Opinion ID: 474261
Heading Depth: 1
Heading Rank: 1

Heading: the concentrated care unit

Text: 2 The Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. Sec. 1395 et seq., provides hospital insurance benefits to certain classes of people, primarily the elderly. 1 Health care facilities certified as providers of services are reimbursed by the federal government for services rendered Medicare beneficiaries, either directly or through a fiscal intermediary. St. Elizabeth's is a Medicare provider of services receiving reimbursement through Blue Cross of Wisconsin (Blue Cross). 3 For care provided a Medicare beneficiary, St. Elizabeth's is entitled to be reimbursed the lesser of either the reasonable cost of the services or the customary charge for such services. 42 U.S.C. Sec. 1395f(b). Congress has charged the Secretary with promulgating regulations governing computation of the reasonable cost of services, requiring that any method incorporate accurate cost accounting and an accurate allocation of costs between Medicare and non-Medicare patients: 4 The reasonable cost of any service shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and services.... Such regulations may provide for determination of the costs of services on a per diem, per unit, per capita, or other basis, may provide for using different methods in different circumstances, may provide for the use of estimates of costs of particular items of services, and may provide for the use of charges or a percentage of charges where this method reasonably reflects the costs. Such regulations shall ... take into account both direct and indirect costs of providers of services in order that, under the methods of determining costs, the costs with respect to individuals covered by the insurance programs established by this subchapter will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by such insurance programs. 5 42 U.S.C. Sec. 1395x(v)(1). 6 The Secretary has promulgated apportionment regulations that detail how to allocate costs between Medicare and non-Medicare patients so that the share borne by the program is based upon actual services received by program beneficiaries, 42 C.F.R. Sec. 405.452(b). Because St. Elizabeth's has more than one hundred beds, it must use the departmental method of apportionment. Id. Sec. 405.452(c)(2). Under this method 2 all units within a hospital are classified as either routine patient care areas or intensive care units, coronary care units, and other special care inpatient hospital units (herinafter special care units). A special care unit must meet the following requirements: 7 [T]he 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. Id. Sec. 405.452(d)(10). 3 8 The reasonable daily cost of services provided to Medicare patients in either a special care unit or the routine care areas is based on an average cost per diem. The average cost per diem is computed by dividing the total cost of routine service (all services save those provided by such ancillary departments as x-ray and pharmacy, which traditionally bill separately, see id. Secs. 405.452(d)(2), 405.452(d)(3)) incurred by both Medicare and non-Medicare patients, by the total number of patient days (Medicare and non-Medicare) in that area. Id. Sec. 405.453(d)(7). To this is added a fraction of total patient charges in the ancillary departments. The total is the reasonable cost of services. This set of calculations is done separately for each of the special care units in a hospital and then for all of the routine care areas taken together. Thus, whether a particular unit is classified as a routine care area or special care unit may alter the amount of Medicare reimbursement to which a hospital is entitled. St. Elizabeth's believes that it will not receive adequate reimbursement for the care it provides to Medicare patients if its concentrated care unit (CCU) is classified as a routine care area for apportionment purposes.
9 St. Elizabeth's CCU is a 21-bed unit, adjacent to but physically separate from its 14-bed intensive care unit, that provides rehabilitation and reorientation to patients suffering from heart trauma. It also cares for stroke patients and other patients who no longer need intensive care but who are not yet ready to return to the routine care wards. 10 Until 1978, St. Elizabeth's treated the CCU as a special care unit for apportionment and reimbursement purposes. In January 1978 Blue Cross conducted a study of per diem costs in Wisconsin hospitals. It found that the average per diem nursing salary and average per diem patient cost in St. Elizabeth's CCU was substantially lower than those in special care units in hospitals of a comparable size. Conversely, it found that the costs in St. Elizabeth's intensive care unit were somewhat higher than the state average for special care units. Blue Cross reported its findings to the Health Care Financing Administration (HCFA), the agency within HHS that administers Medicare. The HCFA instructed Blue Cross to examine whether the CCU qualified, under the regulations, as a special care unit. 11 Blue Cross relying on the requirements set forth in 42 C.F.R. Sec. 402.452(d)(10), supra, determined that the CCU did not qualify as a special care unit. Based on this determination, Blue Cross adjusted St. Elizabeth's cost reports for 1975, 1976 and 1977 to reflect the CCU's new status as a routine care area. The difference in reimbursement after adjustment was $34,299, $22,027, and $23,117, respectively, for the three years in question. 12 St. Elizabeth's appealed this adjustment to the Provider Reimbursement Review Board (the PRRB), which decided that Blue Cross had erred in classifying the CCU as a routine care area. The Secretary reversed this decision, ruling that the CCU was a routine care area. St. Elizabeth's brought suit in federal court in the Eastern District of Wisconsin, challenging the Secretary's final decision. The district court referred the matter to a magistrate, who recommended reversing the Secretary. Magistrate's Recommendation, No. 82-C-656 (Nov. 2, 1984), at 14. The district court adopted the magistrate's recommendation. St. Elizabeth Hospital, Inc. v. Heckler, No. 82 C 656 (Jan. 30, 1985), at 4. The Secretary appeals. 13 We must examine (1) whether the Secretary's decision that the CCU at St. Elizabeth's does not qualify as a special care unit is supported by substantial evidence and (2) whether the Secretary's interpretation of the apportionment regulations as mandating only two levels of care is arbitrary and capricious.
14 The magistrate ruled that the Secretary had not shown that his finding was supported by substantial evidence. The Secretary argues that the magistrate, whose recommendation the district court adopted without comment, misapplied our holding in Community Hospital of Indianapolis v. Schweiker, 717 F.2d 372 (7th Cir.1983). In that case we were asked to review the Secretary's determination that a physical rehabilitation center--a hospital unit providing health care and therapy to physically disabled individuals--did not qualify as a special care unit. There, as here, the question was what was meant by the requirement that care provided in such a unit be extraordinary, concentrated and continuous. 4 We rejected as not implicit in the plain meaning of Sec. 405.452(d)(10) the Secretary's contention that in order to qualify as a special care unit a hospital unit had to treat critically ill patients in immediate life-threatening situations. 717 F.2d at 376. Instead, we held that the regulation required only that the level of care provided in a special care unit be comparable to the level of care provided patients in ... recognized units. Id. (emphasis supplied). In so doing we rejected the ejusdem generis approach (adopted by several circuits 5 ) which would require that all special care units treat the critically ill since those cited in the regulation as examples do. See 717 F.2d at 378 (Wood, J., dissenting). We examined the administrative record and noted that 15 nursing staff-patient ratios and operational costs of the rehabilitation center were much closer to those of the recognized special care units than to those of the Hospital's routine service areas. Moreover, the rehabilitation center, like the recognized special care units, did not employ nurse's aides although such employees are regularly engaged to perform tasks in routine service areas.... 16 Id. at 377. We concluded that the level of care provided in the physical rehabilitation center was comparable to that provided in a special care unit, even if the type of care and patient treated was not. 17 In the case before us, as in Community Hospital, the Secretary offered the magistrate comparative data on per diem costs, nursing hours, nursing salaries and depreciation costs. He argued that these tended to show that St. Elizabeth's CCU had operational costs more comparable to those in the routine care areas than to those in intensive care, a recognized special care unit. The magistrate agreed with the statistical inference: A statistical comparison shows that the CCU falls between intensive care and routine.... In most areas the CCU is in closer proximity to routine care than to intensive care. Magistrate's Recommendation at 9. Nonetheless, he held that these comparisons, taken alone, 6 did not provide substantial evidence to support the Secretary's determination that the CCU was not a special care unit. He held that a 'middle level' of care can still qualify as a special care unit, id. at 9, where as here the care being provided is not 'routine,'  id. at 10. 18 We agree that the magistrate did not apply Community Hospital correctly. Community Hospital merely held that in deciding whether a hospital unit provides special care the Secretary could not consider dispositive the type of care provided and patient treated; he had to look at the level, or intensity, of care offered. The latter approach would conform to the regulation's language and its purpose, increasing the accuracy of cost allocation. 19 The magistrate properly looked at the same criteria we examined in Community Hospital and determined that the level of care provided in the CCU was not comparable to that provided in one of St. Elizabeth's special care units. But he then ruled that the CCU should be deemed a special care unit because the care offered was not routine. Routine care cannot be the benchmark in these circumstances. The regulatory scheme recognizes that a continuum of types and levels of care are present in any hospital and creates a threshold, a certain point at which the level of care reaches such an intensity that Medicare accounts for it separately for apportionment purposes. This is special care, or care that is extraordinary, concentrated, and continuous. All care that falls below that mark is, by definition, routine. 7 It does not matter whether care is considered routine in layman's terms; if the care provided in the CCU is not comparable to special care, it is routine. We hold that there was substantial evidence, of the sort we approved in Community Hospital, to support the Secretary's determination that the CCU was not a special care unit.
20 St. Elizabeth's also suggests that the Secretary's interpretation of the apportionment regulations as mandating only two levels of care is arbitrary and capricious. It does not challenge the regulations themselves (an almost insurmountable burden, since the Secretary's formal rule-making in this field is entitled to legislative effect, Schweiker v. Gray Panthers, 453 U.S. 34, 44, 101 S.Ct. 2633, 2640, 69 L.Ed.2d 460 (1981)); rather, it argues that the Secretary is bound to assure accurate allocation of costs between Medicare and non-Medicare patients by reading his regulations as authorizing an intermediate level of care subject, like special care, to individualized unit cost determinations. Although the Secretary's interpretation of his own regulations is entitled to considerable deference, we are charged with the task of ensuring that this interpretation is consistent with the language and purpose of the regulation. 21 Much of the argument on appeal is over semantics and we believe that the parties' characterizations of their preferred outcomes as involving two versus three levels of care only serves to confuse the issue. As we stated supra, all care that is not denominated special care is considered in the aggregate under the catch-all label routine care in determining average cost per diem and hence the reasonable cost of a hospital stay. Each unit that provides special care is treated separately, with its own average cost per diem and reasonable reimbursement figure. In one sense, then, St. Elizabeth's is correct in stating that the regulations do not, by their terms, limit reimbursement to two levels of care only. There will be as many reimbursement levels as there are special care units--plus one (routine care). But the Secretary's interpretation is supported by the fact that the regulations mention only special and routine care: no third level of care appears in the regulations. 22 What St. Elizabeth's wishes us to do, in effect, is push down the threshold point that divides special care from routine so that the CCU can also be considered separately for apportionment purposes. With the issue before us thus framed, the question is really whether the point at which the cut-off is currently made--that is, the definition of special care--is arbitrary, capricious and inconsistent with the purpose of the regulation. 23 Taking a hospital unit out of routine care and making it a special care unit will (if the costs of that unit are, like the CCU's, on the higher end of the routine care spectrum) raise the average recorded cost per diem of Medicare patients in the CCU--and correspondingly lower the average cost per diem of Medicare patients left in a routine care area. If Medicare patients were uniformly spread throughout a hospital and were receiving the average amount of services provided in their respective units, it would not matter how the Secretary divvied up the units for reimbursement. There would be no need for any special care units at all. But common sense tells us that this is not the case and that a higher percentage of elderly patients (hence, Medicare beneficiaries) will be receiving hospital care of a more intensive--and expensive--kind. If this is the case, computing average per diem cost without differentiating between levels of care would put hospitals at risk of not receiving adequate reimbursement for the care they provide Medicare patients. 24 This effect apparently motivated the 1972 amendments to the apportionment regulations, which first adopted the special care unit classification. 8 This scheme allowed the Secretary to provide a more accurate allocation of costs without creating an unmanageable administrative burden. Certain hospital units with significantly higher costs were separated out, but not so many as to destroy the administrative benefits of aggregation. The question is one of balancing further refinement of allocation against increased administrative costs. We are not sure where another threshold point, more reasonable than the one the Secretary has set, would be found. A hospital would always have the incentive to seek to have its higher cost routine care areas (so long as they were disproportionately Medicare-utilized) accounted for as special care units. St. Elizabeth's told us at oral argument that Medicare patients are disproportionately represented in the CCU. Thus, it is to its advantage to have the CCU accounted for separately and receive a correspondingly smaller reimbursement amount for those (fewer) Medicare patients in the remaining routine care areas. Of course, as St. Elizabeth's is at pains to point out, it is to the Secretary's financial benefit to have the CCU remain a routine care area. But this will not always be the case. If the special care threshold were lowered, other areas in a hospital that benefit the hospital by retaining their routine care designation would also be candidates for special care status. These could be typically Medicare-underutilized units, such as narcotics rehabilitation or neonatal care. (Maternity wards, also typically Medicare-underutilized, are required by the regulation to be considered routine care areas. See 42 C.F.R. Sec. 402.452(d)(10)). The fact that special care unit status is not a one-way street suggests that the increased refinement to be achieved by St. Elizabeth's proffered interpretation would probably not be so great as to overcome the increased administrative burdens, and certainly not weighty enough to persuade us that the Secretary's interpretation is unreasonable. Classification for cost purposes is an area where judgment and discretion must always play a significant role. 25 Therefore the judgment insofar as it sets aside the Secretary's classification of the concentrated care unit is reversed.