Opposition Brief — Snider v. Temple University

Supreme Court, US

re FILED

ay,

No. 91-732 | WOV 29 92

“OFRGE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1991

“

KAREN SNIDER, Acting Secretary

of the Department of Public Welfare,

Commonwealth of Pennsylvania, et al.,

Petitioners,

TEMPLE UNIVERSITY - OF THE COMMONWEALTH

SYSTEM OF HIGHER EDUCATION, et al.,

Respondents.

¢

Petition For A Writ Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

.

BRIEF IN OPPOSITION OF RESPONDENT

TEMPLE UNIVERSITY - OF THE COMMONWEALTH

SYSTEM OF HIGHER EDUCATION

*

Of Counsel: MattHew M. Strickler”

GeEorGE E. Moore, Esquiri LAURIE Marin

University Counsel gery SPAHR ANDREWS

bo NGERSOLI

(38 Peal 1735 Market Street

th 5ist Floor

oe Mont gomner) Philadelphia, PA

19103-7599

> ’ . 1 ¢ Se ~

Philadelphia, PA 19122 (215) 665-8500

*Counsel of Record

ae -

: z

: ie, fai

Se ¥

| y

,

RO

»

ye.

\

QUESTIONS PRESENTED

1. Whether a hospital has a private cause of action

under 42 U.S.C. § 1983 to compel State officers to comply

with two requirements of the Medicaid Act for payment

rates for inpatient hospital care:

(a) the requirement of 42 U.S.C.

§ 1396a(a)(13)(A) and 42 U.S.C. § 1396r-4 that

States take into account the situation of hospi-

tals serving a disproportionate share of indigent

patients; and

(b) the requirement of 42 U.S.C.

§ 1396a(a)(13)(A) that rates be reasonable and

adequate to meet the costs of efficiently and

economically operated hospitals.

2. Whether a State can comply with the “dispropor-

tionate share” hospital requirement of the Medicaid Act

by increasing its payments up to a maximum of 2.5%

when that State’s data establish that hospitals with the

largest indigent patient loads have costs more than 16%

higher than otherwise comparable hospitals.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED . ...c60 ec Se ceee ees tress ta i

ADDITIONAL STATUTORY PROVISIONS

io je 5 fs rr err ere ry ere 1

COUNTERSTATEMENT OF THE CASE ............ 4

REASONS WHY THE PETITION SHOULD BE

fi): |S Pane er mrs tracer: Aer eee 12

I. Introduction and Summary ................... 12

Il. There are No Special Circumstances to Warrant

this Court Reexamining its Interpretation of the

Medicaid Act........ G4 5S ae pee na RL erie 13

Ill. The Holdings of the Courts Below on the Dis-

proportionate Share Hospital Requirement are

Based on Facts Peculiar to Pennsylvania and to

Respondent Teme. oo. kcccce se eeee nares 18

CINE ERIC FIN. n.o-<.0.+ 0. 0 n-0o cn te ie orb aie enya ena 22

ill

TABLE OF AUTHORITIES

Page

Cases:

Arizona v. Rumsey, 467 U.S. 203 (1984).......0....... 14

New Haven Inclusion Cases, 399 U.S. 392 (1970) ...... 20

Patterson v. McLean Credit Union, 109 S. Ct. 2363

er ir hee ain eecyciednanvecduceses: 14, 16

West Virginia University Hospitals, Inc. v. Casey, 885

F.2d 11 (1989), aff'd, 111 S. Ct. 1138 (1991)..... 16, 19

Wilder v. Virginia Hospital Association, 110 S. Ct.

SE Oe dn dc a yo toe Oh «5 belo de 6 passim

Witters v. Washington Department of Services for the

Meee re Am, GO) CIPOO). 8s cece eset ee nees 20

STATUTES:

Pe aeenns Se SOMO MIOMA).......0200205 cc ene 14,5, 7

ES” SS passim

SE: a ea nr 13, 17, 18

Onmibus Budget Reconciliation Act of 1981, Pub.

L. No. 97-35, § 2173, 95 Stat. 357, 808-09 (1981)..... 4

Consolidated Omnibus Budget Reconciliation Act

of 1985, Pub. L. No. 99-272, § 9519, 100 Stat. 82,

I og 0eg0 in dy vis-d cs 04 40.6 Ov ode he 86 ok ss 6

Omnibus Budget Reconciliation Act of 1986, Pub.

L. No. 99-509, § 9433, 100 Stat. 1874, 2068 (1986) ..... 6

Omnibus Budget Reconciliation Act of 1990, Pub.

L. No. 101-508, § 4703, 104 Stat. 1388-171 (1990). .8, 16

24 Pa. Cons. Stat. Ann. §§ 2510-1 to -12 (Supp.

ee Peas holed sync b\y'n6 6-8 ve eee

iv

TABLE OF AUTHORITIES —- Continued

Page

RULES AND REGULATIONS:

Oe Oe OD BI os Niles da Wa gs ek SEEK pee OR ee 8

ee Se CES SEWER Cy ob nek c ced uedg cs OW eRRAe SS 8

erie ee I SPD os ics ew nh = be cee wee RS 12

Oe) ew te) 15

CONGRESSIONAL REPORTS:

H.R. Conf. Rep. No. 208, 97th Cong., Ist Sess.

(39012, Pepemnide 19 196) USCALAN. 2.4.0 66e<8052.5

H.R. Rep. No. 391(1), 100th Cong., Ist Sess. (1987)

reprinted in 1987 U.S.C.C.A.N. 2313-1...... ee

ADDITIONAL STATUTORY PROVISIONS INVOLVED

The Petition omits significant portions of 42 U.S.C.

§ 1396r-4 involved in this case. That Section reads in

relevant part as follows:

(a) IMPLEMENTATION OF REQUIREMENT

(1) A State plan under this subchapter shall not be

considered to meet the requirement of section

1396a(a)(13)(A) of this title (insofar as it requires pay-

ments to hospitals to take into account the situation of

hospitals which serve a disproportionate number of low

income patients with special needs), as of July 1, 1988,

unless the State has submitted to the Secretary, by not

later than such date, an amendment to such plan that

(A) specifically defines the hospitals so

described (and includes in such definition any

disproportionate share hospital described in

subsection (b)(1) of this section, which meets the

requirement of subsection (d) of this section),

and

(B) provides, effective for inpatient hospi-

tal services provided not later than July 1, 1988,

for an appropriate increase in the rate or

amount of payment for such services provided

by such hospitals, consistent with subsection (c)

of this section

(4) The requirement of this subsection may not be

waived under section 1396n(b)(4) of this title

.,

(b) HOSPITALS DEEMED DISPROPORTIONATE

SHARE

(1) For purposes of subsection (a)(1) of this section,

a hospital which meets the requirement of subsection (d)

of this section is deemed to be a disproportionate share

hospital if

(A) the hospital’s medicaid inpatient utili

zation rate (as defined in paragraph (2)) is at

least one standard deviation above the mean

medicaid inpatient utilization rate for hospitals

receiving medicaid payments in the State; or

(B) the hospital’s low-income utilization

rate (as defined in paragraph (3)) exceeds 25

percent.

(c) PAYMENT ADJUSTMENT

In order to be consistent with this subsection, a pay

ment adjustment for a disproportionate share hospital

must either

(1) be in an amount equal to at least the product of

(A) the amount paid under the State plan to the hospital

for operating costs for inpatient hospital services (of the

kind described in section 1395ww(a)(4) of this title), and

(B) the hospital’s disproportionate share adjustment per

centage (established under section 1395ww(d)(5)(F)(iv) of

this title);

(2) provide for a minimum specified additional pay

ment amount (or increased percentage payment) and

(without regard to whether the hospital is described in

subparagraph (A) or (B) of subsection (b)(1) of this se¢

tion) for an increase in such a payment amount (or per

centage payment) in proportion to the percentage by

which the hospital’s medicaid utilization rate (as defined

in subsection (b)(2) of this section) exceeds one standard

deviation above the mean medicaid inpatient utilization

rate for hospitals receiving medicaid payments in the

state or the hospital’s low-income utilization rate (as

defined in subsection (b)(3) of this section); or

(3) provide for a minimum specitied additional pay

ment amount (or increased percentage payment) that

varies according to type of hospital under a methodology

that

(A) applies equally to all hospitals of each

type; and

(B) results in an adjustment for each type

of hospital that is reasonably related to the

costs, volume, or proportion of services pro

vided to patients eligible for medical assistance

under a State plan approved under this sub

chapter or to low-income patients

Respondent Temple University - of the Common-

wealth System of Higher Education! (“Temple”) respect-

fully requests that this Court deny the Petition for Writ of

Certiorari seeking review of the Third Circuit’s decision.

That decision is reported at 941 F.2d 201 (1991).

.

COUNTERSTATEMENT OF THE CASE

1. Title XIX of the Social Security Act, 42 U.S.C.

§§ 1396, 1396a-1396u (the “Medicaid Act”) provides fed-

eral financial participation for payments under State

Medicaid programs that comply with that Act. Prior to

1981, the Medicaid Act required States to pay hospitals

for inpatient care on the basis of the hospitals’ reasonable

costs. In 1981, Congress extended to hospitals what is

commonly called the Boren Amendment. Omnibus Bud-

get Reconciliation Act of 1981, Pub. L. No. 97-35, § 2173,

' Temple is a Pennsylvania non-profit corporation which

has been legislatively designated as state-related but which

operates independently of state government under the direc-

tion of its board of trustees. 24 Pa. Cons. Stat. Ann. §§ 2510-1 to

(Supp. 1991). Temple has no subsidiaries that are not

wholly-owned and no parent corporation.

2 The five actions before this Court on the Petition are

Temple University —- Of the Commonwealth System of Higher Educa

tion v. White, et al., Nos. 90-1112 and 90-1244 (3d Cir.) and C.A.

88-6646 (E.D. Pa.); Frankford Hospital v. White, et al., No. 90-1204

(3d Cir.) and C.A. 88-08927 (E.D. Pa.); Albert Einstein Medical

Center, et al. v. White, et al., No. 90-1203 (3d Cir.) and C.A.

88-08831 (E.D. Pa.); Hahnemann University Hospital, et al

White, et al., No. 90-1205 (3d Cir.) and C.A. 88-09132 (E.D. Pa.);

and Hospital Association of Pennsylvania, et al. v. White, et al., No

90-1206 (3d Cir.) and C.A. 88-09848 (E.D. Pa.).

95 Stat. 357, 808-09 (1981) (codified at 42 U.S.C.

§ 1396a(a)(13)(A)). The actions before this Court involve

two requirements of the Medicaid Act, as modified by the

Boren Amendment: (1) payment rates for inpatient care

must “take into account the situation of hospitals that

serve a disproportionate number of low income patients

with special needs,” and (2) a State must find and make

assurances to the Secretary of Health and Human Ser-

vices that those rates are “reasonable and adequate to

meet the costs which must be incurred by efficiently and

economically operated facilities.” 42 U.S.C.

§§ 1396a(a)(13)(A), 1396r-4. The House Conference Report

for the Boren Amendment described both of these

requirements but emphasized the requirement relating to

“disproportionate share” hospitals by noting their “atypi-

cal costs” and then stating:

The conferees recognize that public hospitals

and teaching hospitals which serve a large Med-

icaid and low income population are partic-

ularly dependent on Medicaid reimbursement,

and are concerned that a State take into account

the special situation that exists in these institu-

tions in developing their rates.

H.R. Conf. Rep. No. 208, 97th Cong., Ist Sess. 962 (1981),

reprinted in 1981 U.S.C.C.A.N. 1, 1324.3

> In later enacting section 1396r-4, the House Budget Com-

mittee described Congressional concern for hospitals with high

Medicaid volumes in similar terms:

The purpose of this requirement ... was to assure

that, precisely because States were given flexibility

in establishing payment rates, that those payment

(Continued on following page)

The “disproportionate share” hospital requirement

has been the subject of Congressional action on six occa-

sions since it was enacted in 1981. In 1985, Congress

required the Secretary of Health and Human Services to

provide a report on the methods used by States for their

compliance with this requirement. Consolidated Omnibus

Budget Reconciliation Act of 1985, Pub. L. No. 99-272,

§ 9519, 100 Stat. 82, 216-17 (1986).4 After the Secretary

submitted that report, the House Budget Committee con-

cluded that there had been a “startling record of noncom-

pliance [reflecting] the indifference, if not hostility, of

HCFA and many of the States to the 1981 statutory

(Continued from previous page)

rates at a minimum mect the needs of those facilities

which, because they do not discriminate in admis-

sions against patients based on source of payment or

on ability to pay, serve a large number of Medicaid-

eligible and uninsured patients who other providers

view as financially undesirable. These “disproportio-

nate share” hospitals are an essential element of the

Nation’s health care delivery system, and the Federal

and State governments, through the Medicaid pro-

gram, have an obligation to assure that payment

levels assist these facilities in surviving the financial

consequences of competition in the health care mar-

ketplace.

H.R. Rep. No. 391(1), 100th Cong., Ist Sess. 524 (1987), reprinted

in 1987 U.S.C.C.A.N. 2313-1, 2313-344.

4 In the interim, the Health Care Financing Administration

attempted to challenge a generous disproportionate share

adjustment proposed by Georgia. Congress responded in 1986

by clarifying that HCFA has no authority to limit the payment

adjustments to disproportionate share hospitals. Omnibus

Budget Reconciliation Act of 1986, Pub. L. No. 99-509, § 9433,

100 Stat. 1874, 2068 (1986) (codified at 42 U.S.C. § 1396a(h)).

requirement [for ‘disproportionate share’ hospitals].”> As

a result, Congress amplified that requirement by enacting

Section 1396r-4, which became effective July 1, 1988. Sec-

tion 1396r-4 had two important requirements. First, the

Section defined “disproportionate shere” hospitals as

including at least those hospitals at least one standard

deviation above the mean Medicaid inpatient utilization

rate and those hospitals with low-income utilization rates

of greater than twenty-five percent. A state might classify

more hospitals as “disproportionate share,” but it could

not classify fewer. 42 U.S.C. § 1396r-4(a)(1), (b). Second, a

State was required to make “appropriate increases” in

payments to “disproportionate share” hospitals using

either (a) the formula used for Medicare reimbursement,

or (b) a formula which the State developed providing for

a minimum payment (or increased percentage payment)

as well as an increase in that payment or percentage “in

proportion to the percentage by which the hospital’s

medicaid utilization rate... exceeds one standard devia-

tion above the statewide mean.” 42 U.S.C. § 1396r-4(a)(2),

(c). The House Budget Committee described what it had

in mind if a State elected not to use the Medicare formula:

The Tennessee approach offers an example of

what the Committee intends for an alternative

payment adjustment. In Tennessee, dispropor-

tionate share hospitals are defined by volume.

For every 1,000 Medicaid days over 4,000 Medi-

caid patient days, hospitals receive a 6 percent

increase in their payment rate for inpatient ser-

vices, up to a maximum increase of 34 percent.

reprinted in 1987 U.S.C.C.A.N. 2313-1, 2313-345.

H.R. Rep. No. 391(1), 100th Cong., 1st Sess. 526 (1987),

reprinted in 1987 U.S.C.C.A.N. 2313-1, 2313-346.

Section 1396r-4 has been amended three times since

1987. Most recently, the 1990 amendment added Section

1396r-4(c)(3), which permits a State, if it chooses, to vary its

“disproportionate share” payments for different hospital

types and to have an adjustment “that is reasonably related

to the costs, volume, or proportion of services provided to

[Medicaid] patients.” Omnibus Budget Reconciliation Act of

1990, Pub. L. No. 101-508, § 4703, 104 Stat. 1388-171 (1990)

(codified at 42 U.S.C. § 1396r-4(c)(3)).¢

Clarification of the “disproportionate share” hospital

requirement continues to the present time. On October

31, 1991 (three days after the Petition was filed), HCFA

published an interim final regulation which would limit

the number of hospitals that States could classify as qual-

ifying for “disproportionate share” payments. In its pub-

lished notice, HCFA stated its intention to publish soon

still another interim final regulation “establishing specific

disproportionate share hospital payment requirements.”

56 Fed. Reg. 56141, 56143 (1991).

2. Respondent Temple operates Temple University

Hospital, the largest provider of hospital services under

the Pennsylvania Medicaid Program. The area of North

Philadelphia surrounding Temple University Hospital is

® This amendment was enacted after the decision of the

District Court. The Court of Appeals was advised of the

change by letter from Respondents’ counsel under Federal

Rule of Appellate Procedure 28(j). Although they do so here,

Petitioners did not rely on this amendment in their briefs or

argument to the Court of Appeals.

largely black and hispanic and has a substantial indigent

population. About half the admissions to Temple Univer-

sity Hospital are eligible for Medicaid, another twenty

percent (also largely indigent) are covered by Medicare,

and about five percent have no source of payment what-

soever. Temple University Hospital deals with all of the

severe health problems of the poor neighborhoods in

American cities, including the effects of crime, drug

addiction, and untreated medical conditions. In each of

the five fiscal years from 1985 through 1989, Temple lost

between $2.5 and $7.5 million treating Medicaid inpa-

tients. Temple achieved some cross-subsidization from

treating non-Medicaid patients but still lost $3.2 million

on inpatient care in fiscal 1989. Temple incurred these

losses notwithstanding that it was, as the District Court

found, efficiently and economically operated. (Pet. App.

65a). Temple University Hospital is a classic example of

the “disproportionate share” hospital which the require-

ments of the Medicaid Act were intended to protect. It is

heavily dependent on the adequacy of payments under

the Pennsylvania Medicaid Program.

3. In August of 1988, Respondent Temple brought

an action in the United States District Court for the

Eastern District of Pennsylvania alleging that the pay-

ment rates for inpatient hospital care under the Pennsyl-

vania Medic Program violated both of the above

requirement: Sf the Medicaid Act. The other hospitals

that are Respondents in this Court brought separate

actions in November and December of 1988 raising sub-

stantially similar issues. The subsequent cases were

assigned to the same District Judge as Temple's action but

10

have never been consolidated with that action in the

District Court.

4. Temple’s action was tried in June of 1989 and

decided by the District Court in January of 1990. In a

series of rulings, the District Court found that Petitioners

had made no real effort to comply with the procedural

requirements of the Medicaid Act and that the payments

for inpatient hospital care violated that Act. The principal

rulings were:

(a) The rate levels were not “reasonable and

adequate” to meet the necessary costs of effi-

cient hospitals but “entirely budget-driven” and

“arbitrary” (Pet. App. 78a);

(b) Petitioners established the amount of the

additional payments to “disproportionate

share” hospitals by allocating the funds deemed

available for that purpose. The additional pay-

ment to Temple was “only a small fraction of the

total increase in costs attributable to Temple’s

status as a disproportionate-share hospital”

(Pet. App. 79a, 80a); and

(c) Petitioners merely certified to the Secretary

of Health and Human Services that the rates

complied with the Medicaid Act without mak-

ing any empirical studies to support the assur-

ances (Pet. App. 84a-85a).

5. Based on these and related findings, the District

Court issued an injunction directing the Petitioners to

bring their Program into compliance. The District Court

was Careful not to insist that Petitioners establish any

particular rate structure, but did direct them to increase

cash payments to Temple pending revision of the Pro-

gram. The District Court also directed Petitioners to

11

increase payments to other Respondents pending revision

of the Program to the extent that the reason for the

increased payments to Temple applied “to all hospitals,

without regard to their classification or other individual

distinguishing characteristics.” (Pet. App. 105a, 107a,

109a, 111a).? These increased payments were subject to

repayment (or offset against future payments) if the hos-

pitals were not entitled to them under the revised Medi-

caid Program. |

6. Petitioners appealed each of these Orders. After

consolidating the appeals, the Third Circuit affirmed the

orders of the District Court in all respects. The Third

Circuit emphasized that Petitioners had conducted no

analysis to determine the reasonableness or adequacy of

these rates and no analysis to determine the effect on a

hospital of the disproportionate add-on payments. (Pet.

App. 25a-26a). The Third Circuit relied on the testimony

of Petitioners’ principal trial witness that they did not

“know, today, what hospital costs are” and concluded

that, since Petitioners had no knowledge of hospital costs,

their assurances of their compliance with the Medicaid

Act were “without foundation.” (Pet. App. 26a-27a).

7. Before decision by the Third Circuit, the parties

entered into a Stipulation of Settlement under which they

agreed to settle any dispute over payments for the effec-

tive period of the Stipulation, to place the actions in the

District Court in civil suspense and to engage in a series

? The other Respondents still have applications for relief

pending in the District Court.

12

of pooling transactions® to enable Petitioners to pay

higher rates. The parties believe that pooling transactions

already completed will enable Petitioners to pay the

higher rates, and will enable the Stipulation of Settlement

to remain in effect, until June 30, 1992. The Stipulation

provides that, if the parties can continue to engage in

pooling transactions so that the Stipulation remains in

effect until July 1, 1993, they will then dismiss each of the

actions pending in the District Court.

8. On October 28, 1991, Petitioners filed this Petition

seeking review of the decision of the Court of Appeals.

a

REASONS WHY THE PETITION SHOULD BE DENIED

I. INTRODUCTION AND SUMMARY

Respondent Temple brought this action to challenge

the particular method by which Pennsylvania established

its Medicaid rates for Temple University Hospital, an

inner-city medical school hospital with the state’s highest

Medicaid volume. The lower courts were constrained to

rule in Temple’s favor by Pennsylvania’s failure to make

even a good faith effort to comply with the Medicaid Act

and by the resulting discrepancies between Pennsylva-

nia’s Program and that Act. The District Court granted

limited relief to the other Respondent hospitals because

* A pooling transaction allows the use of private donated

funds as the State’s share of Medicaid payments as permitted

by 42 C.FR. § 433.45(b).

13

the discrepancies applied in part “to all hospitals, with-

out regard to their classification or other individual dis-

tinguishing features.” (Pet. App. 105a, 107a, 109a, 111a).

Now, in an effort to find some question deserving of

this Court’s attention, Petitioners urge this Court to

reconsider and overrule its recent decision in Wilder v.

Virginia Hospital Association, 110 S. Ct. 2510 (1990). There

is no special justification for such action. In any event,

this case would present a poor vehicle for such action,

given: (1) Petitioners’ total failure to comply with the

procedural requirements of the Medicaid Act; (2) the

peculiar issues presented by the application of the Medi-

caid Act and the Pennsylvania Program to Temple; and

(3) the possibility that these actions may be dismissed

pursuant to a Stipulation of Settlement among the parties.

To their request to reconsider and overrule Wilder,

Petitioners add a question concerning the requirement of

the Medicaid Act for “disproportionate share” hospitals.

This second question is of such limited application as to

be unworthy of this Court’s attention.

Il. THERE ARE NO SPECIAL CIRCUMSTANCES TO

WARRANT THIS COURT REEXAMINING ITS

INTERPRETATION OF THE MEDICAID ACT.

The Petition asks this Court to reconsider its holding

of less than two years ago, in Wilder v. Virginia Hospital

Association, that health care providers have the right

under 42 U.S.C. § 1983 to seek injunctive relief against

State officers to enforce the Medicaid Act. The Petition

argues that Wilder should be reconsidered and overruled

because: (1) Wilder has begun to “unleash” a “torrent” of

14

provider challenges to state Medicaid programs; (2) it

subjects state Medicaid rates to multiple attacks in multi-

ple fora; and (3) Wilder was incorrectly decided.

This Court has held that “ ‘any departure from the

doctrine of stare decisis demands special justification.’ ”

Patterson v. McLean Credit Union, 109 S. Ct. 2363, 2370

(1989) (quoting Arizona v. Rumsey, 467 U.S. 203, 212

(1984)).

We have said also that the burden borne Ly the

party advocating the abandonment of an estab-

lished precedent is greater where the Court is

asked to overrule a point of statutory construc-

tion. Considerations of stare decisis have special

force in the area of statutory interpretation, for

here, unlike in the context of constitutional

interpretation, the legislative power is impli-

cated, and Congress remains free to alter what

we have done.

Patterson, 109 S. Ct. at 2370. There is no special justifica-

tion for departing from this Court’s holding in Wilder so

shortly after it was decided.

Contrary to the Petition, Wilder has not “unleashed”

a “torrent” of provider actions challenging Medicaid pay-

ment rates. Rather, the evidence is that provider actions

have decreased since Wilder. Pennsylvania and forty-five

other states argued in Wilder that decisions by the Courts

of Appeals had resulted in an “explosion” of litigation,

pointing to thirty-one actions then pending against eight-

een states.’ In the present Petition, Pennsylvania points to

9 Brief Amici Curiae of the States of Connecticut, et al. at

vii and Appendix, Wilder.

15

only thirteen actions against nine states.!° At a time when

more than twice as many actions were pending, this

Court in Wilder considered and rejected the argument that

allowing Medicaid providers to enforce State obligations

under the Medicaid Act would burden the courts and the

States with numerous challenges to Medicaid rates.'!! The

few actions cited in the Petition do not constitute special

circum3tances that would warrant reconsideration of Wil-

der.

The Petition also argues that Wilder should be recon-

sidered because it subjects State Medicaid rates to multi-

ple attacks in multiple fora. The Petition does not,

however, identify any method of attack or any forum that

has become available since Wilder. Review by the Secre-

tary of Health and Human Services is not effective since,

as the parties stipulated in this case, the Secretary does

not normally look behind the findings and assurances

given by the State. The Secretary normally accepts them

at face value. Review in State administrative proceedings

is similarly ineffective:

The regulations allow States to limit the issues

that may be raised in [a State] administrative

proceeding. 42 C.FR. § 447.253(c) (1989). Most

States . .. do not allow hez!th care providers to

10 In counting the number of pending actions cited in the

list of the amici in Wilder and in the list in the Petition, we have

included the five actions before this Court on this Petition.

‘1 The number of Medicaid lawsuits is probably decreas-

ing because the courts have accorded substantial deference to

the States in developing Medicaid payment systems. See, e.g.,

Wilder, 110 S. Ct. at 2523 n.18.

16

challenge the overall method by which rates are

determined.

Wilder, 110 S. Ct. at 2524-25.!2 An action in federal court is

a health care provider’s only remedy for a State violation

of the Medicaid Act. States are not subject to multiple

attacks in multiple fora; rather, if Wilder is reversed, State

Medicaid rates will be wholly insulated from provider

challenges.

Since Wilder was decided less than eighteen months

ago, Congress has amended the Medicaid Act as part of

the Omnibus Budget Reconciliation Act of 1990. In

amending the Medicaid Act, Congress declined the

opportunity to nullify or alter Wilder. Similarly, there has

been no intervening development of the law which has

removed the conceptual underpinnings of Wilder, no new

doctrines or policies that compete with Wilder, no evi-

dence that Wilder is unworkable, and no evidence that it

is an obstacle to important legal objectives. There is no

reason to depart from the doctrine of stare decisis. See

Patterson, 109 S. Ct. at 2370-71.

Petitioners argue at length that Wilder was decided

incorrectly. Wilder was decided correctly and we will not

reargue it in this Brief. We will point out, however, that

even if the Court were prepared to overrule Wilder, it

'2 Pennsylvania’s administrative procedure does not

afford providers the right to challenge Pennsylvania’s payment

methodology. W. Va. Univ. Hosps., Inc. v. Casey, 885 F.2d 11, 30

(1989), cert. granted and aff'd on different issue, 111 S. Ct. 1138

(1991).

17

would not necessarily reverse the decision of the Court of

Appeals as to Temple for at least two reasons:

1. The plaintiffs in Wilder alleged only that Vir-

ginia’s rates were not “reasonable and adequate to meet

the costs which must be incurred by efficiently and eco-

nomically operated facilities.” Temple makes the addi-

tional claim that Pennsylvania’s rates violate the

requirement that the rates adequately “take into account

the situation of hospitals which serve a disproportionate

number of low income patients with special needs” as set

forth in 42 U.S.C. § 1396a(a)(13)(A) and expanded by

Congress in 42 U.S.C. § 1396r-4. If this Court were to

overrule Wilder, holding that providers may enforce the

requirement that rates be “reasonable and adequate” to

meet the necessary costs of efficient providers, it would

still have to decide whether a hospital can enforce the

“disproportionate share” requirement. Congress has

repeatedly focused on the financial needs of “dispropor-

tionate share” hospitals, even to the point of enacting an

additional section for their benefit. Moreover, the Medi-

caid Act directly requires rates to take the situation of

“disproportionate share” hospitals into account, not

merely that the State make findings and assurances. Even

if the Court were to overrule Wilder, it might well permit

a “disproportionate share” hospital to bring an action

under 42 U.S.C. § 1983.'3

2. The plaintiffs in Wilder alleged aly that Vir-

ginia’s rates violated the substantive standards of the

13 For the reasons stated below, we do not believe that the

“disproportionate share” hospital requirement is worthy of

this Court’s attention.

18

Medicaid Act. Temple makes the additional claim that

Petitioners violated the procedural requirements of the

Medicaid Act by making no analysis of hospital costs

Indeed, the Court of Appeals held that Pennsylvania’s

findings and assurances to the Secretary were “without

foundation.” (Pet. App. 27a). Even if this Court were to

reverse Wilder by holding that a provider has no right

under 42 U.S.C. § 1983 to require compliance with the

substantive requirements of the Medicaid Act, it would

then have to decide whether a provider has the right to

compel a State to establish rates based on bona fide

findings and assurances.

Il. THE HOLDINGS OF THE COURTS BELOW ON

THE DISPROPORTIONATE SHARE HOSPITAL

REQUIREMENT ARE BASED ON FACTS PECU-

LIAR TO PENNSYLVANIA AND TO RESPON-

DENT TEMPLE.

The “disproportionate share” requirement in the

Medicaid Act applies to a relatively small number of

hospitals, is rarely invoked in hospital litigation against

Medicaid payment rates, has been only rarely interpreted

by the courts, and is still being refined by Congressional]

and regulatory action. The findings of the courts below

were based on facts peculiar to Pennsylvania and to

Temple. The holding of the Court of Appeals on the

“disproportionate share” hospital requirement does not

warrant attention by this Court.

As demonstrated above, Congress has repeatedly

expressed its concern for the manner in which the States

have elected to deal with the situation of high-volume

19

Medicaid hospitals. Repeated Congressional actions have

established both that Congress recognized the special role

that inner city hospitals with high Medicaid volumes play

in delivering health care to the poor and that Congress

intended States to assure the survival of these hospitals

by making substantial additional payments to them.

The “disproportionate share” requirements have,

however, not been the subject of extensive litigation in

the federal courts. Petitioners can show no conflict among

the Circuits. The decision of the Third Circuit in Temple's

action is the only decision by a Court of Appeals on the

substance of the “disproportionate share” hospital

requirement.'* That requirement has been the subject of

little litigation because States are required to make these

payments to only a small percentage of hospitals.'? Thus,

although Congress expressed particular concern for the

treatment of “disproportionate share” hospitals, that con

cern has not been the subject of any substantial amount of

litigation and should not warrant review by this Court

'4 The only other decision by a Court of Appeals is West

Virginia University Hospitals, Inc. v. Casey, 885 F.2d 11 (Gd Cir. ~

1989), cert. granted and aff'd on different issue, 111 S. Ct. 1138

(1991), in which the Third Circuit held that Pennsylvania could

not deny “disproportionate share” status to an out-of-state

hospital that qualified under the standards applied to in-state

hospitals. West Virginia did not address the level of payments

required for “disproportionate share” hospitals.

'5 In contrast, the Medicaid Act requires States to make

payments that are “reasonable and adequate to meet the costs

which must be incurred by efficiently and economically oper-

ated facilities” to all participating hospitals, as well as all

nursing and intermediate care facilities.

20

The Petition attacks the opinion of the District Court

for imposing Gn Pennsylvania a requirement applicable to

all hospitals that is not included in the Medicaid Act and

not supported by any legislative history of that Act.'© The

Petition ignores the fact that the District Court has so far

applied its “disproportionate share” holding to only one

hospital. The Petition also ignores the facts, unique to

Pennsylvania and to Respondent Temple, which form the

basis of the District Court’s holding:

1. Petitioners established the amount of the pay-

ments to “disproportionate share” hospitals without any

consideration or analysis of the needs of, or additional

costs incurred by, these hospitals. (Pet. App. 80a.) Thus,

Petitioners made no bona fide attempt to comply with the

Medicaid Act. Their assurances that the rates complied

with the “disproportionate share” hospital requirement

were “without foundation.” (Pet. App. 27a).

2. Pennsylvania’s additional payment to those hos-

pitals with the highest Medicaid utilization was only

2.5%. Petitioners’ own expert at trial calculated the addi-

tional costs of those hospitals as at least 16% above com-

parable hospitals. (Pet. App. 79a, 80a). The Medicaid add-

on would have provided an additional payment of about

16 The Petition also argues that the District Court should

have given great deference to HCFA’s approval of Pennsylva-

nia’s “disproportionate share” payment plan. Neither the Dis-

trict Court nor the Court of Appeals could have done so

because that approval, if it occurred, was never included in the

record of this proceeding. This Court does not permit argu-

ments based on facts outside the record. Witters v. Wash. Dept.

of Servs. for the Blind, 474 U.S. 481, 486 n.3 (1986); New Haven

Inclusion Cases, 399 U.S. 392, 450 n.66 (1970).

21

21% to one of those hospitals, Respondent Temple. (Pet.

App. 82a). Thus, there was an enormous gap between

what Pennsylvania provided and what objective analysis

or the Medicare formula would have provided. The gap

was So large it could not be upheld under any construc-

tion of the Medicaid Act.

Based on these facts and mindful that States are

given “a considerable amount of flexibility” in this area,

the District Court nonetheless concluded that “Pen-

sylvania’s adjustment for [Temple’s] disproportionate-

share status misses the mark by so wide a margin as to be

inconsistent with the intent of Congress.” (Pet. App. 82a).

The District Court has not yet extended this holding to

other hospitals in Pennsylvania.!7

In summary, the holdings of the Courts below on the

“disproportionate share” hospital requirement relate only

to the particular facts of a single State and of the hospital

with the highest Medicaid volume within that State. The

requirement is still in the process of legislative clarifica-

tion and regulatory interpretation and has only rarely

been the subject of litigation. The issue presented by the

Petition does not warrant review by this Court.

¢

17 Other Respondent hospitals applied to the District

Court for relief on the “disproportionate share” hospital

requirement in early 1990. Those applications remain pending.

22

CONCLUSION

The actions before the Court are the subject of a

Stipulation of Settlement which places them in civil sus-

pense in the District Court and makes them subject to

possible dismissal on July 1, 1993. As a result, any action

by this Court may have no effect on the underlying

litigation. In addition, the Petition presents no special

circumstances why this Court should reconsider its deci-

sion in Wilder v. Virginia Hospital Association. For these

and the other reasons stated in this Brief, this Court

should deny the Petition for Writ of Certiorari.

Dated: November 29, 1991

MattHew M. StrICKLER

LAURIE MARrTIN

BALLARD SPAHR ANDREWS

& INGERSOLL

1735 Market Street

51st Floor

Philadelphia, PA 19103-7599

(215) 665-8500

Attorneys for Respondent

Temple University — Of the Common-

wealth System of Higher Education

Of Counsel:

GeorcE E. Moore, Esquire

University Counsel

Temple University

435 Carnell Hall

Broad and Montgomery Avenue

Philadelphia, PA 19122