IREDELL MEM. HOSPITAL, INC. v. Schweiker, ST-C-81-52.
Decision Date | 07 January 1982 |
Docket Number | No. ST-C-81-52.,ST-C-81-52. |
Citation | 535 F. Supp. 795 |
Court | U.S. District Court — Western District of North Carolina |
Parties | IREDELL MEMORIAL HOSPITAL, INC., Plaintiff, v. Richard SCHWEIKER, Secretary of the U. S. Department of Health and Human Services, Defendant. |
Womble, Carlyle, Sandridge & Rice, Anthony H. Brett, Winston-Salem, N. C., for plaintiff.
Attorney Health Care Financing Div., Dept. of Health and Human Services, Stephen D. Weiss, Baltimore, Md., for defendant.
The Court having heard the oral arguments of the parties and having read the pleadings, the briefs, and the other documents filed in this matter, and being of the opinion that there is no genuine issue as to any material fact and that judgment as a matter of law is proper, enters the following Memorandum and Order:
Plaintiff, Iredell Memorial Hospital, seeks judgment and an order declaring that the actual cost of providing uncompensated indigent care pursuant to its obligation under Section 603(e)(2) of the Hill-Burton Act, 42 U.S.C. § 291c(e)(2) (1974) is an allowable indirect cost, reimbursable under Section 1861(v) of the Medicare Act, 42 U.S.C. § 1395x(v) (West Supp.1981).
Procedural History.
Blue Cross/Blue Shield of North Carolina, the Defendant's fiscal Intermediary, disallowed reimbursement; the Provider Reimbursement Review Board PRRB upheld the disallowance by a 3-2 vote. The Defendant, Secretary of Health and Human Services, declined to review the PRRB decision, which then became a final administrative agency determination pursuant to 42 U.S.C. § 1395oo(f)(1) (West Supp.1981), reviewable under the Administrative Procedure Act, 5 U.S.C. § 701 (1977). The PRRB decision may be overturned if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A) (1977).
Factual Background.
Plaintiff is a 182-bed general short-term care hospital located in Statesville, North Carolina. It is a qualified provider of services under the Medicare program. Plaintiff received $1,286,568. between 1969 and 1970 as a grant under the Hill-Burton Act. As a condition of receiving the grant, Plaintiff was required to render uncompensated care to persons unable to pay. 42 U.S.C. § 291c(e)(2) (1974). Plaintiff furnished such uncompensated care during its fiscal year ending September 30, 1977 in the amount of $132,290. and during its fiscal year ending September 30, 1978 in the amount of $151,653. The amount of reimbursement in dispute is $55,591. for 1977 and $64,710. for 1978, a total of $120,301.
The Defendant bases his position of disallowance upon two arguments:
1. The Secretary's interpretation of its own regulations is entitled to a high degree of deference:
2. Congress intended Hill-Burton "free care" to be at the expense of the hospital, not the government.
If these arguments are found not to be in accordance with the law, this Court must overturn the decision of the PRRB and order reimbursement to the hospital of the sum in dispute.
Defendant contends that this Court must defer to the Secretary's interpretation of its own regulations, citing Batterton v. Francis, 432 U.S. 416, 97 S.Ct. 2399, 53 L.Ed.2d 448 (1977). However, in that case the regulation at issue was explicit in what was to be excluded from coverage under the governing Act. The Court's primary consideration in Batterton was whether the explicit exclusion was reasonably within the purpose of the Act. Id. at 429-432, 97 S.Ct. at 2407-09.
The function of this Court in this case must be distinguished, since neither the Medicare Act nor the regulations promulgated thereunder specifically address the issue of reimbursing Hill-Burton health care to those unable to pay. The function of this Court is to analyze the Medicare Act and its regulations to determine whether reimbursement of Hill-Burton expenses is consistent with the general purpose of Medicare and the intent of Congress under the Hill-Burton Act.
A provider of services under Medicare is entitled to reimbursement for the reasonable cost of services provided to Medicare patients, calculated in part as follows: "the lesser of (A) the reasonable cost of such services, as determined under Section 1395x(v) of this Title 42 ..., or (B) the customary charges with respect to such services ..." 42 U.S.C. § 1395f(b)(1) (West Supp.1981).
Section 1395x(v)(1)(A) states,
42 U.S.C. § 1395x(v)(1)(A) (West Supp. 1981).
42 C.F.R. § 405.451(b)(2) (1980).
The above provisions of the Medicare Act and its regulations reflect a general intent to reimburse the provider for reasonable direct and indirect costs of services rendered. Indirect costs which are allowed include costs related to construction: interest and depreciation. 42 C.F.R. § 419(a) (1980) (interest); 42 C.F.R. § 405.418(a) (1980) (depreciation).
The provision of a certain level of uncompensated care mandated by 42 C.F.R. § 53.111(h) (1980) qualifies the hospital for interest subsidies on construction and modernization projects under the Hill-Burton Act. In lieu of the payment of interest, the provision of uncompensated care is a cost of construction, which would be a reasonable cost reimbursable under the general scheme and purposes of the Medicare Act, in the absence of language in either regulation or statute to the contrary.
1.A. Charity.
Defendant contends that the uncompensated care required by Hill-Burton constitutes "charity" as it is defined in 42 C.F.R. § 405.420(b)(2) (1980): "reductions in charges made by the provider of services because of the indigence or medical indigence of the patient", and thus it is not an allowable cost. 42 C.F.R. § 405.420(g) (1980).
However, the hospital would not provide this uncompensated care in the absence of a legally enforceable obligation under 42 U.S.C. § 291c. Cook v. Ochsner Foundation Hospital, 559 F.2d 968 (5th Circuit 1977). The "voluntary" nature of the application by the hospital for Hill-Burton aid may not be carried over to characterize the nature of the provision of uncompensated care as "charity"; the concepts are distinct. A hospital applies for Hill-Burton aid for many reasons; the "voluntary" nature of economic necessity is debatable. However, the motivation behind applying for such aid would in no case be "charitable", since it is based upon self-interest and financial expansion. The word "charity" has been explored in great detail in St. James Hospital v. Harris, 535 F.Supp. 751 (N.D.Ill.1981). The court in that case concluded that the characterization of uncompensated care under Hill-Burton as "charity" was "arbitrary, erroneous, and irrational." at 760.
1.B. Reimbursement to Non-Medicare Beneficiaries.
Defendant raises 42 U.S.C. § 1395x(v)(1)(A), quoted in part on Page 797 of this opinion, to bar reimbursement of expenses incurred in treating non-Medicare beneficiaries, i.e. the indigents treated under Hill-Burton. Defendant contends that this cost, though mandatory for the receipt of funds to build a structure which will benefit Medicare patients, is not a cost "properly associated with the care of Medicare beneficiaries." Defendant's brief, Page 11 Defendant quotes Harper-Grace Hospital v. Schweiker, No. 80-72082 (E.D. Mich., April 1, 1981) (slip opinion at Page 7):
although the hospital built or modernized with Hill-Burton funds benefits all patients of that facility, both Medicare and non-Medicare alike, the provision of indigent health care does not benefit Medicare recipients except for the attenuated reason that their provision is required by a grant that benefits all.
emphasis added.
The "attentuation" referred to by the court in Harper-Grace is obscure. Interest payments are forwarded to a bank, not to Medicare recipients, yet interest payments are allowable costs, "required by a grant that benefits all." The recipient of the expenditure, be it banker or poor person, should not be determinative of the issue in this case. Rather, the cause of the expenditure, the reasonableness of the cost of operation, should be the focus of this case. The courts in Presbyterian Hospital of Dallas v. Harris, 638 F.2d 1381 (5th Cir. 1981), cert. denied on other grounds, ___...
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