Bethesda Hosp. v. Secretary of Health and Human Services, 86-3090

Decision Date25 February 1987
Docket NumberNo. 86-3090,86-3090
Citation810 F.2d 558
Parties, Medicare&Medicaid Gu 36,028 BETHESDA HOSPITAL, et al., Plaintiffs-Appellees, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

Anthony W. Nyktas, U.S. Atty., Donetta D. Wiethe, Asst. U.S. Atty., Cincinnati, Ohio, Edgar C. Morrison, Jr. (argued), Dept. of HHS, Washington, D.C., for defendant-appellant.

Barbara Scott Bison, Robert S. Bromberg, Cincinnati, Ohio, Leonard C. Homer (argued), Ober, Kaler, Grimes, & Shriver, Baltimore, Md., for plaintiffs-appellees.

Before B. KEITH and GUY, Circuit Judges, and EDGAR, District Judge. *

RALPH B. GUY, Jr., Circuit Judge.

Plaintiffs, a group of twenty-nine hospitals which are providers of services under the Medicare Act, challenged in the district court the promulgation of the 1979 Malpractice Rule by the Secretary of Health and Human Services. In addition, two of the hospitals contested a decision by the Provider Reimbursement Review Board (PRRB) that it lacked jurisdiction to review their claims because those claims were not properly raised in their cost reports filed with the fiscal intermediary. The following issues were presented to the district court:

1) Whether the Provider Reimbursement Review Board (PRRB) erred in concluding that it lacked jurisdiction over the claims of plaintiffs who self-disallowed malpractice insurance costs? 2) Is the challenged regulation invalid under the Administrative Procedure Act (APA) because of deficiencies in either the Notice of Proposed Rule Making or the Basis and Purpose statement accompanying the regulation in final form? 3) Is the challenged regulation violative of the APA as arbitrary and capricious, an abuse of discretion or otherwise not in accordance with law? 4) Is the challenged regulation invalid because it is inconsistent with the Medicare Act?

609 F.Supp. 1360, 1363 (S.D.Ohio 1985).

After review of the administrative record and filings by counsel, the district court concluded that:

1) The PRRB erred in concluding that it lacked jurisdiction over the claims of the health care providers who "self-disallowed" the malpractice insurance costs; 2) the challenged regulation is violative of the APA in two respects: a) the regulation in final form was not accompanied by an adequate statement of basis and purpose; and b) the issuance of the regulation, based upon the data on which the Secretary relied, was arbitrary and capricious. We do not rule on the issue of whether the challenged regulation is invalid because of alleged inconsistency with the Medicare Act.

Id.

Based on these conclusions, the court granted the plaintiff-hospitals' (the hospitals) motion for summary judgment and ordered further briefing on the issue of the appropriate relief. On November 25, 1985, the court issued an order remanding the case to the Secretary for the purpose of granting judgment to the hospitals in the amount of $2,965,767.00 plus interest. The court specifically declined to remand the case to the Secretary for application of any retroactive rulemaking which might result from the Notice of Proposed Rulemaking published by the Secretary on June 17, 1985. 50 Fed.Reg. 25,178. The Secretary timely appealed this order of remand and argues the following issues on appeal:

1. Whether, in light of the promulgation of the 1986 Malpractice Rule on April 1, 1986 (51 Fed.Reg. 11,142, appearing at 42 C.F.R. Sec. 413.56), 1 this case is now moot and the district court's decision should thus be vacated and the complaint dismissed.

2. Assuming arguendo that the case is not technically moot, whether the appropriate relief is to remand this case to the district court with instructions to remand to the Secretary for application of 42 C.F.R. Sec. 413.56 to the cost years in plaintiffs' complaint.

3. Whether the district court erred in concluding that the Provider Reimbursement Review Board (PRRB) should have exercised jurisdiction over the claims of plaintiffs Bethesda Hospital and Deaconess Hospital.

For the reasons below, the decision of the district court is affirmed in part and reversed in part.

I.

With respect to the first two issues on appeal, the Secretary argues that the 1986 Rule, promulgated subsequent to the district court decision in this case, automatically supercedes the invalidated 1979 Rule since, by its terms, it applies to cost reporting periods beginning July 1, 1979. Therefore he contends that, since the 1986 Rule has not yet been applied to the hospitals' cost reports for the contested years (1980 and 1981), there is no "final decision" of the PRRB, a prerequisite to federal court jurisdiction. He argues that, since the 1986 Rule automatically supplants the invalid 1979 Rule and governs the cost years in question, there is no longer a "live controversy" between the parties or, in the alternative, that the case must be remanded to the PRRB for issuance of a final decision pursuant to the 1986 Rule before the court can properly entertain jurisdiction over the hospitals' claims.

In so arguing, the Secretary ignores Supreme Court authority stating that a dispute involving a monetary judgment constitutes a concrete interest in the outcome of the litigation and precludes a finding of mootness based on subsequent events. Ellis v. Brotherhood of Railway, Airline and Steamship Clerks, 466 U.S. 435, 104 S.Ct. 1883, 80 L.Ed.2d 428 (1984); New York City Transit Authority v. Beazer, 440 U.S. 568, 580-81, 99 S.Ct. 1355, 1362-63, 59 L.Ed.2d 587 (1979) ("the case is not moot since their claims arose even before the Act itself was passed, and they have been awarded monetary relief"). Further, the Secretary's argument presumes that it is the agency's sole province to determine the issue of retroactivity. This precise issue arose and has been decided by this court in our opinion in Mason Hospitals v. Secretary of Dept. of Health and Human Services, 809 F.2d 1220 (6th Cir., 1987) where we held that the Secretary is prohibited from applying the 1986 Rule retroactively to 1979. Since our decision in that case is dispositive of the first two issues on appeal here, we hereby adopt the rationale expressed in Mason with reference to the twenty-seven hospitals in this case whose right to contest the retroactive effect of the 1986 Rule is undisputed.

II.

The only issue remaining is the jurisdictional one involving Bethesda and Deaconess Hospitals. The factual background relative to this issue follows.

Twenty-seven of the plaintiff-hospitals notified the fiscal intermediary at the time they filed their cost reports for 1980 and 1981 that they disputed the validity of the 1979 Malpractice Rule and its application to their claims for malpractice premium reimbursement. However, both Bethesda and Deaconess Hospitals complied with the 1979 Rule by completing and attaching Schedule D-8 to their cost reports, "Apportionment of Malpractice Insurance Costs." Schedule D-8 required hospitals to list their total malpractice insurance costs and then apply the methodology of the 1979 malpractice regulation in determining allowable Medicare costs.

The hospitals' cost reports thus included a claim for reimbursement for malpractice insurance costs, but completion of Schedule D-8 thus effectuated a "self-disallowance" of such malpractice insurance costs in excess of those allowed under the 1979 Rule. Because these hospitals complied with the Secretary's regulation and cost report instructions, there was no need for the fiscal intermediary reviewing their cost reports to make an audit adjustment with respect to the malpractice insurance issue before issuing a Notice of Program Reimbursement.

These hospitals timely filed requests for a hearing with the PRRB,...

To continue reading

Request your trial
7 cases
  • Edgewater Hosp., Inc. v. Bowen
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • January 9, 1989
    ...444 F.Supp. at 128.4 Bethesda Hospital considered the following cases in its review:Compare Bethesda Hospital v. Secretary of Health and Human Services, 810 F.2d 558 (CA6 1987) (case below) (finding there is no Board jurisdiction); North Broward Hospital Dist. v. Bowen, 808 F.2d 1405 (CA11 ......
  • Tallahassee Memorial Regional Medical Center v. Bowen, s. 85-3839
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • May 5, 1987
    ...though a regulation was being challenged under the 1980 grant of review under Sec. 1395oo(f). See Bethesda Hospital v. Secretary of Health and Human Services, 810 F.2d 558, 562 (6th Cir.1987) (bound by but suggesting disagreement with Baptist Hospital East ). Baptist Hospital East, which co......
  • Hospital Ass'n of Rhode Island v. Secretary of Health and Human Services
    • United States
    • U.S. Court of Appeals — First Circuit
    • June 8, 1987
    ...in the outcome of the litigation and precludes a finding of mootness based on subsequent events." Bethesda Hospital v. Secretary of Health and Human Services, 810 F.2d 558, 560 (6th Cir.1987) (promulgation of 1986 rule subsequent to lower court decision did not moot action on claim original......
  • Bethesda Hospital Association v. Bowen
    • United States
    • U.S. Supreme Court
    • April 4, 1988
    ...that it is without authority to decide the matter because the provider's claim involves a question of law or regulations. Pp. 403-408. 810 F.2d 558, reversed and KENNEDY, J., delivered the opinion for a unanimous Court. Leonard C. Homer, Baltimore, Md., for petitioners. Andrew J. Pincus, Ne......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT