SUMMARY
On June 24, 2011, the United States Court of Appeals for the District of Columbia released a decision in Auburn Regional Medical Center v. Sebelius. The decision reversed an unfavorable district court decision ruling that statutory deadlines to file appeals with the Provider Reimbursement Review Board (PRRB) were not subject to the doctrine of “equitable tolling.” The equitable tolling doctrine would allow deadlines to be tolled under certain restricted circumstances. The district court ruled that equitable tolling could not apply in any circumstances because the law does not allow it. In reversing, the Court of Appeals held that the law creates a presumption in favor of the potential for equitable tolling unless the statute specifically bars it. With no such bar in the statute, the Court of Appeals remanded the case back to the district court to determine if the rigid criteria for equitable tolling applied in this case.
While we believe this is a favorable development, we do not regard it as a basis to abandon an approach that attempts to perfect otherwise stale claims on grounds that the systemic understatement by the Centers for Medicare and Medicaid Services (CMS) of the Supplemental Security Income (SSI) component of the Medicare Disproportionate Share Hospital (DSH) proxy constituted “fraud or similar fault.” We do not recommend joining group appeals for cost report years dating back to 1987 on a theory based only on equitable tolling.
AUBURN REGIONAL CASE BACKGROUND
At issue are calculations by CMS of the DSH SSI percentage. In Baystate Medical Center v. Leavitt, 545 F.Supp. 20 (D.D.C. 2008), the court agreed with a PRRB determination that CMS had systematically understated the SSI percentage of the hospitals’ DSH calculations and that CMS did so in a fashion it knew or should have known was wrong. Following the Baystate PRRB decision in 2006, the Auburn Regional hospitals filed PRRB appeals for cost report years as far back as 1987. While the Auburn Regional hospitals acknowledged they filed appeals sometimes more than ten years after the 180 day deadline to file appeals after finalization of cost reports, they argued equitable tolling should apply because CMS knowingly and unlawfully failed to disclose that the DSH payments were understated.
REGULATORY BACKGROUND OF THE FRAUD OR SIMILAR FAULT THEORY
One plausible theory not addressed by the Auburn Regional hospitals, yet discussed in the regulations, is that CMS’s actions related to SSI calculations amounted to “fraud or similar fault” which, by regulation, allows for complete suspension of any time limitation for relief.
The provision at 42 C.F.R. § 405.1885(d) reads:
(d) Notwithstanding the provisions of paragraph (a)1 of this section, an intermediary determination or hearing decision, a decision of the Board, or a decision of the Secretary shall be reopened and revised at any time if it is established that such determination or decision was procured by fraud or similar fault of any party to the determination or decision.
This provision not only seems to impose a non-discretionary duty to reopen (with the phrase “shall be reopened”) but is more expansive than § 405.1885(b)2 in that its reopening period is unlimited.
EQUITABLE TOLLING
Equitable tolling is another means by which a deadline can be delayed. It does not exist as statutory or regulatory law, such as the above discussed provisions, but rather as a common law doctrine where courts will suspend the running of a statutory filing deadline when the circumstances of common fairness and equity demand. Tolling is not a permanent release from the deadline. Rather, as the word implies, it is a stopping of the clock in the interest of equity. When equity no longer demands it, the running of the clock continues.
As a general rule and at the discretion of the court, equitable tolling can be applied in circumstances where (1) the appealing party could not have reasonably been aware of its right of a claim, (2) where passage of the additional time through the tolling would not prejudice the defendant’s ability to defend the case, and (3) the appealing party acted in good faith.
In Auburn Regional, the district court refused to even consider whether the appealing hospitals met these criteria, holding that the law did not permit equitable tolling in any circumstances for Medicare reimbursement appeals of this nature. In reversing, the Court of Appeals held that the district court’s reasoning was backwards. Instead of looking for permission in the law for whether the equitable tolling criteria can even be tested, the proper approach is to presume the criteria should be tested unless the law expressly forbids it. Finding no such prohibition in the law, the Court of Appeals remanded the case back to the district court to determine if the criteria for equitable tolling apply.
ANALYSIS
On remand, the district court will still have to determine whether the above-stated criteria for equitable tolling apply. The appealing hospitals will have to prove that they could not have reasonably been aware of a right to a claim even though over ten years had passed and the Baystate hospitals had filed their appeals earlier. Hospitals attempting to use this approach now would have an even more daunting task than the hospitals in Auburn Regional.
We continue to believe that a better approach is to present both arguments for extending the deadline to file. We believe the regulatory construction involving fraud or similar fault is a stronger argument than equitable tolling, particularly since courts are reluctant to apply equity arguments against the government. While we would advance both arguments, the fraud or similar fault basis has the additional benefit of an unlimited reopening period not dependent on the hospital having acted within any particular deadline.
We do not believe hospitals need to join a new PRRB appeal that is based solely on equitable tolling at this time, especially since the June 24th decision by the D.C. Circuit Court would not likely be viewed as a final decision from which hospitals could appeal.
If you have questions or concerns, please feel free to contact Keith Barber at kbarber@hallrender.com or 317-977-1428
, Maureen O’Brien Griffin at mgriffin@hallrender.com or 317-977-1429, or Liz Elias at eelias@hallrender.com or317-977-1468.
1 § 405.1885(a) allows reopenings within three years for any reason at the discretion of the Intermediary.
2 Reopening is mandatory only if the Secretary notifies the Intermediary the prior determination was inconsistent with the law as CMS understood the law to be at the time of the determination, and the Administrator “explicitly directs the Intermediary to reopen.” § 405.1885(b)(1)
