Source: https://law.justia.com/cases/federal/appellate-courts/F3/11/1505/488535/
Timestamp: 2019-05-27 11:02:51
Document Index: 132863573

Matched Legal Cases: ['§ 1395', '§ 706', '§ 1395', '§ 1395', '§ 1395', '§ 1395', '§ 1395']

Wilmot Psychiatric/medicenter Tucson; Dominguez Valleyhospital; Ojai Community Hospital; Mantecahospital, Plaintiffs-appellants, v. Donna E. Shalala,* Secretary of the Departmentof Health & Human Services, Defendant-appellee, 11 F.3d 1505 (9th Cir. 1993) :: Justia
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Wilmot Psychiatric/medicenter Tucson; Dominguez Valleyhospital; Ojai Community Hospital; Mantecahospital, Plaintiffs-appellants, v. Donna E. Shalala,* Secretary of the Departmentof Health & Human Services, Defendant-appellee, 11 F.3d 1505 (9th Cir. 1993)
U.S. Court of Appeals for the Ninth Circuit - 11 F.3d 1505 (9th Cir. 1993)
Argued and Submitted Oct. 7, 1993. Decided Dec. 16, 1993
This case arises from the Secretary of Health and Human Services' ("Secretary") decision not to reimburse Wilmot Psychiatric/Medicenter and several other hospitals ("hospitals") under Part C of the Medicare program. Title XVIII of the Social Security Act, 42 U.S.C. § 1395x(v) (1) (A), for the cost of complimentary meals provided by the hospitals to attending physicians, who have staff privileges at the hospitals. The hospitals appeal the district court's summary judgment in favor of the Secretary. We affirm.
Upon review of the PRRB's decisions, the Secretary, interpreting the Medicare Act, the regulations, and the Provider Reimbursement Manual ("manual" or "PRM"), reversed those decisions and held that the meal expenses were not reimbursable. The district court affirmed the Secretary's decision. The hospitals appeal the district court's holding, and argue that the Secretary's decision is unsupported by substantial evidence. See 5 U.S.C. § 706.
"We review de novo a district court's award of summary judgment affirming a decision of the Secretary in a Medicare reimbursement matter." Vallejo Gen. Hosp. v. Bowen, 851 F.2d 229, 230-31 (9th Cir. 1988). Therefore, this court must review the Secretary's final decision to determine whether it was "arbitrary, capricious, an abuse of discretion, not in accordance with the law, or unsupported by substantial evidence on the record taken as a whole." Id. at 231. "When this standard of review is applicable, the agency determination will not be set aside unless it is clearly erroneous or inconsistent with the regulation or demonstrably irrational." North Clackamas Community Hosp. v. Harris, 664 F.2d 701, 704 (9th Cir. 1980) (internal quotations omitted).
Pursuant to the Medicare Act, 42 U.S.C. § 1395x(v) (1) (A) (1988), providers of health services are entitled to reimbursement for reasonable costs necessary for the efficient delivery of needed health services. National Medical Enters., Inc. v. Sullivan, 916 F.2d 542, 544 (9th Cir. 1990), cert. denied, --- U.S. ----, 111 S. Ct. 2014, 114 L. Ed. 2d 100 (1991). Congress authorized the Secretary to further define "reasonable costs" by regulation. Vista Hill Found., Inc. v. Heckler, 767 F.2d 556, 558 (9th Cir. 1985). "Reasonable costs" are defined as "those that are the necessary and proper costs incurred in rendering the services." Id. (internal quotation omitted). In 42 C.F.R. Sec. 413.9(b) (2), the Secretary "define [s] necessary and proper costs as those costs which are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities. They are usually costs which are common and accepted occurrences in the field of the provider's activity." 767 F.2d at 558 (internal quotation omitted). The Secretary determines whether a particular cost is reasonable. See St. Elizabeth Community Hosp. v. Heckler, 745 F.2d 587, 589 (9th Cir. 1984); 42 U.S.C. § 1395x(v) (1) (A).
Reimbursement to the hospitals is generally made through fiscal intermediaries (usually private insurance companies) in accordance with contracts with the Secretary. The hospitals submit annual cost reports to their fiscal intermediaries who in turn determine the reimbursable costs. In the event that a hospital is dissatisfied with the fiscal intermediary's determination of reimbursement, it may request a hearing before the PRRB, which hears the matter and issues a decision. 42 U.S.C. § 1395oo(a), (d). The decision of the Board is final unless the Secretary, on his own motion, and within sixty days after the hospital is notified of the PRRB's decision, affirms, modifies, or reverses the PRRB's decision. The hospitals have the right to seek judicial review of any final decision of the Board, or of the Secretary. 42 U.S.C. § 1395oo(f) (1).
To aid intermediaries in applying the Medicare statute and reimbursement regulations, the Secretary issued the PRM. The PRM is not binding like a law or regulation. Rather, it guides the application of the laws and regulations. National Medical Enters. v. Bowen, 851 F.2d 291, 293 (9th Cir. 1988). Section 2102.3 (1986) of the PRM states that "costs which are not appropriate or necessary and proper in developing and maintaining the operation of patient care facilities and activities" are not reimbursable.
The Medicare Act allows reimbursement for "reasonable" costs necessary for the efficient delivery of health services. 42 U.S.C. § 1395x(v) (1) (A). The statute offers no definition of the term "reasonable." When " [c]onfronted with an ambiguous statutory provision, we generally will defer to a permissible interpretation espoused by the agency entrusted with its implementation." Good Samaritan Hosp. v. Shalala, --- U.S. ----, ----, 113 S. Ct. 2151, 2159, 124 L. Ed. 2d 368 (1993). The Secretary defines "reasonable" as those costs which are "necessary and proper" in rendering health services, and further defines "necessary and proper" as those costs which are "appropriate and helpful" in developing and maintaining the operation of patient care facilities and activities. The regulation also states that necessary and proper costs are "usually costs that are common and accepted occurrences in the field of the provider's activity." 42 C.F.R. Sec. 413.9(b) (2).
Mercy Hosp. & Medical Ctr., San Diego v. Harris, 625 F.2d 905, 910 (9th Cir. 1980) (citation omitted).
In St. Elizabeth, this court stated that " [d]eference is accorded the Secretary's interpretation of his own regulations where he has expertise in the substantive area involved and where the regulations were promulgated pursuant to congressional authorization." 745 F.2d at 592. " [W]e must examine the interpretation itself in light of the language of the regulations. The words must be reasonably susceptible to the construction placed upon them by the Secretary, both on their face and in light of their prior interpretation and application." Id. (internal quotation omitted). The Secretary's interpretation of the regulations in this case is consistent with prior agency decisions regarding complimentary meals for attending physicians. See Suburban Hosp. v. Blue Cross, Medicare & Medicaid Guide (CCH) p 29,953 (1979) (employee meal costs allowable, but visitor meal costs denied); Hollywood Presbyterian Medical Ctr. v. Blue Cross, Medicare & Medicaid Guide (CCH) p 31,907 (1982) (visitor meal costs not reimbursable because not related to patient care); Pioneer Hosp. v. Travelers, Medicare & Medicaid Guide (CCH) p 32,472 (1983) (costs for employee meals allowable but meal cost for attending physicians not reimbursable because unnecessary for the efficient delivery of health services).
Mercy Hosp., 625 F.2d at 907 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct. 161, 89 L. Ed. 124 (1944)).
The fact that it is a common and accepted occurrence for hospitals to provide complimentary meals to attending physicians does not necessarily demonstrate that the costs involved are reasonable costs necessary for the efficient delivery of health services. In Holy Cross Hosp.-Mission Hills v. Heckler, 749 F.2d 1340 (9th Cir. 1984), we affirmed the Secretary's decision to deny reimbursement for bedside patient phones despite the hospital's argument that the patient phones were ordinarily furnished by hospitals. Id. at 1344-45. We held that in order to reimburse expenses, they must not only be ordinary, but they must also be necessary. Id. at 1345.
The hospitals argue that because the PRRB hearing is "on the record," we must apply the "substantial evidence" standard. They rely upon Memorial, Inc. v. Harris, 655 F.2d 905 (9th Cir. 1980), where this court stated that the "substantial evidence" standard of review is applicable when the court reviews findings on a hearing record. Id. at 910. Because the Secretary did not present evidence to support her decision to deny the reimbursement, the hospitals argue that under the substantial evidence standard, her decision must be reversed.
In determining that costs for complimentary meals were reasonable, the PRRB analogized the meal costs with costs associated with free parking, medical staff meetings, and physician lounges which have been deemed "reasonable" costs. [PRRB Decision at 8.] Allowing reimbursement for the cost of free parking for physicians and costs associated with medical staff meetings but disallowing costs for complimentary meals for physicians may seem arbitrary. However, complimentary meal costs can be distinguished from costs related to free parking, lounges, and medical staff meetings. For example, in Research Medical Ctr. v. Schweiker, 684 F.2d 599 (8th Cir. 1982), the court distinguished costs associated with a hospital's coffee shop from reimbursable costs such as those associated with parking lots, lobbies, and other services provided for visitors. In Research, the Eighth Circuit stated that "it is reasonable to believe that the lack of a coffee shop would have a minor effect on the number of visitors compared with the lack of waiting rooms, lobbies, or parking lots." Id. at 606.
Donna E. Shalala succeeded Louis W. Sullivan, M.D., as Secretary of Health and Human Services on January 22, 1993, and is substituted as Appellee pursuant to Fed. R. App. P. 43(c) (1)