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The details of the major changes contained in the Final Rule and analysis are set forth below. The primary focus of this Executive Alert is on the changes to the PRRB jurisdiction and hearing process (including post-PRRB review). There were a number of changes to the intermediary appeals process, which affect smaller reimbursement appeals (less than $10,000), that are not covered by this Alert in order to provide more discussion on PRRB appeals.

A number of the changes described below simply represent a codification of certain current Board procedural “best practices”; however, there are a significant number of substantive changes to provider appeal rights and processes. This Executive Alert breaks down the major provisions of the Final Rule into the sections as they were generally presented by CMS. Highlights of the substantive changes have been set forth in “bullet point” format followed by brief analysis and practical considerations.

CMS made some important clarifications in the Final Rule designed to reflect its policies with respect to determining how to accurately calculate the due dates for certain critical procedural filings (i.e., a provider's hearing request). The Final Rule seeks to provide clarification of the appeal timeline and important dates in the process by specifying the following:

• The beginning of an appeal period is the date a party receives a triggering notice, and the end of the period for an appeal is the date by which a reviewing entity must receive the party's submission.
• The day of the event from which the designated time period begins to run is not included when calculating time periods. If the last day of the time period is on a weekend or federal legal holiday, the deadline becomes the next day that is not in this category.
• CMS adopted specific definitions for “date of receipt,” which vary depending upon the entity that is sending and/or receiving the document.
• When a reviewing entity is the sender or it is a notice from the intermediary (e.g., the NPR), there is a rebuttable presumption that the receipt date is five days after the postmark date, unless a later date is demonstrated by the preponderance of the evidence.
• When a party (provider or intermediary) or affected nonparty is the sender, there is a rebuttable presumption that the receipt date is the date the document is stamped as “received” by the reviewing entity or if the document is sent by a nationally recognized next day courier (e.g., U.S. Postal Service Express Mail, Federal Express, UPS, DHL), then the receipt date is presumed to be the date of delivery noted by the courier. These presumptions may be overcome if it is shown by clear and convincing evidence that the document was received on a different date.

There are several important things to note from these changes. First, it is that date of receipt that is critical for measuring due dates for appeal purposes. This abrogates any presumed “mail box rule” for filing appeals, making the receipt of a hearing request (or other filing) by the PRRB the effective act for a completed filing, and not the act of placing it in the mail or having it postmarked. Next, the methodology for calculating time periods is similar to that used in the Federal Rules of Civil Procedure, and provides consistency in that regard.

In addition, the “presumed receipt date” of an NPR (or other document requiring a response) of five days after it was sent also provides a level of consistency with other CMS appellate rules (see e.g, 42 C.F.R. §§ 405.942, .962). The five-day presumption may be overcome with proof “by a preponderance of the evidence” that a triggering document was received by the provider on a later date, but that determination is left to the Board's discretion. With respect to the presumed “date of receipt” for a reviewing entity (e.g., the Board), CMS has obviously provided a substantial incentive to utilize an overnight courier for submitting important filings. While it is difficult for a provider to know precisely when its document will be “stamped received” by the reviewing entity, it is quite easy to receive a confirmation from an overnight courier that a package was received. Moreover, overcoming the “date received” presumption requires a showing of clear and convincing evidence (again subject to the Board's discretion) that the document was received on a different date. Thus, the easiest manner for a provider to ensure an accurate receipt date is to utilize a next-day courier service.

Based on the changes, providers should review their docketing systems to ensure that such systems are consistent with the due date calculation methodology contained in the Final Rule. Providers should also implement systems for sending all significant correspondence to the PRRB via overnight courier and tracking and maintaining the delivery documentation in case proof of receipt becomes an issue.

The Final Rule's greatest impact can be found in the changes to the provider hearing rights, both in the nature of obtaining PRRB jurisdiction and raising issues on appeal. While there are a number of interesting administrative law issues that will be fodder for debate and potential legal challenges, providers seeking to avoid immersing themselves in the midst of such challenges should prepare to meet the requirements of the Final Rule.

Based on CMS's changes, for cost reporting periods that end on or after December 31, 2008, the PRRB appeals process begins with the preparation of the cost report. According to the revisions to § 405.1835, in order to have a right to a PRRB hearing:

• A provider must have “preserved its right to claim dissatisfaction with the amount of Medicare payment for the specific item(s) at issue” by either:
• Including the claim for specific items on its cost report where the provider seeks payment that it believes is in accordance with Medicare policy; or
• “Self disallowing the specific items by following the applicable procedures for filing a cost report under protest where the provider believes that the payment it seeks would not be allowable in accordance with Medicare policy (e.g., if the intermediary lacks discretion to award the reimbursement amount the provider seeks for such items).”
• The amount in controversy is $10,000 (which remains unchanged from the prior rule); and
• The provider files its hearing request within 180 days of the date of receipt (see above) of the intermediary's determination (unless a good cause extension has been granted by the Board).

There are multiple critical elements to this change. First, in contrast to the language of the PRRB jurisdictional statute (and court decisions such as Loma Linda University Medical Center v. Leavitt, 492 F.3d 1065 (9^th Cir. 2007) and UMDNJ University Hospital v. Leavitt, 2008 WL 613164 (D.D.C. 2008)), it is CMS's position that the dissatisfaction element must be determined on a specific item-by-item basis. Thus, according to CMS's interpretation, it will no longer be enough to claim PRRB jurisdiction based upon a “dissatisfaction with the amount of total program reimbursement.” Intertwined with this “item specific” interpretation of the dissatisfaction element, is the requirement that the provider must present each claim to the intermediary. In other words, each specific appeal item must be preserved by claiming the cost on the cost report, or protesting the inability to do so.

Practically speaking, if there are issues for which a provider intends to pursue an appeal that it has traditionally been pursuing as “self-disallowed” items (e.g., DSH SSI Ratio, DSH dual eligible no Part A payment days, IME research time, etc.), it will need to begin filing those items as protested amounts (using the procedures in § 115 of the Provider Reimbursement Manual (PRM)) on its cost report in order to satisfy this new regulatory requirement for jurisdiction. Section 115 of the PRM generally requires that disputed items and amounts be “specifically identified in footnotes to the settlement worksheet” and that the fact that the cost report is filed under protest be disclosed. In addition, the PRM indicates that the provider “must submit, with the cost report, copies of the working papers used to develop the estimated adjustments” such that the intermediary can evaluate the methodology used by the provider. Failure to follow the proper procedures may result in a lack of PRRB jurisdiction and dismissal of the issue(s) from the appeal (or a potentially costly legal challenge to the regulation). Thus, providers must change their appeal operations to become proactive and integrated with the cost reporting process in order to adequately preserve their reimbursement rights.

It is worth a quick note to point out the extreme narrowness of the “good cause” extension to the 180-day filing deadline. The determination of “extraordinary circumstances” is left to the Board's discretion, but CMS offered the examples of “fire, catastrophe, or strike” that existed prior to expiration of the 180-day appeal period as “good cause” that could extend the deadline. A subsequent change in law, regulation, or policy is not considered falling within the good cause exception. This is because, according to CMS, a provider must claim under protest to preserve its right to appeal a claim when the provider seeks an amount that may not be allowable under the controlling law, regulations, or policy. Thus, providers should not rely on any flexibility in the 180-day filing deadline.

Once the provider has taken steps to ensure that it has preserved its right to claim dissatisfaction with an intermediary's determination, it can then turn its attention to filing a hearing request containing the required elements under the Final Rule. These are:

• A demonstration that the provider meets the “dissatisfaction” requirements discussed above;
• An explanation (for each specific item at issue) of the provider's dissatisfaction with the intermediary's determination, including an account of all of the following:
• Why the provider believes each specific item is paid incorrectly;
• How the provider believes Medicare payment must be determined differently for each claim; and
• If the provider self-disallows an item, a description of the nature and amount of each self-disallowed item and the payment sought for the item.
• A copy of the intermediary determination under appeal, and any other documentary evidence the provider considers necessary to satisfy the first two requirements above; and
• With regard to a provider under common ownership and control with other providers,
• The name and address of its parent corporation; and
• A statement that, to the best of the provider's knowledge, no other provider with common ownership or control, has pending a hearing request for the same issues contained in the current provider's hearing request for a cost report that falls within the same calendar year as the provider's.

The hearing request is designed to allow the Board to make a preliminary jurisdictional determination with respect to the appeal before any other actions in the appeal can occur (generally limited to a satisfaction of the amount in controversy and timeliness elements). Intermediaries may be expected (as they increasingly have been doing in recent years) to escalate their jurisdictional challenges based on whether or not a provider meets the dissatisfaction elements, and the Board will now be bound by the Final Rule's requirements in reviewing such challenges. Providers will need to ensure that their hearing request has the necessary elements to survive such challenges. While CMS did not require that providers present specific legal authority they believe prevents them from being reimbursed in the manner they seek, or make specific arguments regarding the substantive nature of their claims, CMS specifically indicated that it “should not be seen as preventing the Board from issuing instructions that would require providers to do so.” This is a tacit approval of the Board's previously proposed instructions in which the initial hearing request was required to contain such elements, and essentially became a “position paper” filed at the outset of the appeal. Thus, unlike current provider practices which may involve very terse requests for appeal, the hearing request will be a much more involved instrument.

The additional certification for chain providers under “common ownership and control” is designed to work hand-in-hand with the group appeal requirements discussed in detail below. This will require chain organizations to coordinate the appeal filing process among their hospitals at the front end, rather than organizing group appeals after the initial appeal filing process.

One of the most controversial and troublesome aspects of the Final Rule is the significant restriction on a provider's ability to add issues to its appeal. Currently, providers may add issues at any time “prior to the commencement of the hearing” and this procedural option has been used by providers to add issues to their appeals based on changes in the law, consultant findings, failed attempts to work out reopenings, etc., sometimes years after the hearing request was filed. This practice is virtually eliminated by the Final Rule. According to the Final Rule, a provider may only add an issue to its appeal if:

• It meets the “dissatisfaction” requirements (described above);
• The amount in controversy exceeds $10,000 (when combined with the original issues in the appeal);
• The Board receives the request not later than 60 days after the expiration of the applicable 180-day period for filing an appeal.

In other words, a provider's appeal will be closed to new issues 240 days from the date of receipt of the final determination (i.e., NPR). The first bullet point above further emphasizes the importance of beginning the appeal process at the time of filing the cost report. Late-identified issues (i.e., ones not contained in the initial hearing request) will still have to be items actually claimed on the cost report or protested on the cost report. The 60-day limitation period cannot be waived by agreement of the parties (e.g., in an attempt to “work out” an issue with the intermediary before formally including it in the appeal), and the Board has no discretion to allow for additional time.

The inflexibility of the Final Rule with respect to adding issues is emphasized repeatedly in the preamble discussion. Changes or clarifications in the law, or lack of work paper documentation from the intermediary, do not suffice to allow for any flexibility for a provider to add issues after the expiration of the 240 days from the NPR. Practically speaking therefore, providers must be diligent in identifying all issues at the outset of the appeal and include them in their request for hearing, even if the provider presumes that it will work out an issue with its intermediary informally. As the reopening process is entirely discretionary (and since CMS is attempting to limit the scope of PRRB review for reopenings), providers should not rely on the reopening process to address their concerns. The “fallback” of adding issues to an open appeal if a requested reopening or resolution doesn't pan out will no longer be an option.

It is critical to recognize that CMS is interpreting the new restrictions on adding issues as applicable to currently filed appeals. Thus, providers with pending appeals must add any additional issues to their pending appeal within 60 days of the effective date of the Final Rule (i.e., within 150 days from May 23, 2008). Providers will need to review their appeals logs to ensure that all potential issues that may be raised in the appeal are added to their appeals in order to avoid losing their reimbursement rights with respect to such issues.

There were also a number of very important clarifications and changes to the group appeals process and the Final Rule contains changes from the procedures set forth in the proposed rule. Most of the changes to the regulation are designed to cut down on the workload and backlog of appeals at the Board by encouraging (or mandating) use of group appeals. The Final Rule and preamble provide more instruction with respect to the procedural differences between mandatory and permissive group appeals.

• Group appeals are mandatory for two or more providers under common ownership or control who have a common issue for cost reporting periods ending in the same calendar year, if the combined amount in controversy exceeds $50,000. In other words, for commonly-owned providers, any issue that can be brought as a group appeal must be brought as a group appeal. However, if the $50,000 amount-in-controversy requirement cannot be met, commonly-owned providers are still permitted to bring individual appeals.
• In the case of an individual appeal that should have been brought as a group appeal, the Board will transfer the issue to a group appeal or initiate a group appeal. In order to allow the Board to do so, § 405.1835 now requires a commonly-owned provider to give certain information regarding its parent company and other commonly-owned providers to the Board in its appeal request.
• If a mandatory group appeal is filed by one provider and no other commonly-owned providers ever appeal the issue, the Board will transfer the issue to an individual appeal.
• In the case of mandatory group appeals filed by providers under common ownership or control, if the appeal includes cost reports for more than one fiscal year, then every commonly-owned provider with the issue in the appealed calendar years must be included in the group.
• There can only be one group appeal per issue per calendar year for commonly-owned providers.
• Mandatory group appeals for commonly-owned providers may be initiated by one provider.
• Optional group appeals must be initiated by at least two providers.
• Group appeals (whether mandatory group appeals comprised of commonly-owned providers or optional group appeals comprised of unrelated providers) may contain more than one cost reporting period if it is necessary in order for the group to reach the $50,000 threshold, or for other reasons (such as convenience) if the Board grants permission.
• A group appeal request must include the following:
• A demonstration that the request satisfies the requirements for a group appeal;
• An explanation of each provider's dissatisfaction with the determination under appeal, including why the provider believes the payment is incorrect, why the provider believes payment should be determined differently, and in the case of a self-disallowance, a description of the nature and amount of each self-disallowed item and the reimbursement sought for that item;
• A copy of each determination under appeal and any other necessary documentary evidence needed to establish the requirements for a group appeal, and a precise description of the question of fact or interpretation of law, regulation, or CMS ruling that is common to the matters at issue in the group appeal; and
• A statement that the providers believe they have satisfied the requirements for a group appeal under 42 C.F.R. § 405.1837(a) and requesting the Board to proceed and make jurisdictional findings, OR a statement requesting that the Board defer making jurisdictional findings until the provider requests such findings.
• For mandatory groups formed by providers under common ownership, the Board makes the determination that a group is fully formed, either upon notice from the group or an order by the Board (although the group will have the opportunity to show why the group is not fully formed). For optional groups comprised of unrelated providers, a group appeal will be considered fully formed upon notice in writing from the group, upon expiration of any set time limit, or following an order from the Board that the Board considers the group to be fully formed.
• Once an issue has been appealed through a group appeal, it cannot be transferred back to a provider's individual appeal. The lone exception to this rule is for situations in which a group appeal is requested but the requirements for a group appeal are not met (e.g., failure to meet the amount in controversy or common issue requirements). In that situation, the issue can be transferred back to an individual provider's appeal if the requirements for an individual appeal are met.
• If the transfer of an issue from an individual appeal to a group appeal leaves a provider with an individual appeal that does not meet the $10,000 amount-in-controversy requirement, the Board will not lose jurisdiction over the individual appeal. As long as the individual appeal initially met the amount-in-controversy requirement, the Board retains jurisdiction over the appeal even if the amount in controversy subsequently drops below $10,000.

Going hand-in-hand with the requirement that hospitals in a chain organization certify that the issues under appeal are not required to be pursued as a mandatory or “CIRP” appeal, is the requirement that common issues must be brought originally as group appeals.

This will require chain organizations to identify issues that should initially be brought as group appeals, and individual commonly-owned providers will have to determine whether a group appeal has already been requested by another commonly-owned provider on a given issue prior to filing an individual hearing request on that issue. As the critical time for identifying issues will be during the cost report preparation phase, commonly-owned providers should be able to identify and coordinate their appeals with respect to common issues. Obviously, in order to achieve this coordination, Providers will have to implement changes to their appeals processes that reflect this proactive approach.

CMS also codified certain procedural practices and Board options with respect to the management of group appeals. For example, group appeals may now encompass fiscal years ending in more than one calendar year, if the Board grants permission, or if combining the calendar years is necessary to allow the providers to meet the $50,000 amount-in-controversy threshold. In addition, consistent with the Board's prohibition of such practices in recent years, issues can no longer be transferred back to individual appeals from groups, except when it is necessary to do so because the group could not meet the requirements for a group appeal.

CMS did not make substantive changes to the amount-in-controversy provisions (as the thresholds are statutory in nature), but it did make the following clarifications regarding the calculation of such amounts:

• For individual appeals, the amount in controversy for an issue cannot be aggregated across multiple years. For example, if an adjustment in a given fiscal year has an effect on subsequent fiscal years as well, the provider cannot count the subsequent years' reimbursement impact in its total amount in controversy for that issue for the fiscal year under appeal.
• For group appeals, since more than one fiscal year may be involved, the amount-in-controversy requirement may be met by combining the reimbursement impact of the issue under appeal for multiple fiscal years and multiple providers.
• If an individual or group appeal initially meets the amount-in-controversy requirement but the amount later falls below the minimum required, the Board does not lose jurisdiction over the appeal, as long as the reduction in the amount was due to the settlement or partial settlement of an issue, transfer of an issue to a group appeal, or the abandonment of an issue in an individual appeal. If the reduction is due to a more accurate assessment of the amount in controversy, however, the Board does not retain jurisdiction.

Consistent with its focus on jurisdictional issues, CMS adopted a jurisdictional review process in the Final Rule, designed to bring early focus on the jurisdictional requirements of an appeal. According to the Final Rule:

• As a preliminary matter, the Board will determine whether or not it has jurisdiction to grant a hearing on each issue in each cost reporting period under appeal. This preliminary jurisdictional determination must be made prior to conducting a determination as to its authority to decide a legal question relevant to a matter at issue, permitting discovery, issuing a subpoena or conducting a hearing. If the Board determines that it lacks jurisdiction over all of the issues in an appeal, it must issue a dismissal decision.

The preliminary jurisdictional determination is limited in scope under the regulation to determining whether the time-frame for filing a hearing request and amount in controversy requirements have been met, but leaves open the opportunity to revise the preliminary determination “at any stage of the proceedings.” CMS declined to adopt its proposal that the Board issue a written jurisdictional determination on every appeal, whether that jurisdictional determination is positive or negative. CMS decided that to require the Board to issue decisions when jurisdiction is correct would only add to the Board's workload. Therefore, decisions will only be issued for negative jurisdictional determinations. Final negative jurisdictional decisions may be reviewed by the CMS Administrator and are subject to judicial review.

Practically speaking, the Final Rule changes do not dramatically alter the process currently in place. The Board will likely issue its “Acknowledgement and Critical Due Dates Letter” once it has made its “preliminary determination” and the appeal process will go forward from there. With the new and more restrictive elements for meeting the “dissatisfaction” requirement, however, providers can expect greater scrutiny by the Board (whether from an intermediary challenge or on its own) for final jurisdictional determinations, and some interesting battles on this front may lie ahead.

The procedures for expedited judicial review (EJR) were revamped by CMS as well. The EJR process allows the Board, in certain cases, to make a determination that it lacks the authority to decide the legal question for the matter(s) at issue under the appeal. Underlying the changes to the EJR process was CMS's emphasis that a jurisdictional determination is required by the Board in EJR cases to determine whether or not the Board can even consider if it has authority to decide the legal question. In other words, for cases with no Board jurisdiction, the effect is a dismissal, not an expedited run through the Board process. Again, this places greater emphasis on the importance of meeting the new “dissatisfaction” elements.

• Generally, upon receiving a request for EJR, the Board has 30 days to either issue an EJR decision or issue a written notice to the provider that the EJR request is incomplete (and describing in detail the additional information that is needed to complete the request). No timeline was set for the provider's response.

Additional changes were made to clarify the types of cases to which EJR applies and the procedures for obtaining EJR, and for CMS review of such determinations.

CMS adopted the following changes, among others, to the regulations governing who the parties are to Board proceedings, reflecting the agency's role in the proceedings:

• Although CMS is not a party to a Board hearing, intermediaries are authorized to designate a representative from CMS (including an attorney) to defend the intermediary's position at a Board hearing.
• CMS is permitted to file an amicus curiae brief with the Board in cases having major policy implications. Non-parties may also seek leave from the Board to file amicus curiae briefs with the Board. However, the Board may exclude all or part of an amicus curiae brief from the record.

Through these provisions, CMS allows itself to take a more “hands on” role in the provider appeal process, rather than inserting itself for the first time at the Administrator review level.

There were some significant changes made to the Board quorum requirements that were designed to speed up the appeals process:

• The Board chairperson can unilaterally assign an oral hearing to be held before one or more Board members. Although as few as one Board member may be present at the hearing, the final hearing decision will be issued by a quorum (at least three) of Board members. The Board may make this decision without the agreement of the parties.
• With the intermediary's agreement and Board's approval, a provider may waive its right to an oral hearing and grant permission for the Board to issue a decision on the written record.

The intent behind these changes is to allow for multiple Board hearings to be conducted at the same time, thus allowing the Board to process appeals more quickly. The request for a decision on the written record is a procedure that the Board currently permits and that now has received its written blessing from CMS. Reducing the number of Board members that are present at the hearing will result in less Board member interaction in the most critical phase of the appeal (i.e., the hearing), and such interaction can provide valuable insight to both the parties and the Board's understanding of certain complicated reimbursement issues.

The PRRB jurisdictional statute grants the right to “obtain a hearing with respect to [Medicare reimbursement] by the Board…” and the limitation to “a hearing before a Board member” seems inconsistent with the statute. 42 U.S.C. § 1395oo(a). While three Board members will be required to issue the decision, the one Board member in attendance at the hearing will likely be looked upon to provide the most insight in the evaluation of witness testimony, etc. This will have the unfortunate effect of reducing the full evaluation by “the Board” and dilute its considerable expertise on Medicare reimbursement decisions.

The Final Rule also contains changes to the discovery process for Board hearings. Some highlights include the following:

• Discovery requests must be served no later than 120 days before the initially scheduled starting date of the Board hearing. In the absence of a schedule for responses to discovery, responses to interrogatories and requests for production must be served no later than 45 days before the initially scheduled starting date of the Board hearing.
• CMS removed the requirement that the intermediary ensure that all documentary evidence in support of each party's position is in the record. However, the intermediary is still required to put in the record a copy of all evidence that it considered when making its determination.
• The discovery procedures in §§ 405.1821 and 405.1853 do not apply to CMS, the Secretary, or any other federal agency. According to CMS, Freedom of Information Act (FOIA) procedures should be used to gain access to information in the possession of these organizations. Nonparties (other than CMS or other federal agencies) may only be required to respond to requests for the reasonable production of documents.
• Depositions are only permitted if the deponent agrees to the deposition or the Board finds that the proposed deposition is necessary and appropriate.
• The Board will set position paper deadlines on a case-by-case basis.

From a practical standpoint, the change in the discovery deadlines will require an earlier pre-hearing focus than currently required. Providers should revisit and analyze their appeals at least six months before the hearing to ensure that discovery requests can be prepared adequately. The preamble to the Final Rule contained some clarification that the phrase “initially scheduled hearing date” means the specific date the hearing is originally on the Board's docket. As the tentative “month of hearing” set forth on the standard Acknowledgement and Critical Due Dates Letters is not a firm docketed setting, it appears that the discovery timelines will run from the hearing date set forth in the Board's first official notice of hearing. While the Board is given broad authority to extend deadlines as it deems necessary, providers should not rely on extensions being granted.

While maintaining the ability to inject itself into the appeals process (described above) to defend an intermediary's position or to file an amicus brief, CMS seeks “hands off” treatment for discovery purposes, leaving providers to the FOIA as a manner of obtaining information from the agency. Given this restriction, parties should seek FOIA requests early in the process to ensure that information can be timely obtained for purposes of preparing for a hearing.

Certain discovery tools utilized by providers in the past have been specifically prohibited. Indeed, CMS specifies that “a party may not request admissions or take any form of discovery not authorized” under § 405.1853.

The Final Rule also increases the timeline necessary to have a subpoena issued in a matter and clarifies the limitations of the Board's authority to issue subpoenas.

• Subpoena requests directed at discovery must be received by the Board at least 120 days before the scheduled hearing date. The Board cannot issue a discovery subpoena any later than 90 days before the initially scheduled hearing date.
• Subpoena requests aimed at compelling attendance of a witness at the hearing must be received by the Board at least 45 days before the scheduled hearing. The Board cannot issue a hearing subpoena any later than 30 days before the scheduled hearing.
• The Board lacks the power to issue a subpoena to CMS, the Secretary, or any other federal agency.

• Section 405.1865 specifies what constitutes the “record” of an appeal and states that any evidence ruled inadmissible by the Board (or any other matter that the Board declines to consider) must be clearly identified and segregated in an appendix to the record for purposes of further review.

The Final Rule provided the following clarifications/codifications of Board authority with respect to its procedures:

• If a provider fails to meet a filing or procedural deadline or other requirement set by the Board, the Board may dismiss the appeal or take other appropriate action.
• If the intermediary fails to meet any filing or procedural deadlines or Board requirements, the Board has the right to issue a decision based on the written record submitted to that point or to take other appropriate action. The Board does not have the authority to—as a sanction—reverse or modify the intermediary or Secretary's determination for the cost reporting period under appeal or rule against the intermediary on a disputed issue of law or fact in the appeal.

Providers have long been subject to the draconian punishment of dismissal for failure to meet position paper deadlines, while intermediaries were simply referred to CMS for “contract review.” The Final Rule offers the Board the ability to issue a decision on the limited record in situations where an intermediary misses a deadline, which may offer to lessen the disparity in sanctions between the parties. Providers should continue to anticipate that failure to meet Board deadlines will result in their appeals being dismissed.

CMS, in its attempt to narrowly interpret the PRRB jurisdictional statute, made “clarifications” in the Final Rule regarding its interpretation of PRRB authority:

• Although the Board has statutory authority to make other revisions on specific matters, regardless of whether the intermediary considered those matters in making its determination, the Board may not decide a specific matter at issue for which it lacks jurisdiction or which was not timely raised in the hearing request.

This is a direct attempt to limit the scope of the broad statutory grant of jurisdictional authority conferred upon the Board by § 1878(d) of the Social Security Act (42 U.S.C. § 1395oo(d)), which has been interpreted to provide that once Board jurisdiction pursuant to subsection (a) is obtained, anything in the original cost report is fair game for a challenge by virtue of subsection (d). See e.g., Bethesda Hospital Association v. Bowen, 485 U.S. 399 (1988). CMS interprets this section very narrowly to require that issues be affirmatively raised by the provider in its hearing request (or added within 60 days from the hearing request). CMS indicates in the preamble that it reads § 1878(d) of the Act as “permitting the Board to make revisions to cost report line items that flow directly from determination in which the provider has expressed dissatisfaction and filed a jurisdictionally proper appeal under section 1878(a)…If a provider does not timely express dissatisfaction to the Board of a particular matter in a final determination and, therefore, does not establish jurisdiction before the Board over that matter, the provider cannot then seek to rely upon § 1878(d) of the Act for relief.”

CMS also stated in the preamble that the Board does not have the authority to direct intermediaries to reopen subsequent cost reports to make changes resulting from a “flow-through” of issues impacting multiple years. Thus, from a practical standpoint, providers must continue to appeal cost reporting years in which there may be a “flow-through” impact (e.g., graduate medical education and indirect medical education FTE count issues which affect current and two additional year's cost reports).

The Final Rule also imposes additional controls over the Board's decision-making process. According to changes to § 405.1871:

• When a Board decision reverses or modifies an intermediary determination on an issue for which the policy expressed in an interpretive rule (other than a regulation or CMS ruling), general statement of policy, or rule of agency organization, procedure or practice established by CMS would be dispositive of that issue, the Board's decision must contain an explanation of how the Board gave “great weight” to such instruction but did not find it necessary to affirm the intermediary's determination.

This change is prompted by the language of existing § 405.1867, which states that the Board must comply with all provisions of Title XVIII of the Act and regulations issued thereunder, as well as CMS rulings and that great weight should be afforded to interpretive rules, general statements of policy, and rules of agency organization, procedure or practice established by CMS. This portion of the regulation remains unchanged. According to CMS, the purpose of the new affirmative requirement to explain the “great weight” given to CMS instruction when departing from such instruction is intended to facilitate Administrator or judicial review.

From a practical standpoint, providers need to be prepared to arm the Board with strong arguments substantiating a departure from the “CMS instruction” at issue using the applicable statute and regulation as the “trump cards.”

The Final Rule clarifies existing procedures for obtaining Administrator review of a Board hearing decision. Types of Board decisions subject to Administrator review as well as procedures for obtaining an immediate review also are addressed.

• Requests for Administrator review must be submitted to and received by the Office of the Attorney Advisor no later than 15 days after the date the party or nonparty making the request received the Board's decision or other reviewable action.
• A party or CMS may request review of any reviewable decision or non-final order, but a nonparty (other than CMS) may request review only of a Board discovery order or subpoena to which an objection was made based on privilege or other protection from disclosure.
• The Administrator may immediately review a Board ruling authorizing discovery or disclosure rulings and a Board subpoena to which objections were made based on privilege or other protection from disclosure. The Final Rule does not, however, provide the Administrator with authority to review Board rulings denying a discovery request or a request to issue a subpoena.
• The Board's finding or assumption of jurisdiction is a non-final action and not subject to immediate review by the Administrator.
• The criterion of whether the Board erred in refusing to admit or consider certain evidence was added to the list of illustrative (i.e., not exclusive) criteria that the Administrator should consider in determining whether to review a Board decision.
• The Administrator has the authority to remand a matter not only to the Board but also to any component of HHS or CMS or to an intermediary, under appropriate circumstances (including, but not limited to the purpose of implementing a court's order).
• The date the Administrator decision is rendered is the date the Administrator signs the decision and not the date the decision is mailed or otherwise transmitted to the parties.

The Final Rule grants broader powers to the Administrator in the “fact finding” process designed to be the role of the Board. For example, several commenters raised objections to the proposal that the Administrator should be able to include or exclude evidence that was excluded or included by the Board. Specifically, commenters said the Administrator should only be able to rule on the record “because it is the record on which the Board based its decision and it is the only thing a court may use to overturn a Board or Administrator decision.” In responding to the comments, CMS maintained that the proposal is consistent with the authority courts have in reviewing administrative agency decisions, and as such, the proposal was adopted in the Final Rule without change.

This is simply another illustration of the increasing control of CMS over the PRRB hearing process.

Many of the changes to the reopening procedures contained in the Final Rule incorporate “clarifications” that were made in the August 1, 2002 final rule. 67 Fed. Reg. 49982. Additionally, existing procedures on reopening and revising final determinations were clarified.

• CMS retains the ultimate authority as to whether an intermediary may or may not reopen a matter.
• A change in legal interpretation or policy by CMS in a regulation, CMS ruling or CMS general instruction (whether self-directed or influenced by a court decision) is not a basis for reopening a determination.
• CMS may direct an intermediary to reopen a determination in order to implement a final agency decision, a final court judgment, or an agreement to settle an administrative appeal or a lawsuit. Only the entity that made the original determination or decision may conduct the reopening.
• A decision whether to reopen or not to reopen a determination is not subject to further administrative review or judicial review.
• For reopenings originated by the intermediary or Board, the notice of reopening must be mailed no later than three years after the date of the determination.
• In cases not involving an allegation of fraud, a provider's request for reopening must be received no later than three years after the date of the determination; however, the intermediary or reviewing entity may issue the notice of reopening within a reasonable time after the expiration of the three-year period.
• A final determination may not be reopened after the three-year period, except where the determination was procured by fraud or similar fault.
• An intermediary may reopen a determination that is pending on appeal before the Board or the Administrator; the intermediary may also reopen a determination for which no appeal has been taken, but for which the time to appeal to the Board has not yet expired.
• An intermediary or reviewing entity is obliged to provide written notice of the reopening, allow the parties an opportunity to present additional evidence, and notify the parties at the conclusion of the reopening of the results, including any revision.
• Any matter considered during the course of a reopening, but not subsequently revised, is not appealable through any revised determination issued after the reopening; as a corollary, the scope of appeal of a revised determination is limited to the specific revisions that were made in the revised determination.

On this last point, CMS uses the Final Rule to eviscerate the holding of the Seventh Circuit in Edgewater Hospital v. Bowen in which the court held that matters stated in a notice for reopening but not contained in the revised determination could still be the subject of an appeal to the PRRB. 857 F.2d 1123 (7^th Cir. 1989). After all, a determination to do nothing with an item chosen for review is still a determination. CMS rejects this logic, however, and is limiting the PRRB's jurisdiction over revised NPRs to those issues that were actually revised by the intermediary.

The changes to the reopening procedures further solidify those made in 2002 “clarifying” that intermediaries are prohibited from reopening based on a change in legal interpretation or policy. Given that the reopening process is discretionary and has been limited in such a manner by CMS, the emphasis on perfecting provider appeals of original cost report determinations is even further enhanced.

In the proposed rule, CMS said it was considering amending the regulations on three matters that did not surface until very late in the development of the proposed rule. The proposals, all of which were adopted in the Final Rule, are as follows:

• An ex parte contact with a Board staff member concerning a procedural matter in a case should not be considered a prohibited ex parte communication. [New § 405.1868(f)] Note, however, that the Final Rule “strongly encourage[s] parties to avoid them wherever possible.”
• Upon receipt of a credible allegation that a party's counsel has a conflict of interest in the party's representation, the Board would be able to order the party to show cause why the case should not be dismissed or why other appropriate action should not be taken. [New § 405.1868(g)]
• When an intermediary denies reimbursement for a claimed item without auditing the reimbursement effect of that claim, and the intermediary's denial is reversed by the Board, the Administrator, or a court (making the decision final and non-appealable), CMS may require the intermediary to determine the reimbursement effect of the claim prior to payment. [New §§ 405.1831(e), .1971(b)(4); Amended § 405.1875(f)(5)]

In response to comments regarding the conflict of interest proposal, CMS said the proposal stemmed from the agency's recognition that, not infrequently, persons well-versed in Medicare reimbursement may switch from being a provider representative to an intermediary representative, or vice versa. In such situations, according to the agency, it would be “inappropriate” for a representative “to use any confidential information [defined by the agency as information that “the representative is not authorized to disclose”] obtained during the course of his or her employment.”

Concerns were voiced that the proposal could be interpreted as allowing CMS or the intermediary to re-challenge an issue following a Board decision, as long as the basis for the challenge was not originally raised. In the agency's response, CMS agreed that “intermediaries should not be able to delay indefinitely the resolution of an appeal by making an endless series of objections.” In adopting the third proposal in the Final Rule, CMS chose to limit the proposal's applicability to a situation in which the intermediary makes an adjustment on the cost report, or otherwise denies the relief the provider seeks, for procedural reasons (CMS provides the example of an alleged failure to meet a deadline) or lack of documentation. According to CMS, where the reviewing entity disagrees with the basis for the denial, it must remand the case to the intermediary for a determination on the merits. Similarly, CMS is requiring that a “post-award” audit be performed on self-disallowed claims upon which a provider is ultimately successful at the Board or court level. The intermediary is prohibited from stipulating to the amount at issue for self-disallowed issues unless it “has audited the issue or otherwise has the necessary information” to make the stipulation. Thus, providers victorious in their regulatory challenges will still face an audit at the end of the process.

The Final Rule represents a major change to the provider appeals process. The restrictions on Board jurisdiction implemented by CMS present challenges for providers. Reimbursement departments will be forced to significantly modify their appeal procedures in order to adequately protect Medicare reimbursement rights. This will require adding another aspect to the already burdensome and time consuming cost report preparation process—identifying and claiming issues to be protested on the cost report. In this respect, providers and their representatives will have to be forward-thinking to capture as many potential reimbursement issues as possible on the cost report.

In addition to ensuring that all issues are protected in the cost reporting process, providers will have to file their hearing requests in a manner protecting all potential issues that it may pursue. Providers cannot afford to attempt to work out issues with the intermediary outside the appeal process with the “fallback” of adding the issue to the appeal at a later date. The Final Rule closes the window for new issues shortly after the hearing request is due (i.e., within 60 days). Moreover, due to the application of the Final Rule to currently open appeals, providers will also need to immediately take accounting of their current appeals to ensure that all issues are raised before the deadline for adding issues expires on October 19, 2008.

In sum, providers must adopt a proactive posture to the provider appeals process in order to ensure that they are receiving the appropriate Medicare payment amount. Additional instructions will likely be forthcoming from the PRRB, but there is little doubt that the appeals process will be far more “front-end loaded” than ever before.

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