[00:00:05] Speaker 03:
Final case for argument this morning is 161356 Alvarado Hospital versus Burwell.

[00:00:51] Speaker 03:
We all set.

[00:00:52] Speaker 03:
Mr. Hardeman.

[00:00:54] Speaker 04:
Good morning.

[00:00:55] Speaker 04:
May I please accord Mark Hardeman and Nelson Hardeman on behalf of Alvarado Hospital and the other prime hospitals.

[00:01:03] Speaker 04:
Your honors, as you can see from the briefing, the Secretary has basically conceded that at least that's to our causes of action for declaratory relief against the Secretary and for a writ of mandamus.

[00:01:16] Speaker 04:
that this court does not have jurisdiction with respect to those particular causes of action.

[00:01:21] Speaker 04:
So they should, in fact, be transferred back to the district court for the Central District of California, which leaves the remaining questions, unless the court disagrees with that analysis, as to whether this court should also send back the hospital's breach of contract claim against the secretary on the ground that it is clearly a claim that arises under

[00:01:46] Speaker 04:
the Medicare Act, both with respect to this court's prior cases, including Plum Prime Residential, and under the test enunciated many years ago, the broad expanse of tests of what arising on the Medicare means with respect to a cause of action, regardless of its label.

[00:02:04] Speaker 00:
Please.

[00:02:07] Speaker 04:
Yes.

[00:02:08] Speaker 04:
They do, unless they arise on the Medicare.

[00:02:12] Speaker 04:
I think this court has recognized

[00:02:15] Speaker 04:
If the breach of contract is inextricably entwined with the Medicare Act or a claim for benefits, or otherwise where the substantive basis of the claim and the standing of the claim is under the Medicare Act.

[00:02:34] Speaker 03:
gravitas of the Medicare claim that's necessary to decide this contract claim.

[00:02:39] Speaker 03:
Isn't the contract claim based really outside of anything?

[00:02:43] Speaker 03:
It's not a question of construing or applying the Medicare Act.

[00:02:46] Speaker 03:
It's a question of whether or not you had an enforceable agreement.

[00:02:51] Speaker 03:
That would be step one.

[00:02:52] Speaker 03:
Pay a certain sum of money to the government.

[00:02:54] Speaker 03:
So you're right.

[00:02:56] Speaker 03:
I mean, the Medicare Act is kind of implicated in this case.

[00:03:00] Speaker 03:
But as far as deciding the contract issue, how does this implicate?

[00:03:04] Speaker 03:
And that's in contrast to the Pines case, which you rely on, which the government says is distinguishable.

[00:03:09] Speaker 03:
That's kind of different.

[00:03:10] Speaker 03:
It wasn't this exclusive exchange.

[00:03:13] Speaker 03:
It was an argument that they owe us the money under this contract or settlement that they agreed to.

[00:03:19] Speaker 04:
But that would be true for any claim for Medicare benefits as well, right?

[00:03:22] Speaker 04:
That you want the money under the claim pursuant to your provider agreement.

[00:03:29] Speaker 03:
You want the money, but it could be that the claim and the issue involves the application of some provision under the Medicare Act or something else.

[00:03:38] Speaker 03:
Here, we're not necessarily construing or applying any term of the Medicare Act.

[00:03:45] Speaker 03:
The only thing we're looking at is the argument that there was an enforceable contract here, which the government breached, which is a different piece of paper.

[00:03:55] Speaker 03:
It's outside of the scope of the Medicare Act, right?

[00:03:58] Speaker 04:
I don't agree with that for a couple of reasons.

[00:04:01] Speaker 04:
First of all, the underlying claim here that was settled by the secretary

[00:04:09] Speaker 04:
is indisputably claims Medicare benefits.

[00:04:13] Speaker 03:
OK, OK.

[00:04:13] Speaker 03:
You're with me on that?

[00:04:14] Speaker 03:
I agree with that.

[00:04:15] Speaker 03:
But we're talking about your claim of a breach of contract is predicated on contract law.

[00:04:22] Speaker 04:
There's no question of it.

[00:04:24] Speaker 04:
I agree with you on that.

[00:04:24] Speaker 03:
And on a contract that is outside.

[00:04:26] Speaker 03:
It's all arose in connection with Medicare payments.

[00:04:29] Speaker 03:
There's no dispute about that.

[00:04:31] Speaker 03:
But the contract itself, in order to construe the contract, there's no reason to look at the Medicare Act

[00:04:38] Speaker 04:
I disagree, because first of all, the contract, the secretary's very authority to settle short-stay appeals through the administrative process arises from the Medicare Act.

[00:04:51] Speaker 04:
So she has no authority to just go outside of the Medicare Act and settle claims without... But is anybody disputing whether she had authority here?

[00:04:59] Speaker 03:
No, there's no dispute about that.

[00:05:00] Speaker 04:
But the existence of the contract on a beach of contract claim is one step.

[00:05:07] Speaker 04:
with respect to the breach of contract line.

[00:05:10] Speaker 04:
So say we established that there was a contract, that that settlement agreement is a valid contract and is enforceable.

[00:05:19] Speaker 04:
Then this court is diving right into the deep end of the pool with respect to Medicare issues.

[00:05:24] Speaker 04:
Because if the contract is established, then we have to determine whether the claims that were submitted by these hospitals were eligible short stay appeals, that is,

[00:05:36] Speaker 04:
They were one-day stays on the Medicare Part A. And then there you go.

[00:05:41] Speaker 04:
We're already into terms of art on the Medicare.

[00:05:44] Speaker 03:
If you could just explain, because I thought this alleged contract that we're disputing the terms of, or whether it existed, or whether it was enforceable, had a specific sum of money attached to it.

[00:05:58] Speaker 03:
So it's not like even if you had determined the contract existed and it was a valid contract,

[00:06:04] Speaker 03:
Is there more litigation that's associated with the enforcement?

[00:06:08] Speaker 04:
There is, because you have to determine whether that amount of money is correct based on the claims we submitted.

[00:06:13] Speaker 04:
In other words, the secretary's offer was, if you have these Part A claims, because we're being deluged by Part A claims, so we're offering the settlement to hospitals $0.68 on the dollar of your claims.

[00:06:27] Speaker 04:
What you have to do is submit your lists of all these short stay appeals that you've got going.

[00:06:33] Speaker 04:
And we're going to look at those and determine whether they're eligible.

[00:06:36] Speaker 04:
We're going to look at the reimbursement amount.

[00:06:40] Speaker 04:
And then we're going to apply $0.68 to it.

[00:06:43] Speaker 04:
So yeah, in our complaint, Your Honor, we certainly said our estimation is that we submitted lists of claims of $34 million in Medicare reimbursement.

[00:06:54] Speaker 04:
And we believe that after you look at them, that $0.68 on the dollar would be whatever it is, the approximate $24 million.

[00:07:02] Speaker 04:
But that is not the same thing as saying that's an exact sum, because the very way the agreement is set up requires CMS to verify that these claims are short-stay claims, one-day-stay claims, then determine whether we've correctly claimed the right amount, and then apply the $0.68 discount to those claims.

[00:07:24] Speaker 04:
How that isn't a claim that arises under the Medicare Act

[00:07:27] Speaker 04:
given those steps that would be required if this court found a valid contract strikes me as it would be way out there in terms of this court's prior pronouncements about essentially any delving into the types of services provided, the actual reimbursement that was submitted, and that this $0.68

[00:07:50] Speaker 04:
discount is going to be applied for.

[00:07:53] Speaker 04:
I mean, you're in Medicare land, Your Honors, and that would be the federal court of claim.

[00:07:58] Speaker 04:
They would be in Medicare land to figure that out, assuming that under, yes, basic principles of contract law, we were correct that there was a binding contract.

[00:08:10] Speaker 04:
It may be that on the basic principles of contract law, we get knocked out.

[00:08:15] Speaker 04:
Any court in the land could apply those.

[00:08:17] Speaker 04:
But that's not the beginning and end of our breach of contract.

[00:08:22] Speaker 04:
If there was a contract, a valid contract, then you're in Medicare.

[00:08:27] Speaker 04:
There's no way around that.

[00:08:29] Speaker 04:
And so for that reason, it should be sent back.

[00:08:32] Speaker 04:
I mean, I don't think it should be sent back because of judicial economy or under 1500, because obviously the types of relief we're requesting are completely different under the declaratory injunction.

[00:08:45] Speaker 04:
It is not as simple as saying, this is just a breach of contract claim.

[00:08:49] Speaker 04:
And therefore, that ends the analysis.

[00:08:53] Speaker 04:
I agree that Pine's residential can be distinguished.

[00:08:58] Speaker 04:
But the general principle that the label you put on the cause of action, breach of contract, and the application of contract law is not an out.

[00:09:09] Speaker 04:
to the preemptive effect of the Medicare Act on this court's jurisdiction.

[00:09:14] Speaker 03:
Do any of the factors, which would have to be adjudicated in concluding whether or not this was a valid contract in the first instance, none of that has anything to do with the Medicare Act, right?

[00:09:24] Speaker 04:
I agree with that.

[00:09:25] Speaker 04:
We're in contract principles of the contract.

[00:09:27] Speaker 04:
So the adjudication of the existence of the contract, you're right.

[00:09:33] Speaker 04:
I mean, was there a contract?

[00:09:35] Speaker 04:
Was there consideration?

[00:09:37] Speaker 04:
Does the signature matter?

[00:09:39] Speaker 03:
So that we agree with.

[00:09:41] Speaker 03:
So we're talking about there's a lump sum in the contract, but it may kind of be an estimate in terms of how you have to apply it.

[00:09:48] Speaker 03:
So your argument is that you would apply criteria under the Medicare Act in determining which of those

[00:09:57] Speaker 03:
claims for a benefit under the contract.

[00:10:00] Speaker 03:
But is there any dispute about those terms?

[00:10:03] Speaker 03:
I mean, they could have incorporated those terms into the contract, right?

[00:10:06] Speaker 03:
The criteria that you're saying would apply under the Medicare Act, that's not an issue that the court is going to have to resolve.

[00:10:15] Speaker 03:
Everybody agrees what the rules of the game are.

[00:10:17] Speaker 03:
It's just the application to the claims here, right?

[00:10:22] Speaker 04:
Well, yes and no, because first of all, there's no lump sum in the contract.

[00:10:28] Speaker 04:
There's a methodology that is applied to whatever universe of the hospice.

[00:10:34] Speaker 03:
OK, so that methodology exists outside.

[00:10:38] Speaker 03:
There's no dispute about any of those terms.

[00:10:40] Speaker 03:
There's nothing beyond that methodology that's going to have to be adjudicated.

[00:10:43] Speaker 04:
Right, but the very methodology, Your Honor, is Medicare land.

[00:10:47] Speaker 03:
I keep using Medicare land.

[00:10:49] Speaker 03:
If it's incorporated into the contract, then doesn't it become a contract dispute?

[00:10:56] Speaker 04:
No, because I think that would be a brand new rule with respect to a rising on the Medicare.

[00:11:03] Speaker 04:
Because then this court would be carving out a rule that says, if a breach of, if there's a contract entered into the secretary, indisputably involving Medicare reimbursement,

[00:11:17] Speaker 04:
indisputably involving appeals of Medicare claims and trials, indisputably involving an administrative system that if we didn't have this contract, we would go through the appeal and then end up in district court on the very claims that were settled here.

[00:11:31] Speaker 04:
But you're going to invent a new rule that says if CMS settles those, arising on the Medicare disappears as long as the terms are in there.

[00:11:40] Speaker 04:
But if you look within the terms, assuming you're willing to do that,

[00:11:44] Speaker 04:
that still doesn't deal with the problem, that when you look at the contract itself, and I would invite you to do that, that it contains numerous steps that may ultimately not be in dispute, but require and are inextricably intertwined with Medicare statutory provisions and reimbursement mechanisms.

[00:12:07] Speaker 04:
In other words, the list of eligible claims.

[00:12:10] Speaker 04:
They have to look at those and agree with them to make sure that they are in fact

[00:12:14] Speaker 04:
short-stay appeals, and they're not paying for appeals of some other issue that they don't want to settle.

[00:12:21] Speaker 04:
Then they have to look at what we put in as our reimbursement and determine whether that is the correctly claimed reimbursement before they apply the undisputed methodology that they've agreed to, which is discounting it by 68%.

[00:12:35] Speaker 04:
So you'll be a Medicare court.

[00:12:38] Speaker 03:
OK, you're into your rebuttal.

[00:12:40] Speaker 03:
OK, thank you, Your Honor.

[00:12:41] Speaker 03:
So then we'll give you the government, and we'll keep your time.

[00:12:49] Speaker 02:
May it please the court, Benjamin Schultz on behalf of the Secretary of HHS.

[00:12:54] Speaker 02:
This court's case law interpreting preemption of the Tucker Act has boiled down the essential inquiry to two questions.

[00:13:00] Speaker 02:
One, is this a case in which the plaintiff is seeking Medicare reimbursement?

[00:13:04] Speaker 02:
In which case, if that's true, then it would be something that is outside the court of federal claims jurisdiction.

[00:13:10] Speaker 02:
Or two, is it otherwise something that arises under the Medicare Act?

[00:13:14] Speaker 02:
And this court's case law has boiled down that question as to essentially whether or not this was the kind of claim

[00:13:19] Speaker 02:
that Congress would have wanted channeled through the Medicare administrative system.

[00:13:23] Speaker 02:
And in this unique Medicare case where what really appears to be in dispute here is a question of contract formation, a question that I think both sides agree is not something...

[00:13:33] Speaker 03:
If that question were resolved in your friend's favor, is there something more that has to be resolved in the court in terms of the eligibility of interpreting or applying Medicare rules in terms of what the exact precise claims that are payable under the contract are?

[00:13:49] Speaker 02:
You know, there's a hypothetical possibility that that could be in dispute.

[00:13:52] Speaker 02:
At this stage, we don't have any reason to think that that is in dispute.

[00:13:56] Speaker 02:
But he's right that that is a possibility.

[00:13:59] Speaker 01:
So what is the government's position?

[00:14:03] Speaker 01:
This sort of claim has to go to the Court of Claims.

[00:14:08] Speaker 02:
In this particular case, on the facts here, we do believe that this is the kind of contract case that has to go to the Court of Claims.

[00:14:15] Speaker 01:
Well, I'll tell you, in looking at this statute, it looks on its face as if it's patterned after the Social Security statute.

[00:14:24] Speaker 01:
Now, I have yet to see a Social Security settlement or other contract claim or whatever under that

[00:14:34] Speaker 01:
jurisdictional statute, which goes to the district court, to see that taken to the Court of Federal Claims, and before that, to the Court of Claims.

[00:14:42] Speaker 01:
So you're saying that this almost identical in its words jurisdictional statute needs to be interpreted differently?

[00:14:50] Speaker 02:
No, we're not saying that there's any difference.

[00:14:52] Speaker 02:
And I think all that Your Honor is really getting at here is how unusual this case is.

[00:14:56] Speaker 01:
Typically, when people- Well, that's what I'm trying to understand.

[00:14:58] Speaker 01:
What's unusual about it?

[00:15:00] Speaker 01:
Sure.

[00:15:00] Speaker 01:
Well, so what's- It can be like any other garden variety settles.

[00:15:03] Speaker 02:
Well, I think what's so unusual about this case is that, typically, when people bring breach of contract cases in the Medicare context, they're really just dressing up a Medicare claim as a breach of contract claim.

[00:15:13] Speaker 02:
What they really want is something like benefits.

[00:15:15] Speaker 01:
And so, for example, there are cases where somebody sues a contractor who's... They're saying that every Medicare claimant under some kind of settlement or whatever has to go through this exercise of trying to figure out which court they're in despite the statute.

[00:15:32] Speaker 01:
which says you go to district court?

[00:15:34] Speaker 02:
Your Honor, I think what the statute says is under 405G, what you're going to district court under is you're going to district court to review a particular kind of determination.

[00:15:45] Speaker 02:
And if you look at the relevant regulations and if you look at the statute, the kind of determination you're reviewing is the determination after this whole administrative process.

[00:15:54] Speaker 02:
And the very start of that administrative process is that there has been initial determination about Medicare benefits.

[00:15:59] Speaker 02:
And that's actually defined by a regulation

[00:16:01] Speaker 02:
And this court's case law has looked to HHS's regulation defining what initial determination is.

[00:16:07] Speaker 01:
So we accept your position.

[00:16:08] Speaker 01:
We're now going to see similar social security claims in the court of federal claims rather than the registered court?

[00:16:15] Speaker 02:
Your Honor, I suppose it's theoretically possible that you could have a similar kind of unusual claim.

[00:16:20] Speaker 02:
But I think what I was trying to say before was what is so unusual about this case

[00:16:25] Speaker 01:
It doesn't look unusual.

[00:16:27] Speaker 02:
It may not be unusual for a court that sees a lot of contract cases, but it is very unusual in the Medicare context.

[00:16:33] Speaker 02:
Because what is going on here is you don't have a case where somebody is saying that you breached a contract to pay Medicare benefits, or you breached some sort of contract where ultimately what we're really fighting about is Medicare benefits.

[00:16:47] Speaker 02:
Here you have the unusual case where what seems to be an issue here is a question of contract formation.

[00:16:52] Speaker 02:
And I also add, Your Honor, that I think the Telecare case from this court is an important case in why, at least under this court's precedent, we think that this unique case is a case that belonged in the court of federal claims.

[00:17:06] Speaker 02:
In the Telecare case, there's no question that you had a dispute over Medicare law.

[00:17:10] Speaker 02:
That was the fundamental question there.

[00:17:13] Speaker 02:
Medicare, in that case, was saying that under the Medicare secondary payer statute, a particular kind of entity had to pay.

[00:17:19] Speaker 02:
The entity said it wasn't liable under Medicare law.

[00:17:22] Speaker 02:
about as clear a dispute about Medicare laws you could possibly have.

[00:17:25] Speaker 02:
But this court nonetheless held that it was not something that arose under the Medicare Act, and therefore that there was Tucker Act jurisdiction.

[00:17:33] Speaker 02:
And that was because, in light of the particular administrative scheme at issue there, the court thought that that wasn't the kind of claim that had to be channeled through the administrative process.

[00:17:42] Speaker 02:
And that was because of the unique situation that the plaintiff was in.

[00:17:45] Speaker 02:
The plaintiff in that case was an employer that had sponsored a particular kind of plan.

[00:17:50] Speaker 02:
And because of just quirks in Medicare law, that kind of employer was not someone that, at least in this court's view, was an entity that should be using the administrative process.

[00:18:01] Speaker 02:
So that's why, at least as we have understood this court's case law, what is ultimately at issue in these kinds of cases is a judgment about whether or not the kind of claim that the plaintiff is bringing is the kind of claim that Congress would have wanted channeled.

[00:18:13] Speaker 02:
Now, if we've misjudged that,

[00:18:15] Speaker 03:
Is there a difference if the dispute here over the contract were not whether or not there was a contract form, but rather how to interpret or apply the contract?

[00:18:26] Speaker 03:
Let's assume, hypothetically, it's conceded that the government signed this contract and they're obligated to do whatever it is they're obligated to under the contract.

[00:18:35] Speaker 03:
Would that then

[00:18:37] Speaker 03:
be a district court view under the Medicare Act?

[00:18:41] Speaker 02:
I think there's a lot stronger case that it would be the kind of case that ought to go to district court.

[00:18:46] Speaker 02:
And I think what's challenging in this case is that the relevant regulation that Medicare has here is a regulation defining what is an initial determination.

[00:18:56] Speaker 02:
And I'll point out that that's important because an initial determination is what triggers that whole administrative review process and ultimately judicial review.

[00:19:04] Speaker 02:
And the administrative determination is something that is, by definition, made by a contractor.

[00:19:10] Speaker 02:
Here, the thing that is being challenged here is something that the secretary did, not something that the contractor did.

[00:19:16] Speaker 02:
It was the secretary's refusal to make a payment.

[00:19:19] Speaker 02:
And so that's why it's difficult to fit what plaintiffs are doing here into that initial determination.

[00:19:26] Speaker 02:
Now, if we misunderstood this court's case law, and if in light of Telecare and the other court

[00:19:33] Speaker 02:
And Wilson, we've misunderstood how this court understands the arising under jurisprudence.

[00:19:38] Speaker 02:
Then I guess we must have understood it.

[00:19:40] Speaker 02:
But the position that we're taking here is one just based on our reading of the court's case law.

[00:19:50] Speaker 02:
Any further questions?

[00:19:54] Speaker 04:
I'm going to try not to mention Medicare land again, Your Honor.

[00:19:58] Speaker 04:
But I will address a couple of points there.

[00:20:03] Speaker 04:
Council of the Secretary said, if it's a case that seeks Medicare reimbursement, the inquiry is over.

[00:20:09] Speaker 04:
It goes back to the district court.

[00:20:11] Speaker 04:
And whether it's an issue of contract interpretation or not, and at its most simplistic level, this is clearly a case involving Medicare reimbursement.

[00:20:21] Speaker 04:
Because the very amounts that are going to be paid to us, whether at a discounted rate or not, are Medicare reimbursement,

[00:20:29] Speaker 04:
on 5,994 claims that we appealed.

[00:20:36] Speaker 04:
That is what's being paid, methodology-wise and actual where the monies are.

[00:20:42] Speaker 04:
So it's a Medicare reimbursement case.

[00:20:44] Speaker 04:
So under that very test, I think it's going back, or it should go back, or we would request that it goes back.

[00:20:52] Speaker 04:
Telecare, if I'm pronouncing that correctly, didn't involve any claim for Medicare benefits at all.

[00:20:59] Speaker 04:
It was under the secondary payer statute, which is linked to Medicare, but is a separate statute.

[00:21:06] Speaker 04:
And in that case, the employer was bringing an illegal exaction case, which there's no dispute that the Court of Federal Claims had jurisdiction over those.

[00:21:16] Speaker 04:
But the employer wasn't bringing anything to do with the Medicare claim, had no entitlement to Medicare benefits, et cetera.

[00:21:25] Speaker 04:
So we don't think that that case is an arising under case.

[00:21:29] Speaker 04:
and that it certainly doesn't control here.

[00:21:34] Speaker 04:
At the end of the day, the rule cannot be that in a case that involves Medicare reimbursement, there is going to be a carve-out exception if the secretary simply raises a hand and says, we dispute the existence of a contract.

[00:21:52] Speaker 04:
That can't be the basis for court of claims jurisdiction.

[00:21:58] Speaker 04:
Either there is a category of breach of contract claims that, and if this is the one, that indisputably involve Medicare reimbursement and application of Medicare rules, but that if it's the secretary entering into the contract, she gets to just come out of the Medicare Act and bring it here to determine Medicare stuff and whether the contract exists.

[00:22:21] Speaker 03:
The secretary's position... We don't know if it's going to have to determine any Medicare stuff, because the contract issue seems to be based purely on contract principles that would exist in any context, whether you're talking about Medicare, Social Security, or Admiral.

[00:22:38] Speaker 04:
I totally agree with you, but why stop the film there?

[00:22:42] Speaker 04:
Why stop the film there?

[00:22:43] Speaker 04:
Because if, in fact, the decision ultimately is that there is a contract,

[00:22:49] Speaker 04:
and that the government agreed to sign this and there were no conditions on this settlement, then once you've applied those contract principles, no question about it, one way or another, if the contract exists, then you are into issues of the Medicare Act.

[00:23:07] Speaker 04:
You're into the claims, you're into the amounts billed for those claims, and you're into the application of a discount.

[00:23:14] Speaker 03:
That would be another case.

[00:23:15] Speaker 03:
We don't have that dispute in front of us.

[00:23:17] Speaker 03:
That's not the dispute that's alleged in COP 1.

[00:23:20] Speaker 04:
No, but it is the contract that would require that analysis to be done, which is Medicare-related.

[00:23:28] Speaker 04:
Of course, look, if the Court of Federal Claims doesn't get there because they decide, you know, you don't have a contract here, CMS never signed it, I agree.

[00:23:39] Speaker 04:
It evaporates.

[00:23:40] Speaker 04:
But that would be a rule that says,

[00:23:42] Speaker 04:
That would be a rule that said, even though it really does involve Medicare reimbursement, we're going to take a look at Medicare contracts by the secretary just to determine whether they exist and hope they don't.

[00:23:56] Speaker 04:
Because otherwise, we're going to be into Medicare reimbursement.

[00:23:59] Speaker 04:
So with that, Your Honor, I'd like this court to send me and this case back to California.

[00:24:05] Speaker 03:
Thank you.

[00:24:06] Speaker 03:
Thank you.

[00:24:06] Speaker 03:
The case is submitted.

[00:24:08] Speaker 03:
That concludes our proceedings for this morning.

[00:24:15] Speaker 00:
This honorable court is adjourned until tomorrow morning at 10 a.m.