Holy Cross Hospital-Mission Hills v. Heckler

• Decision Date: 21 December 1984
• Docket Number: HOSPITAL-MISSION,No. 83-6312,83-6312
• Citation: 749 F.2d 1340
• Parties: , Medicare&Medicaid Gu 34,425 HOLY CROSSHILLS, a California nonprofit corporation, and Valley Presbyterian Hospital, a California nonprofit corporation, Plaintiffs-Appellants, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1340

749 F.2d 1340

8 Soc.Sec.Rep.Ser. 101, Medicare&Medicaid Gu 34,425

HOLY CROSS HOSPITAL-MISSION HILLS, a California nonprofit

corporation, and Valley Presbyterian Hospital, a California nonprofit corporation, Plaintiffs-Appellants, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, et al., Defendants-Appellees.

No. 83-6312.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 6, 1984.

Decided Dec. 21, 1984.

Patric Hooper, Los Angeles, Cal., for plaintiffs-appellants.

Michael R. Power, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court For the Central District of California.

Before TUTTLE, ^* HUG, and BEEZER, Circuit Judges.

HUG, Circuit Judge:

Holy Cross Hospital-Mission Hills and Valley Presbyterian Hospital (the "hospitals") brought this action challenging the validity of a Medicare regulation denying hospitals reimbursement under the Medicare program for the cost of patient bedside telephones. The district court granted the motion of the Secretary of Health and Human Services (the "Secretary") for summary judgment, and the hospitals appeal.

The issues on appeal are (1) whether this court has jurisdiction to review the validity of the regulation, and (2) whether the regulation exceeded the authority of the Secretary to promulgate. We hold that we have jurisdiction to reach the merits and that the regulation was within the statutory authority of the Secretary to promulgate. Therefore, we affirm the judgment of the district court.

I FACTS

Title XVIII of the Social Security Act, 42 U.S.C. Sec. 1395 et seq. (1982) ("Medicare Act"), was enacted in 1965, creating a broad program of health insurance for the aged and disabled. Medicare provides two distinct, but interrelated, types of health insurance coverage to qualified participants. One part provides hospital insurance and covers expenses of hospital and certain post-hospital services. This part is designated as Part A. 42 U.S.C. Secs. 1395c-1395i (1982). The second part covers professional services of physicians, as well as certain other non-hospital services. This portion of the program is designated as Part B. 42 U.S.C. Secs. 1395j-1395w (1982). See Pacific Coast Medical Enterprises v. Harris, 633 F.2d 123, 126 n. 3 (9th Cir.1980).

This litigation involves reimbursement under Part A of the health insurance program known as Medicare. Under Part A, hospitals that participate in the program are designated "providers of services" and are paid the "reasonable cost" of services provided to Medicare patients. 42 U.S.C. Sec. 1395x(u) and Sec. 1395f(b) (1982); Pacific Coast Medical Enterprises, 633 F.2d at 126.

"Reasonable costs" which hospitals are entitled to receive for care rendered to Medicare patients are defined by statute and regulations. This case involves a challenge to the validity of a Medicare regulation denying hospitals reimbursement for Medicare's share of the cost of bedside telephones. Appellants are non-profit hospitals licensed as general acute care hospitals by the State of California and certified as providers of services under Part A of the Medicare program.

The hospitals submitted cost reports for the fiscal year ending in 1980, including claims for costs incurred in the provision of telephone services. Although the business portion of the hospitals' telephone costs was reimbursed, the cost of providing bedside patient telephones was disallowed on the basis of a regulation precluding payment for personal comfort items such as telephones. 42 C.F.R. Sec. 405.310(j). The hospitals contest the validity and application of this regulation.

II JURISDICTION

The Secretary contends that this court is without jurisdiction to consider Medicare coverage for the cost of patient bedside telephones and other similar personal comfort items because judicial review is precluded by 42 U.S.C. Secs. 1395oo (g)(1) and 1395y(a)(6) (1982). Section 1395oo (g)(1) provides:

The finding of a fiscal intermediary that no payment may be made under this Section 1395y lists numerous expenses for items and services for which payment will not be made. Included among the list are expenses for "personal comfort items." 42 U.S.C. Sec. 1395y(a)(6) (1982). The relevant portion of the section reads:

subchapter for any expenses incurred for items or services furnished to an individual because such items or services are listed in section 1395y of this title shall not be reviewed by the Board, or by any court pursuant to an action brought under subsection (f) of this section.

Notwithstanding any other portion of this subchapter, no payment may be made under part A or part B of this subchapter for any expenses incurred for items or services--

....

(6) which constitute personal comfort items ....

The Secretary promulgated regulations interpreting the statute. In the portion interpreting section 1395, the regulation provided at 42 C.F.R. Sec. 405.310:

Notwithstanding any other provisions of this Part 405, no payment may be made for any expenses incurred for the following items or services:

....

(j) Personal comfort items and services (for example a television set, or telephone service, etc.).

The Secretary argues that because telephone service has been designated by the regulation as a personal comfort item, a category listed in section 1395y, the decision not to reimburse is non-reviewable under section 1395oo (g)(1).

While we agree that we may not review reimbursement decisions as to items listed in section 1395y of the statute, we note that nowhere in section 1395y is telephone service listed as a "personal comfort item." It is only the interpretive regulation that so classifies it. For us to find that we could not review such a decision by the Secretary would be to grant the Secretary unbridled discretion to prevent reimbursement by promulgating regulations defining personal comfort items. Such a result is contrary to the presumption favoring judicial review. See Dunlop v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 1857, 44 L.Ed.2d 377 (1975) ("In the absence of an express prohibition ... the Secretary ... bears the heavy burden of overcoming the strong presumption that Congress did not mean to prohibit all judicial review of his decision."). The Secretary has failed to meet her burden of demonstrating by "clear and convincing evidence" that Congress intended to restrict judicial review of a regulation defining "personal comfort items." See Abbott Laboratories v. Gardner, 387 U.S. 136, 141, 87 S.Ct. 1507, 1511, 18 L.Ed.2d 681 (1967). Accordingly, we hold that we do have jurisdiction to review the construction the Secretary chooses to give to the term "personal comfort items."

In so holding, we follow the lead and logic of the other circuits that have faced and decided precisely this issue. See Arlington Hospital v. Heckler, 731 F.2d 171, 173 (4th Cir.1984); Memorial Hospital v. Heckler, 706 F.2d 1130, 1132-33 (11th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1275, 79 L.Ed.2d 680 (1984); St. Mary of Nazareth Hospital Center v. Department of Health and Human Services, 698 F.2d 1337, 1345-46 (7th Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 107, 78 L.Ed.2d 110 (1983).

III VALIDITY OF THE REGULATION

While Congress directed that no reimbursement be made under the Medicare program for items that "constitute personal comfort items," 42 U.S.C. Sec. 1395y(a)(6) (1982), Congress did not define the term "personal comfort items." Congress, however, did grant the Secretary broad discretionary power to "prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this subchapter." 42 U.S.C. Sec. 1395hh (1982). The Secretary, as we have noted, drafted and implemented the following regulation:

Notwithstanding any other provisions of this Part 405, no payment may be made for any expenses incurred for the following items or services:

....

(j) Personal comfort items and services (for example a television set or telephone service, etc.).

42 C.F.R. Sec. 405.310.

The Supreme Court has held that the validity of a regulation promulgated pursuant to an empowering statute similar to 42 U.S.C. Sec. 1395hh will be upheld so long as it is "reasonably related to the purposes of the enabling legislation." Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369, 93 S.Ct. 1652, 1660, 36 L.Ed.2d 318 (1973), quoting Thorpe v. Housing Authority of the City of Durham, 393 U.S. 268, 280-81, 89 S.Ct. 518, 525, 21 L.Ed.2d 474 (1969). This court's review is limited to ensuring that the Secretary did not exceed statutory authority and that the regulation is not arbitrary, capricious, or an abuse of discretion. 5 U.S.C. Sec. 706(2)(A) & (C) (1982); see also Schweiker v. Gray Panthers, 453 U.S. 34, 44, 101 S.Ct. 2633, 2640, 69 L.Ed.2d 460 (1981).

A. Section 1395y(a)(6) Authorizes the Patient Telephone Regulation.

Section 1395y(a)(6) provides that no payment may be made for any expenses incurred for items or services that constitute personal comfort items. The Secretary's interpretation of section 1395y(a)(6) is entitled to great deference. See Zuber v. Allen, 396 U.S. 168, 192, 90 S.Ct. 314, 327, 24 L.Ed.2d 345 (1969). The hospitals have not demonstrated that the Secretary's regulation giving telephone service as an example of a personal comfort item exceeds the authorization of section 1395y(a)(6). Indeed, three circuits have held that the patient telephone regulation is authorized by section 1395y(a)(6). Arlington Hospital, 731 F.2d at 174; Memorial Hospital, 706 F.2d at 1134; St. Mary of Nazareth, 698 F.2d at 1347.

Notwithstanding these decisions, the hospitals argue that the Secretary erroneously classified patient bedside telephones as personal comfort items. The hospitals maintain that the legislative history indicates Congress meant to exclude only "health items or services that are not reasonable and necessary for...