Blue Cross Ass'n v. Califano
| Decision Date | 29 June 1979 |
| Docket Number | No. 79-0213-CV-W-2,79-0226-CV-W-2.,79-0213-CV-W-2 |
| Citation | 473 F. Supp. 1047 |
| Parties | BLUE CROSS ASSOCIATION et al., Plaintiffs, v. Joseph A. CALIFANO et al., Defendants. MISSOURI HOSPITAL ASSOCIATION et al., Plaintiffs, v. Joseph A. CALIFANO, Jr., et al., Defendants. |
| Court | U.S. District Court — Western District of Missouri |
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Thos. E. Deacy, Jr., Spencer J. Brown, Phillip B. Grubaugh, Deacy & Deacy, Kansas City, Mo., for plaintiffs Blue Cross Ass'n & Blue Cross Hosp. Serv., Inc. of Mo.
James C. Munson, James D. Adducci, Kirkland & Ellis, Chicago, Ill., for plaintiffs Blue Cross Ass'n.
Max O. Bagby, B. W. Jacob, Bagby, Winger & Jacob, Kansas City, Mo., for plaintiff Blue Cross of Kansas City.
Robert F. Schlafly, Schlafly, Griesedieck, Ferrell & Toft, St. Louis, Mo., for plaintiff Blue Cross Hosp. Serv., Inc. of Mo.
Carl J. Helmstetter, Spencer, Fane, Britt & Browne, Kansas City, Mo., for intervenor-plaintiff American Hospital Ass'n and for plaintiff Kansas City Area Hospital Assn.
Ronald S. Reed, Jr., U. S. Atty., Larry D. Coleman, Asst. U. S. Atty., Kansas City, Mo., Paul Blankenstein, Barbara L. Gordon, Dept. of Justice, Lloyd M. Weinerman, Dept. of HEW, Washington, D. C., Paul P. Cacioppo, Regional Atty., Dept. of HEW, Bruce R. Granger, Asst. Regional Atty., Dept. of HEW, Kansas City, Mo., for defendants.
John C. Shepherd, Coburn, Croft, Shepherd & Herzog, St. Louis, Mo., for plaintiff Hospital Ass'n. of Metropolitan St. Louis.
Cullen Coil, Carson, Monaco, Coil, Riley & McMillin, Jefferson City, Mo., for plaintiff Missouri Hospital Ass'n.
Wayne T. Stratton, Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, Kan., for plaintiff Kansas Hospital Assn.
This is an action for declaratory and injunctive relief. The Court has jurisdiction under the federal question provisions of 28 U.S.C. § 1331. Two cases were filed seeking the same relief on essentially the same grounds. The named defendants are identical. The cases are hereby consolidated for all purposes pursuant to Rule 42(a), Fed.R. Civ.P.
Plaintiffs seek to enjoin defendants from procuring a Medicare Part A Intermediary Contract for the State of Missouri and the metropolitan Kansas City area,1 for the operational period of January 1, 1980 to December 31, 1982, pursuant to a Department of Health, Education and Welfare Request for Proposal dated January 31, 1978.2 Plaintiffs initially sought a preliminary injunction. A conference was held on May 4, 1979 and it was determined that the entire controversy would be decided on cross-motions for summary judgment. Rule 65(a)(2), Fed.R.Civ.P. These motions were filed May 21, 1979. Many of the relevant facts have been stipulated. The record before the Court consists of the initial pleadings, the stipulations, additional proposed findings submitted by each side, affidavits submitted by each side, the briefs, and all exhibits. The following discussion constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a), Fed. R.Civ.P. Factual findings on matters which have not been stipulated have been made from the affidavits.3 There are, however, no disputed material facts. The Court holds that there is no genuine issue as to any material fact and that plaintiffs are entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.P.
Plaintiffs in case No. 79-0213 are the Blue Cross Association ("BCA"), Blue Cross of Kansas City and Blue Cross Hospital Services, Inc. of Missouri. BCA is a nonprofit Illinois corporation with its principal place of business in that state. BCA is a member organization of Blue Cross Plans, which are individual corporations. Blue Cross of Kansas City is a non-profit Missouri corporation with its principal place of business in this state, although it is also qualified to do business in Kansas. Blue Cross Hospital Services, Inc. of Missouri is a non-profit Missouri corporation with its principal place of business in this state.
Plaintiffs in case No. 79-0226 are the Missouri Hospital Association, the Kansas City Area Hospital Association, the Hospital Association of Metropolitan St. Louis, and the Kansas Hospital Association. The former three associations are Missouri corporations consisting of groups of hospitals located in Missouri. The Kansas Hospital Association is a Kansas corporation consisting of several hospitals located in Kansas. By order entered May 29, 1979, the American Hospital Association ("AHA") was granted leave to intervene as a plaintiff pursuant to Rule 24(b), Fed.R.Civ.P.
There are two defendants in each case. Joseph A. Califano, Jr., is Secretary of the United States Department of Health, Education and Welfare ("Secretary"). Leonard Schaeffer is Administrator of the Health Care Financing Administration, an agency within HEW. These defendants are responsible for administering the Medicare program pursuant to Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, et seq.
BCA currently is, and has been since the inception of the Medicare program, an intermediary and has been, since the inception of the Medicare program, serving as a Part A intermediary for providers of medical services located throughout the United States. BCA attained its status as a Part A intermediary through the nomination process set forth in 42 U.S.C. § 1395h. That statute provides in pertinent part:
(a) If any group or association of providers of services i. e., hospitals wishes to have payments under this part to such providers made through a national, State, or other public or private agency or organization and nominates such agency or organization for this purpose, the Secretary is authorized to enter into an agreement with such agency or organization providing for the determination by such agency or organization . . . of the amounts of the payments required pursuant to this part to be made to such providers . . ., and for the making of such payments by such agency or organization to such providers. . . .
BCA was originally nominated as an intermediary by AHA at the inception of the Medicare program. AHA had distributed declarations of intent to state hospital associations which distributed these declarations to the providers. The declarations of intent were executed by the providers and returned to the state associations which forwarded a listing of those providers declaring their intent to nominate BCA to AHA which made the official nomination. Since this original nomination, BCA has entered into a succession of contracts with the Secretary to function as an intermediary throughout the United States. In Missouri and the metropolitan Kansas City area, BCA is currently serving as a Medicare Part A intermediary for approximately 244 out of 268 providers.4 None of the nominations have been withdrawn, terminated, or changed in any way.
The intermediary agreement currently in effect between the Secretary and BCA is for a one-year period ending September 30, 1979, subject to certain exceptions which are not relevant here. BCA does not actually perform the day-to-day administration of the Medicare Part A program. These functions are performed through subcontracts between BCA and its member plans. Under these subcontracts, the member plans have the day-to-day contact with the providers, pay claims for covered services and audit providers to determine the proper cost basis for payment to them for covered services. BCA presently does not have the capacity to perform these claims payment and provider audit functions.
Blue Cross of Kansas City has served as a subcontractor to BCA in its performance of Part A Medicare functions in the metropolitan Kansas City area, and Blue Cross of Kansas City is presently party to a subcontract with BCA for the performance of such functions. Blue Cross Hospital Services, Inc. has served as a subcontractor to BCA in its performance of Part A Medicare functions in the State of Missouri outside the metropolitan Kansas City area, and is presently party to a subcontract with BCA for the performance of such functions. Any subcontract between BCA and its member plans is subject to approval by the Secretary.
BCA performs liaison activities between its various member plans and Congress, various governmental and regulatory agencies, organizations within the health care industry and other groups. It sets up standards, rules and qualifications for member plans and reviews their performance. It also performs certain services for its member plans such as the transfer of funds and credit, the provision of a telecommunication network, and various technical and consultative services. In its role as a Medicare Part A intermediary, BCA performs many of the same functions that it performs in its private business operations. Thus it: (1) maintains a telecommunication network which is used for the determination of the eligibility of individuals for coverage under Medicare; (2) assists in preparing manuals and operating instructions concerning Medicare; (3) provides data processing services; (4) serves as a center for communications between providers and the Secretary; (5) makes management studies in Medicare; (6) participates in and performs statistical and research studies as requested by the Secretary; (7) assists Medicare beneficiaries and subscribers to its private health care programs with inquiries regarding their respective health care programs; (8) provides a provider appeal mechanism for reimbursement disputes; and (9) assures the performance of the subcontracting plans.
On or about February 6, 1979, plaintiffs received a "Request for Proposal Medicare Part A Intermediary to Serve in the State of Missouri and the Metropolitan Kansas City Area," dated January 31, 1979 (RFP). The RFP announced that:
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