Creighton Omaha Regional Health Care Corp. v. Bowen
| Decision Date | 01 July 1987 |
| Docket Number | Nos. 85-2160,85-2161,s. 85-2160 |
| Citation | 822 F.2d 785 |
| Parties | , Medicare&Medicaid Gu 36,391 CREIGHTON OMAHA REGIONAL HEALTH CARE CORPORATION, a Nebraska nonprofit corporation, Appellee, v. Otis R. BOWEN, M.D., Secretary of Health and Human Services, Appellant. CREIGHTON OMAHA REGIONAL HEALTH CARE CORPORATION, a Nebraska nonprofit corporation, Appellant, v. Otis R. BOWEN, M.D., Secretary of Health and Human Services, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Lyman L. Larsen, Omaha, Neb., for appellant.
Frances Reddis, Kansas City, Mo., for appellee.
Before JOHN R. GIBSON, Circuit Judge, BRIGHT, Senior Circuit Judge, and HANSON, * Senior District Judge.
Creighton Omaha Regional Health Care Corporation, d/b/a St. Joseph's Hospital (Hospital), challenges the district court's 1 decision reviewing the Secretary of Health and Human Services' determination regarding cost reimbursement under the Medicare Act. The district court upheld the Secretary's determination that the Hospital's Intermediate Care Unit does not meet the criteria for a "special care unit" for reimbursement purposes. In his cross-appeal, the Secretary challenges the district court's reversal of the Secretary's decision that costs from a computerized arrythmia monitoring system used in the Hospital's Intensive, Cardiac, and Intermediate care units are not reimbursable as "ancillary services." For the reasons stated below, we affirm the district court's decision with regard to the special care unit issue, but we vacate the district court's decision concerning the ancillary service issue and direct the district court to remand this issue to the appropriate administrative body for further proceedings.
Under the Medicare Act, 42 U.S.C. Secs. 1395-1395zz (1982 & Supp.1985), hospitals that qualify as "providers" of medical services must furnish medical care to Program beneficiaries. In return, the Program reimburses the provider for the "reasonable cost" of the services, as defined by the Act and regulations promulgated thereunder. Statutory responsibility for administering the Program resides in the Secretary of Health and Human Services. The Secretary, however, has delegated the responsibility to the Health Care Financing Administration.
The Secretary reimburses providers under the Program through "Intermediaries"--public or private organizations nominated by a provider for the purpose of contracting with the Secretary in order to determine the amounts payable under the Program. Periodically, the Secretary publishes and updates a Provider Reimbursement Manual (PRM) through which he communicates his position and policies to the contractual intermediary for implementation of the Medicare regulations.
St. Joseph's Hospital is a 587-bed nonprofit, general, short-term care facility located in Omaha, Nebraska. As part of its comprehensive service, the Hospital has maintained both Intensive (ICU) and Cardiac Care Units (CCU). In 1972, the Hospital established an "Intermediate Care Unit" (IMCU) which is the center of controversy in this appeal.
Vast changes and new developments in the coronary care field prompted the Hospital to establish the IMCU. Despite the tremendous success generally of coronary care units, many high-risk patients died after being transferred from a coronary care unit to a routine care unit. Medical research, however, shows that mortality rates for cardiac patients can be reduced if the specialized care and surveillance available in coronary care units is duplicated, but with fewer restrictions, in another unit. This new type of unit is often referred to as a "step-down" or "subintensive" care unit. The IMCU serves as such a "step-down" unit.
All beds in the Hospital's ICU, CCU, and IMCU have cardiac monitoring capacity. The cardiac monitoring available in the IMCU, however, is more flexible than the type of monitoring used in either the ICU or CCU. While both the ICU and CCU employ only "hardwire" monitoring, the IMCU offers "telemetry" monitoring. Telemetry monitoring utilizes a remote unit that attaches to the patient and allows him or her to walk. The Hospital does not provide cardiac monitoring in its routine care areas.
In addition to the extensive conventional monitoring devices, the Hospital also utilizes a unique computerized arrythmia monitoring system. The system, developed by Creighton University, is not commercially available. Specially trained technicians constantly verify machine accuracy and adjust the system to the needs of individual patients. The system functions as an independent, accurate, and effective supplement to the conventional monitoring system and allows nurses to deliver more direct patient care. Furthermore, the computerized system aids the identification of heart rhythm problems.
Prior to December 31, 1976, the Hospital's Intermediary, Mutual of Omaha, treated the IMCU as a special care unit for Medicare reimbursement purposes. On June 19, 1980, however, the Intermediary issued a Notice of Amount of Program Reimbursement for the cost reporting year ending December 31, 1977. In effect, the notice reclassified the IMCU from "special care unit" to a unit within the "general routine care area" for cost purposes. 2 The Intermediary based its decision on revised PRM Sec. 2202.7 issued by the Secretary in June of 1977. Similar notices and reclassifications were made for the cost reporting years ending in 1976 and 1978. Consequently, for the years 1976, 1977, and 1978, the Hospital received $60,000, $110,000 and $350,000 less than under the earlier applicable regulations.
The Hospital appealed the Intermediary's determination to the Provider Reimbursement Review Board (PRRB). Although the PRRB concluded that the IMCU did not qualify as a special care unit, it found, on its own motion, that the computerized monitoring service provided in the ICU, CCU, and IMCU should be treated as an "ancillary service." The effect of this decision would allow the Hospital to recoup some, if not all, of the reimbursement amounts the Hospital had lost.
The Deputy Administrator of the Health Care Financing Administration reviewed the PRRB's decision. The Administrator upheld the PRRB's decision regarding the special care unit, but overturned the decision to categorize the computerized monitoring system as an ancillary service. As the final decision of the agency, the Administrator's decision also represents the Secretary's decision.
The Hospital appealed the Secretary's decision to the district court. After receiving a recommendation from the United States Magistrate, the district court affirmed the Secretary's decision with respect to the special care unit, but reversed the Secretary with respect to the ancillary service issue. In effect, the district court reinstated the PRRB's initial decision.
This case presents two issues: (1) whether the Secretary's criteria interpreting the definition of a "special care unit" as published in the Provider Reimbursement Manual, HIM 15-1, Sec. 2202.7, are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law; and (2) whether the Secretary's criteria for classifying a service as "ancillary" are plainly erroneous or inconsistent with the regulation.
We apply a well-recognized standard on review. We may not set aside the Secretary's decision unless it is arbitrary, capricious, an abuse of discretion, unsupported by substantial evidence, or otherwise not in accordance with the law. An administrative agency's interpretation of its own regulations deserves considerable deference. Research Medical Center v. Schweiker, 684 F.2d 599, 602 (8th Cir.1982); Medical Center of Independence v. Harris, 628 F.2d 1113, 1117 (8th Cir.1980). A reviewing court should not reject reasonable administrative interpretation even if another interpretation may also be reasonable. Blue Cross Assoc. v. Harris, 622 F.2d 972, 978-79 (8th Cir.1980) (quoting Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965)). An agency interpretation, however, that is plainly erroneous or inconsistent with the regulation must be reversed. Abbott-Northwestern Hosp. v. Schweiker, 698 F.2d 336, 340 (8th Cir.1983); Columbus Community Hosp. v. Califano, 614 F.2d 181, 187 (8th Cir.1980).
42 C.F.R. Sec. 405.452(d)(10) (1978) determines whether the IMCU should be reimbursed as a special care unit. At all times relevant to the case the regulation provided as follows:
To be considered an intensive care unit, coronary care unit, or other special care inpatient hospital unit, the unit must be in a hospital, must be one in which the care required is extraordinary and on a concentrated and continuous basis and must be physically identifiable as separate from general patient care areas. There shall be specific written policies for each of such designated units which include, but are not limited to burn, coronary care, pulmonary care, trauma, and intensive care units but exclude postoperative recovery rooms, postanesthesia recovery rooms, or maternity labor rooms.
Id. The parties agree that the only requirement in dispute is whether the care provided by the IMCU is "extraordinary and on a concentrated and continuous basis."
In 1977, the Secretary revised PRM Sec. 2202.7 to clarify the agency's position regarding the proper classification of subintensive units. 3 The Secretary contends that the facility in question must be compared to the categories of facilities enumerated in the regulations (burn, coronary, pulmonary care, trauma, and intensive care). If the facility in question is not comparable to the enumerated facilities, then it cannot qualify as a special care unit even though the facility renders care over and above the care that is rendered in a routine area. ...
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