Blue Cross Ass'n v. Harris
| Decision Date | 30 June 1980 |
| Docket Number | 79-1733,Nos. 79-1732,s. 79-1732 |
| Citation | 622 F.2d 972 |
| Parties | BLUE CROSS ASSOCIATION, Appellee, and American Hospital Association, Intervenor-Appellee, v. Patricia R. HARRIS, Secretary of Health, Education & Welfare, Leonard Schaeffer, Administrator, Health Care Financing Administration, Appellants. MISSOURI HOSPITAL ASSOCIATION, a pro forma decree corporation, Kansas City Area Hospital Association, a corporation, Hospital Association of Metropolitan St. Louis, a corporation, Kansas Hospital Association, a corporation, Appellees, and American Hospital Association, Intervenor-Appellee, v. Patricia R. HARRIS, Secretary of the United States Department of Health, Education & Welfare, Leonard D. Schaeffer, Administrator of the Health Care Financing Administration, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Barbara L. Gordon, Atty., Civ. Div., Dept. of Justice, Washington, D. C. (argued), Alice Daniel, Acting Asst. Atty. Gen., Civ. Div., William G. Kanter, Atty., Civ. Div., Dept. of Justice, Washington, D. C., Ronald S. Reed, former U. S. Atty., St. Louis, Mo., and Lloyd M. Weinerman, Office of the General Counsel, Dept. of HEW, Baltimore, Md., on brief, for appellants.
James C. Munson, Kirkland & Ellis, Chicago, Ill. (argued), James D. Adducci and Kathleen Kelly Spear, Chicago, Ill., Thomas E. Deacy, Jr. and Philip B. Grubaugh, Deacy & Deacy, Kansas City, Mo., Cullen Coil, Carson, Monaco, Coil, Riley & McMillin, Jefferson City, Mo., Richard L. Epstein and Jay H. Hedgepeth, American Hospital Assn., Chicago, Ill., John C. Shepherd, Coburn, Croft, Shepherd & Herzog, St. Louis, Mo., Wayne T. Stratton, Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, Kan., and Carl H. Helmstetter, Spencer, Fane, Britt & Browne, Kansas City, Mo., on brief, for appellees.
Before LAY, Chief Judge and BRIGHT and HENLEY, Circuit Judges.
Patricia Harris, Secretary of Health, Education and Welfare, and Leonard Schaeffer, Administrator of the Health Care Financing Administration (collectively, the Secretary or HEW), bring these consolidated appeals from a judgment of the district court in favor of Blue Cross Association, et al. (Blue Cross). Blue Cross currently serves as a fiscal intermediary, an agency which deals with HEW on behalf of hospitals and other providers of Medicare services. See text at notes 1-5 infra. The issue before us on appeal is whether the Secretary, in soliciting offers for an experimental contract to administer Medicare Part A funds, must comply with the statutory provisions that normally govern the nomination and assignment of intermediaries such as Blue Cross.
Pursuant to a statutory provision authorizing HEW to enter into experimental contracts for the administration of Medicare funds, the Secretary solicited offers for a fixed price contract to administer Medicare Part A funds in Missouri and metropolitan Kansas City. The organizations and agencies solicited included, but were not limited to, fiscal intermediaries nominated by Missouri and metropolitan Kansas City health care providers. Blue Cross, a nominated intermediary, thereafter brought this suit, claiming that the Secretary's action in seeking offers from entities not nominated by health care providers exceeded her authority under the Medicare Act. The district court agreed and accordingly enjoined the Secretary from entering into any experimental contract until she had attempted in good faith to negotiate the contract with intermediaries nominated by the affected providers. Blue Cross Association v. Califano, 473 F.Supp. 1047, 1076-77 (W.D.Mo.1979). For reasons set forth below, we reverse the district court's judgment, vacate its injunction, and remand the case for entry of a judgment of dismissal.
In 1965 Congress enacted the Medicare Act (Medicare or the Act), 1 offering medical benefits to the elderly and disabled. Medicare Part A 2 primarily provides hospital insurance benefits for eligible Medicare recipients. As set forth in the Act, "any group or association of providers of (Medicare Part A) services" 3 may nominate a fiscal intermediary 4 to reimburse its members for costs incurred in treating Medicare recipients. 5 42 U.S.C. § 1395h(a) (Supp. II 1978). The Secretary contracts with these nominated intermediaries to administer Medicare Part A funds and compensates them on a cost basis. This means that HEW reimburses the intermediaries for administrative expenses as well as for funds advanced to providers. See 42 U.S.C. § 1395h(c), (a) (1976 & Supp. II 1978).
In 1972 Congress amended the Act. One section of the 1972 amendments, now codified at 42 U.S.C. § 1395b-1 (1976 & Supp. II 1978) (the experimental statute), authorized the Secretary "to develop and engage in experiments and demonstration projects" for a number of specified purposes. 42 U.S.C. § 1395b-1(a)(1) (1976 & Supp. II 1978). In pertinent part, the experimental statute authorizes the Secretary to determine by means of an experiment
whether, and if so which type of, fixed price or performance incentive contract would have the effect of inducing to the greatest degree effective, efficient, and economical performance of agencies and organizations making payment under agreements or contracts with the Secretary for health care and services under health programs established by this chapter (7 of Title 42, 42 U.S.C. § 301 et seq. (1976 & Supp. II 1978)) * * *. (42 U.S.C. § 1395b-1(a)(1) (F) (1976).)
The Secretary chose Missouri and metropolitan Kansas City as the laboratory for such an experiment. On January 31, 1979, HEW solicited proposals for a fixed price Medicare Part A intermediary contract covering these areas. The Secretary solicited proposals by issuing a Request for Proposal (RFP) 6 to organizations including but not limited to intermediaries nominated by Missouri and metropolitan Kansas City health care providers. 7
Having received the Secretary's RFP, Blue Cross instituted this action in district court for declaratory and injunctive relief. 8 After the parties filed cross motions for summary judgment, the district court held that, "insofar as the Request for Proposal * * * fail(ed) to recognize the applicability of 42 U.S.C. § 1395h," it exceeded the Secretary's authority under the experimental statute. 9 Blue Cross Association v. Califano, supra, 473 F.Supp. at 1076. The district court therefore enjoined the Secretary from soliciting offers from organizations not nominated by providers and from entering into an experimental fixed price contract, until she attempted in good faith to negotiate such a contract with the intermediaries nominated by health care providers in the affected areas. See note 7 supra. Blue Cross Association v. Califano, supra, 473 F.Supp. at 1076-77. If the contract was ultimately awarded to an entity not nominated by the providers, the district court also required the Secretary to give a full explanation to the affected providers and nominated intermediaries, and to afford the latter opportunity for a hearing subject to judicial review. See 42 U.S.C. § 1395h(e) (Supp. II 1978) and note 9 supra. Blue Cross Association v. Califano, supra, 473 F.Supp. at 1077.
The district court reasoned that because the experimental statute did not plainly authorize the Secretary to suspend the operation of the Act's provider nomination and intermediary due process provisions, 10 the Secretary must comply with those provisions. Id. at 1066-67, 1069. In other words, the district court construed the language of the experimental statute as giving the Secretary only narrow authority to waive compliance with other provisions of the Act. 11 Id. at 1067-68.
Because this case presents a question of statutory interpretation, we begin our analysis with the language of the statute itself. E. g., Touche Ross & Co. v. Redington, 442 U.S. 560, 568, 99 S.Ct. 2479, 2485, 61 L.Ed.2d 82 (1979); Southeastern Community College v. Davis, 442 U.S. 397, 405, 99 S.Ct. 2361, 2366, 60 L.Ed.2d 980 (1979); Reiter v. Sonotone Corp., 442 U.S. 330, 337, 99 S.Ct. 2326, 2330, 60 L.Ed.2d 931 (1979). The applicable language of the experimental statute provides:
(a)(1) The Secretary of Health, Education, and Welfare is authorized, either directly or through grants to public or nonprofit private agencies, institutions, and organizations or contracts with public or private agencies, institutions, and organizations, to develop and engage in experiments and demonstration projects for the following purposes:
(F) to determine whether, and if so which type of, fixed price or performance incentive contract would have the effect of inducing to the greatest degree effective, efficient, and economical performance of agencies and organizations making payment under agreements or contracts with the Secretary for health care and services under health programs established by this chapter(.) (42 U.S.C. § 1395b-1(a)(1)(F) (1976) (emphasis added).)
This language clearly does not require the Secretary to contract only with nominated intermediaries. On the contrary, the statute unambiguously vests the Secretary with authority to contract "with public or private agencies, institutions, and organizations," for the purpose of conducting the enumerated experiments. Id.
In a recent case presenting a question of statutory construction similar to that before us, the Seventh Circuit gave full effect to this sweeping language. Health Care Service Corp. v. Califano, 601 F.2d 934, 935 (7th Cir. 1979) (per curiam ), aff'g 466 F.Supp. 1190 (N.D.Ill.1979). The issue there was whether the Secretary could award an experimental fixed price contract for administration of the Medicare Part B program in Illinois without complying with the statutory requirement that HEW contract with a "carrier." See 42 U.S.C. §...
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