American Hosp. Ass'n v. Schweiker

• Decision Date: 01 November 1983
• Docket Number: No. 82-1295,82-1295
• Citation: 721 F.2d 170
• Parties: AMERICAN HOSPITAL ASSOCIATION, Plaintiff-Appellant, v. Richard S. SCHWEIKER, et al., Defendants-Appellees, and Illinois Migrant Council, et al., Intervening Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 170

721 F.2d 170

AMERICAN HOSPITAL ASSOCIATION, Plaintiff-Appellant, v. Richard S. SCHWEIKER, et al., Defendants-Appellees and Illinois Migrant Council, et al., Intervening Defendants-Appellees.

No. 82-1295.

United States Court of Appeals Seventh Circuit.

Argued Oct. 27, 1982.

Decided November 1, 1983.

William G. Kopit, Epstein, Becker, Borsody & Green, P.C., Washington, D.C., for plaintiff-appellant.

Shalom Brilliant, U.S. Dept. of Justice, Washington, D.C., for defendants-appellees.

Nelson A. Soltman, Legal Assistance Foundation of Chicago, Chicago, Ill., for intervening defendants-appellees.

Before CUDAHY and COFFEY, Circuit Judges, and WISDOM, Senior Circuit Judge. ^*

CUDAHY, Circuit Judge.

This case involves a challenge to certain regulations issued on May 18, 1979, by the Secretary of Health, Education and Welfare (now Health and Human Services) (the "Secretary") pursuant to Title VI (the "Hill-Burton Act") and Title XVI of the Public Health Service Act, 42 U.S.C. Secs. 291, 300o et seq. (1976). The regulations, published at 42 C.F.R. Sec. 124, Subparts F and G, impose specified obligations for community service and uncompensated care upon hospitals which received funds under the Hill-Burton Act. The American Hospital Association ("AHA"), on behalf of those hospitals, sued to have the 1979 regulations declared invalid, arguing that they violated statutory, contractual and constitutional rights. The district court granted summary judgment in favor of the Secretary. We affirm.

I

In 1946, in response to President Truman's call to enact legislation which would ensure adequate health care for all Americans, see President Truman's Message to Congress on Health Legislation, 1945 U.S.CODE CONG.SERV. 1143, Congress passed the Hospital Survey and Construction Act, Pub.L. No. 79-725, 60 Stat. 1040 (1946), presently codified as Title VI of the Public Health Service Act, 42 U.S.C. Sec. 291. Title VI, commonly known as the Hill-Burton Act, was intended to address post-Depression and post-war problems with respect to the adequacy and distribution of health service facilities by means of a program of grants-in-aid to the states. See Statement of Senator Hill, in Hearings on S. 191 Before the Senate Comm. on Education and Labor, 79th Cong., 1st Sess. 6-9 (1945). The stated purpose of the Hill-Burton Act, in addition to the development and improvement of physical facilities and the promotion of research, was:

to assist the several States in the carrying out of their programs for the construction and modernization of such public or other non-profit community hospitals and other medical facilities as may be necessary, in conjunction with existing facilities, to furnish adequate hospital, clinic, or similar services to all their people....

42 U.S.C. Sec. 291. States wishing to obtain the federal financial assistance--outright grants, loans and loan guaranties--were required to submit to the Surgeon General for his approval a state plan for carrying out the congressional purpose. 42 U.S.C. Sec. 291d.

Most importantly to the issues involved in this litigation, the Hill-Burton Act provided that:

The Surgeon General ... shall by general regulations prescribe--

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(e) that the State plan shall provide for adequate hospitals, and other facilities for which aid under this part is available 42 U.S.C. Sec. 291c(e). ¹ Thus the statute required the state plan (1) to make provision for adequate health facilities for all persons residing in the state and (2) to furnish necessary services to persons unable to pay. The regulation or regulations which the Surgeon General (later the Secretary ²) was directed to issue could require as a condition of approval of a project that the state give certain "assurances": (1) that the facility would be made available to all persons residing in the territorial area of the applicant and (2) that there would be made available in the facility a reasonable volume of services to persons unable to pay. These two assurances have become known, respectively, as the "community service assurance" and the "reasonable volume" or "uncompensated care assurance."

for all persons residing in the State, and adequate hospitals (and such other facilities) to furnish needed services for persons unable to pay therefor. Such regulations may also require that before approval of an application for a project is recommended by a State agency to the Surgeon General for approval under this part, assurance shall be received by the State from the applicant that (1) the facility or portion thereof to be constructed or modernized will be made available to all persons residing in the territorial area of the applicant; and (2) there will be made available in the facility or portion thereof to be constructed or modernized a reasonable volume of services to persons unable to pay therefor, but an exception shall be made if such a requirement is not feasible from a financial viewpoint.

The regulations issued from 1947 to 1972 in implementation of this statutory provision essentially tracked the language of the statute, see 42 C.F.R. Secs. 53.61-53.63 (Supp.1947); and, although over $4.4 billion in grants and $2 billion in loans and loan guaranties were authorized between 1947 and 1974, see S.Rep. No. 1285, 93d Cong., 2d Sess., reprinted in 1974 U.S.CODE CONG. & AD.NEWS 7842, 7860, the hospitals receiving aid displayed a marked reluctance to give even the most token charitable care. See Comment, Provision of Free Medical Services by Hill-Burton Hospitals, 8 Harv. C.R.-C.L. L.REV. 351, 352 (1973). After--and apparently in response to--a series of lawsuits brought by several private citizens and public interest groups against federally assisted hospitals to enforce compliance with the Hill-Burton obligations, see, e.g., Euresti v. Stenner, 458 F.2d 1115 (10th Cir.1972); Cook v. Ochsner Foundation Hospital, 61 F.R.D. 354 (E.D.La.1972), the Secretary began in 1972 to issue regulations which defined standards for compliance with the assurances. These regulations specified what was to be deemed a "reasonable volume of services" in terms of a quantitative presumptive compliance level, defined "persons unable to pay," established standards for compliance with the community service assurance and initiated various reporting requirements to ensure compliance. See 42 C.F.R. Secs. 53.111, 53.113 (1974).

In 1975 a new federal assistance program for hospital construction and modernization was established to replace Title VI. This later program, Title XVI of the Public Health Service Act, now codified at 42 U.S.C. Sec. 300q et seq., provides for assurances similar to those in Title VI but adds teeth to the Title VI requirements as well. Thus, Title XVI requires applicants for federal aid to give reasonable assurance that at all times after such application is approved (i) the facility or portion thereof to be constructed, modernized, or converted will be made available to all persons residing or employed in the area served by the facility, and (ii) there will be made available in the facility or portion thereof to be constructed, modernized, or converted a reasonable volume of services to persons unable to pay therefor and the Secretary, in determining the reasonableness of the volume of services provided, shall take into consideration the extent to which compliance is feasible from a financial viewpoint.

42 U.S.C. Sec. 300s-1(b)(1)(K). Apparently in recognition of the compliance problems which had arisen under the Hill-Burton program, Title XVI mandates, rather than permits, the Secretary to prescribe by regulation the manner in which all recipients of financial assistance under either Title VI or Title XVI "shall be required to comply with the assurances required to be made at the time such assistance was received and the means by which such entity shall be required to demonstrate compliance with such assurances." 42 U.S.C. Sec. 300s(3). The Secretary is also given extensive investigative and enforcement power by Title XVI. 42 U.S.C. Sec. 300s-6.

The regulations which have given rise to the instant litigation were issued by the Secretary in response to this mandate. See 44 Fed.Reg. 29,372-29,410 (1979). The sections of the regulations relevant here are set forth in the Appendix to this opinion. Briefly, the 1979 regulations apply to all health facilities which gave assurances under either Title VI or Title XVI. The obligations under Title VI are made to continue for twenty years after the completion of construction or until the amount of the grant or loan is repaid, ³ 42 C.F.R. Sec. 124.501(b)(1), although they have no retroactive application to the period prior to the effective date of the regulations. See 44 Fed.Reg. 29,372-29,374 (1979). In carrying out the uncompensated care assurance, Subpart F of the regulations sets a quantitative annual standard of compliance by requiring uncompensated care equal to the lesser of either 3% of the facility's operating cost for the last fiscal year or 10% of all federal assistance received by the facility, adjusted to make allowance for inflation for each year after 1979 (in effect prescribing the meeting of the obligation in the equivalent of 1979 dollars). 42 C.F.R. Sec. 124.503(a). If in any year a facility is financially unable to meet this standard, the deficit may be made up in the following year, or in years subsequent to that, and, if necessary, at the end of the twenty-year period of obligation. 42 C.F.R. Sec. 124.503(b). Excesses will similarly be applied as credits against subsequent years' obligations. 42 C.F.R. Sec. 124.503(c). The regulations also specify that amounts received as reimbursement from insurance programs or under Medicare or Medicaid may not be counted in computing the amount of uncompensated services rendered. 42 C.F.R. Sec. 124.509.

With respect to the community service assurances, Subpart G of the regulations requires that the federally...