                             UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA




HOSPITAL OF THE UNIVERSITY OF
PENNSYLVANIA, et al.,

        Plaintiffs,
                v.                                         Civil Action No. 11-464 (JDB)

KATHLEEN SEBELIUS,
Secretary, U.S. Department of Health
and Human Services,

        Defendant.




                                 MEMORANDUM OPINION

       The Secretary of the Department of Health and Human Services is responsible for

administering Medicare. Plaintiffs are three associated Philadelphia hospitals — Hospital of

University of Pennsylvania, Presbyterian Medical Center, and Pennsylvania Hospital — that

seek judicial review of the Secretary's denial of payments associated with services the hospitals

provided to certain Medicare recipients in fiscal years 1999 and 2000. The Medicare fiscal

intermediary did not receive claims for these payments from plaintiffs in a timely fashion, and

the Secretary determined that there was insufficient evidence to conclude that the claims were

actually mailed by plaintiffs. Plaintiffs contend that they mailed claims for these payments to the

intermediary and that, in any case, the Secretary failed to notify them of the timing requirements

for mailing claims, making the deadlines invalid. Plaintiffs also contend that, notice aside, the

time limits were improper.




                                                -1-
       This Court previously remanded this matter to the Secretary to explain why plaintiffs had

sufficient notice of the time limits for filing these claims and why the time limits were proper.

The Court also concluded that the basis of the Secretary's finding that plaintiffs did not show

they actually mailed the claims was contrary to law and remanded for further examination of

whether the claims were, in fact, mailed. In the meantime, the D.C. Circuit ruled in a similar

case, Loma Linda Univ. Med. Ctr. v. Sebelius, 408 Fed. Appx. 383 (D.C. Cir. 2010), that

hospitals were not put on notice of these deadlines.

       On remand, the Secretary determined that plaintiffs, unlike Loma Linda, had notice of the

deadlines and that the deadlines were proper. The Secretary also concluded that plaintiffs

presented insufficient evidence that the claims were mailed and received. Plaintiffs then sought

judicial review of the Secretary's decision. Now before the Court are the parties' cross-motions

for summary judgment. For the reasons described below, the Court concludes that plaintiffs did

not receive adequate notice of the relevant deadlines. Accordingly, plaintiffs' claims must now

be processed and paid.

I. Statutory and Regulatory Background

a. Claims Under Medicare Parts A & C

       The Secretary of the Department of Health and Human Services, through the Centers for

Medicare and Medicaid Services ("CMS" or "Administrator"), administers the Medicare statute,

Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. The Medicare program is

divided into several parts, of which Parts A and C are relevant here. Part A covers "inpatient

hospital services" furnished to Medicare beneficiaries by participating providers, such as

hospitals. 42 U.S.C. § 1395d(a)(1). CMS itself is directly responsible for the costs of Part A




                                                -2-
services. Id. To coordinate billing by and payment to hospitals under Part A, Medicare contracts

with fiscal intermediaries (usually private insurance companies) pursuant to 42 U.S.C. § 1395h. 1

        Medicare Part C was created by the Balanced Budget Act of 1997 ("BBA '97"). Under

Part C, beneficiaries may receive Medicare benefits through private health insurance plans called

"Medicare+Choice" plans. See 42 U.S.C. § 1395w-21(a)(1). Such plans — referred to by the

parties as "Medicare HMOs" — receive payment in advance from CMS for each enrollee and are

then responsible for the costs of the enrollees' services. The Medicare HMOs themselves

coordinate billing and payment with health care providers once services have been provided.

See 42 U.S.C. § 1395mm(a).

        Health care providers submit claims for services provided— either to fiscal

intermediaries (for services provided under Part A) or to Medicare HMOs (for services provided

under Part C) — and these claims are paid over the course of the year. At year-end, hospitals file

cost reports with the fiscal intermediaries, which reconcile interim payments made over the

course of the year with actual reimbursements due. See 42 C.F.R. § 405.1803. The fiscal

intermediary makes a final determination, which is appealable to the Provider Reimbursement

Review Board ("PRRB" or "Board"). 42 U.S.C. § 1395oo(a). The PRRB's decision is subject to

further review by the CMS Administrator, and a hospital may seek review of the Administrator's

decision in federal district court. See 42 U.S.C. § 1395oo(f).

        To receive payment under Medicare Part A, hospitals submit claim forms (labeled "UB-

92" forms) to their fiscal intermediaries. These claims are governed by the regulations set forth

at 42 C.F.R. § 424.30 et seq.. Among the requirements are time limits for filing claims, which

are codified at 42 C.F.R. § 424.44:


1
  The Court will refer interchangeably to "Medicare," "the Secretary," "HHS," "CMS," and "the Administrator,"
since nothing hinges on the distinction between these labels.

                                                       -3-
        Basic limits. . . . [T]he claim must be mailed or delivered to the intermediary or
        carrier, as appropriate—

                       (1)     On or before December 31 of the following year for
        services that were furnished during the first 9 months of a calendar year; and

                       (2)     On or before December 31 of the second following year for
        services that were furnished during the last 3 months of the calendar year.

42 C.F.R. § 424.44(a). 2      The first regulation in the set, § 424.30 (entitled "Scope"), describes

what claims the requirements apply to. Section 424.30 states: "This subpart sets forth the

requirements, procedures, and time limits for claiming Medicare payments. Claims must be filed

in all cases except when services are furnished on a prepaid capitation basis by a health

maintenance organization (HMO), a competitive medical plan (CMP), or a health care

prepayment plan (HCPP)." Medicare Part C services are "services [that] are furnished on a

prepaid capitation basis by a health maintenance organization (HMO)." 3 Hence, claims that

providers filed with HMOs for payment for services provided to Medicare Part C enrollees are

exempted from the requirements. As explained in detail below, a key issue in this case is whether

the regulatory exception, which clearly exempts claims filed with Medicare HMOs for services

provided to Part C enrollees, also applies to claims filed with fiscal intermediaries for graduate

medical education payments associated with the services provided to Part C enrollees.

b. Medical Education Payments

        The Medicare program also pays teaching hospitals for certain costs related to graduate

medical education. Medicare makes both an "indirect graduate medical education payment"

("IME") and a "direct graduate medical education payment" ("GME"). IME payments are

intended to reimburse teaching hospitals providing services to Medicare beneficiaries for their

2
 The regulations have since been modified slightly.
3
 The services "are furnished on a prepaid capitation basis by [an HMO]" because the Administrator prepays the
HMO a certain amount per capita — hence, on a "prepaid capitation basis."

                                                       -4-
higher-than-average operating costs. See 42 U.S.C. §§ 1395f(b), 1395ww(d). Medicare makes a

payment for each Medicare beneficiary discharged by a hospital. See 42 U.S.C. §§ 1395ww(d),

1395w-21(i)(1). The per-discharge payment increases depending on the hospital's ratio of

medical residents to beds — i.e., the higher the number of residents or the higher the number of

discharges, the greater the IME payment. See 42 U.S.C. § 1395ww(d)(5)(B). The GME

payment, on the other hand, is a payment intended to compensate teaching hospitals for the

direct costs of graduate medical education incurred because of services provided to Medicare

beneficiaries. 42 U.S.C. § 1395ww(h). The amount of the GME payment depends on the

number of full-time residents and the Medicare "patient load." Hence, like the IME payment, the

GME payment increases when the number of Medicare enrollees or the number of residents

rises. See id. Both GME and IME payments, then, depend on the number of residents and the

number of Medicare enrollees receiving services from a hospital.

       Before the passage of BBA '97, only services provided to Medicare Part A or B

beneficiaries were counted in calculating IME and GME payments. That is, the "per-discharge"

multiplicand for IME payments did not include discharges of Part C Medicare HMO enrollees,

and the "patient load" multiplicand for GME payments did not include Part C Medicare HMO

enrollees. BBA '97, however, directed the Secretary to make additional IME and GME

payments, phased in over five years, for services provided to Medicare HMO enrollees under

Part C. See BBA '97 §§ 4622, 4624 (codified at 42 U.S.C. §§ 1395ww(d)(11),

1395ww(h)(3)(D)(I)).

II. Background and Prior Proceedings

       Plaintiffs allege that they were improperly denied supplemental medical education

payments by their intermediary, Mutual of Omaha, for the 1999 and 2000 fiscal years. See



                                               -5-
Hosp. of Univ. of Penn v. Sebelius, 634 F. Supp. 2d 9, 11 (D.D.C. 2009) ("HUP I"). After the

fiscal intermediary denied payment, plaintiffs timely appealed to the PRRB. Id. at 11. Plaintiffs

argued that, under the applicable regulations, the claims filing requirements do not apply to

claims for supplemental medical education payments. See Administrative Record ("A.R.") at 59.

Specifically, plaintiffs contended that the "timely filing guidelines" — that is, the deadlines — at

42 C.F.R. § 424.44 do not apply to claims for IME/GME payments for services provided to

Medicare Part C enrollees. See id. Plaintiffs now also maintain that they never received

adequate notice that the Secretary would apply the claims filing requirements to the

supplemental medical education payments. See Compl. ¶ 71. Plaintiffs also argue that the

application of the claims filing requirements to claims for supplemental education payments

violates the Paperwork Reduction Act, 44 U.S.C. § 3501 et seq., because the Secretary did not

seek OMB approval of the filing requirements. See Compl. ¶¶ 123-35. Finally, plaintiffs argued

to the PPRB that whatever the resolution of the legal question, they had in fact complied with the

filing requirements and deadlines of 42 C.F.R. § 424.44 by mailing appropriately coded UB-92s

to their fiscal intermediary in a timely fashion. See A.R. at 59. Plaintiffs produced various

forms of evidence in support of this claim to the PRRB at a hearing on May 15, 2007. See HUP

I, 634 F. Supp. 2d at 12.

       With respect to the legal issue, the Board agreed with plaintiffs that "[t]he claims in

question . . . are specifically exempt from the requirements, procedures, and time limits" of 42

C.F.R. § 424. A.R. at 63. The Board explained that the regulations had not been changed after

the enactment of BBA '97 and, by the text of the regulation, the exception at 424 C.F.R. § 434.30

applied, thereby exempting these claims from the requirements. See id. at 63-65. The Board

therefore concluded that "the Intermediary improperly denied the Providers' submission of



                                                -6-
IME/[GME] claims for Medicare managed care enrollees due to untimely filing, and the Provider

should be given the opportunity to support its claim for payment." Id. at 65. In considering the

factual dispute, the PRRB wrote that "[t]he evidence in this case was conflicting" and that it

"finds [plaintiffs'] evidence that it filed claims credible, but there is no evidence that the claims

were proper for processing." Id. at 63. Nonetheless, the PRRB deemed the factual issue moot in

light of its resolution of the legal issue. Id. One member of the PRRB dissented, finding that the

regulatory exception did not apply and that plaintiffs had not provided sufficient evidence they

mailed the claims. Id. at 67-69.

       The intermediary appealed to the Administrator pursuant to 42 U.S.C. § 1395oo(f). The

Administrator devoted most of his analysis to the legal question and reversed, concluding that

the § 424.44 requirements do apply to claims for supplemental medical education payments

while addressing the factual dispute only briefly. See A.R. at 7-17. Citing the PRRB dissent, the

Administrator found that plaintiffs had not established that they had timely mailed UB-92s to the

intermediary. Id. at 18. Plaintiffs then appealed to this Court for review.

       The Court considered plaintiffs' original suit together with a similar case against the

Secretary, Cottage Health Systems v. Sebelius, 631 F. Supp. 2d 80 (D.D.C. 2009). In Cottage

Health, the Court assessed the plaintiff's allegation that it did not receive adequate notice that

health care providers were required to file UB-92s directly with fiscal intermediaries for the

IME/GME payments authorized by BBA '97. Id. at 95. The Court concluded that the

Administrator's decision that the plaintiff had been notified of the requirement to file UB-92s

with fiscal intermediaries was supported by substantial evidence. Id. The Court found that four

documents — three issued by the Secretary to hospitals generally and a letter pertaining only to

the Cottage Health plaintiff — supported the Administrator's decision with respect to notifying



                                                  -7-
health care providers of the requirement to file UB-92s with fiscal intermediaries. Id. at 96. The

three documents issued by the Secretary were a May 12, 1998 rule published in the Federal

Register, a July 1, 1998 Program Memorandum (PM A-98-21), and a July 13, 1998 Medicare

Bulletin. See id. at 95-96. The Court found that the Program Memorandum clearly explained

that hospitals must submit UB-92s to fiscal intermediaries for the additional IME/GME

payments. Id. at 96.

       Although Cottage Health upheld the Secretary's determination with respect to notice to

hospitals of the requirement to file UB-92s with intermediaries, the Court concluded that the

Administrator had not explained in sufficient detail why the plaintiff was notified that the UB-

92s must be filed within a specific time frame. Id. at 98-99. The Court noted that the

Administrator "did not point to any rule or informal notice that explicitly incorporated the time

limits." Id. at 98. Accordingly, the Court remanded to the Secretary "for further explanation as

to whether the time limits from 42 C.F.R. §§ 424.30 and 424.44 apply, and if so, why." Id. at 99.

The Court also remanded for the Administrator to address the argument that the Paperwork

Reduction Act required OMB approval before the implementation of the claims filing

requirements. See id. at 99-100.

       In its prior decision involving the present parties (HUP I), the Court relied on Cottage

Health for resolution of the legal issues. Noting that "the methods of providing notice to

hospitals" of the filing requirements are "identical, with limited exception" to the notice

considered in Cottage Health, the Court determined that the Administrator's rationale for finding

that plaintiffs had notice that the time limits from § 424.44 applied was too cursory for reasoned




                                                 -8-
review. HUP I, 634 F. Supp. 2d at 14. 4 The Court remanded to the Secretary for further

examination and explanation of whether plaintiffs received adequate notice of the time limits.

Id.

         With respect to the factual dispute present here but not in Cottage Health — whether

plaintiffs did, indeed, file UB-92s within the relevant time limits — the Court concluded that the

Administrator's exclusive focus on documentary evidence was "'not in accordance with the law.'"

Id. at 15 (quoting 5 U.S.C. § 706(2)(A)). The Court therefore vacated and remanded to the

Secretary to determine whether plaintiffs' testimonial and documentary evidence together was

sufficient to prove that the UB-92s were mailed to, and hence may be deemed received by, the

intermediary. Id. 5

         Subsequently, the district court in Loma Linda ruled on a hospital's claim that it did not

receive notice of the deadlines for filing claims for IME/GME payments for Part C enrollees.

That court considered the same three documents from HHS — the May 12, 1998 rule, Program

Memorandum A-98-21, and the July 13, 1998 Medicare Bulletin — that this Court had

considered in Cottage Health and HUP I. See Loma Linda, 684 F. Supp. 2d at 52-53. The court

noted that "there is no language in any of those documents regarding time limits, nor is there any

mention of 42 C.F.R. § 424.44, the regulation governing deadlines for Part A claims." Id. at 53.

The court also noted that the Administrator did not "identify any other agency publication

informing hospitals that bills for []GME and IME costs associated with Medicare+Choice




4
  The Court, as in Cottage Health, also affirmed the Secretary's determination that, time limits aside, hospitals
received notice of the need to file UB-92s. HUP I, 634 F. Supp. 2d at 13-14. Likewise, the Court remanded for
consideration of the Paperwork Reduction Act issue. Id. at 14.
5
  With respect to whether the UB-92s, if mailed, were properly coded, the Court concluded that the Administrator
did not make a finding, leaving the Court with no decision to review, and instructed the Administrator to consider
the issue if she determined that plaintiffs had, in fact, presented sufficient evidence of mailing. HUP I, 634 F. Supp.
2d at 15-16.

                                                          -9-
enrollees were subject to Part A regulations generally or to the deadlines in 42 C.F.R. § 424.44 in

particular." Id.

         The Loma Linda court held that the Secretary "did not inform hospitals" that the Part A

time limits applied to claims for IME/GME payments for Part C enrollees and therefore "Loma

Linda's delay in filing is not a basis for rejecting the hospital's claims." Id. at 54, 56. In so

deciding, the court rejected the Secretary's "insist[ence] that Loma Linda knew of the deadline

for submitting the bills at issue here." Id. at 54. The Court also rejected the Administrator's

determination that the three documents from CMS "implicitly put Loma Linda on notice" and the

Administrator's reasoning that "requiring hospitals to submit UB-92 forms indicated that the Part

C medical education payments would fall under the Part A regulations." Id. The court stated

instead that "[a]s far as the Court can ascertain from the record before it, Loma Linda first

learned of the filing deadlines when it sought payment for unbilled claims and was informed by

the intermediary and CMS that the request was untimely." Id. 6 On appeal, the D.C. Circuit

affirmed the district court's grant of partial summary judgment in a short, per curiam opinion.

The court stated: "Appellee did not receive notice 'with ascertainable certainty,' Gen. Elec. Co.

v. EPA, 53 F.3d 1324, 1329 (D.C. Cir. 1995), of the billing deadline for seeking payment for

medical education costs associated with Medicare+Choice (Part C) inpatient days." Loma Linda,

408 Fed. Appx. 383. 7

III. Secretary's Remand Decision



6
  In addition to not filing its claims for payment within the time limits, Loma Linda, unlike plaintiffs, was unable to
file all of its claims in UB-92 format. See Loma Linda, 684 F. Supp. 2d at 48. Loma Linda sought to receive
payment by reporting the information in alternative form, which the Administrator denied. See id. at 48-49, 50. On
review, the court, in addition to its finding regarding notice of the timeliness requirements, also concluded that the
Secretary did not sufficiently explain the rejection of Loma Linda's request to file in alternative form and remanded
to the Secretary for further explanation. Id. at 56-58.
7
  The court also affirmed the district court with respect to requiring the Secretary to further consider Loma Linda's
"proposed alternative computation method." 408 Fed. Appx. 383.

                                                         -10-
       On remand in the present case, the Administrator considered this Court's prior decisions,

Loma Linda, the record, and further arguments made by plaintiffs. The Administrator concluded

that the regulations at 42 C.F.R. § 424.30, et seq., including the relevant deadlines, apply to these

claims for IME/GME payments for Part C enrollees. See A.R. at 2504-2512. In reaching this

conclusion, the Administrator quoted the relevant language from 42 C.F.R. § 434.30: "Claims

must be filed in all cases except when services are furnished on a prepaid capitation basis by a

health maintenance organization (HMO), a competitive medical plan (CMP), or a health care

prepayment plan (HCPP)." Id. at 2504. The Administrator then stated:

       The claims at issue are not for "services furnished on a prepaid capitation basis by
       a health maintenance organization." The services are related to the IME/GME
       teaching costs attributable to inpatient services provided to managed care
       enrollees. The payment at issue has been specifically carved out of the Part C
       capitation rates and is specifically being made to hospitals under the authority set
       forth in Part A. The intent of the exclusion is to prevent the double payment for
       the same service under Medicare fee-for-service (Parts A and B) and also under
       Part C. A hospital (not a managed care organization) must submit claims in
       conformity with 42 CFR 424.30, et seq., to be able to receive managed care
       enrollees for the Part A IME and GME payments from its intermediary.

Id. The Administrator concluded that "the provision for this additional payment for managed

care enrollees is within [a] framework of a pre-existing methodology for IME/GME payments

under Medicare Part A and not under the exception at 42 CFR 424.30 provided for Medicare Part

C claims." Id. at 2509. The Administrator further stated that "[t]he requirement that a Provider

submit a claim UB-92 form cannot be separated from the requirement that it be filed within the

prescribed timeframes for such a form under 42 CFR 424.30, et seq[]." Id. at 2510. The

Administrator also stated that, "[a]mong other things, Congress specifically statutorily excluded

the payment under Part C, [and] Congress specifically included the payment under the Medicare

inpatient Part A section of the Medicare Act . . . ." Id. at 2511-12.




                                                -11-
        The Administrator also considered the notice issue. See id. at 2510-12. The

Administrator stated that "[t]o suggest that a provider might believe there are no deadlines would

be unwarranted" because "[t]hat is contrary to every provider's general practice and experience in

receiving payment under Medicare." Id. at 2510. The Administrator concluded that "the

teaching hospital community and its associations knew the filing of the UB-92 form was, like all

other claims, required to be done within the usual timeframes." Id. at 2511. The Administrator

wrote that the "irrefutable connection between using the UB92 form for payment and need to

timely file the form within the normal filing deadlines is evident in the November, 2, 1999

'Memorandum from the American Association of []Medical Colleges,'" which plaintiffs received

in November 1999. Id. The Administrator noted that the American Association of Medical

Colleges ("AAMC") memorandum "specifically indicates that claims for services rendered in

1998 must be filed by December 31, 1999." Id. Later in the Administrator's decision (though in

a discussion of whether plaintiffs had presented factual evidence of having mailed the claims, not

a discussion of notice), the Administrator also stated that plaintiffs' "upper management was

aware of the deadlines," citing the AAMC memorandum (as well as other documents that did not

actually reference the deadlines). A.R. at 2545. 8

        The Administrator next considered the factual question of whether plaintiffs had, in fact,

presented sufficient evidence of mailing these claims to their fiscal intermediary. See A.R. at

2516-2548. The Administrator concluded that plaintiffs "did not present sufficient evidence to

trigger the presumption of mailing," largely because plaintiffs failed to present evidence that

items intended to be mailed actually reached the U.S. Postal Service from plaintiffs' facilities,

which the Administrator deemed an important gap in plaintiffs' evidence. See id. at 2542-47.


8
 The Administrator also considered and rejected plaintiffs' legal argument involving the Paperwork Reduction Act.
See A.R. at 2512-16.

                                                      -12-
The Administrator also concluded, assuming arguendo that plaintiffs' provided evidence

"trigger[ing] the presumption of mailing," that the intermediary rebutted that presumption with

its evidence. See id. at 2547-48. 9

        Finally, in a brief concluding paragraph, the Administrator distinguished Loma Linda

from the plaintiffs' situation. The Administrator stated:

        First, the Administrator is reviewing this case pursuant to a specific remand order.
        Second, each case is based on its own distinct factual record. For example, this
        record shows that [plaintiffs] were aware of the deadline for filing claims as was
        the larger community and that the instruction to file a UB92 claim was understood
        to involve the deadlines for filing . . . [.] Third, the court has already made clear
        that this case could be resolved on a narrower factual issue distinct from that
        presented in the Loma Linda case based on whether the claims can be found to be
        timely filed.

A.R. at 2549.

IV. Summary Judgment Standard

        Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate when the

pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law." In a case involving review of a

final agency action under the Administrative Procedures Act, 5 U.S.C. § 706, however, the

standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing

the administrative record. See N.C. Fisheries Ass'n v. Gutierrez, 518 F. Supp. 2d 62, 79 (D.D.C.

2007). Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision

that is supported by the administrative record, whereas "the function of the district court is to

determine whether or not as a matter of law the evidence in the administrative record permitted

the agency to make the decision it did." See Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70

(9th Cir. 1985). Summary judgment thus serves as the mechanism for deciding, as a matter of

9
 The Administrator also briefly considered whether the UB-92s were, if actually mailed, properly coded, and
concluded that the record would not support that conclusion. See A.R. at 2549.

                                                      -13-
law, whether the agency action is supported by the administrative record and otherwise

consistent with the APA standard of review. See Richards v. INS, 554 F.2d 1173, 1177 & n. 28

(D.C. Cir. 1977), cited in Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d

1060 (D.C. Cir. 2003).

       Under the APA, a court may vacate an agency decision if it is "arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law" or if it is "unsupported by

substantial evidence." 5 U.S.C. §§ 706(2)(A), (E). Agency actions are entitled to much

deference, and the standard of review is narrow. See Citizens to Preserve Overton Park, Inc. v.

Volpe, 401 U.S. 402, 416 (1971). The reviewing court is not permitted to substitute its judgment

for that of the agency. See id. That is, it is not enough for the agency decision to be incorrect —

as long as the agency decision has some rational basis, the court is bound to uphold it. See id.

The court may only review the agency action to determine "whether the decision was based on a

consideration of the relevant factors and whether there has been a clear error of judgment." Id.

V. Analysis

       As described below, the Court finds that plaintiffs were not notified of the timing

requirements for the filing of IME/GME claims for Part C enrollees. Since the deadlines cannot

be enforced against plaintiffs without notice, the Court need not decide whether the deadlines

are, notice aside, actually proper under HHS regulations. Nonetheless, the regulations merit

some discussion to the degree that the regulatory text affects how much notice HHS must

provide of its interpretation of the regulations.

a. Administrator's Decision and Parties' Current Arguments

       Plaintiffs assert that they did not receive adequate notice that the deadlines for filing

claims under Medicare Part A also applied to claims for the additional IME/GME payments



                                                    -14-
mandated by BBA '97 for Medicare Part C enrollees. See Pls.' Mem. in Supp. of Mot. for

Summ. J. [Docket Entry 11-1] ("Pls.' Mem.") at 13-16. Plaintiffs also contend that, even if they

were properly notified of the deadlines, the deadlines themselves are improper because they are

contrary to HHS regulations. See id. at 20-26. More specifically, plaintiffs contend that the

claims they filed fall within the exception to the regulations that applies "when services are

furnished on a prepaid capitation basis by a health maintenance organization." See id. at 21-23.

       On remand, as explained above, the Administrator concluded that these claims do not

come under the regulatory exception. The Administrator also concluded that plaintiffs received

notice of the deadlines — or, more precisely, that "the teaching hospital community," which

includes the plaintiffs, "and its associations knew the filing of the UB-92 form was, like all other

claims, required to be done within the usual timeframes," A.R. at 2510, and that plaintiffs,

specifically, were "aware of the deadlines," A.R. at 2545.

       The Secretary now argues both that the timing deadlines apply to these claims and that

plaintiffs had "actual notice" of them. With respect to whether the deadlines apply, the Secretary

quite appropriately echoes the Administrator's decision on remand. See Mem. of P. & A. in

Supp. of Def.'s Cross-mot. for Summ. J. and in Opp'n to Pls.' Mot. for Summ. J. [Docket Entry

12] ("Def.'s Cross-mot.") at 10-14. First, the Secretary explains that IME/GME payments under

Part A predated Medicare Part C and are based on a different methodology than Part C

payments, which are "capitated" payments that the Secretary makes to HMOs, not hospitals. Id.

at 11-12. Second, the Secretary argues that Congress specifically carved out IME/GME

payments from Part C, so the payments fall under Part A and are linked to the existing

methodology for filing Part A claims. Id. at 12-13. Third, the Secretary notes that the purpose of

the exception clause is to prevent double payment for the same service — that is, to prevent



                                                -15-
hospitals from receiving payment both from fiscal intermediaries and from HMOs for services

provided to patients under Part C. Since hospitals receive payment for IME/GME costs only

from fiscal intermediaries and not from HMOs, applying the exception to claims for IME/GME

payments would not serve the purpose of the regulation. Id. at 31.

       With respect to whether plaintiffs were notified of the deadlines, the Secretary's argument

now deviates somewhat from the Administrator's remand decision. To begin with, the Secretary

argues that plaintiffs waived their notice argument by failing to raise the notice issue in either the

initial proceedings at HHS or the initial suit in this Court and "conceded" at those times that they

were aware of the deadline. Def.'s Cross-mot. at 7-8. The Secretary notes that plaintiffs moved

for reconsideration of the Court's decision in HUP I in part because, according to plaintiffs, they

did not "frame their appeal" in terms of notice as the Cottage Health plaintiff had. Id. at 8 n.3;

see Pls.' Mem. of P. & A. in Supp. of Mot. for Recons. and Clarification at 4, HUP I (No. 08-

1665). Likewise, the Secretary notes that plaintiffs' original complaint in HUP I stated that

plaintiffs timely filed their claims after receiving warnings through "'the grapevine'" and from the

AAMC that the Secretary had decided to require hospitals to file these claims within the time

limits applicable for Part A claims. See Def.'s Reply to Pls.' Opp'n to Def.'s Cross-mot. for

Summ. J. [Docket Entry 17] at 3; see Compl. ¶¶ 69-70, HUP I (No. 08-1665).

       Next, the Secretary argues that Loma Linda did not foreclose a finding that plaintiffs had

"actual notice" of the deadlines. See Def.'s Cross-mot. at 8-10. The Secretary notes that

plaintiffs, in their correspondence with the intermediary following the rejection of their claims,

did not claim ignorance of the timing rules but rather maintained that they complied with (in the

words of plaintiffs' employee) "the required deadline." Id. at 9 & n.5. Although the Secretary

concedes that the AAMC memorandum cannot serve as notice of the Secretary's interpretation



                                                -16-
because it did not actually come from the Secretary, the Secretary contends that plaintiffs

themselves indicated that they understood from the AAMC memorandum "what the Secretary's

deadlines were." See id. at 10. At a motions hearing before the Court, counsel for the Secretary

also noted that the court in Loma Linda did not consider the AAMC memorandum in reaching its

conclusion that the Secretary "did not inform hospitals" of the deadlines, 684 F. Supp. 2d at 54;

counsel argued that the court might have come to a different conclusion if it had considered the

memorandum.

b. Agency Notice When Regulations Not Clear

       There is a relationship between the need for agencies to notify regulated parties of

regulatory requirements and the text of the regulations that set out those requirements. When the

text of regulations administered by an agency is clear, the agency need not provide other notice

to regulated entities because the regulations themselves provide notice. See Gen. Elec. Co. v.

EPA, 53 F.3d 1324, 1329 (D.C. Cir. 1995) ("[W]e must ask whether the regulated party received,

or should have received, notice of the agency's interpretation in the most obvious way of all: by

reading the regulations."). But when regulations can reasonably be interpreted in a way other

than the agency does, the agency must give regulated entities notice before enforcing

requirements based on that interpretation. See Satellite Broad. Co., Inc. v. FCC, 824 F.2d 1, 3-4

(D.C. Cir. 1987). The D.C. Circuit has endorsed the "ascertainable certainty" standard for

providing fair notice of regulatory requirements: "If, by reviewing the regulations and other

public statements issued by the agency, a regulated party acting in good faith would be able to

identify, with 'ascertainable certainty,' the standards with which the agency expects parties to

conform, then the agency has fairly notified a petitioner of the agency's interpretation." General




                                                -17-
Electric, 53 F.3d at 1329 (quoting Diamond Roofing Co v. OSHRC, 528 F.2d 645, 649 (5th Cir.

1976)).

          In the Court's view, this case presents a situation that is arguably the reverse of the

situation in which clear regulations provide notice to regulated parties, because here the agency's

interpretation of its regulation may actually contradict the regulatory text. Of course, an agency's

interpretation of its own regulations is entitled to substantial deference, and the Court need not

and will not decide whether the Secretary's interpretation of the regulations is sustainable; that

question need not be reached if the Court finds that the agency loses on notice grounds. See

General Electric, 53 F.3d at 1329-30 (citing Gates & Fox v. OSHRC, 790 F.2d 154, 155 (D.C.

Cir. 1986)). Nonetheless, in the Court's view, when an agency's reading of the relevant

regulation is, to put the point mildly, quite strained, then the obligation on the agency to provide

adequate notice is at its peak, because a reasonable reader of the regulations could quite naturally

reach a conclusion contrary to that reached by the agency.

c. 42 C.F.R. § 424

          Under Medicare Part A, hospitals file UB-92s with fiscal intermediaries to receive "fee-

for-service" payments for the services provided to Medicare enrollees. By contrast, in order to

be paid for services provided to Medicare Part C enrollees, providers like plaintiffs file UB-92s

with HMOs. The claims that hospitals file with fiscal intermediaries for IME/GME payments

associated with Part C enrollees are so-called "no pay" UB-92s. The claims are "no pay" bills

because Medicare is not paying the hospitals for those services (as under the Part A "fee-for-

service" model). Plaintiffs have stated that they generated the "no pay" bills by photocopying the

original UB-92s (the "pay" bills, filed with HMOs) and then adding codes to distinguish them as

"no pay" bills. The question is whether these "no pay" bills, filed with fiscal intermediaries for



                                                   -18-
IME/GME payments relating to Part C services, are subject to the same regulatory requirements

as ordinarily apply to claims filed with fiscal intermediaries under Medicare Part A.

       As indicated above, the Secretary's requirements for filing claims under Medicare Part A,

including the time limits, are set out at 42 C.F.R. § 424.30, et seq. 42 C.F.R. § 424.30 describes

what claims the requirements apply to: "This subpart sets forth the requirements, procedures,

and time limits for claiming Medicare payments. Claims must be filed in all cases except when

services are furnished on a prepaid capitation basis by a health maintenance organization

(HMO), a competitive medical plan (CMP), or a health care prepayment plan (HCPP)." Services

provided to Medicare Part C enrollees are "services [that] are furnished on a prepaid capitation

basis by a health maintenance organization." The regulation therefore effectively reads, in

relevant part: "Claims must be filed in all cases except when services are furnished" under Part

C.

       On remand, the Administrator stated that "[t]he claims at issue are not for 'services

furnished on a prepaid capitation basis by a health maintenance organization.' The services are

related to the IME/GME teaching costs attributable to inpatient services provided to managed

care enrollees." A.R. at 2504. This statement is true, but it does not track the regulation's text.

The regulation does not except claims "for 'services furnished'" under Part C, as the

Administrator states. The Secretary's reading, then, rewrites the regulation's text as: "Claims

must be filed in all cases except when the claim is for services that are furnished on a prepaid

capitation basis by a health maintenance organization . . . ." But the regulation instead states that

"[c]laims must be filed in all cases except when services are furnished" under Part C (emphasis

added). And these claims were claims filed when (that is, in cases in which) services were

furnished to enrollees under Part C. They were not claims for those services, but the regulation



                                                -19-
is written with reference to how the services are furnished, not what the claims being filed are

for.

         The Court is not the first to make this point. The Provider Reimbursement Review

Board, in its initial review of this case, concluded that "the IME/[GME] payment arises from

'services . . . furnished on a . . . capitation basis,'" and that therefore the claims fall under the

exception to the § 424 requirements. See A.R. at 65. As the Board described, the regulations at

issue pre-date BBA '97 and simply were not crafted with an eye toward the present situation, in

which duplicate claims are filed with intermediaries in cases when services are furnished on a

prepaid capitation basis by an HMO and the Secretary has a separate payment obligation

associated with those services. See id. at 63-65. 10 Of course, as the Secretary correctly

indicates, the Administrator's decision, not the Board's, is the final decision of the agency. See,

e.g., Am. Med. Int'l, Inc. v. Sec'y of Health, Educ. and Welfare, 466 F. Supp. 605, 611 (D.D.C.

1979), aff'd, 677 F.2d 118 (D.C. Cir. 1981). Nonetheless, that the Board, with its substantial

Medicare expertise, read the regulations as requiring these claims to be exempted from the

requirements suggests that specialized knowledge of the subject matter does not change the

meaning of the regulation's plain text.

         The Secretary has not really tried to dissuade the Court from concluding that her

interpretation is a rewriting of the regulatory text. The Secretary points out that IME/GME

services are not "services furnished on a prepaid capitation basis" by HMOs; instead they are

ongoing payments made by the Secretary, on the basis of a formula (not prepaid per capita). But,


10
  The Board concluded that since the exception applied, not only the deadlines but also the underlying requirement
to file UB-92s with fiscal intermediaries was contrary to the regulations. See A.R. at 65. The Court previously
concluded that the Secretary did adequately notify hospitals of the requirement to file UB-92s. See HUP I, 634 F.
Supp. 2d at 13-14. Since the Court concludes that plaintiffs were not notified of the deadlines, and plaintiffs will
therefore receive the relief sought here (payment) through the processing and payment of their untimely claims, the
Court need not address whether, notice aside, the underlying requirement to file UB-92s was improper under the
regulations, as the Board concluded.

                                                        -20-
again, the regulatory exception is not based on what services the payment is being made for.

Rather, the regulation refers to "cases when services are furnished" under Part C, which is the

case for these claims. Indeed, the IME/GME claims are just recoded versions of the claims

earlier filed for services furnished under Part C.

         Rather than focusing on the regulatory text, the Secretary instead focuses primarily on

how much sense it would make to apply the § 424 requirements to these claims. And, indeed,

her arguments for applying the requirements to these claims do make some sense. The "no pay"

claims are, from the perspective of filing and payment, no different from any other claims filed

with fiscal intermediaries, so it would be logical to apply the same rules, including timing

deadlines. Health care providers are accustomed to the rules; in fact, they are accustomed to

filing claims with these very forms (UB-92s) under these rules. Not applying the timing rules

could mean that health care providers can file claims whenever they want — not a particularly

reasonable state of affairs. Furthermore, the purpose of the exception clause in § 424.30 is to

prevent providers from inappropriately filing fee-for-service claims with fiscal intermediaries,

since claims for payment for the services are filed with HMOs. That purpose is not served by

including "no pay" claims in the exception, because such claims are only filed with

intermediaries. Finally, Congress instructed the Secretary to "carve out" IME/GME payments

from Part C, so it makes little sense for the treatment of the claims to differ because they are

associated with Part C services. And plaintiffs have not put forward much of a reason,

compelling or otherwise, why it makes sense for the requirements not to apply to these claims. 11



11
  The closest plaintiffs have come to suggesting why the ordinary requirements ought not to apply to these claims
— although the argument is framed regarding plaintiffs' claims under the Paperwork Reduction Act, not the
interpretation of 42 C.F.R. § 424.30 — is that filing "no pay" UB-92s is repetitive and expensive. See Pls.' Mem. at
31-32. But, of course, this objection is to the requirement to file no pay UB-92s at all, not to the deadlines; plaintiffs
have not articulated any reason why, given the requirement to file "no pay" UB-92s, the regular deadlines should not
apply.

                                                          -21-
       Of course, the Secretary could solve the problem simply by changing the regulation to

clearly express her interpretation, but she has not done so. More to the point here, the Court

need not resolve this apparent tension between the plain meaning of the regulatory text and a

reading that would make more sense as a matter of policy and accordance with the statute. Since

the Court will decide the case on notice grounds, it need not determine whether the Secretary's

interpretation is sustainable on the basis of the substantial deference owed to HHS in interpreting

its own regulations. What is clear is that, given how the regulations read, the Secretary was

obliged to provide fair notice to regulated parties about how she was interpreting the regulations

— an interpretation at odds with the literal language of § 424.30. The regulations themselves

certainly do not provide such notice. On the contrary, a regulated entity relying on the

regulations would likely come to the opposite conclusion, making notice from the Secretary of

paramount importance.

d. Notice

       This Court has already concluded that the Secretary gave hospitals, including plaintiffs,

notice of the requirement to file with their fiscal intermediaries "no pay" UB-92s for Medicare

Part C enrollees in order to receive IME/GME payments. See HUP I, 634 F. Supp. 2d at 13-14;

Cottage Health, 631 F. Supp. 2d at 95-97. This notice came in the form of a July 1, 1998

Program Memorandum that "clearly stated that 'hospitals must submit a claim' for the additional

IME/GME payments 'to the hospitals' regular intermediary in UB-92 format.'" Cottage Health,

631 F. Supp. 2d at 96 (quoting Program Memorandum). This memorandum, however, contained

no mention of the deadlines that the Secretary now insists accompanied the use of the UB-92s.

The district court in Loma Linda considered the same documents issued by the Secretary and

concluded that hospitals did not receive notice of the timing deadlines. 684 F. Supp. 2d at 56.



                                               -22-
The D.C. Circuit affirmed that determination, concluding that Loma Linda "did not receive

notice 'with ascertainable certainty.'" 408 Fed. Appx. 383.

         Regarding notice, the only difference between this case and Loma Linda is the AAMC

memorandum. That memorandum did indicate that the relevant deadlines applied to these

claims. It stated: "This memorandum is to remind you that December 31, 1999 is the deadline

for submitting Medicare+Choice shadow claims to your fiscal intermediary for purposes of

receiving [GME] or [IME] payments for the period January-September, 1998." A.R. at 2511.

The memorandum did not come from HHS, nor did it reference any official HHS source for this

statement. Plaintiffs agree that they received the memorandum in November 1999 and attempted

— successfully, they maintain — to file "no pay" claims by year-end. 12

         The question for the Court is whether the receipt of the AAMC memorandum, and

plaintiffs' action to conform their conduct to it, requires a different determination than that

reached in Loma Linda. 13 The parties agree, as does the Court, that the sole fact that the AAMC

sent the memorandum and plaintiffs received it is insufficient to provide notice, since the AAMC

is a third party, not the Secretary's agent. See Gates & Fox, 790 F.2d at 156-57 (finding

inadequate notice when warning "came not from OSHA but from the general contractor's safety

inspector, and was therefore not an authoritative interpretation of the regulation"). Rather, the

Secretary maintains that what distinguishes this case from Loma Linda is that plaintiffs here

"knew" or "understood" the deadlines, indicating that they had "actual notice" of them. In other

words, since plaintiffs gathered, from the AAMC memorandum, that the deadlines applied and


12
   More precisely, plaintiffs indicate that staff was instructed to file "no pay" UB-92s beginning in February 1998,
and then performed a "massive search of records and bill[ing]" (by their account, a "rebilling") after receiving the
AAMC memorandum in November 1999. See A.R. at 2522-23, 2527.
13
   The district court in Loma Linda stated that CMS "did not inform hospitals" (plural) of the decision to apply the
Part A regulations to claims for IME/GME payments associated with Part C enrollees. See 684 F. Supp. 2d at 54.
On the other hand, the D.C. Circuit framed its affirmance in terms of "[a]ppellee" — that is, Loma Linda
specifically. 408 Fed. Appx. 383. To what degree these locutions were purposeful is not clear.

                                                        -23-
took action as such, plaintiffs were not prejudiced by the fact that the Secretary did not actually

inform them of the deadlines. By contrast, Loma Linda concluded that "neither the

Administrator's decision nor the Secretary's filings to this Court identify any evidence in the

record that Loma Linda was aware of the deadline for filing." 684 F. Supp. 2d at 55.

         The Administrator's decision on remand in this case suggests unacceptable non-

acquiescence to Loma Linda — i.e., to D.C. Circuit law. The Administrator incorporated the

AAMC memorandum into her analysis not as an indication that these plaintiffs, specifically,

understood the timing requirements, but rather as evidence that hospitals generally did so — the

very conclusion rejected by Loma Linda. The Administrator thus wrote that the "irrefutable

connection between using the UB92 form for payment and need to timely file the form within the

normal filing deadlines is evident in" the AAMC memorandum. A.R. at 2511. And the

Secretary reiterated that "the teaching hospital community and its associations knew the filing of

the UB-92 form was, like all other claims, required to be done within the usual timeframes." Id.

at 2511. The Court finds this language objectionable. A court of this district, affirmed by the

D.C. Circuit, has explicitly ruled that there was no "irrefutable connection" between using UB-

92s and the timing deadlines. The Administrator's stubborn repetition of this argument is

unacceptable.

         The Secretary has tried to rehabilitate the Administrator's statements by pointing out that

the courts in Loma Linda might have reached a different conclusion had the record in that case

contained the AAMC memorandum. Fair enough, but that is not quite what the Administrator

said on remand. The D.C. Circuit has already considered the Administrator's contention that the

use of UB-92s notified hospitals of the deadlines. The Administrator lost that argument in Loma

Linda.



                                                 -24-
        In any case, the Court will consider the Secretary's present argument that plaintiffs had

"actual notice" because they "knew" of the relevant deadlines, even though the Administrator did

not base her remand decision on this specific reason. See Dickson v. Sec'y of Def., 68 F.3d

1396, 1404 (D.C. Cir. 1995) ("A reviewing court will 'uphold a decision of less than ideal clarity

if the agency's path may reasonably be discerned.'") (quoting Bowman Transp., Inc. v. Arkansas-

Best Motor Freight Sys., 419 U.S. 281 (1974)). To be fair, the Administrator did note, albeit

elsewhere in her decision, that plaintiffs, specifically, were "aware of the deadlines." A.R. at

2524.

        The issue, then, is whether plaintiffs' "knowledge" of the relevant deadlines constitutes

"actual notice" from the Secretary. The Secretary relies on cases from the notice-and-comment

rulemaking context indicating that "even if the agency has not given notice in the statutorily

prescribed fashion, actual notice will render the error harmless." Small Refiner Lead Phase-

down Task Force v. EPA, 705 F.2d 506, 549 (D.C. Cir. 1983) (citing Sierra Club v. Costle, 657

F.2d 298, 355, 360, 398-99 (D.C. Cir. 1981)). The Secretary notes that plaintiffs, in

correspondence with the fiscal intermediary about these claims (in 2003), referred to "the

required deadline" for filing the claims; plaintiffs then stated that they "received notification

from the [AAMC]" that the claims "had to be submitted by December 31, 1999." Def.'s Cross-

mot at 9-10; see A.R. at 893.

        Plaintiffs rely principally on General Electric for the proposition that "notice must be

provided either from the face of the regulations or by other 'statements issued by the agency.'"

Pls.' Mem. in Opp'n to Def.'s Cross-mot. and in Reply to Def.'s Opp'n to Pls.' Mot. for Summ. J.

[Docket Entry 16] at 6 (quoting General Electric, 53 F.3d at 1329). In the "ascertainable

certainty" passage from General Electric cited by the D.C. Circuit in Loma Linda, the court



                                                 -25-
focused the inquiry on whether the agency had "fairly notified" regulated parties through its

"regulations and other public statements." General Electric, 53 F.3d at 1329. Plaintiffs have also

cited several cases in which the D.C. Circuit's language similarly implies that notice must come

from the agency itself. See, e.g., Trinity Broad. of Fl., Inc. v. FCC, 211 F.3d 618, 628 (D.C. Cir.

2000) ("We thus ask whether 'by reviewing the regulations and other public statements issued by

the agency a regulated party acting in good faith would be able to identify, with ascertainable

certainty, the standards with which the agency expects parties to conform . . . .'") (quoting

General Electric, 53 F.3d at 1329). However, plaintiffs do not cite any cases that explicitly

consider and reject the Secretary's position that "actual notice" can be based on what the

regulated party knew or understood from sources other than the agency.

       In the Court's view, General Electric did consider what the regulated party "knew," but

that consideration took place within a larger discussion of what the agency itself said. General

Electric examined at some length the relevant regulations and indications given by the agency

about how it was interpreting the regulations. See 53 F.3d at 1330-33. The court also briefly

considered the government's argument that the regulated party received "actual notice" of the

regulatory requirements. See id. at 1333. In a short few sentences, the court did consider the

conduct of the regulated party without any obvious reference to a statement by the agency,

before concluding that the party's conduct did not indicate it "knew" of the agency's

requirements. See id. ("While GE sought a permit for that alternative, its decision to do so does

not mean that it knew EPA required a permit for distillation in itself."). Nonetheless, the bulk of

the "actual notice" discussion focused on a letter sent by the agency itself, as well as GE's

response to the letter. See id.




                                                -26-
         On the whole, the Court finds that plaintiffs did not receive adequate notice that the

deadlines at 42 C.F.R. § 424.44 applied to the filing of these claims. Loma Linda concluded that

hospitals were not informed by the Secretary's own statements that the deadlines applied to

claims for IME/GME payments for Part C enrollees. Although the Secretary is not wrong that

this determination was made without consideration of the AAMC memorandum, the Court does

not believe that simply adding this document changes the conclusion reached in Loma Linda.

The AAMC memorandum was generated by a third party on the basis of the very statements that

Loma Linda found inadequate to provide notice. The AAMC memorandum did not cite (or

otherwise purport to rely on) anything from the Secretary that actually indicated that the

deadlines would apply. The fact that a third party discerned — on the basis of statements that

did not themselves give notice — what the Secretary would conclude is simply not enough to

change the notice determination.

         Hence, Loma Linda's holding — that hospitals generally were not notified by the

Secretary of these deadlines — maintains its force on the present record. The Court must still

consider, however, whether these plaintiffs, specifically, received "actual notice" of the

deadlines. On that question, the Court rejects the Secretary's argument that the evidence that

plaintiffs "knew" or "understood" the deadlines means that they received "actual notice" of the

rules.

         The Secretary is conflating plaintiffs' understanding of the regulatory requirements with

"actual notice" from the Secretary. The very concept of "notice" of a regulatory requirement is

that the government has appropriately informed the regulated community before penalizing it for

noncompliance. The cases cited by the Secretary stand most clearly for the proposition that an

agency need not give notice in a particular manner, rather than the proposition that notice can be



                                                 -27-
inferred from a regulated party's conduct without actual notification by the agency. See Small

Refiner, 705 F.2d at 549 ("Our cases recognize that even if the agency has not given notice in the

statutorily prescribed fashion, actual notice will render the error harmless. . . . As a general rule,

EPA must itself provide notice of a regulatory proposal.") (first emphasis added). These cases

are from the notice-and-comment rulemaking context, in which the need for notice from an

agency is different from when the agency is penalizing a regulated party on the basis of a

regulatory requirement that was not clear. All the statements from the D.C. Circuit describing

the "ascertainable certainty" standard in this context use the word "notice" to refer to what the

agency itself told the regulated party or, relatedly, what the regulated party concluded from the

agency's own statements.

       In General Electric, the court inquired into whether the plaintiff had received "actual

notice" by considering whether the plaintiff had been able to glean the agency's expectations

from what the agency itself said or whether the plaintiff had been specifically notified by the

agency in some manner other than how the general public had been informed. See 53 F.3d at

1333. There is no evidence in the record here either that plaintiffs were able to glean the

Secretary's conclusion from what the Secretary actually said or that the Secretary informed

plaintiffs specifically. Rather, plaintiffs' "knowledge" of the Secretary's expectations came from

a third party's interpretation of the Secretary's own inadequate statements. Again, that the

AAMC interpreted the Secretary's statements in a particular way and informed plaintiffs of that

interpretation cannot alter the fact that the notice given by the Secretary was inadequate. On the

basis of what the Secretary herself said, the AAMC might well have been incorrect that the

deadlines applied. Indeed, a straightforward reading of the regulations would suggest that the




                                                 -28-
AAMC was, in fact, wrong. And nothing from the Secretary expressed a contrary interpretation

of the language of the exception in § 424.30.

       To be sure, the Secretary has a valid point that plaintiffs were not obviously prejudiced

by the Secretary's failure to give notice. Plaintiffs contend that they submitted these claims

within the deadline upon receiving the AAMC memorandum in November 1999, and it is not

clear what, if anything, plaintiffs would have done differently if they had been notified by the

Secretary herself. There is a sense, then, that plaintiffs are benefitting from CMS's mistake when

that mistake did not actually harm them. On the other hand, there also seems to be little question

that plaintiffs actually did provide services to these enrollees under Medicare Part C and that,

therefore, they are entitled to these payments so long as they complied with the applicable

procedural requirements. If the Secretary wishes to enforce procedural requirements strictly, she

must provide notice to regulated parties what those requirements actually are, especially when,

as here, the Secretary's own regulations suggest that the requirements do not apply. Having

failed to provide adequate notice, the Secretary's error is not excused simply because plaintiffs

attempted to submit their IME/GME claims by the deadline, particularly when the Secretary is

strictly enforcing the regulatory procedural requirements against plaintiffs.

       In sum, the Secretary did not provide adequate notice to plaintiffs that the timing

requirements of 42 C.F.R. § 424.44 applied to their claims for IME/GME payments for enrollees

treated under Medicare Part C. Loma Linda established that the Secretary did not provide

hospitals generally with notice that the timing deadlines applied. The only relevant difference

between the present situation and Loma Linda is that here plaintiffs received a memorandum

from a third party indicating that the relevant deadlines applied. Absent any communication

whatsoever from HHS, this third party memorandum is insufficient to provide adequate notice to



                                                -29-
plaintiffs, regardless of how plaintiffs reacted to or understood that memorandum. The need for

clear notice from the Secretary is especially acute here because the agency's interpretation is at

odds with relevant regulatory language. Hence, plaintiffs did not receive notice of the filing

deadlines with "ascertainable certainty," General Electric, 53. F.3d at 1329, and the Secretary's

denial of payment to plaintiffs was invalid.

VI. Factual Determination and Plaintiffs' Other Claims

         In addition to the timing issue, plaintiffs' complaint alleges that the requirement to file

"no pay" UB-92s violates the Paperwork Reduction Act, 44 U.S.C. § 3501 et seq., because the

Secretary did not receive OMB approval for this requirement. See Compl. ¶¶ 123-35; see also

Pls.' Mem. at 30-33. In theory, this claim is not mooted by the Court's finding that plaintiffs did

not receive adequate notice of the timing requirements, since plaintiffs still need to file UB-92s

for 1999 and 2000 even if the deadlines do not apply. In practice, however, the relief actually

sought by plaintiffs —setting aside the Secretary's decision denying plaintiffs' IME/GME

payments for fiscal years 1999 and 2000 and requiring payment of those sums, see Compl. at 28-

29 — will be effectuated based on the Court's resolution of the notice issue with respect to the

timing deadlines. The Court therefore will not reach the Paperwork Reduction Act claim. 14

Likewise, the Court need not address the Administrator's factual determination that these claims

were not actually timely filed.

VII. Conclusion



14
  Plaintiffs' contention that applying the filing requirements to these claims is inconsistent with 42 C.F.R. § 424
could be construed as an argument against the underlying requirement to file UB-92s. See Pls.' Mem. at 20-26.
Further consideration of this issue is not necessary, however, for the same reason that further consideration of the
Paperwork Reduction Act issue is unnecessary. Plaintiffs also argue that even if their UB-92s had validly been
rejected as untimely, they would still be entitled to IME/GME payments based on the principle that cost report
settlements must utilize the "best available data." See Pls.' Mem. at 26-30. It seems that this argument is primarily
directed at the timing requirement (rather than the underlying need to file UB-92s), and so is made moot by the
Court's determination that plaintiffs did not receive adequate notice of the timing requirement.

                                                        -30-
         HHS regulations do not clearly require hospitals to file claims for supplemental medical

education expenses associated with Medicare Part C enrollees within the ordinary time frames

for filing Part A Medicare claims through fiscal intermediaries. Given the unclear dictates of the

regulations, and upon consideration of the record in this case, the Secretary did not provide

plaintiffs with adequate notice that the deadlines applied. The Secretary's decision denying

plaintiffs these payments is therefore invalid and the case will be remanded to the Secretary for

processing and payment of plaintiffs' fiscal years 1999 and 2000 IME/GME claims. 15 A separate

order has been issued on this date.



                                                                       /s/
                                                                JOHN D. BATES
                                                           United States District Judge

Dated: March 20, 2012




15
   Although plaintiffs' complaint also sought recovery of attorneys' fees and costs, see Compl. ¶¶ 144-50, the Court
is not presently inclined to grant such relief. If plaintiffs still wish to pursue recovery of fees and costs, they may
file a motion to that effect, and the Court will consider the issue further at that time.

                                                          -31-
