Davis v. Ball Memorial Hospital Ass'n

Decision Date03 December 1980
Docket NumberNo. 80-1209,80-1209
Citation640 F.2d 30
PartiesUneeda DAVIS et al., Plaintiffs-Appellants, v. BALL MEMORIAL HOSPITAL ASSOCIATION; Patricia Roberts Harris, in her capacity as Secretary of Health, Education and Welfare et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Jane A. Cullen, Legal Services Organization of Indiana, Inc., Bloomington, Ind., for plaintiffs-appellants.

John C. Hoyle, Dept. of Justice, Washington, D.C., for defendants-appellees.

Before FAIRCHILD, Chief Judge, CUMMINGS, Circuit Judge, and GRANT, Senior Judge. *

CUMMINGS, Circuit Judge.

Plaintiffs, three indigent persons formerly patients at Ball Memorial Hospital in Delaware County, Indiana, 1 originally brought this suit on behalf of themselves and all low income persons who have received or will receive care there charging violations of the defendant Hospital's obligations under the Constitution and the Hill-Burton Act, 42 U.S.C. § 291, et seq. 2 After the Hospital moved to join as defendants the members of the Indiana State Board of Health, the State Health Commissioner and the Secretary of Health, Education and Welfare (now Health & Human Services), plaintiffs amended their complaint to include these parties and to broaden the class to all persons in Indiana eligible for uncompensated services under the Act. On September 10, 1979, the Secretary moved to be dismissed as a party to the lawsuit, and on December 17, 1979, the district court granted the motion, thus eliminating the two relevant claims of the complaint insofar as they involved allegations concerning the Secretary. The district court thereafter denied plaintiffs' motion to enter this dismissal as a final judgment under Rule 54(b), and plaintiffs appealed. We now reverse and remand the district court's order with respect to one claim and affirm with respect to the other.

Originally enacted in 1946, the Hill-Burton Act 3 provides federal assistance for the construction and modernization of medical facilities nationwide. As a condition of receiving funds under the program, the Act requires each facility to give "assurances" that it will provide "a reasonable volume of services to persons unable to pay therefor" to the extent that the financial condition of the facility permits. 42 U.S.C. § 291c(e). 4 The tortuous development of the assurances requirement since adoption of the Act is set out in detail in the two opinions in American Hospital Association v. Harris, 625 F.2d 1328 (7th Cir., 1980) 5 and there is no need to repeat it here. Nevertheless, a brief overview of that development as it applies to this case may be useful.

Despite the presence of the assurances requirement in the Act, the Secretary failed to take steps to implement the provision until 1972, when substantive regulations were finally promulgated. 6 Those regulations, amended in 1974, stipulated that a facility could meet its indigent-care obligations either by setting aside for uncompensated services 3% of its operating costs or 10% of such federal assistance, whichever is less, or by simply certifying that it would not exclude any person because of an inability to pay for medical care. 42 C.F.R. § 53.111(d). The Secretary's power to ensure compliance with the regulations was, however, diluted by the structure of the Act. The Secretary's primary role was to see that the assurances were reflected in state health plans while State authorities were otherwise responsible for specific enforcement. As a consequence, efforts to effect compliance remained lax. See S.Rep.No. 93-1285, 93d Cong., 2d Sess., reprinted in U.S.Code Cong. & Admin.News pp. 7842, 7900 (1974).

In 1974, Congress passed Title XVI of the Public Health Services Act (42 U.S.C. § 300o), amending the Hill-Burton Act in part to provide stricter enforcement of the uncompensated services program. The new legislation gave the Secretary direct investigative and enforcement power, including the authority to withhold payments (42 U.S.C. § 300p-2(c)), acknowledged the possibility of private actions against the facilities (id.), and directed the Secretary to adopt new regulations for the uncompensated services program. 42 U.S.C. §§ 300o -1(5) and (6). The Secretary was again slow to respond to this last directive. On May 18, 1979, however, the Secretary promulgated the current regulations, which inter alia set out eligibility criteria (42 C.F.R. § 124.506), prescribe the level of uncompensated services required for compliance with the assurances (42 C.F.R. § 124.503), provide for individual notice to patients regarding the availability of the services (42 C.F.R. § 124.505), and establish procedures for the determination of benefits (42 C.F.R. § 124.508). The 1979 regulations no longer allow a facility to meet its obligations by merely certifying that it will not exclude a patient because of an inability to pay. Compare 42 C.F.R. § 124.503 with 42 C.F.R. § 53.111(d).

Before the Secretary issued the 1979 regulations, plaintiffs filed this suit in federal court. 7 In an amended complaint, filed April 26, 1979, plaintiffs alleged 8 that plaintiffs Davis and Bright, formerly patients at Ball Memorial Hospital, had inadequate resources to pay for their medical services, received no notice of the availability of uncompensated services, gained no determination of eligibility, and encountered difficulties in applying after discharge for a settlement of their bills under the program. 9 They brought suit against a variety of defendants to compel compliance with the Act's directives, filing on behalf of themselves and "(a)ll consumers of health care services who have been, are, or will be eligible for uncompensated services from defendant ( ) Ball Memorial Hospital Association, Inc." and "(a)ll consumers of health care services who have been, are, or will be eligible for uncompensated services from any facility located in the State of Indiana which receives funds pursuant to the Hill-Burton Act." (Am.Cplt., par. 14).

Only two claims of the amended complaint are relevant to this appeal. Claim 4 charges the Secretary and the individual state defendants with violating the Due Process Clause of the Fourteenth Amendment 10 by failing to adopt in federal regulations or the state plan proper notice and determination procedures. 11 Claim 6 charges the Secretary alone with violating the Hill-Burton Act by failing to issue proper regulations or to monitor properly compliance with the assurance obligations. 12 Plaintiffs sought a judgment against the Secretary declaring that she has violated and continues to violate the Act and that she has violated and is still violating the Due Process Clause. They also sought an order requiring the Secretary to comply with her duties under the Act and to "inform Hospitals and enforce (her) duty to provide due process of law protection."

Shortly after amending the complaint, plaintiffs moved for a determination of their class action claims. The Secretary responded to these claims and then, relying in part on the May 18, 1979, issuance of new regulations, moved for dismissal from the lawsuit. On December 17, the district court granted the latter motion. Judge Holder found that the allegations of Claim 4 had been mooted "to a great extent" by the new regulations and to the extent they had survived, the allegations failed because plaintiffs had not exhausted their administrative remedies as provided by the Administrative Procedure Act (5 U.S.C. § 553(e)) 13 (App. 39-40). With respect to Claim 6, the district court held that the Act provided no private right of action against the Secretary or in the alternative, that plaintiffs had failed to exhaust the administrative remedies expressly provided in the Hill-Burton statute as a prerequisite to such a suit (App. 40-42). 14 Judge Holder subsequently refused to enter this order as a final decision under Rule 54(b) (R. 260). Plaintiffs then appealed.

Appealability

The Secretary contends first that the decision of the district court is not appealable. Clearly, Judge Holder's decision is not by its nature a final decision under 28 U.S.C. § 1291, and his refusal to grant plaintiffs' motion to enter the dismissal as a final judgment under Rule 54(b) of the Federal Rules of Civil Procedure forecloses plaintiffs' only other available means for meeting standard jurisdictional requirements. Plaintiffs assert nonetheless that as a decision denying all relief, including injunctive relief, against the Secretary, the district court's ruling is an interlocutory order "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions," thereby qualifying for the exception to the final decision rule found in Section 1292(a)(1) of the Judicial Code. We agree.

First, it is settled that a district court's refusal to make an entry under Rule 54(b) does not preclude appellate jurisdiction under § 1292(a)(1). Tapeswitch Corp. of America v. Recora Co., 527 F.2d 1013 (7th Cir. 1976). Rule 54(b), which affords the district court an opportunity to apply its first-hand knowledge of the case to the question of the separability of certain parts of the action, provides for appellate review in some cases in which Section 1292(a)(1) does not and results in its denial by the district court in some cases in which Section 1292(a)(1) grants jurisdiction. Therefore it remains for the Court of Appeals to consider independently the availability of jurisdiction under the excepting statute. This conclusion does not mean that the policies behind Rule 54(b) regarding the inadvisability of piecemeal review and the dangers of splitting a cause of action should not be considered by this Court in the application of Section 1292(a)(1) to any particular case. Defendants are quite correct to raise those issues here. Rather, a weighing of these policies against the competing...

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