Heckler v. Commun. Health Svcs., 467 U.S. 51 (1984)

Heckler v. Community Health Services

No. 83-56

Argued February 27, 1984
Decided May 21, 1984
467 U.S. 51

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

Syllabus

Under the Medicare program, providers of health care services are reimbursed for the reasonable cost of services rendered to Medicare beneficiaries and are required to submit annual cost reports which are audited to determine actual costs. The Secretary of Health and Human Services (Secretary) may reopen any reimbursement determination within a 3-year period and make appropriate adjustments. Respondent nonprofit corporation (hereafter respondent), pursuant to its contract to provide home health care services under the Medicare program, received reimbursement through a fiscal intermediary, Travelers Insurance Cos. (Travelers). Respondent also received a federal grant under the Comprehensive Employment and Training Act (CETA), which authorized the use of federal funds to provide training and job opportunities for economically disadvantaged persons. This made it possible for respondent to take on additional personnel and to expand its home health care services. A regulation to prevent double reimbursement of providers’ costs indicated that grants received by a provider to pay special operating costs must be subtracted from the reasonable costs for which the provider may be reimbursed under the Medicare program. Respondent asked Travelers whether the salaries of its CETA-funded employees who provided services to Medicare patients were reimbursable as reasonable costs under Medicare, and was orally advised by Travelers’ Medicare manager that the CETA funds were "seed money" as defined in the Provider Reimbursement Manual to mean "[g]rants designated for the development of new health care agencies or for expansion of services of established agencies," and that therefore, even though the CETA employees’ salaries constituted specific operating costs paid by a federal grant, they were reimbursable under the Medicare program. Relying on this advice, respondent included costs for which it was receiving CETA reimbursement in its cost reports for fiscal years 1975, 1976, and 1977, and received reimbursement for those sums. Eventually, however, Travelers, as it should have done previously, referred respondent’s inquiry to the Department of Health and Human Services, and was formally advised that the CETA funds were not "seed money," and thus had to be subtracted from respondent’s Medicare reimbursement. Travelers then reopened respondent’s cost reports for the years in question and recomputed the reimbursable costs, determining that respondent had been overpaid $71,480. When Travelers demanded repayment of this amount, respondent filed suit in Federal District Court, but, after it had obtained temporary injunctive relief, the parties stipulated that the suit would be stayed pending administrative review. Thereafter, while rejecting the position that CETA funds were "seed money," the Provider Reimbursement Review Board found that the Secretary’s right to recoup the 1975 overpayment was barred because Travelers had not given respondent a written notice of reopening within the 3-year limitation period, and accordingly reduced the amount in dispute. Respondent then filed another suit in the District Court seeking review of this determination. Consolidating the two suits, the court ruled in the Secretary’s favor, rejecting respondent’s claim that the Secretary ought to be estopped to deny that the CETA funds were "seed money" because of the representations of the Secretary’s agent, Travelers. The Court of Appeals reversed, holding that the Government may be estopped by the "affirmative misconduct" of its agents and that Travelers’ erroneous advice, coupled with its failure to refer the question to the Secretary, constituted such misconduct.

Held: The Government is not estopped from recovering the funds in question from respondent, since respondent has not demonstrated that the traditional elements of an estoppel are present with respect to either its change in position or its reliance on Travelers’ advice. Pp. 59-66.

(a) The consequences of the Government’s misconduct were not entirely adverse, since respondent did receive an immediate benefit as a result of the double reimbursement. Its detriment is the inability to retain money that it should never have received in the first place. Thus, this is not a case in which respondent has lost any legal right or suffered any adverse change in its status. Respondent cannot claim any right to expand its services to levels greater than those it would have provided had the error never occurred. Curtailment of operation does not justify an estoppel when the expansion of respondent’s operation was achieved through unlawful access to federal funds. Respondent cannot raise an estoppel without proving that it would be significantly worse off than if it had never obtained the CETA funds in question. Pp. 61-63.

(b) The regulations governing the cost reimbursement provisions of Medicare should and did put respondent on ample notice of the care with which its cost reports must be prepared, and the care which would be taken to review them within the relevant 3-year period. Yet respondent prepared those reports on the basis of an oral policy judgment by an official who, it should have known, was not in the business of making policy. That is not the kind of reasonable reliance that could even give rise to an estoppel against a private party, and therefore cannot estop the Government. Pp. 63-66.

698 F.2d 615, reversed and remanded.

STEVENS, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and O’CONNOR, JJ., joined. REHNQUIST, J., filed an opinion concurring in the judgment, in which BURGER, C.J., joined, post, p. 66.