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ST. AGNES HOSP. v. BOWEN

March 9, 1989

St. Agnes Hospital, et al., Plaintiffs,
v.
Otis R. Bowen, M.D., Secretary of the Department of Health and Human Services, et al., Defendants



The opinion of the court was delivered by: RICHEY

 CHARLES R. RICHEY, UNITED STATES DISTRICT JUDGE.

 The above-entitled suit arises out of plaintiff hospitals' challenge to a decision of the Department of Health and Human Services denying a request for the reimbursement of routine services rendered inpatient medicare beneficiaries. On March 4, 1987, the Court entered judgment in plaintiffs' favor. *fn1"

 The parties agree that, under 42 U.S.C. § 1395 oo (f)(2), plaintiffs are entitled to interest on that judgment. The sole bone of contention between the parties is the rate at which interest should be assessed. Plaintiffs argue that they are entitled to interest at a rate equal to one and one-half times the average rates of return on special issues of public debt obligations to the Federal Hospital Insurance Trust Fund (13.875%). The Government contends that plaintiffs are entitled to interest only at a rate equal to the average rates of return on Federal Hospital Insurance Trust Fund obligations (9.25%). *fn2" Both parties have moved to clarify the rate at which interest must be paid.

 The Court has had the benefit of oral argument and thorough briefs on these motions. After considering the arguments advanced by the parties and the underlying law, the Court finds that plaintiffs are entitled to interest at a rate of one and one-half times the average rates of interest on special issues of public debt obligations issued to the Federal Hospital Insurance Trust Fund, and it will enter an Order to this effect.

 BOTH THE EXPRESS LANGUAGE OF THE RELEVANT STATUTORY SECTION AND THE LANGUAGE AND DESIGN OF THE MEDICARE ACT AS A WHOLE SUPPORT PROVISION OF INTEREST AT A RATE EQUAL TO ONE AND ONE-HALF TIMES THE AVERAGE RATES OF INTEREST ON SPECIAL ISSUES OF FEDERAL HOSPITAL INSURANCE TRUST FUND DEBT OBLIGATIONS

 The parties agree that 42 U.S.C. § 1395 oo (f)(2) establishes the plaintiffs' right to interest on the judgment entered in their favor. The Court's interpretation of that section must be guided by the Supreme Court's recent reaffirmation that a court must first look at the express language of the relevant section, and then may consider "the language and design of the statute as a whole." Bethesda Hospital Association v. Bowen, 485 U.S. 399, 108 S. Ct. 1255, 1258-59, 99 L. Ed. 2d 460 (1988). Both the plain language of § 1395 oo (f)(2) and the "language and design" of the Medicare Act support plaintiff's claim of entitlement to interest at the higher rate.

 The relevant statutory section provides:

 
Where a provider seeks judicial review . . . the amount in controversy shall be subject to annual interest beginning on the first day of the first month beginning after the 180-day period as determined pursuant to subsection (a)(3) of this section and equal to the rate of return on equity capital established by regulation pursuant to section 1395x(v)(1)(B) of this title and in effect at the time the civil action . . . [was] commenced, to be awarded by the reviewing court in favor of the prevailing party.

 42 U.S.C. § 1395 oo (f)(2) (1983) (emphasis added).

 This suit was filed on February 25, 1986. At that time, there was only one regulation in effect promulgated pursuant to 42 U.S.C. § 1395x(v)(1)(B) (1983). That regulation concerns the rate of return on equity capital paid as an allowance to proprietary providers other than those providing inpatient hospital services. Under that regulation, for cost reporting periods beginning prior to April 20, 1983, *fn3"

 
. . . the amount allowable on an annual basis is determined by applying to the provider's equity capital a percentage equal to one and one-half times the average of the rates of interest on special issues of public debt obligations issued to the Federal Hospital Insurance Trust Fund for each of the months during the provider's reporting period or portion thereof covered under this program.

 42 C.F.R. § 405.429(a)(ii) (1985).

 By virtue of the above, it is clear that plaintiffs are entitled to litigation interest at the rate established by this regulation: a rate "equal to one and one-half times the average of the rates of interest on special issues of public debt obligations issued to the Federal Hospital ...


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