[00:00:00] Speaker 00:
Case number 12-5411, Grossmont Hospital Corporation doing business at Sharp Grossmont Hospital at L Appellants versus Sylvia Matthews Burwell, Secretary, United States Department of Health and Human Services.

[00:00:13] Speaker 00:
Mr. Roth for the appellants, Ms.

[00:00:15] Speaker 00:
Foster for the appellee.

[00:00:17] Speaker 05:
Mr. Roth.

[00:00:19] Speaker 01:
Good morning, Your Honor.

[00:00:20] Speaker 01:
I reserved three minutes for rebuttal.

[00:00:22] Speaker 01:
May it please the Court, Robert Roth, Hubert Lundy, and Bookman for the appellant hospitals,

[00:00:28] Speaker 01:
The issue here is whether the Secretary correctly decided that the Medicare co-payments at issue were not actually collectible from California Medicaid when the hospitals claim them as worthless, because the hospitals did not produce a California Medicaid liability determination, which that agency had steadfastly refused to issue for more than 15 years.

[00:00:51] Speaker 01:
The Secretary's final decision makes clear, however, that the sole purpose of the State determination requirement is, quote, to determine the State's liability and likewise the amount of co-insurance and deductible attributable to Medicare bad debt, close quote.

[00:01:04] Speaker 01:
Here the hospitals determine the Medicare bad debt using the same methodology that the Secretary and the State had used for the larger universe of claims previously at issue.

[00:01:14] Speaker 01:
And the Medicare audit contractor stipulated that the hospitals, quote, supplied sufficient documentation to support their methodology, close quote.

[00:01:23] Speaker 01:
The Provider Reimbursement Review Board found that the Secretary, quote, could easily determine the amounts to which the state is not obligated to pay of finding the Secretary's final determination and final decision did not dispute.

[00:01:38] Speaker 01:
The Secretary has properly not disputed the hospital's determinations in this litigation because the record supports the accuracy.

[00:01:45] Speaker 01:
Thus, the Secretary's refusal to pay because of no state determination is pretextual,

[00:01:50] Speaker 01:
Unsupported by the record, arbitrary and capricious and must be reversed by this Court as a clear violation of the statutory prohibition on cross-subsidization.

[00:01:59] Speaker 05:
Are these claims for which California might be liable for some payment, or are they ones for which we know in advance California would not have any responsibility?

[00:02:09] Speaker 01:
There are certain claims that are in the listings that are in the joint appendix where there was a small amount.

[00:02:15] Speaker 01:
On some of the claims, yes, the state actually had some liability.

[00:02:18] Speaker 05:
Okay.

[00:02:18] Speaker 05:
And how many of the claims are from 1994?

[00:02:22] Speaker 05:
Is that a percentage?

[00:02:25] Speaker 05:
I don't need an exact number, but percentage?

[00:02:27] Speaker 01:
Well, there's approximately $2 million at issue, and 1994 represents $520,000, the entirety of 1994, calendar year 1994, Your Honor.

[00:02:38] Speaker 01:
But far more disturbing than the Secretary's final decision and the refusal to pay is the criticism of the hospitals for not doing more to obtain the missing determinations, while the Secretary at the same time, hypocritically, is refusing to require Medi-Cal, which is the California Medicaid program, to comply with applicable federal regulations that the Secretary says are mandatory.

[00:03:06] Speaker 05:
When you sent a letter to Medi-Cal in 99, did you actually attach claims?

[00:03:12] Speaker 05:
What specific information about claims, when you were identifying what they missed, did you include?

[00:03:16] Speaker 01:
Yeah, they got the same listings that were presented in this case and that were appealed through the process.

[00:03:23] Speaker 01:
They were presented because they were grouped in months.

[00:03:25] Speaker 01:
There were months that were missing, not isolated claims here and there.

[00:03:30] Speaker 01:
So it's hard to know whether it was a processing failure on behalf of Medicaid

[00:03:35] Speaker 01:
or whether the claims never crossed over from Medicare.

[00:03:39] Speaker 05:
Your clients were aware that the crossover system during the relevant time was not perfect, correct?

[00:03:46] Speaker 01:
Well, it depends what you mean, Your Honor, by the relevant time.

[00:03:48] Speaker 01:
There came a time when they realized that the Secretary's crossover process that had been in place for decades wasn't working properly.

[00:03:56] Speaker 05:
When was that?

[00:03:56] Speaker 05:
When did they realize that?

[00:03:57] Speaker 01:
They realized that I think it was sometime in 98, and then they went about trying to

[00:04:02] Speaker 01:
get some of these claims submitted.

[00:04:05] Speaker 01:
But of course, the Secretary's final determination makes clear that the determination is not based on the failure to bill, the failure to meet the must-bill part of the regulation, of their policy, excuse me.

[00:04:19] Speaker 01:
So, but it's your question.

[00:04:21] Speaker 05:
Do you dispute the failure to bill?

[00:04:23] Speaker 01:
I'm sorry?

[00:04:23] Speaker 05:
Do you dispute the failure to bill?

[00:04:24] Speaker 05:
I know the Secretary said he wasn't going to rely on that, but do you dispute the failure to bill?

[00:04:30] Speaker 01:
Well, we just don't – we don't know.

[00:04:31] Speaker 01:
I mean, the sec – we presume, as this Court has presumed, the regularity of the Secretary's processes, especially a process of crossover that had been in place for decades.

[00:04:41] Speaker 05:
But if people – I think people knew that it wasn't working by, like you said, at least 1998, so I don't think you can presume regularity for claims arising then.

[00:04:48] Speaker 01:
Well, we knew that the claims were in process.

[00:04:52] Speaker 01:
That doesn't necessarily mean that the claims didn't cross over.

[00:04:56] Speaker 01:
It could have meant that they did cross over, but the Medicaid program, which at that time was issuing remittance advices,

[00:05:04] Speaker 01:
that were incorrect.

[00:05:06] Speaker 01:
We don't know what happened within those processes.

[00:05:09] Speaker 01:
That's between the two of them, and they knew.

[00:05:11] Speaker 01:
But we do know that the secretary in the state most significantly entered into an agreement to reprocess all of these claims.

[00:05:19] Speaker 01:
And the claims that are at issue here are a subset of those claims.

[00:05:22] Speaker 05:
My understanding is that hospitals, at least a number of hospitals, had figured out that there were gaps in the federal crossover process, and so that they were also submitting claims on their own as a backup.

[00:05:33] Speaker 05:
Were your clients not doing that, or were they doing that?

[00:05:36] Speaker 01:
I'm not aware of that reference in the record.

[00:05:39] Speaker 01:
Our clients, I think, were, yeah, so I'm not aware of that.

[00:05:44] Speaker 01:
The situation with the remittance advice, with the crossover claims, was that there came a point where there were conversations with the intermediary that was responsible for making these crossovers, and they said, yeah, there was some kind of a problem.

[00:06:02] Speaker 01:
And the secretary in the final decision here would only go as far as to say that some claims didn't cross over.

[00:06:09] Speaker 01:
So the secretary herself here didn't acknowledge or discuss a pervasive failure of these claims to cross over, did not attribute the decision to a lack of a reasonable collection effort.

[00:06:22] Speaker 01:
That distinguishes this case from Maine Medical and even from the community hospital case.

[00:06:27] Speaker 02:
I may be reading the wrong case.

[00:06:30] Speaker 02:
I thought the Secretary's position – I understand you're reviewing it differently.

[00:06:34] Speaker 02:
I thought the Secretary's position – to give it as simply as I understand it – they've had a regulation in place for a long, long time.

[00:06:43] Speaker 02:
That regulation has been interpreted over the years, and there have been both circuit court and agency dispositions that have consistently said that in order for you to get what you want, you have to

[00:06:59] Speaker 02:
first bill the state agency, first bill the state Medicaid agency with bad debts, and then get a determination from them.

[00:07:09] Speaker 02:
And you haven't done that here.

[00:07:11] Speaker 02:
And you don't dispute that.

[00:07:13] Speaker 02:
And you're not suggesting that their interpretation of their regulation is somehow impermissible.

[00:07:19] Speaker 02:
I think you're short-circuiting the bad debt requirement.

[00:07:21] Speaker 02:
There are two components to it.

[00:07:23] Speaker 02:
not just the submission, but getting a determination.

[00:07:27] Speaker 02:
And that may be unfair, but it's never been challenged by anyone.

[00:07:29] Speaker 02:
It's been consistently applied.

[00:07:31] Speaker 02:
The Ninth Circuit ruled on it.

[00:07:34] Speaker 02:
The Secretary's consistently ruled on it.

[00:07:37] Speaker 02:
This is a long-standing rule.

[00:07:38] Speaker 02:
It is not post-moratorium, as you argue.

[00:07:42] Speaker 02:
I went back and looked at those cases.

[00:07:45] Speaker 02:
So I'm not understanding.

[00:07:46] Speaker 02:
You either complied with the rule that's properly interpreted or not.

[00:07:50] Speaker 01:
Well, the Secretary clearly didn't comply with her own rules, Your Honor, because... No, no, no.

[00:07:55] Speaker 02:
My understanding of the record is you did not comply with the Secretary's clear rules.

[00:07:59] Speaker 01:
Yeah.

[00:08:03] Speaker 01:
We call attention of the Court to Section 1102 of the Provider Reimbursement Manual, which was in effect while these claims were being processed and while these claims were repealed back in 2010.

[00:08:14] Speaker 01:
and after, and that established conclusively that the Secretary had an alternative determination policy.

[00:08:22] Speaker 05:
The Secretary has pointed... That's not a policy that applies to you, because that's why I asked you.

[00:08:28] Speaker 05:
You said some of these claims involved ones where Medicaid owed a payment and the provider reimbursement manual provision only applies

[00:08:34] Speaker 05:
where the provider can establish that Medicaid is not responsible for payment.

[00:08:39] Speaker 01:
Right.

[00:08:39] Speaker 01:
And for most of these claims, for the lion's share of 90 percent of them, Medicaid has no responsibility at all.

[00:08:46] Speaker 01:
And for a small percentage of them, there is.

[00:08:48] Speaker 01:
But that interpretation, Your Honor, was rejected by the Ninth Circuit and the community hospital to try to argue that the language in 1102 somehow was limited to situations where there was no Medicaid payment at all.

[00:09:01] Speaker 01:
But the larger point here, Your Honor, Judge Edwards.

[00:09:04] Speaker 05:
It's plain tack.

[00:09:05] Speaker 05:
I can't imagine anything plainer where the provider can establish that Medicaid is not responsible for payment and that doesn't apply to all of your claims.

[00:09:12] Speaker 01:
I believe in the previous paragraph it says in part or in full.

[00:09:18] Speaker 01:
I can get that language.

[00:09:19] Speaker 01:
I can get that language.

[00:09:21] Speaker 05:
It's JA 237.

[00:09:23] Speaker 05:
What is it?

[00:09:23] Speaker 05:
237 is what I have.

[00:09:34] Speaker 05:
The first part, looking under column four, where it says begins column four, it's just a general description.

[00:09:50] Speaker 01:
It says any portion, in the column four, I think it's the third sentence, any portion of the deductible co-insurance not paid by Medicaid under those criteria is deemed a Medicare bad debt.

[00:10:02] Speaker 01:
And so, Your Honor,

[00:10:03] Speaker 05:
That's got nothing to do with your ability to prove it by alternative means.

[00:10:07] Speaker 05:
That only shows up in the next paragraph as to things for which Medicaid is not responsible.

[00:10:11] Speaker 01:
But the Secretary herself used alternative means in the universe in this case, Your Honor.

[00:10:15] Speaker 01:
The Secretary did not rely on the – did not require remittance advice for the universe of claims that was at issue because of the irregularities that were going on with the state Medicaid program in the 90s.

[00:10:26] Speaker 05:
My understanding is the Secretary's position is that the answer they got as part of the settlement was California's answer.

[00:10:32] Speaker 05:
That was its answer to those claims that were submitted to it.

[00:10:35] Speaker 01:
No, no, I understand that that was their answer, but the point I'm going to is that the Secretary did not have a monolithic policy because the Secretary didn't follow that policy here.

[00:10:45] Speaker 01:
That if, in fact, that policy had been in place, the Secretary would have violated a road rule by the agreement.

[00:10:51] Speaker 01:
He didn't follow which policy?

[00:10:52] Speaker 01:
didn't follow the policy that a remittance advice was required for payment.

[00:10:56] Speaker 01:
That's what's laid out in JSM 370, which is the only place that the Secretary can point to where that policy was articulated.

[00:11:04] Speaker 01:
The Secretary settled the claims here without using a remittance advice.

[00:11:08] Speaker 01:
The Secretary used an alternative process that the hospitals themselves then followed that the Secretary's own contractor said was correct.

[00:11:15] Speaker 05:
So, Your Honor, there was never before... The settlement process had a mass amount of claims submitted to California, and then California made payment on them.

[00:11:24] Speaker 05:
Why isn't that payment?

[00:11:26] Speaker 01:
Because there's no dispute that these claims were excluded from that process that came to California Medicaid from the Medicare process and that were then determined using this alternative arrangement, not a remittance advice.

[00:11:41] Speaker 01:
And the Secretary, in fact, in her briefs here doesn't even talk about requiring remittance advice, where that's what's in JSM 370.

[00:11:48] Speaker 01:
JSM 370 talks only in terms of a remittance advice, doesn't talk about any alternative, and in fact confirms in that JSM 370 to hold harmless hospitals that in fact had relied on that

[00:12:04] Speaker 01:
on that alternative documentation policy.

[00:12:06] Speaker 01:
Here the alternative that the hospitals relied on was the exact policy, was the exact methodology that the secretary had agreed to use with California Medicaid.

[00:12:17] Speaker 01:
The difference here is that the secretary didn't use her good offices to try to get the remittance advice here.

[00:12:23] Speaker 01:
What the Secretary is doing here is they are chastising the hospital for not having remittance devices under circumstances where the Secretary didn't lift a finger to get those when the Secretary, as she did in the agreement here, made sure that California in fact issued those.

[00:12:38] Speaker 02:
But under their interpretation of the regulation, the responsibility to get the remittance device is not on the Secretary.

[00:12:45] Speaker 01:
The responsibility to get the remittance advice is not on anybody because it wasn't articulated until JSM 37.

[00:12:50] Speaker 02:
Well, I mean, we may disagree on the reading in the record as to what their interpretation is.

[00:12:54] Speaker 01:
Okay.

[00:12:54] Speaker 02:
You persist in saying that the interpretation that they're relying on doesn't exist, and I went back through the record, including the Ninth Circuit's decision, as part of the explanation for their decision.

[00:13:07] Speaker 01:
Decisions well before that and everyone has said the policy has been in place a long time and the burden has been on Your clients not the secretary right and the Ninth Circuit case was a documentation case where those were outpatient claims which didn't automatically cross over and they were claims that arose before 1994 so that was pure addictive in that case and

[00:13:27] Speaker 02:
But more importantly... Well, I'm talking about their other interpretations from the Secretary as well.

[00:13:32] Speaker 01:
The interpretations all from the Secretary were in these non-ceiling cases, and they said you have to bill the state and get the money because we're not going to pay you.

[00:13:41] Speaker 01:
That's fine.

[00:13:42] Speaker 01:
We don't question that.

[00:13:44] Speaker 01:
But the mandatory state determination process that is at issue here, that isn't mentioned before the 2000 administrative decision, that...

[00:13:54] Speaker 02:
I mean, I'll have to go back when you sit down and get the citations again, but I'm just reading the record differently.

[00:14:01] Speaker 02:
It occurred before 2000.

[00:14:03] Speaker 02:
We don't believe, Your Honor, that it was – I understand you don't believe that, and I don't understand it because everyone who's looked at it has said the policy

[00:14:11] Speaker 02:
was long-standing.

[00:14:12] Speaker 01:
The state determination policy does not exist before 2000, is not mentioned anywhere.

[00:14:17] Speaker 01:
But more importantly here, even if that policy existed and was firm law, the secretary herself didn't follow it with the claims, with the universe of claims at issue here.

[00:14:27] Speaker 01:
Because what the secretary did with the universe of claims at issue here is didn't require remittance advice.

[00:14:32] Speaker 01:
When you look at that agreement and when you look at what came out of it,

[00:14:35] Speaker 01:
the Secretary's decision or the Provider Reimbursement Review Board decision, it only talks about reports being made.

[00:14:42] Speaker 01:
There were no state determinations.

[00:14:45] Speaker 03:
If I could jump to a discreet question that hasn't been mentioned, in your allegations of error, if you would, you rely at least in part on the 1987 moratorium statute, the district court ruled that you had not preserved that in the administrative proceedings.

[00:15:04] Speaker 03:
I read

[00:15:06] Speaker 03:
Your brief is not a model of clarity on how you claim to have crossed that hurdle.

[00:15:11] Speaker 03:
Could you briefly tell me how it is that you think the district court was wrong in that analysis, sir?

[00:15:19] Speaker 01:
Yes, Judge Santella.

[00:15:20] Speaker 01:
The issue of the applicability to the moratorium didn't come up when this case was at the Provider Reimbursement Review Board, because like the community hospital case, it was a documentation case.

[00:15:31] Speaker 01:
And what happens is the parties agreed, the secretary's own audit contractor agreed,

[00:15:36] Speaker 01:
that the documentation was sufficient to work under the methodology that had been used in the universe of claims.

[00:15:42] Speaker 01:
So the concern about the moratorium or the applicability of the state determination requirement simply didn't arise.

[00:15:51] Speaker 01:
And then we won.

[00:15:52] Speaker 01:
You didn't arise.

[00:15:53] Speaker 01:
That's another way of saying you didn't raise it, right?

[00:15:55] Speaker 01:
Of course, because it didn't come up until the Secretary issued her decision and she mentioned the moratorium.

[00:16:02] Speaker 01:
So we're simply – we are simply now making argument about why that decision was arbitrary and capricious, Your Honor, because it raised for the – It's an argument you did not raise after the Secretary issued the opinion.

[00:16:15] Speaker 03:
You did not in any fashion in the administrative proceedings raise the 1987.

[00:16:19] Speaker 01:
Once the Secretary issues her final decision, which was the first time the moratorium issue even came up, there is no opportunity to respond until we get to the Court.

[00:16:26] Speaker 05:
So there was nothing for... But you certainly had an opportunity all along to make an argument that the Secretary's policy here itself violated the bad debt moratorium.

[00:16:33] Speaker 01:
Oh, yes, Your Honor, absolutely.

[00:16:34] Speaker 01:
You didn't do that.

[00:16:35] Speaker 01:
That's because, as we said, it was a documentation case.

[00:16:37] Speaker 01:
The secretary's contractor didn't raise that as an issue.

[00:16:40] Speaker 01:
It wasn't something that was contested before the Provider Reimbursement Review Board because the only question there was whether, in fact, the documentation was sufficient.

[00:16:51] Speaker 01:
which isn't contested, and to the extent, Judge Edwards, to the extent there may have been some kind of long-standing regulation, which we don't think there was, and we don't even believe the Secretary is arguing there was a mandatory state determination process before a 1993 decision,

[00:17:06] Speaker 01:
That must yield to the cross-subsidization prohibition.

[00:17:10] Speaker 01:
In other words, there's no question.

[00:17:11] Speaker 01:
The Secretary hasn't disputed the amounts at issue here.

[00:17:14] Speaker 01:
If the Secretary doesn't pay these amounts, somebody's got to pay him.

[00:17:17] Speaker 01:
And what Congress said, the overarching basis for all of these risks.

[00:17:22] Speaker 02:
You're starting premises that must yield.

[00:17:24] Speaker 02:
That is a claim that the Secretary's interpretation is legally impermissible.

[00:17:29] Speaker 02:
You have not preserved that argument.

[00:17:31] Speaker 01:
On the moratorium?

[00:17:32] Speaker 02:
No, that the current interpretation, the one that I'm reading is a 1993 hospital, the area, the Carolina, there are a number of citations where the Secretary said this over and over again.

[00:17:45] Speaker 02:
I'm just perplexed at your argument.

[00:17:49] Speaker 02:
And if you're claiming that their interpretation of their regulation is impermissible, that's a separate challenge.

[00:17:56] Speaker 01:
Absolutely, Your Honor.

[00:17:58] Speaker 01:
The 1993, you know, the Carolina PRRB decision, the administrative decision that you make reference to, was a non-ceiling case.

[00:18:08] Speaker 01:
That had nothing to do with the situation where there was some money owed by the state Medicaid program.

[00:18:14] Speaker 01:
There was none.

[00:18:15] Speaker 01:
And it stands for the unremarkable proposition that Medicare isn't going to pay

[00:18:20] Speaker 01:
when Medicaid is responsible.

[00:18:22] Speaker 01:
We agree with that a hundred percent and that's been in place forever and it should be in place forever.

[00:18:27] Speaker 01:
Our point here is more subtle than that which goes to the state determination which the lower court didn't address at all.

[00:18:34] Speaker 01:
It merged it both into the mandatory state determination must build together but as the First Circuit said in Maine Medical those are really very separate policies with very separate pedigrees.

[00:18:44] Speaker 02:
I think as I'm reading this case law respectfully they look part

[00:18:49] Speaker 02:
of the entire policy, which interprets the original regulation.

[00:18:54] Speaker 01:
They go hand in hand.

[00:18:55] Speaker 01:
Well, except the mandatory state determination policy doesn't come up anywhere, because what the secretary were saying in these non-ceiling cases was, don't bill us, bill Medicaid, because they're on the hook.

[00:19:09] Speaker 01:
It was not until the 2000 adjudicated decision that there came a non-sealing case where there's actually some liability.

[00:19:17] Speaker 01:
So before 2000, the factual predicate that stands here never arose.

[00:19:21] Speaker 01:
And what the secretary's interpretive rules said back then, going back to long before 1987, is that the hospitals make the determination.

[00:19:31] Speaker 01:
They determine if anyone else was liable.

[00:19:33] Speaker 01:
And in fact, they can use an alternative determination

[00:19:36] Speaker 01:
alternative documentation which was explicitly put in the provider reimbursement manual and it wasn't until after the Ninth Circuit issued its decision in community hospital that the secretary said, oh, well maybe that wasn't right.

[00:19:51] Speaker 02:
But there was no question that when that policy... Yeah, maybe that was inconsistent with their prior interpretation of the regulation.

[00:19:56] Speaker 02:
So they had to go back to the prior interpretation, the long-standing prior interpretation.

[00:20:00] Speaker 02:
Except it was pure dicta in that case.

[00:20:02] Speaker 02:
And the fact that they... But the secretary then followed and went back to the long-standing interpretation of the regulation.

[00:20:09] Speaker 01:
The record reflects, Your Honor, that in JSM 370, when they went back, they said, to the extent any hospital has relied on the previous alternative documentation policy, we will recognize it.

[00:20:21] Speaker 01:
That's what happened here because when the State of California and the Secretary entered into an agreement to reprocess these claims and deal with these claims, they did it under an alternative theory.

[00:20:32] Speaker 01:
There was never any remittance advice.

[00:20:34] Speaker 01:
This was precisely why there was the hold harmless and why the Secretary, knowing the reliance of these particular hospitals and others around the country, said no.

[00:20:43] Speaker 01:
This is not a wooden rule.

[00:20:44] Speaker 01:
This is not somehow, as the Secretary now argues, void of an idio.

[00:20:48] Speaker 01:
Not at all.

[00:20:49] Speaker 01:
It was a consistent expression of the alternative documentation policy that had been in place forever and had never come up because all of these adjudications that the Secretary referred to were situations where the Medicaid program owed 100% of the amount and Medicare owed zero.

[00:21:11] Speaker 05:
So I know you make a lot of this ceiling, non-ceiling distinction, but I'm having trouble figuring out why that should make a difference, even if, whether they owe 100 percent or in some they'll owe something, some they'll owe none.

[00:21:27] Speaker 05:
Why the Secretary still wouldn't want to have the hospitals and the states sorted out in the first place?

[00:21:33] Speaker 01:
Oh, absolutely, Your Honor.

[00:21:35] Speaker 01:
We think that that is a correct and good policy when states are compliant.

[00:21:40] Speaker 01:
there are regulations that require the issuance of remittance advices.

[00:21:45] Speaker 01:
In California, they first of all would issue remittance advices for zero amounts that the secretary's own lawyers said that the Medicare program had to ignore because they were incorrect.

[00:21:56] Speaker 01:
So the remittance advices being issued by California were themselves suspect.

[00:22:01] Speaker 05:
So this prior pre-existing policy of requiring a remittance advice

[00:22:08] Speaker 05:
You don't challenge that it sensibly applies both to ceiling and non-ceiling cases.

[00:22:13] Speaker 05:
Put aside the California just stops paying exception.

[00:22:17] Speaker 01:
Whatever general rule there might have been, the Secretary allowed alternatives until 2000.

[00:22:23] Speaker 01:
It was the first time the Secretary articulated that somehow a remittance advice is mandatory.

[00:22:29] Speaker 02:
Where's the regulatory interpretation pre-2000 that says you can use an alternative to their stated rule?

[00:22:36] Speaker 01:
It's in PRM 1102, Judge Edwards.

[00:22:38] Speaker 01:
That's where it explicitly says that to the extent there is liability on somebody other than the Medicare, excuse me, than Medicaid,

[00:22:46] Speaker 01:
You can use whatever documentation you seem fit.

[00:22:50] Speaker 01:
And it's in cases where the Medicaid is responsible for all of the Medicare copayment amount or only a part of that copayment amount.

[00:22:59] Speaker 01:
And importantly, not only is that consistent with what's in 1102, which was vetted by the General Counsel's Office of HHS at the least,

[00:23:08] Speaker 01:
But it's consistent with what the Secretary did here in entering into an agreement with California Medicaid that called for payment on the basis of reports, not remittance advices.

[00:23:18] Speaker 01:
There isn't a shred of evidence anywhere in this record that the Secretary ever required remittance advices.

[00:23:24] Speaker 01:
And that is what's in the JSM 370 that the government now relies on as being the clear statement.

[00:23:29] Speaker 01:
But even her briefs mention state determinations and don't rely on state remittance advice.

[00:23:34] Speaker 02:
Isn't part of your assertion here that the state still owes some on some of these claims?

[00:23:37] Speaker 01:
Absolutely, they've made clear, no, no, not at all, Your Honor.

[00:23:40] Speaker 01:
We don't have any right to go after them because there's a six-month requirement of timely filing for these claims to go over.

[00:23:48] Speaker 01:
Once those six months haven't been met, which they weren't met because of the crossover claim process here, we were powerless.

[00:23:54] Speaker 01:
We couldn't bring a state mandamus action or something like that.

[00:23:57] Speaker 02:
We needed the Secretary to weigh in on this thing.

[00:24:02] Speaker 02:
I'm trying to make sure I understand it.

[00:24:03] Speaker 02:
The state made mistakes in their calculations.

[00:24:06] Speaker 02:
You got stuck with them, and then it was too late to challenge them.

[00:24:08] Speaker 02:
Is that what you're saying to me?

[00:24:10] Speaker 01:
It was too late to force them to issue a remittance advice.

[00:24:13] Speaker 01:
And what does the Secretary's bad debt... But... Wait, wait, wait.

[00:24:16] Speaker 02:
Finish your sentence.

[00:24:17] Speaker 02:
You sound like me.

[00:24:19] Speaker 01:
That's an honor, Your Honor.

[00:24:21] Speaker 01:
That's the highest compliment I think I've ever been paid.

[00:24:24] Speaker 03:
You might note that as slow as I talk, it's probably how slow I listen, too.

[00:24:30] Speaker 03:
If you take a breath every now and then, it might help me fall.

[00:24:33] Speaker 02:
We need to finish that sentence.

[00:24:34] Speaker 02:
I'm trying to make sure I have the picture straight in my head.

[00:24:39] Speaker 02:
There was this huge problem, an agreement to settle, the state paid an amount that you felt was not accurate,

[00:24:48] Speaker 02:
They screwed up the calculation, and then they wouldn't hear any more from you.

[00:24:52] Speaker 02:
Is that right?

[00:24:53] Speaker 01:
That the state paid correctly on the basis of the claims that they adjudicated, but they missed a bunch of claims.

[00:25:00] Speaker 02:
Right.

[00:25:01] Speaker 02:
Well, they didn't cover all of what that's... Correct.

[00:25:04] Speaker 02:
In your view, they messed up.

[00:25:05] Speaker 02:
They messed up.

[00:25:06] Speaker 02:
All right, so now you cannot go back to the state, you're saying, because of a time limitation?

[00:25:12] Speaker 01:
Correct, Your Honor.

[00:25:13] Speaker 01:
And even if we were to go back to the state,

[00:25:15] Speaker 01:
This is where we get to the default position here of the capriciousness of the Secretary from a substantial evidence perspective, is that there's no question that the amounts that we're seeking here are owed only from Medicare.

[00:25:30] Speaker 02:
There are some minor Medicaid amounts that... Well, you know, I understand that that may be right.

[00:25:34] Speaker 02:
I'm just trying to understand this picture, because part of what I thought they were saying was, that may or may not be true, but we have a process, and you have to follow our process, like it or not.

[00:25:43] Speaker 02:
Yes.

[00:25:44] Speaker 02:
Even though it looks patently absurd to you, and you have to go back and get the remittance.

[00:25:48] Speaker 01:
That's correct, Your Honor, and we identified the six-month time limit that exists for timely filing, and it was in fact raised, Judge Santel, in the position paper that was filed before the Provider Reimbursement Review Board.

[00:26:00] Speaker 01:
That point was made, that was preserved, that's been a part of this case.

[00:26:02] Speaker 01:
The Secretary has never challenged it, never refuted it, never questioned it, says kind of glibly and in a conclusory manner that the hospitals could have done more,

[00:26:12] Speaker 01:
But there's nothing more that the hospitals could have done.

[00:26:14] Speaker 01:
They never articulated what it was and what our legal basis would be.

[00:26:17] Speaker 01:
But more importantly, Your Honor, is that the requirement here is a reasonable collection effort.

[00:26:22] Speaker 01:
The hospital is not required to bankrupt itself by trying to chase down every one of these claims.

[00:26:28] Speaker 01:
And a reasonable collection effort is defined, Your Honor, as what would be required of a non-Medicare patient.

[00:26:34] Speaker 01:
So in other words, what the rules require here

[00:26:37] Speaker 01:
is that the hospitals treat Medicare and non-Medicare the same, so they're not dumping these bad debt requirements onto the Medicare program.

[00:26:43] Speaker 01:
Well, here that's not an issue because we know the determinations are correct, but moreover, the requirement is reasonable.

[00:26:50] Speaker 01:
And there's no question that the hospitals did here acted reasonably in pursuing this as much as they can for 15 years trying to get these remittance advice.

[00:26:58] Speaker 01:
What's unreasonable is the Secretary's failure

[00:27:01] Speaker 01:
to engage the way she did in 1999 and enter into some kind of a settlement with the state so they would issue these remittance advices and then we don't have to clog up the court with this kind of case.

[00:27:11] Speaker 01:
This case should never have been brought because the secretary had the – says these – that her regulations were mandatory

[00:27:19] Speaker 01:
and could have put pressure, as she did in 1999, on the state to issue these remittance advices, but failed to do it in a way that we think is a self-serving non-feasance.

[00:27:28] Speaker 01:
Because what happens if we don't get the remittance advices?

[00:27:30] Speaker 01:
Then Medicare doesn't have to pay.

[00:27:32] Speaker 01:
The Secretary should have done that, should have engaged here, because this is a situation, no matter how you look at these regulations,

[00:27:38] Speaker 01:
no matter what regulation you think is in place, Your Honor, that there was never a discussion about what would happen if the remittance advice weren't issued.

[00:27:46] Speaker 01:
They assumed that states would comply with their legal requirements and issue remittance advices.

[00:27:52] Speaker 05:
Thank you, Mr. Roth.

[00:27:53] Speaker 01:
Thank you.

[00:28:12] Speaker 04:
May it please the Court, Sidney Foster for the Government.

[00:28:14] Speaker 03:
Your Honor, under certain limited circumstances, Medicare will reimburse providers of health care services for... Would you, early on, answer what counsel posited, that the Secretary is saying that the hospitals did not do enough, but that they can't tell what more it is they should have done?

[00:28:34] Speaker 03:
How would you answer that proposition?

[00:28:37] Speaker 04:
Sure.

[00:28:37] Speaker 04:
I'd love to address that.

[00:28:39] Speaker 04:
The secretary here found that it was within the control of the providers to submit their bills to the Medicaid agency, but that they failed to do so.

[00:28:52] Speaker 04:
What happened here is that starting in 1994, the automated crossover system apparently was having some problems and that some of the claims did not reach

[00:29:02] Speaker 04:
the Medicaid agency.

[00:29:05] Speaker 04:
What plaintiffs should have done at that point but waited three years to do was to implement a system to catch those claims, to identify the claims that were not automatically crossing over and then to directly bill those claims to the state.

[00:29:19] Speaker 04:
They did implement a system like that in 1997 and then they found that that system was effective because the amount that they say is allegedly missing from the 1999 lump sum payments

[00:29:30] Speaker 03:
The thing, the act that the Secretary would say the hospital should have done was send a bill directly to the Medicaid, and they did not do so.

[00:29:40] Speaker 03:
Is that?

[00:29:41] Speaker 04:
That is correct.

[00:29:42] Speaker 04:
That is what they should have done.

[00:29:43] Speaker 02:
They didn't submit to Medicaid?

[00:29:46] Speaker 04:
I'm sorry, what's that?

[00:29:47] Speaker 02:
They didn't submit to Medicaid?

[00:29:49] Speaker 02:
What was the settlement all about then?

[00:29:51] Speaker 04:
So the settlement addressed any claims that were already in Medicaid system.

[00:29:55] Speaker 04:
So those would be claims that had crossed over through the automated crossover system or claims that had been directly billed to the Medicaid system.

[00:30:03] Speaker 04:
But it wouldn't include claims that the Medicaid system had never received.

[00:30:06] Speaker 04:
And the Secretary found that the claims that are at issue in this lawsuit

[00:30:10] Speaker 04:
are claims that the Medicaid system never received.

[00:30:12] Speaker 04:
They didn't make it through in the automated crossover system, and they didn't make it through with the direct billing.

[00:30:18] Speaker 04:
So there was a finding here that these claims were never received.

[00:30:23] Speaker 05:
And I'd like to address... I'm sorry.

[00:30:25] Speaker 05:
I'm sorry.

[00:30:25] Speaker 05:
When precisely were they on notice that the crossover process had failed as to these claims?

[00:30:31] Speaker 04:
Well, I mean, I think it's their response.

[00:30:34] Speaker 04:
The crossover system is their...

[00:30:38] Speaker 04:
it's their responsibility to ensure that the crossover system is working properly.

[00:30:42] Speaker 04:
When they get remittance advices back from the state, it's, you know, they're their claims, it's the responsibility of the providers to make sure that those remittance advices are properly reflecting the claims that were submitted.

[00:30:55] Speaker 04:
They have all the information in front of them as to whether or not the number of claims that they're getting remittance advices on.

[00:31:01] Speaker 05:
Does everything usually go

[00:31:02] Speaker 05:
smoothly so that if you got remittance advices for April and May and nothing for June, you'd be on notice that, hmm, those June things never made it there?

[00:31:12] Speaker 05:
Or were they reasonably relying on your crossover system to get things there and didn't know until it was too late that they weren't there?

[00:31:19] Speaker 04:
Initially, I'll note that I think that they actually claim in this 1999 letter to the state that they wrote, which by the way, there's no evidence in the record that any of the claims were attached to that.

[00:31:33] Speaker 04:
That's a new argument that we're hearing for the first time, an argument.

[00:31:35] Speaker 04:
But I think in that letter they say that there were whole months that were missing from some of the 1994 claims.

[00:31:42] Speaker 04:
So you might, it would seem reasonable to me that you might think that that would have

[00:31:47] Speaker 04:
alerted them to the fact that there was a problem.

[00:31:50] Speaker 03:
But it is- How long did they have to cure that in if they wanted to take action based on that notice or information?

[00:31:59] Speaker 03:
How long did they have to cure that in?

[00:32:01] Speaker 03:
Everybody seems to agree it's not timely now.

[00:32:04] Speaker 03:
When did it cease to be timely?

[00:32:06] Speaker 04:
Right, so the governing regulation is that 51008.

[00:32:09] Speaker 04:
It does provide a general six-month limitation, but if you look at it, there's an exception for good cause when circumstances are out of the control of the provider, and it refers you to a different section, which is 51008.5.

[00:32:22] Speaker 03:
Every section refers to another section.

[00:32:24] Speaker 03:
Exactly.

[00:32:26] Speaker 03:
Six months.

[00:32:27] Speaker 04:
Right, so in that section there is an exception for if you first submit your claims to Medicare, which is what would seem to be applicable here.

[00:32:34] Speaker 04:
I think that's point two of this, or subparagraph two of this section, and says that in those cases then there's a year between kind of the date of discharge and the date that Medicaid requires the payment.

[00:32:48] Speaker 04:
There's also an exception, I think it's subparagraph five, for other special circumstances that are beyond the control of a provider.

[00:32:54] Speaker 03:
I don't know how that would apply here.

[00:32:57] Speaker 03:
I mean, they're operating in real life on the basis of the regulation.

[00:33:03] Speaker 03:
The exception's going to be backward-looking.

[00:33:07] Speaker 03:
The exceptions, I'm sorry, but... When you're talking about what they needed to do, I'm not sure how they could have the advantage of an exception that is inherently backward-looking.

[00:33:16] Speaker 03:
We couldn't say there was a special circumstance until they've already gotten out of time.

[00:33:20] Speaker 03:
So when we're talking about what they should have done, we'll be talking about six months,

[00:33:25] Speaker 04:
Well, as I read the regulation, they had at least a year from the date of discharge to submit under that subparagraph to – I still think that they could potentially have at least asked to take advantage of the special circumstances.

[00:33:36] Speaker 04:
But I think at the end of the day, look, the Secretary found that it was within their control, and that's supported by substantial evidence.

[00:33:42] Speaker 04:
And part of why we know that it was within their control is that in 1997 they were able to implement a system

[00:33:48] Speaker 04:
where they were able to catch these claims that weren't crossing over and directly bill them to the state.

[00:33:53] Speaker 04:
That suggests that they had enough time under whatever provisions were applicable to do this.

[00:34:00] Speaker 04:
And there's also testimony in the record by their representative.

[00:34:04] Speaker 04:
He testified that he thought that the time limit in question was 60 days, which is now not the timeline that the plaintiffs are saying is applicable.

[00:34:15] Speaker 02:
Is there any doubt about the viability of the disputed claims now?

[00:34:20] Speaker 04:
As to whether or not the payment is required for them?

[00:34:26] Speaker 02:
As to whether or not the Fed should be paying?

[00:34:30] Speaker 04:
There is a dispute.

[00:34:31] Speaker 04:
Right now, without a state determination of payment responsibility, we don't know exactly how much... The states have already refused.

[00:34:40] Speaker 04:
So I think you're right.

[00:34:42] Speaker 04:
No, actually, I don't think there are any refusals.

[00:34:44] Speaker 04:
That's just the problem here.

[00:34:45] Speaker 04:
There are no state determinations here.

[00:34:48] Speaker 02:
You're saying that everything that was part of the settlement process had previously had a state determination?

[00:34:57] Speaker 04:
Right.

[00:34:57] Speaker 04:
The settlement process covered claims that were already in Medicaid systems.

[00:35:01] Speaker 04:
So they would have been claims that Medicaid had previously processed but erroneously processed.

[00:35:06] Speaker 02:
Right.

[00:35:06] Speaker 02:
So what's it?

[00:35:07] Speaker 02:
Didn't the petitioners interact with the states with respect to the matters that are still in dispute and the state said – washed its hands of those?

[00:35:17] Speaker 04:
The only thing that – so the secretary found that these particular claims were never submitted to the state.

[00:35:26] Speaker 02:
Don't use technical words.

[00:35:28] Speaker 02:
Let's talk at a real low level.

[00:35:32] Speaker 02:
Didn't they say to the states, but wait, in your calculation, there are these other claims which you haven't accounted for.

[00:35:41] Speaker 02:
This is my picture of it.

[00:35:43] Speaker 02:
And the state effectively said, no, go away.

[00:35:48] Speaker 04:
So in 1999, after they received the lump sum payments, they did send a letter to the state with just kind of a vague request for help.

[00:35:55] Speaker 02:
Don't characterize it.

[00:35:56] Speaker 02:
They sent a request.

[00:35:58] Speaker 02:
They called the state out on these other matters, right?

[00:36:01] Speaker 04:
That's correct, in the letter.

[00:36:04] Speaker 02:
They called them out, and the state effectively said, by action and inaction, go away.

[00:36:09] Speaker 02:
No.

[00:36:12] Speaker 04:
Yes, that's correct.

[00:36:12] Speaker 02:
Okay, so the picture I have had, which is very perplexing for me,

[00:36:17] Speaker 02:
and you can put all the section numbers around it to try and make an argument, because it seems completely bizarre to me.

[00:36:24] Speaker 02:
They effectively said as soon as the state made the determination, there are these other claims as well that you have to account for.

[00:36:31] Speaker 02:
So they put them on notice and the state said, it's like a determination, the state said, no, go away.

[00:36:38] Speaker 02:
You folks know that and they're saying, what more do you want to know?

[00:36:43] Speaker 04:
Well, to the extent you're suggesting that the absence of a response to the letter or response within a phone call count as a state determination.

[00:36:51] Speaker 02:
No, but I mean, do you seriously doubt that the state has said go away?

[00:36:54] Speaker 02:
We're not paying them.

[00:36:55] Speaker 04:
No, absolutely not, but we know that... Know what?

[00:36:57] Speaker 02:
You don't doubt that, right?

[00:36:58] Speaker 04:
I don't, right.

[00:36:59] Speaker 02:
Okay, so the feds know the state have effectively determined we're not paying these.

[00:37:03] Speaker 02:
Now, what more are they supposed to do?

[00:37:05] Speaker 02:
Well, so under the... It has to be on an official piece of paper?

[00:37:08] Speaker 04:
No, under the must-build policy, states are required to issue a determination, but it also has to be a proper determination where they're actually determining the amount that they are owed.

[00:37:19] Speaker 02:
But if the state is saying to the petitioners, we're not going to do it.

[00:37:24] Speaker 02:
We're just telling you no.

[00:37:26] Speaker 02:
What are they supposed to do?

[00:37:30] Speaker 02:
That's what I thought this was about.

[00:37:32] Speaker 02:
And I want to make sure I was understanding your story.

[00:37:34] Speaker 02:
This is a very bizarre case.

[00:37:36] Speaker 02:
I don't know what else you're supposed to do.

[00:37:38] Speaker 02:
Everybody knows that the state has told them, that the state knows there are these additional claims, and the state has said, we will not pay them.

[00:37:47] Speaker 02:
And you know that, and they know that, and they're pulling their hair out wondering what else do you want us to do?

[00:37:54] Speaker 02:
The state will not pay us.

[00:37:56] Speaker 04:
Your Honor, I mean, the fundamental problem here is that the claims were not submitted in that 1994 to 1998 period.

[00:38:04] Speaker 04:
Had they been submitted during that period when they had enough time to do so, then they would have been covered by the lump sum payment.

[00:38:10] Speaker 02:
That's not what the State has said.

[00:38:14] Speaker 02:
As far as I know.

[00:38:16] Speaker 04:
Well, that's what the Secretary found, was that these claims have not been submitted to the state, and that's supported by the substantial evidence in the record that I was referencing.

[00:38:24] Speaker 04:
At 1999 – in 1999, if – was there something else?

[00:38:27] Speaker 02:
Are you justifying the state's refusal to consider on grounds that they came too late to the state?

[00:38:35] Speaker 04:
States definitely can reasonably refuse to – Yeah, absolutely.

[00:38:39] Speaker 02:
I'm not saying they can't.

[00:38:40] Speaker 02:
I'm saying that – but is that what the state said?

[00:38:42] Speaker 02:
It was untimely?

[00:38:43] Speaker 04:
Well, the state didn't issue an answer to the letter.

[00:38:46] Speaker 04:
There was only a response in the phone call.

[00:38:48] Speaker 05:
The phone calls... I think the confusion here might be about the they.

[00:38:51] Speaker 05:
And my understanding is that there was just a general letter in 1999 that said, we've got a problem.

[00:39:00] Speaker 05:
Things were missed.

[00:39:02] Speaker 05:
Will you help us with it?

[00:39:03] Speaker 05:
But they didn't actually submit claims, so that California could look and say, that person wasn't Medicaid eligible.

[00:39:11] Speaker 05:
It's not only untimely, that person wasn't Medicaid eligible.

[00:39:13] Speaker 05:
There just was never an actual submission of individual claims that are now being submitted to you for payment.

[00:39:20] Speaker 05:
There was simply a general letter saying, we've got a problem.

[00:39:23] Speaker 05:
That's exactly right.

[00:39:25] Speaker 05:
Where is this Medi-Cal letter in the JA?

[00:39:27] Speaker 04:
The letter, their 1999 letter is J203-204.

[00:39:32] Speaker 04:
Thank you very much.

[00:39:35] Speaker 04:
And that's, no, that's exactly right.

[00:39:36] Speaker 04:
The first time that the plaintiffs actually... What was the citation?

[00:39:40] Speaker 05:
The claims have never been submitted and they say they were attached.

[00:39:44] Speaker 05:
That's exactly right.

[00:39:45] Speaker 02:
What was the citation?

[00:39:46] Speaker 04:
It's J203-204.

[00:39:53] Speaker 05:
The letter doesn't indicate attachment.

[00:39:58] Speaker 05:
And so your understanding is that all California got was this letter, and they said, we're done with this.

[00:40:06] Speaker 05:
We know there was nothing in the system, so it certainly wasn't submitted to the system that way.

[00:40:10] Speaker 05:
Right.

[00:40:11] Speaker 05:
And so what California said no to was not claims specific.

[00:40:16] Speaker 05:
It was no to this letter.

[00:40:17] Speaker 04:
That's correct.

[00:40:18] Speaker 04:
That's correct.

[00:40:19] Speaker 04:
And the vague request in the phone calls.

[00:40:21] Speaker 04:
It wasn't until 2006, which was seven years after the 1999 lump sum payments, that the plaintiffs first actually submitted the claims that are at issue here to the state.

[00:40:31] Speaker 04:
The state at that point did respond and said that it was untimely.

[00:40:34] Speaker 05:
And then in the ordinary course, so put aside this whole California shenanigans, if a provider is just untimely in sending an acclaim to the state and the state says, we're not going to pay, that's untimely,

[00:40:48] Speaker 05:
Does the secretary then pay to prevent cross-subsidization, or is that just on the providers for being late?

[00:40:53] Speaker 04:
No, that's then on the providers.

[00:40:54] Speaker 04:
A state determination about the amounts that's based on a properly submitted claim is what's required.

[00:41:00] Speaker 04:
So obviously, if the opposite were the policy, then that would provide providers with no incentive to ever bill the state.

[00:41:07] Speaker 04:
They can say, oh, whoops, it was too late.

[00:41:09] Speaker 04:
And then the secretary just becomes responsible for everything.

[00:41:11] Speaker 05:
So it's just not reasonable collection efforts if they don't do it on time.

[00:41:14] Speaker 05:
So it doesn't qualify as bad debt that you would reimburse.

[00:41:17] Speaker 05:
That's correct.

[00:41:22] Speaker 05:
uh... if the court has no idea right now and so what would you do if uh... the state when you say you've got the sort of two thing you must you must bill and the state must answer what if the state just categorically what if the state just categorically refused to answer the hospitals can't make they can submit the bills but they can't make them answer

[00:41:48] Speaker 05:
Could there be an exception?

[00:41:50] Speaker 05:
I know you say that isn't this case, but could there be an exception, or is the Secretary's rule absolutely hard and fast no matter what?

[00:41:57] Speaker 04:
Yeah, I mean, that isn't this case, and so there's no need for the Court to address it, but it is... There's no need for you to address it.

[00:42:03] Speaker 04:
Right.

[00:42:04] Speaker 04:
And I will, don't worry.

[00:42:07] Speaker 04:
But it is a hard and fast rule, and it's reasonable for the reasons that we've explained in our brief.

[00:42:11] Speaker 04:
I mean, as an initial matter, states are legally obligated to issue these determinations.

[00:42:15] Speaker 04:
These claims don't actually come up that much because states generally fulfill that obligation.

[00:42:20] Speaker 03:
Well, that's well and good to say it's not going to come up, but we're hypothesizing.

[00:42:24] Speaker 03:
We get to do that from the bench.

[00:42:26] Speaker 03:
And it seems that you're requiring

[00:42:29] Speaker 03:
the huffs of the providers to be responsible for something they can't control.

[00:42:33] Speaker 03:
When you say it's a hard and fast rule that they have to have the state response, if the state just doesn't do it, they're out of the picture.

[00:42:43] Speaker 03:
They can't do anything.

[00:42:45] Speaker 04:
Well, you know, providers have a number of means to try and obtain the state determination.

[00:42:49] Speaker 04:
The first step is to actually submit the bills, which didn't happen here.

[00:42:53] Speaker 03:
And then there's following... We're assuming they've submitted a bill.

[00:42:56] Speaker 03:
And the state Medicaid agency has just not responded.

[00:43:00] Speaker 03:
They just don't do anything, which is sort of what they say is happening here.

[00:43:03] Speaker 03:
But even if you think that they submitted the bills... Never mind what they did or didn't do in this case.

[00:43:08] Speaker 03:
Right.

[00:43:08] Speaker 03:
We're asking now, if it is the case that the provider has submitted to the Medicaid agents, Medicaid has not responded, state has not responded, the secretary says, well, go away, you don't have a response from the...

[00:43:25] Speaker 03:
Medicaid, what are they supposed to do?

[00:43:27] Speaker 04:
I want to answer that, but I just want to resist the characterization that all that the private provider needs to do is submit the bills.

[00:43:33] Speaker 04:
I mean, follow-up would be appropriate.

[00:43:35] Speaker 04:
If the state says no, they could say, you know, it's untimely.

[00:43:38] Speaker 04:
They can say, no, actually we submitted it to the state.

[00:43:41] Speaker 03:
But if the state doesn't respond, they're out in the woods somewhere, they can't do anything about it, and the secretary is not going to give them any relief because of what the state failed to do.

[00:43:50] Speaker 03:
Is that right?

[00:43:51] Speaker 04:
That is right and the reason that that that makes that the policy is reasonable even in those circumstances which by the way they would also have administrative and potentially judicial remedies.

[00:44:04] Speaker 03:
Go to the answer to the question without chasing the rabbits down the trail.

[00:44:08] Speaker 04:
Okay, absolutely.

[00:44:09] Speaker 04:
So it's reasonable because states are legally required to do so, and it serves many important functions, and this is critical.

[00:44:17] Speaker 03:
States have the most accurate information about... We're sure it's a good idea to get it from the state, but what we're trying to ask you about is what can a provider do if the state doesn't follow its duty?

[00:44:28] Speaker 04:
And again, it's not presented, but it is the hard and fast rule that a state determination... That's not at all what I'm asking you, is it?

[00:44:36] Speaker 02:
What else can a provider do?

[00:44:38] Speaker 02:
We're just curious, what can they do if the state says, no, we hear you saying that they're obliged to do it, but suppose they don't?

[00:44:46] Speaker 04:
Well, I've been trying to describe what they can do to seek the determination from the state.

[00:44:50] Speaker 02:
You told us all of that.

[00:44:51] Speaker 04:
Right.

[00:44:52] Speaker 04:
And if the state doesn't do it, then it is their responsibility.

[00:44:57] Speaker 04:
That is the policy.

[00:44:58] Speaker 03:
So they can't do anything about it, but they're responsible for it.

[00:45:03] Speaker 04:
They can't do anything.

[00:45:04] Speaker 03:
You're from the government.

[00:45:04] Speaker 04:
You're there to help.

[00:45:05] Speaker 04:
That's right.

[00:45:06] Speaker 04:
That's right.

[00:45:07] Speaker 05:
I mean, sometimes your answer would be do what they did here, which is file a lawsuit against California or against the state and compel them to do it.

[00:45:16] Speaker 05:
And then you apparently got involved and did this whole settlement with them.

[00:45:21] Speaker 04:
That's right.

[00:45:22] Speaker 04:
And so my major point, which I think the court is resisting a bit, is that they have many things that they can do to get the determinations from the state.

[00:45:28] Speaker 02:
We're really trying to understand it.

[00:45:29] Speaker 02:
This case does not come across clearly, believe me.

[00:45:32] Speaker 02:
Let me ask you one other thing.

[00:45:34] Speaker 02:
I'm trying to anticipate what counsel is going to say when he gets up for rebuttal.

[00:45:38] Speaker 02:
I think part of what he's going to say is that you didn't follow this claimed procedure in handling the bunch of claims that were part of the settlement.

[00:45:50] Speaker 02:
And so how do you make exception there and not here?

[00:45:54] Speaker 02:
They didn't follow that course.

[00:45:57] Speaker 02:
They didn't follow the course of the rule that you say is hard and fast, and if they don't go through that, too bad.

[00:46:04] Speaker 04:
I think plaintiffs are characterizing the must-build policy narrowly to require actual documents from the state called remittance advices.

[00:46:12] Speaker 04:
That's not part of the must-build policy.

[00:46:15] Speaker 04:
The must-build policy requires determinations from the state as to their payment responsibility.

[00:46:19] Speaker 04:
It doesn't matter what is at the top of that document, whether it says remittance advice or is it some other form.

[00:46:24] Speaker 04:
When the lump sum payments were issued here, they were based on the state going through

[00:46:29] Speaker 04:
looking at all of the prior claims that had been submitted to it, billed to it through either the crossover process or direct billing, they looked at them, they made determinations as to their payment responsibility, and they put those in a document and they sent them to Medicare, and those were the basis for those lump sum payments.

[00:46:46] Speaker 04:
So those lump sum payments were based on state determinations.

[00:46:49] Speaker 04:
That's what the must-bill policy requires.

[00:46:51] Speaker 04:
There was no deviation from that.

[00:46:53] Speaker 04:
in this particular case.

[00:46:55] Speaker 05:
Can I just ask you one quick procedural question?

[00:46:57] Speaker 05:
When there was an appeal here to the administrator procedurally and the intermediary and secretary submitted comments or briefs or letters or whatever they were called as part of that process, did the hospitals see those and do you exchange those like briefs or are they confidential communications between each party and the administrator?

[00:47:19] Speaker 04:
I'm 99% sure that the hospitals would have received, at least the intermediaries, I'm pretty sure the others.

[00:47:26] Speaker 04:
I can't recall with certainty, but I think they have CCs on them, so that's why I think that's my memory, but I'm not sure.

[00:47:35] Speaker 05:
Thank you.

[00:47:36] Speaker 05:
Thank you.

[00:47:36] Speaker 05:
Thank you.

[00:47:39] Speaker 05:
All right, Mr. Roth, you used up all your time, but we'll give you two minutes for rebuttal.

[00:47:44] Speaker 05:
My first question to you is, where in the record does it show that actual claims were attached to the 1999 letter?

[00:47:51] Speaker 01:
I don't believe the claims were attached to those letters.

[00:47:54] Speaker 01:
That was an invitation to the state.

[00:47:56] Speaker 01:
It was given them notice that claims were missing, months were missing, and made reference in any attachment to, because it says there was something attached in that paragraph.

[00:48:08] Speaker 01:
and but I don't believe they were submitted this at that time obviously between now and then each and every one of those claims was presented at least to the secretary but I believe also to the to the Medicaid program as well but they had a refusal hold on just to be clear do we know whether these have actually all been submitted into all these individual claims have ever been submitted to California to the medical system as opposed to the secretary I don't believe

[00:48:37] Speaker 01:
They've been, for adjudication by the state, I can't tell you definitively whether they have or they haven't, because the state had said, don't bother us, we're not going to do anything with them, go to Medicare.

[00:48:49] Speaker 01:
But that's after you missed the deadline.

[00:48:52] Speaker 01:
after the secretary missed the deadline.

[00:48:54] Speaker 02:
No, after you missed the deadline.

[00:48:55] Speaker 02:
You did not submit, timely submit the claims to the state.

[00:48:59] Speaker 01:
Initially.

[00:49:00] Speaker 01:
In fact, you didn't submit them at all.

[00:49:03] Speaker 01:
Of course not, because the crossover claim was in process.

[00:49:05] Speaker 01:
There has never been a case

[00:49:08] Speaker 01:
that is held that the crossover, that the SEC, that I know of, that hospitals cannot rely on the crossover claim process.

[00:49:17] Speaker 01:
What the hospitals did here is there was some diligence, but even that wasn't perfect because there's still payments from 97 and 98 that weren't made.

[00:49:24] Speaker 05:
And if you go to page, the J- I just want to be clear though, why as they say by 97 you had a system in place to cover the sort of backup billing, I guess, because the crossover system you realized wasn't perfect.

[00:49:37] Speaker 05:
So if you had the system in place by 97, you must have realized sometime before 1997 that crossover billing wasn't worked.

[00:49:44] Speaker 05:
So why was it working so, wasn't reliable?

[00:49:48] Speaker 05:
and that you needed to have a backup system.

[00:49:50] Speaker 05:
So why, at a bare minimum, wouldn't your claims from, say, 96 on be barred?

[00:49:55] Speaker 05:
You can't rely on, you knew you couldn't rely on a secretary's submission.

[00:49:59] Speaker 01:
A fair question, Judge Millett.

[00:50:01] Speaker 01:
And to respond, I need to use a few seconds.

[00:50:05] Speaker 01:
I know that I don't have any time left.

[00:50:08] Speaker 01:
But what happened here, you need to, this is a one-off case.

[00:50:11] Speaker 01:
This is not going to affect any other providers around the country.

[00:50:14] Speaker 01:
This was California Medicaid from 94 to 98.

[00:50:19] Speaker 01:
And the cases that you allude to, Your Honor, were brought to compel not payment of Medicare bad debt, but to compel payment under the Medicaid program based on an interpretation of the law.

[00:50:29] Speaker 01:
having Medicaid payment, not Medicare, bad debt.

[00:50:32] Speaker 01:
And so what was going on back then, you really need to put this in context, is that the state began in May 1, 1994, issuing remittance advices that were incorrect.

[00:50:43] Speaker 01:
They were stating that there was no state liability based on a state plan that had not been accepted by CMS.

[00:50:51] Speaker 01:
Okay?

[00:50:52] Speaker 01:
And so what happened is CMS instructed its contractors to ignore Medicaid remittance advice from California.

[00:51:01] Speaker 01:
When that occurred, it affected hospitals themselves as far as the Medicaid reviewing their remittance advice is concerned, number one.

[00:51:09] Speaker 01:
Number two, because Medicaid eligibility often takes years to determine, it is not unusual for Medicaid remittance advices not to be issued for several years down the road as the Medicaid agency is figuring out what's going on.

[00:51:23] Speaker 01:
So what happened is, before May 1, 1994, the hospital was going along, and before May 1, 1994, Your Honor,

[00:51:34] Speaker 01:
The hospitals never even looked at a Medicaid remittance advice for Medicare bad debt purposes.

[00:51:41] Speaker 01:
Never did it.

[00:51:42] Speaker 01:
Because Medicaid was on the hook for the full amount.

[00:51:46] Speaker 01:
It was non-sealing.

[00:51:48] Speaker 01:
There was no benefit.

[00:51:49] Speaker 01:
There was no practical need to look at those remittance advice.

[00:51:53] Speaker 01:
Then all of a sudden, the state said, it's not going to pay.

[00:51:56] Speaker 01:
Medicare says, we think your remittance advices are wrong.

[00:51:59] Speaker 01:
And this is all going on in real time.

[00:52:01] Speaker 01:
And then all of a sudden, the states come to realize, excuse me, the hospitals come to realize, oh my goodness, now these remittance advice, we need to start looking at these things, which they never had to look at in the past.

[00:52:11] Speaker 01:
And they went to the Court of Appeals in the Ninth Circuit twice and won.

[00:52:16] Speaker 01:
saying that the state was, in fact, responsible to pay.

[00:52:19] Speaker 01:
So this was not hospitals, like in Maine Medical, who were confused and didn't know what to do, sat on their rights.

[00:52:25] Speaker 01:
These were hospitals that were actively engaged in litigation with a state that was not only refusing to pay what it was required to under the Medicaid program, but issuing remittances.

[00:52:35] Speaker 02:
But I think Judge Gillette asked you, I mean, that's interesting and helpful to understand, but she asked you a very focused question.

[00:52:43] Speaker 02:
Once you realized something in 97, you had a problem with crossover, and there were claims that you needed to capture.

[00:52:51] Speaker 01:
Right.

[00:52:51] Speaker 02:
Why didn't you do something then and submit those claims?

[00:52:54] Speaker 01:
They did.

[00:52:55] Speaker 01:
The hospitals here went out and hired a contractor.

[00:52:58] Speaker 01:
No, no.

[00:52:58] Speaker 01:
Why didn't you submit those claims?

[00:53:00] Speaker 02:
They did submit the claims.

[00:53:02] Speaker 02:
They submitted the claims.

[00:53:03] Speaker 02:
You medicated and got determinations?

[00:53:05] Speaker 02:
I'm totally missing.

[00:53:06] Speaker 03:
We're in the JA.

[00:53:08] Speaker 03:
Well, we see those claims that they submitted.

[00:53:10] Speaker 03:
That were submitted.

[00:53:11] Speaker 03:
Well, presumably those claims... Don't presume anything.

[00:53:14] Speaker 03:
You said they submitted claims.

[00:53:16] Speaker 03:
Where would we find those claims?

[00:53:17] Speaker 01:
I don't have that site, Your Honor.

[00:53:19] Speaker 02:
You said there wasn't an attachment to your letter, and where else?

[00:53:22] Speaker 02:
Well, how can you not... That's the whole... I mean, it's not the whole case, but that's a crucial part of your case.

[00:53:28] Speaker 02:
And I'm perplexed that you're perplexed, because that means I don't understand this case.

[00:53:32] Speaker 02:
You either submitted these claims somewhere, or you didn't.

[00:53:36] Speaker 02:
And Judge Miletsch started by asking you

[00:53:40] Speaker 02:
All right, once you found out there was a crossover problem and you were missing some claims.

[00:53:45] Speaker 02:
Correct.

[00:53:46] Speaker 02:
Why didn't you pull them out and submit them?

[00:53:49] Speaker 02:
And now you're saying you did and where?

[00:53:51] Speaker 01:
Well, if I could, if I could.

[00:53:53] Speaker 02:
No, just give us a citation.

[00:53:55] Speaker 01:
No, no, no.

[00:53:56] Speaker 01:
The claims that would have been submitted would have been processed and paid under the normal course.

[00:54:00] Speaker 01:
That wasn't what you were asked.

[00:54:02] Speaker 01:
Yeah, and that- The ones that we're talking about.

[00:54:05] Speaker 01:
Those would have been paid.

[00:54:06] Speaker 01:
What do you think we're asking you?

[00:54:08] Speaker 01:
Judge Sentel, the Secretary's decision here was not based on... That's not what we're asking you.

[00:54:14] Speaker 03:
We're asking you if you submitted those claims, where would we find the evidence of the claims that were submitted?

[00:54:22] Speaker 01:
I don't know.

[00:54:24] Speaker 01:
I don't know the answer.

[00:54:25] Speaker 01:
They were submitted to Medicare.

[00:54:27] Speaker 03:
You understand we have to operate from the record we have.

[00:54:30] Speaker 01:
Oh yeah, but the record in this case is that the hospitals, and this was their testimony, went to Medicaid and said you've missed a number of claims.

[00:54:37] Speaker 01:
Right.

[00:54:37] Speaker 01:
They said don't bother us with the claims.

[00:54:39] Speaker 02:
Right.

[00:54:40] Speaker 02:
And that was late.

[00:54:41] Speaker 02:
Right.

[00:54:43] Speaker 02:
And what Judge Millett says, but you had a period between 97 and 99 when you sent the letter without any attachments.

[00:54:49] Speaker 01:
Well, they started prospectively submitting claims because they didn't know what hadn't made it through the crossover process.

[00:54:58] Speaker 01:
That's when they started doing it on a prospective basis.

[00:55:01] Speaker 01:
But Your Honor, I must take you back... Of course, there's no reason it would have to be prospective.

[00:55:06] Speaker 05:
At that point, you could go, shoot, we better be careful here and submit everything since this whole thing went haywire in 94, right?

[00:55:13] Speaker 01:
Well, I guess that's possible, but it was only a small percentage of these claims, and they didn't know at that point which claims had been missed until they got the listing from this resolution.

[00:55:25] Speaker 01:
But the point here

[00:55:26] Speaker 01:
Your Honor?

[00:55:29] Speaker 01:
I'm sorry?

[00:55:30] Speaker 01:
The point here is the Secretary's decision itself was not based on the hospital's failure to bill.

[00:55:40] Speaker 01:
There is nothing in the decision that bases the decision on the failure to bill and at most she said only some claims didn't cross over.

[00:55:50] Speaker 01:
It was based on there not being proper documentation of payment

[00:55:54] Speaker 01:
and that documentation here is not disputed and the secretary has no right to violate the anti-cross-subsidization statute.

[00:56:02] Speaker 01:
Thank you.

[00:56:02] Speaker 01:
Thank you, Your Honor.

[00:56:03] Speaker 05:
The case is submitted.