Flagstaff Medical Center, Inc. v. Sullivan

• Decision Date: 22 August 1991
• Docket Number: No. CIV 88-1881-PCT-CAM,CIV 89-0576-PCT-CAM.,CIV 88-1881-PCT-CAM
• Citation: 773 F. Supp. 1325
• Parties: FLAGSTAFF MEDICAL CENTER, INC., Plaintiff, v. Louis W. SULLIVAN, Secretary of Health & Human Services, Defendant.
• Court: U.S. District Court — District of Arizona

773 F. Supp. 1325

FLAGSTAFF MEDICAL CENTER, INC., Plaintiff, v. Louis W. SULLIVAN, Secretary of Health & Human Services, Defendant.

Nos. CIV 88-1881-PCT-CAM, CIV 89-0576-PCT-CAM.

United States District Court, D. Arizona.

August 22, 1991.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Susan Slasor, Coconino County Legal Aid, Michele Melden & Laura Rosenthal, National Health Law Program, for plaintiffs Elizabeth Mazon, Leon Salazar, Jack Sabo, Maria Sandoval, Ruth Havatone, Quade Uqualla, and Aurora Petty, individually and on behalf of all other persons similarly situated.

Sheila Lieber & Tracy L. Merritt, Civ. Div., U.S. Dept. of Justice, for defendant Louis W. Sullivan, Secretary of Health and Human Services.

Daniel J. Stoops, Mangum, Wall, Stoops & Warden, for defendants Flagstaff Medical Center & Flagstaff Health Management Corp.

AMENDED MEMORANDUM and ORDER

MUECKE, District Judge.

The following Amended Memorandum and Order is issued pursuant to the court's Order of August 22, 1991, which addressed defendant Flagstaff Medical Center's motion to clarify and other clerical errors contained in the initial Memorandum and Order filed August 9, 1991. The Amended Memorandum and Order contains no substantive changes from the Memorandum and Order filed August 9, 1991.

The court has carefully reviewed and considered the parties' cross-motions for summary judgment and the oral argument presented to the court, and concludes as follows:

INTRODUCTION

"An aura of inevitably is upon us. It is no longer acceptable morally, ethically, or economically for so many of our people to be medically uninsured or seriously underinsured."¹ Such was the conclusion of a recent editorial in The Journal of the American Medical Association. Indeed, the Journal considers the problem of uninsured and underinsured to be so critical that it devoted an entire issue to the access to health care crisis in this country. See The Journal of the American Medical Association, Vol. 265, No. 19 (May 15, 1991).

"Many crises are born of a series of small events that one day reach critical mass." Friedman, E., "The Uninsured: From Dilemma to Crisis," Id. at 2493. So it has been with the uninsured and underinsured. Although Americans spend more on health care per capita than any other country in the world,² serious problems concerning access to health care remain. Bobinski, Mary A., "Unhealthy Federalism: Barriers to Increasing Health Care Access for the Uninsured," 24 U.C. Davis L.Rev. 255, 257 (1990). Estimates of Americans lacking any type of insurance coverage (public or private) place the number between 31 and 36 million. Friedman, supra, at 2491. These estimates represent approximately thirteen to fifteen percent of the population. Almost as many or more may be underinsured. Bobinski, supra, at 262-63.

Clearly, "access to basic medical care for all our inhabitants is still not a reality in this country." Journal of American Medical Association, supra, at 2566. Although the current health care crisis is one that must be addressed by the legislative and executive branches of our government, the court believes it is necessary to acknowledge the crisis in order to understand adequately the context of the current litigation.

BACKGROUND

This case is a consolidated matter involving indigent access to health care under the Hill-Burton Act. 42 U.S.C. § 291, et seq. The Hill-Burton Act (named after its Senate sponsors, Lister Hill and Harold H. Burton), officially known as the 1946 Hospital Survey and Construction Act, was one of four major postwar medical programs.³

Hill-Burton was the result of a plan for postwar hospital construction developed by the American Hospital Association. Shortly before the war ended, the American Hospital Association "decided to organize a national commission (Commission on National Health Care) to develop — or, perhaps more accurately, to develop support for — a national program for hospitals." Starr, The Social Transformation of American Medicine 348 (1982). The Commission, as might be expected, recommended a huge program of hospital construction. Id. at 341. Advocates of Hill-Burton originally argued that the program would help provide access to health care for families and communities that otherwise could not afford the cost. The allocation of funds favored those with low per capita income, and, in this regard, the law was redistributive. Id. at 350. Although proposals during the late 1940s favored the financing of comprehensive medical services, the measures adopted put the power of finance behind hospitals alone. Id. at 348.

The purpose of the Hill-Burton Act was to assist states in "furnishing adequate hospital, clinic, or similar services to all their people." Pub.L.No. 79-725, § 601, 60 Stat. 1040, 1041 (1946). The Act provided federal grants, and later loans, loan guarantees, and interest subsidies for hospital construction and modernization. 42 U.S.C. § 291a. Under the Hill-Burton Act, health care facilities could not receive hospital construction funds unless the facilities provided an assurance that

there will be made available in the facility or portion thereof to be constructed or modernized ... a reasonable volume of services to persons unable to pay therefor. ...

Id. § 291c(e)(2). This assurance became known as the "reasonable volume" or "uncompensated care" assurance. American Hosp. Ass'n v. Schweiker, 721 F.2d 170, 173 (7th Cir.1983), cert. denied, sub nom., American Hosp. Ass'n v. Heckler, 466 U.S. 958, 104 S.Ct. 2169, 80 L.Ed.2d 553 (1984).⁴

Although the Hill-Burton Act tied the funding of hospital construction to a commitment by the hospital to provide uncompensated care to indigent persons, the provision of such care was largely an illusion. In great part, this was due to the fact that for the first twenty-six years of the Act, "enforcement of the Hill-Burton Act's uncompensated care ... assurances existed only in precatory, exhortative language." Blumstein, J., "Court Action, Agency Reaction: The Hill-Burton Act as a Case Study," 69 Iowa L.Rev. 1227, 1238 (1984). The regulations issued between 1947 and 1974 essentially tracked the language of the statute. During this period, "the hospitals receiving aid displayed a marked reluctance to give even the most token charitable care." American Hosp. Ass'n, 721 F.2d at 170; see Comment, "Provision of Free Medical Services by Hill-Burton Hospitals," 8 Harv.C.R.-C.L.L.Rev. 351, 352 (1973). Indeed, the Senate Committee on Labor and Public Welfare, in reviewing the Hill-Burton enforcement experience, concluded that federal and state agency compliance efforts reflected a "sorry performance." S.Rep. No. 1285, 93d Cong., 2d Sess. 61, reprinted in 1974 U.S.CODE CONG. & ADMIN.NEWS 7842, 7900. Widespread non-compliance by many hospitals and the inability or unwillingness of the Department of Health and Human Services ("HHS") (and its predecessor agency, Health, Eduction and Welfare) to ensure hospital compliance resulted in the denial of a basic necessity of life for many indigent patients during this period.

In response to a series of lawsuits, see, e.g., Euresti v. Stenner, 458 F.2d 1115 (10th Cir.1972); Cook v. Ochsner Foundation Hosp., 61 F.R.D. 354 (E.D.La.1972), the Secretary in 1972 began to issue regulations that defined standards for compliance with the assurances. These regulations, among other things, defined a "reasonable volume of services" and "persons unable to pay," and established standards for compliance and initiated various reporting requirements. American Hosp. Ass'n, 721 F.2d at 173.

In 1975, Congress enacted a new federal assistance program for health care facility construction and modernization that replaced Title VI, the title that covered Hill-Burton. 42 U.S.C. § 300q et seq. This later Act, which added Title XVI to the Public Health Service Act, provides for assurances similar to those in Title VI but adds teeth to the Hill-Burton Act's requirements as well. Title XVI grants the Secretary of Health and Human Services extensive investigative and enforcement powers over facilities assisted under both Title VI and Title XVI of the Public Health Service Act. id. at § 300s-6. "Apparently in recognition of the compliance problems which had arisen under the Hill-Burton program, Title XVI mandates, rather than permits, the Secretary to prescribe by regulation," American Hosp. Ass'n, 721 F.2d at 174,

the general manner in which each entity which ... has received financial assistance under either Title XVI or Title VI shall be required to comply with the assurance required to be made at the time such assistance was received and the means by which such entity shall be required to demonstrate compliance with such assurances.

42 U.S.C. § 300s(3).

In response to the congressional mandate, the Secretary of HHS (then, Health, Education and Welfare) in 1979 adopted regulations⁵ that, among other things, set health care facilities' uncompensated care obligations at specific levels,⁶ established eligibility criteria for indigent patients, and required facilities to make eligibility determinations within two days of a request for services. 44 Fed.Reg. 29,372-409 (May 18, 1979). Under the 1979 regulations, facilities could not obtain credit toward their uncompensated care obligations in cases in which they failed to make eligibility determinations within two days of a request. 42 C.F.R. § 124.508(a) (1979). According to the preamble of the finalized regulations, "clear recordkeeping requirements are ... established to avoid the current problem of distinguishing between uncompensated services qualifying for credit and `bad debts,' `courtesy allowances' and other writeoffs that do not qualify." 44 Fed. Reg. 29,374 (May 18, 1979).

In 1987, HHS substantially revised the 1979 regulations. HHS revised the timing requirements for eligibility determinations by retaining the two-day requirement for requests for...