Hca Health Services of Tennessee, Inc. v. Thompson, 3:00-0991.

• Decision Date: 02 April 2002
• Docket Number: No. 3:00-0991.,3:00-0991.
• Citation: 207 F.Supp.2d 719
• Parties: HCA HEALTH SERVICES OF TENNESSEE, INC., et al., Plaintiffs, v. Tommy G. THOMPSON, Secretary of the United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — Middle District of Tennessee

207 F.Supp.2d 719

HCA HEALTH SERVICES OF TENNESSEE, INC., et al., Plaintiffs, v. Tommy G. THOMPSON, Secretary of the United States Department of Health and Human Services, Defendant.

No. 3:00-0991.

United States District Court, M.D. Tennessee, Nashville Division.

April 2, 2002.

H. Lee Barfield, II, W. Brantley Phillips, Jr., Bass, Berry & Sims, Nashville, TN, for HCA Health Services of Tennessee, Inc., Hospital Corporation of Tennessee, SP Acquisition Corp., Athens Community Hospital, Inc., Medical Park Hospital, Inc., Benton Community Hospital, Inc., Hospital Corporation of America, General Care Corp., Indian Path Hospital, Inc., Hospital Corporation of White County, Hartselle Medical Center, Inc., Community Hospital of Andalusia, Inc., L.V. Stabler Memorial Hospital of Greenville, Inc., Hospital Corporation of Northwest, Inc., Community Hospital of DeQueen, Inc., Encino Hospital Corporation, Inc., Sebastopol Hospital Corporation, HCA Hospital Services of San Diego, Inc., Ukiah Hospital Corporation, Los Robles Regional Medical Center, Community Hospital of La Habra, Inc., Chino Community Hospital Corporation, Inc., North Okaloosa Medical Center, Inc., Medical Center of Santa Rosa, Inc., Central Florida Regional Hospital, Inc., Sarasota Doctors Hospital, Inc., Northwest Medical Center, Inc., New Port Richey Hospital, Inc., North Florida Regional Medical Center, Inc., Hospital Corporation of Lake Worth, HCA Health Services of Florida, Inc., University Hospital, Ltd., West Florida Regional Medical Center, Inc., Putnam Hospital, Inc., Bay Hospital, Inc., Lawnwood Medical Center, Inc., Largo Medical Center, Inc., Okeechobee Hospital, Inc., Tallahassee Medical Center, Inc., EHCA Northlake, LLC, Fairview Park, LP, Clayton Acquisition Corp., Colliseum Medical Center, LLC, Redmond Park Hospital, Inc., EHCA West Paces, LLC, Corporation, EHCA Parkway, LLC, Columbus Doctors Hospital, Inc., Hospital Corporation of Lanier, Inc., HCA Health Services of Georgia, Inc., West Valley Medical Center, Inc., Terre Haute Regional Hospital, Inc., HCA Health Services of Indiana, Inc., Wesley Medical Center, LLC, Meadowview Regional Medical Center, LLC, Springview Hospital, Inc., Bourbon Cummunity Hospital, LLC, Logan Memorial Hospital, LLC, Georgetown Community Hospital, LLC, Hospital Corporation of America, Greenview Hospital, Inc., Frankfort Hospital, Inc. HCA Health Services of Louisiana, Inc., HTI Health Services, Inc., St. Peter's Community Hospital, Inc., Guadalupe Medical Center, Inc., Hobbs Community Hospital, Inc., HCA-Raleigh Community Hospital, Inc., HTI Health Services of North Carolina, Inc., Hospital Corporation of North Carolina, Cumberland Medical Center, Inc., Willamette Valley Medical Center, LLC, Walterboro Community Hospital, Inc., Trident Medical Center, LLC, Columbia North Hills Hospital Subsidiary, LP, Victoria Hospital Corporation, Wysong Medical Center, Inc., Columbia Navarro Regional Hospital Subsidiary, LP, Piney Woods Healthcare Systems, LP, Spring Branch Medical Center, Inc., Doctors Hospital (Conroe), Inc., CHCA West Houston, LP, Columbia Medical Center of Plano Subsidiary, LP, Malone-Hogan Hospital, Inc., Columbia Valley Healthcare Systems, LP, Columbia Plaza Medical Center of Fort Worth Subsidiary, LP, Longview Regional Hospital, LP, Columbia Rio Grande Healthcare, LP, Columbia/St. David's Healthcare System, LP, Columbia Medical Center at Lancaster Subsidiary, LP, Methodist Healthcare System of San Antonio, Ltd., Castleview Hospital, LLC, HTI of Utah, Inc., Hospital Corporation of Utah, Lewis-Gale Medical Center, LLC, Northern Virginia Hospital Corporation, Reston Hospital Center, LLC, Pulaski Community Hospital, Inc., Columbia Capital Medical Center Limited Partnership, Tri-Cities Health Service Corp., Raleigh General Hospital, Teays Valley Health Services, Inc., Riverton Memorial Hospital, LLC, HCA Health Services of Oklahoma, Inc., General Health Services, Inc.

W. Brantley Phillips, Jr., for Dauterive Hospital Corporation, El Paso Healthcare System, Ltd., Columbia Medical Center of Arlington Subsidiary, LP.

Michael L. Roden, Office of the United States Attorney, Nashville, TN, David T. Zaring, Department of Justice Civil Division, Washington, DC, for Tommy G. Thompson.

MEMORANDUM

ECHOLS, District Judge.

Presently pending before the Court are Plaintiffs' Motion for Summary Judgment (Docket Entry No. 11), to which Defendant responds in opposition, and Defendant's Motion for Summary Judgment (Docket Entry No. 13), to which Plaintiffs respond in opposition. For the reasons explained herein, Plaintiffs' motion will be DENIED, and Defendant's motion will be GRANTED. Accordingly, this case will be DISMISSED.

I.

One hundred twelve hospitals seek judicial review, pursuant to 42 U.S.C. § 1395oo(f)(1) (2000) and 5 U.S.C. § 702 (2000), of an administrative decision by the Secretary of the United States Department of Health and Human Services denying certain Medicare reimbursements for fiscal years 1984 through 1986. Plaintiffs ask the Court to reverse the Secretary's decision and compel the Secretary to pay the disputed Medicare reimbursements, interests, and costs. After the Secretary filed an Answer (Docket Entry No. 5), the parties filed cross motions for summary judgment. The parties agree that no discovery is necessary and have submitted the case for decision on the administrative record and briefs alone. This Court has federal question jurisdiction. See 28 U.S.C. § 1331 (1994).

II.

Under the Administrative Procedure Act, courts must "hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law...." 5 U.S.C. § 706(2)(A) (2000). Under this standard, a court's inquiry is "`searching and careful,' yet in the last analysis, diffident and deferential." GTE Midwest, Inc. v. FCC, 233 F.3d 341, 344-45 (6th Cir.2000) (quoting Natural Res. Def. Council v. SEC, 606 F.2d 1031, 1041 (D.C.Cir.1979) (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971))). "Nonetheless, the agency must articulate a `rational connection between the facts found and the choice made,' and must `provide something in the way of documentary support' for its action." Id. at 345 (quoting City of Brookings Mun. Tel. Co. v. FCC, 822 F.2d 1153, 1165 (D.C.Cir.1987), Cincinnati Bell Tel. Co. v. FCC, 69 F.3d 752, 764 (6th Cir. 1995)).

When a court reviews an agency's construction of the statute that it administers, it must follow the familiar two-step analysis first set out in Chevron USA Inc. v. Natural Res. Def. Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). "First, always, is the question whether Congress has directly spoken to the precise question at issue." Id. at 842, 104 S.Ct. 2778. "If, by `employing traditional tools of statutory construction,' we determine that Congress' intent is clear, `that is the end of the matter.'" Regions Hosp. v. Shalala, 522 U.S. 448, 457, 118 S.Ct. 909, 139 L.Ed.2d 895 (1998) (quoting Chevron, 467 U.S. at 842, 843 & n. 9, 104 S.Ct. 2778). Second, "`if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.'" Id. (quoting Chevron, 467 U.S. at 843, 104 S.Ct. 2778). "If the agency's reading fills a gap or defines a term in a reasonable way in light of the Legislature's design, we give that reading controlling weight, even if it is not the answer `the court would have reached if the question had initially arisen in a judicial proceeding.'" Id. (quoting Chevron, 467 U.S. at 843 n. 11, 104 S.Ct. 2778).

III.

A. HOSPITAL REIMBURSEMENT UNDER MEDICARE AND THE PROSPECTIVE PAYMENT SYSTEM (PPS)

The Medicare program, established in 1965, provides federally funded health insurance for the elderly and disabled. See 42 U.S.C. § 1395-1395ggg (2000). The Secretary of the Department of Health and Human Services, who is currently Defendant Tommy Thompson, is responsible for administering the Medicare program. See 42 U.S.C. § 1395kk. The Secretary has in turn delegated much of that responsibility to the Centers for Medicare and Medicaid Services, which, at the time of the events that led to this lawsuit, was known as the Health Care Financing Administration.

This case concerns what is known as "Part A" of the Medicare program. Under Part A, the Secretary reimburses qualified hospitals for certain costs that they incur in treating Medicare beneficiaries. A hospital may participate in the Medicare program as a "provider of services" by entering into a "provider agreement" with the Secretary. Providers then receive Medicare reimbursements directly from the Secretary or, more commonly, through a "fiscal intermediary" appointed by the provider. See 42 U.S.C. § 1995g-h. The fiscal intermediary, usually a private insurance company, acts as an agent of the Secretary for the purpose of processing and paying providers' claims' for reimbursement, and the fiscal intermediary must apply the Medicare statutes and the Secretary's rules and regulations in making its determination as to the proper amount of each reimbursement. See 42 U.S.C. § 1395h; 42 C.F.R. § 405.1803 (2001). Plaintiffs in this case all entered into provider agreements with the Secretary.

Before October 1, 1983, Medicare reimbursed providers based on the lower of the "reasonable costs" or "customary charges" of inpatient services furnished to Medicare patients. See 42 U.S.C. § 1395f(b) (1988); see generally Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 405-06, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993) (discussing pre-1983 reimbursement scheme). Under this regime, the Secretary reimbursed providers for the actual costs that they incurred, provided they fell within certain cost limits. Thus, as hospital costs increased, so too did Medicare reimbursements.

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