HOME HEALTH SERVICES OF GR. PHILADELPHIA v. Harris
| Decision Date | 22 January 1982 |
| Docket Number | Civ. A. No. 79-3161. |
| Citation | 530 F. Supp. 1236 |
| Parties | HOME HEALTH SERVICES OF GREATER PHILADELPHIA, INC. v. Patricia HARRIS, Secretary of Health, Education and Welfare. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Donna D. Fraiche, New Orleans, La., Norman M. Berger, Philadelphia, Pa., for plaintiff.
Peter F. Vaira, Jr., U. S. Atty., Joseph M. Masiuk, Asst. U. S. Atty., Philadelphia, Pa., for defendant.
In this matter, the Court reviews pursuant to section 1878(f)(1) of the Social Security Act, 42 U.S.C. § 1395 oo(f)(1), a final decision of the Department of Health, Education and Welfare (HEW) disallowing certain claims of plaintiff, Home Health Services of Greater Philadelphia, Inc. (Home Health) for Medicare reimbursement for the cost year ending June 30, 1975. The decision, rendered by the Administrator of HEW's Health Care Financing Administration (Administrator) on July 1979, affirmed the determination of the intermediary, HEW's Division of Direct Reimbursement (Intermediary) and reversed that of the Department's Provider Reimbursement Review Board (PRRB). Since this action must be decided upon a review of the administrative record, the parties have appropriately filed cross-motions for summary judgment. Based upon our review of the entire record and the administrator's decision, the Court has determined that the decision of the Administrator must be vacated in that it is not supported by substantial evidence.
Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., establishes a two-part program of federal reimbursement for medical care for the aged and disabled commonly known as "Medicare." Part A of the program provides "hospital insurance" benefits (in-patient hospital and post-hospital extended or home health care) and is financed by Social Security payroll contributions. Sections 1811-1818 of the Social Security Act, 42 U.S.C. §§ 1395c-1395(i)-2. Part B provides "medical insurance" benefits for physician services, and out-patient services and supplies, and is financed by premium payments of enrollees together with contributions from funds appropriated by the federal government. Sections 1831-1844 of the Social Security Act, 42 U.S.C. §§ 1395j-1395w. Both parts of the program are administered by the Medicare Bureau of the Health Care Financing Administration.
Health care providers (hospital, skilled nursing facilities, and home health agencies) that have filed an agreement with the Secretary pursuant to section 1866 of the Social Security Act, 42 U.S.C. § 1395 cc, may participate in the medicare program. Under Part A of the Social Security Act, the "reasonable cost" of covered services rendered by providers to Medicare beneficiaries is paid directly to the providers in lieu of reimbursing Medicare beneficiaries. 42 U.S.C. § 1395(f)(b). In order not to delay reimbursement payments until a final determination of the reasonable cost of the services, interim estimated payments are made to providers at least monthly, with subsequent adjustments for overpayments and underpayments, 42 U.S.C. § 1395g, § 1395 x(v)(1)(A)(ii); 42 CFR § 405.405. A final determination as to reimbursable costs is made after the close of the provider's fiscal year, based upon a cost report which the provider is required to file. 42 CFR § 405.406(b). The reasonable cost of services rendered by the provider to program beneficiaries is initially determined by a fiscal intermediary, in this case HEW's Division of Direct Reimbursement (Intermediary), who is responsible for the processing of claims and the payment of funds to the provider. A provider who is dissatisfied with the intermediary's reimbursement decision, may request a hearing before the Provider Reimbursement Review Board (PRRB) where the amount in controversy is $10,000 or more. 42 U.S.C. § 1395 oo(a). Within sixty days after a PRRB decision, the Secretary of HEW, on his or her own motion, may reverse or modify the decision. 42 U.S.C. § 1395 oo(f)(1). The district court is given jurisdiction to review any final decision of the PRRB or any reversal, affirmance or modification by the Secretary. Id. Such an action "shall be tried pursuant to the applicable provisions under Chapter 7 of Title 5 the Administrative Procedure Act, notwithstanding any other provisions in section 405 of this title 42." 42 U.S.C. § 1395 oo(f)(1).
On July 7, 1971, plaintiff, Home Health, entered into a contractual agreement with Unihealth Services Corporation (Unihealth) whereby Unihealth would provide certain services to Home Health. Unihealth is a New Orleans, Louisiana-based management company which assists in establishing non-profit home health agencies and assists them also in the necessary start-up and operation of the agency. The agreement between Unihealth and Home Health provided for start-up services, professional management services, financial and health care consultation, on-call and data processing services. Unihealth charged an initial "start up" fee of $12,500 and a fee of 7% of the gross billings of Home Health for its continuing services. In January 1975, the fixed 7% fee was changed to a sliding scale charge whereby the percentage fee for services would decline as Home Health's volume of gross billings increased.
On August 3, 1973, Home Health was certified as a provider of Medicare services. Home Health submitted its first cost report for the fiscal year ended 1974. It reflected the management fees for Unihealth for that year as well as the amortized start-up fees. After an audit ordered by the Intermediary, the management fees as charged by Unihealth were found reasonable and a Notice of Program Reimbursement was issued which made no adjustment as to the cost figures submitted by Home Health relating to the services supplied by Unihealth.
The following year, Home Health submitted a cost report for the fiscal year ending June 30, 1975. In the report, Home Health claimed that it incurred $32,872 in fees for management services provided by Unihealth. On April 28, 1976, the Intermediary issued a Notice of Program Reimbursement for the fiscal year ending June 30, 1975 in which it disallowed $12,720 of the Unihealth management fees and allowed reimbursement in the amount of $20,152. The explanation for the adjustment contained in the notice read:
Thereafter, the Intermediary reopened its review of Home Health's cost report for 1975 and on or about January 17, 1977, the director of the Intermediary informed Home Health that the 1975 cost report would be adjusted downward in the amount of $16,126. This amount represented an $11,976 adjustment of the Unihealth management services fees, a $1,150 adjustment of the amortized Unihealth start-up cost, and a $3,000 adjustment of local CPA service fees which were found to be duplicative of services provided by Unihealth. The Intermediary's letter to Home Health stated that "this amount ($16,126) represents a partial disallowance of fees charged by Unihealth as an unreasonable cost." In an accompanying adjustment report, the explanation for the adjustment was stated as "To adjust service fees in accordance with reasonable cost and prudent buyer concept" as set forth in HIM-15. (Healthcare Intermediary Manual) sections 2102.1 and 2103. Also accompanying the letter was the following breakdown of the costs claimed by Home Health for the services provided by Unihealth and the costs allowed by the Intermediary.
HOME HEALTH SERVICES OF GREATER
PHILADELPHIA, INC.
Total Allowable Cost for the Period
July 1, 1974 - June 30, 1975
As Claimed Corrected
Start-up cost $12,500 $ 6,750
_______ _______
Amortized over
60 months 2,500 1,350
Disallowance $1,150*
EDP Fee $12,345
Consulting 3,360
Travel 963
Accounting Fees 3,700
_______
$32,344 $20,368
Plus: Services of
Local CPA (a
duplication of
function) 3,000
_______ _______
$35,344 $20,368
_______ _______...To continue reading
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Grancare, Inc. v. Shalala, 98-1971 (TFH).
...unless the provider's costs are found to be substantially out of line. 42 C.F.R. § 413.9(c)(2); Home Health Servs. of Greater Philadelphia, Inc. v. Harris, 530 F.Supp. 1236, 1248 (E.D.Pa.1982) (ruling that the use of a "benchmark or fixed criterion for reasonable cost" is an "arbitrary decl......