No. 14460 IN THE SUPREME COURT OF THE STATE OF MONTANA

ST. JAMES COMMUNITY HOSPITAL, INC., A MONTANA CORPORATION, Plaintiff and Appellant,

DEPARTMENT OF SOCIAL AND REHABILITATION SERVICES OF THE STATE OF MONTANA, Defendantand Respondent.
Appeal from: DistrictCourtof the FirstJudicial District, HonorableW. W. Lessley, Judge presiding. Counsel of Record: For Appellant: SmithLaw Firm, Helena, Montana Chadwick Smithargued, Helena, Montana Corette, Smith & Dean, Butte, Montana ForRespondent: LeaphartLaw Firm, Helena, Montana W. WilliamLeaphart argued, Helena, Montana

Submitted: February 8, 1979 Decided:

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## 3 1979 

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## 31979 Filed: 

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ClerMr. Justice Daniel J. Shea delivered the Opinion of the Court.
St. James Community Hospital appeals from an order of the Lewis and Clark County District Court granting summary judgment to the Department of Social and Rehabilitation Services (SRS) in an action for declaratory judgment. The hospital brought suit for a judicial determination that by enacting House Bill 269 (the 1975-1977 legislative appropriations bill), the Montana Legislature intended that Montana hospitals participating in the federalMedicaid program be reimbursed
on the basis of their "full and adequate costs" rather than their "reasonablecosts"as defined in the federal Medicaid regulations. The controversy stems from the same contractualrelationship recently discussed by this Court in Montana Children's Home et al. v. Dept. of SRS (1979), Mont

# . , 592 P.2d 

### 481, 36 St.Rep. 507. Beginning in 1967, SRS contractedwith severalMontana hospitals to provide inpatient hospital services to eligible Medicaid recipients. The standard contract between SRS and the hospitals provided that SRSwould reimburse the hospitals
on the basis of "reasonablecosts",which were to be determined at the end of each fiscal year by Blue Cross of Montana, in compliancewith federalguidelines. In the interim, however, SRSwould reimburse the hospitals on the basis of their "standard charges" to the cash-paying general public with appropriate adjustments between the two standards to be made at the end of the fiscalyear. If the federally defined "reasonable.. costsWwerefound to be less than "fulland adequate costs",the hospitals could negotiate with SRS for a supplemental allowancebringing the total to "fulland adequate costs". The funds for this supplemental allowancewere drawn from SRS's general biennium legislative appropriation. Before the commencement of the ensuing fiscalyear, on June 30, 1976, SRS terminated its standard contract with the hospitals and the parties contemporaneously executed an "interimagreement". By this agreement SRSwas to pay the hospitals less than their standard charges and the hospitals agreed to continueproviding services to Medicaid patients, without being held to "accord and satisfaction". The interim agreement further provided that if the Legislative Interim Finance Committee ruled that the legislative intent behind House Bill 269 (the 1975-1977 appropriations bill)
was to pay hospitals "fulland adequate costs",then the hospitals would be retroactively reimbursed on that basis. On July 23, 1976,however, the Interim Finance Committee passed 

### amotion that House Bill 269 was not appropriated to provide funds for supplementation of the federal standard of "reasonablecosts". Nonetheless, St. James Community Hospital continued to provide medical services to eligible Medicaid patients. SRS refused to pay more than "reasonable costs" for themedical services,and the hospital therefore started the present lawsuit. On January 21, 1977,St. James Community Hospital filed
a declaratory judgment action seeking a determination that the 1975 Legislature intended the hospitals be paid "full and adequate costs" throughout the entire 1975-1977 biennium, rather than just half of the biennium. Upon cross-motions for summary judgment, the District Court granted summary judgment to SRS and held: "HouseBill No. 269, 1975, constituted an appropriation to the General Fund from which the Department of SRS can administer the Medicaid program consistently with TitleXIX 

### of the Social SecurityAct 

# . .

# . House Bill 269 contains absolutelyno expression of legislative intent to pay participating hospitals 'fulland adequate' costs. Payment of 'fulland adequate' costs from 1967-1976 was amatter of contractbetween SRS and the hospitals and said contracts are not evidence of legislative intent." The hospital presents four issues for our review and we hold against the hospital on each issue. Two of them can be disposed of summarily. The hospital contends that _a 

### legislative interim committee has no authority to make a binding determination of legislative intent, but we need not discuss this issue because both sides agree that the committee has no such authority. The hospital also contends that federal law,namely 42 

### U.S.C. §1396a,et seq., and the appropriate regulations,do not prohibit the reimbursement of hospitals beyond "reasonable costs" as defined by federal law. That, however,would only become a consideration if we determined that the hospital
was entitled to compensation beyond "reasonablecosts" under the remaining two issues. Sincewe do not so determine,we do not reach the issue of whether federal law prohibits reimbursementbeyond the federally established "reasonable costs" limitations. The remaining issues arewhether the 1975 Legislature intended to appropriate funds for payment of full and adequate costs to the hospitals through the end of the 1975-1977 biennium, and if not,whether SRS is bound nonetheless to pay full and adequate costs under implied contractual and equitable principles to avoid unjust enrichmentof SRS. 

### St. James Community Hospital contends that,by enacting House Bill 269, the Legislature intended providers of Medicaid services in Montana be reimbursed for their "fulland adequate costs". The argument is that since full and adequatecostswere paid for the first year of the 1975-1977 biennium, the Legislature must have intended the same for the second year. The "fulland adequate cost" reimbursements for the first year of the bienniumwere made pursuant to written contracts between SRS and the hospitals. When SRS terminated its contractwith the hospital on June 30, 1976, it thereby ended its contractualobligation to pay full and adequate costs. Absent a contract, there is nothing in the legislative appropriations bill which would allow recovery of full and adequate costs. House Bill 269 is a general appropriations bill. Itdoes not approve, direct or refer to a continuation of supplementalpayments. Nor can such legislative intent be gathered from the circumstances surrounding the enactment of House Bill 269. The circumstances to which the hospital alludes--the contract and its terms--were not the motivating influence behind adoption of the appropriations bill. Itwould indeed be burdensome to hold that contractors engaged by the Statemay not be terminated until the end of the biennium unless specifically authorized by the Legislature. The hospital also claims that payment of less than "full and adequate costs" will result in higher charges to the cash-paying public and that the Legislature could not have intended such an unreasonable or oppressive result. As already stated, there is no indication that the Legislature considered this contract in its biennium appropriation. We note,moreover, that the "reasonable cost" limitation under the federal statute and regulations is designed to encourage "economy,efficiency and quality of care."Johnson's Professional Nursing Home v. Weinberger (5thCir. 19741, 490 F.2d 841, 843. See also,American Medical Association
v. Matthews (D.C. Ill. 1977), 429 F.Supp. 1179, 1199. It is not for this Court tomodify this general policy by adopting a different standard than that intended by Congress. The hospital further charges that SRS has taken advantage of the hospitals by using their services from July 1, 1976 through June 30, 1977 knowing fullwell the hospitalswould acceptno less than full and adequate cost reimbursement. It contends therefore that the situation gives rise to an implied contract,obligating SRS to pay the fullvalue of the benefits received. An implied contract, however, arises not from the consent of the parties,but fromprinciples of natural justice and equity,based on the doctrine of unjust enrichment. Brown v. Thornton (1967), 150 Mont. 150, 432 P.2d 386. Here, the hospital initially consented to the arrangement. The law will not imply a promise to pay the value of services rendered and accepted if there is a special agreement to pay a particular amount or in a particular
manner for the services rendered. 66 Am.Jur.2d Restitution and Implied Contractsg6, 25. In the instant case,Medicaid serviceswere furnished after June 30, 1976 by reason of the "interimagreement". This agreement contemplated that whatever statement of legislative intent the standing committee made, would determine the measure of payment for Medicaid
care after June 30, 1976. Even if this Court were to accept the hospital's argument that the committee's adverse ruling did not bind the hospitals and that the matter then had to be litigated, the measure of reimbursement for Medicaid servicesrendered after June 30, 1976 would depend on the court's determination of legislative intent. The interimagreement thus precludes recovery under a theory of quasicontract. The judgment of the District Court is affirmed.

Jus

We Concur:

defJustice \

Justices