United Hosp. Center, Inc. v. Richardson
| Decision Date | 20 March 1985 |
| Docket Number | Nos. 84-1062,84-1088,s. 84-1062 |
| Parties | Medicare&Medicaid Gu 34,558 UNITED HOSPITAL CENTER, INC., a private, non-profit corporation; Reynolds Memorial Hospital, Inc., a private, non-profit corporation; Davis Memorial Hospital, Inc., a private, non-profit corporation; St. Joseph's Hospital of Parkersburg, a private, non-profit corporation, Appellees, v. Sally K. RICHARDSON; William L. Gilligan; Larry C. Fizer and West Virginia Health Care Cost Review Authority, Appellants, and John D. Rockefeller, IV, Governor of the State of West Virginia; Chauncey H. Browning, Attorney General of the State of West Virginia; The West Virginia Department of Health, a Department of the State of West Virginia; L. Clark Hansbarger, Director of the State Department of Health; The Office of the Assistant Commissioner of Medical Services for the West Virginia Department of Welfare and David W. Forinash, Assistant Commissioner of Medical Services for the West Virginia Department of Welfare, Defendants. UNITED HOSPITAL CENTER, INC., a private, non-profit corporation; Reynolds Memorial Hospital, Inc., a private, non-profit corporation; Davis Memorial Hospital, Inc., a private, non-profit corporation; St. Joseph's Hospital of Parkersburg, a private, non-profit corporation, Appellees, v. The WEST VIRGINIA DEPARTMENT OF HEALTH, a Department of the State of West Virginia; L. Clark Hansbarger, Director of the State Department of Health; The Office of the Assistant Commissioner of Medical Services for the West Virginia Department of Welfare; David W. Forinash, Assistant Commissioner of Medical Services for the West Virginia Department of Welfare, Appellants, and John D. Rockefeller, IV, Governor of the State of West Virginia; Chauncey H. Browning, Attorney General of the State of West Virginia; Sally K. Richardson; William L. Gilligan; Larry C. Fizer and West Virginia Health Care Cost Review Authority, Defendants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
John H. Kozak, General Counsel, West Virginia Health Care Cost Review Authority, Charleston, W.Va. (Chauncey H. Browning, Atty. Gen., William F. Carroll, Deputy Atty. Gen., Charleston, W.Va., on brief), for appellants.
Robert J. O'Neil, Charleston, W.Va. (George G. Guthrie, Spilman, Thomas, Battle & Klostermeyer, Charleston, W.Va., on brief), for appellees.
Before RUSSELL, WIDENER and PHILLIPS, Circuit Judges.
This is an action by four West Virginia private non-profit hospitals to enjoin the enforcement of sections 16-29B-4 and 16-29B-27 of the West Virginia Health Care Review Act, W.Va.Code Sec. 16-29B-1, et seq. (Supp.1984) (hereafter "Act") and any regulations promulgated thereunder by the West Virginia Health Care Cost Review Authority created to implement and administer the Act and for a declaratory judgment of the unconstitutionality of such sections.
The original defendants in the action were the Governor and Attorney General of West Virginia, the West Virginia Department of Health and its director, and the Office of Assistant Commissioner of Medical Services for the West Virginia Department of Welfare and the Individual Assistant Commissioner. Jurisdiction was predicated on 28 U.S.C. Secs. 1331 and 1343 (1983), in support of claims under 42 U.S.C. Sec. 1983, and 28 U.S.C. Sec. 2201, et seq.
Prior to the filing of an answer by the named defendants, the district judge, on motion of the plaintiffs, entered a temporary restraining order against the enforcement of the challenged sections, and later, after the original defendants had answered, a preliminary injunction to the same effect was granted. Thereafter, by stipulation, the Governor and Attorney General were dismissed as defendants and the Authority and its individual members were added as defendants. The Secretary of the United States Department of Health and Human Services was also permitted (actually requested) to file a memorandum of position as an amicus curiae. After a hearing on the merits, the district judge entered an order granting the plaintiffs declaratory judgment of invalidity of section 4 of the Act. 1 The defendants have appealed. We reverse.
The beginning point for a review of the judgment is the Act itself. As stated in its preamble, the purpose of the legislation was to establish a complex, integrated system for restraining "unreasonable increases in the costs of acute care hospital services" in the State of West Virginia. 2 In effectuating this purpose, it created an Authority, composed of three members. The Authority (later described as board) 3 was to develop and promulgate a uniform system of accounting and reporting for all State acute care hospitals and to establish a schedule of rates for the hospitals. In the discharge of this responsibility it was expressly authorized to develop rules and regulations to administer the provisions of this section. 4 The Act, also, granted power to the board to employ a staff, including general counsel to represent it in "all adjudicatory matters," and to "contract with third parties." 5
While the Act became effective as of March 12, 1983, jurisdiction of the board over "rates for health services care" did not arise until July 1, 1984. Section 16-29B-4 which is the object of the plaintiffs' attack, was enacted to govern health service charges by State acute care hospitals in the interim period between the effective date of the Act and the date after the assumption of jurisdiction over such rates by the board and the issuance of initial rates for the hospitals. Such section freezes during this interim period "[a]ll rates for hospital services" as of February 1, 1983 "except as adjustments are provided in this article." It proceeds significantly to provide that, though there was the general "freeze," the board or the director of the state department of health were "empowered to approve temporary rate increases for hospitals subject to the provisions of this article, in accordance with the provisions of section twenty-one, subsection (c) of this article." Subsection 16-29B-21(c) confers on the board, "[w]hether before or after" its jurisdiction to fix rates arises on July 1, 1984, "discretionary authority to allow a temporary change in a hospital's rates which may be effective immediately upon filing and in advance of review procedures when it has been determined that such temporary rate changes are in the public interest, and are necessary to prevent insolvency, to maintain accreditation or for emergency repairs or to relieve undue financial hardship." Section 4 also sets a "cap" of "twelve percent per annum" on any increase in a hospital's "gross patient revenues," subject to the provision that
The Legislature clearly recognized that Medicare and Medicaid rates presented special problems in establishing both interim and permanent rates and required special treatment. It sought to meet this problem by its grant of authority to the board and by subsections (d) and (e) of Sec. 16-29B-16, as well as by the language of section 4 relating to the "cap" on patient care reserve which was to be prorated in connection with Medicare and Medicaid patients. The subsections of section 16 provided that the board should "[u]pon appointment" of its members, seek approval for reimbursement to hospitals under the Medicare and Medicaid programs in accordance with rates approved by the board and to this end was charged with the responsibility "[o]n or before" June 1, 1984, of submitting to the Secretary of Health and Human Services application for approval of such rates.
Immediately after their appointment and qualification, the members of the board began the preparation of rules and regulations to be followed in the administration of the Act both during the interim period and for the period after the issuance of the initial rate schedule by the board. These rules and regulations were revised a time or two but in the final, approved revision, they were submitted for public hearing in accordance with state procedures. Thereafter, they were filed with and approved by the appropriate legislative rule-making review committee as required under Sec. 29A-3-11 of the West Virginia Code (Supp.1984). As approved by the designated legislative committee, such rules and regulations were then approved in formal legislation by the full Legislature.
It is the position of the plaintiffs that both the provision of section 4 freezing (subject to adjustment as provided in that section) the rates charged by them in the interim period between the enactment of the Act and the date when the board created under the Act issues its initial rate schedules for each hospital as well as the provision of the same section restricting increases in annual gross patient revenue of the hospitals to "twelve percent per annum" are violative of the supremacy and due process clauses of the federal Constitution, in that they contradict the clear language of the medicare and medicaid provisions of the Social Security Act. 6 Under this Act a State which has elected to participate in the Medicare and Medicaid programs Title XVIII (42 U.S.C. Sec. 1395, et seq.) and Title XIX (42 U.S.C. Sec. 1396 et seq.) of the Social Security Act, and thereby to receive matching funds from the federal government must develop a "State plan" which sets the rates of reimbursement for services rendered both Medicare and Medicaid patients which comply with certain federal standards. West Virginia had elected to participate in those programs and was accordingly...
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