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Presbyterian Hospital of Dallas v. Harris: A Dubious Consequence of Piecemeal Health Care Legislation
Published online by Cambridge University Press: 24 February 2021
Abstract
For almost forty years, legislators have advocated comprehensive measures designed to assure Americans quality health care. Instead of implementing an integrated health care plan, Congress has intermittently enacted statutes which address specific health care delivery problems. At times the judiciary has stretched the ambit of existing health legislation in response to particular plaintiffs’ urgent claims. This Case Comment examines the dilemma of piecemeal legislation and judicial policymaking as exemplified by Presbyterian Hospital of Dallas v. Harris, a Fifth Circuit Court of Appeals health care financing decision whose outcome Congress has flatly rejected.
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- Copyright © American Society of Law, Medicine and Ethics and Boston University 1983
References
1 Pub. L, No. 79-725, 60 Stat. 1040 (1946) (current version at 42 U.S.C. §§ 291-291(o)-l (1979)).
2 42 U.S.C. § 291(a).
3 Id. at § 291c(e); see also 42 C.F.R. § 53.111(c).
4 Note, Provision of Free Medical Services by Hill-Burton Hospitals, 8 Harv. C.R.-C.L. L. Rev. 351, 352 n.10 (1973)Google Scholar.
5 See, e.g., Saine v. Hosp. Auth. of Hall County, 502 F.2d 1033 (5th Cir. 1974) (court allowed indigents a private right of action against hospitals legally obligated to provide free care); Cook v. Ochsner Found. Hosp., 319 F. Supp. 603 (E.D. La. 1970) (indigent plaintiffs have standing to sue hospitals for failure to fulfill their free service obligations under the Hill-Burton Act).
6 See, e.g., Cook, 319 F. Supp. at 606, construing 42 U.S.C. §§ 291(a) and 291c(e).
7 Note, Hill-Burton Notice Provisions: Informing the Indigent, 36 Wash. & Lee L. Rev. 1095 (1979)Google Scholar. The more important of the new regulations include: 42 C.F.R. §§ 53.111(d) (sets presumptive compliance levels for Hill-Burton hospitals); (e) (requires filing of compliance reports with appropriate state agencies); (f) (determination of eligibility must be made prior to rendition of services); (g) (state must establish eligibility criteria for persons unable to pay); (i) (hospitals required to post notice of the availability of free services); (j) (sanctions may be imposed on a hospital for failure to comply); § 53.113(d) (Hill-Burton facilities must serve Medicaid recipients if eligible to do so).
8 Formerly Health, Education and Welfare (HEW).
9 See infra notes 15-79 and accompanying text. The Medicare Act is Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395tt (1979).
10 See infra notes 59-66 and accompanying text.
11 See infra notes 25-27 and accompanying text.
12 638 F.2d 1381 (5th Cir. 1981).
13 Id. at 1388-89.
14 Pub. L. No. 97-248; 96 Stat. 337 (1982). Courts have held that TEFRA § 106 excludes costs incurred under the Hill-Burton free care obligation from the “reasonable costs" reimbursable by the Medicare Program. See, e.g., Harper-Grace Hosp. v. Schweiker, 691 F.2d 808 (6th Cir. 1982); Arlington Hosp. v. Schweiker, 547 F. Supp. 670 (D. Va. 1982); Memorial Hosp. v. Heckler, 706 F.2d 1130 (11th Cir. 1983).
15 President Truman disclosed his concerns and suggested federal subsidies for hospital construction in an address to Congress on November 19, 1945. President’s Message to Congress on Health Legislation, 1945 U.S. Code Cong. & Ad. News 1143.
16 Id. at 1144.
17 Id. at 1143.
18 At the time, there was a pressing need for hospitals. Forty percent of the counties either had no local hospital or had no local hospital which met “minimum standards of national professional associations.” Id. at 1145.
19 Id. at 1146-47. In 1945, only about four percent of the population had comprehensive private health insurance. Id. at 1149.
20 Id. at 1145.
21 Id. at 1151.
22 Hospital Construction Act: Hearings on S. 191 Before the Senate Comm. on Education and Labor, 79th Cong., 1st Sess. 64-65 (1945).
23 Id. at 64-66.
24 Id. at 30, 34, 190.
25 Id. at 190-91.
26 Senator Ellender’s response was telling:
If people in all localities were able to pay for hospitalization there would be no need for this bill. It seems to me that our primary purpose should be to devise means to take care of those who cannot take care of themselves. My reason for supporting a bill providing for Federal aid to build hospitals is to make it easy for the community in which a hospital is built to give aid to the indigent.
Id.
27 Hospital Survey and Construction Act, Pub. L. No. 79-725, § 622f(1), (2), 60 Stat. 1040 (1946).
28 Id. at §601, 60 Stat. at 1041.
29 Id. at § 633(a), 60 Stat. at 1048.
30 12 Fed. Reg. 6,179 (1947).
31 See supra notes 22-27 and accompanying text.
32 Miller, , The Hill-Burton Act and Delivery of Uncompensated Services, 2 Medicolegal News 1 (Jan. 1974)CrossRefGoogle Scholar.
33 Rose, , Federal Regulation of Services to the Poor Under the Hill-Burton Act: Realities and Pitfalls, 70 Nw. U.L. Rev. 168, 169-70 (1975)Google Scholar.
34 Rose, , The Duty of Publicly-Funded Hospitals to Provide Services to the Medically Indigent, 3 Clearinghouse Rev. 254, 255 (1970)Google Scholar. In 1972 federal regulations declared that both these practices were evasions of the congressional mandate. See 37 Fed. Reg. 14,721 (1972) (codified at 42 C.F.R. § 53.111(f)(2) (1982)) (HEW regulation defining the phrase “services which are made available to persons unable to pay therefor" as “uncompensated services”).
35 A 1972 survey of approximately 187 nonprofit Hill-Burton hospitals revealed that approximately 70% had not complied with their current obligation. Cypen, , Access to Health Care Services for the Poor: Existing Programs and Limitations, 31 U. Miami L. Rev. 127, 136 (1976)Google Scholar.
36 In the interim, the authority for promulgating Hill-Burton regulations had been transferred from the Surgeon-General to HEW. This authority currently rests in HHS.
37 Rosenblatt, , Health Care Reform and Administrative Law: A Structural Approach, 88 Yale LJ. 243, 270-71 (1978)CrossRefGoogle Scholar. See, e.g., Euresti v. Stenner, 458 F.2d 1115 (10th Cir. 1972) (indigent plaintiffs can sue to enforce hospital’s obligation under Hill-Burton because they are the intended beneficiaries of the Act); Perry v. Greater Southeast Community Hosp. Found., No. 725-71, (D.D.C. June 28, 1972) (plaintiffs had standing to sue but it was impossible for the court to tell whether the hospital had met its “community services" obligation because there were no standards by which to measure this); Cook v. Ochsner Found. Hosp., 61 F.R.D. 354 (E.D. La. 1972) (HEW was obligated by the Hill-Burton Act to prescribe regulations enforcing the Act’s free-care and community service provisions). Not all courts agree with this interpretation. See, e.g., Newsom v. Vanderbilt, 653 F.2d 1100, 1117 (6th Cir. 1981) (Congress did not intend the Hill-Burton Act to provide medical services to all indigents, thus individual indigents lack a right of entitlement to free services). See also Note, Due Process for Hill-Burton Assisted Facilities, 32 Vand. L. Rev. 1469 (1979)Google Scholar.
38 Cook v. Ochsner Found. Hosp., 61 F.R.D 354, 360-61 (E.D. La. 1972).
39 Cook v. Ochsner Found. Hosp., 319 F. Supp. 603, 606 (E.D. La. 1970).
40 Id. at 603.
41 Id. at 606.
42 458 F.2d 1115(1972).
43 Id. at 1118. Similar conclusions were reached in many scholarly legal articles. See, e.g., Rose, supra note 33; Rosenblatt, supra note 37; Note, supra note 7.
44 The initial proposals were published at 37 Fed. Reg. 7,632 (1972), and in final form on June 22, 1973 at 38 Fed. Reg. 16,353 (1973).
45 "An action to effectuate compliance with any such assurance [that the Hill-Burton obligation will be fulfilled] may be brought by a person other than the Secretary . . . .” 42 U.S.C. § 300s-6 (Supp. V 1981).
46 373 F. Supp:. 550 (S.D.N.Y. 1974).
47 Id. at 557-58.
48 In determining the amount of uncompensated services provided by an applicant, there shall be included only those services provided to an individual with respect to whom the applicant has made a written determination prior to the provision of such services that such individual is unable to pay therefor under the criteria established pursuant to 42 C.F.R. Sec. 53.111(g) except that: (i)such determination may be made after the provision of such services in the case of services provided on an emergency basis ....
42 C.F.R. §53.111(1) (1982).
49 S. Rep. No. 404, 89th Cong., 1st Sess. 1, reprinted in 1965 U.S. Code Cong. & Ad. News 1943.
50 Id. at 1964.
51 Id. at 1943.
52 Waxman, , An Introduction to Medicare, 52 L.A.B.J. 338, 342 (1977)Google Scholar.
53 Under the Medicare Act, private organizations under contract with the Secretary of HHS serve as fiscal intermediaries by reimbursing the hospital for the reasonable cost of care provided to Medicare beneficiaries. 42 U.S.C. § 1395h.
54 Waxman, supra note 52 at 339.
55 The PRRB was set up in 1972 as an intermediate review mechanism between the fiscal intermediary and the Health Care Financing Administration (HCFA) Administrator. The Administrator must still review all decisions of the PRRB before the hospital may appeal to the federal courts. Social Security Amendments of 1972, H.R. Rep. No. 231, 92nd Cong. 2nd Sess. 3, reprinted in 1972 U.S. Code Cong. & Ad. News 5308-10.
56 Waxman, supra note 52 at 343-44.
57 Id.
58 S. Rep. No. 404, supra note 49 at 1976-77.
59 Id. at 1976; see 42 U.S.C. § 1395(f)(b) (1981).
60 S. Rep. No. 404, supra note 49 at 1976 (although “reasonable cost" is not defined as actual cost, the method of computation attempts to approximate actual cost as closely as possible).
61 Id.; see 42 U.S.C. § 1395x(v)(1)(A) (1981) and 42 C.F.R. §§ 405.402(a), 405.420(d) (1979).
62 S. Rep. No. 404, supra note 49 at 1977. “[T]he principles [of reimbursement for provider costs] give recognition to such factors as depreciation, interest, bad debts, educational costs, compensation of owners, and an allowance for a reasonable return on equity capital of proprietary facilities.” 42 C.F.R. § 405.402(c) (1979).
63 S. Rep. No. 404, supra note 49 at 1989.
64 Id. at 1977.
65 Id. at 1989.
66 Id.
67 See infra notes 81-106 and accompanying text.
68 S. Rep. No. 404, supra note 49 at 1977.
69 Id. at 1977-78.
70 Part A is the major portion of the Medicare program, automatically funding many health care costs of the elderly. Part B is designed to defray costs not covered by Part A. Beneficiaries choose whether to join Part B, and pay a small monthly premium for this additional coverage. Waxman, supra note 52, at 338-39.
71 42 U.S.C. § 1395(f)(c) (Supp. V 1981). See also S. Rep. No. 404, supra note 49, at 2109.
72 Social Security Amendments of 1967, S. Rep. No. 744, 90th Cong., 1st Sess. 2, reprinted in 1967 U.S. Code Cong. & Ad. News 2834.
73 Social Security Amendments of 1972, supra note 55 at 4989. 74See infra notes 75-77 and accompanying text.
75 Congress also sought to lower Medicare costs by denying reimbursement to providers for large capital expenditures made without prior approval of a state or local health planning agency. Social Security Amendments of 1972, supra note 55, at 5004.
76 Id. at 5066.
77 Id. at 5066-67.
78 In 1982, Congress directly addressed this relationship in TEFRA § 106, supra note 14.
79 Social Security Amendments of 1967, supra note 72 at 2851 and Social Security Amendments of 1972, supra note 55 at 5004-05.
80 Tax Equity & Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. 337 (1982). The sparse legislative history on TEFRA § 106 specifically states that the new provision was added in response to Presbyterian Hasp. House Ways and Means Committee Print, reprinted in 1983 Medicare & Medicaid Guide (CCH) ¶ 24,511.
81 42 U.S.C. §§ 1395(f)(b), 1395x(v)(1)(A) (1976). Approximately 31% of Presbyterian Hospital’s patients were Medicare beneficiaries in 1976, so the Medicare program was already funding a large proportion of the hospital’s budget. Presbyterian Hosp. of Dallas v. Harris, 638 F.2d 1381, 1383 (1981).
82 42 U.S.C. § 291 j-4 (1976). Originally, the federal government directly funded hospital construction; now it only subsidizes the interest on the hospital’s construction loan.
83 42 U.S.C. 291(c)(e) (1976).
84 Presbyterian Hosp., 638 F.2d at 1384. Presbyterian Hospital also sought to recover from Medicare the expenses it had incurred in providing telephone and television service to Medicare patients. Additionally, it claimed interest paid during construction of a sub-acute facility as a current expense rather than a capital expenditure. This Comment is not concerned with the disposition of these issues.
85 See supra notes 53-54 and accompanying text.
86 Presbyterian Hosp., 638 F.2d at 1384.
87 See supra notes 55-56 and accompanying text.
88 Presbyterian Hosp., 638 F.2d at 1383.
89 Id.
90 Id. at 1386.
91 Id. at 1387. See 42 C.F.R. § 405.420(g) (1982).
92 Id. at 1386. See 42 C.F.R. §§ 405.451(a), (b) (1982).
93 Hospitals are entitled to judicial review of final PRRB decisions. 42 U.S.C. § 1395oo(f) (1976) (Supp. V 1981). The court’s standard of review is governed by the Administrative Procedure Act, 5 U.S.C. § 706 (Supp. V 1981); it must confine itself to questions of law, and may only make factual determinations if the agency’s fact-finding procedures are inadequate.
94 Presbyterian Hosp. of Dallas v. Harris, 1980 Medicare & Medicaid Guide (CCH) ¶ 30,581 (N.D. Tex. Mar. 28, 1980).
95 Id. at ¶ 30,582. This evidence included the Medicare Act and applicable regulations as cited in the PRRB’s opinion.
96 Presbyterian Hosp. of Dallas v. Harris, 638 F.2d 1381, 1383 (1981). The hospital again argued that its indigent care expenses indirectly benefited Medicare patients by enabling it to improve its facilities for the benefit of all. Id. at 1387.
97 Id. at 1386.
98 42 U.S.C. § 1395x(v)(1)(A) (1976).
99 42 C.F.R. § 405.420(c) (1979).
100 Id. The regulation reads: "Bad debts, charity and courtesy allowances represent reductions in revenue. The failure to collect charges for services rendered does not add to the cost of providing the services. Such costs have already been incurred in the production of the services."
101 Rapides Gen. Hosp. v. Matthews, 435 F. Supp. 384 (W.D. La. 1977), vacated and remanded on other grounds, No. 77-3125 (5th Cir., Oct. 23, 1978). The court reasoned that the free care expenses are a cost imposed on the hospital as a result of expanding its facilities, and are therefore necessary and proper expenses incurred in rendering services to Medicare recipients. The Board’s denial of reimbursement was held unlawful, and summary judgment for the plaintiff hospital was granted. Id. at 389.
102 Presbyterian Hosp., 638 F.2d at 1386.
103 42 C.F.R. § 405.451(c)(3) (1979).
104 42 C.F.R. § 405.419 (1979).
105 Presbyterian Hosp., 638 F.2d at 1387-88.
106 Id. at 1388-89.
107 Id. at 1384. These provisions are: 42 U.S.C. §§ 291j-4, 291(c) (1976) and 42 C.F.R. § 53.111(d) (1979).
108 Id. at 1386-87.
109 Id. at 1387-88.
110 42 C.F.R. § 405.420(c) (1979).
111 See supra notes 70-71 and accompanying text.
112 42 U.S.C. § 1395f(c) (1982).
113 42 C.F.R. § 405.311(b) (1982).
114 42 C.F.R. § 405.420(c) (1982).
115 42 U.S.C. § 1395y (1979). All of these provisions have been cited in a decision by the HCFA Administrator, overturning the PRRB’s allowance of reimbursement for a hospital’s Hill-Burton free care costs. Gaston Memorial Hosp. Inc. v. Blue Cross Ass'n./Blue Cross/ Blue Shield of N.C., 1982 Medicare & Medicaid Guide (CCH) ¶ 31,637 (HCFA Admin. Dec. Nov. 7, 1981).
116 42 U.S.C. § 1395y(a)(2) (1979).
117 42 U.S.C. § 1395y(2) (1979).
118 42 C.F.R. §53.111-.135 (1982).
119 42 C.F.R. § 53.111(f)(2)(h) (1980).
120 42 C.F.R. § 53.111(b)(4) (1982).
121 See 42 C.F.R. §§ 405.402(c)(7), 405.420(g) (1982).
122 42 U.S.C. § 1395x(v)(1)(A) (1979).
123 The Deputy Administrator of the Health Care Financing Administration aptly articulated the unfairness of the Presbyterian Hosp. court’s approach:
[T]he relationship of the Hill-Burton program to the Medicare program should be considered. The Government provided public funds in the first place to a hospital for capital improvements. A condition of that grant was that the recipient offer free or below cost care to indigent persons. It is not reasonable to expect the Government then to use more public funds to pay yet a second time under a different program—Medicare—the costs of fulfilling that obligation.
Gaston Memorial Hosp. Inc. v. Blue Cross Ass'n/Blue Cross/Blue Shield of N.C., 1982 Medicare & Medicaid Guide (CCH) ¶ 31,637 (HFCA Admin. Dec. Nov. 7, 1981).
124 Federal programs currently pay 42% of the nation’s total health care bill. 2 Health Care Fin. Trends 1 (Summer 1981).
125 See, e.g., Note, The Role of Prepaid Group Practice in Relieving the Medical Care Crisis, 84 Harv. L. Rev. 887, 889 (1971)CrossRefGoogle Scholar; , V., Who Shall Live? 9 (1974)Google Scholar.
126 The statistics on these costs are overwhelming. In the twelve months ending in March, 1981, the United States spent $256 billion on health care. This was 9.4% of the Gross National Product (GNP). 2 Health Care Fin. Trends 1 (Summer 1981). In comparison, national health expenditures totaled $12.7 billion in 1950, and constituted only 4.4% of GNP. U.S. Health Care Financing Administration, Health Care Fin. Rev. (Summer 1980).
127 Rosser, J. & Mossberg, H., an Analysis of Health Care Delivery 70 (1977)Google Scholar.
128 Note, supra note 125, at 894.
129 Merrill, , State and Local Responsibilities to Provide Indigent Health Care, 12 Clearinghouse Rev. 469 n.2 (1978)Google Scholar.
130 Carroll, & Arnett, , Private Health Insurance Plans in 1978 and 1979: A Review of Coverage, Enrollment and Financial Experience, Health Care Fin. Rev. 55, 69 (September 1981)Google ScholarPubMed.
131 National Health Law Program, The Medicaid Cap: Bad Medicine for the Poor, 15 Clearinghouse Rev. 62, 63 (1981)Google Scholar. Medicaid eligibility is determined by state law and varies widely from state to state. For example, in Nebraska and South Dakota, over 60% of the poor are ineligible for Medicaid while New York and Massachusetts provide Medicaid coverage to 80-90% of the poverty level population. Id. at 65.
132 Carroll & Arnett, supra note 130, at 69. These statistics do not include individuals over age 65 as most are covered by Medicare.
133 See supra notes 36-43 and accompanying text.
134 Rose, supra note 33 at 199 n.173. But see, supra n.175.
135 Rosenblatt, supra note 37 at 286.
136 Merrill, supra note 129, at 472.
137 Rosenblatt, supra note 37, at 281-82.
138 President’s Message to Congress on Health Legislation, supra note 15, at 1143.