                FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PAMC, LTD., a California Limited         No. 12-56652
Partnership, DBA Pacific Alliance
Medical Center,                            D.C. No.
                Plaintiff-Appellant,    2:11-cv-01373-
                                          JAK-MAN
                 v.

KATHLEEN SEBELIUS, Secretary of            OPINION
the United States Department of
Health and Human Services,
                 Defendant-Appellee.


      Appeal from the United States District Court
         for the Central District of California
      John A. Kronstadt, District Judge, Presiding

               Argued and Submitted
         March 6, 2014—Pasadena, California

                  Filed April 8, 2014

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

              Opinion by Judge Fernandez
2                   PAMC, LTD. V. SEBELIUS

                           SUMMARY*


                        Expert Testimony

   The panel affirmed the district court’s order affirming the
Secretary of the Department of Health and Human Services’s
decision denying PAMC, Ltd., its full Medicare Annual
Payment Update for the fiscal year 2009.

    PAMC, a certified Medicare provider, 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 reduced PAMC’s annual percentage
increase by two percent as a result.

    The panel held the Department did not act arbitrarily and
capriciously when it refused to excuse PAMC’s late filing of
the required RHQDAPU data by the admittedly applicable
deadline. The panel rejected PAMC’s claims to a right to
equitable relief, or the benefit of the contract doctrine of
substantial performance, to excuse its failure to submit timely
data.


                            COUNSEL

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

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                   PAMC, LTD. V. SEBELIUS                         3

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.


                           OPINION

FERNANDEZ, Circuit Judge:

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

  1
    We will sometimes refer to all of these Department of Health and
Human Services actors, taken together, as the “Department.”
4                PAMC, LTD. V. SEBELIUS

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
                 PAMC, LTD. V. SEBELIUS                     5

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 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 relationship between HHS and a Medicare
provider.” This appeal followed.

    JURISDICTION AND STANDARD OF REVIEW

   The district court had jurisdiction pursuant to 28 U.S.C.
§ 1331 and 42 U.S.C. § 1395oo(f)(1). We have jurisdiction
pursuant to 28 U.S.C. § 1291.

   “The district court’s review of the [Board’s] decision, and
our de novo review of its decision, are governed by the
Administrative Procedure Act, 5 U.S.C. §§ 701–706 . . . .”
Cmty. Hosp. of Monterey Peninsula v. Thompson, 323 F.3d
782, 789 (9th Cir. 2003). Under the Administrative
Procedure Act (APA), an agency’s decision may be reversed
6                PAMC, LTD. V. SEBELIUS

if it is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
As the Supreme Court has held regarding a hospital’s claim
to Medicare reimbursement:

       We must give substantial deference to an
       agency’s interpretation of its own regulations.
       Our task is not to decide which among several
       competing interpretations best serves the
       regulatory purpose. Rather, the agency’s
       interpretation must be given controlling
       weight unless it is plainly erroneous or
       inconsistent with the regulation. In other
       words, we must defer to the Secretary’s
       interpretation unless an alternative reading is
       compelled by the regulation’s plain language
       or by other indications of the Secretary’s
       intent at the time of the regulation’s
       promulgation.

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.
Ct. 2381, 2386-87, 129 L. Ed. 2d 405 (1994) (citations and
internal quotation marks omitted). “This broad deference is
all the more warranted when, as here, the regulation concerns
a complex and highly technical regulatory program . . . .” Id.
(internal quotation marks omitted); see also Cmty. Hosp.,
323 F.3d at 789–90.

                       DISCUSSION

    PAMC bases its appeal on its claim that the Department
acted arbitrarily and capriciously when it refused to excuse
PAMC’s late filing of the required RHQDAPU data by the
admittedly applicable deadline — 11:59 p.m. CST on
                     PAMC, LTD. V. SEBELIUS                  7

November 20, 2007. It claims a right to equitable relief or the
benefit of the contract doctrine of substantial performance.
In so doing, PAMC appears to have forgotten the aphorism:
“Men must turn square corners when they deal with the
Government.” Rock Island A. & L. R. Co. v. United States,
254 U.S. 141, 143, 41 S. Ct. 55, 56, 65 L. Ed. 188 (1920). As
we will discuss further, the Department has always insisted
that the deadline for submitting data is a square corner, but
PAMC now seeks to make it round. It is not entitled to do so.

   Ultimately, the issues before us are not unduly complex,
but a brief tour of the legal and regulatory structure is
necessary.

    Under the Medicare statute, 42 U.S.C. §§ 1395–1395kkk-
1, the Department reimburses health care providers for
services provided to Medicare patients. CMS is charged with
administering the Medicare program. Providers receive
Medicare reimbursement for inpatient hospital services
through the Prospective Payment System2 and receive an
annual percentage update to their payments for inflation.3 For
the relevant period in this case, if a provider did not submit
data that related to the quality of care furnished by the
provider “in a form and manner, and at a time, specified by
the Secretary,” its applicable annual percentage increase
under the PPS was reduced by two percent. 42 U.S.C.
§ 1395ww(b)(3)(B)(viii)(I)–(II); 42 C.F.R. § 412.64(d)(2).
Data collection is mandated by the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, Pub. L.
No. 108-173, § 501(b), 117 Stat. 2066, 2289–90. Those data


 2
     42 U.S.C. § 1395ww(d).
 3
     Id. § 1395ww(b), (d).
8                       PAMC, LTD. V. SEBELIUS

are collected pursuant to the requirements of the RHQDAPU
program. See 69 Fed. Reg. 28196, 28278 (May 18, 2004).
The program’s purposes are to give hospitals the incentive to
report on quality measures they have used, to improve
providers’ services, and to educate consumers. See 69 Fed.
Reg. 48916, 49078 (Aug. 11, 2004); 73 Fed. Reg. 48434,
48597–99 (Aug. 19, 2008).

     Congress delegated broad authority to the Secretary to
promulgate rules governing the submission of quality data
under the RHQDAPU program.                  See 42 U.S.C.
§ 1395ww(b)(3)(B)(viii)(II) (“Each subsection (d) hospital
shall submit data on measures selected under this clause to
the Secretary in a form and manner, and at a time, specified
by the Secretary for purposes of this clause.”). Pursuant to
that authority, the Secretary promulgated a regulation
implementing the statutory provision4 and has published
instructions in the Federal Register and on the QualityNet
Exchange website setting forth the “form and manner” of data
submission.5 The regulation provides that in the case of a
hospital “that does not submit quality data on a quarterly
basis to CMS, in the form and manner specified by CMS, the
applicable percentage change . . . is reduced . . . by 2
percentage points.” 42 C.F.R. § 412.64(d)(2)(i)(B). Thus, the
full annual percentage increase is predicated on the successful
submission of data to CMS by the established deadline. See,
e.g., 70 Fed. Reg. 47278, 47421 (Aug. 12, 2005) (“[T]he data
for each quarter must be submitted on time . . . . The full
annual payment updates will be based on the successful


    4
        42 C.F.R. § 412.64.
 5
   See, e.g., 73 Fed. Reg. 48434, 48616–19 (Aug. 19, 2008); 72 Fed. Reg.
47130, 47359–61 (Aug. 22, 2007).
                  PAMC, LTD. V. SEBELIUS                     9

submission of data to CMS via the QIO Clinical Warehouse
by the established deadlines.”).

    The Secretary also created an administrative appeals
process for the RHQDAPU program. See 72 Fed. Reg.
47130, 47365 (Aug. 22, 2007). Under this process, if CMS
determines that a hospital did not meet the statutory and
regulatory requirements for submission of quality data, and
the hospital disagrees with that determination, the hospital
may seek reconsideration from CMS. Id. But the Secretary
has established guidelines for reconsideration. See 71 Fed.
Reg. 47870, 48041 (Aug. 18, 2006). “CMS has not held a
hospital responsible for data processing and communication
errors that were clearly under the control of CMS or its
contractors.” Id. “If the error is by the hospital’s contracted
vendor, the hospital is held responsible.” Id.

    If a hospital is dissatisfied with CMS’s disposition of the
reconsideration request and meets the applicable amount-in-
controversy and time-limit requirements, it may file an appeal
with the Board. 42 U.S.C. § 1395oo(a); 42 C.F.R.
§ 405.1835(a). The Board’s decision is final unless the
Secretary reverses, affirms, or modifies that decision within
sixty days. 42 U.S.C. § 1395oo(f)(1). A hospital may seek
judicial review of “any final decision of the Board” by filing
suit in the United States District Court within sixty days. Id.

   As already noted, that process was followed in this case,
and the issues are now properly before us.

   A. Equitable Relief

  Without pointing to statutory or regulatory authority,
PAMC asserts that the Board was required to apply equitable
10                   PAMC, LTD. V. SEBELIUS

principles to ameliorate the consequences of PAMC’s default.
We do not agree.

    We agree with the Board that it did not have independent
authority to grant equitable relief in these circumstances. No
doubt the Secretary established the Board pursuant to a
statutory directive,6 and it has been given the power to
“affirm, modify, or reverse [CMS’s] findings on each specific
matter at issue.”7 But that does not give the Board carte
blanche. Rather, as the regulations provide:

          In exercising its authority to conduct
          proceedings under this subpart, the Board
          must comply with all the provisions of Title
          XVIII of the Act and regulations issued
          thereunder, as well as CMS Rulings issued
          under the authority of the Administrator as
          described in § 401.108 of this subchapter.
          The Board shall afford great weight to
          interpretive rules, general statements of
          policy, and rules of agency organization,
          procedure, or practice established by CMS.

42 C.F.R. § 405.1867. In that regard, the Board was bound
to be cognizant of the long-standing view of the Department
that:

          CMS has not held a hospital responsible for
          data processing and communication errors
          that were clearly under the control of CMS or


 6
     See 42 U.S.C. § 1395oo(a).
 7
     42 C.F.R. § 405.1869(a); see also 42 U.S.C. § 1395oo(d).
                   PAMC, LTD. V. SEBELIUS                         11

        its contractors. However, CMS does hold the
        hospital responsible for its own errors in data
        processing and communication. If the error is
        by the hospital’s contracted vendor, the
        hospital is held responsible.

71 Fed. Reg. 47870, 48041 (Aug. 18, 2006). PAMC argued,
and argues, that this passage demonstrates that CMS has
equitable authority and so must the Board. PAMC’s logic is
flawed. In the first place, the fact that CMS does not hold
hospitals responsible for CMS’s own errors does not suggest
an exercise of equitable power; it would certainly seem
arbitrary and capricious for CMS to make an error that
essentially prevented the proper submission of data and then
penalize a hospital for not presenting the data. But that is
nothing like errors by a hospital or its agents. Secondly, as
the Board pointed out, even if CMS has some discretion, that
does not demonstrate that the discretion in question was
“expanded to the Board” itself.

     In this case, there can be little doubt that the failure to file
the report on time was not due to CMS’s error; rather, as
PAMC’s vendor admitted at one point, “the error on our part
is in no way justified.” In fact, hundreds of other reports had
been submitted by that vendor at the proper time; the glitch
in the vendor’s system could not be ascribed to CMS, which
actually sent PAMC a number of alerts about the missing data
starting November 1, 2007, nineteen days before the
November 20, 2007, deadline.

   While we do not question PAMC’s good faith efforts to
comply, that does not mean that it is entitled to relief from the
deadline in question. Nor does it mean, or even suggest, that
CMS, or the Board, or the Secretary
12                PAMC, LTD. V. SEBELIUS

        relied on factors which Congress has not
        intended it to consider, entirely failed to
        consider an important aspect of the problem,
        offered an explanation for its decision that
        runs counter to the evidence before the
        agency, or is so implausible that it could not
        be ascribed to a difference in view or the
        product of agency expertise.

Kaiser Found. Hosps. v. Sebelius, 649 F.3d 1153, 1159 (9th
Cir. 2011) (internal quotation marks omitted).

    In short, PAMC neither points to any contrary or
antithetical decisions by the Department under similar
circumstances, nor otherwise demonstrates that the Board
acted arbitrarily or capriciously when it denied equitable
relief.

     B. Substantial Performance

    PAMC argues that the Board should have used the
contract doctrine of substantial performance to excuse
PAMC’s failure to submit data at the proper time. Again, we
disagree.

     The Board declared that even “[a]ssuming arguendo that
the substantial compliance standard can be considered in this
case,” PAMC’s claim failed. The Board pointed out that the
failure to submit the quarterly report on time yields a twenty-
five percent error rate for that year, which is not minor;
actually, it “is considered a major error.” The Board went on
to state “[m]oreover, the Secretary has defined precisely what
is required in order for hospitals to receive the full market
basket update. Specifically, the full market basket update is
                 PAMC, LTD. V. SEBELIUS                   13

predicated on the successful submission of data to CMS via
the QIO Clinical Warehouse by the established deadline.”

    That reasoning follows the Department’s long-standing
strict policy in this area. CMS has been explicit about the
need for timely submission of data reports. As it has stated:
“[T]he data for each quarter must be submitted on time and
pass all of the edits and consistency checks required in the
clinical warehouse.” 70 Fed. Reg. 47278, 47421 (Aug. 12,
2005). And before the deadline in issue here, CMS
responded to a suggestion that hospitals did not have
sufficient time to comply by answering:

           The current data submission timeframe is
       designed to provide sufficient time for
       hospitals to meet all reporting requirements.
       Hospitals are given 4½ months following the
       last day of a discharge quarter to submit
       accurate data . . . . We believe that this is a
       sufficient timeframe for the vendor, hospital,
       QIO or other interested party to identify data
       errors and submit corrections in advance of
       the data submission deadline.

71 Fed. Reg. 47870, 48032 (Aug. 18, 2006). Since then, the
importance of time limits has, again, been emphasized:

       Our past experience has indicated that the vast
       majority of hospitals submit accurate data in
       a timely manner before the quarterly
       submission deadline. . . . We believe that data
       submission after the quarterly deadline would
       result in delays in the quarterly CDAC
       validation processing, and would adversely
14                PAMC, LTD. V. SEBELIUS

        impact our ability to deliver timely validation
        results to hospitals.

73 Fed. Reg. 48434, 48618 (Aug. 19, 2008). The agency’s
indication that the vast majority of hospitals do comply is
borne out by the evidence in this case. The vendor for PAMC
did submit timely data for about 400 other hospitals. The
importance of the requirement of timely submission is
reflected in the very precision of the deadline itself (here right
down to the very minute, 11:59 p.m. CST on November 20,
2007), and is further reflected in the care that CMS takes as
the deadline approaches to alert hospitals that their reports
have not yet been submitted (here PMAC was called four
times, November 1, November 13, November 15, and
November 20).

    Thus, while it might seem harsh, we do not view the
Board’s adherence to the policy of strict compliance with a
deadline as arbitrary and capricious. Especially is that true
when we consider that the whole notion of importing contract
doctrines into an area that is a complex statutory and
regulatory scheme is problematic. We have, on occasion,
stated that providers and others have contracts with the
government in this area, but our decisions have turned on the
regulatory regime rather than on contract principles. See,
e.g., United States v. Bourseau, 531 F.3d 1159, 1162,
1169–70 (9th Cir. 2008); Pac. Coast Med. Enters. v. Harris,
633 F.2d 123, 125 n.1, 133–35 (9th Cir. 1980). As the
Eleventh Circuit Court of Appeals held when hospitals
complained of legislative impairment of their contract rights
in this area because they had agreements with the Secretary:
“Upon joining the Medicare program, however, the hospitals
received a statutory entitlement, not a contractual right.”
Mem’l Hosp. v. Heckler, 706 F.2d 1130, 1136 (11th Cir.
                    PAMC, LTD. V. SEBELIUS                          15

1983); see also Bennett v. Ky. Dep’t of Educ., 470 U.S. 656,
669, 105 S. Ct. 1544, 1552, 84 L. Ed. 2d 590 (1985) (stating
that while states had “grant agreements” with the federal
government and those had a “contractual aspect,” the
program should not be viewed like a “bilateral contract” and
should not “be construed most strongly against the drafter”
(internal quotation marks omitted)); cf. Sebelius v. Auburn
Reg’l Med. Ctr., __ U.S. __, __, 133 S. Ct. 817, 828–29, 184
L. Ed. 2d 627 (2013) (declining to apply equitable tolling
principles to time set by Secretary for appealing to the
Board); Kaiser Found. Hosps., 649 F.3d at 1160 (declining to
apply excusable neglect equitable analysis to Board’s
dismissal of case for “failure to timely submit a position
paper”).

    The district court determined that the substantial
compliance doctrine does not apply in the Medicare area, but
we should not8 and need not go that far9; at the very least, the
Board was wise to be cautious about the doctrine and did not
act in an arbitrary and capricious manner when it ruled as it
did.

                          CONCLUSION

   Congress mandated the collection of data, directed the
Secretary to assure that it was collected, and imposed a


 8
   See SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S. Ct. 1575, 1577,
91 L. Ed. 1995 (1947); Anaheim Mem’l Hosp. v. Shalala, 130 F.3d 845,
849 (9th Cir. 1997).
 9
  Of course, we review the district court’s decision de novo. Moreover,
we can affirm it on any basis supported by the record. Downs v. Hoyt,
232 F.3d 1031, 1035–36 (9th Cir. 2000).
16                PAMC, LTD. V. SEBELIUS

penalty on hospitals that did not comply. The Secretary
created the RHQDAPU program for that purpose, and the
Department has never deviated from its demand that
hospitals’ reports be submitted by the precise time specified.
PAMC failed to submit a timely report; not very late, but late
nevertheless. PAMC is of the opinion that enforcement of the
rigid timing requirement against it was too rhadamanthine,
and insists that the Board erred when it refused to ameliorate
the result by granting legal or equitable relief. We, however,
are not able to declare that the Board’s decision to enforce the
submission standards was arbitrary or capricious.

     AFFIRMED.
