Baylor University Medical Center v. Schweiker
| Decision Date | 13 September 1983 |
| Docket Number | Civ. A. No. 3-82-0986-H. |
| Citation | 571 F. Supp. 374 |
| Parties | BAYLOR UNIVERSITY MEDICAL CENTER, Plaintiff, v. Richard S. SCHWEIKER, Secretary of U.S. Department of Health and Human Services, Defendant. |
| Court | U.S. District Court — Northern District of Texas |
Catherine A. Gerhauser, Burford & Ryburn, Dallas, Tex., for plaintiff.
Mary Ann Moore, Asst. U.S. Atty., Dallas, Tex., for defendant.
This case is before the Court on the parties' cross-Motions for Summary Judgment.
The Court, after reviewing the record and the parties' Motions, is of the opinion that Defendant's Motion for Summary Judgment should be DENIED and Plaintiff's Motion for Summary Judgment should be GRANTED.
Plaintiff ("Baylor") filed its annual cost report for fiscal year ending ("FYE") June 30, 1979, pursuant to Defendant's (the "Secretary") regulation 42 C.F.R. § 405.453(f). In its FYE 1979 cost report Baylor claimed a return on its net invested equity capital and computed its average per diem costs exclusive of labor and delivery room days. Baylor's fiscal intermediary disallowed Baylor's claim for a return on equity and recomputed Baylor's average per diem costs inclusive of labor and delivery room days. The fiscal intermediary's action resulted in a reduction in Baylor's Medicare reimbursement in the amount of $2,629,259.
Baylor requested and received a hearing before the Secretary's Provider Reimbursement Review Board ("PRRB"). The PRRB affirmed the intermediary's disallowance of return on equity costs and reversed the intermediary on the labor and delivery area issue. The Secretary's Deputy Administrator, upon review of the PRRB's decision, held in favor of the Secretary on both issues, thus reinstating the intermediary's decision. The Deputy Administrator's decision represents the final decision of the Secretary which is reviewable by this Court pursuant to 42 U.S.C. § 1395oo.
This issue, involving the same parties for a prior fiscal year (FYE 1978), was decided by this Court in an April 25, 1983, Memorandum Opinion, Civil Action No. 3-81-0266-H. The parties and issues being identical, the Court adopts its prior decision in Baylor University Medical Center v. Schweiker, 563 F.Supp. 1081, in its entirety as it relates to labor and delivery area costs. Accordingly, Plaintiff's Motion for Summary Judgment on the labor/delivery area issue is GRANTED, and Defendant's Motion for Summary Judgment on this issue is DENIED.
The Medicare Act's1 central reimbursement section provides that Medicare providers will be reimbursed their "reasonable costs" in providing health care to Medicare beneficiaries. 42 U.S.C. § 1395x(v)(1)(A). The Secretary of Health and Human Services is directed to issue regulations determining which costs are reasonable. Id. On June 2, 1966, the Secretary published proposed regulations establishing "reasonable cost" reimbursement principles. 31 Fed. Reg. 7864 et seq. Included in the proposed regulations was what is presently codified as 42 C.F.R. § 405.428, which provided for "an allowance amounting to two percent of costs allowed under the other Medicare reimbursement principles ... as an element of reasonable cost ... in lieu of a specific interest return on equity capital as well as other factors not given specific recognition in these regulations". 31 Fed.Reg. 7871.
On June 27, 1969, the Secretary repealed 42 C.F.R. § 405.428. 34 Fed.Reg. 9927-9928. The Secretary concedes that the notice and comment procedures of the Administrative Procedures Act were not observed in repealing the two percent return on equity allowance. Id.
Baylor argues that the Secretary's repeal of the two percent return on equity allowance contravenes the Medicare Act and its legislative history, and that the Secretary's action in repealing the two percent allowance was in violation of the Administrative Procedure Act ("APA").
The Secretary contends that her action in withdrawing the two percent allowance for non-proprietary providers did not violate the Medicare Act, and was consistent with the Act's legislative history and amendments. The Secretary cites several recent decisions, all supporting her position on the substantive return on equity issue.2 Concerning the procedural return on equity issue, the Secretary asserts that she was exempt from APA rules when she repealed the two percent allowance. Before it reaches the substantive issues, the Court feels it is necessary to consider the procedural aspects of the Secretary's action.
In June 1966 when the Secretary issued the proposed regulations which originally included the two percent return on equity allowance, the Secretary stated in the preamble of the regulations that:
31 Fed.Reg. 7864. The proposed regulations were adopted in final form in November 1966, the preamble of the final regulations acknowledging that the proposed regulations, including the two percent allowance, were filed, public comments received, changes in the proposed regulations made, and final regulations adopted, all in accordance with APA requirements. 31 Fed.Reg. 14808.
In June 1969, the Secretary repealed 42 C.F.R. § 405.428, the two percent allowance, without following APA notice and comment procedures. In defense of her action the Secretary stated in the notice repealing the regulation:
This amendment is prepared to conform to the Department of Health, Education and Welfare budget policy for fiscal 1970 in implementation of the President's Review of the 1970 Budget which was released on April 15, 1969, by the Executive Office of the President. For this reason, it is determined that compliance with the notice, public procedure, and effective date requirements of the Administrative Procedure Act, 5 U.S.C. § 553, is unnecessary.
The applicable portions of the APA provide that:
General notice of proposed rule making shall be published in the Federal Register .... After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments .... After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of the basis and purpose.
5 U.S.C. § 553. In certain specific instances agencies are able to avoid these notice and comment APA requirements "to the extent that there is involved ... a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts." 5 U.S.C. § 553(a). Agencies are also exempt from APA notice and comment rules "when the agency for good cause finds ... that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." 5 U.S.C. § 553(b)(B).
APA procedural guidelines "were designed to assure fairness and mature consideration" of agency rule making, NLRB v. Wyman-Gordon Company, 394 U.S. 759, 764, 89 S.Ct. 1426, 1429, 22 L.Ed.2d 709 (1969). This Circuit has pointed out that:
Congress realized that an agency's judgment would be only as good as the information upon which it drew. It prescribed these procedures to ensure that the broadest base of information would be provided by those most interested — and perhaps best informed — on the subject of the rulemaking at hand.
Brown Express, Inc. v. United States, 607 F.2d 695, 701 (5th Cir.1979). APA notice and comment procedures were also intended to assure that a rule making agency considers relevant facts and information. National Association of Home Health Agencies v. Schweiker, 690 F.2d 932, 949 (D.C.Cir. 1982), cert. denied, ___ U.S. ___, 103 S.Ct. 1193, 75 L.Ed.2d 438 (1983).
The APA notice and comment requirements are specifically applicable to the repeal of a rule: "`rule making' as defined in the APA means agency process for formulating, amending or repealing a rule ...." 5 U.S.C. § 551(5).3 In fact, where an agency decision, which was originally adopted in full compliance with APA notice and comment procedures, is reversed in the absence of notice and comment, such a decision is to be examined closely by the courts. N.R.D.C. v. U.S. E.P.A., 683 F.2d at 760-1. "It would be meaningless to require notice and a reasonable opportunity to participate in rulemaking, if after announcement of a rule, the agency could closet its intent to reconsider and completely undo the rule first made." Arlington Oil Mills, Inc. v. Knebel, 543 F.2d 1092, 1100 (5th Cir.1976).
Here, the Secretary used APA notice and comment procedures to promulgate the regulation granting non-proprietary Medicare providers a two percent return on equity allowance. Two years later, however, the Secretary repealed this regulation without using APA notice and comment procedures. The Secretary argues that her action repealing the regulation was exempt from APA notice and comment requirements since it involved a "benefit" program, thus qualifying for exemption from APA notice and comment under 5 U.S.C. § 553. (See Defendant's Reply Brief at 17-18.)
Granted, some pre-1971 Medicare regulations may qualify for an exemption from APA rule making procedures under the "benefits" exception to section 553(a)(2).4 However, as recently noted by the Supreme Court, "it is...
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Baylor University Medical Center v. Heckler
...summary judgment, the court held that the Secretary's 1969 repeal had run afoul of the APA's notice and comment requirements. 571 F.Supp. 374, 380 (N.D.Tex.1983). The court reasoned first that the repeal merited close examination because notice and an opportunity for comment had been afford......
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Washington Hosp. Center v. Heckler, Civ. A. No. 83-2341
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