Blue Cross Ass'n v. HarrisBlue Cross Ass'n v. Harris
Patricia Harris, Secretary of Health, Education and Welfare, and Leonard Schaeffer, Administrator of the Health Care Financing Administration (collectively, the Secretary or HEW), bring these consolidated appeals from a judgment of the district court in favor of Blue Cross Association, et al. (Blue Cross). Blue Cross currently serves as a fiscal intermediary, an agency which deals with HEW on behalf of hospitals and other providers of Medicare services. See text at notes 1-5 infra. The issue before us on appeal is whether the Secretary, in soliciting offers for an experimental contract to administer Medicare Part A funds, must comply with the statutory provisions that normally govern the nomination and assignment of intermediaries such as Blue Cross.
Pursuant to a statutory provision authorizing HEW to enter into experimental contracts for the administration of Medicare funds, the Secretary solicited offers for a fixed price contract to administer Medicare Part A funds in Missouri and metropolitan Kansas City. The organizations and agencies solicited included, but were not limited to, fiscal intermediaries nominated by Missouri and metropolitan Kansas City health care providers. Blue Cross, a nominated intermediary, thereafter brought this suit, claiming that the Secretary’s action in seeking offers from entities not nominated by health care providers exceeded her authority under the Medicare Act. The district court agreed and accordingly enjoined thе Secretary from entering into any experimental contract until she had attempted in good faith to negotiate the contract with intermediaries nominated by the affected providers. Blue Cross Association v. Califano,
I. Background.
In 1965 Congress enacted the Medicare Act (Medicare or the Act),
In 1972 Congress amended the Act. One section of the 1972 amendments, now codified at
whether, and if so which type of, fixed price or performance incentive contract would have the effect of inducing to the greatest degree effective, efficient, and economical performance of agencies and organizations making payment under agreements or contracts with the Secretary for health care and services under health programs established by this chapter [7 of Title 42,42 U.S.C. § 301 et seq. (1976 & Supp. II 1978)] * * *. [42 U.S.C. § 1895b-l(a)(l)(F) (1976).]
The Secretary chose Missouri and metropolitan Kansas City аs the laboratory for such an experiment. On January 31, 1979, HEW solicited proposals for a fixed price Medicare Part A intermediary contract covering these areas. The Secretary solicited proposals by issuing a Request for Proposal (RFP)
Having received the Secretary’s RFP, Blue Cross instituted this action in district court for declaratory and injunctive relief.
The district court reasoned that becausе the experimental statute did not plainly authorize the Secretary to suspend the operation of the Act’s provider nomination and intermediary due process provisions,
II. Analysis.
A. The Experimental Statute and the Provider Nomination Provisions.
Because this case presents a question of statutory interpretation, we begin our analysis with the language of the statute itself. E. g., Touche Ross & Co. v. Redington,
(a)(1) The Secretary of Health, Education, and Welfare is authorized, either directly or through grants to public or nonprofit private agencies, institutions, and organizations or contracts with public or private agencies, institutions, and organizations, to develop and engage in experiments and demonstration projects for the following purposes:
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(F) to determine whether, and if so which type of, fixed price or performance incentive contract would have the effect of inducing to the greatest degree effective, efficient, and economical performance of agencies and organizations making payment under agreements or contracts with the Secretary for health care and services under health programs established by thischapteif.] [ 42 U.S.C. § 1395b-1(a)(1)(F) (1976) (emphasis added).]
This language clearly does not require the Secretary to contract only with nominated intermediaries. On the contrary, the statute unambiguously vests the Secretary with authority to contract “with public or private agencies, institutions, and organizations,” for the purpose of conducting the enumerated experiments. Id.
In a recent case presenting a question of statutory construction similar to that' before us, the Seventh Circuit gave full effect to this sweeping lаnguage. Health Care Service Corp. v. Califano,
The experimental statute’s only express limitation upon the Secretary’s authority to conduct experiments or demonstration projects reads as follows:
(b) * * *
No experiment or demonstration project shall be engaged in or developed undersubsection (a) of this section until the Secretary obtains the advice and recommendations of specialists who are competent to evaluate the proposed experiment or demonstration project as to the soundness of its objectives, the possibilities of securing productive results, the adequacy of resources to conduct the proposed experiment or demonstration project, and its relationship to other similar experiments and projects already completed or in process. [ 42 U.S.C. § 1395b 1(b) (1976).]
This limitation, specifying only the conditions which the Secretary must meet before entering into any contract authorized by the experimental statute, obviously does not forbid the Secretary to contract with entities not nominated by health care providers.
If the plain language of a statute is clear in its context, it is controlling. E. g., Ernst & Ernst v. Hochfelder,
B. The Experimental Statute and the Intermediary Due Process Provision.
The Act prоvides that, notwithstanding Medicare Part A’s provider nomination provisions,
the Secretary, after taking into consideration any preferences of providers of services, may assign or reassign any provider of services to any agency or organization which has entered into an agreement with h[er] under this section, if [s]he determines, after applying the standards, criteria, and procedures developed under [42 U.S.C. § 1395h(f) (Supp. II 1978)], that such assignment or reassignment would result in the more effective and efficient administration of [Medicare Part A], [42 U.S.C. § 1395h(e)(l) (Supp. II 1978).]
Before the Secretary may make such assignment of health care providers to an intermediary not nominated by them, she must provide the intermediary nominated by the providers with an explanation and an opportunity for a hearing, subject to judicial review.
First, the intermediary due process provision by its terms does not apply to the award of a fixed price contract under the experimental statute. The intermediary due process provision applies only when the Secretary, having applied performance standards established under
To be sure, the experimental statute includes no separate authorization for the Secretary to assign or reassign providers to an intermediary not nominated by them. If, however, the experimental statute authorizes the Secretary to contract with an intermediary not nominated by affected providers, as we have determined, it follows a fortiori that she has the implicit authority to assign or reassign the providers to such an intermediary. Without this authority, her power to contract with an intermediary not nominated by providers would be meaningless. It is a commonplace of statutory construction that a legislative grant of power carries with it the right to use the means and instrumentalities necessary to the beneficial exercise of that power. Daly v. Stratton,
Second, the district court’s imposition here of the Act’s intermediary due process requirements places the Sеcretary in an untenable position. The intermediary due process provision compels the Secretary to prove that assigning or reassigning providers to an intermediary not nominated by them “would result in the more effective and efficient administration of [Medicare Part A].”
C. Deference.
Even if we doubted our reading of the experimental statute, we would reject the district court’s judgment here. The district court failed to apply the doctrine of construction which counsels deference to the interpretation given a statute by the agency charged with its administration. We have frequently followed this well-settled
The Court in Udall v. Tallman,
When faced with a рroblem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration. “To sustain the Commission’s application of this statutoryterm, we need not find that its construction is the only reasonable one, or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings.” * * * “Particularly is this respect due when the administrative practice at stakе ‘involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new.’ ” [Id. at 16, 85 S.Ct. at 801 (citations omitted).]
In Health Care Service Corp. v. Califano, supra,
We believe that the Secretary’s interpretation of the experimental statute, as refleсted in her RFP, is reasonable. Given the complexity of the Medicare Act and the silence of the experimental statute’s legislative history on the point in question, the district court should have deferred to the Secretary’s interpretation of that statute.
III. Conclusion.
We emphasize that our disposition of this case in no way repeals the Act’s provider nomination and intermediary due process provisions. We hold only that they do not apply while the Secretary conduсts an experiment pursuant to the experimental statute. These provisions will continue to govern normal Medicare Part A cost reimbursement contracts.
On one point, at least, we agree with Blue Cross: the issues in this case regarding the Secretary’s experimental authority in the health care area vitally affect the public interest. Unlike Blue Cross, however, we believe that the public interest in increasing the efficiency and reducing the cost of government health care programs is best served by the Secretary’s using her authority under the experimental statute to the fullest extent permitted by the language of that statute. Only then can she determine whether fixed price or performance incentive contracts really increase the efficiency and reduce the cost of these government programs, and, if so, determine which type of contract is most conducive to these ends.
Accordingly, we reverse the judgment of the district court, vacate its injunction, and remand for entry of an appropriate judgment of dismissal.
Notes
. Health Insurance for the Aged (Medicare) Act, Pub.L.No.89-97, tit. I, 79 Stat. 286 (1965) (codified in scattered sections of 26, 42, 45 U.S.C.).
. Social Security Act Subchapter XVIII, Part A,
. “The term ‘provider of services’ means a hospital, skilled nursing facility, or home health
. Under the Act, “a national, State, or other public or private agency or organization” may serve as a fiscal intermediary.
. A provider may nominate an intermediary different from that nominated by the group or association to which it belongs.
. As provided in the applicable regulations, the solicitation of proposals is a prerequisite to the negotiation of a government contract for services. 41 C.F.R. §§ l-1.302-l(b), l-3.101(c) (1979). See also
. At the time the district court decided this case, three organizations served as nominаted intermediaries in this area: Blue Cross, Aetna Life & Casualty, and Mutual of Omaha Insurance Company. Blue Cross Ass’n v. Califano, supra,
. Shortly thereafter, associations representing Missouri and metropolitan Kansas City health care providers also filed suit against the Secretary. The American Hospital Association was subsequently granted leave to intervenе as a plaintiff in this latter suit, pursuant to
. As relevant to this appeal,
In the event that its contract is ultimately awarded to another intermediary, an organization presently under contract with HEW as a nominated intermediary has a right to a hearing, subject to judicial review.
. See note 9 supra.
. The district court also rejected the Secretary’s argument that federal procurement regulations required her to solicit offers so as to ensure “full and free competition.” 41 C.F.R. § l-1.302-l(b) (1979). See also note 6 supra. Our reading of the experimental statute makes it unnecessary for us to determine whether the district court correctly interpreted the applicable procurement regulations.
. Medicare Part B is a voluntary supplemental program providing for services of doctors and other health care professionals which are not covered by Medicare Part A.- See Social Security Act Subchapter XVIII, Part B,
. The district court in Health Care had held both that plaintiffs’ action challenging- the award of the Medicare Part B contract to a noncarrier was untimеly, and that the plain language of the experimental statute authorized the Secretary to contract with noncarriers.
. The district court in the case before us held that “[t]he most, that cаn be concluded with certainty from [the experimental statute’s] listing of entities with whom the Secretary may contract is that the meaning is not plain and that it is unclear whether Congress intended to grant the Secretary authority to ignore the provider nomination of [sic] provisions of
Our examination of the experimental statute’s legislative history has revealed nothing to support either the Secretary’s or Blue Cross’ interpretation. See generally S.Rep.No.92-1230, 92d Cong., 2d Sess, 224-26 (1972); H.Rep.No.92-231, 92d Cong., 2d Sess., reprinted in [1972] U.S.Code Cong. & Admin.News, pp. 4989, 5004, 5066-69, 5290-92. Both parties have adduced more recent legislative materials in support of their positions. These, materials are entitled to little weight. Blanchette v. Connectiсut General Ins. Corp. (Regional Rail Reorganization Act Cases),
. The first sentence of
. For example,
. £. g., United States v. Rutherford,
. See notes 12 and 13 supra and accompanying text.