McLean Hospital Corp. v. United States

18 Cl. Ct. 152, 1989 U.S. Claims LEXIS 177, 1989 WL 103374
CourtUnited States Court of Claims
DecidedSeptember 6, 1989
DocketNo. 723-87 C
StatusPublished
Cited by3 cases

This text of 18 Cl. Ct. 152 (McLean Hospital Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McLean Hospital Corp. v. United States, 18 Cl. Ct. 152, 1989 U.S. Claims LEXIS 177, 1989 WL 103374 (cc 1989).

Opinion

OPINION

WIESE, Judge.

The plaintiff in this suit, McLean Hospital Corporation (the “hospital”), seeks reimbursement of costs incurred in providing inpatient mental health care to a beneficiary of the Civilian Health and Medical Program of the Uniformed Services (“CHAMPUS”). Under the terms of the legislation defining the CHAMPUS program, 10 U.S.C. §§ 1071-1103 (1982 & Supp. V 1987), coverage of inpatient health care costs is limited to 60 days per patient per year unless a waiver of this restriction has been authorized by the Secretary of Defense because of “extraordinary medical or psychological circumstances that are confirmed by review by a non-Federal health professional pursuant to regulations prescribed by the Secretary of Defense.” 10 U.S.C. § 1079(i)(4) (Supp. V 1987).

An application for waiver was submitted by the hospital in accordance with this statute and its implementing regulations; the same was denied in a final decision entered by the Director of the Office of the Civilian Health and Medical Program of the Uniformed Services (“OCHAMPUS”) on October 16, 1987. This suit followed. On December 6, 1988, upon the parties’ joint motion, the case was remanded to OCHAM-PUS for reconsideration in light of new evidence and the agency’s expressed interest in reexamining the issues in the case. It is this revised final decision, dated April 19, 1989, (which reaffirms and incorporates the original decision by reference), that we now consider on appeal.

Before us are cross-motions for summary judgment raising two basic questions: first, may the regulations implementing the waiver standard be applied retroactively (as, in fact, they were in this case)? Second, was the recommended decision of the CHAMPUS hearing officer (adopted by and subsequently issued as the final decision of OCHAMPUS) erroneous as a matter of law and/or lacking in substantial evidence? Upon consideration of the parties’ briefs and the oral arguments offered in connection therewith, we decide the first issue in defendant’s favor, the second in plaintiff’s favor.

FACTS

The CHAMPUS beneficiary whose hospitalization expenses give rise to this case received inpatient psychiatric care at the McLean Hospital from October 24, 1984 until August 29, 1985 at which time he was discharged into a residential care center. The hospital received cost reimbursements from CHAMPUS (some pursuant to waivers) for the care provided through April 30, 1985; reimbursement for the care extended after that date was denied. Pursuant to the administrative procedures established for such cases, the question of the hospital’s entitlement to reimbursement based on waiver went before a CHAMPUS hearing officer who issued a decision recommending against allowance of the claim. The decision rested on the hearing officer’s conclusion that (i) the waiver criteria set forth at 32 CFR § 199.4(b)(5)(ix)(B) were valid and retroactively enforceable and (ii) the evidence offered by plaintiff had failed to meet all the criteria required for waiver as specified by the regulation. Specifically, after weighing the competing medical testimony presented at the hearing in light of the beneficiary’s clinical record, the hearing officer concluded that after May 1, 1985, the beneficiary, though still afflicted by an acute mental disorder, no longer presented a significant danger or risk either to himself or to others. It was therefore concluded that plaintiff had not met its burden of proof. In subsequent proceedings, this recommended decision was adopted as the agency’s final decision.

DISCUSSION

There are, as we have noted, two basic questions to be decided. The first, which we take up now, concerns plaintiff’s [154]*154contention that its right to a waiver should have been determined under the general standard set forth in the waiver-authorizing statute—“extraordinary medical or psychological circumstances,” 10 U.S.C. § 1079(i)(4)—rather than under the regulations implementing that standard. The analysis offered in support of this result goes like this:

The regulation in question, 32 CFR § 199.4(b)(5)(ix)(B) (1987), although not promulgated until January 1986, some seven months after the time period involved in plaintiffs request, was nevertheless used as the benchmark to measure and ultimately to reject plaintiffs application for a waiver. It is this aspect of the regulation, namely, its retroactivity, that gives rise to the argument. Plaintiff maintains that, since the regulation was written pursuant to a specific delegation of authority to implement the statutory standard for the issuance of waivers, it is, in effect, a legislative or substantive regulation and, as such, may not be applied retroactively. Therefore, the argument continues, the only enforceable standard applicable to plaintiffs situation was that set out in the statute itself, namely, “extraordinary medical or psychological circumstances.” It is further argued that this general standard was satisfied in the case of the beneficiary in question, and, therefore, the denial of reimbursement for the hospital’s health care costs was contrary to law.

This argument cannot be accepted. It is not correct to say that rules promulgated by an agency pursuant to a specific delegation of authority, so-called “legislative” rules, may not be given retroactive effect. Granted, the Administrative Procedures Act, 5 U.S.C. §§ 551-554 (1988) defines a rule (i.e., a regulation) as “the whole or a part of an agency statement of general or particular applicability and future effect; id. § 551(4) (emphasis added). It is clear, however, that the courts have not demanded literal compliance with this definition. Rather, while rules of prospective application are the norm, those having a retroactive application are permitted in instances where the concerns for a coherent administrative policy are judged to outweigh the adverse effects of enforcing an after-the-fact standard.

The considerations that enter into this balancing approach are recited in Retail, Wholesale and Department Store Union v. N.L.R.B., 466 F.2d 380 (D.C.Cir.1972)—a case involving an agency’s attempt to apply retroactively a rule imposing back pay liability to redress a company hiring practice that was not unlawful (i.e., not an unfair labor practice) at the time the challenged practice took place. In declining to permit full retroactive application to the back pay sanction, the court identified the following factors as bearing on the issue in general:

(1) whether the particular case is one of first impression,
(2) whether the new rule represents an abrupt departure from well established practice or merely attempts to fill a void in an unsettled area of law,
(3) the extent to which the party against whom the new rule is applied relied on the former rule,

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Related

McLean Hospital Corp. v. United States
26 Cl. Ct. 1144 (Court of Claims, 1992)
Green Hospital v. United States
23 Cl. Ct. 393 (Court of Claims, 1991)
Fricano v. United States
22 Cl. Ct. 796 (Court of Claims, 1991)

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Bluebook (online)
18 Cl. Ct. 152, 1989 U.S. Claims LEXIS 177, 1989 WL 103374, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mclean-hospital-corp-v-united-states-cc-1989.