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August 8, 1991

THE DISTRICT OF COLUMBIA, et al., Defendants

The opinion of the court was delivered by: SPORKIN


 The Hospital is a privately held, non-profit hospital located in Northeast Washington, D.C. It is a participant in the Medicaid program, providing medical services to Medicaid recipients and receiving payment directly from the District. Since its 1987 fiscal year, the Hospital has suffered substantial operational losses continuing into 1991.

 The Hospital makes two claims. The first is that the District has failed to accord with its duty under the Boren Amendment, 42 U.S.C. § 1396a(a)(13)(A), to provide for payment rates under its Medicaid plan that are "adequate to meet the costs which must be incurred by efficiently and economically operated hospital facilities." The Hospital also alleges that this failure amounts to an unconstitutional taking, because the Hospital has been forced to operate for inadequate compensation.

 According to the Hospital, the Department of Human Services Office of Health Care Financing ("OHCF"), the agency responsible for setting the District's rates for Medicaid reimbursement, has failed to make any adjustment in its Medicaid plan to reflect inflation in hospital operational costs and expenses since 1987. The Hospital argues that available inflation data indicates that the Medicaid payment rate must be increased by approximately 20% to 30% if it is to remain reasonable and adequate.

 The District points out that the Hospital has the right, under 42 C.F.R. 447.253(c) and 22 D.M.C.R. 1309, 1310, and 1311, to pursue an administrative review of any dispute with the OHCF's determination of reimbursement rates. In such a proceeding, the Hospital is provided with the opportunity to challenge the rates set and to introduce evidence and argument with respect to such rates. OHCF's response to this challenge is appealable by the Hospital to the D.C. Board of Appeals and Review. In turn, any decision of this administrative board is appealable to a court of record.

 The Hospital has failed to take advantage of its administrative challenge, despite the fact that the OHCF has signalled its willingness to consider the Hospital's arguments. This Court finds that although the Hospital does have the right to sue under 42 U.S.C. § 1983, see Wilder v. Virginia Hospital Ass'n, 496 U.S. 498, 110 L. Ed. 2d 455, 110 S. Ct. 2510 (1990), the Hospital should proceed with its administrative challenge and, if necessary, return to the court system after the resolution of these issues.

 The OHCF is best equipped to consider the complicated nature of the Hospital's challenge. The agency has experience in setting rates and in considering the appropriateness of such rates, as well as a familiarity with the costs of hospital services and operations. While this Court would have the jurisdiction to hear plaintiff's claim, it believes the prudent course to follow is to defer in the first instance to the administrative agency with the experience and expertise to review such matters. Under the doctrine of primary jurisdiction, it is appropriate for a court to withhold its jurisdiction pending the referral of the issues to the administrative body with the appropriately specialized knowledge.

 This procedure also helps ensure that there will be a uniformity of regulation. Rate setting has been left to the special competence of OHCF. It is preferable that this one central and specialized agency set rates, rather than various courts. The courts are not designed to be an alternative body for administering regulations. The role of the courts is to ensure that justice is served by the agency's carrying out its mandate appropriately. See, e.g. Kappelmann v. Delta Airlines, Inc., 176 U.S. App. D.C. 163, 539 F.2d 165 (D.C. Cir. 1976).

 Accordingly, Counts I and II, plaintiff's claims concerning the propriety of the District's Medicaid rates will be dismissed without prejudice.

 The Hospital accordingly submitted an application to SHPDA for a Certificate of Need ("CON") to convert its acute care beds to long-term skilled nursing beds. SHPDA replied that no CON was necessary in order to make this change. In mid-November 1990, a suit was filed in the Superior Court of the District of Columbia against the District by the Coalition to Save Capitol Hill Hospital, a non-profit, private public interest group, to prevent the closing of the Hospital's acute care services. The basis of the suit was that SHPDA had erred in its interpretation of the applicable regulations and that the Hospital should not be allowed to convert its acute care beds without applying for a CON. The Hospital was not a party to the suit.

 Although SHPDA contested the action, the Superior Court issued a preliminary injunction directing SHPDA to require the Hospital to obtain a CON before closing out its acute care services. Pursuant to the court's order, on December 18, 1990, SHPDA sent a letter to the Hospital requiring that it obtain a CON and that it continue to maintain its acute care ...

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