11 F.3d 1505 (9th Cir. 1993), 92-55602, Wilmot Psychiatric/Medicenter Tucson, Dominguez Valley Hospital, Ojai Community Hospital, Manteca Hospital v. Shalala , Secretary of Department of Health & Human Services

Docket Nº:92-55602.
Citation:11 F.3d 1505
Party Name:WILMOT PSYCHIATRIC/MEDICENTER TUCSON; Dominguez Valley Hospital; Ojai Community Hospital; Manteca Hospital, Plaintiffs-Appellants, v. Donna E. SHALALA, [*] Secretary of the Department of Health & Human Services, Defendant-Appellee.
Case Date:December 16, 1993
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1505

11 F.3d 1505 (9th Cir. 1993)

WILMOT PSYCHIATRIC/MEDICENTER TUCSON; Dominguez Valley

Hospital; Ojai Community Hospital; Manteca

Hospital, Plaintiffs-Appellants,

v.

Donna E. SHALALA, [*] Secretary of the Department

of Health & Human Services, Defendant-Appellee.

No. 92-55602.

United States Court of Appeals, Ninth Circuit.

December 16, 1993

Argued and Submitted Oct. 7, 1993.

Page 1506

Patric Hooper, Hooper, Lundy & Bookman, Los Angeles, CA, for plaintiffs-appellants.

George H. Wu, Asst. U.S. Atty., Los Angeles, CA, Jerry J. Bassett, Asst. Regional Counsel, Dept. of Health and Human Services, San Francisco, CA, for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before: REINHARDT, T.G. NELSON, Circuit Judges, and KAUFMAN, [**] District Judge.

T.G. NELSON, Circuit Judge:

OVERVIEW

This case arises from the Secretary of Health and Human Services' ("Secretary") decision not to reimburse Wilmot Psychiatric/Medicenter and several other hospitals ("hospitals") under Part C of the Medicare program. Title XVIII of the Social Security Act, 42 U.S.C. Sec. 1395x(v)(1)(A), for the cost of complimentary meals provided by the hospitals to attending physicians, who have staff privileges at the hospitals. The hospitals appeal the district court's summary judgment in favor of the Secretary. We affirm.

FACTS AND PROCEDURAL HISTORY

Wilmot Psychiatric/Medicenter and several other hospitals seek reimbursement through the Medicare program for unrecovered meal expenses. The hospitals incurred these meal expenses by providing complimentary meals to private physicians who had staff privileges at the hospitals. The complimentary meals were provided to the physicians while they attended to their own private patients whom they had admitted to the hospitals. After the Medicare fiscal intermediaries initially denied reimbursement, the hospitals appealed to the Provider Reimbursement Review Board ("PRRB"). Following a hearing, the PRRB issued decisions in favor of the hospitals. The PRRB held that the costs for the complimentary meals for attending physicians were reasonable and related to patient care.

Upon review of the PRRB's decisions, the Secretary, interpreting the Medicare Act, the regulations, and the Provider Reimbursement Manual ("manual" or "PRM"), reversed those decisions and held that the meal expenses were not reimbursable. The district court affirmed the Secretary's decision. The hospitals appeal the district court's holding, and argue that the Secretary's decision is unsupported by substantial evidence. See 5 U.S.C. Sec. 706.

DISCUSSION

I. Standard of Review

"We review de novo a district court's award of summary judgment affirming a decision of the Secretary in a Medicare reimbursement matter." Vallejo Gen. Hosp. v. Bowen, 851 F.2d 229, 230-31 (9th Cir.1988). Therefore, this court must review the Secretary's final decision to determine whether it was "arbitrary, capricious, an abuse of discretion, not in accordance with the law, or unsupported by substantial evidence on the record taken as a whole." Id. at 231. "When this standard of review is applicable, the agency determination will not be set aside unless it is clearly erroneous or inconsistent with the regulation or demonstrably irrational." North Clackamas Community Hosp. v. Harris, 664 F.2d 701, 704 (9th Cir.1980) (internal quotations omitted).

II. Medicare Act

Pursuant to the Medicare Act, 42 U.S.C. Sec. 1395x(v)(1)(A) (1988), providers of health services are entitled to reimbursement for reasonable costs necessary for the efficient delivery of needed health services. National Medical Enters., Inc. v. Sullivan, 916 F.2d 542, 544 (9th Cir.1990), cert. denied, --- U.S.

Page 1507

----, 111 S.Ct. 2014, 114 L.Ed.2d 100 (1991). Congress authorized the Secretary to further define "reasonable costs" by regulation. Vista Hill Found., Inc. v. Heckler, 767 F.2d 556, 558 (9th Cir.1985). "Reasonable costs" are defined as "those that are the necessary and proper costs incurred in rendering the services." Id. (internal quotation omitted). In 42 C.F.R. Sec. 413.9(b)(2), the Secretary "define[s] necessary and proper costs as those costs which are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities. They are usually costs which are common and accepted occurrences in the field of the provider's activity." 767 F.2d at 558 (internal quotation omitted). The Secretary determines whether a particular cost is reasonable. See St. Elizabeth Community Hosp. v. Heckler, 745 F.2d 587, 589 (9th Cir.1984); 42 U.S.C. Sec. 1395x(v)(1)(A).

Reimbursement to the hospitals is generally made through fiscal intermediaries (usually private insurance companies) in accordance with...

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