variation from any source.   That deadline is “unqualified” in the law, the brief said, so Congress meant it to be a hard-and-fast deadline, unlike a mere deadline that may be established for a “claims-processing” function of a government agency.

“Because a jurisdictional limitation defines the authority of a tribunal to act, this Court has traditionally held that such limitations are not subject to waiver, forfeiture, or (in the case of time limitations) equitable tolling,” the brief asserted.

Challenging the government’s defense of discretion at HHS to relax the deadline, Professor Manning argued that “under the circumstances of this case,” the Secretary was not entitled to deference of the kind courts ordinarily indulge with federal agencies.  Congress wrote the Medicare law’s filing deadline for the Board, and thus addressed “the precise question” of whether that deadline was binding, on both the courts and on HHS as well.   Moreover, the professsor contended, the HHS Secretary has not been consistent on this point.

There are no amici explicitly lining up on the federal government’s side, although Professor Manning does support the government view that the courts cannot relax the Board’s filing deadline.  And there is an amicus brief, in support of neither party, from a professor of court procedure at the University of California Hastings College of Law — Scott Dodson — urging the Court to decide the case without following the analytical approach urged by Professor Manning — that is, judging the deadline issue by jurisdictional principles.  The focus, Professor Dodson suggested, should be on the effect that a statutory filing deadline will have.

The hospitals have gained the support of the American Hospital Association, health care consulting firms, and the Cardozo School of Law Tax Clinic, which provides free tax advice to low-income taxpayers, and entered this case to defend the virtue of a generous allowance of late filings.


This a case in which the mode of analysis that the Justices apply may well determine the outcome, fairly easily.  If, especially, the Court accepts Professor Manning’s argument that Congress meant the Reimbursement Board’s deadline to be fixed, binding, and beyond alteration, as a jurisdictional limitation, the case might well be over for the HHS Secretary’s option of retaining some power to relax the deadline.  One gets the impression, though, that the Secretary would not be particularly upset with that result, so long as the courts had their discretion taken away in the process.

The important point on that possibility, though, is that this is a Court that in recent years has grown quite skeptical of seeing limitations on process as “jurisdictional” in nature — a point that California professor Dodson made in the opening of his amicus brief against a jurisdiction-based approach to this case.   He even argued that a jurisdictonal approach by itself cannot answer what he regarded as a separate question, whether “equitable tolling” is to be allowed to relax a filing deadline.

If the Court were to have any sympathy for the hospitals, and their lawyer has gone to considerable lengths to portray them as victims of an incompetent if not malevolent government agency, or if the Court finds itself sensitive to the need to give those who must live under complex government regimes a full opportunity to vindicate their interests, there would seem to be an opening to uphold the D.C. Circuit’s ruling.  The very real fact, leaving aside the heated rhetoric by the hospitals’ counsel, is that they did receive reimbursement calculations that were notably flawed.  Moreover, it seems very likely that they did not get that word early enough to use the available review machinery at the Board.

The wild card in the case, perhaps, is the government’s sky-is-falling argument: the sheer pile-up of cases, all having missed deadlines of as much as a quarter-century ago, and the mountain of work that the Board would have to sort out in response.  Those circumstances could well be seen by the Justices as a deterrent to letting the deadline be suspended.

This case, made simple:

The federal government pays hospitals and other health care institutions in advance when they treat older and disabled patients covered by the Medicare program, but allows them to come back at the end of the year in an attempt to test the accuracy and adequacy of those payments.   If a hospital treats a comparatively large number of poor Medicare patients, they get a chance for a higher annual adjustment.   The availability of that adjustment is not being questioned in this case.  All that is at stake is when a hospital must file an appeal testing its adjustment-for-the-poor reimbursement.

The Medicare law allows 180 days for such an appeal to the federal agency that processes such requests.  A good many hospitals missed that deadline, claiming later that they did not know that the government’s calculations of the reimbursement formula was seriously in error, so now they want more time to file appeals.   A federal appeals court has ruled that the 180 days do not impose a fixed and binding deadline.   The Court in this case faces three choices: rule that it is a fixed and binding deadline which cannot be relaxed by any court or agency, rule that a government agency can relax the deadline but a court cannot, or rule that the deadline is subject to interruption for reasons of basic fairness.

Recommended Citation: Lyle Denniston, Argument preview: Hospitals, money, and missing a deadline, SCOTUSblog (Dec. 3, 2012, 12:07 AM),