State of N.Y. on Behalf of Holland v. Sullivan, 564

• Decision Date: 25 February 1991
• Docket Number: D,No. 564,564
• Citation: 927 F.2d 57
• Parties: , Medicare&Medicaid Gu 39,121 STATE OF NEW YORK on Behalf of Theresa HOLLAND, Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Secretary of Health & Human Services, Defendant-Appellant. ocket 90-6181.
• Court: U.S. Court of Appeals — Second Circuit

Page 57

927 F.2d 57

32 Soc.Sec.Rep.Ser. 515, Medicare&Medicaid Gu 39,121

STATE OF NEW YORK on Behalf of Theresa HOLLAND, Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Secretary of Health & Human

Services, Defendant-Appellant.

No. 564, Docket 90-6181.

United States Court of Appeals, Second Circuit.

Argued Dec. 7, 1990.

Decided Feb. 25, 1991.

Robert E. Wanerman, Asst. Regional Counsel, New York City (Stuart M. Gerson, Asst. Atty. Gen., Anthony J. Steinmeyer, New York City, Frederick J. Scullin, Jr., U.S. Atty., Syracuse, N.Y., on the brief), for defendant-appellant.

Lenore B. Browne, Asst. Atty. Gen. (Robert Abrams, Atty. Gen., Peter H. Schiff, Deputy Sol. Gen., Peter G. Crary, Asst. Atty. Gen., New York City, on the brief), for plaintiff-appellee.

Before KAUFMAN, NEWMAN, and WINTER, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

The Secretary of Health and Human Services appeals from the April 8, 1990, judgment of the District Court for the Northern District of New York (Howard G. Munson, Judge), directing that Medicare benefits be calculated and paid to the State of New York on behalf of Theresa Holland. The issue on appeal is whether the Secretary was entitled to deny Medicare coverage for Holland's hospitalization on the ground that inpatient hospital care was not "reasonable and necessary," within the meaning of 42 U.S.C. Sec. 1395y(a)(1)(A) (1988). In conformity with the recent decision of this Court in New York ex rel. Stein v. Secretary of Health and Human Services, 924 F.2d 431 (2d Cir.1991) (hereafter "Stein"), we vacate the decision of the District Court and remand with instructions to return the matter to the Secretary for further findings.

Background

Holland, a 77-year-old Medicare claimant, was admitted to Helen Hayes Hospital, a New York State rehabilitation hospital in West Haverstraw, New York, after being transferred from another hospital to which she had been admitted after suffering her second stroke. Her attending physician signed the admission request form, and the Utilization Review Committee (URC) at Helen Hayes approved her stay. Holland remained at Helen Hayes for about five weeks. While there, she participated in a program of physical therapy.

The hospital submitted a claim for Medicare hospital insurance benefits, which was rejected, first administratively and then following a hearing before an administrative law judge. Ultimately, the Appeals Council approved the rejection of coverage on the ground that inpatient hospitalization had not been necessary. The costs of hospitalization were imposed on the hospital on the ground that it should have known that Medicare coverage was not available for Holland's stay at Helen Hayes.

New York then filed this action in the District Court. The matter was referred to Magistrate Judge ¹ Ralph W. Smith, Jr., for a report and recommendation. The Magistrate Judge recommended that benefits be awarded on the ground that a decision in favor of hospitalization, made jointly by an attending physician and a URC, is binding on the Secretary. The District Court, accepting this so-called dual certification rule, adopted the report of the Magistrate Judge.

Discussion

The Secretary may not provide reimbursement for services that are "not reasonable and necessary" for diagnosis or treatment of illness or injury. 42 U.S.C. Sec. 1395y(a)(1)(A). The determination of whether services are reasonable and necessary includes a decision as to the setting where the services are to be rendered, for example, on an inpatient basis in a hospital or skilled nursing facility, as an outpatient, or in the patient's home. See New York ex rel. Bodnar v. Secretary of Health and Human Services, 903 F.2d 122, 125 (2d Cir.1990) (hereafter "Bodnar "). The Secretary has promulgated specific criteria to guide the determination as to whether it is reasonable and necessary to provide rehabilitation services in an inpatient hospital setting. See Health Care Financing Administration Ruling 85-2, 50 Fed.Reg. 31,040 (July 31, 1985) (hereafter "HCFAR 85-2"). The basic inquiry is whether the "patient needs a relatively intense rehabilitation program that requires a multidisciplinary coordinated team approach to upgrade his ability to function." Id. p A. Coverage will be provided both for a brief period of assessment and for the rendering of rehabilitation services. HCFAR 85-2 identifies eight criteria, all of which are to be met in the determination that a patient needs rehabilitation services on an inpatient hospital basis. These include, among other things, "[c]lose medical supervision by a physician with specialized training or experience in rehabilitation," "[t]wenty-four hour rehabilitation nursing," "[a] relatively intense level of physical therapy or occupational therapy," and "[a] multidisciplinary team approach to the delivery of the program." Id. p D(1), (2), (3), (4). Objective standards are set forth for determining whether some of these criteria have been met. For example, "close medical supervision" by a rehabilitation physician is defined to mean involvement with the patient "at least every 2-3 days during the patient's stay." Id. p D(1).

Though the Secretary's attempt to provide precise guidance for those who must process vast numbers of claims is commendable, it must be recognized that overly refined adherence to regulatory standards drafted for the generality of situations may fail to carry out basic legislative purposes in specific situations. For example, a physician attending a rehabilitation patient every 2-3 days might elect to forgo a visit during a brief interval in which he prefers to see how the patient does on a modified regime, before making the decision whether to...