Alabama Hospital Ass'n v. United States

• Decision Date: 17 June 1981
• Docket Number: No. 465-79C.,465-79C.
• Parties: ALABAMA HOSPITAL ASSOCIATION, et al. v. The UNITED STATES.
• Court: U.S. Claims Court

656 F.2d 606

ALABAMA HOSPITAL ASSOCIATION, et al. v. The UNITED STATES.

No. 465-79C.

United States Court of Claims.

Decided June 17, 1981.

M. Roland Nachman, Jr., Montgomery, Ala., attorney of record, for plaintiffs; Steiner, Crum & Baker and John P. Oliver, II, Montgomery, Ala., of counsel.

Elizabeth Langer, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant.

Before KASHIWA, BENNETT, and SMITH, Judges.

ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS MOTION FOR JUDGMENT ON THE PLEADINGS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT

KASHIWA, Judge:

This case is before the court on plaintiffs' motion for summary judgment and defendant's alternative cross motion for summary judgment or motion for judgment on the pleadings. There is no genuine issue as to any material fact. After hearing oral argument and fully considering the parties' submissions, we hold in defendant's favor.

This case is the most recent in a number of suits concerning Medicare. The present case was first filed as a class action in the district court but was transferred here pursuant to 28 U.S.C. § 1406(c) (1976) after the circuit court of appeals vacated the unreported district court decision for a lack of subject matter jurisdiction. Alabama Hospital Association v. Califano, 587 F.2d 762 (5th Cir.), cert. denied, 444 U.S. 826, 100 S.Ct. 48, 62 L.Ed.2d 32 (1979). In the district court, the parties had stipulated that the action was "properly maintainable and may proceed as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure * * *." After transfer, the plaintiffs¹ originally sought to continue the class action here pursuant to the stipulation; while the defendant contended the somewhat different considerations applicable to such actions here rendered the stipulation of little value.² Fortunately, upon the court's suggestion at oral argument, counsel for the plaintiffs agreed to pursue this case as a joint action under Court of Claims Rule 63(a). As defendant concurred, we proceed on that basis.³

Federal Health Insurance for the Aged, popularly known as Medicare, was enacted by Congress in Title I of the Social Security Amendments of 1965, Pub.L.No.89-97, §§ 101-122, 79 Stat. 286 (1965), as Subchapter XVIII of the Social Security Act. The 1965 legislation, as amended, presently is codified at 42 U.S.C. §§ 1395-1395rr (1976 and Supp. III 1979). Subsequent statutory references are to the 1970 United States Code except as noted.

Medicare consists of two basic parts. Part A (42 U.S.C. §§ 1395c-1395i-1) provides insurance for hospital and related post-hospital services. Part B (42 U.S.C. §§ 1395j-1395w) provides insurance for supplemental medical services apart from hospitalization, such as those rendered by physicians. This case arises under Part A.

Under Part A, the cost of essential hospital services for persons aged 65 and older is paid from a trust fund financed by wage taxes on employees and self-employers. The trust fund makes payments for the benefit of elderly individuals directly to the institutions offering the services. However, before an institution can receive payments, certain requirements, such as accreditation, must be met. See 42 U.S.C. §§ 1395f(a), 1395x(u), and 1395bb. Moreover, these institutions, commonly known as providers, must enter agreements with the Secretary of Health, Education and Welfare (HEW). Those agreements must meet the requirements of 42 U.S.C. §§ 1395cc(a) and 1395f(a). Payment for services is based on the reasonable cost of such services, 42 U.S.C. § 1395f(b), as determined pursuant to 42 U.S.C. § 1395x(v) and implementing regulations.

Private, non-governmental entities handle the routine administration of both Part A and Part B. These entities are termed "fiscal intermediaries" under Part A and "carriers" under Part B. Usually, these entities are health and accident insurance companies such as the Blue Cross organization. The Part A intermediaries are nominated by a provider or group of providers and themselves enter contracts with HEW. These intermediaries serve as HEW's agent for many functions, such as hospital audits, information dissemination, and fund disbursement.

In making Part A disbursements, the fiscal intermediaries must resolve two important and distinct questions: (1) whether the particular services provided to a beneficiary are covered under 42 U.S.C. § 1395d and not excluded by 42 U.S.C. § 1395y, i. e., coverage determinations; and (2) whether the amount paid for the services is the reasonable cost under 42 U.S.C. § 1395x(v), i. e., reasonable cost determinations. The two determinations are made under different procedures, which we discuss more fully below.

In 1972 the fiscal intermediary for provider hospitals in Alabama reviewed certain earlier coverage determinations favorable to the providers. The review assessed whether the services which had been rendered were medically "reasonable and necessary" as required by 42 U.S.C. § 1395y(a)(1). The provider hospitals had previously been reimbursed by Medicare for the services. The investigations consisted of a bi-level review in which patient files were first examined by registered nurses employed by the fiscal intermediary. Those files which suggested medically unnecessary services had been performed were then reexamined by consulting physicians also employed by the intermediary. The intermediary made such coverage redetermination only after a consulting physician concurred with the preliminary finding of the registered nurse.

After the review had been completed, the hospitals were informed by letter of any overpayment resulting from adverse coverage redeterminations, the names of beneficiaries involved, the number of days of service disallowed, and the specific amount of the overpayment. The letter also requested repayment. As a result of such letters, the majority of the provider hospitals "voluntarily" repaid the amounts requested. The remaining hospitals had these overpayments recouped from later unrelated Medicare payments. The correctness of the later Medicare payments is not presently in dispute.

These Medicare providers seek money damages in the amount of monies repaid or recouped, alleging as all plaintiffs in this court must, jurisdiction under the Tucker Act, 28 U.S.C. § 1491 (1976).⁴ Plaintiffs' exact theory of jurisdiction, however, is somewhat confused. At one point, plaintiffs assert:

This is not a case where the issue for determination is whether or not certain provider hospitals were entitled under the Medicare Act to reimbursement for hospital services. The issue is whether the United States, through HEW, may take from these Alabama hospitals $657,000 of funds already paid to them and already in their coffers, without affording them a hearing which satisfies the constitutional requirements of due process of law.

Plaintiffs' repeated citation of Whitecliff, Inc. v. United States, 210 Ct.Cl. 53, 536 F.2d 347 (1976), cert. denied, 430 U.S. 969, 97 S.Ct. 1652, 52 L.Ed.2d 361 (1977), and similar cases, which hold that Medicare cases arising prior to 1973 are within our Tucker Act jurisdiction as claims founded on the Medicare contracts and statute, id. at 58, 536 F.2d at 351, suggests plaintiffs nevertheless assert this basis as well. Moreover, plaintiffs' citation of Kirkendall v. United States, 90 Ct.Cl. 606, 31 F.Supp. 766 (1940), United States v. State Bank, 96 U.S. 30, 24 L.Ed. 647 (1877), and similar cases, offers the further possibility that plaintiffs are alleging contract-implied-in-fact jurisdiction.

This apparent confusion as to the jurisdictional basis for suit, as well as the related assertion by plaintiffs that this court should do no more than apply the vacated district court decision, causes considerable attention to be directed towards a non-issue, whether this court has jurisdiction to award money damages if the Due Process Clause of the Fifth Amendment has been violated. It is well settled, as the defendant correctly argues, that we have no jurisdiction over a claim founded solely on that provision. The Due Process Clause simply cannot be read to mandate money damages be paid, as United States v. Testan, 424 U.S. 392, 400, 96 S.Ct. 948, 954, 47 L.Ed.2d 114 (1976), requires. E. g., Gordon v. United States, Ct.Cl. 649 F.2d 837, 838 n.2; Carruth v. United States, 224 Ct.Cl. 422, ___, 627 F.2d 1068, 1081 (1980); Vlahakis v. United States, 215 Ct.Cl. 1018, 1019 (1978). It does not follow, however, that this petition must be dismissed as beyond our Tucker Act jurisdiction. It is equally well settled that where a claim appears to be within our jurisdictional statute, as for example one founded on statute or contract, that claim is not removed from our jurisdiction merely because a plaintiff must make a constitutional argument to prevail. Gentry v. United States, 212 Ct.Cl. 1, 5-8, 546 F.2d 343, 345-346 (1976). Thus, in Overlook Nursing Home, Inc. v. United States, 214 Ct.Cl. 60, 556 F.2d 500 (1977), and Ulman v. United States, 214 Ct.Cl. 308, 558 F.2d 1 (1977), we passed on due process claims in the context of the Medicare statute. On this issue, the present controversy is no different from Overlook and Ulman. When this petition is reduced to its essentials, and despite plaintiffs' contrary assertions, these are at least claims founded on the Medicare contracts and statute. See, e. g., Pasadena Hospital Association, Ltd. v. United States, 223 Ct.Cl. 72, ___, 618 F.2d 728, 729-730 (1980); Overlook, supra; Whitecliff, supra. These claims are within the literal breadth of the Tucker Act.

Once the literal requirements of the Tucker Act are satisfied, plaintiffs contend, this court should apply the rationale of the district court on all subsequent issues in this suit. The district court concluded that this suit was not barred under the statutory scheme and further concluded that due process required a hearing on the...