Clinton Memorial Hosp. v. Shalala

• Decision Date: 10 December 1993
• Docket Number: No. 92-5107,92-5107
• Citation: 10 F.3d 854
• Parties: , 62 USLW 2436, 43 Soc.Sec.Rep.Ser. 20, Medicare&Medicaid Guide P 41,946 CLINTON MEMORIAL HOSPITAL, Appellant v. Donna E. SHALALA, Secretary, Department of Health and Human Services, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 854

10 F.3d 854

304 U.S.App.D.C. 79, 62 USLW 2436, 43

Soc.Sec.Rep.Ser. 20,

Medicare&Medicaid Guide P 41,946

CLINTON MEMORIAL HOSPITAL, Appellant v. Donna E. SHALALA, Secretary, Department of Health and Human Services, Appellee.

No. 92-5107.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 17, 1993.

Decided Dec. 10, 1993.

Appeal from the United States District Court for the District of Columbia (90cv02075).

Kathleen Houston Drummy, Los Angeles, CA, argued the cause for appellant. With her on the briefs were Richard K. Simon, Tracy Green, Los Angeles, CA, and Amy Hancock, Washington, DC.

Kathleen M. Scully-Hayes, Counsel, U.S. Dept. of Health and Human Services, Washington, DC, argued the cause for appellee. With her on the brief were Stuart Schiffer, Acting Asst. Atty. Gen., and J. Ramsey Johnson, U.S. Atty., Washington, DC.

Before: EDWARDS, WILLIAMS, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

Clinton Memorial Hospital, a rural public hospital certified as a provider of services in the federal Medicare program, challenges administrative regulations that prevent it from being treated as a "sole community hospital" under that program. The district court upheld the regulations. Clinton Memorial Hosp. v. Sullivan, 783 F.Supp. 1429 (D.D.C.1992). We affirm.

* * *

In 1972 Congress authorized the Secretary of Health, Education and Welfare to establish limits on the costs that hospitals could recover for care of Medicare beneficiaries. Pub.L. No. 92-603 Sec. 223, 86 Stat. 1329, 1393 (1972). The House Ways and Means Committee and the Senate Finance Committee, however, both said that they "expect[ed]" the provision not to apply in communities with only one hospital, reasoning that beneficiaries in those communities would be unable to shop around for hospital services, and that in any event the absence of comparative cost data in such localities would make it hard to set appropriate limits. See H.R.Rep. No. 231, 92d Cong., 1st Sess. 84 (1971); S.Rep. No. 1230, 92d Cong., 2d Sess. 188 (1972), U.S.Code Cong. & Admin.News 1972, p. 4989. Taking the hint, the then-Secretary promulgated regulations authorizing exemptions for any hospital that

by reason of factors such as isolated location or absence of other providers of the same type, is the sole source of such care reasonably available to beneficiaries.

20 CFR Sec. 405.460(f)(4) (1975).

The definition of hospitals eligible to be treated as "sole community hospitals" ("SCHs") remained purely regulatory until 1983. In that year, Congress--seeking to encourage hospitals to operate more efficiently [304 U.S.App.D.C. 81] --abandoned the old method of reimbursing Medicare providers and instituted the "Prospective Payment System", which pays hospitals flat sums based on the diagnoses of the Medicare beneficiaries treated. Aware that some hospitals might not flourish under this system, Congress established a different reimbursement formula for sole community hospitals and for the first time provided a statutory definition of the term. Drawing heavily on the definition contained in the Secretary's prior regulations, Congress declared:

[T]he term 'sole community hospital' means a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to individuals in a geographical area who are entitled to benefits under part A [the portion of the Medicare program covering payment for in-patient hospital care].

Pub.L. No. 98-21 Sec. 601(e), 97 Stat. 158 (1983) (current version at 42 U.S.C. Sec. 1395ww(d)(5)(D)(iii) (Supp. III 1991)).

The Secretary responded with new regulations that established more clear-cut criteria for granting SCH status. See 48 Fed.Reg. 39752, 39780-82 (1983) (proposed regulations); 49 Fed.Reg. 234, 270-72 (1984) (final regulations). The regulations established four categories, based on the hospital's proximity to any "like hospital". ¹ Roughly speaking, the closer a hospital was to any like hospital, the heavier was its burden to show that it was, nonetheless, a sole community hospital. First, neither urban hospitals nor rural hospitals located within 15 miles of another like hospital could ever be classified as SCHs (except by virtue of a grandfathering provision). Second, rural hospitals located between 15 and 25 miles of other like hospitals could be SCHs only if "local topography or periods of prolonged severe weather conditions" made the other like hospitals "inaccessible for at least one month out of each year". Third, a rural hospital located between 25 and 50 miles of the nearest like hospital could qualify as an SCH if either the other hospitals were inaccessible in this sense or the applying hospital accounted for at least 75 percent of the hospital admissions of residents in its service area. Finally, rural hospitals located more than 50 miles away from the nearest like hospital could receive SCH treatment without any further showing. 42 CFR Sec. 412.92(a) (1985). ² In all cases, mileage is measured as distance over "improved roads". Id. at Sec. 412.92(c)(1). Clinton Memorial Hospital loses out under these regulations--it lies within 25 miles of three other "like hospitals" and cannot show a month of inaccessibility.

Here Clinton attacks the regulations on a variety of substantive and procedural theories. The district court rejected the challenges, and so do we.

I

Clinton first asserts that the Secretary has a statutory obligation to consider the admitting practices of local physicians, the availability of public transportation, and other factors when assessing a hospital's application for SCH status--even if the hospital is located within 25 miles of another like facility and if neither topography nor weather renders the other facility inaccessible for a full month. These factors sometimes were decisive under the regulatory scheme that prevailed before 1983. Although the Health Care Financing Administration ("HCFA"), the agency through which the Secretary administers the Medicare program, noted in a 1974 "Intermediary Letter" that "generally" hospitals within 25 miles of a like facility would not qualify for the exemption, I.L. No. 74-22 (July 1974), [1974 Transfer Binder] Medicare & Medicaid Guide (CCH) p 27,044, another Intermediary Letter in 1978 suggested that hospitals should receive SCH status whenever the admitting patterns of local physicians resulted in "general nonuse of the otherwise closest like facilities by residents in the hospital's service area". I.L. No. 78-17 (April 1978), [1978 Transfer Binder] Medicare & Medicaid Guide (CCH) p 28,972. In practice, hospitals within 25 miles of a like hospital occasionally won the status even when the other like facilities were not as physically inaccessible as is now required. See, e.g., Hamilton Memorial Hosp. v. Schweiker, [1982 Transfer Binder] Medicare & Medicaid Guide (CCH) p 32,109 (N.D.Ga., June 30, 1982); Santa Ynez Valley Hosp. v. Blue Cross Ass'n, [1978 Transfer Binder] Medicare & Medicaid Guide (CCH) p 29,221 (PRRB July 25, 1978); see also St. Elizabeth Community Hosp. v. Heckler, 745 F.2d 587 (9th Cir.1984); Graham Hosp. Ass'n v. Heckler, 739 F.2d 285 (7th Cir.1984). Clinton contends that Congress intended to preserve the factors that were considered under the old regulations.

Measured against the statutory language, the Secretary's regulation appears neither to contradict "the unambiguously expressed intent of Congress" nor to be an impermissible reading of the statute. See Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). The Secretary has taken into account each of the four overlapping factors that Congress identified in 1983--isolated location, weather conditions, travel conditions, and absence of other hospitals. ³ Although it is true that in some cases mileage alone ("isolated location" and "absence of other hospitals") will resolve a case (hospitals within 15 miles of a like hospital never qualify, ones more than 50 miles away always do), nothing in the statutory language suggests that Congress intended each of the four variables to be considered as to every applicant hospital. Interestingly, Clinton's category (a hospital with a like hospital located 15 to 25 miles away) takes account of all four factors--under the rubric of "accessibility". While one might argue that alternative hospitals are not "reasonably available" (within the meaning of the statute) in a community whose doctors cannot or do not currently admit patients to them, the Secretary's contrary interpretation of the statutory language seems permissible, in light of the statute's failure to refer to admitting patterns and its delegation to the Secretary of primary responsibility for implementing the SCH definition.

Clinton protests, however, that the background of the statutory definition of "sole community hospital" makes clear Congress's desire to preserve the factors that mattered before 1983, and that the post-1983 regulations violate this unambiguous intent. To stave off criticism that it is elevating legislative history over statutory text, Clinton first asserts that the statutory definition of SCH uses the phrases "isolated location" and "absence of other hospitals"--the two factors that had appeared in the Secretary's old regulatory definition--as "terms of art" meant to incorporate all the factors that were relevant before 1983. Clinton invokes Morissette v. United States, 342 U.S. 246, 72 S.Ct. 240, 96 L.Ed. 288 (1952), but these two phrases hardly qualify as words that reflect "the legal tradition and meaning of centuries of practice", id. at 263, 72 S.Ct. at 250 (considering meaning of "steals" in a criminal statute).

Nor does...