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U.S. Court In Illinois Holds Plaintiff Failed To Exhaust Administrative Remedies In Medicare Payment Dispute


HLD, v. 32, n. 6 (June 2004)

U.S. Court In Illinois Holds Plaintiff Failed To Exhaust Administrative Remedies In Medicare Payment Dispute

Plaintiff Michael Reese Hospital and Medical Center is a Medicare provider and its fiscal intermediary Health Care Services Corporation (HCSC) calculates its Medicare reimbursements. HCSC reopened the reimbursements for 1986 to 2001 based on a change in the Medicare reimbursement policy. Plaintiff requested a hearing after disagreeing with HCSC's determination, but HCSC, plaintiff's subsequent owner Columbia Hospital Corporation of America (CHA), and plaintiff's agent Strategic Reimbursement Inc. (SRI) reached an Administrative Resolution about the issue. HCSC issued a revised reimbursement calculation, which plaintiff agreed with. HCSC agreed to reopen the cost reports, but never did. HCSC's subsequent intermediary AdminaStar Federal Inc. (AdminaStar) denied plaintiff's requests to reopen the cost reports because it determined the Administrative Resolution did not apply to years 1986 to 1991. Plaintiff asked the Centers for Medicare and Medicaid Services (CMS) to intervene, and CMS agreed with AdminaStar's denial. Plaintiff sued defendant the Secretary of the Department of Health and Human Services, and defendant moved to dismiss for lack of jurisdiction.

The U.S. District Court for the Northern District of Illinois granted defendant's motion to dismiss. Plaintiff argued it was entitled to judicial review of the determination because it had relied to its detriment on HCSC's reimbursement calculation and allowed its appeal period before the Provider Reimbursement Review Board (PRRB) to lapse based on HCSC's actions. Plaintiff contended CMS' actions in affirming AdminaStar's denial was a final appealable agency action. Defendant argued plaintiff failed to exhaust its administrative remedies and CMS' determination was not a final agency action.

Rejecting plaintiff's argument that the Administrative Resolution terminated the litigation and it was not required to exhaust any administrative remedies, the court noted that the Medicare Act provides certain procedures for resolving disputes. An Administrative Resolution does not carry with it the same finality as a PRRB decision, said the court, and CMS' action in affirming AdminaStar's decision was not a final agency action. Therefore, the court held plaintiff did not exhaust its administrative remedies and did not receive a final agency action. Thus, the court lacked subject matter jurisdiction.

Plaintiff's other claim was that the Administrative Resolution should be treated like any other settlement and the Medicare statute's cost reimbursement provisions did not apply to it. The court determined that the Administrative Resolution was the result of a dispute over Medicare reimbursements, and because the Medicare statute governed the Administrative Resolution, plaintiff could only seek remedies provided in the statute, which did not include judicial review of a reimbursement determination. Concluding that plaintiff could not assert jurisdiction based on the diversity of the parties, the court held plaintiff was not entitled to jurisdiction under the mandamus statute. Accordingly, the court granted defendant's motion to dismiss.

Michael Reese Hosp. and Med. Ctr. v. Thompson, No. 03 C 6034 (N.D. Ill. April 6, 2004).

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