The opinion of the court was delivered by: LAMBERTH
This case comes before the court on the parties' cross-motions for summary judgment.
The controversy here involves plaintiff hospital's 1984 claim for Medicare reimbursement for interest incurred as a result of borrowing $ 14,675,000.00 for a capital project without using the $ 3,480,575.00 fund designated for spending on capital projects. The court finds that the hospital must forfeit most of its claim for interest expense reimbursement for 1984 since it failed to use the designated capital fund account first.
A. The 1982 ICU/CCU construction plan
In 1979-80 Hampton's Board of Trustees approved a long-term capital improvement plan, which included construction of an intensive care unit and a critical care facility. Plaintiff's Statement of Material Facts ("Pltf. Stmt.") at 4, para. 14 (Nov. 27, 1989). When the Board was ready to begin construction in April 1982, it expected the project to cost $ 15,681,002.00. Pltf. Stmt. at 15.
Like any consumer planning a large purchase, the Hampton Board needed to minimize its interest costs while keeping installment payments manageably low. Hampton here could plan its construction to maximize Medicare reimbursement for all of their "necessary and proper expenses incurred in furnishing services, such as administrative costs, maintenance costs, and premium payments" that they incur in serving Medicare patients. 42 C.F.R. § 413.13(c)(3) (1989). See also 42 U.S.C. § 1395ww(a) (1988). Since Congress requires the Health Care Financing Administration ("HCFA")
to avoid both subsidization of expenses that non-Medicare patients incur and non-Medicare patient shouldering of Medicare expenses, HCFA will reimburse the cost of new construction to the extent that Medicare patients will occupy the new building just as it will pay traditional medical bills.
Total cost of routine services x Medicare = Annual
Total number of inpatient days inpatient days reimbursement
St. Mary of Nazareth Hospital Center v. Heckler, 760 F.2d 1311, 1314 (D.C. Cir. 1985) (Interest earned on all accounts but FDAs reduce the fraction's numerator - "cost of routine services" - which in turn reduces annual reimbursement).
Not only must the hospital spend the FDA exclusively upon capital projects, but, to minimize the Medicare program's liability for interest expense reimbursement, the hospital also must use the fund to reduce ...