Villa View Community Hosp., Inc. v. Heckler, s. 83-1310

• Decision Date: 02 March 1984
• Docket Number: Nos. 83-1310,83-1456,s. 83-1310
• Citation: 728 F.2d 539
• Parties: , 4 Soc.Sec.Rep.Ser. 187, Medicare&Medicaid Gu 33,646 VILLA VIEW COMMUNITY HOSPITAL, INC., a nonprofit corporation, Appellant v. Margaret M. HECKLER, Secretary of Health and Human Services. LOS ALAMITOS GENERAL HOSPITAL, INC., a corporation, dba Los Alamitos General Hospital v. Margaret M. HECKLER, Secretary of Health and Human Services, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 539

728 F.2d 539

234 U.S.App.D.C. 258, 4 Soc.Sec.Rep.Ser. 187,

Medicare&Medicaid Gu 33,646

VILLA VIEW COMMUNITY HOSPITAL, INC., a nonprofit corporation, Appellant v. Margaret M. HECKLER, Secretary of Health and Human Services.

LOS ALAMITOS GENERAL HOSPITAL, INC., a corporation, dba Los

Alamitos General Hospital v. Margaret M. HECKLER, Secretary of Health and Human Services,

Appellant.

Nos. 83-1310, 83-1456.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 13, 1984.

Decided March 2, 1984.

Patric Hooper, Los Angeles, Cal., for appellant in No. 83-1310.

Amy Yourman, New York City, a member of the Bar of the New York State Court of Appeals First Division, pro hac vice by special leave of the Court with whom Stanley S. Harris, U.S. Atty., Washington, D.C., (at the time the brief was filed) and Robert P. Jaye, Deputy Asst. Gen. Counsel, Dept. of Justice, Washington, D.C., were on the brief, for appellee in No. 83-1310.

Jeanne Schulte Scott, Washington, D.C., for appellant. Stanley S. Harris, U.S. Atty., Washington, D.C., (at the time the brief was filed), Royce C. Lamberth, Michael J. Ryan and Valerie K. Schurman, Asst. U.S. Attys., Washington, D.C., also entered appearances, for appellant in No. 83-1456.

Patric Hooper, Los Angeles, Cal., for appellee in No. 83-1456.

Before WRIGHT, MIKVA and BORK, Circuit Judges.

Opinion PER CURIAM.

PER CURIAM:

These cases raise a common issue concerning the appropriate level of Medicare reimbursement that a hospital should receive for costs incurred in specialized units that are more intensive than routine care, but less intensive than a traditional Intensive Care Unit. The two units at issue in these cases treat patients with serious cardiac problems who do not require bedside monitoring. These patients are ambulatory and are monitored with portable software telemetry units. In both cases, the Secretary of Health and Human Services (the

                Secretary) determined that the units were not "special care inpatient hospital unit[s]" within the meaning of 42 C.F.R. Sec. 405.452(d)(10) (1978). *   If the units had been classified as "special care" units, each hospital would have obtained a higher level of Medicare reimbursement.  One district judge upheld the Secretary's decision as to Villa View Community Hospital and the hospital appealed.  A second district judge reversed the Secretary's determination as to Los Alamitos General Hospital and the Secretary appealed.  Although each case involves unique facts, the Secretary's treatment of the two units raise virtually identical issues under the applicable regulation and we decide both cases in this single opinion.  Because we find that the Secretary's determinations are supported by substantial evidence, we affirm the district court in Villa View Community Hospital, Inc. v. Schweiker, Civil Action No. 81-1793 (D.D.C. Jan. 16, 1983) (Villa View), and reverse the district court in Los Alamitos General Hospital, Inc. v. Donnelly, 558 F.Supp. 1141 (D.D.C.1983) (Los Alamitos)
                

THE REGULATORY FRAMEWORK

These cases arise under Part A of the Medicare statute, which authorizes the payment of benefits to institutional providers of health services, including Villa View Community Hospital (Villa View) and Los Alamitos General Hospital (Los Alamitos). Such providers are reimbursed for the reasonable and necessary costs of the services provided to Medicare beneficiaries. See 42 U.S.C. Sec. 1395x(v)(1)(A) (1976); 42 C.F.R. Sec. 405.402 et seq. (1978).

The initial calculation and review of reimbursable costs is conducted by fiscal intermediaries (usually major private health insurance companies) who act as agents of the Secretary. See 42 C.F.R. Secs. 405.406(b) and 405.453(f) (1978). A provider may appeal the intermediary's determination to the Provider Reimbursement Review Board (the Board). 42 U.S.C. Sec. 1395oo (1976). Within sixty days of the Board's determination, the Secretary may elect to review that decision on her own motion. (The Secretary has delegated this authority to the Administrator of the Health Care Financing Administration who issued the decisions in these cases.) Judicial review is available after the administrative proceedings have been completed. The statute authorizes a provider to seek judicial review of "any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary ...." 42 U.S.C. Sec. 1395oo (f)(1) (1976).

Congress has given the Secretary considerable discretion to promulgate cost-reimbursement regulations that give meaning to the term "reasonable costs." See 42 U.S.C. Sec. 1395x(v)(1)(A) (1976). Under the regulations, an average cost per diem is determined for services provided by the hospital. That figure is multiplied by the number of patient days attributable to Medicare beneficiaries. During the first five years of the Medicare program, the Secretary's regulations recognized only one class of inpatient hospital care for purposes of reimbursement. In 1972, however, the Secretary amended the regulations, on the theory that the purposes of Medicare would be served better if two classes of care were used to calculate reimbursable costs. See Psychiatric Institute of Washington, D.C., Inc. v. Schweiker, 669 F.2d 812, 813 (D.C.Cir.1981).

The regulations now distinguish between care provided in "Routine Care" centers and that provided in "Special Care Units." The average costs per diem in each class are calculated separately. Because special care units are much more expensive to run, the average cost per diem in such units is much higher than the average cost per diem in routine care units. The result is that hospitals will receive more money per patient if the cost of services provided that patient are averaged into the special care calculation rather than into the routine care calculation.

The legal issue presented by both cases is very narrow and involves the application of the regulation which defines special care units. That subsection provides in full:

(10) Intensive care units, coronary care units, and other special care inpatient hospital units. To be considered an intensive care unit, coronary care unit, or other special care inpatient hospital unit, the unit must be in a hospital, must be one in which the care required is extraordinary and on a concentrated and continuous basis and must be physically identifiable as separate from general patient care areas. There shall be specific written policies for each of such designated units which include, but are not limited to burn, coronary care, pulmonary care, trauma, and intensive care units but exclude postoperative recovery rooms, postanesthesia recovery rooms, or maternity labor rooms.

42 C.F.R. Sec. 405.452(d)(10) (1978). Because the units in question do not fall under any of the enumerated categories, if they are covered by the regulation at all, they must be classified as "other special care inpatient hospital unit[s]" and must meet the various requirements set forth in the regulation. The only issue on appeal is whether the units in question are ones "in which the care required is extraordinary and on a concentrated and continuous basis." Id. (emphasis added). The Secretary found that all of the other requirements of the regulation had been met in both cases.

The application of this regulation and, in particular, interpretation of the terms "extraordinary," "concentrated," and "continuous" has sparked a great deal of litigation. See, e.g., Psychiatric Institute, 669 F.2d 812; Sun Towers, Inc. v. Schweiker, 694 F.2d 1036 (5th Cir.1983); John Muir Memorial Hospital, Inc. v. Schweiker, 664 F.2d 1337 (9th Cir.1981); White Memorial Medical Center v. Schweiker, 640 F.2d 1126 (9th Cir.1981). In deciding whether a unit is a special care unit, the Secretary determines whether the care provided is similar to that provided by the same institution in one of its units that is explicitly enumerated in the regulation. Although providers have challenged that interpretation of the regulation, arguing that the proper comparison is to the routine care provided by the institution, we have upheld the Secretary's interpretation as reasonable. Psychiatric Institute, 669 F.2d at 814. Other courts have also upheld the Secretary's comparison to the highest level of care provided. See e.g., Sun Towers, 694 F.2d 1036; White Memorial, 640 F.2d 1126.

The question for the district court and for this court on appeal is whether the Secretary's determinations that the care provided was not "extraordinary and on a concentrated and continuous basis" are supported by substantial evidence. See 42 U.S.C. Sec. 1395oo(f) (judicial review is governed by the standards set forth in section 706 of the Administrative Procedure Act, 5 U.S.C. Sec. 706 (1976)). Although there are some differences between the two units at issue on appeal, they are similar in most...