BGM ENTERPRISES v. Harris

• Decision Date: 11 January 1980
• Docket Number: No. CV-79-6-GF.,CV-79-6-GF.
• Citation: 482 F. Supp. 1073
• Parties: B. G. M. ENTERPRISES, d/b/a Park Place Nursing Home and Rehabilitation Center, Plaintiff, v. Patricia Roberts HARRIS, Secretary, Department of Health, Education and Welfare, and Montana Foundation for Medical Care, Defendants.
• Court: U.S. District Court — District of Montana

482 F. Supp. 1073

B. G. M. ENTERPRISES, d/b/a Park Place Nursing Home and Rehabilitation Center, Plaintiff, v. Patricia Roberts HARRIS, Secretary, Department of Health, Education and Welfare, and Montana Foundation for Medical Care, Defendants.

No. CV-79-6-GF.

United States District Court, D. Montana, Great Falls Division.

January 11, 1980.

Dennis E. Lind, Datsopoulos & MacDonald, Missoula, Mont., for plaintiff.

Jerome T. Loendorf, Helena, Mont., for Montana Foundation for Medical Care.

Robert T. O'Leary, U. S. Atty., Butte, Mont., for defendants.

MEMORANDUM

HATFIELD, District Judge.

Plaintiff, B. G. M. Enterprises, d/b/a Park Place Nursing Home and Rehabilitation Center ("Nursing Home"), brings this action under Titles XI and XIX of the Social Security Act, 42 U.S.C. §§ 1301 et seq. and 42 U.S.C. §§ 1396 et seq., alleging that its constitutional rights to due process and equal protection were violated when defendants discontinued using the Nursing Home as a designated Medicare-Medicaid review authority. Jurisdiction vests in this court pursuant to 28 U.S.C. § 1331(a).

Defendants have moved to dismiss plaintiff's claims, plaintiff has responded thereto, and the matter is ripe for disposition.

Plaintiff is a licensed long-term care skilled nursing facility participating in Medicare and Medicaid programs, with its principal place of business in Great Falls, Montana.

Defendant Harris¹ is Secretary of the Department of Health, Education and Welfare ("HEW"), the federal agency responsible for the administration of the Social Security Act. Defendant Montana Foundation for Medical Care ("MFMC") is the entity designated by HEW as the Professional Standard Review Organization ("PSRO") for Montana. A PSRO, under the Social Security Act (the "Act"), ordinarily is a nonprofit professional association composed of physicians licensed to practice within the PSRO area, whose membership includes a substantial proportion of all physicians in that area. 42 U.S.C. § 1320c-1(b). A PSRO has the duty to review the professional health care services and items provided within its area by physicians and health care facilities to insure compliance with Act requirements. The PSRO may delegate review functions to statutorily designated health care facilities.

In the course of its review, the PSRO must determine whether:

(A) such services and items are or were medically necessary;

(B) the quality of such services meets professionally recognized standards of health care; and

(C) in case such services and items are proposed to be provided in a hospital or other health care facility on an inpatient basis, such services and items could, consistent with the provision of appropriate medical care, be effectively provided on an outpatient basis or more economically in an inpatient health care facility of a different type.

42 U.S.C. § 1320c-4(a)(1).

A physician who is a member of the PSRO may not review a patient's health care services for which he was directly responsible, nor may he review services provided in or by an institution in which he or his family has a significant financial interest. 42 U.S.C. § 1320c-4(a)(6). If a PSRO reviews a health care service or item and disapproves it, payment may not be made for that service or item under the Social Security Act. 42 U.S.C.A. § 1320c-7(a). The Act imposes upon health care practitioners and facilities the obligation to assure that services and items for which payment is made under the Act:

(A) will be provided only when, and to the extent, medically necessary; and

(B) will be of a quality which meets professionally recognized standards of health care; and

(C) will be supported by evidence of such medical necessity and quality in such form and fashion and at such time as may reasonably be required by the Professional Standards Review Organization in the exercise of its duties and responsibilities . . ..

42 U.S.C.A. § 1320c-9(a)(1). If the PSRO reports—and the Secretary agrees—that a practitioner or facility has demonstrated an unwillingness or an inability to comply with these obligations, the Secretary may exclude that practitioner or facility from receiving payments under the Social Security Act, or he may require repayment of the wrongful payments made to the practitioner or facility. 42 U.S.C.A. § 1320c-9(b).

The Secretary of HEW must reimburse the PSRO for all expenses which the PSRO "reasonably and necessarily" incurs in performing its review duties and functions. 42 U.S.C. § 1320c-4(f)(2).

The provision at issue in this litigation is 42 U.S.C. § 1320c-4(e)(1). Prior to 1977, that provision read as follows:

Each Professional Standards Review Organization shall utilize the services of, and accept the findings of, the review committees of a hospital or other operating health care facility or organization located in the area served by such organization, but only when and only to the extent and only for such time that such committees in such hospital or other operating health care facility or organization have demonstrated to the satisfaction of such organization their capacity effectively and in timely fashion to review activities in such hospital or other operating health care facility or organization (including the medical necessity of admissions, types and extent of services ordered, and lengths of stay) so as to aid in accomplishing the purposes and responsibilities described in subsection (a)(1), except where the Secretary disapproves, for good cause, such acceptance.

The PSRO under this provision could and did delegate review functions to plaintiff, an independent skilled nursing facility which is not part of a hospital.

In October of 1977, Congress enacted Public Law 95-142, which made several amendments to the Social Security Act. Section 5(d)(3)(A) of that statute provided:

Section 1155(e) (1) of such Act is amended by striking out "of a hospital or other operating health care facility or organization" and inserting in lieu thereof "of a hospital (including any skilled nursing facility, as defined in section 1861(j), or intermediate care facility, as defined in section 1905(c), which is also a part of such hospital) or other operating health care facility or organization (other than such a skilled nursing facility or intermediate care facility which is not a part of a hospital)".

Thus, the amendments made by Public Law 95-142 prohibit a PSRO from delegating its review responsibilities to a review committee of a skilled nursing facility or an intermediate care facility, unless such facility is a part of a hospital to which review responsibility has been delegated by the PSRO.

The amendments therefore preclude the PSRO from granting further review authority to plaintiff, a skilled nursing facility "which is not part of a hospital." Defendant MFMC terminated plaintiff's delegated authority in July, 1978.

Plaintiff claims that it is still qualified to conduct Medicare-Medicaid review, and that the amendments to 42 U.S.C. § 1320c-4(e)(1), which preclude the PSRO from delegating review authority to plaintiff and all other nursing facilities which are not part of hospitals, have unconstitutionally deprived plaintiff of due process and the equal protection of the law.

Defendant Harris claims initially that plaintiff's prayer for relief is barred by the doctrine of sovereign immunity. Plaintiff, in its amended complaint, asks for an order directing defendant Secretary of HEW "to promulgate regulations allowing continued delegated review authority for those skilled care facilities given such authority prior to the amendment of 42 U.S. C.A. §§ 1301 et seq." A requested remedy is precluded by principles of sovereign immunity when "the relief requested cannot be granted by merely ordering the cessation of the conduct complained of but will require affirmative action by the sovereign . . .." Larson v. Domestic & Foreign Corp., 337 U.S. 682, 691 n.11, 69 S.Ct. 1457, 1462 n.11, 93 L.Ed. 1628 (1949). Plaintiff's request that this court order the Secretary of a government agency to promulgate regulations favorable to plaintiff's interests is such a request to "require affirmative action by the sovereign" which is barred by sovereign immunity. Congress of Racial Equality v. Commissioner, Social Security Administration, 270 F.Supp. 537, 541 (D.Md. 1967). Absent any showing by plaintiff that the government has consented to liability for suits requesting such relief, plaintiff's claim for relief that defendant Harris be required to promulgate regulations is barred by principles of sovereign immunity and will be dismissed.

Plaintiff, however, also seeks declaratory relief from which the governmental defendant is not insulated from suit under the sovereign immunity doctrine. See, Tennessee Power Co. v. Tennessee Valley Authority, 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 (1939). Plaintiff first asks this court to declare that the amendments to 42 U.S.C. §§ 1301 et seq., do not preclude the PSRO from delegating review authority to plaintiff.

The express language of 42 U.S.C. § 1320c-4(e)(1), as amended, however, clearly precludes a PSRO such as defendant Montana Foundation for Medical Care from delegating review authority to any "skilled nursing facility or intermediate care facility which is not part of a hospital". Plaintiff, a free-standing skilled nursing facility, is not part of a hospital and therefore may not be delegated review authority. The amended statute contains no grandfather clause for free-standing skilled nursing facilities which previously had been delegated review authority, and plaintiff has pointed to nothing in the legislative history of the Act to indicate that Congress intended to create such an exception. This court will not rewrite the statute to create a grandfather clause which would exempt plaintiff from the provisions of 42 U.S.C. § 1320c-4(e)(1) when Congress has not seen fit to include such an exception.

Plaintiff alternatively claims that the 42...