Opinion
Civ. No. 6-85-1078.
August 3, 1988
John A. Cotter, Larkin, Hoffman, Daly Lindgren, Minneapolis, Minn., for plaintiffs.
Lynn A. Zentner, Assistant U.S. Attorney, Minneapolis, Minn., for defendants.
ORDER
Plaintiffs brought this action challenging defendant Department of Health and Human Service's position that plaintiff Douglas County Hospital had violated two provisions of the Hill-Burton regulations during the years 1980 through 1983 and, consequently, had an annual compliance deficit for those years which would have to be made up. Last December, the court granted summary judgment for defendants on the issue of whether Douglas County had violated the two-day determination rule and the presumptive plan rule but denied summary judgment on the issue of whether the Department could, as an enforcement measure, require Douglas County to provide additional free care.
Plaintiffs now move for summary judgment on the sole remaining issue of enforcement measures. The parties agree that there exist no genuine issues of material fact precluding resolution by summary judgment. The issue is whether the Department validly interpreted the governing Hill-Burton regulations (42 C.F.R. §§ 124.501-.12) (1979) as authorizing the denial of credit for care given in connection with Douglas County's violations of the two-day determination rule and the presumptive plan rule. As noted in the court's November 23, 1987, order for partial summary judgment in this matter, an agency's interpretation of its own regulations is entitled to deference unless plainly erroneous or inconsistent with the regulations. Bowles v. Seminole Rock Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217 (1945). The court finds the Department's denial of credit in these two instances, however, to be unsupported by, and inconsistent with, the regulations and not entitled to deference.
A. Two-Day Determination Rule Violations
In ordering partial summary judgment, the court found that Douglas County's general practice, during the years 1980 through 1983, of delaying written eligibility determinations until two days after receiving verification of an applicant's income violated § 124.508(a) of the 1979 Hill-Burton regulations. During that period, Douglas County provided approximately $500,000 in free care to eligible patients. The Department's refusal to credit Douglas County for that free care on account of violating the two-day determination rule is neither supported by, nor consistent with, the regulations.
None of the enforcement provisions suggest denial of credit as an appropriate remedy where, as here, a facility has documented that it has actually given free care to eligible patients. Section 124.511(b)(1) gives the Department broad authority to take any legal action necessary to "secure compliance." However, since the noncompliance is failure to make an eligibility determination within two days, denying credit for actual free care given does not secure compliance. Section 124.511(b)(3) permits the Department to require a facility with an annual compliance level deficit to make that deficit up in succeeding years. As discussed below, however, Douglas County had no annual compliance deficit for 1980 through 1983. Section 124.511(b)(2) would support the Department's requiring a facility provide free care to any applicant to whom uncompensated services were wrongly denied whether the facility had an annual compliance deficit for that year or not. As discussed below, however, Douglas County did not wrongfully deny applicants uncompensated services when it failed to make determinations within two days.
The court rejects defendants' argument that Douglas County, in failing to make eligibility determinations within two days as required by § 124.508(a), denied applicants uncompensated services resulting in annual compliance level deficits for 1980 through 1983. That argument is premised upon the Department's interpretation of the term "uncompensated services" as excluding any free care given to patients for whom eligibility determinations were not made within two days, an interpretation the Department argues is implicit in the regulations and their legislative history.
The Department's interpretation is at odds with the regulations. "Uncompensated services" is defined by the regulations as "services that are made available to persons unable to pay for them without charge or at a charge which is less than the allowable credit for those services." § 124.502. The definition goes on to briefly describe how the dollar value is calculated and then specifically excludes services provided to patients for whom "the facility has [not] made a written determination of eligibility." Id. The definition does not exclude free care given to patients for whom written eligibility determinations are not made within two days after a request for free care. Obviously, the regulations could have easily stated so had that been the intention.
Nor does the legislative history persuade the court that the Department's interpretation of "uncompensated services" is implicit in the regulations. Both the 1972 and 1975 versions of the regulations did exclude from the definition of uncompensated services qualifying for credit any free care given to patients for whom written eligibility determinations were not made by a specified point in time. 42 CFR § 53.111(f) (1973) (prior to any collection effort); 42 CFR § 53.111(f) (1976) (prior to provision of services). The deletion of such language from the 1979 regulations is a strong indication that credit is not to be denied for failure to satisfy the two-day determination rule. Defendants state the regulations were revised in 1975 in response to Corum v. Beth Israel Medical Center, 373 F. Supp. 550 (S.D.N.Y. 1974) and argue that the Department's interpretation of the 1979 regulations is implicit when viewed in light of this legislative history. The Department modified § 53.111(f) in 1975 in order to meet the Corum court's criticism that allowing credit for services provided before an eligibility determination is made discouraged eligible persons from seeking free care and permitted hospitals to count bad debts towards their Hill-Burton assurances. Dissatisfaction with the 1975 rules led the Department to revise the rules again in 1979 with a new approach to satisfying the Corum court's concerns. The 1979 regulations required each person be given individual notice of the availability of services and of their ability to trigger an eligibility determination within two days by requesting free care. Section 124.505(d). If it was considered important under the new approach to exclude free care where the two-day rule was not satisfied, the 1979 regulations could have preserved that requirement. Instead, the 1979 regulations deleted it. As interpreted by the court, the 1979 regulations are consistent with Corum's twin aims of encouraging eligible people to apply for free care and preventing hospitals from writing off bad debts under the program. The Department's interpretation is not implicit in the legislative history of the 1979 regulations.
B. Presumptive Plan Rule Violations
In granting partial summary judgment, the court found that Douglas County's practice in 1981 of charging Category B patients for part of the cost of medical services was in violation of the presumptive plan rule, § 124.507(b), and that the Department properly ordered Douglas County to refund the illegal charges to Category B patients. The refund order is authorized by § 124.511(b)(1) and § 124.511(b)(2). However, the Department's denial of credit to Douglas County for refunds it ordered made is unsupported by, and inconsistent with, the regulations. None of the enforcement provisions suggest that a facility which makes such reparation for improperly denied free care ought be denied credit towards its compliance level. To the contrary, § 124.511(b)(3)(i) suggests the opposite conclusion. That provision demonstrates that a facility which fails to meet its annual compliance level in a particular year is given credit towards that deficit for surplus free care provided in future years, even when the facility's noncompliance with the regulations caused the deficit. Section 124.503(b) is to the same effect. Moreover, where a facility has no compliance level deficit for a given year, surplus amounts of free care are credited towards its annual compliance level in future years. § 124.503(c). As stated above, Douglas County had no deficit for the years in question.
C. Conclusion
The Department's refusal to credit Douglas County for free care actually given to eligible patients as a means of enforcing the two-day determination rule and the presumptive plan rule is inconsistent with, and unsupported by, the regulations. In both instances, the denial of credit is further inconsistent with the regulations' overall goal of ensuring that each facility provide a fixed amount of free care in meeting its Hill-Burton assurance. Requirements for Provision of Services to Persons Unable to Pay Therefor and Community Services by Assisted Health Care Facilities, Appendix I, 44 Fed.Reg. 29,382, 29,382 and 29,385 (1979).
Plaintiffs' motion for summary judgment on their challenge of the enforcement measures is GRANTED.
The Department of Health and Human Services is hereby ORDERED to give Douglas County Hospital credit for all uncompensated services provided by the hospital to patients eligible for Hill-Burton care during the years 1980 through 1983 which the Department of Health and Human Services previously disallowed by letter dated December 18, 1986, from Richard Ashbaugh, Assistant Surgeon General, Associate Director for Health Facilities, Department of Health Human Resources to William G. Flaig, Douglas County Hospital.
As this order resolves the sole remaining issue, the Clerk is directed to close the case.