Presbyterian Hospital of Dallas v. Harris

• Decision Date: 13 March 1981
• Docket Number: No. 80-1589,80-1589
• Citation: 638 F.2d 1381
• Parties: PRESBYTERIAN HOSPITAL OF DALLAS, Plaintiff-Appellant, v. Patricia R. HARRIS, Secretary of Health and Human Services, Defendant-Appellee. Summary Calendar. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1381

638 F.2d 1381

PRESBYTERIAN HOSPITAL OF DALLAS, Plaintiff-Appellant, v. Patricia R. HARRIS, Secretary of Health and Human Services Defendant-Appellee.

No. 80-1589

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Unit A

March 13, 1981.

Grover Hartt, Jr., Dallas, Tex., for plaintiff-appellant.

Kenneth J. Mighell, U.S. Atty., Fort Worth, Tex., John M. Stokes, Regional Atty., Suzanne C. Cochran, Asst. Reg. Atty., Dallas, Tex., Judith A. Shepherd, Asst. U.S. Atty., Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before GEE, RUBIN and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

This appeal arises from an action brought by Presbyterian Hospital of Dallas (the Hospital) to seek review of a final decision of the Secretary of Health and Human Services (the Secretary) which denied medicare reimbursement for certain expenses incurred by the Hospital in 1976. In particular, the Hospital challenges (1) the disallowance of expenses incurred in the provision of television and telephone service to the Hospital's medicare patients, and (2) the disallowance of expenses incurred in the provision of free medical care to indigents, as required of the Hospital by the Hill-Burton Act. The United States District Court for the Northern District of Texas granted summary judgment in favor of the Secretary on both grounds. With respect to the first, we affirm the judgment of the district court. With respect to the second, we reverse the judgment of the district court and direct the district court to remand this case to the Secretary.

I. THE FACTS

The Hospital is a private, non-profit acute care hospital located in Dallas, Texas. It is a qualified provider of medical services under Part A of the medicare provisions of the Social Security Act, 42 U.S.C. § 1395 et seq. (1976), and is therefore entitled to be reimbursed for the reasonable costs it incurs in the provision of necessary health services to medicare beneficiaries. 42 U.S.C. §§ 1395f(b), 1395x(v)(1)(A) (1976). In 1976, approximately 31% of the Hospital's patients were treated under the medicare program. As a medicare provider, the Hospital is entitled to monthly reimbursements from a fiscal intermediary of the Department of Health and Human Services. 42 U.S.C. §§ 1395g, 1395h (1976). There is no review of monthly reimbursements, 42 U.S.C. § 1395g, but at the conclusion of each fiscal year medicare providers must file a cost report with the intermediary. 42 U.S.C. § 1395g; 42 C.F.R. § 405.453(f) (1979). The intermediary may then retroactively adjust the payments it has made during the previous year. 42 U.S.C. § 1395g; 42 C.F.R. § 405.454(f) (1979).

The fiscal intermediary which reimburses the Hospital is Blue Cross of Texas (the Intermediary). After the Intermediary received the Hospital's cost report for the fiscal year ending September 30, 1976, it adjusted the amount due the Hospital for that year by reducing the Hospital's reimbursable expenses for, inter alia, the two items at issue here. The Hospital appealed the Intermediary's decision to the Provider Reimbursement Review Board of the Department of Health and Human Services (the Board), pursuant to 42 U.S.C. § 1395oo(a) (1976). The Board affirmed the decision of the Intermediary and, pursuant to 42 U.S.C. § 1395oo(f) (1976), the Board's decision became the final decision of the Secretary when the Secretary failed to modify or reverse the Board's decision within sixty days of its issuance. The Hospital then sought judicial review of this decision pursuant to 42 U.S.C. § 1395oo(f); accordingly, our standard of review is that set forth in the Administrative Procedure Act, 5 U.S.C. § 706 (1976).

The first issue on appeal involves the Secretary's refusal to allow reimbursement for television and telephone service. The Hospital's practice is to provide a television and telephone to all patients without an additional charge. In the fiscal year at issue, the Hospital claimed $6,062 in television rental and repair expenses, $2,657 for depreciation of television equipment, and $221,598 for telephone expenses. The Intermediary disallowed 90% of the television expenses and 34.72% of the telephone expenses. The Intermediary calculated the television disallowance percentage on the basis that 10% of patient use was "educational" and therefore reimburseable pursuant to 42 C.F.R. § 405.421 (1979); the telephone disallowance percentage was based on the ratio of patient telephone jacks to the total number of telephone jacks in the Hospital.

The second issue on appeal involves the Secretary's refusal to allow reimbursement for the expenses the Hospital incurred in fulfilling its free care obligation under the Hill-Burton Act, 42 U.S.C. § 291 et seq. (1976). The Hill-Burton Act provides an interest subsidy to hospitals on hospital construction and modernization loans, whereby the federal government pays directly to the lender 3% of the effective net interest per year. 42 U.S.C. § 291j-4 (1976). In order to qualify for this subsidy, however, the hospital must agree to provide a certain amount of free medical care to indigents. 42 U.S.C. § 291(c) (1976). As we explained in Cook v. Ochsner Foundation Hospital, 559 F.2d 968, 972 (5th Cir. 1977), "(t)he service to indigent patients is a quid pro quo exacted in return for the benefaction received from the taxpayers." The free care obligation is legally enforceable, and vests a cause of action in the indigent beneficiaries to sue for the free care. Saine v. Hospital Authority of Hall County, 502 F.2d 1033, 1034-35 (5th Cir. 1974). The obligation may be met in one of two ways: the hospital may agree to budget for uncompensated services to indigents not less than the lesser of 3% of its operating costs or 10% of all federal assistance received under the Hill-Burton Act, or it may agree that it will not exclude any person from admission on the ground that that person is unable to pay for the needed services. 42 C.F.R. § 53.111(d) (1979). The Hospital chose the latter "open door" approach, and agreed to provide service to all indigents who presented themselves for care. The Hospital received approximately $225,000 in Hill-Burton interest subsidies during the fiscal year at issue. The Hospital sought to recover a total of $178,871 in expenses incurred in the provision of free care to indigents, and the Board disallowed this entire amount. ¹

II. TELEVISION AND TELEPHONE EXPENSES

The Social Security Act specifically excludes "personal comfort items" from medicare coverage. 42 U.S.C. § 1395y(a)(6) (1976). Interpreting this provision, regulations of the Department of Health and Human Services list "a television set" and "telephone service" as examples of personal comfort items. 42 C.F.R. § 405.310(j) (1979). The Hospital does not seriously argue that this interpretation is beyond the authority of the Secretary. ²

Instead, the Hospital argues that medicare patients have a constitutional right, under the Free Speech Clause of the First Amendment, to government reimbursement of television and telephone expenses incurred during their covered hospitalization. We disagree. Assuming without deciding that the government is barred by the First Amendment from acting to prevent a hospital patient's access to television and telephone service, we think it clear that there is no constitutional obligation to finance such access. In Harris v. McRae, --- U.S. ---, --- - ---, 100 S.Ct. 2671, 2688-89, 65 L.Ed.2d 1094 (1980) (holding constitutional the Hyde Amendment, which severely limits the reimbursement of abortion costs from medicaid funds), the Supreme Court explained the applicable principle:

Although the liberty protected by the Due Process Clause affords protection against unwarranted government interference with freedom of choice in the context of certain personal decisions, it does not confer an entitlement, to such funds as may be necessary to realize all the advantages of that freedom. To hold otherwise would mark a drastic change in our understanding of the Constitution. It cannot be that because government may not prohibit the use of contraceptives, or prevent parents from sending their child to private school, (that) government therefore, has an affirmative constitutional obligation to ensure that all persons have the financial resources to obtain contraceptives or send their children to private schools.

--- U.S. at --- - ---, 100 S.Ct. at 2688-89 (citations omitted). The exclusion of television and telephone expenses from medicare coverage does not prevent access to television and telephone service, for the patient may pay for such service himself. Since the government is not required to finance the exercise of First Amendment rights, the government may exclude from medicare coverage costs which may in fact be used for such purposes.

The Hospital argues that the government is nevertheless constitutionally required to provide hospital patients with television and telephone service because of the restraints placed on their liberty by hospital confinement. For this proposition the Hospital relies on the First Amendment rights of prisoners. See, e. g., Pell v. Procunier, 417 U.S. 817, 822, 94 S.Ct. 2800, 2804, 41 L.Ed.2d 495 (1974). Hospital patients, like prisoners, do indeed have their liberty restrained. But the First Amendment analogy between hospital patients and prisoners is inapposite. As the Supreme Court explained in Harris v. McRae:

(A)lthough government may not place obstacles in the path of a woman's exercise of her freedom of choice, it need not remove those not of its own creation. Indigency falls in the latter category. The financial constraints that restrict an indigent woman's ability to enjoy the full range of constitutionally protected freedom of choice are the product not of governmental restrictions on access to abortions, but rather of her indigency.

--- U.S. at ---, ...