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June 7, 1976


The opinion of the court was delivered by: BRYANT

 This matter is now before the Court on defendant's Motion To Dismiss and both parties' cross-motions for summary judgment. For the reasons discussed below, the Court denies defendant's Motion To Dismiss and defendant's Motion For Summary Judgment, and grants plaintiff's Motion For Summary Judgment.

 Plaintiff Humana, a "provider of services" [ 42 U.S.C. § 1395x(u)] under Title XVIII of the Medicare Act, has brought this action seeking declaratory and injunctive relief against the provisions of 20 C.F.R. § 405.429(a), the defendant's regulation establishing a specific formula for determining the appropriate rate of return on equity capital to be included as an element of the "reasonable cost" of services for which proprietary providers are to be reimbursed under 42 U.S.C. §§ 1395f(b) and 1395x(v)(1)(A). The government admits that a return on equity capital is a reimbursable cost of patient care for proprietary providers. Defendant's Answer, para. 8. Plaintiff challenges the regulation on three grounds, two of them substantive and one procedural. First, Humana contends, the regulation violates 42 U.S.C. §§ 1395f(b) and 1395x(v)(1)(A) and (B) in that it does not in fact reimburse proprietary hospitals their reasonable costs. Second, plaintiff argues that the regulation violates 42 U.S.C. § 1395x(v)(1)(A) in that it has the effect of forcing individuals not covered by Medicare to bear a portion of the cost of services provided by proprietary hospitals to individuals covered by Medicare. Humana's third (procedural) contention is that the regulation was promulgated without compliance with the rulemaking requirement of 5 U.S.C. § 553, the Administrative Procedure Act. The government defends the regulation on the merits, and also moves to dismiss for an alleged lack of subject matter jurisdiction and failure to exhaust administrative remedies.


 The government, relying principally on the Supreme Court's recent decision in Weinberger v. Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975), contends that this Court lacks subject matter jurisdiction over this action, pursuant to 42 U.S.C. § 405(h), which provides:

Finality of Secretary's decision.
The findings and decisions of the Secretary after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Secretary shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 41 of Title 28 to recover on any claim arising under this subchapter.

 Section 405(b) requires the Secretary to grant a hearing to any individual whose application for payment under the subchapter (i.e. the various Social Security benefits) has been acted upon adversely, upon the request of such individual (or the individual whose rights have allegedly been prejudiced by the original decision). Section 405(g) provides for limited judicial review of the decision made by the Secretary as the result of such hearings. Section 1395ii provides that section 405(h) applies to subchapter XVIII (Medicare) "to the same extent as [it is] applicable with respect to subchapter II of this chapter" (i.e. Social Security). Taken together, and as construed in Salfi, the government argues, these provisions deprive the Court of subject matter jurisdiction over this action. *fn1"

 For several reasons, the defendant's arguments are without merit. First, the Court does not believe that § 405(h) is even applicable to the matters here at issue. As noted above, the only applicability that section has to the Medicare context is by virtue of the operation of § 1395ii, which applies it to the same extent that it would apply to any analogous situation in the Social Security (Title II) context. The question then is the extent to which provider reimbursement questions correspond to those Title II matters which are subject to § 405(h). A review of the statutory scheme involved makes clear that the question here at issue -- the legality of the Secretary's regulation establishing the rate of return on equity capital for proprietary providers -- does not correspond to any Title II determination that would be subject to the limitations of § 405(h).

 Section 405(h) limits review of decisions arrived at after hearing by the Secretary. Those hearings are mandated by § 405(b) for the purpose of resolving a contested right to Social Security benefits on the part of a particular individual. The statutory scheme also provides for judicial review of the outcome of such hearings, through the procedure of § 405(g). The clear purpose of this scheme as a whole is to limit the number of dissatisfied applicants that would otherwise deluge the courts by providing an administrative appeal process followed by limited judicial review. The provision under which determination of individuals' eligibility for Medicare benefits is made in § 1395ff. As with § 405(b), the initial determinations are made ex parte. As with § 405(b), an individual dissatisfied with such decision is entitled to a hearing, and in fact is explicitly entitled to that hearing "to the same extent as is provided in section 405(b)". As with § 405(b), the results of that hearing are subject to limited judicial review, and that review is to be "as is provided in section 405(g)". Clearly, then, the determinations intended by § 1395ii to be subject to the ex parte decision-administrative appeal limited judicial review scheme of sections 405(b), (g), and (h) are those found in § 1395ff, and the Court finds that there are no other such provisions in the Medicare Act. Cf. St. Louis University v. Blue Cross Hospital Service, 537 F.2d 283 (C.A. 8, 1976), at n. 5 and Slip Op. at 17. The extent to which determinations affecting providers of services are subject to the limitations of § 405(h) is therefore determined by the scope of § 1395ff.

 Section 1395ff does subject certain decisions relative to providers to the § 405 scheme. In § 1395ff(c) the Medicare Act grants the right to a hearing to any institution or agency dissatisfied with a determination of the Secretary that it is not a provider of services or a decision of the Secretary to terminate an agreement with a provider pursuant to § 1395cc(b)(2). That right to a hearing exists "to the same extent as is provided in section 405(b)". There is, as in Title II, a right to limited judicial review of the outcome of that hearing, "as is provided in section 405(g)". These two issues are the only ones relating to providers of services committed by the Medicare Act to the statutory scheme of § 405, and therefore to the limitations of § 405(h). Cf. Kingsbrook Jewish Medical Center v. Richardson, 486 F.2d 663, 666 n. 6 (C.A. 2, 1973); cf. Aquavella v. Richardson, 437 F.2d 397, 401 (C.A. 2, 1971). Finally, that the Medicare Act did not commit all decisions regarding providers to the § 405 scheme is also clear from the presence of sections 1395h and 1395 oo, which establish an entirely separate administrative and judicial review process for determinations regarding certain aspects of reimbursement. The Court therefore holds, in light of the statutory scheme as a whole, that § 405(h) neither applies to nor bars this suit.

 Even if it should be found that § 405(h) is in general applicable to this case, however, the Court would still have to determine whether its operation would deprive the Court of jurisdiction in the specific circumstances of this case. The question in such an inquiry would be whether or not the Medicare Act establishes some mechanism for the determination of the legality of the regulation at issue; it is of course now well established that "because of considerations of due process, all of the restraints on judicial action included in section 405(h) are inapplicable where the Medicare Act provides no procedure for judicial review." Kingsbrook, supra at 667 (emphasis in original); Aquavella, supra at 402. In such a case, "nonstatutory" judicial review is available under the grants of jurisdiction contained in 28 U.S.C. 1331 and the APA. Kingsbrook, supra; Sanders v. Weinberger, 522 F.2d 1167 (C.A. 7, 1975); Cappadora v. Celebrezze, 356 F.2d 1 (C.A. 2, 1966); Pickus v. U.S. Board of Parole, 165 U.S. App. D.C. 284, 507 F.2d 1107 (C.A.D.C., 1974). Of course, where the Medicare Act does establish procedures for review of an action of the Secretary, a court may not review that action by any other means. Aquavella, supra at 402.

 The Supreme Court's narrow decision in Salfi does not substantially affect the nonstatutory review cases discussed above. That holding simply expands the number of situations in which statutory review under 42 U.S.C. § 405(g) is available to an individual seeking benefits under 42 U.S.C. § 405(b) (the Social Security Act) to include an application for benefits which challenges the constitutionality of a statutory limitation affecting that person's right to such benefits. That the Court in Salfi did not intend to preclude nonstatutory judicial review where the Act does not provide for a review mechanism is apparent from its discussion of the distinction between Salfi and Johnson v. Robison, 415 U.S. 361, 39 L. Ed. 2d 389, 94 S. Ct. 1160 (1974). In that discussion the Court indicates that it was not considering in Salfi a situation in which judicial review was wholly unavailable. It said, rather, that "the plain words of the third sentence of § 405(h) do not preclude constitutional challenges. They simply require that they be brought under jurisdictional grants contained in the Act, and thus in conformity with the same standards which are applicable to nonconstitutional claims arising under the Act." Id. 422 U.S. at 762. If a statute contained no provision for judicial review of such challenges, and the statute were read to preclude such review, a "serious constitutional question of the validity of the statute as so construed" would be raised. Id. at 762. Such a restriction would be "extraordinary, such that 'clear and convincing' evidence would be required before we would ascribe such intent to Congress, 415 U.S., at 373". Id. at 762. Salfi cannot be taken therefore to have addressed the question of the availability of "nonstatutory" judicial review of a provision whose legality could not be tested through any mechanism provided by the Medicare Act itself. *fn2" If therefore the Medicare Act does not provide such a mechanism, nonstatutory judicial review continues to be available. *fn3"

  As to fiscal periods ending prior to June 30, 1973, while the government does not contend that any provision was made in the Act for judicial review of the legality of the regulation, it does contend that plaintiff failed to exhaust the administrative remedy available to it, an appeal to its fiscal intermediary under the provisions of 20 C.F.R. § 405.490 et seq. (now 20 C.F.R. § 405.1801-.1833). *fn4" However a review of the regulations involved clearly shows that a fiscal intermediary hearing is not a permissible forum for the presentation or resolution of plaintiff's challenge to the regulation involved. Under 20 C.F.R. § 405.406 and.453(f), a provider is required to submit a "cost report" to the intermediary. The regulations make clear that this is to be a strictly financial document, in which no opportunity exists for presentation of plaintiff's challenge. If the provider is dissatisfied with the intermediary's determination under § 405.1803 of the amount of reimbursement to which the provider is entitled, it can have a hearing to review any items claimed on the cost report which have been disallowed by the intermediary, § 405.1811. The issues considered at that hearing are strictly limited, and afford no opportunity for presentation of plaintiff's challenge. Under § 405.1829, the hearing officer in making his decision "must comply with all the provisions of Title XVIII of the Act and regulations issued thereunder, as well as with rulings issued under the authority of the Commissioner of Social Security . . .". This regulation clearly prohibits consideration of the validity of a regulation issued by the Secretary. Indeed, the intermediary has admitted as much in a letter to Humana with respect to this specific matter. "The Officers cannot entertain arguments directed to the ...

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