Source: http://openjurist.org/622/f2d/972
Timestamp: 2014-11-26 17:55:44
Document Index: 230044318

Matched Legal Cases: ['§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 301', '§ 1395', '§ 1395', '§ 1395']

622 F2d 972 Blue Cross Association v. R Harris & Missouri Hospital Association | OpenJurist
622 F. 2d 972 - Blue Cross Association v. R Harris & Missouri Hospital Association	Home622 f2d 972 blue cross association v. r harris & missouri hospital association
622 F2d 972 Blue Cross Association v. R Harris & Missouri Hospital Association 622 F.2d 972
BLUE CROSS ASSOCIATION, Appellee,andAmerican Hospital Association, Intervenor-Appellee,v.Patricia R. HARRIS, Secretary of Health, Education &Welfare, Leonard Schaeffer, Administrator, HealthCare Financing Administration, Appellants.MISSOURI HOSPITAL ASSOCIATION, a pro forma decreecorporation, Kansas City Area Hospital Association, acorporation, Hospital Association of Metropolitan St. Louis,a corporation, Kansas Hospital Association, a corporation, Appellees,andAmerican Hospital Association, Intervenor-Appellee,v.Patricia R. HARRIS, Secretary of the United StatesDepartment of Health, Education & Welfare, LeonardD. Schaeffer, Administrator of theHealth Care FinancingAdministration, Appellants.
Nos. 79-1732, 79-1733.
Submitted Feb. 14, 1980.Decided June 6, 1980.Rehearing and Rehearing En Banc Denied June 30, 1980.
Barbara L. Gordon, Atty., Civ. Div., Dept. of Justice, Washington, D. C. (argued), Alice Daniel, Acting Asst. Atty. Gen., Civ. Div., William G. Kanter, Atty., Civ. Div., Dept. of Justice, Washington, D. C., Ronald S. Reed, former U. S. Atty., St. Louis, Mo., and Lloyd M. Weinerman, Office of the General Counsel, Dept. of HEW, Baltimore, Md., on brief, for appellants.
James C. Munson, Kirkland & Ellis, Chicago, Ill. (argued), James D. Adducci and Kathleen Kelly Spear, Chicago, Ill., Thomas E. Deacy, Jr. and Philip B. Grubaugh, Deacy & Deacy, Kansas City, Mo., Cullen Coil, Carson, Monaco, Coil, Riley & McMillin, Jefferson City, Mo., Richard L. Epstein and Jay H. Hedgepeth, American Hospital Assn., Chicago, Ill., John C. Shepherd, Coburn, Croft, Shepherd & Herzog, St. Louis, Mo., Wayne T. Stratton, Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, Kan., and Carl H. Helmstetter, Spencer, Fane, Britt & Browne, Kansas City, Mo., on brief, for appellees.
Before LAY, Chief Judge and BRIGHT and HENLEY, Circuit Judges.
Patricia Harris, Secretary of Health, Education and Welfare, and Leonard Schaeffer, Administrator of the Health Care Financing Administration (collectively, the Secretary or HEW), bring these consolidated appeals from a judgment of the district court in favor of Blue Cross Association, et al. (Blue Cross). Blue Cross currently serves as a fiscal intermediary, an agency which deals with HEW on behalf of hospitals and other providers of Medicare services. See text at notes 1-5 infra. The issue before us on appeal is whether the Secretary, in soliciting offers for an experimental contract to administer Medicare Part A funds, must comply with the statutory provisions that normally govern the nomination and assignment of intermediaries such as Blue Cross.
Pursuant to a statutory provision authorizing HEW to enter into experimental contracts for the administration of Medicare funds, the Secretary solicited offers for a fixed price contract to administer Medicare Part A funds in Missouri and metropolitan Kansas City. The organizations and agencies solicited included, but were not limited to, fiscal intermediaries nominated by Missouri and metropolitan Kansas City health care providers. Blue Cross, a nominated intermediary, thereafter brought this suit, claiming that the Secretary's action in seeking offers from entities not nominated by health care providers exceeded her authority under the Medicare Act. The district court agreed and accordingly enjoined the Secretary from entering into any experimental contract until she had attempted in good faith to negotiate the contract with intermediaries nominated by the affected providers. Blue Cross Association v. Califano, 473 F.Supp. 1047, 1076-77 (W.D.Mo.1979). For reasons set forth below, we reverse the district court's judgment, vacate its injunction, and remand the case for entry of a judgment of dismissal.
In 1965 Congress enacted the Medicare Act (Medicare or the Act),1 offering medical benefits to the elderly and disabled. Medicare Part A2 primarily provides hospital insurance benefits for eligible Medicare recipients. As set forth in the Act, "any group or association of providers of (Medicare Part A) services"3 may nominate a fiscal intermediary4 to reimburse its members for costs incurred in treating Medicare recipients.5 42 U.S.C. § 1395h(a) (Supp. II 1978). The Secretary contracts with these nominated intermediaries to administer Medicare Part A funds and compensates them on a cost basis. This means that HEW reimburses the intermediaries for administrative expenses as well as for funds advanced to providers. See 42 U.S.C. § 1395h(c), (a) (1976 & Supp. II 1978).
In 1972 Congress amended the Act. One section of the 1972 amendments, now codified at 42 U.S.C. § 1395b-1 (1976 & Supp. II 1978) (the experimental statute), authorized the Secretary "to develop and engage in experiments and demonstration projects" for a number of specified purposes. 42 U.S.C. § 1395b-1(a)(1) (1976 & Supp. II 1978). In pertinent part, the experimental statute authorizes the Secretary to determine by means of an experiment
whether, and if so which type of, fixed price or performance incentive contract would have the effect of inducing to the greatest degree effective, efficient, and economical performance of agencies and organizations making payment under agreements or contracts with the Secretary for health care and services under health programs established by this chapter (7 of Title 42, 42 U.S.C. § 301 et seq. (1976 & Supp. II 1978)) * * *. (42 U.S.C. § 1395b-1(a)(1) (F) (1976).)
The Secretary chose Missouri and metropolitan Kansas City as the laboratory for such an experiment. On January 31, 1979, HEW solicited proposals for a fixed price Medicare Part A intermediary contract covering these areas. The Secretary solicited proposals by issuing a Request for Proposal (RFP)6 to organizations including but not limited to intermediaries nominated by Missouri and metropolitan Kansas City health care providers.7
Having received the Secretary's RFP, Blue Cross instituted this action in district court for declaratory and injunctive relief.8 After the parties filed cross motions for summary judgment, the district court held that, "insofar as the Request for Proposal * * * fail(ed) to recognize the applicability of 42 U.S.C. § 1395h," it exceeded the Secretary's authority under the experimental statute.9 Blue Cross Association v. Califano, supra, 473 F.Supp. at 1076. The district court therefore enjoined the Secretary from soliciting offers from organizations not nominated by providers and from entering into an experimental fixed price contract, until she attempted in good faith to negotiate such a contract with the intermediaries nominated by health care providers in the affected areas. See note 7 supra. Blue Cross Association v. Califano, supra, 473 F.Supp. at 1076-77. If the contract was ultimately awarded to an entity not nominated by the providers, the district court also required the Secretary to give a full explanation to the affected providers and nominated intermediaries, and to afford the latter opportunity for a hearing subject to judicial review. See 42 U.S.C. § 1395h(e) (Supp. II 1978) and note 9 supra. Blue Cross Association v. Califano, supra, 473 F.Supp. at 1077.
The district court reasoned that because the experimental statute did not plainly authorize the Secretary to suspend the operation of the Act's provider nomination and intermediary due process provisions,10 the Secretary must comply with those provisions. Id. at 1066-67, 1069. In other words, the district court construed the language of the experimental statute as giving the Secretary only n