United States v. Baylor University Medical Center, Civ. A. No. CA-3-82-0453-D.

• Citation: 564 F. Supp. 1495
• Decision Date: 07 June 1983
• Docket Number: Civ. A. No. CA-3-82-0453-D.
• Parties: UNITED STATES of America, Plaintiff, v. BAYLOR UNIVERSITY MEDICAL CENTER, Defendant.
• Court: U.S. District Court — Northern District of Texas

564 F. Supp. 1495

UNITED STATES of America, Plaintiff, v. BAYLOR UNIVERSITY MEDICAL CENTER, Defendant.

Civ. A. No. CA-3-82-0453-D.

United States District Court, N.D. Texas, Dallas Division.

June 7, 1983.

Wm. Bradford Reynolds, Asst. Atty. Gen., Civil Rights Div., Timothy M. Cook, Daniel P. Butler, Attys. Sp. Lit. Sec., Civil Rights Div., Dept. of Justice, Washington, D.C., for plaintiff.

Robert W. Smith, Bowen L. Florsheim, Smith, Smith & Florsheim, Dallas, Tex., for defendant.

ORDER

ROBERT M. HILL, District Judge.

This is an action brought by the United States to enforce the provisions of Section 504 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 794, and regulations promulgated thereunder by the Department of Health and Human Services (HHS). On the basis of certain complaints it received, HHS seeks to investigate defendant Baylor University Medical Center (Baylor) to determine whether hearing-impaired patients are provided effective services at Baylor's facilities, in compliance with Section 504. Baylor has refused to allow HHS to investigate it, on the ground that it is not a recipient of "Federal financial assistance" within the meaning of Section 504, and therefore is not required to comply with the provisions of that section. This matter is presently before the Court on Baylor's motion for summary judgment or alternatively for partial summary judgment and the government's cross-motion for summary judgment. Having considered the briefs which were submitted and heard oral argument on the motions, this Court has concluded, for the reasons set forth below, that Baylor's motion must be denied and the government's cross-motion must be granted.

I.

The following summary of the facts pertinent to this case is culled from the set of stipulated facts to which the parties agreed, as well as the various exhibits which have been attached to the parties' motions or responses to motions.

Baylor is a medical facility which receives federal funds from Medicare and Medicaid as reimbursement for services rendered to patients covered by Medicare and Medicaid. In July 1977, in accordance with Department of Health, Education and Welfare regulations, Baylor signed and filed an assurance of compliance with Section 504 in order to receive Medicare and Medicaid payments. In signing that assurance, however, Baylor did not concede that Medicare or Medicaid would constitute federal financial assistance such that it would require Baylor to comply with Section 504.¹

Medicare, Medicaid, and private insurance all provide reimbursement to Baylor for costs incurred in rendering services to patients. That reimbursement is, in many instances, only a portion of the cost of the services rendered. The patient who is covered by private insurance must pay for the services not reimbursed by his or her insurance; no additional payments, however, are received from Medicare and Medicaid patients. The funds received from private insurance, Medicare, and Medicaid are all placed in the general operating fund of Baylor. Baylor draws from its general operating fund to pay for, among other things, supplies, building maintenance, and general operations.

On May 9, 1980, the first of three complaints from the same complainant was filed with the Regional Office of HHS in Dallas, Texas. It alleged that Baylor had refused to permit a hearing-impaired person, a patient at the hospital, access to sign language interpreter services which she had contracted for at her own expense and which she needed to communicate effectively with hospital personnel. On May 20, 1980, HHS initiated an investigation into Baylor's compliance with Section 504 in connection with services for hearing-impaired persons, by requesting pertinent data and a meeting with Mr. Boone Powell, Jr., president of Baylor.

Baylor responded through counsel on June 20, 1980, stating that it refused to subject itself to any investigation by HHS due to its belief that it received no "Federal financial assistance" within the meaning of Section 504. HHS then notified Baylor of its position that Medicare payments are considered Federal financial assistance and indicated that other payments to Baylor constitute such assistance. Baylor, however, held to its position that HHS lacks jurisdiction to investigate under Section 504. On August 25, 1981, HHS referred the case to the Department of Justice for enforcement action. The complaint in this action was filed on March 23, 1982.

Motion for summary judgment have been filed by both parties in this action. In Baylor's motion it contends: (1) that this Court lacks jurisdiction over the action; (2) that Baylor is not a "recipient" of Federal financial assistance as that term is defined in the relevant regulations; and (3) that neither Medicare nor Medicaid payments constitute "Federal financial assistance" within the meaning of Section 504 and 45 C.F.R. § 84.3(h).² Fourth, Baylor raises in the alternative an argument concerning the fact that Section 504 is "program-specific," i.e., the fact that it applies only to programs or activities benefited by federal financial assistance. Baylor argues that that means in this case that HHS may not conduct an investigation unless the complainant upon whose complaint the investigation would be based is him- or herself a direct beneficiary of Medicare or Medicaid. For its part, the United States argues in its cross-motion (1) that this Court does have jurisdiction over the action, (2) that Baylor is a "recipient" of federal financial assistance, and (3) that both Medicare and Medicaid constitute such assistance. Further, the United States agrees that Section 504 is "program-specific," but contends that its program-specificity does not impede the right of HHS to investigate allegations of discrimination against hearing-impaired persons in Baylor's provision of in-patient and emergency room services where those services are paid for in part through Medicare and Medicaid.

II.

The first issue to consider is the jurisdiction of this Court over this action. It is evident that such jurisdiction exists.

Pursuant to 28 U.S.C. § 1345, the district court has original jurisdiction over all civil actions commenced by the United States or by an agency thereof. Thus, jurisdiction exists so long as the United States has the right to bring this suit.

Both federal common law and statutory authority provide the United States with the right to sue in this case. The statutory authority for the Department of Justice to sue on behalf of HHS to seek enforcement of Section 504 of the Rehabilitation Act lies in 29 U.S.C. § 794a(a)(2); 42 U.S.C. § 2000d-1; and 28 U.S.C. § 516. In addition, it is well established under federal common law that the government has the right to sue to enforce contractual assurances of compliance with the Civil Rights laws, such as the assurance of compliance with section 504 into which Baylor entered. See United States v. Marion County School Dist., 625 F.2d 607, 611 (5th Cir.1980). Consequently, jurisdiction over this action is proper, and this Court may proceed to consider the arguments of the parties in connection with the relevant substantive law.

The rights and duties conferred by Section 504 apply with respect to "any program or activity receiving Federal financial assistance." 29 U.S.C. § 794. Baylor contends that it is not a "recipient" of Federal assistance within the meaning of Section 504 and the applicable HHS regulations. The argument lacks merit. The term "recipient" is defined in the regulations to include "any ... institution, organization, or other entity ... to which Federal financial assistance is extended directly or through another recipient, ... by excluding the ultimate beneficiary of the assistance." 45 C.F.R. § 84.3(f). Assuming arguendo for the moment that Medicare and Medicaid are forms of Federal financial assistance, it is clear that Baylor is an institution to which Federal assistance is extended, and further that it is not Baylor but rather the eligible patients who are the ultimate beneficiaries of the assistance. Thus Baylor is a "recipient" of federal assistance, so long as Medicare or Medicaid constitute such assistance.

The chief argument raised by Baylor is that neither Medicare nor Medicaid is "Federal financial assistance" within the meaning of Section 504, and more particularly, the applicable HHS regulations. Specifically, Baylor contends that the Medicare and Medicaid funding which it admittedly receives are "insurance-type payments" and are therefore exempt from the statute's coverage by reason of the "contract of insurance" exclusion contained in HHS regulation 45 C.F.R. § 84.3(h). See note 2 supra.

The Medicare program is established under the terms of Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. The statute describes the program as an "insurance program" designed to provide "basic protection against the costs of hospital and related posthospital services," available generally to all persons age 65 or over who are entitled to retirement benefits under Title II of the Social Security Act or under the railroad retirement system, and to all persons under 65 who have been entitled to disability benefits under Title II or the railroad retirement system for at least two years. 42 U.S.C. § 1395c. Part A of the Medicare program covers the provision of hospital insurance benefits, while Part B of the program provides supplementary medical insurance benefits.

The Medicaid program is established under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., and it is a program by which the federal government gives grants to the states in order for them to provide medical assistance for the needy, under state plans conforming with federal requirements. Federal Medicaid funds are appropriated from general federal reserves. See 42 U.S.C. § 1396.

In considering whether either of these programs constitutes "Federal financial...