Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399 (1988)

Bethesda Hosp. Ass’n v. Bowen

No. 86-1764

Argued February 29, 1988
Decided April 4, 1988
485 U.S. 399

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

Syllabus

Under the Medicare program of the Social Security Act, a qualified provider of health care services, in order to obtain reimbursement from the Secretary of Health and Human Services for its cost of providing covered services to Medicare patients, must submit an annual cost report to a fiscal intermediary, usually a private insurance company acting as the Secretary’s agent. The intermediary then audits the cost report and determines the amount of reimbursement due to the provider. The statute, 42 U.S.C. § 1395oo (1982 ed. and Supp. III), authorizes the provider to appeal to the Provider Reimbursement Review Board. The Board may affirm, modify, or reverse the intermediary’s decision. The Secretary, either on his own motion or at the provider’s request, may review the matter further, and a provider that remains dissatisfied with a final decision of the Board or Secretary may seek review in a federal district court. In their cost reports for 1980, petitioner providers, in apportioning malpractice insurance costs, followed a 1979 regulation of the Secretary that disallowed certain claims for malpractice insurance premium costs. Petitioners later filed a request for a hearing before the Board, challenging the validity of the malpractice regulation and seeking reimbursement for malpractice costs in accordance with the pre-1979 methodology. Because the amounts had been "self-disallowed" in the reports filed with the intermediary, however, the Board determined that it was without jurisdiction to hear petitioners’ claims. In proceedings challenging the 1979 regulation, the District Court held that the Board should have exercised jurisdiction over the matter. The Court of Appeals reversed.

Held: The Board may not decline to consider a provider’s challenge to a regulation of the Secretary on the ground that the provider failed to contest the regulation’s validity in the cost report submitted to its fiscal intermediary. The plain language of § 1395oo(a) demonstrates that the Board had jurisdiction to entertain this action. There is no merit to the Secretary’s contention that a provider’s right to a hearing before the Board extends only to claims presented to a fiscal intermediary, because the provider cannot be "dissatisfied" with the intermediary’s decision to award the amounts requested in the provider’s cost report. The submission of a cost report in full compliance with the unambiguous dictates of the Secretary’s rules and regulations does not, by itself, bar the provider from claiming dissatisfaction with the amount of reimbursement allowed by those regulations. Providers know that, under the statutory scheme, the intermediary is confined to the mere application of the Secretary’s regulations, that the intermediary is without power to award reimbursement except as the regulations provide, and that any attempt to persuade the intermediary to do otherwise would be futile. While the express language of § 1395oo(a) requires the conclusion reached here, that conclusion is also supported by the language and design of the statute as a whole. Neither the intermediary nor the Board has the authority to declare regulations invalid, but, as the predicate to the right of providers to obtain judicial review of an intermediary’s action, the Board must first determine that it is without authority to decide the matter because the provider’s claim involves a question of law or regulations. Pp. 403-408.

810 F.2d 558, reversed and remanded.

KENNEDY, J., delivered the opinion for a unanimous Court.