Cabell Huntington Hospital, Incorporated v. Donna E. Shalala

101 F.3d 984
CourtCourt of Appeals for the Fourth Circuit
DecidedNovember 27, 1996
Docket95-3095
StatusPublished

This text of 101 F.3d 984 (Cabell Huntington Hospital, Incorporated v. Donna E. Shalala) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cabell Huntington Hospital, Incorporated v. Donna E. Shalala, 101 F.3d 984 (4th Cir. 1996).

Opinion

101 F.3d 984

52 Soc.Sec.Rep.Ser. 257, Medicare & Medicaid Guide
P 44,912
CABELL HUNTINGTON HOSPITAL, INCORPORATED, a Statutory
Corporation; Charleston Area Medical Center, Incorporated;
Ohio Valley Medical Center, Inc.; West Virginia University
Hospital, Plaintiffs-Appellees,
v.
Donna E. SHALALA, Secretary of Health and Human Services,
Defendant-Appellant,
and
Bruce C. Vladeck, Administrator, Health Care Financing
Administration; Susan Hereford, Manager, Provider
Audit and Reimbursement, Blue Cross and
Blue Shield of Virginia, Defendants.

No. 95-3095.

United States Court of Appeals,
Fourth Circuit.

Argued Sept. 26, 1996.
Decided Nov. 27, 1996.

COUNSEL: Scott Ramsey McIntosh, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Defendant-Appellant. Terrence J. O'Rourke, Nash & Company, P.C., Pittsburgh, Pennsylvania, for Plaintiffs-Appellees. ON BRIEF: Frank W. Hunger, Assistant Attorney General, Rebecca Aline Betts, United States Attorney, Anthony J. Steinmeyer, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Defendant-Appellant. David W. Thomas, Nash & Company, P.C., Pittsburgh, Pennsylvania, for Plaintiffs-Appellees.

Before WILKINSON, Chief Judge, LUTTIG, Circuit Judge, and SMITH, United Stated District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Chief Judge WILKINSON wrote the majority opinion, in which Judge SMITH joined. Judge LUTTIG wrote a dissenting opinion.

OPINION

WILKINSON, Chief Judge:

Four West Virginia hospitals challenge Medicare reimbursement calculations made by the Secretary of Health and Human Services. The hospitals argue that "disproportionate share" (DSH) payments, which are made to hospitals that serve a disproportionate number of low-income patients, were calculated by the Secretary based on an incorrect reading of the Medicare statute. The district court agreed with the hospitals and granted summary judgment in their favor. We affirm the judgment of the district court.

I.

When Congress enacted an overhaul of the Medicare payment system in 1983, it noted that low-income Medicare patients have generally poorer health and are costlier to treat than high-income Medicare patients. See Rye Psychiatric Hospital Center, Inc. v. Shalala, 52 F.3d 1163, 1164 (2d Cir.1995). To compensate for this disparity, Congress authorized the Secretary to disburse extra Medicare funds--DSH payments--to hospitals that treated a disproportionate share of low-income patients. 42 U.S.C. § 1395ww(d)(5)(F); see Social Security Amendments of 1983, Pub.L. No. 98-21, § 601(e) (codified at 42 U.S.C. § 1395ww(d)(5)(C)(i) (1983)). The Secretary chose not to formulate the DSH adjustment, 48 Fed.Reg. 39,783 (1983), but was then instructed by Congress to do so by December 31, 1984, Deficit Reduction Act of 1984, Pub.L. No. 98-369, § 2315(h). When the Secretary failed to act, several hospitals sought a court order forcing compliance with the congressional mandate. See Samaritan Health Center v. Heckler, 636 F.Supp. 503 (D.D.C.1985). The Secretary finally published criteria for the DSH payments in 1986, 50 Fed.Reg. 53,398-53,400, but Congress replaced them with its own in a 1986 amendment to the Medicare statute. Consolidated Omnibus Budget Reconciliation Act of 1985, Pub.L. No. 99-272, § 9105 (1986); See Samaritan Health Center v. Bowen, 646 F.Supp. 343, 345-47 (D.D.C.1986); 42 U.S.C. § 1395ww(d)(5)(F). The Secretary then promulgated new interpretive regulations to implement the statute. 42 C.F.R. § 412.106.

The four plaintiff hospitals in this case serve a disproportionate number of low-income Medicare recipients, and are therefore entitled to DSH payments. They sought judicial review, under 42 U.S.C. § 1395oo(f)(1), of the Secretary's calculations of their DSH reimbursements for inpatient hospital services. The district court entered summary judgment in favor of the hospitals, ruling that the Secretary's latest regulations were based on an interpretation of the statute that was inconsistent with its language, legislative history, and basic purpose. The district court ordered the Secretary to recalculate the DSH payments to the plaintiff hospitals. The Secretary appeals.

II.

Our task in this appeal is to interpret the statutory formula for Medicare DSH payments to health care providers. The goal of statutory interpretation is to implement congressional intent. Where the statute speaks clearly to the issue at hand, the inquiry ends. Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). Where the statute is silent or ambiguous with respect to the question, a reasonable agency interpretation warrants deference. Id. at 843, 104 S.Ct. at 2782. We turn, therefore, to the statutory text and structure.

The DSH formula is composed of the sum of two fractions. Both fractions are designed to count the number of low-income patients served by a hospital, but each fraction counts a different group of those patients. The first, called the "Medicare fraction" or the "Medicare proxy" counts Medicare recipients who are entitled to supplemental security income (SSI), a federal low-income supplement.

The second fraction of the calculation is called the "Medicaid fraction" or "Medicaid proxy." It counts patients who are not entitled to Medicare benefits, but who qualify for Medicaid, a joint federal-state program serving indigent persons. This second fraction, the Medicaid proxy, is the one at issue in this case. This fraction reads:

the fraction (expressed as a percentage), the numerator of which is the number of the hospital's patient days for such period which consist of patients who (for such days) were eligible for medical assistance under a State plan approved under [the Medicaid program], but who were not entitled to benefits under part A of [the Medicare program], and the denominator of which is the total number of the hospital's patient days for such period.

42 U.S.C. § 1395ww(d)(5)(F)(vi)(II) (emphasis added).

Because Medicaid is a joint federal-state program, states vary, within the broad federal requirements, on eligibility rules and coverage. Some states, like West Virginia, limit the number of days that patients are covered for inpatient hospital care under Medicaid. 3 Medicare and Medicaid Guide (CCH) p 15,656 at 6615. This court must decide whether the emphasized language in the above Medicaid proxy means DSH payments should take account of only those inpatient hospital days which are actually paid by West Virginia's Medicaid program (as the Secretary maintains), or whether the calculation should include all the days of patients who otherwise qualify for Medicaid but who may have exceeded the number of days covered under the state Medicaid plan (as the hospitals argue).

The question is of some practical importance.

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