St. Louis University v. Blue Cross Hospital Serv., Inc.

• Decision Date: 18 February 1975
• Docket Number: No. 72-638C (4).,72-638C (4).
• Citation: 393 F. Supp. 367
• Parties: ST. LOUIS UNIVERSITY, a Missouri not for Profit Corporation, Plaintiff, v. BLUE CROSS HOSPITAL SERVICE, INC. OF ST. LOUIS, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

393 F. Supp. 367

ST. LOUIS UNIVERSITY, a Missouri not for Profit Corporation, Plaintiff, v. BLUE CROSS HOSPITAL SERVICE, INC. OF ST. LOUIS, et al., Defendants.

No. 72-638C (4).

United States District Court, E. D. Missouri, E. D.

February 18, 1975.

Bryan, Cave, McPheeters & McRoberts, Thomas V. Connelly and Veryl L. Riddle, St. Louis, Mo., for plaintiff.

Donald J. Stohr, U. S. Atty., St. Louis, Mo., for defendants.

MEMORANDUM

NANGLE, District Judge.

This action for review of an administrative decision limiting provider reimbursement under the Medicare Act is before the Court upon the motions of the defendants to dismiss and upon all parties' cross-motions for summary judgment.

Plaintiff St. Louis University, through its hospitals, agreed on June 26, 1966, with the defendant Secretary of Health, Education and Welfare ("Secretary") to provide medical services to individuals under Parts A and B of the Health Insurance for the Aged Act, Pub.Law 89-97, 42 U.S.C. § 1395 et seq., as amended ("Medicare Act"), Title XVIII of the Social Security Act.

Pursuant to 42 U.S.C. § 1395h (1965), defendant Blue Cross Association ("BCA") contracted with the Secretary to serve as a fiscal intermediary in the administration of the Part A Medicare program. The intermediary determines the amount of the payments due to providers from the Secretary for Medicare services. The intermediary also makes the actual reimbursement to the providers, may be required to provide consultative services to providers regarding the maintenance of fiscal records, and is to serve as a channel of communication between providers and the Secretary. 42 U.S.C. § 1395h(a).

BCA subcontracted its duties as a Medicare intermediary in the St. Louis, Missouri, area to defendant Blue Cross Hospital Service, Inc. of St. Louis, doing business as Blue Cross Plan of St. Louis ("Plan"). BCA and its staff work closely with the employees of the Plan and BCA is dependent upon the Plan to carry out BCA's duties as Part A fiscal intermediary.

Pursuant to 42 U.S.C. § 1395u (1965), General American Life Insurance Company ("General American") agreed with the Secretary to serve as a carrier (with duties similar to those of a Part A fiscal intermediary) in the administration of Part B of the Medicare program.

Although plaintiff may have elected to deal directly with the Secretary in its capacity as provider, it nominated BCA and the Plan to provide intermediary services under Part A, and General American as its Part B carrier.

In 1969 a dispute arose between plaintiff and the Plan over the amount of Part B reimbursement due plaintiff for services rendered by physicians employed on salary by plaintiff; General American had previously reviewed plaintiff's reimbursement claim and had approved it. The Plan determined that plaintiff had been overpaid $89,380.00 for the fiscal years ending August 31, 1966, 1967, and 1968, and thereafter proceeded to deduct certain amounts from plaintiff's Part A reimbursement. In reaching this decision the Plan sought advice from BCA on the merits of plaintiff's reimbursement claim. BCA responded with advice contrary to plaintiff's position.

Plaintiff appealed the Plan's decision to the BCA Provider Appeals Committee. This Committee was established by BCA, pursuant to its contract with the Secretary, to resolve provider complaints after a hearing. The Appeals Procedure, under which the Committee acted, provided that the decision of the Committee would be final. The Committee is composed of five members, three of whom are representatives of BCA appointed by the president of BCA; the other two members are chosen by the BCA president from persons nominated by national provider associations also selected by the president of BCA. A quorum of three members is required to conduct a hearing; one of the three must be a BCA vice-president who acts as hearing chairman. Both the provider and the Plan have an opportunity to present evidence, to cross-examine witnesses, and to dispute evidence offered. A stenographic record is kept.

On May 10, 1972, a hearing by the Committee on plaintiff's appeal from the Plan's reimbursement determination was held. On August 16, 1972, the Committee upheld the Plan. Plaintiff commenced this action thereafter.

In their brief filed January 18, 1974, defendants "suggest that this decision of the BCA Appeals Committee represents the final, non-reviewable determination of the Secretary . . . .".

Defendants' alternative motions to dismiss and for summary judgment are premised upon the grounds that the Court lacks subject matter jurisdiction and that plaintiff failed to state a claim upon which relief can be granted. Fed.R.Civ.Pro. 12(b) (1), (b) (6).

SUBJECT MATTER JURISDICTION

Plaintiff posits alternative statutory grounds for jurisdiction: 42 U.S.C. § 405(g) (Title II of the Social Security Act), 5 U.S.C. § 702 (Administrative Procedure Act), and 28 U.S.C. § 1331 (federal question). Plaintiff alleges, and it plainly appears from the record, that the amount in controversy exceeds $10,000.00, exclusive of interest and costs.

Plaintiff's claims are three. In Count I plaintiff alleges that the merits of defendants' decision which resulted in the reimbursement limitation is contrary to the provisions of the Medicare Act and the regulations promulgated thereunder, and is "arbitrary, wrongful and discriminatory". To the extent the regulations were correctly interpreted, plaintiff claims they are contrary to the provisions of the Medicare Act and invalid. In Count I plaintiff prays for declaratory relief and for an order directing defendants to properly reimburse plaintiff.

In Count II plaintiff attacks the composition of the BCA Appeals Committee. Plaintiff claims that the review by the Committee, a majority of whom were BCA personnel, did not constitute a fair and impartial review and was a denial of due process of law. Plaintiff further claims that, to the extent that the Appeals Procedure is a delegation by the Secretary of the right to review the decision of the Plan and to determine issues, the delegation is unlawful and denies plaintiff its due process right to impartial administrative review. In Count II plaintiff prays for remand to the Secretary for proper review.

In Count III plaintiff alleges that claims similar to plaintiff's have been allowed, when those claimants utilized a certain bookkeeping method acceptable to the Plan. Plaintiff claims this is unfair, arbitrary and denies plaintiff equal rights and protection of the law; plaintiff prays for relief similar to that sought in Count I.

Defendants assert that this is an action to which the United States has not consented and, therefore, the action is barred by sovereign immunity. The doctrine of sovereign immunity has been severely criticized,¹ but its vitality is unquestionable. See Gnotta v. United States, 415 F.2d 1271 (8th Cir. 1969); e. g., Twin Cities Chippewa Tribal Council v. Minnesota Chippewa Tribe, 370 F.2d 529 (8th Cir. 1967). It is relevant as a defense to an action, such as this, where the judgment of the Court would "interfere with the public administration" or would "expend itself on the public treasury". Dugan v. Rank, 372 U.S. 609, at 620, 83 S.Ct. 999, at 1006, 10 L.Ed.2d 15 (1963); e. g., Pine View Gardens, Inc. v. Mutual of Omaha Insurance Company, 158 U.S.App.D.C. 294, 485 F.2d 1073 (1973).

Contrary to plaintiff's argument, neither 28 U.S.C. § 1331 nor the Administrative Procedure Act operates to waive sovereign immunity, Twin Cities Chippewa Tribal Council, supra, at 532; nor does the Administrative Procedure Act confer subject matter jurisdiction upon this Court. Id.; see also, Opelika Nursing Home, Inc. v. Richardson, 356 F.Supp. 1338, 1341 (M.D.Ala. 1973), aff'd sub nom. Johnson's Professional Nursing Home v. Weinberger, 490 F.2d 841 (5th Cir. 1974).

Exceptions to the defense of sovereign immunity exist where the subject governmental action is committed without statutory powers or if within those powers, the powers or their exercise are constitutionally void. Larson v. Domestic & Foreign Corporation, 337 U.S. 682, 702, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949); Malone v. Bowdoin, 369 U.S. 643, 647, 82 S.Ct. 980, 8 L.Ed.2d 168 (1962); Dugan v. Rank, 372 U.S. 609, 621-622, 83 S.Ct. 999, 10 L.Ed.2d 15 (1963); e. g., Gardner v. Harris, 391 F.2d 885, 888 (5th Cir. 1968). It is not disputed by plaintiff that the Medicare Act empowers the Secretary and the intermediaries to reduce provider reimbursement. See 42 U.S.C. § 1395g. Therefore, the Court concludes that plaintiff's Count II claim alone, raising a constitutional challenge to the BCA hearing process, can survive the defense of sovereign immunity.² Jurisdiction to determine the Count II claim exists as granted by 28 U.S.C. § 1331. Temple University v. Associated Hospital Service of Philadelphia, 361 F.Supp. 263, at 267 (E.D.Pa.1973); cf., Wilson Clinic & Hospital Inc. v. Blue Cross of South Carolina, 494 F.2d 50 (4th Cir. 1970); Coral Gables Convalescent Home v. Richardson, 340 F.Supp. 646 (S.D.Fla.1972).

Defendants further argue that 42 U.S.C. § 405(h)³ precludes this entire action, since that section contains no provision for judicial review of reimbursable cost determinations. This argument must be denied. The Court is pursuaded that § 405(h) forbids judicial review of administrative decisions only where the claimant seeks to bypass review procedures provided by the Medicare Act. Kingsbrook Jewish Medical Center v. Richardson, 486 F.2d 663, 666 (2nd Cir. 1973). As in Temple University, supra, when plaintiff's claim arose, the Medicare Act provided no express procedure for review or appeal of a provider-intermediary dispute of this nature.⁴ Section 1395h(a) of Title 42 (1965) provided only that an intermediary's determination of the amount of payments...