Covenant Medical Center, Inc v. Secretary of HHS
424 F. App'x 434
6th Cir.2011Background
- Medicare reimburses hospitals for costs of graduate medical education based on hospital FTE resident counts.
- FTEs include time residents spend in patient care even outside the hospital when the hospital incurs most training costs.
- Written agreement requirement (42 C.F.R. § 413.86(f)(3)-(f)(4)(ii)) governs nonhospital time and requires hospital to incur costs and compensate the nonhospital site for supervision.
- Covenant Medical Center used Synergy, a joint venture with St. Mary’s, to run a residency program; Covenant and Synergy split Synergy’s costs.
- Intermediary initially allowed Covenant’s inclusion of Synergy residents’ time; Administrator later required a written agreement and examined cost-incurrence.
- District court granted summary judgment for the Secretary; the Sixth Circuit affirms, upholding the written agreement requirement and Covenant’s noncompliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 413.86(f)(3)-(f)(4)(ii) apply to related parties? | Covenant argues § 413.17(a) overrides the written agreement for related parties. | Secretary treats related parties as subject to the written agreement requirement. | Yes; related parties are subject to the written agreement requirement. |
| Did Covenant comply with the written agreement requirement? | Covenant produced documents it argues satisfy the agreement. | The Administrator found no document that satisfies § 413.86(f)(4)(ii). | No; Covenant failed to produce a compliant written agreement. |
| Is the written agreement requirement a valid exercise of the Secretary's authority? | Statute requires counting all patient-care time if costs are incurred; no extra prerequisites allowed. | Written agreement is a procedural tool within the Secretary's broader authority to determine costs. | Yes; the requirement is a valid administrative mechanism under Chevron. |
Key Cases Cited
- Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945) (agency interpretations defer unless plainly erroneous)
- United States v. Mead Corp., 533 U.S. 218 (2001) (agency interpretations of regulations; force of law)
- Rosen v. Goetz, 410 F.3d 919 (6th Cir. 2005) (duty of courts to read agency decisions with deference)
- Sierra Club v. EPA, 557 F.3d 401 (6th Cir. 2009) (Chevron step analysis for statutory silence)
- Chase Bank USA, N.A. v. McCoy, 131 S. Ct. 871 (2011) (consistency with regulatory text; administrative interpretations)
- Mayo Foundation for Med. Educ. & Res. v. United States, 131 S. Ct. 704 (2011) (statutory interpretation of tax/benefits via Supreme Court)
- Christensen v. Harris Cnty., 529 U.S. 576 (2000) (agency interpretations must be reasonable)
- Heckler v. Cmty. Health Servs. of Crawford Cnty., Inc., 467 U.S. 51 (1984) (administrative deference in Medicare context)
- Bloate v. United States, 130 S. Ct. 1345 (2010) (regulatory text governs; interpretive overload avoidance)