filed: August 14, 1990; As Amended. As Corrected October 31, 1990.
On Appeal From the United States District Court for the Eastern District of Pennsylvania; D.C. Civil No. 87-7746.
Sloviter, Becker, Circuit Judges, and Lifland, District Judge.*fn*
This appeal by American Ambulance Service of Pennsylvania, Inc. ("AASI"), a health care provider, challenges the district court's decision that it lacked subject matter jurisdiction to review certain Medicare Part B recoupment determinations.*fn1 The recoupment determinations were made by a Fair Hearing Officer, acting under the auspices of the Medical Service Association of Pennsylvania ("Blue Shield"), which, in turn, acts as agent for the Secretary of Health and Human Services ("the Secretary"). The determinations obliged AASI to reimburse Blue Shield for payments previously made by Blue Shield to AASI for ambulance services furnished to three dialysis patients between January 1, 1983 and September 30, 1984. The district court's conclusion that it lacked jurisdiction was grounded on United States v. Erika, Inc., 456 U.S. 201, 72 L. Ed. 2d 12, 102 S. Ct. 1650 (1982), which held that Medicare Part B claims are not ordinarily reviewable in federal court. The district court found Bowen v. Michigan Academy of Physicians, 476 U.S. 667, 90 L. Ed. 2d 623, 106 S. Ct. 2133 (1986), which held that Medicare Part B claims are reviewable only if a complaint challenges the method by which the claim was determined, inapplicable.*fn2 It dismissed all counts of AASI's thirteen-count complaint on jurisdictional grounds because it construed AASI's claims as challenges to the Hearing Officer's individualized determinations, not the method by which she made them.
AASI appeals the decision only with respect to counts VI, VII, VIII and IX. Given its jurisdictional ruling, the district court did not reach the merits, but, as will be seen, the jurisdictional issues before us cannot be understood or decided without taking into account the parties' contentions on the merits. We will therefore analyze those contentions throughout this opinion. However, nothing in this opinion should be construed as a judgment on the merits. That judgment must come, in the first instance, from a district court with jurisdiction to evaluate the claims.
AASI's first merits contention is that both the Secretary's Carrier Manual provision and the Health Care Financing Administration ("HCFA") Regional Medicare letter, on which the Hearing Officer relied in upholding Blue Shield's claim for reimbursement, conflict with and impermissibly modify the Medicare statute, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. Second, AASI asserts that although overpayments*fn3 like the one at bar are statutorily waived as long as the provider acted reasonably and had no reason to know that Blue Shield would deny the payment, another provision in the Carrier Manual automatically denies the benefits of this statutory waiver to ambulance service providers. In AASI's view, that denial cannot be reconciled with the statute, and hence is invalid. The Secretary counters that these challenges by AASI are merely to the application of the rules, that such applications are not reviewable under Erika or Michigan Academy, and that the district court's dismissal for lack of subject matter jurisdiction was therefore proper.
We disagree with the Secretary. After careful review of the record, we conclude that AASI's challenge to the Carrier Manual provision and HFCA Regional Medicare letter is a challenge to the method Blue Shield uses to determine its claims, not merely to the results of that method in this case. We also believe that AASI's challenge to the blanket exclusion of ambulance service providers from the statute's waiver provisions is a challenge to the Carrier Manual itself, not to its application. We thus find the requisites of the Michigan Academy exception to Erika met, conferring jurisdiction on the district court. We will therefore reverse and remand for consideration of the merits.
I. FACTS AND PROCEDURAL HISTORY
Part B of the Medicare program is a voluntary, federally subsidized health insurance program that covers medical expenses, including necessary ambulance services, not covered under Part A of the program. 42 U.S.C. § 1395j-1395w-4.*fn4 AASI's underlying claims turn on who decides what a "necessary ambulance service" is and how that determination is made. Normally, a patient submits a Medicare voucher to a health care provider. The provider then submits the voucher to an insurance carrier (in this case Blue Shield), 42 U.S.C. § 1395u(b)(3), which pays the provider for roughly 80% of the provider's submitted costs. The other 20% is borne by the patient. The carrier is then reimbursed from the Social Security Trust Fund. In designing Part B, Congress authorized the Secretary to delegate to private insurance carriers the responsibility for setting rates, reviewing claims, and making payments from the Social Security Trust Fund on behalf of the Secretary. 42 U.S.C. § 1395u. The Secretary pays the participating carriers' costs of administration. 42 U.S.C. § 1395u(c).
Between January 1, 1983, and September 30, 1984, AASI provided a total of 428 ambulance trips to dialysis patients George Dagilus, Francis New, and Joseph Perla ("Enrollees"), all of whom were enrolled in the Part B program. AASI's total charges for these services were $122,656, and it submitted claims totaling this amount to Blue Shield. Attached to the claims were forms known as Supplemental Documentation for Ambulance Transportation ("SDFAT"), signed by physicians, certifying: (1) that the enrollee's physical condition required movement by stretcher; (2) that transportation by means other than an ambulance was "contraindicated"; and (3) that the enrollee was confined to bed both before and after the ambulance transportation. In addition to the SDFATs, AASI also filed letters from each enrollee's treating physician stating that ambulance services were medically necessary.
After evaluating these claims, Blue Shield decided to reimburse AASI, but determined that the $122,656 figure should be reduced to $114,347, the amount it found to be a reasonable charge for the services. Thus, Blue Shield paid AASI $91,420.60, or 80% of $114,347. Several months later, Blue Shield conducted a post-payment survey on these claims. The survey, based on a review of the patients' hospital and nursing home records, indicated that the enrollees had possessed some ambulatory ability at the time of the services in question, and that ambulance service was not called for. At that point, Blue Shield asked for its $91,420.60 back. At AASI's request, Blue Shield reviewed that decision, but did not change its mind.
AASI then appealed to a Blue Shield appointed Fair Hearing Officer in accordance with 42 C.F.R. § 405.820-872. The Hearing Officer, along with a physician consultant, reviewed the enrollees' medical records and, in a written opinion, rejected AASI's appeal based upon two determinations. First, the Hearing Officer determined that other means of transportation were not conclusively contraindicated. 42 U.S.C. § 1395x(s)(7). Second, the Hearing Officer determined that AASI was not entitled to a waiver of liability because the denial was based on § 1395x(s)(7), not § 1395y(a)(1). 42 U.S.C. § 1395pp waives provider liability for overpayments if payment is denied pursuant to § 1395y(a)(1) and the provider could not have reasonably expected that payment would be denied.
AASI thereupon sued in the district court. Its complaint alleged that it had complied with all of Part B's requirements, and that Blue Shield and the Hearing Officer were not free to overrule the determinations by the enrollees' physicians that ambulance services were necessary and that all other forms of transportation were contraindicated. AASI also alleged that it was entitled to a waiver of reimbursement liability, pursuant to 42 U.S.C. § 1395pp, on the ground that neither it nor its enrollees knew or should have known that the services in question were not reasonable and necessary.
Blue Shield responded with a motion for summary judgment, arguing that § 2120 of the Medicare Carrier Manual and HCFA Regional Letter Number 10-80 required that all other forms of transportation be conclusively contraindicated, not merely contraindicated, and that therefore it was free to re-evaluate diagnoses by physicians, treating or non-treating. Blue Shield also contended that § 7300.2.C. of the Carrier's Manual prevented AASI from qualifying for a waiver because payment for the services in question was barred by 42 U.S.C. § 1395x(s)(7). AASI filed a cross ...