55 soc.sec.rep.ser. 325, Medicare & Medicaid Guide P 46,034, 48 Fed. R. Evid. Serv. 1034 Board of Trustees of Knox County Hospital, Doing Business as Good Samaritan Hospital v. Donna E. Shalala, as Secretary of the Department of Health and Human Services

135 F.3d 493
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 2, 1998
Docket97-2421
StatusPublished
Cited by2 cases

This text of 135 F.3d 493 (55 soc.sec.rep.ser. 325, Medicare & Medicaid Guide P 46,034, 48 Fed. R. Evid. Serv. 1034 Board of Trustees of Knox County Hospital, Doing Business as Good Samaritan Hospital v. Donna E. Shalala, as Secretary of the Department of Health and Human Services) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
55 soc.sec.rep.ser. 325, Medicare & Medicaid Guide P 46,034, 48 Fed. R. Evid. Serv. 1034 Board of Trustees of Knox County Hospital, Doing Business as Good Samaritan Hospital v. Donna E. Shalala, as Secretary of the Department of Health and Human Services, 135 F.3d 493 (7th Cir. 1998).

Opinion

135 F.3d 493

55 Soc.Sec.Rep.Ser. 325, Medicare & Medicaid Guide
P 46,034,
48 Fed. R. Evid. Serv. 1034
BOARD OF TRUSTEES OF KNOX COUNTY HOSPITAL, doing business as
Good Samaritan Hospital, Plaintiff-Appellant,
v.
Donna E. SHALALA, as Secretary of the Department of Health
and Human Services, Defendant-Appellee.

No. 97-2421.

United States Court of Appeals,
Seventh Circuit.

Argued Nov. 5, 1997.
Decided Feb. 2, 1998.

William H. Thompson (argued), Hall, Render, Killian, Heath & Lyman, Indianapolis, IN, for Plaintiff-Appellant.

Gerald A. Coraz, Office of the United States Attorney, Indianapolis, IN, Lauren S. Ruby (argued), Donna Morros Weinstein, Department of Health and Human Services, Chicago, IL, for Defendant-Appellee.

Before BAUER, RIPPLE and DIANE P. WOOD, Circuit Judges.

RIPPLE, Circuit Judge.

This appeal arises out of a Medicare reimbursement dispute between the Board of Trustees of Knox County, d/b/a Good Samaritan Hospital ("Good Samaritan"), and the Secretary of the Department of Health and Human Services ("Secretary"). In this case, the Health Care Financing Administration ("HCFA") denied Good Samaritan's request for increased reimbursement under a program aimed at ensuring that large rural hospitals receive Medicare reimbursement similar to that received by their urban counterparts. Good Samaritan then sought review of the HCFA's decision before the Provider Reimbursement Review Board ("PRRB"), the administrative body charged with hearing Medicare reimbursement disputes between hospitals and their Medicare fiscal intermediaries. The PRRB ruled in favor of Good Samaritan. However, the Secretary later reversed the decision of the PRRB. Good Samaritan then appealed the Secretary's decision to the district court. The parties filed cross-motions for summary judgment, and the district court entered summary judgment in favor of the Secretary. Good Samaritan now appeals to this court. For the reasons set forth in the following opinion, we affirm the judgment of the district court.

* BACKGROUND

A.

At the outset, a review of the statutory and regulatory framework is helpful. The Medicare program reimburses hospitals and other health care providers for a portion of the expenses they incur in treating the aged and disabled. Medicare providers are reimbursed by the federal government, usually through private organizations acting as "fiscal intermediaries" under contract with the Secretary.

Initially, the government, through the HCFA, reimbursed Medicare providers based on a retrospective or reasonable cost basis. In order to receive reimbursement under this regime, providers were required to submit several documents to both the HCFA and their fiscal intermediaries detailing the costs incurred in treating Medicare beneficiaries. See 47 Fed.Reg. 43,296, 43,304 (1982). Most notably, providers were required to submit a "Medicare cost report" which contained information concerning the costs the provider incurred treating Medicare beneficiaries during a designated cost reporting period. Id. The information contained in those reports was then used by the fiscal intermediaries to calculate the total amount of Medicare reimbursement to which the hospital was entitled for that cost period. Id. In addition, providers were required to submit detailed billing information for each Medicare inpatient and a narrative description of the services provided to certain randomly-selected Medicare beneficiaries. Id. This information was then compiled by the HCFA and maintained in a statistical file called "MEDPAR." Id.

Under the reasonable cost regime, providers were reimbursed for the actual costs incurred in treating Medicare beneficiaries as long as those costs fell within certain parameters. Consequently, as hospital costs increased, so too did Medicare reimbursements. As Medicare costs soared in the 1970s and early 1980s, members of Congress became concerned that the reasonable cost reimbursement regime, fueled by the dramatic increase in hospital costs,1 was placing undue strain on the federal budget. There was concern that reimbursement under the reasonable cost regime was tantamount to giving hospitals a blank check to cover the cost of care for Medicare beneficiaries because hospitals had no incentive to render cost efficient treatment to Medicare beneficiaries.2

Congress modified the reasonable cost regime with the passage of the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"). See Pub.L. No. 97-248, 96 Stat. 324 (1982). In TEFRA, Congress enacted several measures aimed at curbing hospital costs.3 One of these measures was the placement of a cap on the amount of reimbursement allowed each hospital. One factor used in setting this cap was a case-mix index ("CMI") specific to each hospital. See 42 U.S.C. § 1395ww(a)(1)(B)(i). The CMI is a mathematical representation of the complexity (i.e., the cost) of the average case treated at a given hospital. More specifically, it represents the cost of each hospital's particular mix of cases in comparison to the cost of the mix of cases at the average American hospital. To determine a CMI for each hospital provider, the Secretary relied upon the information collected under the original reasonable cost regime: the MEDPAR file and the annual Medicare cost reports. Using this information, the Secretary calculated a 1981 CMI for all providers. These CMIs were published in the Federal Register in September 1983.

Although the TEFRA regime itself was only a modification of the reasonable cost regime, Congress also directed the Secretary to develop a prospective system of Medicare reimbursement by December 31, 1982. See TEFRA, Pub.L. No. 97-248, § 101(a)(1), 96 Stat. 324, 335 (1982). On December 27, 1982, the Secretary submitted a report to Congress entitled "Hospital Prospective Payment for Medicare." See 48 Fed.Reg. 39,753, 39,754 (1983). In April 1983, Congress voted to substitute the Prospective Payment System ("PPS") for the reasonable cost regime. See Social Security Amendments of 1983, Pub.L. No. 98-21, § 601, 97 Stat. 65, 149 (1983). Accordingly, since the beginning of hospital fiscal years commencing on or after October 1, 1983, Medicare reimbursement has been administered under the PPS regime.4

Under PPS, hospitals are reimbursed according to prospectively fixed rates.5 These rates are determined by the type of treatment involved in a particular case6 with certain adjustments made to account for the varying costs associated with the location of the hospital (i.e., urban or rural). For example, a provider will be able to determine in advance the amount of Medicare reimbursement it will receive for a coronary bypass with cardiac catheterization as opposed to a coronary bypass without cardiac catheterization.7

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Bluebook (online)
135 F.3d 493, Counsel Stack Legal Research, https://law.counselstack.com/opinion/55-socsecrepser-325-medicare-medicaid-guide-p-46034-48-fed-r-ca7-1998.