Mount Sinai Hosp. of Greater Miami, Inc. v. Weinberger

• Decision Date: 06 February 1974
• Docket Number: No. 73-804-Civ-JLK.,73-804-Civ-JLK.
• Citation: 376 F. Supp. 1099
• Parties: MOUNT SINAI HOSPITAL OF GREATER MIAMI, INC., Plaintiff, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare and Blue Cross of Florida, Inc., Defendants.
• Court: U.S. District Court — Southern District of Florida

376 F. Supp. 1099

MOUNT SINAI HOSPITAL OF GREATER MIAMI, INC., Plaintiff, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare and Blue Cross of Florida, Inc., Defendants.

No. 73-804-Civ-JLK.

United States District Court, S. D. Florida,

February 6, 1974.

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James G. Roth, Broad & Cassel, Miami Beach, Fla., for plaintiff.

Kelly, Black, Black & Kenny, P. A., Miami, Fla., for defendant Blue Cross of Fla.

JAMES LAWRENCE KING, District Judge.

Plaintiff Mount Sinai Hospital brought this action to contest the defendants' right to recover some $6 million in Medicare payments received between 1966 and 1972 for services that the Government has since decided were not covered by the Medicare program. The case presents substantial questions about the scope of Governmental authority and the power of the courts to control its exercise, the decision of which will have important consequences for the administration of the Medicare program and the local community which the hospital serves.

Plaintiff is a non-profit facility located in Miami Beach, Florida, a popular retirement haven for senior citizens from across the nation, a large percentage of whom are Medicare beneficiaries. Since the inception of the program following enactment of the Social Security Amendments of 1965 (Medicare amendments),¹ the lion's share of Mount Sinai's services have understandably been devoted to meeting the needs of the great number of Medicare recipients in the surrounding community. As even defendants have recognized, Mount Sinai in 1971 received the highest daily income from Medicare of any hospital of comparable size in the United States, and submitted claims to the program the following year for more services than any other facility in the Southeast, irrespective of size.²

Mount Sinai has been an institution authorized to furnish Medicare services since the program began on July 1, 1965. To qualify as such a "provider of services," the hospital was required to agree not to charge Medicare beneficiaries for its services, but to accept payment from the Federal Hospital Insurance Trust Fund.³ Payments were made by defendant Blue Cross of Florida, nominated by Mount Sinai to serve as its "fiscal intermediary," and acting by agreement with the defendant Secretary of the Department of Health, Education and Welfare as his agent in administering the program.⁴ From 1966 through 1971, Blue Cross apparently reviewed and allowed, with few exceptions, the bills it received from Mount Sinai for Medicare services rendered during that period.

Plaintiff's problems with Medicare began in the summer of 1972 when Blue Cross learned from the Bureau of Health Insurance of the Social Security Administration that charges of overutilization of services covered by the program had been made against Mount Sinai by an area physician. With the assistance of the Florida Medical Foundation Peer Medical Review Committee, Blue Cross and the Bureau proceeded to review some 700 patient charts for the year 1970 as a means of ascertaining whether erroneous payments had been made for services excluded from Medicare coverage and of projecting the amount of such overpayments during the entire period from 1966 to 1972. By affidavit of J. W. Herbert, President of Blue Cross, it is now alleged on the basis of that review that an estimated $6,380,587.40 in claims were improperly paid to Mount Sinai for items or services not covered by the program. Defendants specifically charge that Mount Sinai performed medically unnecessary procedures and that hospital stays were longer than required.

On the basis of its investigation, Blue Cross delivered a written suspension order to plaintiff on May 10, 1973, which stated that 15 percent of the Medicare payments coming due to Mount Sinai for current services would henceforth be withheld so that the trust fund could begin to recover the alleged overpayments. The suspension order was predicated on regulations that became effective May 27, 1972, which detail a procedure for instituting such suspensions where there is "reliable evidence" that an overpayment has been made.⁵

Before the suspension could be implemented, plaintiff brought this action for temporary and permanent injunctive relief, challenging the statutory authority for the suspension order as well as the constitutionality of the procedures prescribed by the suspension regulations for its issuance. An emergency hearing was accordingly convened after notice to all the parties on May 17, 1973.

The evidence presented at the hearing demonstrated that not only Mount Sinai, but the entire community it serves would be irreparably injured by the threatened suspension of Medicare payments. The undisputed testimony indicated that if the suspension order were implemented, Mount Sinai's income could be reduced by as much as $100,000 a week. Such a decrease in the hospital's cash flow would jeopardize its ability to meet weekly payrolls and operating expenses, officials pointed out, because Mount Sinai's capital assets have been fully mortgaged to permit the plant expansion required to meet ever increasing community needs. The impending loss of a major part of the hospital's regular income, they said, would consequently necessitate the discontinuance of such vital, but money-losing, community services as Mount Sinai's medical training program and emergency room operation.

Upon finding that plaintiff had presented evidence sufficient to meet all the prerequisites for temporary relief, the court issued an order intended to preserve the status quo pending further consideration of the case. The order was subsequently extended by stipulation to permit formulation of the issues and decision on a motion to dismiss and on opposing motions for summary judgment to be prepared by the parties. Following the submission of these motions and oral argument thereon, the court further delayed initiation of the suspension with the acquiescence of the parties to permit preparation of this opinion.

Defendants argue in their motion to dismiss that the doctrines of sovereign immunity, ripeness, finality and exhaustion of administrative remedies, as well as the Medicare amendments themselves, prevent the court from hearing plaintiff's claims. We reject that conclusion and deny the motion to dismiss because under none of these theories was it ever intended that the courthouse doors be closed to a litigant in Mount Sinai's shoes confronted with irreparable injury from Government action and seeking only to prevent what Congress may never have authorized.

There being no genuine dispute as to any fact material to the issue of statutory authority, as the statements of the parties at oral argument and in their opposing motions for summary judgment reveal, we proceed to consider the question of statutory authority. The court independently arrives at the same conclusion expressed by Congress itself when it amended the Act to provide special authority and procedures to determine whether overutilization of Medicare services is occurring, to recover any payments improperly made for such services, and to safeguard the rights of hospitals and other providers of services in the process.⁶

These 1972 amendments were necessary because Congress, when it established the program, provided that if the Government once determined that hospital services were covered by Medicare and proceeded to pay for them, it could not return to the coverage question a second time years later and decide that the same services were not covered. The reason for such a limitation may be explained by the need to encourage hospitals to participate in Medicare despite the requirement that they agree not to charge their patients, but to bill the program for services it covers. By means of the prohibition against reopening coverage determinations, Congress insured that participating hospitals would be protected by prompt notification if the services they had provided were not covered, so that they could immediately proceed to collect from their patients.

Not until 1972 did Congress grant Medicare the authority to recover funds it had paid to a hospital under the circumstances of this case. Because the payments Medicare now seeks to recover were made between 1966 and 1972, at a time when Congress had not given Medicare the authority to recoup such payments, we hold that defendants are barred from implementing a suspension order against Mount Sinai for those years.

Under the authority granted by Congress in 1972, Medicare can now recover payments resulting from alleged over-utilization of services. Consequently, the problem presented in this case will not hereafter arise.

I

Defendants' motion to dismiss must be considered first because it goes to the heart of the court's power to resolve the questions of statutory authority and constitutionality raised by plaintiff's complaint. At the outset it is useful to delimit the precise issues presented by the motion: Whether the court has jurisdiction over this action and, if so, whether that authority should be exercised in this case. Not at issue are such factual problems as whether overutilization of Medicare services actually took place at Mount Sinai between 1966 and 1972, what the extent of the alleged abuses might have been, and whether overpayments to plaintiff resulted.

Plaintiff contends, as the complaint alleges, that the court's power to hear its claims is properly predicated on general federal question jurisdiction⁷ and on Section 10 of the Administrative Procedure Act (APA).⁸ Defendants respond that this action is barred by the Social Security Act itself and by the doctrines of sovereign immunity, ripeness, finality and exhaustion of administrative remedies. We will consider these theories seriatim.

STATUTORY PRECLUSION

The limitation on judicial review contained in the original Social Security Act...