Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-09T05:31:54.115Z Has data issue: false hasContentIssue false
  • English
  • Français

The Freedom of Information Act and Medicare Cost Reports

Published online by Cambridge University Press:  24 February 2021

Laurence J. Shulman
Laurence J. Shulman*
Affiliation:
Boston University School of Law, American Journal of Law & Medicine
Get access Rights & Permissions [Opens in a new window]

Abstract

Health care providers must submit cost reports to the Department of Health and Human Services or its designated intermediary before they can be reimbursed for their services by the Medicare system. These reports closely detail the financial operations of the provider. Whenever third parties have requested copies of the cost reports pursuant to the Freedom of Information Act and the Department of Health, Education and Welfare (now HHS) has declared its intention to comply with the request, the providers have sued to enjoin disclosure.

This Note evaluates whether the cost reports are confidential and therefore exempt from mandatory disclosure under Exemption 4 of the Freedom of Information Act. It concludes that they should not be exempt, but that even if they are, disclosure is mandated by a validly promulgated HEW regulation. This regulation was enacted in compliance with the Administrative Procedure Act, and should not be considered an abuse of the HEW Secretary's discretion.

Type
Notes and Comments
Information
American Journal of Law & Medicine , Volume 6 , Issue 4 , Winter 1981 , pp. 541 - 558
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1981

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 The Medicare system authorized federal funding of health care for persons unable to pay for it. 42 U.S.C. § 1396 (1978) provides:

For the purposes of enabling each State, as far as practicable under the conditions in such State, to furnish (1) medical assistance on behalf of families … whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families … .there is hereby authorized to be appropriated for each fiscal year a sum sufficient to carry out the purposes of this subchapter.

2 At the time the cases discussed herein were initiated and the regulation promulgated, this department was known as the Department of Health, Education and Welfare (hereinafter HEW). Therefore, this Note refers to the department as HEW when it discusses the promulgation of the regulation and the litigation of the cases.

3 42 U.S.C. § 1395(g) (1978).

4 Hospital and Hospital-Skilled Nursing Facility Complex Statistical Data, Form HCFA-2552 (1980) (Published by U.S. Dep't of Health & Human Services).

5 These include: occupancy rates for various services, such as maternity and renal dialysis treatment, remuneration to hospital-based physicians, a ratio of costs to charges for every patient service, and a complex formula which the hospital must follow to determine the proper reimbursement due from the federal government. Id. at 4-31.

Id.at 13.

7 Id. at 3-4.

8 Id. at 37.

9 Id. at 6-9.

10 See Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. 1174, 1177 (E.D. Va. 1978), rev'd, 622 F.2d 78 (4th Cir. 1980).

11 See St. Mary's Hosp., Inc. v. Harris, 604 F.2d 407, 408 (5th Cir. 1979); Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. 236, 237 (M.D. Fla. 1979); Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. at 1175.

12 See St. Mary's Hosp., Inc. v. Harris, 604 F.2d at 408; Doctor's Hosp. of Sarasota, Inc. v. Califano, 455 F. Supp. 476, 478 (M.D. Fla. 1978).

13 See Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. 296, 297 (E.D. Pa. 1979).

14 5 U.S.C. § 552 (1977). The Act authorizes disclosure of documents within the control of the Federal government to interested citizens upon request.

15 20 C.F.R. § 422.435(c) (1975) provides that “upon a request in writing, costs reports submitted by providers of services” should be available to the public. is The Supreme Court ruled in 1979 that suppliers of data to the government do not have,a cause of action under the FOIA; that is, there is no “reverse FOIA” cause of action. Chrysler Corp. v. Brown, 441 U.S. 281 (1979). Following this decision, health care providers seeking to enjoin disclosure can sue under the Administrative Procedure Act, 5 U.S.C. § 702 (1977). This section provides that “[a] person suffering legal wrong because of agency action … is entitled to judicial review thereof.” The term “reverse FOIA suit” therefore only applies to cases begun before Chrysler.

17 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 78; Cedars Nursing & Convalescent Center v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 297; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. 1247 (N.D. Ga. 1979); Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 238; Doctor's Hosp. v. Califano, 455 F. Supp. at 478; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. 1093, 1095 (E.D. Tenn. 1977), rev'd,625 F.2d 719 (6th Cir. 1980).

18 5 U.S.C. § 552(b)(4) (1977) exempts “trade secrets and commercial or financial information obtained … [that is] privileged or confidential.“

19 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 77; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1249; Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 388; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. at 1097-98.

20 18 U.S.C. § 1905 (1970), the TSA, provides:

Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment … which information concerns or relates to … income, profits, losses, or expenditures of any person, firm, partnership, corporation … shall be fined not more than $1000 or imprisoned not more than one year, or both … . (emphasis added)

Much of the legal controversy centers around whether the regulation furnishes “authorization by law.“

21 Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 238; Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. at 1176; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. at 1097;

22 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 78; Cedars Nursing & Convalescent Center v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 297; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1248; Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 238; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. at 1097.

23 In Washington Hosp. Center v. Mutual of Omaha, No. 78-2485 (D.D.C., June 25, 1979), the court enjoined disclosure of the cost reports. It found that Congress had not delegated authority to the Secretary of HEW to promulgate a regulation nullifying the force of the TSA. Disclosure was permitted in Parkridge Hosp., Inc. v. Califano, 625 F.2d 719 (6th Cir. 1980); Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. 1174 (E.D. Va. 1978), rev'd,622 F.2d 78 (4th Cir. 1980); St. Mary's Hosp., Inc. v. Harris, 604 F.2d 407 (5th Cir. 1979); Cedars Nursing & Convalescent Center v. Aetna Life & Cas. Ins. Co., 472 F. Supp. 296 (E.D. Pa. 1979); Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. 1247 (N.D. Ga. 1979); Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. 236 (M.D. Fla. 1979); Doctor's Hosp. of Sarasota, Inc. v. Califano, 455 F. Supp. 476 (M.D. Fla. 1978). In Doctor's Hospital and Diplomat Lakewood(consolidated with Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 625 F.2d 719 (6th Cir. 1980)), the courts specifically rejected the holding of Washington Hospital. In Parkridge and Diplomat Lakewood, the Sixth Circuit ruled that the regulation was not an abuse of the Secretary's discretion. Parkridge Hosp., Inc. v. Califano, 625 F.2d at 724.

24 This is the standard used by the FOIA. 5 U.S.C. § 552 (b)(4) (1977).

25 5 U.S.C. §§ 701-706 (1977). The Administrative Procedure Act limits the rulemaking power of federal agencies by prescribing the method in which they may issue regulations.

26 E.P.A. v. Mink, 410 U.S. 73, 80 (1973).

27 5 U.S.C. § 552(a) (1977).

28 Department of the Air Force v. Rose, 425 U.S. 352, 361 (1976).

29 5 U.S.C. § 552(b)(l)-(9) (1977).

30 The Supreme Court noted in Chrysler Corp. v. Brown:

There was sentiment (in Congress) that Government agencies should have the latitude … to afford the confidentiality desired by these submitters. But the congressional concern was with the agency's need or preference for confidentiality; the FOIA … protects the submitters’ interest in confidentiality only to the extent that this interest is endorsed by the agency collecting this information.

441 U.S. at 292, 293 (emphasis in original).

31 441 U.S. at 293.

32 The House Report states: “[The FOIA] sets up workable standards for the categories of records which may be exempt from disclosure.” H.R. REP. NO. 1497, 89th Cong., 2d Sess. 2, 5-7, reprinted in [1966] U.S. CODE CONG. & AD. NEWS 2419.

33 5 U.S.C. § 553 (1977) requires both publication of the proposed rule in the Federal Register not less than thirty days before its intended effect and a chance for interested persons to comment on the regulation before its implementation.

34 5 U.S.C. § 706(A)(2) (1977).

35 5 U.S.C. § 552(b)(3) (1977).

36 5 U.S.C. § 552(b)(4) (1977).

37 5 U.S.C. § 552(b)(3) (1977). Statutes covered by Exemption 3 include: the Central Intelligence Act, 50 U.S.C. § 403(d) (1951); the Federal Aviation Act, 49 U.S.C. § 1461 (1980); and the Patent Act, 35 U.S.C. § 122 (1979).

38 The Trade Secrets Act …

would not permit the witholding of information otherwise required to be disclosedby the Freedom of Information Act since the disclosure is there authorized by law … . [I]f material did not come within the broad trade secrets exemption contained in the Freedom of Information Act (i.e., Exemption 4), section 1905 would not justify witholding.

H.R. REP. NO. 880, 94th Cong., 1st Sess. 23, reprinted in[1974] U.S. CODE CONG. & AD. NEWS 2191 (emphasis added). 39 Id.

40 See Continental Oil Co. v. F.P.C., 519 F.2d 31 (5th Cir. 1975) (detailed sales information); National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (concessions).

41 Continental Oil Co. v. F.P.C., 519 F.2d at 35.

42 National Parks & Conservation Ass'n v. Morton, 498 F.2d at 770.

43 See note 23 supra.

44 Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. at 1117, Parkridge Hosp. v. Blue Cross & Blue Shield of Tenn. 430 F. Supp. at 1095.

45 See Hearing Transcripts, Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. 236 (M.D. Fla. 1979); Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. 1093 (E.D. Tenn. 1977), rev'd,625 F.2d 719 (6th Cir. 1980).

46 Hearing Transcript at 9, Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. 1093 (E.D. Tenn. 1977), rev'd, 625 F.2d 719 (6th Cir. 1980). During his testimony, the plaintiff's accountant stated that the cost report indicates how well a hospital organization is managed.

47 430 F. Supp. 1093 (E.D. Tenn. 1977), rev'd, 625 F.2d 719 (6th Cir. 1980).

48 Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. at 1095.

49 Hearing Transcript at 17-18, Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. 1093 (E.D. Tenn. 1977), rev'd, 625 F.2d 719 (6th Cir. 1980).

50 455 F. Supp. 1174 (E.D. Va. 1978), rev'd, 622 F.2d. 76 (4th Cir. 1980).

51 Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. at 1177.

52 Id.

53 Id.

54 Id.

55 Id.

56 464 F. Supp. 236 (M.D. Fla. 1979).

57 Hearing Transcript at 47-48, Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. 236 (M.D. Fla. 1979).

58 Id. at 59-60.

59 Id. at 70-73.

60 id. at 49, 80-81.

61 Id.

62 Id. at 53-54.

63 Id. at 57.

64 Humana of Va., Inc. v. Blue Cross of Va., 455 F. Supp. at 1178.

65 id.

66 Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 245-46.

67 Hearing Transcript at 129, Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 246.

68 464 F. Supp. 236 (M.D. Fla. 1979).

69 Providers must obtain state approval before they undertake capital expenditures or significant changes in service. If an institution proceeds without obtaining the certificate which indicates state approval, it may be subject to licensure sanctions. The federal government will not allocate funds for the development or maintenance of health facilities of any state that does not utilize certificate of need review. 42 U.S.C. § 300m(d) (1980). See Miller, PSRO Data and Information: Disclosure to State Health Regulatory Agencies, 57 B.U.L. REV. 245, 257-60 (1977).

70 Id.

71 42 U.S.C. § 1320a-l(b) (1980).

72 Cost reports only reveal actual dollars expended. They do not reveal future projects if no expenditures have been incurred. The certificate of need process discloses such plans before capital outlays have been made.

73 Humana of Va., Inc. v. Blue Cross o£ Va., 622 F.2d at 78; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F. Supp. at 1097. Later cases proceeded under the assumption that the cost report is within Exemption 4 without making a specific finding of this fact. See, e.g., St. Mary's Hosp., Inc. v. Harris, 604 F.2d at 409-10.

74 464 F. Supp. 236 (M.D. Fla. 1979).

75 464 F. Supp. at 245. See notes 64-67 supraand accompanying text.

76 Seenote 17 supra and accompanying text.

77 Seenote 19 supra and accompanying text.

78 Seenote 17 supra.

79 1 U.S.C. § 1905 (1970).

80 Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 246.

81 The rule was stated in Westinghouse Elec. Corp. v. Schlesinger, 542 F.2d 1190, 1206 (4th Cir. 1976).

82 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 79.

83 441 U.S. 281 (1979).

84 Chrysler Corp. v. Brown, 441 U.S. at 295. The Court considered a Labor Department regulation which called for disclosure of information covered by Exemption 4 and the TSA. While concluding that the regulation in question did not have the “force and effect of law,” it formulated the criteria which regulations would need to satisfy to serve as authorization for disclosure.

85 Chrysler Corp. v. Brown, 441 U.S. at 301-02.

86 Id.at 302.

87 Id.at 303.

88 Id.

89 Id.

90 Parkridge Hosp., Inc. v. Califano, 625 F.2d at 721; Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 79; Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 297; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1250; Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 253-54.

91 42 U.S.C. § 1306(a) (1976).

92 No. 78-2485 (D.D.C. June 25, 1979).

93 Id. at 1.

94 Parkridge Hosp., Inc. v. Califano, 625 F.2d at 724; Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 79; St. Mary's Hosp., Inc. v. Harris, 604 F.2d at 409; Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 298; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1250.

95 Amendments to Title XI of the Social Security Act, ch. 666, § 1106, 53 Stat. 1398 (1939).

96 H.R. REP. NO. 728, 76th Cong., 1st Sess. 77 (1939); S. REP. NO. 734, 76th Cong., 1st Sess. 88-89 (1939).

97 [1950] U.S. CODE CONC. & AD. NEWS 3481.

98 Id. at 3482. The House bill imposed no “restrictions on the Administrator's authority to release information (in accordance with his regulations).“

99 Id. at 3511. “ The conference agreement retains existing law respecting the authority for disclosure of information and authorizes the Administrator to charge fees for the information furnished.“

100 Amendments to Title XI of the Social Security Act, ch. 809, § 1106(a), 64 Stat. 559 (1950).

101 S. REP. NO. 92-1230, 92d Cong., 2d Sess. 15 (1972).

102 See note 25 supra.

103 Chrysler Corp. v. Brown, 441 U.S. at 308.

104 Id.

105 5 U.S.C. § 553(b) (1977) provides:

General notice of proposed rulemaking shall be published in the Federal Register … The notice shall include: (1) a statement of the time, place and nature of public rulemaking proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) … the terms or substance of the proposed rule.

106 5 U.S.C. § 553(c) (1977) requires that: “[t]he agency shall give interested persons an opportunity to participate in the rulemaking through submission of written data, views or arguments.“

107 According to 5 U.S.C. § 553(d) (1977): “The required publication or service of a substantive rule shall not be made less than 30 days before its effective date.“

108 The Memorandum of Record is discussed in Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. 236 (M.D. Fla. 1979) and Doctor's Hosp. v. Califano, 455 F. Supp. 476 (M.D. Fla. 1978). Whether it was introduced in the other cost report cases is not known.

109 The Memorandum considered: “(1) the public's interest, (2) the competitive need for privacy, (3) the existence of any actual confidentiality, and (4) the likelihood of injury.” Westchester Gen. Hosp. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 257.

110 “The agency concluded that the public has a right to be informed of public records pertaining to public business.” Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 257.

111 Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 257.

112 40 Fed. Reg. 17,849 (1975).

113 40 Fed. Reg. 27,648 (1975).

114 “[T]he Secretary once again concluded that cost reports are public records about public business, involving the expenditure of public funds, and therefore it is not in the public interest to withhold the reports from the public.” Excerpt from 40 Fed. Reg. 27,649 (1975), reprinted in Westchester Gen. Hosp., Inc. v. Department of Health, Educ. & Welfare, 464 F. Supp. at 257.

115 430 F. Supp. 1093 (E.D. Tenn. 1977).

116 id. at 1098.

117 Id.

118 625 F.2d at 719.

119 See notes 108-14 supra and accompanying text. Since the Chrysler decision, the Fourth and Fifth Circuits have specifically recognized that the regulation is not an abuse of discretion. Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 80; St. Mary's Hosp., Inc. v. Harris, 604 F.2d. at 410.

120 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 80; St. Mary's Hosp., Inc. v. Harris, 604 F.2d at 410; Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 298; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1250.

121 Humana of Va., Inc. v. Blue Cross of Va., 622 F.2d at 79; St. Mary's Hosp. Inc. v. Harris, 604 F.2d at 410; Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 298; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1250.

122 470 F. Supp. at 1250.

123 St. Mary's Hosp., Inc. v. Harris, 604 F.2d at 409-10; Cedars Nursing & Convalescent Center, Inc. v. Aetna Life & Cas. Ins. Co., 472 F. Supp. at 297; Brookwood Medical Center, Inc. v. Califano, 470 F. Supp. at 1249.