State of NC ex rel. Morrow v. Califano

• Decision Date: 17 April 1978
• Docket Number: No. 76-0049-CIV-5.,76-0049-CIV-5.
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: STATE OF NORTH CAROLINA ex rel. Sarah T. MORROW, Secretary of the North Carolina Department of Human Resources, Plaintiff, American Medical Association and North Carolina Medical Society, Plaintiffs-Intervenors, State of Nebraska, Plaintiff-Intervenor, v. Joseph A. CALIFANO, Secretary of the United States Department of Health, Education and Welfare, Defendant, American Association for Comprehensive Health Planning, Inc., Defendant-Intervenor, National Association of Neighborhood Health Centers, Defendant-Intervenor.

445 F. Supp. 532

STATE OF NORTH CAROLINA ex rel. Sarah T. MORROW, Secretary of the North Carolina Department of Human Resources, Plaintiff, American Medical Association and North Carolina Medical Society, Plaintiffs-Intervenors, State of Nebraska, Plaintiff-Intervenor, v. Joseph A. CALIFANO, Secretary of the United States Department of Health, Education and Welfare, Defendant, American Association for Comprehensive Health Planning, Inc., Defendant-Intervenor, National Association of Neighborhood Health Centers, Defendant-Intervenor.

No. 76-0049-CIV-5.

United States District Court, E. D. North Carolina, Raleigh Division.

September 22, 1977.

Judgment Affirmed April 17, 1978.

William F. O'Connell, Sp. Deputy Atty. Gen., Rufus L. Edmisten, Atty. Gen., State of North Carolina, North Carolina Dept. of Justice, Raleigh, N. C., for plaintiff.

John H. Anderson, Henry A. Mitchell, Jr., Smith, Anderson, Blount & Mitchell, Raleigh, N. C., Newton N. Minow, Jack R. Bierig, Edna S. Epstein, Sidly & Austin, Chicago, Ill., for plaintiffs-intervenors American Medical Association & North Carolina Medical Society.

Mel K. Kammerlohr, Asst. Atty. Gen., Lincoln, Neb., for plaintiff-intervenor State of Nebraska.

Rex E. Lee, Steven I. Frank, Asst. Attys. Gen., Dept. of Justice, Washington, D. C., for defendant.

William G. Kopit, Richard G. Vernon, Washington, D. C., Eugene Hafer, Raleigh, N. C., for defendant-intervenor and American Association for Comprehensive Health Planning, Inc.

Adam Stein, Chambers, Stein, Ferguson & Becton, Chapel Hill, N. C., Herbert Semmel, Michael C. Harper, Center for Law and Social Policy, Washington, D. C., for defendant-intervenor Nat. Association of Neighborhood Health Centers.

Judgment Affirmed April 17, 1978. See 98 S.Ct. 1597.

OPINION and ORDER

RUSSELL, Circuit Judge, LARKINS, Chief District Judge, and DUPREE, District Judge.

This is a suit against the Secretary of Health, Education and Welfare challenging the constitutionality of the National Health Planning and Resources Development Act of 1974, 42 U.S.C. § 300k et seq. (hereinafter referred to as "the Act"). The original complainant was the State of North Carolina. Later, interventions by the American Medical Association, the North Carolina Medical Society, as well as by the State of Nebraska, were allowed.

The attack by North Carolina on the Act focuses primarily on the requirement thereunder that any State, in order to qualify for financial grants under the federal health programs, should establish a State Health Planning and Development Agency, which, among other things, should "administer a State certificate of need program satisfactory to the Secretary which applies to new institutional health services proposed to be offered or developed within the State" and under which "only those services, facilities, and organizations found to be needed shall be offered or developed in the State."¹ And the reason for the State's concern is found in the decision of its own Supreme Court that a certificate of need statute as required under the Act "is in excess of the constitutional power of the Legislature." In Re Certificate of Need for Aston Park Hosp., Inc., 282 N.C. 542, 193 S.E.2d 729, 733 (1973). Absent a constitutional amendment, the State argues it would be required by the challenged provision of the Act to forfeit its right to participate in some forty-odd federal financial assistance health programs. It contends that, under these circumstances, the requirement represents an effort to compel the State to amend its constitution and thus constitutes an unconstitutional interference with the State's legislative and constitutional processes violative of the principles of federalism and state sovereignty, as guaranteed under the due process clause, the Tenth Amendment and the Guaranty Clause of Article IV, Section 4 of the Constitution.

The American and North Carolina Medical Associations, who have intervened in support of the plaintiff North Carolina, join in the grounds raised by North Carolina against the validity of the certificate of need requirement. In addition, they argue that the Act is invalid because it seeks to convert private facilities into public facilities subject to federal regulation and "interferes with the physician-patient relationship by rationing health resources for reasons unrelated to the promotion of high quality care." They rely, as authority for their special contentions, on the First, Fifth and Ninth Amendments.

The intervenor Nebraska, which similarly supports the position of North Carolina, also asserts an independent ground of attack on the Act. It would find invalid on constitutional grounds the population requirements for health service areas established under the Act and the related waiver provisions.

The defendant, in his answer, denies the validity of the contentions of the plaintiff and its supporting intervenors. As is obvious, there are no real issues of contested fact; the dispositive issues are legal. All parties have recognized this and both sides have moved for summary judgment. Under these circumstances, disposition of the cause on the basis of such motions is appropriate.

As we have said, the primary attack of the plaintiff North Carolina relates to the certificate of need requirement in the Act. In making such an attack, the plaintiff concedes that, in the exercise of a valid spending power, the federal government may impose terms and conditions upon fiscal grants allotted by it among the states. King v. Smith (1968) 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118; Oklahoma v. Civil Service Comm'n (1947) 330 U.S. 127, 67 S.Ct. 544, 91 L.Ed. 794. Nor does the plaintiff dispute the validity of federal appropriations to promote the public health under the general welfare clause. Its attack on the certificate of need requirement is that, while Congress may attach conditions to federal grants to the states, such conditions may not be arbitrary, may not be unrelated to the legitimate purposes of federal health legislation, and may not invade the sovereign rights of the states.

The Act as a whole had as one of its basic purposes the more efficient and economical uses of health services. It grew out of a Congressional concern that the many unneeded hospital beds available in the nation imposed an unnecessarily exorbitant financial burden on the furnishing of required health care, and that there was an uneven distribution of health care facilities, resulting in some areas being over supplied and others being woefully deficient.² It sought through a national health planning policy to provide for the development of a program for dealing with the "maldistribution of health care facilities and manpower" and to "authorize financial assistance for the development of resources to further that policy."³ An integral part of such a program was the certificate of need requirement which the plaintiff assails. The State health planning and development agency, authorized under the Act, was to "serve as the designated planning agency of the State to * * * (B) administer a State certificate of need program which should apply to new institutional health services proposed to be offered or developed within the State and which is satisfactory to the Secretary. Such program shall provide for review and determination of need prior to the time such services, facilities, and organizations are offered or developed * * *, and provide that only those services, facilities, and organizations found to be needed shall be offered or developed in the State."⁴

We perceive nothing unconstitutional either in the purposes of the Act or in the condition thereby attached to health grants made to the States under federal health programs. Without question Congress in making grants for health care to the States, should be vitally concerned with the efficient use of the funds it appropriates for that purpose. It had a perfect right to see that such funds did not cause unnecessary inflation in health costs to the individual patient. It certainly had the power to attach to its grants conditions designed to accomplish that end.

The plaintiff argues that however valid such power may be generally, this power of the federal government to attach conditions to grants to the States is not an unlimited one and may not be stretched to validate "coercive" conditions. That it urges is the necessary consequence of the requirement of a State certificate of need law. In support of this argument, it relies primarily on Steward Machine Co. v. Davis (1937) 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279. In Steward, the Court recognized that to hold "motive or temptation on the part of a State to comply with a condition attached to a federal appropriation grant is to be construed as equivalent to coercion is to plunge the law in endless difficulty."⁵ It accordingly declared as a general rule, that whenever the condition attached by Congress to an appropriation grant available to the States relates to a "legitimately national" purpose, inducement or temptation to conform⁶ does not go beyond the bounds of the federal government's legitimate spending power and is not coercion in any constitutional sense.⁷

It is not to be assumed that the plaintiff would argue that fiscal support for a national health program is not a legitimate national interest, which will support a federal grant to the States. Were it to do so, it would undercut the very basis of its action, which seeks to secure the benefits of such grants without compliance with the challenged condition. Accepting then the premise that such federal support is constitutionally valid, it would seem manifest that the federal government could validly attach a condition which was intended to assure the efficient use of the funds so granted. Such a condition would certainly relate to the legitimate national interest in health. So viewed, it would satisfy the standard phrased by Justice Cardozo in Steward and...