Monmouth Medical Center v. Harris

• Decision Date: 16 May 1980
• Docket Number: 79-1510,79-580,Civ. A. No. 78-3139,78-3149 and 79-581.
• Citation: 494 F. Supp. 590
• Parties: MONMOUTH MEDICAL CENTER, a non-profit corporation of the State of New Jersey, etc., Plaintiff, v. Patricia Roberts HARRIS, in her capacity as Secretary of Health, Education and Welfare, Defendant. POINT PLEASANT HOSPITAL, a non-profit corporation of the State of New Jersey, etc., Plaintiff, v. Patricia Roberts HARRIS, in her capacity as Secretary of Health, Education and Welfare, Defendant.
• Court: U.S. District Court — District of New Jersey

494 F. Supp. 590

MONMOUTH MEDICAL CENTER, a non-profit corporation of the State of New Jersey, etc., Plaintiff, v. Patricia Roberts HARRIS, in her capacity as Secretary of Health, Education and Welfare, Defendant.

POINT PLEASANT HOSPITAL, a non-profit corporation of the State of New Jersey, etc., Plaintiff, v. Patricia Roberts HARRIS, in her capacity as Secretary of Health, Education and Welfare, Defendant.

Civ. A. Nos. 78-3139, 79-580, 79-1510, 78-3149 and 79-581.

United States District Court, D. New Jersey.

May 16, 1980.

Frank R. Ciesla, Giordano, Halleran & Crahay, Middletown, N. J., for plaintiffs.

Marla Simpson, Anne Singer, Asst. U. S. Attys., Newark, N. J., for defendant.

OPINION

DEBEVOISE, District Judge.

I. Parties, Jurisdiction and Proceedings.

The plaintiffs in this proceeding are Monmouth Medical Center, a non-profit hospital located in Long Branch, New Jersey ("Monmouth"), and Point Pleasant Hospital, a non-profit hospital located in Point Pleasant, Ocean County, New Jersey ("Point Pleasant"), both of which are providers of medical assistance and care under the Medicare provisions (Title XVIII) of the Social Security Act, 42 U.S.C. § 1395 et seq. Each hospital has brought this action on behalf of itself, as a provider, and on behalf of Medicare beneficiaries who were treated in the hospital during various periods of time. The defendant in this case is Patricia Roberts Harris,¹ who, in her capacity as Secretary of Health, Education and Welfare, is responsible for reimbursement of provider hospitals for covered services rendered by the provider to beneficiaries.²

The case involves a dispute over the reimbursement payable to Monmouth and Point Pleasant under Part A of the Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., for the costs related to inpatient hospital stays by Medicare patients or beneficiaries. Monmouth and Point Pleasant, as providers of services under Part A, are entitled to be reimbursed on the basis of the reasonable costs incurred in providing covered inpatient hospital services. The principal issue is whether a hospital is entitled to reimbursement in a situation where a patient's hospital stay is extended solely because the hospital is unable to place the patient in another institution for care which is not covered under the Medicare Program.

Each of the named beneficiary-plaintiffs was at one time during 1975-1977 hospitalized in one of the two named institutions, and, as to each, defendant denied, at least in part, reimbursement claims submitted by the institution, on the ground that the care rendered was custodial in nature within the meaning of 42 U.S.C. § 1395y(a)(9), and, therefore, not covered by the Medicare Act. Pursuant to Section 1879(a), 42 U.S.C. § 1395pp(a), defendant waived the beneficiaries' liability for the non-covered care but declined to waive liability for Monmouth or Point Pleasant. Each such waiver denial was upheld on reconsideration.

Since the amount in controversy exceeded $100.00 as to each beneficiary, the hospitals were entitled to further administrative review, including, if requested, an oral hearing under 42 U.S.C. §§ 1395ff(b) and 1395pp(d). The hospitals duly requested such review, and in each instance the Secretary affirmed the waiver denials at both the Administrative Law Judge and Appeals Council levels. Accordingly, plaintiffs have exhausted their administrative remedies, as required.

Thereafter, the hospitals filed their complaints in this Court, seeking injunctive relief and reimbursement of the claims which had been denied. They alleged jurisdiction to review the Secretary's final determinations pursuant to 42 U.S.C. §§ 405(g) and 1395ff(b)(1), which are made applicable to the hospital plaintiffs by 42 U.S.C. § 1395pp(d).

Defendant Secretary moved for an order pursuant to Fed.R.Civ.P. 12(b)(1) and (6) dismissing the complaint or, in the alternative, for an order pursuant to Fed.R.Civ.P. 56 for summary judgment. Plaintiffs cross-moved for summary judgment. In view of the nature of the review of a decision of the Secretary, in essence I am being asked to affirm or reverse the decision of the Secretary in this case and, in the case of plaintiff hospitals, to grant injunctive relief, e. g. Torphy v. Weinberger, 384 F.Supp. 1117 (E.D.Wis.1974).

II. The Facts.

A. The Statutory and Regulatory Scheme.

1. Description of the Act and Definitions: Title XVIII of the Social Security Act was enacted by Congress in 1965 to establish the federally funded health insurance program known as "Medicare". 42 U.S.C. § 1395 et seq. This program, which provides federal reimbursement for medical care to the aged,³ consists of two basic components: Part A, providing "hospital insurance" funded out of Social Security taxes, and Part B, a voluntary supplementary medical insurance program primarily covering physicians' services.

Part A is designed to provide "basic protection against the costs of hospital and related post-hospital services . . ." for individuals who are age 65 or over by providing for government payment (after payment of a deductible by the beneficiary, 42 U.S.C. § 1395(e), of the "reasonable cost" of certain defined basic services which are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member". 42 U.S.C. § 1395(e)(a)(1). Covered services include three basic categories of medical service, as set forth in 42 U.S.C. § 1395d(a): (1) inpatient hospital services, defined in 42 U.S.C. § 1395x(b) and 42 C.F.R. § 405.116; (2) post-hospital extended care services, defined in 42 U.S.C. §§ 1395x(h) and (i) and 42 C.F.R. §§ 405.125-405.128; and (3) home health care services, defined in 42 U.S.C. §§ 1395x(m) and (n) and 42 C.F.R. § 405.130.

In brief, extended care coverage extends to "services furnished to an inpatient of a skilled nursing facility, including nursing care, other enumerated medical services and such other services necessary to the health of the patients as are generally provided by skilled nursing facilities". 42 U.S.C. § 1395x(h). "Medical and other health services" are further defined in 42 U.S.C. § 1395x(s) and "skilled nursing facilities" are further defined in 42 U.S.C. § 1395x(j). The Secretary's regulations elaborate upon these definitions and provide specific examples of covered and non-covered services. 42 C.F.R. §§ 405.125-405.128a.

2. Agreements between H.E.W. and Providers: The Act delineates responsibilities for participating providers. Hospitals such as plaintiffs may participate in the Medicare program as providers and receive federal payments by filing an agreement with the Secretary. 42 U.S.C. § 1395cc. Reimbursement to providers for services rendered to Medicare beneficiaries is performed either by the Secretary or, more commonly, by certain private organizations acting as fiscal intermediaries under contract with the Secretary at the request of providers. 42 U.S.C. § 1395h. In the instant case, Prudential Insurance Company of America ("Prudential") is such a fiscal intermediary.

3. Excluded Services: The Act also enumerates certain specific exclusions from reimbursement, including "custodial care", 42 U.S.C. § 1395y(a)(9); the regulations indicate, in particular, that aftercare which does not meet the definition of extended care constitutes custodial care, 42 C.F.R. § 405.310(g).

When services are rendered, the Act mandates various provider and physician certifications that the covered care is or was medically necessary. 42 U.S.C. § 1395f(a).

The Secretary's regulations provide, however, with regard to the two covered levels of medical care, that "a physician may certify or recertify to the need for continued hospitalization if he finds that the patient could receive proper treatment in a skilled nursing facility but no bed is available in a particular extended care facility". 42 C.F.R. § 405.1627(a)(2). See also 42 U.S.C. § 1395f(a)(2)(C).

4. Utilization Review Plans Required: Participating providers must establish utilization review plans providing, inter alia, for periodic review of the "medical necessity of the services . . . to promote the most efficient use of available health facilities and services"; such plans must provide as well "for prompt notification to the institution, the individual, and his attending physician of any finding . . . that further stay in the institution is not medically necessary". 42 U.S.C. § 1395x(k), 42 C.F.R. § 405.1035. The decision of the providers' utilization review committee does not constitute a determination of the Secretary, but is considered along with other evidence in arriving at coverage determinations. 42 C.F.R. § 405.706. If, however, the Secretary finds a "substantial failure" to make timely utilization review in long-stay inpatient cases, she may, in lieu of terminating the provider agreement, determine—after notice and hearing — that no payment shall be made for inpatient services to individuals beyond the twentieth day of a continuous period. 42 U.S.C. § 1395cc(d), 42 C.F.R. §§ 405.163 and 405.167.

5. Rights and Procedures where Non-Covered Services are Provided: The statute sets forth the relationships and rights of beneficiaries (patients) and providers in non-coverage cases. First of all, once the provider's utilization review committee finds that further inpatient hospital or extended care services are no longer medically necessary, payment to the provider may be continued notwithstanding for a period of up to three days. 42 U.S.C. § 1395f(a)(7), 42 C.F.R. § 405.162.

a. Waiver of Individual Liability: Although the Act does provide for federal recovery of benefits overpaid to or on behalf of individuals in some circumstances, it specifically precludes recovery or recoupment from an individual who is "without fault" and is denied benefits on grounds, inter alia, that services constituted only custodial care, 42 U.S.C. § 1395gg;...