__________

                                    94-3067
                                  __________

Hennepin County Medical Center,        *
                                       *
     Plaintiff - Appellee,             *
                                       *  Appeal from the United States
     v.                                *  District Court for the
                                       *  District of Minnesota
Donna E. Shalala,                      *
                                       *
     Defendant - Appellant.            *
                                  __________

                         Submitted:    November 16, 1995

                             Filed:    April 9, 1996
                                 __________

Before HANSEN, JOHN R. GIBSON, and MURPHY, Circuit Judges.
                               __________


MURPHY, Circuit Judge.


     The Secretary of Health and Human Services Donna Shalala appeals from
a judgment in favor of Hennepin County Medical Center (HCMC).     HCMC sought
review in the district court of the Secretary's decision to disallow some
of its claims for reimbursement of bad debts related to Medicare patients.
Both sides moved for summary judgment, and the district court granted the
motion of HCMC after concluding that several amendments to the Medicare Act
(Title XVIII of the Social Security Act, as amended, 42 U.S.C. § 1395 et
seq.) prevent the Secretary from disallowing the claims.        We affirm in
part, reverse in part, and remand.


     Medicare patients are often responsible for both deductible and
coinsurance payments for hospital care.        When Medicare patients fail to
make these payments to the care providers, the government
will reimburse hospitals if they have made reasonable collection efforts.
42 C.F.R. § 413.80(e).   Congress authorized the Secretary to promulgate
regulations to ensure that hospitals would not be forced to shift these
costs to non-Medicare patients.     42 U.S.C. § 1395x(v)(1)(A)(i).   In order
to qualify for reimbursement, hospitals must comply with a network of
collection, record keeping, and reporting regulations and rules.     This case
involves a decision by the Secretary to disallow a reimbursement for 1983
which had already been made to HCMC.


                                      I.


     Hospitals that provide Medicare services may prepare a reimbursement
request which includes deductible and coinsurance amounts owed, but not
paid, by Medicare patients.   The Secretary employs private entities, called
intermediaries, to review the requests made by provider hospitals.       Blue
Cross & Blue Shield of Minnesota was the intermediary used by the Secretary
to review HCMC's reimbursement requests.


     A provider may seek review by the Provider Reimbursement Review Board
(PRRB) of an intermediary's decision regarding a reimbursement request.
42 C.F.R. §§ 405.1835, 405.1841.    Following a PRRB ruling, either party may
request that the Administrator of the Health Care Financing Administration
(HCFA), an agency of the Department of Health and Human Services, exercise
his discretion to review the case.          42 C.F.R. § 405.1875.      If the
Administrator declines to review the case, the PRRB decision becomes the
decision of the Secretary.    

Administrator's decision
is considered the decision of the Secretary.      

event, the
provider may seek judicial review under most circumstances.      42 U.S.C. §
1395oo(f)(1); 42 C.F.R. § 405.1877.    Federal jurisdiction in this case also
is based on the Administrative Procedure Act, 5 U.S.C. § 701-706.




                                      -2-
       For HCMC's fiscal year beginning January 1, 1983, it reported that
Medicare patients had failed to make roughly $500,000 in payments.                       Blue
Cross did a full field audit of the request in early 1985 and found that
some   of    the   services      listed    in   the   request    were   not   eligible   for
reimbursement under Medicare.1            It reduced the claimed amount accordingly
and then issued a notice of program reimbursement in September 1985.                       As
a result HCMC received roughly $385,000 in reimbursement for Medicare bad
debts.


       During      the   audit    the     intermediary    also    requested    information
regarding HCMC's collection efforts directed at Medicare bad debt patients.
           The HCMC business office manager provided the hospital's written
collection policies and assured the auditor that HCMC used the same methods
of collection regardless of a patient's Medicare eligibility.


       A year later, Blue Cross was auditing HCMC's 1985 reimbursement
request.       During    this    audit,     the    intermediary   was   concentrating      on
reviewing the bad debt collection policies of providers.                        Blue Cross
asserts that the HCMC business office manager told the auditor that it did
not pursue the bad debts of Medicare patients as vigorously as those of
non-Medicare patients.            The manager allegedly said that non-Medicare
patients received a series of five letters before their accounts were
turned over to a collection agency.               Medicare patients, on the other hand,
received only one or two phone calls, and their accounts were also
apparently not turned over to collection agencies.                Blue Cross also claims
that the manager told the auditor that the differing collection policies
had been in effect for several years, not just for the 1985 fiscal year
which was the subject of the audit.                    In response, the intermediary
requested more information about HCMC's




       1
      The intermediary's decisions to disallow several other
claims, which were also upheld by the PRRB, are not at issue on
this appeal.

                                                -3-
collection policies.       Some evidence suggests that HCMC promised to provide
documentation regarding its collection efforts for 1985, but never produced
any.


        Blue Cross then decided to reopen its reimbursement recommendation
for 1983, pursuant to 42 C.F.R. § 405.1885.              Under the regulations the
intermediary, or various Health and Human Services entities, may reopen a
determination within three years of the date the notice of program
reimbursement is issued if "new and material evidence" is discovered, if
there was "a clear and obvious error," or if the earlier determination was
"inconsistent       with   the   law,    regulations     or    rulings,      or     general
instructions."      HCFA Pub. 15-1 § 2931.2; see State of Oregon on Behalf of
Oregon Health Sciences Univ. v. Bowen, 

, 350 (9th Cir. 1988).
In a September 1988 letter, Blue Cross informed HCMC both of the decision
to reopen the 1983 determination and of its intention to disallow all of
the bad debt claims.        In a subsequent letter several weeks later, Blue
Cross indicated that "until such time as you supply us with convincing
evidence to support your position, the adjustments will stand as proposed."


        The disallowance was based on two types of reimbursement claims by
HCMC.    If a Medicare patient is indigent, a provider need not always try
to collect deductible and coinsurance payments before submitting them to
the intermediary as bad debts.         HCMC had therefore included in its request
patients it considered indigent because a different county agency had
determined them to be eligible for Medicaid.             Blue Cross disallowed some
claims    because    it    concluded    that    HCMC   did    not   obtain    and     store
documentation supporting these indigency determinations from the other
county agency.


        The second disallowance category relates to the quality of HCMC's
efforts to collect unpaid deductible and coinsurance payments from non-
indigent Medicare patients and its alleged




                                          -4-
failure to provide documentation of those efforts.             Based on the business
office manager's alleged statements that HCMC used different collection
procedures   for    Medicare   than   for    non-Medicare     patients,    Blue     Cross
concluded that the hospital might be in violation of the rules requiring
similar collection efforts.     Blue Cross argues that the decision to reopen
the 1983 cost year followed HCMC's failure to provide documentation of its
collection efforts for any of the cost years covered by the manager's
alleged statements.      HCMC claims that no documentation was ever requested
for the 1983 cost year at issue here.            It also argues that its collection
efforts were reasonable, as required by the regulation and as demonstrated
by its eighty percent collection rate on Medicare accounts, regardless of
any alleged dissimilarity in its collection efforts.


       HCMC appealed the intermediary's decision to the PRRB under 42 U.S.C.
§ 1395oo and 42 C.F.R. § 405.1835.          After an extensive hearing which also
addressed other issues, the PRRB concluded that Blue Cross had properly
reopened the 1983 determination based on new information discovered during
the subsequent audit.     The board also concluded that HCMC had not complied
with   the   reporting    regulations       in   that   it   had   not   provided    the
documentation requested by the intermediary.             In late 1991 the PRRB thus
upheld the intermediary's decision to disallow the bad debt reimbursement.
HCMC next appealed to the Administrator of the HCFA, who declined to review
the decision.   The decision of the PRRB therefore became the final decision
of the Secretary.     42 C.F.R. § 405.1875.


       HCMC sought judicial review of the Secretary's decision in the
district court under 42 U.S.C. § 1395oo(f)(1), and each party moved for
summary judgment.    The district court granted the motion of HCMC and denied
the Secretary's motion.        Concluding that the Secretary's decision to
disallow the reimbursement was barred by several amendments to the Medicare
Act, the court entered judgment in favor of HCMC.




                                        -5-
                                     II.


     The three amendments relied on by the district court were passed by
Congress (in 1987, 1988, and 1989) in response to heightened scrutiny by
intermediaries and HCFA of Medicare bad debt reimbursement requests.   H.R.
Conf. Rep. No. 1104, 100th Cong., 2d Sess. 277 (1988), reprinted in 1988
U.S.C.C.A.N. 5048, 5337 (1988 Conf. Rep.).   In 1986, the inspector general
of Health and Human Services had proposed either eliminating bad debt
reimbursement entirely or attempting to recoup the costs by garnishing the
Social Security checks of debtors.      Proposal Would Tap Social Security
Payments, New York Times, December 3, 1986 at A24; HHS Inspector General
Urges Deducting Unpaid Bills from Social Security Checks, 13 BNA Pension
& Benefits Reporter 49, at 2037 (December 8, 1986).    Neither proposal was
adopted.    The inspector general then called for much closer examination of
providers' bad debt requests.      See HHS Inspector General Continues to
Recommend Scrapping or Revamping Bad-Debt Reimbursement, Modern Healthcare,
June 17, 1991, at 50.


     Congress responded with the first amendment:

     In making payments to hospitals under [the Medicare program],
     the Secretary of Health and Human Services shall not make any
     change in the policy in effect on August 1, 1987, with respect
     to payment under [the Medicare program] to providers of service
     for reasonable costs relating to unrecovered costs associated
     with unpaid deductible and coinsurance amounts incurred under
     [the Medicare program] (including the criteria for what
     constitutes a reasonable collection effort.)

Omnibus Budget Reconciliation Act of 1987 (OBRA), Pub. L. No. 100-203, §
4008(c), 101 Stat. 1330-55, 42 U.S.C. § 1395(f) note.


     The inspector general continued to urge closer scrutiny of bad debt
requests.   During the fiscal year beginning October 1, 1987, intermediaries
disallowed forty percent of providers' bad debt reimbursement requests.
See HHS Inspector General Continues to Recommend Scrapping or Revamping
Bad-Debt Reimbursement, Modern




                                     -6-
Healthcare, June 17, 1991, at 50.


     In 1988 Congress again amended the Medicare Act to add the following
to the amendment passed in 1987:

     including criteria for indigency determination procedures, for
     record keeping, and for determining whether to refer a claim to
     an external collection agency).

Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, §
8402, 102 Stat. 3798, 42 U.S.C. 1395(f) note.


     In 1989 it added another paragraph:

     The Secretary may not require a hospital to change its bad debt
     collection policy if a fiscal intermediary, in accordance with
     the rules in effect as of August 1, 1987, with respect to
     criteria for indigency determination procedures, record
     keeping, and determining whether to refer a claim to an
     external collection agency, has accepted such policy before
     that date, and the Secretary may not collect from the hospital
     on the basis of an expectation of a change in the hospital's
     collection policy.

Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, § 6023, 103
Stat. 2167, 42 U.S.C. § 1395(f) note.     Congress made the 1989 amendment
retroactive to 1987.   H.R. Conf. Rep. No. 386, 101st Cong., 1st Sess. 737
(1989), reprinted in 1989 U.S.C.C.A.N. 3018, 3340 (1989 Conf. Rep.).    We
will refer to the amendments collectively as the OBRA moratorium, or
simply, the moratorium.2


     2
      In its final form, the moratorium reads:

     In making payments to hospitals under [the Medicare
     program], the Secretary of Health and Human Services
     shall not make any change in the policy in effect on
     August 1, 1987, with respect to payment under [the
     Medicare program] to providers of service for
     reasonable costs relating to unrecovered costs
     associated with unpaid deductible and coinsurance
     amounts incurred under [the Medicare program]
     (including the criteria for what constitutes a
     reasonable collection effort including criteria for
     indigency determination procedures, for
record keeping, and for determining whether to refer a claim to
an external collection agency).

                                    -7-
     The   district   court   concluded     that,   for   the   purposes   of   the
moratorium, the intermediary had "accepted" HCMC's Medicare bad debt
policies regarding indigency determination and collection procedures for
1983 when it issued the notice of program reimbursement following the audit
in 1985.   The intermediary and the Secretary were therefore prohibited from
disallowing the reimbursements already made for the 1983 cost year.


     The Secretary appealed the decision on both types of disallowance.
At oral argument, however, the Secretary conceded that the HCMC's indigency
determination procedures were adequate and that the disallowance of those
claims was improper under the rules and regulations.       Because the Secretary
has conceded that the disallowance of this portion of HCMC's bad debt
claims was in error, we need not discuss indigency determination further,
and the district court should be affirmed in that respect.            The issues
remaining relate to HCMC's collection procedures regarding non-Medicaid
patients with delinquent accounts.


                                     III.


     The central issue to be decided in this case is whether the OBRA
moratorium barred the reopening of the 1983 cost year.          Both sides focus
on language in the second paragraph of the moratorium, added in 1989.           The
district court concluded that the intermediary




     The Secretary may not require a hospital to change its
     bad debt collection policy if a fiscal intermediary, in
     accordance with the rules in effect as of August 1,
     1987, with respect to criteria for indigency
     determination procedures, record keeping, and
     determining whether to refer a claim to an external
     collection agency, has accepted such policy before that
     date, and the Secretary may not collect from the
     hospital on the basis of an expectation of a change in
     the hospital's collection policy.

                                     -8-
had "in accordance with the rules in effect as of August 1, 1987, with
respect to criteria for indigency determination procedures, record keeping,
and determining whether to refer a claim to an external collection agency,
[] accepted such policy before that date . . . ."     It therefore concluded
that the moratorium prevented reopening of the 1983 cost year and precluded
the Secretary's disallowance in this case.   We conclude that the moratorium
may not have barred reopening in this situation and remand to the district
court so that it may consider the factual circumstances in light of the
legal framework discussed below.


     Judicial review of the Secretary's decision is governed by the
Administrative Procedure Act (APA), 5 U.S.C. 706(2)(A).      Shalala v. St.
Paul-Ramsey County Medical Center, 

(8th Cir. 1995).   Under the
APA, the Secretary's decision shall be set aside if it is arbitrary,
capricious, an abuse of discretion, unsupported by substantial evidence,
or contrary to law.   Federal court review is de novo, 

but is
limited to the administrative record.


     The plain meaning of a statute controls, if there is one, regardless
of an agency's interpretation.   Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 

, 842-43 (1984).   If there is ambiguity
in a statute that an agency has been entrusted to administer, however, the
agency's interpretation is controlling when embodied in a regulation,
unless the interpretation is "arbitrary, capricious, or manifestly contrary
to the statute."   

  An agency's interpretative rules, which
are not subject to APA rulemaking procedures, are nonbinding and do not
have the force of law.   Ramsey County Medical 

n.4.
In this case the Secretary has developed a comprehensive set of rules
contained in the Provider Reimbursement Manual (PRM).     

the task of statutory interpretation is to seek to interpret
the statute in a way that includes every word and clause.




                                     -9-
However, "we must not be guided by a single sentence or member of a
sentence, but look to the provision of the whole law, and to its object and
policy."    U.S. National Bank of Oregon v. Independent Insurance Agents, 

, 2182 (1993) (internal citations omitted).          Although the
wording of the section of the 1989 amendment at issue in this case is not
precise, the structure and history of the three incremental amendments
provide considerable guidance in interpreting the section.


      The OBRA moratorium states unambiguously that the Secretary may not
impose new or different bad debt criteria on a provider after August 1,
1987, if the intermediary had "accepted" the provider's policies before
that date in accordance with the rules in effect on that date.          What
constitutes an acceptance by the intermediary, however, and how it must
"accord" with the rules is not immediately apparent.    Careful review of the
language and structure of the amendments, along with their legislative
histories, shows they are sufficiently clear to support the conclusion that
there is no "gap" to be filled by the Secretary's interpretation of the
statute.3   See Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 

, 844 (1984).


                                      A.


      HCMC argues that the issuance of a notice of program reimbursement
is a clear acceptance.    The district court agreed, stating that the notice
proved acceptance "conclusively."          Hennepin County Medical Center v.
Shalala, No. 3-91-725, slip. op. at 7 (D. Minn. Nov. 2, 1993).           The
Secretary responds that the reopening regulation, 42 C.F.R. § 405.1885,
allows a determination to be revisited within three years of the issuance
of the notice.    She




      3
      The Secretary's interpretation of the OBRA moratorium is
not entitled to deference where the plain meaning of the
amendments is sufficient to guide our decision. See 

(1984).

                                     -10-
contends        that   reopening    is    consistent     with     the    intent   of   Congress,
especially when based on new and material evidence indicating the initial
determination was in error.


         A notice of program reimbursement, and the reimbursement that flows
from it, are the only tangible forms of acceptance a provider can expect
from an intermediary.            As HCMC points out, there is no other mechanism
through which a provider can submit a given policy and receive formal
approval by the Secretary or the intermediary.                    In the majority of cases,
the notice of program reimbursement is the final consideration of a policy
by an intermediary.            A conclusion that a notice of program reimbursement
cannot constitute an acceptance is therefore untenable.


         A    reimbursement      notice     will   not    always        be   equivalent     to   an
acceptance, however.           Congress enacted the moratorium with the intention
of preserving the bad debt reimbursement rules and regulations as they
existed prior to August 1, 1987.

         [T]he conferees do not intend to preclude the Secretary from
         disallowing bad debt payments based on regulations, PRRB
         decisions, manuals and issuance is [sic] in effect prior to
         August 1, 1987.

1988 Conf. Rep. 277, reprinted in 1988 U.S.C.C.A.N. at 5337.


         When the Secretary seeks to disallow bad debt payments already made
to   a       provider,   she    must     proceed   to    reopen    the       notice   of   program
reimbursement within three years of the date it was issued.                            42 C.F.R.
§ 405.1885.       Once a cost year is reopened, the Secretary may disallow all
or some of the reimbursement.             The reopening regulation has been in place
for many years and is in accord with the agency's authority under the
Medicare Act.          See HCA Health Services of Oklahoma, Inc. v. Shalala, 

, 618 (D.C.Cir. 1994); State of Oregon on Behalf of Oregon Health
Sciences Univ. v. Bowen, 

, 349 (9th Cir. 1988).




                                              -11-
     If the issuance of a notice of program reimbursement were invariably
an acceptance, as HCMC argues and the district court decided, the reopening
regulation and others issued before August 1, 1987 would be superfluous.
This would frustrate the intent of Congress that existing regulations be
enforced.   It appears that a notice of program reimbursement functions as
an acceptance by the intermediary in most cases, the vast majority of which
apparently go unchallenged by the provider and are never reopened.


     In this case, it seems that two factors -- the thoroughness of the
audit of the 1983 cost year, and the alleged new and material information
-- may be particularly relevant in determining whether the intermediary
accepted HCMC's policies.   Because the district court never reached these
factual issues, however, it is preferable that it be given an opportunity
to determine whether the reopening was both justified and in compliance
with the moratorium under these circumstances.4



                                    B.


     Because the district court concluded that the issue of acceptance was
dispositive, it did not reach the second clause of the 1989 amendment and
consider whether any acceptance was "in




     4
      The result reached by the Fifth Circuit in Harris County
Hospital District v. Shalala, 

(5th Cir. 1995), the
only other appellate case to address the issue, is not
necessarily in conflict with our conclusion that a notice of
program reimbursement is not always an acceptance. There the
issuance of the notice of program reimbursement was said to be an
acceptance "after an investigation and audit." 

It
is unclear from the opinion whether the audit thoroughly explored
the issue at question. There also was apparently no new
information available to the intermediary or the Secretary to
suggest that reopening was warranted. On remand, the district
court may find that this case is factually distinguishable. In
any event, we do not read Harris County to hold that any audit
and investigation is necessarily sufficient to make a notice of
program reimbursement an acceptance.

                                   -12-
accordance with the rules in effect as of August 1, 1987, with respect to
criteria for indigency determination procedures, record keeping, and
determining whether to refer a claim to an external collection agency."5
The concepts of acceptance and accordance are intertwined in the statutory
amendment relating to bad debt collection policy, the meaning of the "in
accordance" language was thoroughly briefed by the parties, and some
discussion of its application to this case may aid the district court on
remand.


      In the only other case directly confronting this issue, the district
court concluded that, contrary to the Secretary's arguments in that case,
the "in accordance" clause in the 1989 amendment modifies "accepted" rather
than "policy".    Harris County Hosp. Dist. v. Shalala, 

,
408-09 (S.D.Tex. 1994), aff'd 

(5th Cir. 1995) (see supra note
4).   It reasoned:

      The secretary wants [the 1989 amendment] to say that she cannot
      force a hospital to change the policy only if the policy is in
      accord with the rules. If the policy is not, then she can.
      That would leave nothing to the moratorium.

  HCMC makes the same argument here.   We agree that the "in
accordance" clause modifies "accepted", but that does not end the matter.


      HCMC argues that the process used by the intermediary in accepting
a provider's policy must be "in accordance" with the existing rules, rather
than the substance of the accepted policy




      5
       The relevant portion of the 1989 amendment reads:

      The Secretary may not require a hospital to change its
      bad debt collection policy if a fiscal intermediary, in
      accordance with the rules in effect as of August 1,
      1987, with respect to criteria for indigency
      determination procedures, record keeping, and
      determining whether to refer a claim to an external
      collection agency, has accepted such policy before that
      date . . . .

(emphasis added).

                                   -13-
itself.        This reading, which was also adopted by the district court in
Harris County, is inconsistent with the clause "with respect to the
criteria for indigency determination procedures, record keeping, and
determining whether to refer a claim to an external collection agency."
If Congress had meant only to require that the intermediary had followed
the procedural rules governing program reimbursement, the word "criteria"
would be unnecessary.           The only reasonable interpretation of "criteria" in
this    instance refers to those criteria set out in the Act, rules,
regulations, and PRRB decisions that apply to providers.                     Whether an
intermediary correctly applied those criteria necessarily invokes the
substance of the provider's policies to which the criteria were applied.
We reject HCMC's reading because it fails adequately to account for the
inclusion of the word "criteria" by Congress.


        In     passing    the    moratorium,    Congress   was   motivated   to   prevent
unexpected consequences to providers from the inspector general's proposed
changes in the criteria for bad debt reimbursement.               1988 Conf. Rep. 277,
reprinted in 1988 U.S.C.C.A.N. at 5337.              Permitting correction of errors
made by intermediaries in the application of rules existing on August 1,
1987 is consistent with that policy.            It appears Congress merely sought to
freeze a moment in time, forbidding the Secretary to change the criteria
after that date, but allowing full enforcement of the policies in place
before it.


        Requiring that a provider's policies were in accord with the rules
existing in 1987 does not render the moratorium meaningless.                  It leaves
intermediaries, the PRRB, HCFA, and the Secretary free to correct improper
applications of the rules as they existed and as they were interpreted on
August 1, 1987.        It prevents those entities from retroactively applying new
rules     or     new     interpretations   of    existing    rules,   however.       This
interpretation coincides with the intent of Congress that the inspector
general not revise the Secretary's interpretations of the existing rules.




                                           -14-
        If       Congress     had    intended     to     address    the     manner    in    which
intermediaries conducted their investigations and issued notices of program
reimbursements, it certainly could have done so.                          The language of the
amendments indicates, however, that it was the provider's compliance with
the existing regulations that would trigger the moratorium's protection
from retroactive changes.


        There is also no indication that the 1989 amendment was intended to
prevent the Secretary from applying the rules existing on August 1, 1987,
as Congress had explicitly intended she be able to do under the 1987 and
1988 amendments.            1988 Conf. Rep. 277, reprinted in 1988 U.S.C.C.A.N. at
5337.    The 1989 conference report describes the amendment in that year as
a   "Clarification          of    continuation     of    August    1987    hospital   bad    debt
recognition         policy."        1989   Conf.       Rep.   at   737,   reprinted    in   1989
U.S.C.C.A.N. at 3340 (emphasis added).                  The House Report from the same year
emphasized         that     the     amendment    "further      clarified"       the   "existing
prohibition."         H.R. Rep. No. 247, 101st Cong., 1st Sess. 998-99 (1989),
reprinted in 1989 U.S.C.C.A.N. 1906, 2469-70.                  Since the 1989 amendment was
a clarification of the earlier amendments, there is no reason to believe
that Congress intended to disavow its earlier statements that the existing
rules, including the reopening regulation, were to be enforced.


        We conclude on this analysis that Congress intended the moratorium
to apply only where a provider was in compliance with rules existing on
August       1, 1987, as embodied in the regulations, the PRM, and PRRB
decisions.         The Secretary may not retroactively apply a more stringent
interpretation of those existing rules, nor may she or an intermediary
reopen       a    notice     of     program     reimbursement       if    the   intermediary's
interpretation of the existing rules leading to the issuance of the notice
was reasonable and based on




                                                -15-
sufficient information.6


       The record keeping and collection rules at issue here were in force
on August 1, 1987.7        The requirement that "[t]he provider must be able to
establish that reasonable collection efforts were made" before a delinquent
account may be considered allowable bad debt has remained essentially
unchanged since it was promulgated in 1966.               42 C.F.R. § 413.80(e)(2)
(redesignated twice, see 42 Fed. Reg. 52,826, (1977); 51 Fed. Reg. 34,790
(1986)).       The PRM section requiring "similar" collection efforts for
Medicare and non-Medicare patients has been in place since 1968 without
relevant amendment.         PRM § 310.      The same section requires that "[t]he
provider's collection effort should be documented in the patient's file by
copies of the bill(s), follow-up letters, reports of telephone and personal
contact, etc."       

had refused to reimburse hospitals based on
both       grounds   --    unsatisfactory    collection   efforts   and   inadequate
documentation -- well before the




       6
      Preventing disallowance under the moratorium when an
intermediary has accepted a provider's policy based on a
reasonable interpretation of the rules in existence on August 1,
1987 is consistent both with the moratorium and the Secretary's
interpretation of it. HCFA Memorandum to Regional
Administrators, HCFA Clarification of Bad Debt Policy (June 11,
1990), reprinted in [1990 Transfer Binder] Medicare & Medicaid
Guide (CCH) ¶ 38,623.
       7
      At the time of the reopening, the PRRB had ruled that it
was not always necessary under existing regulations to submit the
accounts of Medicare patients to outside collection agencies.
See, e.g., St. Francis Hospital and Medical Center v. Blue Cross
and Blue Shield Assoc./Kansas Hospital Service Assoc., PRRB
Hearing Dec. No. 86-D21 (Nov. 12, 1985), reprinted in [1986-2
Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 35,302; Reed
City Hospital v. Blue Cross and Blue Shield Assoc./Blue Cross and
Blue Shield of Michigan, PRRB Hearing Dec. No. 86-D67 (Feb.
20,1986), reprinted in [1986-2 Transfer Binder] Medicare &
Medicaid Guide (CCH) ¶ 35,474. Any failure of HCMC to use
collection agencies should not therefore affect the final result
in this case.

                                            -16-
1987 moratorium date.8 Thus, if the district court determines on remand
that there was sufficient new and material information to justify the
reopening, it appears that the "in accordance" clause of OBRA should not
bar the Secretary's actions.



                                   IV.


     Accordingly, the judgment is vacated, and the matter is remanded for
further proceedings consistent with this opinion.       The order of the
district court is reversed as to the claims relating to bad debt collection
efforts, but its order is affirmed as to the claims relating to indigency
determination.


     A true copy.


           Attest:


                 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




     8
      See, e.g., Davie County Hospital v. Blue Cross and Blue
Shield Assoc/Blue Cross/Blue Shield of North Carolina, PRRB
Hearing Dec. No. 84-D89 (March 22 ,1984), reprinted in [1984-2
Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 33,939
(dissimilar collection efforts); Buckeye Home Health Service,
Inc. v. Blue cross of Central Ohio, Blue Cross and Blue Shield
Assoc., PRRB Hearing No. 83-D108 (July 14, 1983), reprinted in
[1983-2 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶
33,098 (inadequate collection efforts and poor documentation
justify disallowance); Amador Hospital v. Blue Cross Assoc./Blue
Cross of Northern California, PRRB Hearing Dec. No. 80-D83 (Oct.
3, 1980), reprinted in [1980-81 Transfer Binder] Medicare &
Medicaid Guide (CCH) ¶ 30,748 (failure to document bad debts
under PRM § 310.B).

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