to 5 U.S.C. § 706, which provides that the Secretary's decision shall be set aside if it is found to be arbitrary, capricious, an abuse of discretion, not in accordance with law, contrary to the Constitution, or in excess of statutory authority.
The parties have filed cross-motions for summary judgment. As no material issues of fact exist, summary judgment is appropriate. For the reasons stated below, the defendant's motion must be granted and the plaintiff's motion denied.
II. REIMBURSEMENT FOR FREE CARE RENDERED PURSUANT TO HILL-BURTON AGREEMENT
Plaintiff argues that Hill-Burton uncompensated care is reimbursable as an indirect cost of delivering services to Medicare beneficiaries. It relies on 42 U.S.C. § 1395f(b)(1), which states that a provider shall be paid the "reasonable cost" of providing services to Medicare beneficiaries or the customary charge, whichever is less; on 42 U.S.C. § 1395x(v)(1)(A), which defines "reasonable cost" as "the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services" and instructs the Secretary to promulgate regulations to ensure that "the necessary costs of efficiently delivering covered services to individuals covered by [Medicare] will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by [Medicare]"; and on 42 C.F.R. § 405.451(b)(2), which describes allowable costs as those "which are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities." Plaintiff states that it used its Hill-Burton grant to make capital improvements which benefit all patients, both Medicare and non-Medicare. In effect, it asserts that it "purchased" those improvements by providing free care. It argues that a proportionate share of the cost of the improvements (i.e., a proportionate share of the cost of Hill-Burton free care) should be borne by Medicare patients; otherwise, plaintiff asserts, non-Medicare patients will bear the entire cost of the capital improvements, and thus will bear part of the cost of delivering medical services to Medicare patients, in contravention of 42 U.S.C. § 1395x(v)(1)(A). Plaintiff characterizes the cost of Hill-Burton free care as an indirect cost of maintaining the hospital; it argues that, since other indirect costs such as depreciation and interest are reimbursable under Medicare, see 42 U.S.C. § 1395x(v)(1)(A); 42 C.F.R. §§ 405.417-405.419, the cost of Hill-Burton free care should be reimbursable as well. In support of its argument, plaintiff cites Presbyterian Hospital of Dallas v. Harris, 638 F.2d 1381 (5th Cir.), cert. denied, 454 U.S. 940, 102 S. Ct. 476, 70 L. Ed. 2d 248 (1981), and Rapides General Hospital v. Matthews, 435 F. Supp. 384 (W.D.La.1977), vacated on other grounds, No. 77-3125 (5th Cir. Oct. 23, 1978), which used this reasoning to hold that Hill-Burton free care costs were reimbursable under Medicare.
The Secretary argues that a recent amendment to the Social Security Act, which conclusively determined that Hill-Burton free care costs are not reimbursable under Medicare, decides this case in her favor. The Tax Equity and Fiscal Responsibility Act of 1982 was passed by Congress on August 17, 1982, and signed by the President on September 3, 1982. Section 106(a) of that act amends the section of the Social Security Act which empowers the Secretary to promulgate Medicare regulations, 42 U.S.C. § 1395x(v)(1), by adding the following subparagraph:
(M) Such regulations shall provide that costs respecting care provided by a provider of services, pursuant to an assurance under Title VI or XVI of the Public Health Service Act that the provider will make available a reasonable volume of services to persons unable to pay therefor, shall not be allowable as reasonable costs.