46 F3d 1145 Medicare & Medicaid Guide P 43099 Medicare & Medicaid Guide P 43166

46 F.3d 1145

Medicare & Medicaid Guide P 43,099,
Medicare & Medicaid Guide P 43,166

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

SIMI VALLEY HOSPITAL, aka: SVH, Plaintiff-Appellant,
Secretary of HHS; J. Michael Hudson, Deputy Administrator
of the Health Care Financing Administration; Health Care
Financing Administration, Defendants-Appellees.

No. 93-55668.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 2, 1994.
Decided Feb. 7, 1995.

Before: GIBSON,* HUG, and POOLE, Circuit Judges.

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Simi Valley Hospital ("SVH") appeals the district court's entry of summary judgment in favor of the defendants in this dispute involving the timeliness of SVH's application for geographical reclassification under the Medicare reimbursement system. For reversal, SVH argues that the district court erred in: (1) determining that the Secretary's interpretation of the applicable statute was a permissible construction; and (2) dismissing SVH's disparate treatment claim. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291 (1988), and we affirm.


A. Medicare Statutes and Regulations


Hospitals are reimbursed for Medicare services pursuant to a payment system that categorizes them according to their location: large urban; other urban; or rural. 42 U.S.C. 1395ww(d)(2)(D). This classification system affects the amount of Medicare reimbursements by establishing a hospital's "average standardized amount per discharge"1 and "wage index value."2 Id. Secs. 1395ww(d)(2)(D) and (H).


In 1989, Congress amended the Medicare statutes to establish the Medicare Geographical Classification Review Board ("Board"). Id. Sec. 1395ww(d)(10). The Board reviews geographical reclassification applications within the guidelines prescribed by the Secretary of Health and Human Services ("Secretary"). Id. Sec. 1395ww(d)(10)(C) and (D). A hospital seeking reclassification must apply to the Board "not later than the first day of the preceding fiscal year." Id. Sec. 1395ww(d)(10)(C)(ii) (the federal fiscal year commences October 1). The Board must render its reclassification decisions within 180 days. Id. Sec. 1395ww(d)(10)(C)(iii)(I). The Secretary then adjusts the payment system in order to ensure that the Board's decisions do not result in "aggregate payments under [the Medicare Act] that are greater or less than those that would otherwise be made." Id. Sec. 1395ww(d)(8)(D).


On September 6, 1990, the Secretary issued an "interim final rule" that established the criteria for the Board to use in reviewing geographical reclassification applications. The regulations state that "[a] completed application must be received by not later than the first day of the Federal fiscal year preceding the Federal fiscal year for which reclassification is requested." 42 C.F.R. 412.256(a)(2) (1991). However, because the criteria were published less than one month before the 1992 fiscal deadline, the Secretary required hospitals to file their initial applications by October 1, 1990, but extended the deadline for completion of the applications until November 6, 1990. See 55 Fed.Reg. 36,757 (1990).

On November 5, 1990, Congress provided:


For purposes of determining whether a hospital requesting a change in geographic classification for fiscal year 1992 ... has met the deadline described in subparagraph (C)(ii) ... an application ... shall be considered to have been submitted by the first day of the preceding fiscal year if it is submitted within 60 days of the date of publication of the guidelines described in subparagraph (D)(i) of such section.


Omnibus Budget Reconciliation Act, Pub.L. No. 101-508, Sec. 4002(h)(2)(A) (1990).

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On June 4, 1991, the Secretary issued a "final rule with comment period." See 56 Fed.Reg. 25,458 (1991). In responding to complaints that the November 6th deadline did not give providers enough time to complete their applications, the Secretary noted that Congress had effectively "ratified" the earlier extension. Id. at 25,461. In addition, the Secretary stated that the Board "may, for good cause, grant a hospital that has submitted an application by October 1, an extension beyond October 1 to complete its application." 42 C.F.R. Sec. 412.256(c)(2) (1991). On August 30, 1991, the Secretary published the "final rule" and revised the prospective payment system rates. See 56 Fed.Reg. 43,196 (1991).

B. SVH's Application


On July 24, 1991, SVH requested geographical reclassification in order to use an adjacent county's wage index for the 1992 fiscal year. The Board determined that SVH's application was time-barred and denied it. SVH then appealed to the Deputy Administrator of the Health Care Financing Administration ("HCFA").3 See 42 U.S.C. Sec. 1395ww(d)(10)(C)(iii)(II).


SVH argued that it had "good cause" for its late application because the mid-year updates to the wage index tables were not published until June 3, 1991, and SVH would not have benefited from reclassification under the previous wage index tables.4 Alternatively, SVH claimed that pursuant to Pub.L. No. 101-508 Sec. 4002(h)(2), it had sixty days from the publication of the wage index tables in which to file its application for reclassification. The Administrator determined that the "good cause" exception applied only when a hospital's initial application was received before the October 1st deadline. The Administrator also rejected SVH's argument that the phrase "publication of the guidelines" in Sec. 4002(h)(2) referred to the wage index tables, concluding that the term "guidelines" was totally distinct from the wage index tables.


Although the Secretary's denial of an appeal from the Board's decision is not judicially reviewable, see 42 U.S.C. Sec. 1395ww(d)(10)(C)(iii)(II), the district court granted jurisdiction to review: (1) SVH's challenges to the Secretary's statutory interpretation; and (2) SVH's constitutional claim that it was being treated differently than similarly situated hospitals. The district court found that Sec. 4002(h)(2) was ambiguous and that the Secretary's interpretation was a permissible statutory construction. The court rejected SVH's disparate treatment claim, concluding that the Secretary had never accepted applications based on the wage index updates and that the Secretary had never approved applications filed after March 31, 1991. SVH appeals.


A. The Secretary's Statutory Interpretation


This Court reviews de novo the district court's determination that the Secretary's interpretation was a permissible statutory construction. See Regents of Univ. of Cal. v. Heckler, 771 F.2d 1182, 1187 (9th Cir.1985). We note that "[j]udicial review of Medicare reimbursement decisions is governed by the Administrative Procedure Act, 5 U.S.C. Secs. 701-06 (1982), which requires a court to set aside agency actions found to be 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law ...' " Regents, 771 F.2d at 1187. So long as it does not conflict with statutory directives "an agency's interpretation of the statutory scheme under which it operates is entitled to considerable deference...." Id.


SVH argues that the sixty-day extension should commence after the mid-year wage index updates. Alternatively, SVH claims that the Secretary's September 6th publication was only an "interim final rule" and that it had sixty days from the publication of either the Secretary's June 4th "final rule with comment period" or the Secretary's August 30th "final rule." In support of this argument, SVH claims that the Secretary's interpretation of Sec. 4002(h)(2) is impermissible because it renders the statute nugatory. If the Secretary's November 6th deadline controls, in effect, on November 5, 1990, Congress merely granted hospitals a "sham extension" of sixty days.


The Secretary contends that SVH has erroneously equated the wage index tables with the Board's guidelines. Furthermore, the Secretary argues that it is reasonable to interpret Sec. 4002(h)(2) as applying to the September 6th publication, not the subsequent revisions to the guidelines. Contrary to SVH's arguments, the Secretary's interpretation of Sec. 4002(h)(2) does not render it nugatory. Unlike the Secretary's extension, Sec. 4002(h)(2) extended the filing date until November 6, 1990, regardless of whether a hospital had filed an initial application by October 1.


In reviewing an agency's construction of a statute which it administers, the court must analyze "whether Congress has directly spoken to the precise question at issue." Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984). If the statute is silent or ambiguous regarding the precise issue, the inquiry is "whether the agency's answer is based on a permissible construction of the statute." Id. at 843.


Section 4002(h)(2) extends the deadline for applications "submitted within 60 days of the date of publication of the guidelines described in subparagraph (D)(i) of such section." Subparagraph (D)(i) directs the Secretary to publish guidelines for the Board and details certain requirements that these guidelines must include.5 42 U.S.C. Sec. 1395ww(d)(10)(D)(i). Having reviewed the statute and applicable regulations, we find that the Secretary's September 6th publication comports with the requirements of (D)(i). See 55 Fed.Reg. 36754 (1990). Therefore, we conclude that the Secretary's interpretation that Sec. 4002(h)(2) extended the deadline for filing applications until November 6, 1990, is clearly permissible.

B. Disparate Treatment


Summary judgment is appropriate when the record demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We review the district court's grant of the Secretary's motion for summary judgment de novo. Mt. Diablo Hosp. v. Shalala, 3 F.3d 1226, 1230 (9th Cir.1993).


SVH argues that it has demonstrated a triable issue concerning the Board's policies of accepting applications based on the wage index tables and accepting late applications. The Secretary admits that there was some confusion within the agency and that the Board did accept some applications that were filed after November 6, 1990; however, the Board never accepted applications received after its March 31st deadline for rendering decisions. In response, SVH claims that Sec. 4002(h)(2) implicitly extended the Board's decision deadline from March 31 until May 6, 1991.


Although SVH argues that the Board accepted some late applications, there is no evidence that any applications submitted after the Board's March 31st decision deadline were approved. Furthermore, SVH's arguments concerning whether the Board's decision deadline was March 31st or May 6th do not resurrect its July 24th filing. We conclude that SVH has failed to present a genuine issue of material fact on its disparate treatment claim and that the defendants were entitled to summary judgment.



We AFFIRM the district court's judgment.


The Honorable Floyd R. Gibson, Senior Circuit Judge for the Eighth Circuit Court of Appeals, sitting by designation


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3


The Secretary of the Department of Health and Human Services establishes a different average standardized amount per Medicare discharge for hospitals in each different classification


The wage index value is a comparison between the average hospital wage in a particular area and the national average


The Secretary delegated authority to the Deputy Administrator of HCFA to review the Board's decisions


HCFA annually publishes wage index tables, which describe the wage index values for all geographical areas in the country. HCFA also publishes mid-year revisions to these tables


Subparagraph (D)(i) states that the guidelines shall include:

(I) Guidelines for comparing wages....

(II) Guidelines for determining whether the county in which the hospital is located should be treated as being a part of a particular Metropolitan Statistical Area.

(III) Guidelines for considering information provided by an applicant....

(IV) Guidelines for considering the appropriateness of the criteria used to define New England County Metropolitan Areas.