Source: http://openjurist.org/315/f3d/984/st-lukes-methodist-hospital-v-g-thompson
Timestamp: 2013-12-19 20:08:21
Document Index: 439062503

Matched Legal Cases: ['§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 413', '§ 413']

315 F3d 984 St Luke's Methodist Hospital v. G Thompson | OpenJurist
315 F. 3d 984 - St Luke's Methodist Hospital v. G Thompson	Home315 f3d 984 st luke's methodist hospital v. g thompson
315 F3d 984 St Luke's Methodist Hospital v. G Thompson 315 F.3d 984
ST. LUKE'S METHODIST HOSPITAL, Appellee,v.Tommy G. THOMPSON, Secretary of the United States Department of Health and Human Services, Appellant.
No. 01-3995.
Filed: January 13, 2003.
Eric D. Miller, argued, Washington, DC (Scott McIntosh, on the brief), for appellant.
Frank P. Fedor, argued, Sacramento, CA, (Nancy J. Penner, on the brief), for appellee.
The Secretary of Health and Human Services appeals the order of the district court1 granting summary judgment to St. Luke's Hospital. The hospital challenged the Secretary's denial, in part, of its request for an upward adjustment from the routine cost limit applicable to hospital-based skilled nursing facilities (SNFs). We affirm.
By statute, the federal government reimburses SNFs for the "reasonable cost" of covered services that they provide to medicare beneficiaries. "Reasonable cost" is the cost "actually incurred, excluding any part ... unnecessary in the efficient delivery of needed health services," and it is calculated according to regulations. 42 U.S.C. § 1395x(v)(1)(A). SNFs are grouped as to whether they are free-standing or hospital-based and whether they are urban or rural, and a "routine cost limit" (RCL) is set for each group of SNFs. See 42 U.S.C. 1395yy(a). In 1980, the RCL for each group of SNFs was 112% of the mean per diem routine service cost for that group. See 45 Fed. Regis. 58699, 58700 (Sept. 4, 1980).
The actual per diem cost for hospital-based SNFs, such as St. Luke's, is higher than the cost for free-standing SNFs. The parties agree that this difference is based, in part, on the fact that hospital-based SNFs are more likely to treat patients who are sicker and who receive more intensive care, but the Secretary contends that part of the difference in costs results from the inefficiency of hospital-based SNFs.
In 1984, Congress changed the formula for calculating the RCL for hospital-based SNFs, which resulted in a lower RCL, but it did not alter the formula for calculating the RCL for free-standing SNFs. See 42 U.S.C. § 1395yy(a). Under the new formula, the RCL for hospital-based SNFs is the RCL for free-standing SNFs plus fifty percent of the amount by which 112% of the mean per diem cost for hospital-based SNFs exceeds the RCL for free-standing SNFs. See id. Section 1395yy(a) thus cut in half the amount by which the RCL for hospital-based SNFs exceeded the RCL for free-standing SNFs. For example, as explained in St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 942 (6th Cir. 2000), if the RCL for free-standing SNFs is $80, and 112% of the mean per diem cost for hospital-based SNFs is $120, then the RCL for hospital-based SNFs would be $100.
Another subsection of § 1395yy provides that the Secretary "may make adjustments" in the cost limits for any SNF to the extent that the Secretary "deems appropriate, based upon case mix or circumstances" beyond the facility's control. See 42 U.S.C. § 1395yy(c). The relevant regulation, 42 C.F.R. § 413.30 (1996), sets forth general rules to establish "reasonable" limits for provider costs, as well as "rules governing ... adjustments to limits" that the Secretary "may make as appropriate in consideration of special needs or situations of particular providers."
St. Luke's sought reimbursement based on § 413.30(f)(1), under which the Secretary may grant an upward adjustment for "atypical services." This adjustment may be granted only if the SNF shows that the cost of items or services provided "exceeds the applicable limit because such items or services are atypical in nature and scope" compared to those "generally furnished by providers similarly classified," and that the "[a]typical items or services are furnished because" of the patients' "special needs...