Setting up a significant legal hurdle for healthcare providers, the nation's top judges said last week that providers cannot bypass HCFA's administrative hearing process by taking their grievances against Medicare rules directly to federal court.
Writing for the U.S. Supreme Court's 5-4 majority, Justice Stephen Breyer said the federal courts have no jurisdiction over such claims because Medicare statutes require providers to follow the special HCFA review process created for that purpose.
The high court's finding against the Illinois Council for Long Term Care applies to all Medicare providers and their associations, lawyers familiar with the case said.
"Our interest in this case. . . was the contention that we or our members cannot sue the government directly for vague, misleading or nonexistent rules or regulations," said Thomas Nickles, senior vice president of federal relations for the American Hospital Association, which filed a brief supporting the council.
"We are very disappointed in the Supreme Court decision. In order to have the possibility of getting into federal court you (now) must exhaust your administrative remedies first," he said.
Those remedies can be so costly and time-consuming that providers are likely to submit to unfair rules rather than fight to change them, he and others argued.
The council, a Chicago-based group representing about 200 nursing homes, sued the government in 1996 over what were then new rules for the Medicare survey process. It said the rules were vague and didn't adequately give nursing homes the ability to contest adverse findings.
The U.S. District Court in Chicago threw out the case, saying it had no jurisdiction, but the 7th U.S. Circuit Court of Appeals in Chicago disagreed and let the case go forward. Last week's opinion reversed that decision.
But that's not the end of the story, according to the council's attorney, Charles Sheets. Because the government contested only Medicare claims, and the high court specified that its ruling did not address Medicaid, the case has been sent back to the U.S. District Court for an April 27 hearing. The council will ask the court to consider Medicaid-only claims against the same survey rules.
Still, most observers were pessimistic about the ruling.
"It's another step in the process that gives the government enormous power," said Ronald Sutter, a Washington attorney who has taken on the government and lost in similar Supreme Court Medicare cases. But narrow decisions in those cases and one other could mean that providers may yet prevail in court, he said.
At least one case before a federal appeals court will probably be affected by last week's ruling.
In that case, a federal appeals court reinstated a lawsuit by the American Hospital Association and the Ohio hospital association, which challenged an ongoing government investigation on how hospitals bill Medicare for certain laboratory tests. The court said the associations did have standing to sue HHS. After last week's Supreme Court ruling, however, the U.S. Justice Department obtained an extension to ask the appeals court to reconsider its decision (See story, p. 30).
The council's executive director, Terrence Sullivan, called the survey process and the series of penalties that result from an adverse finding "numbingly and grindingly automatic."
A case in point is Beverly Enterprises, which last year sued the government for terminating one of its facilities from Medicare after a survey turned up what the company claimed were minor deficiencies. Before filing its suit in federal court, the Fort Smith, Ark.-based company completed HCFA's administrative hearing process, which took nearly two years.
An administrative judge threw out the finding of deficiencies but said he had no jurisdiction over the termination decision. A smaller nursing home company likely would not be able to withstand such a lengthy process, lawyers said.
The Supreme Court's majority opinion appeared to ignore such "practical problems," said Jody Noon, a Portland, |Ore.-based lawyer who is on the legal committee of a nursing home group that filed a supporting brief in the case. Like other observers, she said legislation could be the next step.