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PAMC, Ltd. v. Sebelius

United States Court of Appeals, Ninth Circuit

April 8, 2014

PAMC, LTD., a California Limited Partnership, DBA Pacific Alliance Medical Center, Plaintiff-Appellant,
v.
KATHLEEN SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant-Appellee

Argued and Submitted, Pasadena, California: March 6, 2014.

Appeal from the United States District Court for the Central District of California. D.C. No. 2:11-cv-01373-JAK-MAN. John A. Kronstadt, District Judge, Presiding.

Lloyd A. Bookman and Tracy A. Jessner, Hooper, Lundy & Bookman, P.C., Los Angeles, California, for Plaintiff-Appellant.

Stuart F. Delery, Acting Assistant Attorney General, André Birotte Jr., United States Attorney, Mark B. Stern and Stephanie R. Marcus, Attorneys, Appellate Staff, Civil Division, Department of Justice, Washington, D.C., for Defendant-Appellee.

Before: Ferdinand F. Fernandez, Susan P. Graber, and Mary H. Murguia, Circuit Judges. Opinion by Judge Fernandez.

OPINION

Page 1215

FERNANDEZ, Circuit Judge:

PAMC, Ltd., dba Pacific Alliance Medical Center, (PAMC) appeals the district

Page 1216

court's order affirming the decision of the Secretary of the Department of Health and Human Services (Secretary), which denied PAMC its full Medicare Annual Payment Update for the fiscal year 2009. PAMC had failed to make a timely submission of specified data under the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program, and the Centers for Medicare & Medicaid Services (CMS) reduced PAMC's annual percentage increase by two percent as a result. The Provider Reimbursement Review Board (Board) upheld CMS's decision, and the Secretary declined to review the Board's decision.[1] We affirm.

BACKGROUND

PAMC is a general acute care hospital that was a duly certified provider of inpatient hospital services under the Medicare program and participated in the RHQDAPU program. PAMC missed the deadline for submitting quality data regarding second-quarter discharges for the fiscal year 2007. The deadline was 11:59 p.m. CST on November 20, 2007. PAMC's third-party vendor, Thomson Reuters (Thomson), which was responsible for submitting PAMC's data, failed to do so until 12:27 p.m. CST on November 21, 2007. Both PAMC and Thomson acknowledged that PAMC's failure to meet the deadline was Thomson's fault. CMS notified PAMC that the failure to timely submit data would result in a two percent reduction of its market basket update.

PAMC filed a request for reconsideration with CMS, and contended that, among other things, it had been diligent, its filing was not very late, and any failure to meet the requirement should be excused because it was due to Thomson's error. CMS denied the request on the basis that the failure to make a timely submission was due to vendor error, which is not a ground for reconsideration.

PAMC appealed the denial of reconsideration to the Board. After a hearing, the Board affirmed CMS's denial of reconsideration. The Board determined that PAMC did not submit its quality data within the timeframe specified by the Secretary and was, thus, subject to a two percent reduction in its annual payment update. The Board observed that Congress had given the Secretary broad authority to implement the RHQDAPU program and that the Secretary had published program procedures in the Federal Register and on the QualityNet Exchange website. The Board explained that it lacked authority to award PAMC equitable relief because PAMC indisputably had failed to meet the applicable deadline and was ultimately responsible for the errors of its own vendor. In addition, the Board determined that even assuming arguendo that the contract doctrine of substantial performance was applicable, PAMC had not substantially complied with the doctrine's requirements.

PAMC sought review by the Secretary, who declined to review the Board's decision. The Board's decision therefore became the final agency action subject to judicial review.

PAMC sought review of the decision in the district court and contended that the Board erred when it failed to grant PAMC equitable relief and when it determined that PAMC had not substantially complied with the RHQDAPU program requirements. The district court held that neither the Medicare statute nor agency regulations granted CMS or the Board authority to award equitable relief where, as here, a provider has missed the

Page 1217

applicable deadline through its own fault or that of its vendor. The court also rejected PAMC's argument that the Board erred by declining to apply the contract doctrine of substantial performance, and held that contract principles are inapplicable to the " statutory and regulatory ...


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