People by Whalen v. Woman's Christian Ass'n of Jamestown, Inc.
| Decision Date | 23 November 1976 |
| Citation | 88 Misc.2d 803,389 N.Y.S.2d 520 |
| Parties | The PEOPLE of the State of New York, by Robert P. WHALEN, M.D., as Commissioner of the Department of Health of the State of New York, and Thomas A. Harnett as Superintendent of Insurance of the State of New York, Plaintiffs, v. The WOMAN'S CHRISTIAN ASSOCIATION OF JAMESTOWN, INC. and Chautauqua Region Hospital Service Corporation, Defendants. |
| Court | New York Supreme Court |
Louis J. Lefkowitz, Atty. Gen. (Kenneth J. Connolly, Albany, of counsel), for plaintiffs.
Hinman, Straub, Pigors & Manning, Albany (Stephen M. Cleary, Albany, of counsel), for Chautauqua Region Hospital Service Corporation.
Costello, Cooney & Fearon, Syracuse (Proskauer, Rose, Goetz & Mendelsohn, New York City, of counsel), for defendant The Woman's Christian Association of Jamestown, Inc.
In an action for a permanent injunction, plaintiffs move for an order which would enjoin the defendant The Woman's Christian Association of Jamestown, Inc. (hereinafter 'Hospital') pendente lite from charging any subscriber of defendant Chautauqua Region Hospital Service Corporation (hereinafter 'Jamestown Blue Cross'), or any subscriber of any other hospital service corporation, an amount in excess of the reimbursements rates for the Hospital established pursuant to section 2807 of the Public Health Law.
Effective October 15, 1976, defendant Hospital terminated the operating agreement with Jamestown Blue Cross which had been in effect since 1973. That agreement conformed to the general pattern of such agreements in that the Hospital agreed therein to '* * * furnish hospital service to the subscribers of (Jamestown) Blue Cross in accordance with the contracts made between (Jamestown) Blue Cross and its subscribers * * *', and Jamestown Blue Cross agreed to compensate the Hospital for its services pursuant to a reimbursement formula which was subject to certification by the Commissioner of Health and approval by the Superintendent of Insurance. Because the Hospital in 1975 sustained an operating loss in excess of $285,000, which was an increase in excess of $226,000 over the loss sustained in 1974, and the Blue Cross reimbursement rate for 1976 was frozen by State officials at the 1975 level, the defendant Hospital terminated the said operating agreement so that it might increase its revenues by charging directly to the patients who were covered by Blue Cross such sums as the Hospital deemed appropriate and necessary to maintain its financial stability, even if such sums exceeded the amounts payable by Jamestown Blue Cross.
Immediately prior to the 1969 amendment of section 2807 of the Public Health Law, the stated objective of State review of payments to be made by Blue Cross and other corporations organized pursuant to article 9--C of the Insurance Law was to insure that Blue Cross payments were reasonably related to the costs of providing hospital services (see L.1969, ch. 957, § 4). However, said section 2807 was amended by said chapter 957 of the Laws of 1969 (see Public Health Law, § 2807, subd. 3) so that thereafter Blue Cross payments for such services might be made only at rates which the Commissioner of Health had found were 'reasonably related to the costs of the efficient production of such service' and in fixing those rates, the Commissioner was required to consider, among other things, 'the need for incentives to improve services and institute economies' in hospital operations.
The plaintiffs and Jamestown Blue Cross say that, although the said section 2807 of the Public Health Law does not purport to directly control hospital charges, the legislative history of the 1969 amendments and the recitations therein contained, compel the conclusion that the Legislature intended to, and did, impose direct price controls on...
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