Arlington Hosp. v. Schweiker, Civ. A. No. 82-0093-A.

Citation547 F. Supp. 670
Decision Date17 September 1982
Docket NumberCiv. A. No. 82-0093-A.
CourtU.S. District Court — Eastern District of Virginia
PartiesThe ARLINGTON HOSPITAL, Plaintiff, v. Richard S. SCHWEIKER, Secretary Department of Health & Human Services, Defendant.


Griffin T. Garnett, III, Garnett, Kostik & Garnett, Arlington, Va., for plaintiff.

Linda B. Bridgman, Asst. U. S. Atty., Alexandria, Va., for defendant.


RICHARD L. WILLIAMS, District Judge.


This civil action arises out of plaintiff's suit to obtain under the federal Medicare program reimbursements for certain of its operational costs incurred during 1977. Specifically, the plaintiff seeks (i) $39,698 for costs incurred in providing uncompensated patient care pursuant to its obligations under the Hospital and Medical Facilities Amendments of 1964, 42 U.S.C. § 291 et seq.; (ii) $19,642 for providing inpatient telephone services to Medicare patients; (iii) $23,152 in costs not otherwise disallowable for which plaintiff claims it was improperly denied reimbursement as part of its physician billing services.

Plaintiff is a short-term, general, acute-care hospital located in Arlington, Virginia. It is a qualified provider of services under the Medicare program. 42 U.S.C. § 1395cc; 42 CFR § 405.1011 et seq. Under the Medicare program, providers are reimbursed for their "reasonable costs" of providing services to Medicare beneficiaries; reasonable costs are defined as "the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services. ..." 42 U.S.C. § 1395x(v)(1)(A).

Certain costs are specifically excluded from coverage of the Medicare program. 42 U.S.C. § 1395y. Among the costs so excluded are any expenses incurred for items or services "which constitute personal comfort items." 42 U.S.C. § 1395y(a)(6). The Secretary's regulations give as examples of personal comfort items for which costs are not reimbursable "a television set, or telephone service, etc." 42 CFR § 405.310(j) (parenthesis deleted).

Plaintiff also received $1,215,000 in federal construction financing between 1955 and 1963 under the Hill-Burton Act. As a condition for receiving the grant, plaintiff was required to furnish indigents access to a reasonable volume of medical service. 42 U.S.C. § 291c(e)(2). Additionally, in 1972, as a result of litigation concerning obligations of Hill-Burton grantees, the Secretary promulgated 42 CFR § 53.111, establishing Hill-Burton compliance guidelines. That regulation required hospitals receiving Hill-Burton assistance to budget and pay for a specified level of uncompensated care for the indigent as a condition to receipt of federal assistance.

During 1977, plaintiff incurred costs of providing telephone services, and costs of uncompensated care under the Hill-Burton Act. The plaintiff felt that it should be reimbursed for that portion of telephone costs attributable to Medicare patients, and that a portion of the uncompensated care costs it was compelled to incur should be reimbursable under Medicare as would be other construction financing costs. Therefore, the plaintiff included these costs in its monthly cost reports during 1977 and asked for reimbursement of these amounts. The monthly reimbursements are made for the Secretary by a fiscal intermediary. 42 U.S.C. § 1395g. At the conclusion of each fiscal year, Medicare providers file a cost report with the intermediary. Id. The intermediary may retroactively adjust payments it has made during the previous year. Id. Blue Cross Association, and its subcontractor, Group Hospital, Inc., acting as intermediary in this case, reduced plaintiff's reimbursable expenses for the items at issue here.

The plaintiff appealed the intermediary's decisions on these three amounts to the Provider Reimbursement Review Board ("the PRBB"), pursuant to 42 U.S.C. § 1395 oo(a). The plaintiff and the intermediary agreed to incorporate the record developed in the Florida Hospital Group Appeal, P.R. B.B. Decision No. 79-091, as part of the record with respect to the patient telephone and Hill-Burton uncompensated care issues. The PRBB, based on the Florida record, allowed reimbursement for the Hill-Burton uncompensated care costs, and disallowed the portion of the telephone costs attributable to patients' personal use. The PRBB also affirmed the intermediary's method for calculating the amount of the hospital's physician billing services to be disallowed. On December 2, 1981, the Deputy Administrator, acting as the Secretary's delegate, affirmed the PRBB's decisions concerning telephone costs and physician billing services, but reversed the PRBB's decision concerning Hill-Burton uncompensated care. Plaintiff appeals the decision of the Deputy Administrator.

Jurisdiction in this case is based upon 42 U.S.C. § 1395oo(f)(1). Review is to be conducted according to 5 U.S.C. § 701 et seq., which provides that the Secretary's decisions may be overturned only if they were arbitrary, capricious, an abuse of discretion, otherwise not in accordance with law, or unsupported by substantial evidence.

The cause is before the court on cross-motions for summary-judgment. See Fed.R. Civ.P. 56(a), (b). There are no material issues of fact to be resolved. This being so, the court concludes the following: as to the Hill-Burton free care issue, the Secretary's motion for summary judgment is granted and the plaintiff's denied; as to the patient telephone issue, the Secretary's motion is denied and the plaintiff's granted; and as to physician billing services, the Secretary's motion is denied, and the cause remanded for further proceedings consistent with this opinion.


The plaintiff's argument that the Hill-Burton uncompensated care is reimbursable is based upon the contention that such costs are no different than other indirect costs, such as depreciation or interest, which are reimbursable. See 42 CFR § 405.401 et seq. In support of its argument, plaintiff cites many cases in which similar arguments were successful, and Hill-Burton uncompensated care costs were held to be reimbursable. See Presbyterian Hospital of Dallas v. Harris, 638 F.2d 1381 (5th Cir. 1981), cert. denied, 454 U.S. 940, 102 S.Ct. 476, 70 L.Ed.2d 248 (1981); Iredell Memorial Hospital v. Schweiker, 535 F.Supp. 795 (W.D.N.C. 1982); St. James Hospital v. Harris, 535 F.Supp. 751 (N.D.Ill.1981); Johnson County Memorial Hospital v. Schweiker, 527 F.Supp. 1134 (S.D.Ind.1981); Metropolitan Medical Center v. Harris, Civil No. 80-67 (M.D.Fla., October 20, 1981); Rapides General Hospitals v. Matthews, 435 F.Supp. 384 (W.D.La.1977), vacated on other grounds, No. 77-3125 (5th Cir. 1978). But cf., St. Mary's of Nazareth Hospital Center v. Department of Health & Human Services, 531 F.Supp. 419 (N.D.Ill.1982); Harper-Grace Hospitals v. Schweiker, Civil No. 80-72082 (E.D.Mich., April 1, 1981).

However, regardless of what might otherwise have been the merits of plaintiff's position, recent congressional activity must control this court's decision in the case before it. Section 106 of The Tax Equity and Fiscal Responsibility Act of 1982, Pub.L.No. 97-248, 51 U.S.L.W. 5, 9 (1982), amends 42 U.S.C. § 1395x(v)(1) by redefining the term "reasonable cost" to require that the

costs respecting care provided by a provider of services, pursuant to an assurance under title VI or XVI of the Public Health Service Act that the provider will make available a reasonable volume of services to persons unable to pay therefor, shall not be allowable as reasonable costs.

The Conference Report on that bill states that the provision "is intended to clarify that Hill-Burton free care costs have never been, and are not, allowable for Medicare reimbursement purposes." H.R.Rep.No.97-760, 97th Cong., 2d Sess. at 431, U.S.Code Cong. & Admin.News 1982, pp. 781, 1211.

Section 106(b) of the same Act provides that the amendment

shall be effective with respect to any costs incurred under title XVIII of the Social Security Act, except that it shall not apply to costs which have been allowed prior to the date of enactment of this act pursuant to the final court order affirmed by a United States Court of Appeals.

Congress passed the bill containing the amendment August 19, 1982, and the President signed it into law September 3, 1982. The plaintiff does not fall within the narrow exception provided for litigants whose case has been settled authoritatively. The amendment apparently eliminates any claim for Medicare compensation of Hill-Burton costs plaintiff might have, since the amendment unequivocally bars Hill-Burton free care costs from the category of costs for which Medicare may supply reimbursement.

The plaintiff's asserted claim with which Section 106 purportedly interferes is its supposed right to Medicare reimbursement for Hill-Burton uncompensated care costs. But the entitlement plaintiff claims was not expressly given by statute or regulation; it was, rather, based on plaintiff's own reading of the Medicare Act and interpretation of its legislative history. The Secretary obviously gave that Act a different reading. While the only circuit court that has ruled on the issue affirmed the plaintiff's view of congressional intent, see Presbyterian Hospital of Dallas v. Harris, 638 F.2d 1381 (5th Cir. 1981), the recent amendment suggests congressional disagreement with that reading.

The Supreme Court has previously indicated that subsequent congressional legislation which declares the intent of an earlier statute is entitled to "great weight". Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 380-81, 89 S.Ct. 1794, 1801-02, 23 L.Ed.2d 371 (1969); FHA v. The Darlington Inc., 358 U.S. 84, 90, 79 S.Ct. 141, 145, 3 L.Ed.2d 132 (1958). See also Ruhe v. Bergland, 683 F.2d 102 at 103-104 (4th Cir. 1982). The weight to be given congressional action is all the greater when the statutory modification is...

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