Community Hosp. of Roanoke Valley v. Health and Human Services, s. 84-1709
| Decision Date | 26 August 1985 |
| Docket Number | Nos. 84-1709,s. 84-1709 |
| Court | U.S. Court of Appeals — Fourth Circuit |
| Parties | , Medicare&Medicaid Gu 34,872 COMMUNITY HOSPITAL OF ROANOKE VALLEY; Giles Memorial Hospital; Johnston Memorial Hospital; King's Daughters' Hospital; Lonesome Pine Hospital; Martha Jefferson Hospital; Memorial Hospital; Roanoke Memorial Hospital; Smyth County Community Hospital; Twin County Community Hospital; Waynesboro Community Hospital; and Wythe County Community Hospital, Appellees, v. HEALTH AND HUMAN SERVICES, Appellant. CULPEPER MEMORIAL HOSPITAL, INC.; DePaul Hospital; Fairfax Hospital; Loudoun Memorial Hospital; Mary Washington Hospital, Inc.; Medical College of Virginia; Petersburg General Hospital; Portsmouth General Hospital; St. Mary's Hospital; Winchester Memorial Hospital, Appellants, v. Margaret M. HECKLER, Secretary of Health and Human Services, Appellee. (L), 84-2005. |
Sanford V. Teplitzky, Baltimore, Md. (James B. Wieland, Ober, Kaler, Grimes & Shriver, Baltimore, Md., John William Crews, Martin A. Donlan, Jr., Crews, Hancock & Dunn, Richmond, Va., on brief), for appellants.
Javier A. Arrastia, Asst. Regional Atty., Philadelphia, Pa. (Beverly Dennis, III, Regional Atty., Dept. of Health and Human Services, Philadelphia, Pa., John P. Alderman, U.S. Atty., Roanoke, Va., Karen B. Peters, Asst. U.S. Atty., Elsie L. Munsell, U.S. Atty., Alexandria, Va., G. Wingate Grant, Asst. U.S. Atty., Richmond, Va., on brief), for appellees.
Before RUSSELL, HALL and ERVIN, Circuit Judges.
This appeal concerns the validity of Medicare accounting practices governing hospital labor/delivery room services. The plaintiff hospitals seek reimbursement from the Department of Health and Human Services for services provided to Medicare beneficiaries, and challenge the agency's reimbursement practices. In filing their requests for reimbursement with the agency, some of the hospitals complied with the Secretary's labor/delivery room accounting methods and others did not. The complying and noncomplying hospitals then challenged the reimbursement practices without success in the administrative appeals process. Subsequently, the hospitals filed suit in federal court.
Upon cross motions for summary judgment, the United States District Courts for the Eastern and Western Districts of Virginia rendered contrary rulings. In Community Hospital of Roanoke Valley v. Heckler, 588 F.Supp. 674 , the court ruled, first, that it had jurisdiction to consider appeals by the hospitals that had complied with the challenged practices, and second, that the accounting methods were improper. In Culpeper Memorial Hospital v. Heckler, 592 F.Supp. 1173 (E.D.Va.1984), the court declined to consider the jurisdictional question, and found the accounting policy to be a permissible exercise of agency discretion. The Secretary now appeals from the decision in Community Hospital, and the hospitals appeal from the ruling in Culpeper. We reverse the jurisdictional ruling in Community Hospital and affirm that case on the merits. We reverse the judgment in Culpeper.
The plaintiffs in these consolidated cases are acute care general hospitals certified as Medicare providers. See 42 U.S.C. Sec. 1395x(u). The hospitals provide services to Medicare beneficiaries and are entitled to reimbursement for the "reasonable cost" of the services. See 42 U.S.C. Sec. 1395x(v). The hospitals claim that the method of computing patient costs during the billing period at issue in this case 1 improperly diluted the actual cost of Medicare patient services. As a result, they argue that Medicare costs have been shifted to non-Medicare patients in violation of 42 U.S.C. Sec. 1395x(v)(1)(A).
For the purpose of Medicare reimbursement, hospital services are divided into three areas: 1) routine services in general care areas such as normal hospital beds, nursing services and meals, 45 C.F.R. Sec. 405.452(d)(2), 2) routine services in special care areas such as intensive care and coronary care units; and 3) ancillary services such as x-rays and lab analysis for which separate charges are customarily made. 42 C.F.R. Sec. 405.452(d)(3). Medicare reimbursement is determined separately for each of these three areas. Reimbursement for routine services in general care areas is determined by multiplying the average cost per patient per day of routine care by the number of Medicare patients receiving routine services. The disputed question in this case is whether the method of calculating average routine costs is rational and is consistent with the Medicare statute.
The average cost per day of providing routine services is calculated by dividing the overall cost of the services by the number of Medicare and non-Medicare patients using the services. The average cost per day, or the "per diem," is then multiplied by the number of days of care rendered to Medicare beneficiaries. The resulting figure is the amount of reimbursement a hospital is entitled to receive. 42 C.F.R. Sec. 405.452(d)(2). This process is illustrated as follows:
Total Cost of
Routine Services = Average Cost
---------------- "Per Diem"
Total Number of
"Inpatient Days"
Average Cost X Number of = Amount
"Per Diem" Medicare of
"Inpatient Reimbursement
Days"
The total number of "inpatient days" is determined by counting the number of inpatients present in the hospital each day at the "midnight census hour." Each patient present at midnight is counted as representing one full day of routine care costs. Patients who have incurred routine costs during the day in question but have been discharged before midnight are not counted. Patients present at midnight who have been admitted shortly before the census hour and have only received a partial day's care are counted as having incurred a full day of routine costs. By counting only one of two partial days, the ultimate patient count approximates the number of 24-hour patient days actually spent in the hospital.
The issue disputed in this case is the propriety of including patients in the labor/delivery room in the overall patient count at the midnight census hour. In 1976, the Secretary adopted a policy requiring patients in the labor/delivery room at the census hour to be included in the routine care inpatient count. Provider Reimbursement Manual (hereinafter "PRM"), Part I Sec. 2345 (September 1, 1976). While hospitals were required to include labor/delivery room patients in the number of inpatients receiving routine care, the costs of labor/delivery room services were not included in overall routine costs. This is due to the fact that labor/delivery room services are ancillary, not routine, services. Id. at Sec. 2202.8. The requirement that labor/delivery room patients be included in the inpatient count reduces the average per diem cost of routine services. Because few Medicare patients use labor/delivery room services, it also reduces the compensation the hospitals receive for routine services. This result can be illustrated as follows using hypothetical figures:
Because they believed the labor/delivery room policy improperly reduced their Medicare reimbursement, several of the hospitals did not follow the requirement in calculating their routine costs for the applicable reimbursement period. Their accounting of routine service costs was rejected by the fiscal intermediary. The remaining hospitals complied with the policy, and joined the noncomplying hospitals in an appeal to the Provider Reimbursement Review Board ("PRRB"). The PRRB determined that it did not have jurisdiction to consider challenges to the policy by the hospitals that had complied with it. On the merits, the PRRB sustained the position of the noncomplying hospitals. It found that "obstetrical patients in the labor/delivery room ancillary service cost center at the inpatient census-taking hour have not received routine services." (JA 11). Consequently, the PRRB ruled that it was improper to include these patients in the inpatient count used for apportioning routine care costs.
The Deputy Administrator of the Health Care Financing Administration ("HCFA") 2 affirmed the PRRB's jurisdictional ruling and reversed the PRRB's substantive ruling. The Deputy Administrator believed that the labor/delivery room policy was proper because although a "labor/delivery room patient may not receive full routine services until she actually leaves the delivery room," these services "are always available to her in the hospital." (JA 26). In addition, "significant standby costs" are incurred in reserving routine beds for maternity patients in the labor/delivery area. Further, patients in other ancillary areas at the census hour, such as operating rooms and radiology departments, are properly included in the inpatient count. Consequently, the Deputy Administrator concluded that the policy was reasonable and was consistent with the Medicare regulations.
Both complying and noncomplying hospitals then sought judicial review of the Deputy Administrator's decision. They filed group appeals...
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