U.S. Supreme Court Holds Equitable Tolling Doctrine Does Not Apply To Administrative Appeal Deadline

by Perkins Coie
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On January 22, 2013, the U.S. Supreme Court issued a unanimous decision in Sebelius v. Auburn Regional Medical Center, 568 U.S. _____ (2013), holding that hospitals cannot appeal Medicare inpatient reimbursement determinations to the Provider Reimbursement Review Board (PRRB) if it has been more than three years since the issuance of  a Notice of Program Reimbursement (NPR) from a Medicare fiscal intermediary.  The Court held that the presumption of equitable tolling does not apply to internal agency filing deadlines such as the three-year appeal period at issue.  

This case involved a challenge by a group of hospitals to reimbursement amounts they received for serving a disproportionate number of low-income patients, called “Disproportionate Share Hospital” (DSH) payments.  The hospitals claimed that they were underpaid between 1987 and 1994 because the Centers for Medicare & Medicaid Services (CMS) had been using erroneous data in calculating their DSH reimbursement.  The dispute arose after the hospitals learned about the error through an unrelated case, Baystate Medical Center v. Leavitt, 545 F. Supp. 2d 20 (D.D.C. 2008).  After the Baystate decision, the providers immediately requested a hearing before the PRRB to challenge CMS’ DSH payment determinations.  

Hospitals challenging inpatient reimbursement decisions typically have 180 days from the time they receive an NPR to request a hearing.  See 42 U.S.C. § 1395oo(a)(3); 42 C.F.R. § 405.1835(a)(3).  This 180-day time period may be extended up to three years, though, for good cause.  42 C.F.R. § 405.1836; 42 C.F.R. § 405.1841(b)(2007).  Because the hospitals’ hearing requests involved NPRs issued more than 10 years after the 180-day deadline, they argued that the three-year limitations period should be tolled because CMS failed to timely inform them that its reimbursement calculations were based on faulty data.  The PRRB dismissed the appeal, finding it had no jurisdiction.  The providers appealed.  The district court ruled in favor of the government and the U.S. Court of Appeals for the District of Columbia reversed, finding the presumption of equitable tolling, i.e., that limitations periods are customarily subject to equitable tolling unless tolling would be inconsistent with the text of the relevant statute, applied in this case.  See Auburn Reg’l Med. Ctr. v. Sebelius, 642 F.3d 1145, 1148 (D.C. Cir. 2011).  

The Court first addressed the preliminary question of whether 42 U.S.C. § 1395oo(a)(3) imposes a “jurisdictional” limitation on providers seeking a hearing before the PRRB.  If the limitation is jurisdictional, the Court would not be empowered to apply the equitable tolling doctrine.  The Court concluded that the restriction is not jurisdictional as Congress did not clearly say otherwise.  The Court also cited its holdings in other cases that similar filing deadlines are not ordinarily found to be jurisdictional.  As a result, the Court concluded that the secretary of the Department of Health and Human Services (DHHS) was not prohibited from extending the 180-day limitation period by federal rule for good cause.

After concluding that the regulation permitting a three-year extension for good cause is consistent with 42 U.S.C. § 1395oo(a)(3), the Court turned to whether the limitation could be equitably tolled to allow the providers’ appeal to proceed.  The D.C. Circuit previously held that the limitation could be tolled, relying primarily on the Supreme Court’s decision in Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96 (1990), in which it held that “the same rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States.”  But the Supreme Court found Irwin inapplicable, explaining that the presumption has been applied to time limits for filing suits in federal court and has never applied in the context of an agency’s internal administrative appeal deadline. 

The hospitals also argued that prohibiting equitable tolling would be fundamentally unjust given that the DHHS secretary or a Medicare fiscal intermediary may reopen a reimbursement decision at any time if the determination was procured by fraud or similar fault of the provider.  See 42 C.F.R. § 405.1885.  The Court rejected that argument, finding the inequity justified when a handful of fiscal intermediaries are responsible for issuing tens of thousands of reimbursement determinations and when providers are responsible only for reviewing their own submissions.  The Court’s logic is difficult to understand though.  In this case, the hospitals, even with all due diligence, did not have access to the data that would have permitted them to identify the calculation errors and make an intelligent decision to timely appeal. 

This decision manifests and perhaps portends a further hostility to providers in their interaction with CMS, and specifically those providers who must rely on CMS to provide accurate and reliable information about reimbursement determinations.  Given the more recent transparency of CMS DSH calculations, however, the Court’s opinion should not further bear on this specific reimbursement issue unless CMS decides that it is in its interests to again cloister its approach to the calculations. 

The Supreme Court’s decision should be a reminder to hospitals to request a PRRB hearing within the 180-day period proscribed by statute and rule.  Providers cannot rely on the principle of equitable tolling to circumvent CMS’ PRRB filing deadline, even when improper and unlawful action is alleged.  Moreover, reliance on the three-year good cause extension should be avoided if possible, as the agency’s determination of whether “good cause” exists is discretionary and is not subject to judicial review.  See 42 C.F.R § 1836(e)(4).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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