In Sebelius v. Auburn Regional Medical Center, et al., the US Supreme Court ruled that equitable tolling is not applicable to administrative appeals filed by hospitals contesting an amount of Medicare reimbursement. Under the doctrine of equitable tolling, the period for filing an action may be extended, as explained in Currier v. Radio Free Europe, when a party "despite all due diligence ... is unable to obtain vital information bearing on the existence of his claim." While the precise issue in Auburn may have been narrow, its implications are potentially far-reaching due to the Supreme Court's suggestion that equitable tolling will not normally be permitted in administrative actions.
In the Medicare program, determinations as to the amount of reimbursement owed to a hospital are initially made by a fiscal intermediary, which is typically a private insurance company. Under the statute at issue in Auburn, the hospital has 180 days to appeal this determination to the Provider Reimbursement Review Board (PRRB), which is the administrative tribunal designated to hear such appeals. A provider dissatisfied with the PRRB's ruling may then file an appeal to a federal district court. While the statute provides for an appeal within 180 days, the secretary, by regulation, has permitted this period to be extended with a maximum extension time of three years upon a showing of good cause.
In Auburn, the fiscal intermediary made a determination as to the amount of disproportionate share (DSH) reimbursement owed to the hospital under the Medicare program. The DSH program is designed to provide additional monies to hospitals treating low-income patients. The amount of this reimbursement is based in part upon the number of patients receiving benefits under the Supplemental Security Income (SSI) program. Hospitals do not have access to the database of individuals entitled to SSI benefits for privacy reasons. Accordingly, the Centers for Medicare and Medicaid Services (CMS) the agency responsible for administering Medicare obtains this data directly from the Social Security Administration (SSA). CMS then matches the hospital's inpatient records with the data received from the SSA to compute the amount of disproportionate reimbursement due to the hospital. The data upon which the amount of this reimbursement is based is therefore exclusively within the possession of the government.
Auburn filed its appeal to the PRRB more than 10 years after the fiscal intermediary made a determination as to the amount of DSH reimbursement due to the hospital. In its appeal, Auburn alleged that the 180-day appeal period should be equitably tolled because the hospital was unable to identify the deficiencies in its DSH payment due to lack of access to the data used by CMS to make its computation. Auburn alleged that it only became aware of these deficiencies as a result of publication of a separate decision by the PRRB in Baystate Medical Center v. Mutual of Omaha Insurance Company. In Baystate, the PRRB held that CMS systemically understated for all providers the numbers of SSI entitled patients in its calculations, which resulted in an underpayment to the hospitals. The PRRB further held that CMS was aware of these deficiencies, but did not correct them.
Auburn alleged that its appeal, filed within 180 days after publication of the Baystate decision, was timely on the basis of equitable tolling principles. Auburn's position in this litigation was that it had no way of reasonably identifying the deficiencies in the payments made by CMS until after the publication of the PRRB's decision in Baystate. The PRRB dismissed Auburn's appeal as being untimely.
There were three principle arguments advanced by the parties in the Auburn case. First, the government asserted that its regulations providing for an extension of the appeal period for up to three years constituted a reasonable exercise of its rule making authority under the Medicare Act. Therefore, the hospital's claims, filed more than 10 years after the fiscal intermediary's determination, must be dismissed.
Second, an amicus curiae appointed by the Supreme Court argued that the 180-day period for filing appeals was jurisdictional, and therefore the secretary's regulation providing for an extension of the appeal period for up to three years was invalid. This argument, like the argument made by the government, would also result in the dismissal of the hospital's claims.
Third, the hospital argued that the equitable tolling period did not stop until publication of the PRRB's decision in Baystate.
Under generally accepted equitable tolling principles set forth in Holland v. Florida, the period for tolling is not limited to a specific time frame, such as the three years contained in the secretary's regulations, but, rather, continues until such time as the hospital was reasonably able to identify the basis for its appeal.
The Supreme Court held that equitable tolling would be precluded if it found the 180-day period to be jurisdictional. However, the Court stated that limitations periods are not normally jurisdictional, unless there is a clear manifestation of congressional intent to the contrary. In this case, the Court did not find any persuasive evidence that Congress intended the 180-day period to be jurisdictional.
The Supreme Court next addressed whether the secretary's regulations permitting an extension of the appeal period for up to three years was a reasonable exercise of the secretary's regulatory authority. The Court emphasized the typically deferential standard of review accorded to the secretary's regulations governing the Medicare program. The Court noted that a three-year outer limit served to protect the government's interest in the orderly administration of the Medicare program.
The Court further noted that Congress amended the appeals provision at issue in Auburn six times since the adoption of the secretary's regulation authorizing an extension of the appeal period for up to three years. The Court held that the fact that Congress amended the statute on several occasions without disapproving the secretary's regulations indicated congressional acquiescence in those regulations. This further suggested to the Court that the more open-ended equitable tolling scheme sought by plaintiffs was inconsistent with congressional intent. Based upon these factors, the Court upheld the secretary's regulations authorizing an extension of the 180-day appeal period, but only up to a maximum of three years.
The Court could have ended its analysis at this point. The plaintiffs' appeals, brought more than a decade after the intermediary's final determination, could not survive if the secretary's regulations were upheld. However, the Court then undertook a somewhat broader analysis of the circumstances in which equitable tolling should be allowed. Specifically, the Court reaffirmed its prior decisions applying a presumption in favor of equitable tolling in connection with the time limitations for filing actions in federal court. However, the Court strongly suggested that it would not apply this presumption with respect to the time for filing appeals to administrative tribunals.
This aspect of the Court's opinion is likely to reverberate throughout the federal government. There are vast numbers of cases including many arising under the Medicare Act in which a plaintiff must file an administrative action prior to obtaining access to the federal courts. Absent application of equitable tolling at the administrative level, a party may never have access to the federal courts. As noted by Justice Sonia Sotomayor in her concurring opinion, it makes little sense to permit equitable tolling in connection with appeals from administrative tribunals to the federal courts, while at the same time precluding equitable tolling in connection with the filing of the initial appeal to the administrative tribunal.
The absence of any presumption in favor of equitable tolling with respect to appeals filed before administrative tribunals raises a number of interesting questions. First, courts will be required to struggle with the criteria which should be used in deciding whether equitable tolling may be applied at the administrative level. The Supreme Court's holding in Auburn strongly suggests that the decision as to whether equitable tolling is available at the administrative level will be left largely to the discretion of the agency.
This conclusion makes little sense in light of the fact that permitting equitable tolling necessarily results in a waiver of sovereign immunity. In the Auburn case, allowing the suit to go forward by tolling the appeal period could have resulted in the payment of millions of dollars by the government to the hospitals. The Court's prior decisions, such as Irwin v. Dep't of Veterans Affairs, have emphasized that sovereign immunity may be waived only by the legislature. Permitting an administrative agency to construct its own waivers of sovereign immunity through the exercise of administrative discretion would not be consistent with this principle.
Additionally, the Supreme Court based its decision in large measure upon the fact that Congress amended the appeals statute at issue in Auburn six times, but left undisturbed the secretary's regulatory guidance authorizing an extension of the appeals period for up to three years. Any attempt to derive some indication of congressional intent from this fact is highly implausible. Members of Congress are often unfamiliar with the statutory language which they enact. It is all the more unlikely that members have any familiarity whatsoever with the sub-statutory regulatory guidance issued by the agency interpreting those statutes.
The Supreme Court's ruling calls into question fundamental issues of basic fairness. Here, the hospitals were clearly deprived of an opportunity to exercise their appellate rights due to the government's alleged concealment of the errors in computing the payments owed to the hospital. The government should not be permitted to profit from what were allegedly deliberate acts of concealment.
However, all may not be lost for Auburn, and similarly situated hospitals. The Supreme Court's ruling was decided in the context of the hospital's argument concerning the applicability of equitable tolling. As noted by Sotomayor in her concurring opinion, equitable tolling is only one of several arguments which may be used by a hospital to extend the period for filing an appeal. Other legal theories which may be advanced include equitable estoppel. Under this theory articulated in Chung v. DOJ, a party cannot assert a limitations period as a defense when that party itself is responsible for the plaintiff's failure to file a timely appeal. While not firmly established, at least some courts have held that equitable estoppel is applicable to the US government such as the US Court of Appeals for the District of Columbia Circuit in ATC Petroleum, Inc. v. Sanders.
The evidence in the Baystate case suggested that the secretary had information pertaining to the deficiencies in its computation of the DSH payment, but effectively concealed that information from the hospitals. As such, there may still be a narrow window for hospitals such as Auburn to contend that its appeal is timely filed on the basis of equitable estoppel, as opposed to equitable tolling.
Jeffrey Lovitky is an attorney in private practice in Washington D.C. He focuses on Medicare reimbursement issues, with particular emphasis on Medicare's disproportionate share program. He has litigated numerous appeals on behalf of hospitals at the federal district courts and the US Courts of Appeals in cases involving Medicare reimbursement disputes. He is also Board Certified in Health Law.
Suggested citation: Jeffrey A. Lovitky, The Appellate Implications of Sebelius v. Auburn Regional Medical Center, JURIST - Sidebar, Feb. 14, 2012, http://jurist.org/sidebar/2013/02/jeffrey-lovitky-sebelius-auburn.php
This article was prepared for publication by Stephanie Kogut, an associate editor with JURIST's professional commentary service. Please direct any questions or comments to her at email@example.com