Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


May 25, 1976

ARISTOCRAT SOUTH, INC., et al., Plaintiffs,

United States District Judge Charles R. Richey.

The opinion of the court was delivered by: RICHEY


 This case arises under the fifth amendment to the Constitution of the United States and Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., popularly referred to as the "Medicare Act." It is presently before the Court on plaintiffs' motion for summary judgment and defendant's motion to dismiss for lack of subject matter jurisdiction or for summary judgment.

 There are basically two issues presented for decision. First, the defendant contends that this Court is without jurisdiction to hear the case. Second, on the merits, the Court is asked to decide whether the challenged regulatory changes in "provider" accounting methods effectuated by defendant, Secretary of HEW, in 1972, were enacted arbitrarily and capriciously and without observance of procedures required by the Administrative Procedure Act. The Court, with the assistance of thorough briefs prepared by the parties, has determined, for the below-stated reasons, that it does not have jurisdiction over the matter and accordingly must dismiss the action without reaching the merits of plaintiffs' complaint.


 Plaintiffs each own and operate a skilled nursing facility which provides skilled nursing care to beneficiaries of the Medicare program and to others who are not covered by the program. Under the terms of the Medicare Act and the provider agreement, which each of the plaintiffs has with the Secretary of HEW, the plaintiffs are to be reimbursed by the Secretary for the "reasonable costs" of the covered services rendered by them to program beneficiaries. Each of the plaintiffs receives this reimbursement from a private organization acting as "fiscal intermediary" pursuant to contract with the Secretary, a common practice authorized by section 1816 of the Medicare Act, 42 U.S.C. § 1395h. These fiscal intermediaries make payments in accordance with established cost reporting procedures and regulations, but themselves have no vested interest in the expenditure of these funds.

 Pursuant to the statutory obligation of the Secretary of HEW to reimburse skilled nursing facilities for the reasonable cost of the services they provide to Medicare patients, federal regulations were promulgated in 1966 which established two basic accounting methods to be used for apportioning costs for care and services between Medicare and other patients. 20 C.F.R. §§ 405.401-.454. These two methods, the "Combination Method" and the "Departmental Method," were available at the sole option of a Medicare provider for cost reporting periods starting before January 1, 1972, and each of the plaintiffs herein elected to use the departmental method. By federal regulation effective May 20, 1972, 20 C.F.R. §§ 405.404, 405.452, 405.453, the Secretary issued final regulations that eliminated the option to chose either accounting method and required all skilled nursing facilities to use the combination method for all cost reporting periods after December 31, 1971. Plaintiffs have all submitted cost reports using the combination method for periods after December 31, 1971. On April 2, 1975, they initiated the present action challenging the 1972 regulations, claiming that they have not been fully reimbursed under the combination method for all their reasonable costs incurred. Plaintiffs allege that this Court has jurisdiction under both the general federal question statute, 28 U.S.C. § 1331, and the Administrative Procedure Act, 5 U.S.C. §§ 701-06. At the core of the dispute between the plaintiffs and defendant is the question of whether a review procedure is established under the Medicare Act to resolve claims of the type herein presented. The defendant starts from the premise that 42 U.S.C. § 1395 oo, which allows providers to request a hearing before the Provider Reimbursement Review Board (hereinafter, "PRRB") if dissatisfied with an intermediary's determination of reimbursement, provides an administrative review mechanism which must be exhausted by plaintiffs prior to obtaining judicial review. Defendant further claims that the exclusivity of this review provision is established in Weinberger v. Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975). Plaintiffs, on the other hand, claim that there is no appropriate review procedure since the PRRB cannot afford the relief sought and that, therefore, this Court has jurisdiction pursuant to the federal question and APA statutes.


 The threshold question before the Court is whether the Medicare Act provides an administrative process which could consider the plaintiffs' claims that the challenged regulations are (1) unconstitutional and (2) arbitrary and capricious in violation of the Medicare Act. This Court, having examined carefully the provisions of the Act, has determined that 42 U.S.C. § 1395 oo provides such an administrative process, available to plaintiffs and ultimately leading to judicial review. This provision provides in pertinent part:

"(a) Any provider of services which has filed a required cost report within the time specified in regulations may obtain a hearing with respect to such costs report by a Provider Reimbursement Review Board . . ., if
(1) such provider
(A) is dissatisfied with a final determination of the organization serving as its fiscal intermediary pursuant to section 1395h of this title as to the amount of total program reimbursement due the provider for the items and services furnished to individuals . . . .
(f)(1) A decision of the Board shall be final unless the Secretary, on his own motion, and within 60 days after the provider of services is notified of the Board's decision, reverses, affirms, or modifies the Board's decision. Providers shall have the right to obtain judicial review of any final decision of the Board, or of any reversal, affirmance, or modification by the Secretary . . . ."

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.