Greater Dallas Home Care Alliance v. U.S.
| Decision Date | 22 June 1998 |
| Docket Number | CIV. A. No. 3:98-CV-0821-H.,CIV. A. No. 3:98-CV-0768-H. |
| Citation | 10 F.Supp.2d 638 |
| Parties | GREATER DALLAS HOME CARE ALLIANCE, Metro Home Health, Inc., Christian Home Health, and Nurse Call Home Health, Plaintiffs, v. UNITED STATES of America (Department of Health and Human Services, Donna Shalala, Secretary and the Health Care Financing Administration), et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
William Todd Hughey, Law Office of William T. Hughey, Dallas, TX, for Plaintiffs Greater Dallas Home Care Alliance, Metro Home Health, Inc., Christian Home Health, Nurse Call Home Health.
Michael E. Clark, Gardere & Wynne Sewell & Riggs, Houston, TX, Craig Buck Florence, Gardere & Wynne, Dallas, TX, James C. Pyles, Powers Pyles Sutter & Verville, Washington, DC, for Consolidated Plaintiffs Texas Ass'n for Home Health Care, Rockwall Home Health Inc., Medical Insights & Care Unlimited, Inc., Cardiovascular Home Care, Inc.
Paula Mastropieri Billingsley, U.S. Atty's Office, Dept. of Justice, Dallas, TX, David O. Buchholz, Carol Federighi, U.S. Dept. of Justice, Washington, DC, for Defendants U.S., Dept. of Health and Human Services, Donna NMI Shalala, Health Care Financing Admin., Palmetto Government Benefits Administrators.
Paula Mastropieri Billingsley, U.S. Atty's Office, Dept. of Justice, Dallas, TX, for Consolidated Defendant Nancy Ann Min Deparle.
On June 10, 11 and 12, 1998, the Court heard evidence and oral argument on Plaintiffs' Motion for Preliminary Injunction, filed May 18, 1998; Defendants' Memorandum in Opposition, filed May 28; and related pleadings and briefs.
Plaintiffs, seeking a preliminary injunction, sue Defendants alleging that the Congress acted irrationally and unconstitutionally in adopting legislation in 1997 changing the method of payment and reimbursement to providers of home health care. Plaintiffs further allege that the Health Care Financing Administration ("HCFA") failed to follow regulatory statutes in implementing the legislation. Plaintiffs also assert breach of contract by Defendants.
Defendants deny Plaintiffs' claims. Defendants say that Congress acted constitutionally for the legitimate purpose of reducing medicare costs and to curb abuses in the home health care system. Defendants further say that HCFA acted in compliance with the law.
The Court concludes that Congress did not act unconstitutionally and that it is not the function of the Court to determine the wisdom of this congressional action. The Court also concludes that HCFA acted correctly. The Court is of the opinion that Plaintiffs have not met the requirements for issuance of a preliminary injunction. Plaintiffs' Application must be denied.
Medicare is a federal health insurance program to provide medical care to eligible elderly and disabled patients. See 42 U.S.C. §§ 1395(c), 1395(d). While the Secretary of Health and Human Services ("HHS") is charged with the administration of the Medicare Act, HCFA is the agency to which this responsibility has been delegated. Home health care agencies ("HHAs") provide medical care to homebound Medicare beneficiaries and are reimbursed in accordance with the Medicare Act and HCFA's implementing regulations.1
HHAs provide skilled services and deliver medical items and treatment pursuant to a plan of care that is established and reviewed every 62 days by a physician. HHAs must provide Medicare patients with the same level of care that is furnished to their non-Medicare patients, if any. HCFA contracts with fiscal intermediaries to monitor the financial administration of the HHAs. The HHAs submit cost reports to the fiscal intermediaries within five months after their cost reporting period closes and the HHAs receive periodic reimbursements during the year until their final cost reports are settled. When an HHA's fiscal year ends and it files its annual cost report, then the fiscal intermediary determines whether the periodic payments resulted in an overpayment or an underpayment, at which point the fiscal intermediary either issues another payment to the HHA or requires the HHA to remit any overpayments.
Medicare has traditionally reimbursed HHAs pursuant to a reasonable cost system which mandated that the HHAs be reimbursed for services rendered to Medicare beneficiaries in accordance with the reasonable costs that they incurred capped by a predetermined maximum limit.2 However, the traditional reasonable cost reimbursement method was modified when, on August 5, 1997, the Balanced Budget Act ("BBA") was enacted. In that Act, Pub.L. No. 105-33, Congress mandated significant changes in the HHA payment methodology. These changes are incorporated in Sections 4602 and 4603 of the Act. Congress directed that, for cost reporting periods beginning on or after October 1, 1999, HHAs be paid under a Prospective Payment System ("PPS") similar to that utilized for other medicare providers such as hospitals. Pub. L No. 105-33, § 4603(a), codified at 42 U.S.C. § 1395ff(a), (b). Until that system can be implemented, Congress required that HCFA implement an Interim Payment System ("IPS"). Id., § 4602 codified at 42 U.S.C. § 1395x(v)(1)(L). Congress intended that, in many cases, HHAs' total annual payments under the IPS for treating the same number of beneficiaries as they had before the BBA would be lower than before Congress passed the BBA. The present consolidated case challenges the IPS system.
The legislative history reflects that Congress was attempting to maintain the economic viability of the Medicare system by containing costs and reducing perceived fraud in the home health care industry.3 See H.R.Rep. No. 49, 105th Cong., 1st Sess. (1997), reprinted in 1997 WL at 1330-31, 133-36, 2514.4 Effective October 1, 1999, and not later than October 1, 2003, HHAs will be reimbursed in conformity with the Prospective Payment System ("PPS") under which HHAs will receive predetermined levels of reimbursement which are intended to account for each patient's unique medical needs. Until the PPS becomes effective, however, the IPS will be operative. Under the IPS, HCFA will pay HHAs on a modified reimbursement basis which, according to Plaintiffs, bears no relation to an individual patient's medical requirements.
To begin implementing the IPS, HCFA promulgated revised per visit cost limits on January 2, 1998. See 63 Fed.Reg. 89, 92-93 (1998).5 Thereafter, on March 31, 1998, HCFA promulgated the new maximum per beneficiary limits. See 63 Fed.Reg. 15, 717 (1998).6 These caps were effective as of October 1, 1997.
Plaintiffs allege that the IPS and the regulations implemented by HCFA violate their procedural and substantive due process rights as well as their equal protection rights under the Fifth Amendment to the Constitution of the United States because the new cost limits are based, especially with respect to HHAs that did not have a final cost report for the 1994 fiscal year, on the flawed presumption that such HHAs have the same average cost per patient. Plaintiffs further contend that because HHAs are prohibited from adjusting the type of services provided (they must follow the physician's plan of care) and because HHAs cannot discriminate against Medicare patients with respect to non-Medicare patients, HHAs will be forced to care for patients at a loss. As a consequence, the new statute and regulations will, allegedly, force many HHAs out of business or into bankruptcy.
The IPS limits apply to the HHAs' cost reporting periods beginning on or after October 1, 1997. However, it was not until after HCFA promulgated the cost limits in the January 2, 1998 and March 31, 1998 regulations that the fiscal intermediaries could start calculating the HHAs' reimbursements in accordance with the new limits. Consequently, HHAs are currently receiving demand letters for any overpayments since their cost reporting year beginning on or after October 1, 1997. Plaintiffs assert that this is a retroactive taking of property in violation of their substantive and procedural due process rights under the Fifth Amendment to the Constitution.
Plaintiffs further contend that the IPS and the attendant HCFA regulations are unconstitutional because they calculate cost limits based on the 12 month cost reporting period ending between October 1, 1993 and September 30, 1994, without allowance for the specialized programs that many HHAs have recently developed and without making appropriate adjustments for inflation. Thus, Plaintiffs allege, the new formulas for determining the cost limits unfairly reward HHAs who did not control their costs in fiscal 1994 (because they will be permitted a higher reimbursement) and penalize both new HHAs that currently provide care to high cost patients and old HHAs that treat more high cost patients now than they did during the 1994 fiscal year.
Plaintiffs additionally allege that the IPS is irrational because it is premised on erroneous financial and statistical projections issued by the Congressional Budget Office ("CBO") regarding, for instance, the growth rate of HHAs. Also, Plaintiffs allege that Congress relied on inaccurate information concerning the effect and impact of steps that the HHAs will take in order to adapt to the new regulations.7
Plaintiffs levy against the Government several other allegations to support their contention that the statute and regulations at issue are irrational and unconstitutional. For instance, Plaintiffs contend that it is inequitable that the new regulations require that HHAs that treat the same patients during the same cost reporting period are required to share the reimbursement on a pro rata basis, regardless of who bore the major share of the costs. Also, Plaintiffs claim that on February 6, 1998, HCFA Administrator Nancy-Ann Min DeParle violated their First...
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