Bedford County General Hosp. v. Heckler, 84-5051

• Decision Date: 11 January 1985
• Docket Number: No. 84-5051,84-5051
• Citation: 757 F.2d 87
• Parties: , Medicare&Medicaid Gu 34,538 BEDFORD COUNTY GENERAL HOSPITAL, et al., Plaintiffs-Appellants, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 87

757 F.2d 87

9 Soc.Sec.Rep.Ser. 114, Medicare&Medicaid Gu 34,538

BEDFORD COUNTY GENERAL HOSPITAL, et al., Plaintiffs-Appellants, v. Margaret HECKLER, Secretary of Health and Human Services Defendant-Appellee.

No. 84-5051.

United States Court of Appeals Sixth Circuit.

Jan. 11, 1985.

Decided March 7, 1985.

David S. Neiger, Weissburg & Aronson, Inc., Patric Hooper, argued, Michael Tichon, Los Angeles, Cal., Sarah Y. Sheppeard, Lockridge & Becker, Knoxville, Tenn., for plaintiffs-appellants.

John W. Gill, U.S. Atty., James Michael Haynes, Asst. U.S. Atty., Knoxville, Tenn., Juan A. Del Real, Gen. Counsel, Ann Hunsaker, Dept. of Health & Human Services, Health Care Financing & Human Development Services Div., Washington, D.C., Henry Eigles, argued, Dept. of Health & Human Services, Baltimore, Md., for defendant-appellee.

Before LIVELY, Chief Judge, and MARTIN and KRUPANSKY, Circuit Judges.

KRUPANSKY, Circuit Judge.

Plaintiffs (eight nonprofit hospitals providing services to Medicare and other patients) appealed the summary judgment entered in favor of the Secretary and Health and Human Services (Secretary) in an action challenging the validity of a Medicare regulation. 574 F.Supp. 943. Specifically, plaintiffs contended below and on appeal that 42 C.F.R. Sec. 405.310(j), which designated patients' bedside telephones as "personal comfort items" precluded from reimbursement pursuant to 42 U.S.C. Sec. 1395y(a)(6), is invalid because it allegedly: (1) conflicts with the legislative intent of the Medicare Act; (2) fails to comport with 42 U.S.C. Sec. 1395x(b)(2) which provides that the reasonable cost of (reimbursable) inpatient hospital services includes, inter alia, "ordinarily furnished" hospital facilities, appliances and equipment; and (3) was promulgated by the Secretary without consideration of relevant factors. The Secretary counters with the arguments that (1) federal courts do not have subject matter jurisdiction over the instant dispute; and (2) that the regulation is in any event valid.

As a threshold issue, the Secretary vigorously argued that Sec. 1395oo(g) precludes judicial review of the validity of the patient telephone regulation, and thus denies subject matter jurisdiction to federal courts over the instant complaint. However, courts which have considered the Secretary's jurisdictional argument have rejected it, holding that 42 U.S.C. Sec. 1395oo(g) does not bar judicial review of the issue. See e.g., Holy Cross Hospital-Mission Hills, et al. v. Heckler, 749 F.2d 1340, 1341 (9th Cir.1984); Fairview Deaconess Hospital v. Heckler, 749 F.2d 1256 (8th Cir.1984); Arlington Hospital v. Heckler, 731 F.2d 171 (4th Cir.1984); Memorial Hospital v. Heckler, 706 F.2d 1130 (11th Cir.1983); Saint Mary of Nazareth Hospital Center v. Department of HHS, 698 F.2d 1337 (7th Cir.1983). This court finds the analysis presented in these opinions pursuasive, and thus concludes that federal courts possess subject matter jurisdiction over disputes involving Medicare regulations.

Turning to the validity of the regulation itself, this court's standard of review is set forth at 5 U.S.C. Sec. 706(2) (the Administrative Procedure Act). Section 706(2) mandates that a court

hold unlawful and set aside agency action, findings, and conclusions found to be--

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

* * *

* * *

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right....

This circuit and others have interpreted the above statute as requiring a court to set aside agency action which is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law; contrary to a constitutonal right, power, privilege or immunity; or unsupported by substantial evidence where an agency hearing is being reviewed on the record. Shaker Medical Center Hosp. v. Secretary, 686 F.2d 1203, 1207 (6th Cir.1982). Accord, Medical Center of Independence v. Harris, 628 F.2d 1113, 1117 (8th Cir.1980); Fairfax Hosp. Ass'n. v. Califano, 585 F.2d 602 (4th Cir.1978); Pleasantview Convalescent and Nursing Center, Inc. v. Weinberger, 565 F.2d 99, 102 (7th Cir.1976).

Where the question is the validity of a regulation or the Secretary's interpretation thereof, the standard is whether the Secretary's decision was arbitrary or capricious. Diplomat Lakewood, Inc. v. Harris, 613 F.2d 1009, 1018 (D.C.Cir.1979). The Supreme Court has defined the term "arbitrary and capricious" with respect to administrative agency rules thusly:

Normally, an agency rule would be arbitrary and capricious if the agency relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Motor Vehicle Manufacturers Ass'n v. State Farm, 463 U.S. 29, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983) (holding invalid National Highway Traffic Safety Administration's recission of requirement that new automobiles be equipped with passive restraint devices--airbags or automatic seat belts--due to failure to adequately explain reason for recission).

Finally, while regulations promulgated by the Secretary must be granted deferential consideration and courts must therefore exercise caution in overturning them, a court will not "rubber stamp" the Secretary's decision where there is no justification for the promulgation of the regulation and the regulation is obviously inconsistent with the Medicare statute. Michigan Academy of Family Physicians v. Blue Cross, 728 F.2d 326, 332 (6th Cir.1984).

Plaintiffs' position in this case is that patient telephone service was incorrectly cast by the Secretary as a "personal comfort item" excluded from Medicare coverage under 42 U.S.C. Secs. 1395y(a)(6), when it should be classified as a service "ordinarily furnished" by hospitals to patients as part of the hospital facility, and thus eligible for reimbursement as an inpatient hospital service under 42 U.S.C. Sec. 1395x(b)(2). The essence of plaintiffs' argument is simply that the Secretary has classified an item as excluded from Medicare coverage which plaintiffs believe is deserving of coverage. While this court might classify patient telephone services differently than did the Secretary if considering the issue de novo, the wide scope of discretion which Congress vested in the Secretary to further define included and excluded costs cannot be disregarded. ¹ And it cannot be overlooked that six other circuits which have reviewed similar challenges to the patient telephone regulation have sustained its validity. See, e.g., Holy Cross Hospital v. Heckler, 749 F.2d 1340, 1341 (9th Cir.1984); Fairview Deaconess Hospital v. Heckler, 749 F.2d 1256 (8th Cir.1984); Arlington Hospital v. Heckler, 731 F.2d 171 (4th Cir.1984); Memorial Hospital v. Heckler, 706 F.2d 1130 (11th Cir.1983); Saint Mary of Nazareth Hospital Center v. Department of HHS, 698 F.2d 1337 (7th Cir.1983); Presbyterian Hosp. of Dallas v. Harris, 638 F.2d 1381 (5th Cir.1981). And, in addition to the court below, see 574 F.Supp. 943, several other district courts have upheld the patient telephone regulation. See, St. Joseph Hosp. v. Heckler, 570 F.Supp. 434 (N.D.Ind.1983); Greater...