962 F.

2d 1110

37 Soc.Sec.Rep.Ser. 234, Medicare & Medicaid Guide

P 40,159
ST. FRANCIS MEDICAL CENTER
v.
Louis W. SULLIVAN, M.D., Secretary of the Department of
Health and Human Services, and Louis B. Hayes, Acting
Administrator, Health Care Financing Administration, and
Elise D. Smith, Chairman Provider Reimbursement Review
Board, United States of America, Appellant in No. 91-3406,
Louis W. Sullivan, M.D., Secretary of the Department of
Health and Human Services, and Louis B. Hayes, Acting
Administrator, Health Care Financing Administration, and
Elise D. Smith, Chairman Provider Reimbursement Review
Board, Appellants in No. 91-3429.
Nos. 91-3406, 91-3429.

United States Court of Appeals,

Third Circuit.
Argued Dec. 10, 1991.
Decided April 24, 1992.

Stuart Gerson, Asst. Atty. Gen., Thomas W. Corbett, Jr., U.S. Atty.,
Bonnie R. Schluetter, Asst. U.S. Atty., Pittsburgh, Pa., Barbara H. Fisher
(argued), Office of the Gen. Counsel, Baltimore, Md., and John P.
Schnitker and Barbara C. Biddle, U.S. Dept. of Justice, Civ. Div.,
Appellate Staff, Washington, D.C., for appellants.
Stephen P. Nash (argued) and Domenic A. Bellisario, Nash & Co.,
Pittsburgh, Pa., for appellees.
Before: SCIRICA, ALITO, and SEITZ Circuit Judges.
OPINION OF THE COURT
SEITZ, Circuit Judge.

This is an appeal by the Secretary of the Department of Health and Human

Services, et al. from an order of the district court. That order overturned the
Provider Reimbursement Review Board's ("Board") refusal on jurisdictional
grounds to grant the request of the plaintiff, St. Francis Medical Center
("Medical Center"), for a hearing. The dispute arises over reimbursement
allegedly due from the Secretary to a provider of hospital services under the
Medicare statute, 42 U.S.C. 1395 et seq. The narrow issue presented is
whether the provider met the requirement in the statute, 42 U.S.C. 1395 oo(a)
(1984) that limits hearing by the Board to claims involving amounts of $10,000
or more. The Medical Center asserts, alternatively, that federal question
jurisdiction is available to entertain this provider's claims pursuant to 28 U.S.C.
1331 (1980).

2I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. STATUTORY AND REGULATORY BACKGROUND
3

The Medical Center is a "provider" of health care services covered under Part A
of the Medicare statute, 42 U.S.C. 1395 et. seq. Payments under Part A are
made directly to eligible providers under the reimbursement scheme enacted in
1982, the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), Pub.L.
No. 97-248 (codified, as amended, at 42 U.S.C. 1395ww(b) (1988)).

Under TEFRA, a hospital may receive no more than the "target amount" of per
patient costs that is calculated according to the hospital's actual cost of service
in the base year. The base year cost reporting period is the year prior to the first
year when the TEFRA reimbursement scheme becomes effective. See 42
U.S.C. 1395ww(b)(3)(A) (1988). In that year and in subsequent years, a
hospital's Medicare reimbursement is limited to "the allowable operating costs
of inpatient hospital services" incurred in the base year. 1395ww(b)(3)(E).
The TEFRA target amount determines the maximum amount of reimbursement
that the hospital can receive per patient in subsequent years. If the hospital
renders care at a cost below its TEFRA target amount, it receives an "incentive
payment" as a reward for its efficiency. The incentive payment is equal to fifty
percent of the difference between the hospital's actual costs and its target
amount of maximum per patient reimbursement. 42 U.S.C. 1395ww(b).

The jurisdictional dispute in this case arose from the Medical Center's claim as
a provider seeking to adjust the cost report for the base year 1985, in order to
qualify for an incentive payment. The Medical Center's base year adjustment

request was denied by the intermediary and it sought a hearing to review that
determination before the Board. Such a hearing may be obtained if the
jurisdictional requirements of 1395oo(a) are met. That section provides:
6 provider of services which has filed a required cost report within the time
Any
specified in regulations may obtain a hearing with respect to such cost report by [the
Board] ... if-7(1) such provider-8

(A)(i) is dissatisfied with a final determination of the organization serving as its

fiscal intermediary ... as to the amount of total program reimbursement due the
provider for the items and services furnished to individuals for which payment
may be made under this subchapter for the period covered by such report, ...

9....
(2) the amount in controversy is $10,000 or more, and
10
11 such provider files a request for a hearing within 180 days after notice of the
(3)
intermediary's [or Secretary's] final determination....
12

(emphasis added)

13

The Board denied the Medical Center's request on the ground that it lacked
jurisdiction under 1395oo(a) because the amount in controversy requirement
was not met. Ultimately, the Board's decision becomes final unless the
Secretary, on his own motion, within 60 days, reverses, affirms or modifies the
Board's decision. See 42 U.S.C. 1395oo(f)(1) (1984). In this case, the
Secretary did not alter the Board's decision and it became final. The Medical
Center then filed this action in the district court, inter alia, under 1395oo(f)
(1). The district court reversed the Board's ruling and the Secretary now
appeals.

B. ADMINISTRATIVE AND JUDICIAL PROCEEDINGS

14

The Medical Center sought reimbursement under TEFRA as a "distinct part

rehabilitation unit," as defined by the TEFRA regulations.1 The intermediary,
Blue Shield of Western Pennsylvania, concluded that the Medical Center was
not a "rehabilitation unit" under the regulations since less than 75% of its
patients required intensive rehabilitation. The intermediary terminated the
provider as a distinct part rehabilitation unit and the Health Care Finance

Administration (hereinafter "HCFA") upheld that decision. To comply with the

75% rule, the Medical Center transferred some of its "non-qualifying" patients
from the rehabilitation unit to its acute care facility. This transfer was
completed in the year ending July 30, 1986, beyond the base year.
15

The non-qualifying patients in the rehabilitation unit in 1985 were nevertheless

included in the Medical Center's 1985 base year cost report. Since the Medical
Center's TEFRA target amount was set according to that base year, the Medical
Center's 1985 cost report substantially underestimated its actual costs in 1986.
The underestimate arose from the fact that certain "non-qualifying" patients
were included on the original 1985 cost report for the Medical Center's
rehabilitation unit, but then were transferred out of that unit by 1986. The
absence of these "non-qualifying" patients from the group of patients treated by
the unit in 1986 meant that the Medical Center's average patient costs were
higher in 1986 than the estimates of those costs derived from the 1985 base
year cost report. In addition, the base year cost report did not include costs
associated with a physical expansion project completed in 1986. The difference
between 1985 and 1986 average patient costs for the patients receiving service
in 1986 was an amount in excess of $700,000.

16

To obtain relief from this distortion, the Medical Center submitted an amended
base year cost report pursuant to 42 C.F.R. 413.40(h) (1988). The
intermediary denied this initial request to adjust or amend the 1985 cost report
and issued a final Notice of Program Reimbursement ("NPR".) The Medical
Center then filed a request for a base year adjustment, pursuant to 42 C.F.R.
413.40(h) and, in the alternative, requested an "exception" to its 1986 TEFRA
target amount, pursuant to 42 U.S.C. 1395ww(b)(4)(A) and 42 C.F.R.
413.40(g) (1988).2

17

The intermediary rejected the base year adjustment request and, instead,
recommended to the HCFA that the Medical Center be granted an exception to
its 1986 TEFRA target amount. In reviewing that decision, the HCFA denied
the base year cost adjustment claim, as well as the request for an exception to
the 1986 TEFRA target amount. The Medical Center sought a hearing before
the Board on that decision.

18

The Board ruled that it lacked jurisdiction over the Medical Center's request for
a base year cost adjustment. It found that the $10,000 amount in controversy
requirement of 1395oo(a) was not met.

19

The Medical Center filed this action in the district court against the Secretary

and the court exercised jurisdiction pursuant to 42 U.S.C. 1395 oo(f). See
McKeesport Hospital v. Heckler, 612 F.Supp. 279, 282 (W.D.Pa.1985).
Pursuant to a designation from the district court, the magistrate heard the case
and issued a Report and Recommendation that the Secretary's motion to dismiss
be denied and the case be remanded to the Board for review on the merits. The
district court adopted the report and recommendation of the magistrate as its
own and entered an order denying the Secretary's motion to dismiss and
remanding the matter to the Board for determination of the merits.3 This appeal
by the Secretary followed.
II. JURISDICTION
20

Although the parties do not challenge our jurisdiction, we have an independent

obligation to decide whether 28 U.S.C. 1291 (1982) provides a jurisdictional
basis for this appeal.

21

The Medical Center filed its complaint in the district court pursuant to
1395oo(f)(1).4 That court reversed the Board's jurisdictional ruling and
remanded the matter to the Board. It is true that "remands to administrative
agencies are not ordinarily appealable," Finkelstein v. Bowen, 869 F.2d 215,
217 (3d Cir.1989), rev'd sub nom. Sullivan v. Finkelstein, 496 U.S. 617, 110
S.Ct. 2658, 110 L.Ed.2d 563 (1990). However, there are exceptions to this rule.
For example, the Medicare statute confers jurisdiction on the district court over
any "civil action" filed there by a Medicare provider pursuant to 42 U.S.C.
1395oo(f). The Supreme Court in Finkelstein construed a similar judicial
review provision in the Social Security Act, 42 U.S.C. 405(g). In reviewing
the district court's remand order, the Court held that it was appealable because
the "[t]he use of the term 'civil action' [in 1395oo(f) ] suggests that each final
decision of the Secretary will be reviewable by a separate piece of litigation."
Id., 110 S.Ct. at 2663.

22

As in Finkelstein, if this appeal is dismissed and the Secretary's final decision

awards relief to the Medical Center, we have grave doubts whether the
Secretary could obtain any later review of the jurisdictional issue presented in
this appeal. Id., 110 S.Ct. at 2664.5 Based on the reasoning of Finkelstein, we
conclude that the district court's order, which terminated proceedings in the
district court, is a "final decision" subject to immediate appeal for purposes of
28 U.S.C. 1291.6

III. DISCUSSION
23

We now turn to the primary issue in this case, namely, did the district court err

in concluding that the Board had subject matter jurisdiction to grant a hearing
on the Medical Center's reimbursement claims, despite the $10,000 amount in
controversy requirement found in 42 U.S.C. 1395oo(a). Since this presents a
legal issue, our standard of review is plenary.
24

In denying jurisdiction, the Board stated simply that "the amount in controversy
for the issues you wish to raise is less than $10,000." In reversing that finding,
the district court decided that the statutory jurisdictional amount requirement
was easily met. It reasoned that a cost adjustment in the 1985 base year would
have automatically resulted in an increase in the amounts due the provider in
the years 1986, 1987 and 1988 and that these amounts would be well in excess
of $10,000.

25

On appeal, the Medical Center contends that the district court correctly decided
that it met the Board's jurisdictional requirement. In so contending, the Medical
Center interprets 1395oo(a) to require the Board to grant a hearing whenever
the claim involves at least $10,000 in additional reimbursement, whether or not
that reimbursement is due in the year of the cost report in dispute. Under this
view, the amount in controversy requirement can be met by aggregating
amounts of reimbursement due over cost reports covering several years. The
Secretary argues that this "amount in controversy" requirement may not be met
by including the reimbursement due to the Medical Center in the 1986-88
period because the dispute here relates only to the 1985 cost report.

26

As we read 1395oo(a), it does not permit a single provider to aggregate

claims over several cost reports in order to satisfy the amount in controversy
requirement of 1395oo(a) with respect to the base year. Rather, 1395oo(a)
limits a provider's request for a Board hearing to claims that could result in
reimbursement of $10,000 or more due the provider under the cost report in
dispute. Our view of the statute is based primarily on the language of 42 U.S.C.
1395oo(a).

27

The language of 42 U.S.C. 1395oo(a)(2) clearly provides that a single

provider's request for a Board hearing on the denial of a reimbursement claim
must involve $10,000 or more with respect to a "required cost report," which
must be filed yearly. Further, the language of 1395oo(a)(1)(A)(i) cannot be
reconciled with the Medical Center's argument that the "amount in controversy"
equals the difference between the base year costs that the Medical Center
claims and the lower costs calculated by the HCFA. The "amount in
controversy" is defined by this provision as "the amount of total program
reimbursement due to the provider for the items and services furnished to
individuals for which payment may be made ... for the period covered by such

report." 1395oo(a)(1)(A)(i) (emphasis added). Moreover, the "amount" that

must be "in controversy," according to the statute, relates to a dispute regarding
"payment" of reimbursement "as the Secretary may require." 1395oo(a).
28

Nowhere in the statute is it stated that a single provider may aggregate amounts
in controversy raised by several cost reports to meet the amount in controversy
requirement to obtain a hearing before the Board. The lack of any mention of
such aggregation in 1395oo(a) demonstrates that a single provider's request
must be limited to claims for reimbursement arising in a single cost report. If
Congress had intended to authorize such aggregation of claims from several
cost reports in a single provider appeal, it is reasonable to assume that it would
have so provided.

29

Notwithstanding the language of the single provider hearing provision, the

Medical Center suggests that we must permit it to aggregate its claims over
several cost reports by analogy to the group provider hearing provision, 42
U.S.C. 1395oo(b). The group provision authorizes the filing of a request for a
Board hearing where several cost reports of members of the group involve an
"amount in controversy" that "in the aggregate" is $50,000 or more.

30

The analogy that the Medical Center attempts to draw between this case and a
group provider request fails. Congress intended to permit groups of providers to
avoid the $10,000 amount in controversy requirement by aggregating their
claims. They may do so, however, only when their claims present the Board
with a common question of law and fact. See generally Good Samaritan
Hospital v. Sullivan, No. CV88-L-523 (D.Neb. 2/16/90); Medicare & Medicaid
Guide (CCH), p 38,400 (1990), 1990 WL 42393 (multiple claims may be
aggregated where they present issues of law and fact common to the group),
rev'd in part, aff'd in part on other grounds, 952 F.2d 1017 (8th Cir.1991).
Group provider requests are subject to a less stringent amount in controversy
requirement because Congress made a policy decision to treat aggregated
smaller claims less stringently than single providers' claims. Cleveland
Memorial Hospital, Inc. v. Califano, 594 F.2d 993, 996 (4th Cir.1979).

31

Thus, we cannot agree with the Medical Center's argument that decisions
interpreting the group provider request provision are controlling and require the
Board to find that it had jurisdiction over this single provider's application. The
Medical Center asserts that Cleveland Memorial Hospital, Inc., 594 F.2d at 995
n. 4 and White Memorial Medical Center v. Schweiker, 640 F.2d 1126 (9th
Cir.1981) support its position. These decisions are inapposite because they
interpreted the language of the group provider hearing request provision,
1395oo(b), according to its plain language. They did not express a view

whether 1395oo(a) permits single providers to aggregate claims over several

cost report years to meet the amount in controversy requirement.
32

Even if the language of 42 U.S.C. 1395oo(a) and 1395oo(f) do not clearly

deny the Board jurisdiction to entertain this provider's claims, we believe the
regulations support the Secretary's position. First, the Secretary's implementing
regulations do not permit the aggregation of costs over several cost reports to
meet the amount in controversy requirement. They authorize a provider to
request a hearing when it seeks reimbursement of $10,000 or more based on a
single cost report in dispute. See 42 C.F.R. 405.1835(a); 42 C.F.R. 1801(a)
(1) (defining an "intermediary's determination" as "a determination of total
reimbursement due ... for the period covered by the cost report.") The Secretary
has consistently followed this regulation in refusing to aggregate the amounts in
dispute from several costs reports submitted by a single provider in determining
if the $10,000 amount in controversy threshold of 1395oo(a) has been met.
See Bradner Village v. Blue Cross & Blue Shield Ass'n/Blue Cross of Indiana,
Medicare & Medicaid Guide (CCH), p 38,428 at 22,412 (HCFA Administrator
Decision, March 11, 1990); Home Call, Inc. v. Blue Cross & Blue Shield
Association, Medicare & Medicaid Guide (CCH), p 36,261 at 13,862 (HCFA
Administrator Decision, February 6, 1987).

33

Second, the regulation that defines how the amount in controversy is to be

calculated excludes non-reimbursable costs such as costs incurred in a
subsequent year. 42 C.F.R. 405.1839(a)(2) provides that the $10,000 amount
in controversy requirement will be calculated, for provider reimbursement
under TEFRA, according to the following formula: "by deducting the adjusted
total reimbursable program costs due to the provider on a reasonable cost basis
from the total reimbursable costs claimed by the provider." (emphasis added)

34

The Medical Center did not meet this definition of amount in controversy
because it did not claim reimbursable costs in excess of $10,000 that were
actually incurred in 1985 but not included by it in the base year cost report. In
other words, the Medical Center did not show that, after subtracting the amount
of reimbursement determined by the intermediary on the NPR from the
reimbursable costs it claims were incurred in 1985, the difference is an amount
of $10,000 or more. 7

35

Thus, even if the statutory provision is considered to be unclear and we are

thereby able to resort to these regulations for enlightenment, we conclude that
they would compel the same conclusion we have reached in interpreting the
language of the statute. Since the Social Security Act expressly grants the
Secretary rulemaking power, " 'our review is limited to determining whether

the regulations promulgated exceeded the Secretary's statutory authority and

whether they are arbitrary and capricious.' " Sullivan v. Zebley, 493 U.S. 521,
110 S.Ct. 885, 890, 107 L.Ed.2d 967 (1990), (quoting Bowen v. Yuckert, 482
U.S. 137, 145, 107 S.Ct. 2287, 2293, 96 L.Ed.2d 119 (1987), quoting Heckler
v. Campbell, 461 U.S. 458, 466, 103 S.Ct. 1952, 1956, 76 L.Ed.2d 66 (1983)).
We cannot so find.
36

Given the language of the statute and the regulations, the Medical Center's
request for a hearing before the Board of its 1985 base year cost report fails to
"adhere to the administrative procedure which Congress has established for
adjudicating [its] claims." Heckler v. Ringer, 466 U.S. 602, 619, 104 S.Ct.
2013, 2024, 80 L.Ed.2d 622 (1984). We, therefore, conclude that the district
court's order does not comport with a correct application of the controlling
jurisdictional provision of the Medicare statute, 42 U.S.C. 1395oo(a)(1), and
must be reversed.8

IV. FEDERAL QUESTION JURISDICTION

37

The Medical Center contends, in the alternative, that 28 U.S.C. 1331 confers
subject matter jurisdiction on the district court to hear the Medical Center's
claim. 9 The Secretary responds that the question of the availability of federal
question jurisdiction under 1331 is not properly before the court. He argues
that because 28 U.S.C. 1331 was not asserted as a ground for jurisdiction in
the district court that basis for relief was not properly preserved for appellate
review.

38

The Medical Center tacitly concedes that 1331 was not asserted as a
jurisdictional basis in its complaint or in any other aspect of the district court
proceedings. It does contend, inter alia, that "this case should be remanded to
the district court with instructions to allow the Medical Center to amend its
complaint so as to specifically assert general federal [question] jurisdiction ...
pursuant to 28 U.S.C. 1331."

39

We conclude that in the exercise of our discretion and in the interests of justice
this matter should be remanded to the district court to afford the Medical Center
an opportunity to petition the district court for leave to amend its complaint.
See 28 U.S.C. 1653. See generally Hahn v. United States, 757 F.2d 581, 587
(3d Cir.1985) (This court may, on appeal, consider whether jurisdiction was
proper on grounds not asserted below). We do so for several reasons. First, the
district court did not need to consider whether 1331 could form a basis for
jurisdiction over the Medical Center's claim because under its decision that
issue did not need to be reached. Second, the Secretary does not suggest any

reason why it would be prejudiced by this limited action. See generally

Gagliardi v. Flint, 564 F.2d 112, 114-15 (3d Cir.1977) (motion to amend
jurisdictional statement to include reference to 1331 jurisdiction may be
granted absent a showing of prejudice to non-moving party with respect to
issues tried in district court). If the Secretary does desire to assert prejudice that
issue can be presented to the district court. Third, this court has been liberal in
exercising its discretion to permit such amendments to be made in an attempt to
cure defective allegations of jurisdiction. This is done in the interest of justice
to avoid dismissal of suits on purely technical grounds. Local No. 1 (ACA) v.
International Brotherhood of Teamsters, 614 F.2d 846, 853 (3d Cir.1980). For
these reasons, a remand granting leave to seek permission to file such a request
is granted.10
V. CONCLUSION
40

We conclude that the district court erred in deciding that the Medical Center's
base year adjustment request met the amount in controversy requirement of
1395oo(a) and that portion of the order must be reversed. We will, however,
remand the cause to the district court to permit the Medical Center to file an
application for leave to amend its complaint to assert a 28 U.S.C. 1331 basis
for this action.

41

SCIRICA, Circuit Judge, concurring in part and dissenting in part.

42

I concur in the majority's decision to remand this case to allow the Medical
Center to assert 28 U.S.C. 1331 as a basis for jurisdiction in the district court.
However, I respectfully dissent from the majority's conclusion that the Medical
Center has failed to meet the jurisdictional requirements of 42 U.S.C.
1395oo(a).

43

The Secretary's regulations provide, in part:

44

(e) Hospital requests regarding applicability of the rate of increase ceiling. A

hospital may request an exemption from, or exception or adjustment to, the rate
of cost increase ceiling imposed under this section.... HCFA's decision is
subject to review under Subpart R of Part 405 of this chapter [i.e., by the
PRRB].

45

42 C.F.R. 413.40(e) (emphasis added).

46

The Secretary's regulations further provide:

47

(h) Adjustments--(1) Comparability of cost reporting periods. (i) HCFA may

adjust the amount of the operating costs considered in establishing cost per case
for one or more cost reporting periods, including both periods subject to the
ceiling and the hospital's base period, to take into account factors that could
result in a significant distortion in the operating costs of inpatient hospital
services....

48

42 C.F.R. 413.40(h)(1)(i) (emphasis added).

49

The Medical Center seeks, under 42 C.F.R. 413.40(h), an adjustment to the

base year costs that establish its cost per case and TEFRA increase ceilings. It
contends that its base year costs were distorted by: (1) the inclusion of patients
who were subsequently transferred to an acute care facility; and (2) the
exclusion of physical expansion costs. In requesting an adjustment to its base
year costs to account for these distortions, the Medical Center seeks to increase
its reimbursable cost ceilings in subsequent years. It seems to me that the
amount in controversy analysis in requests for such base year cost adjustments
necessarily includes subsequent years, because the effect of granting the
adjustment would be to increase reimbursable costs in subsequent years.
Reimbursements in the base year would not be affected, because the adjustment
is to "the amount of the operating costs considered in establishing cost per
case"--not to the amount of operating costs actually reimbursed in the base year.

50

In cases involving group appeals, both the Fourth and Ninth Circuits have
considered effects upon reimbursement in subsequent years in determining
whether the amount in controversy requirement for PRRB jurisdiction was met.
White Memorial Medical Ctr. v. Schweiker, 640 F.2d 1126, 1128 (9th
Cir.1981); Cleveland Memorial Hosp. v. Califano, 594 F.2d 993, 996 (4th
Cir.1979). As the United States Court of Appeals for the Fourth Circuit noted:

51 Board's distinction, by which one figure determines the scope of the appeal and
The
another determines jurisdiction, is without foundation in either the statute or the
applicable regulation. It is also unrelated to the purpose of the amount in
controversy requirement, which is to ensure the substantiality of issues raised before
the Board.
52

Cleveland Memorial Hosp., 594 F.2d at 996 (footnote omitted).

53

The Secretary contends that these cases are inapposite because the amount in
controversy requirement in group appeals is "fundamentally different" from
that in individual appeals. The PRRB has jurisdiction over group appeals from

HCFA decisions if "the matters in controversy involve a common question of

fact or interpretation of law or regulations and the amount in controversy is, in
the aggregate, $50,000 or more." 42 U.S.C. 1395oo(b).
54

The amount in controversy requirement for group appeals differs from that for
individual appeals only in the increase of the jurisdictional amount from
$10,000 to $50,000, and by the addition of the phrase, "in the aggregate."
Compare 42 U.S.C. 1395oo(b) (group appeals) with 42 U.S.C. 1395 oo(a)
(2) (individual appeals). The Secretary contends that it is only the phrase "in
the aggregate" that permits consideration of effects in subsequent years to meet
the amount in controversy requirement. A less strained construction of this
statutory language would read "in the aggregate" to refer to the aggregation of
the claims of multiple providers. I can discern no reason why the jurisdictional
requirements in group appeals should be met by consideration of effects of
requested adjustments upon reimbursement in subsequent years, whereas the
jurisdictional requirements in individual appeals can be met by consideration
only of the year for which the adjustment is requested.

55

Moreover, the Secretary's interpretation appears to contravene Congress's intent

in enacting the amount in controversy requirement. "The legislative history of
1395oo, although relatively brief, shows a clear intent to provide independent
review of reimbursement decisions by fiscal intermediaries which involve
significant issues." Cleveland Memorial Hosp., 594 F.2d at 996. The purpose of
1395oo was to allow the PRRB (and the federal courts) "to review and decide
upon substantial reimbursement issues raised by providers of services." Id.
(quoting H.R.Conf.Rep. No. 1407, reprinted in 1974 U.S.C.C.A.N. 5992, 599596) (Fourth Circuit's emphasis omitted). The Medical Center contends that the
requested adjustment would result in its receipt of additional reimbursements of
approximately $2,000,000 for the years 1986-88, and of approximately
$700,000 for 1986 alone. These amounts appear to me to be both "significant"
and "substantial."

56

Additional statutory support for the Medical Center's position is provided by 42

U.S.C. 1395x(v)(1)(A) (entitled "Reasonable costs").1 "Numerous courts have
construed section 1395x(v)(1)(A) as imposing a statutory duty upon the
Secretary to make suitable corrective adjustments whenever the amount of
reimbursement determined by the chosen method of cost calculation fails to
adequately reimburse all reasonable costs." Regents of the Univ. of Cal. v.
Heckler, 771 F.2d 1182, 1188 (9th Cir.1985) (citing and following cases
imposing this duty). The Secretary's interpretation circumvents this statutory
duty.

57

Finally, the Secretary's interpretation may well have the unfortunate

consequence of preventing the kind of capital improvements that are largely
responsible for the current controversy. Had the Medical Center not undertaken
to improve its facility, it would not need an adjustment to its base year costs to
correct the distortion caused by expenses stemming from capital improvements
incurred in subsequent years. Congress cannot have intended such a result.

42 C.F.R. 405.471(c)(2)(ii) [redesignated in 1985 as 42 C.F.R. 412.29(a) ]

(hereinafter "the 75 percent rule.") See also 42 C.F.R. 412.23(b). See
generally, Delaware County Memorial Hospital v. Bowen, 871 F.2d 10 (3d
Cir.1989)

Later, in support of this base year adjustment request, the Medical Center
submitted a further revision to the cost report on April 13, 1988

Although the district court's order itself does not explicitly implement its ruling
as to the jurisdiction of the Board, the parties have treated it as doing so.
Respecting substance over form we conclude that the order did amount to a
final order

"Providers shall have the right to obtain judicial review of any final decision of
the [Board], or of any reversal, affirmance, or modification by the Secretary by
a civil action commenced within 60 days of the date on which notice of any
final decision by the [Board] or of any reversal, affirmance or modification by
the Secretary is received."

Thus, the posture of this appeal differs from a case where the provider has
appealed a remand by the district court to obtain broader relief. Finkelstein, 110
S.Ct. at 2663 n. 3

Moreover, this result is supported by decisions in other circuits prior to

Finkelstein. St. Mary's Hospital Medical Center v. Heckler, 753 F.2d 1362 (7th
Cir.), cert. denied, 472 U.S. 1028, 105 S.Ct. 3502, 87 L.Ed.2d 633 (1985);
Edgewater Hospital, Inc. v. Bowen, 857 F.2d 1123, 1127-9 (7th Cir.1988);
Tallahassee Memorial Regional Medical Center v. Bowen, 815 F.2d 1435,
1443 n. 12 (11th Cir.1987), cert. denied, 485 U.S. 1020, 108 S.Ct. 1573, 99
L.Ed.2d 888 (1988)

The Secretary contends that the amount in controversy requirement of

1395oo(a) requires the provider to request relief that will result in the payment
from the Medicare program of a positive amount of $10,000 or more for the
cost report in dispute. Given our resolution of this issue, we need not address

the merits of the Secretary's definition of amount in controversy in its brief on

appeal
8

Because of our decision we need not consider the Secretary's mootness

argument since it is predicated on an assumption that we would otherwise
affirm the district court's order

Section 1331 provides: "The district courts shall have original jurisdiction in all
civil actions arising under the Constitution, laws or treaties of the United
States."

10

We do not decide at this time whether the hospital's claims may properly be
asserted under this jurisdictional provision

Title 42 U.S.C. 1395x(v)(1)(A) provides, in pertinent part:

The reasonable cost of any services shall be the cost actually incurred,
excluding therefrom any part of incurred cost found to be unnecessary in the
efficient delivery of needed health services, and shall be determined in
accordance with regulations establishing the method or methods to be used, and
the items to be included, in determining such costs for various types or classes
of institutions, agencies, and services
42 U.S.C. 1395x(v)(1)(A).