Wilmington United Neighborhoods v. United States Deptartment of Health, Education & Welfare

ADAMS, Circuit Judge,

concurring in-part and dissenting in part.

We examine in this appeal one of the programs designed by Congress to control the rapid inflation nationwide in the cost of health care. Congress did not choose to tackle this problem by direct regulation or by expanding the federal bureaucracy. Instead, it selected a more oblique method that would encourage and strengthen existing local and statewide health planning units and in some cases prompt their creation. The intricate network thereby established was one of many experiments in cooperative federal, state, and local endeavors spawned by HEW.

Health planning was originally organized by the hospital industry as a means of limiting the supply of hospital beds in a period of declining revenue during the Depression. The first national attempt to create governmental planning units and to introduce the viewpoint of the consumer was the Comprehensive Health Planning and Public Health Services Amendments of 1966.¹ Federal funds under this act were granted to local and statewide planning agencies that created advisory councils. The legislation required that a majority of the members of the councils affiliated with the planning agencies had to represent consumers.

The statute on which this case focuses, and which is referred to as § 1122, was enacted in 1972.² Dissatisfaction with existing efforts led Congress to pass the National Health Planning and Resources Development Act of 1974,³ which, inter alia, was designed to strengthen even further the role of consumers in health planning and to provide more specific goals for this effort.⁴

Section 1122 evinces a legislative attempt to avoid indirect subsidization — through reimbursement for medical services under various federal programs — of unnecessary capital expenditures in the health care field. Unless a hospital or other provider obtains a § 1122 approval of its plan prior to undertaking a major expenditure, it will not be reimbursed for that portion of any medicaid, medicare or other charge payable by the federal government which is attributable to the nonapproved capital expenditure.

In accordance with the statutory schema, under which the substantive decision as to approval or disapproval of a hospital’s proposal is made by a state designated planning agency (DPA),⁵ Delaware’s DPA consulted two subagencies. One, the Interim State Comprehensive Health Planning Council, is statewide; the other, the Health Planning Council, Inc., is local. Both of the subagencies recommended approval of the plan put forth by the Wilmington Medical Center to relocate most of its services from the downtown area of the city to the suburbs. Thereupon, it is alleged, the DPA certified its approval of the proposal to HEW without making independent findings.

The question addressed here is whether any judicial review is to be available when consumers of health care, primarily those of limited means, allege that the health planning system established by Congress has not worked properly and that federal law has been violated. Although I agree with the majority’s conclusion that review of claims against HEW is statutorily barred, I cannot concur in part IV of the majority’s opinion, which holds that jurisdiction over the DPA is precluded, nor can I agree with the overall conclusion of the majority that the plaintiffs here are remediless.

Plaintiffs, in this action for declaratory and injunctive relief, alleged federal jurisdiction under 28 U.S.C. § 1331 (1976).⁶ They claimed injury caused by the defendants’ violation of federal law. In considering whether relief may be afforded to them, a court should be guided by the general proposition that federal tribunals have a “virtually unflagging obligation to exercise the jurisdiction given them.”⁷ The specific task here, then, is to ascertain whether Congress has foreclosed jurisdiction by the federal judiciary when an action has been asserted against the DPA.

In concluding that there is no jurisdiction to consider the complaint here, which has been asserted by consumers of hospital services in the Wilmington area, the majority relies solely on congressional intent in enacting § 1122(f). Inasmuch as the foreclosure of judicial review in § 1122(f) is textually limited to “a determination by the Secretary,” a claim by the plaintiffs should not be cut off unless a fair construction of subsection (f) equates action by the DPA with “a determination by the Secretary.” The majority candidly acknowledges that the statute “ ‘does not expressly preclude judicial review of DPA approvals [of capital expenditures],’ ” but maintains, as did the district court, that “ ‘nonreviewability may be inferred from [the] statute’s purpose and its legislative history.’ ” ⁸

Yet, according to the governing principles conceded by the majority, it is “ ‘only upon a showing of “clear and convincing evidence” of a contrary legislative intent’ that the courts should restrict access to judicial review.”⁹ The meager legislative history applicable to § 1122 does not yield such “clear and convincing evidence.”¹⁰ Thus, that section cannot sustain the majority’s conclusion in this regard.

This Court has already demarcated the respective roles of the DPA and the Secretary. We have said that the state agency has a substantive duty “to assess any capital expenditure ... to determine if [it] is consistent with the state’s need for adequate health care in the area.” ¹¹ And we have also made clear that the Secretary, on the other hand, “has mere ministerial duties”¹² — i. e., he has no discretion to review the DPA’s substantive assessment, and may examine only the procedures employed to ensure that all the correct steps were taken.¹³

Here, the DPA is a state agency,¹⁴ while HEW is, of course, a federal department. It is the obligation of the DPA to evaluate the proposed capital expenditure to ensure conformity with local needs as set forth in the area or statewide plan — a plan that must be consonant with federal statutory and regulatory guidelines. In contrast, the Secretary is simply to ensure that the statutory procedures are followed. Given this legislative arrangement, it is difficult to perceive how substantive action by the state agency may be considered part of the “determination by the Secretary.”

The majority would “federalize” the DPA, for purposes of foreclosing judicial review, by finding that decisions of the state agency come within the statutory preclusion of a “determination by the Secretary.” Nonetheless, according to the majority, the DPA is an autonomous state agency, and the planning encouraged by § 1122 is local and not part of a federal program. Confusion regarding this matter may be attributable to the fact that although there is a bright-line distinction between the substantive decisions to be made by the DPA and the assurance of correct procedures which is the responsibility of the Secretary, the federal-state separation in the statue as a whole is not so clear. Moreover, the absence of a rigid separation seems to have been intentional, inasmuch as the DPA is to be guided in its substantive decision by a mixture of federal and local elements. General federal standards and goals are to be given more specific content in an area plan informed by local assessments of need.¹⁵

Following the reasoning of the district court, which was based primarily on Supreme Court decisions interpreting the Administrative Procedure Act,¹⁶ the majority bars federal judicial review of the DPA because it discerns a statutory intent to eschew federal interference in state health planning. But if, as is apparent in the statute, there is federal law to apply to the DPA, it is Congress that has intruded into state health planning, not the plaintiffs’ invocation of judicial review. The majority relies in its conclusion on two passages from the limited legislative history purportedly addressing this issue.

First, reference is made to the fact that the House Committee stated in its report that the bill “would in no way change the autonomy or authority of existing state or local planning agencies.”¹⁷ But as I understand this assertion, it simply means that the federal government was not attempting to preempt the field of health planning or to abolish existing state efforts. Congress decidedly did not intend that there would be no federal control over the DPAs. By enunciating mandatory terms for the agreements between HEW and the states with regard to the DPAs. Congress established certain guidelines to govern the variables left to the states. It provided that at least half the membership of the DPA was to represent “consumers of health services”;¹⁸ procedures for notice and review of capital expenditures — as well as hearings in some instances — were specified;¹⁹ certain other agencies were to be consulted;²⁰ and the standards, criteria, or plans used by the DPAs to evaluate capital expenditures were to be congruent with those statutorily established in previous legislation.²¹ In short, Congress promulgated rules as to the composition, procedures, and standards for decisionmaking by the DPAs.²² These congressional commands, and not judicial review to enforce them, limit the “autonomy or authority” of the existing agencies. The DPAs, moreover, need not in all cases be state or local government agencies, but may also be private nonprofit organizations.²³

The majority’s second reference to legislative history is the observation that each paragraph of the House Report that discusses § 1122 is entitled, “Limitation on Federal Participation for Capital Expenditures.”²⁴ The body of the relevant sections, however, makes clear that the heading refers to Congress’s intention to limit the use of federal money; the commentary is not aimed at limiting the federal role in health planning. Indeed, this interpretation of the congressional intent is explicit in the statute itself, which declares:

The purpose of this section is to assure that Federal funds appropriated under [various programs] are not used to support unnecessary capital expenditures made by or on behalf of health care facilities or health maintenance organizations which are reimbursed under any of such [programs] and that, to the extent possible, reimbursement under such [programs] shall support planning activities with respect to health services and facilities in the various States.²⁵

Congress did not want providers of health care, such as hospitals, to be subsidized through federally financed programs for unnecessary capital expenditures. To achieve this aim, Congress created a national health planning program and set national goals and criteria.²⁶ It was contemplated that this experiment in national \ health planning would draw on preexisting state and local agencies to the extent possible, and would leave to those agencies the determination whether specific projects met local needs. Detailed decisions were to be left to the DPAs, but the process to be employed in reaching the decisions and the criteria to guide the DPA in arriving at its conclusions were set by Congress and HEW, and are to be applied nationwide.

As the district court observed, “The regulations and the agreement between HEW and Delaware pursuant to § 1122 recognize that judicial review may be available under State law or regulation to a proponent [such as a hospital] of an expenditure disapproved by the DPA.”²⁷ This was thought to be irrelevant to the plaintiffs’ contention that the federal court has jurisdiction, because, the judge stated, (1) the existence of judicial review for a proponent of a capital expenditure does not indicate an intention to provide it for an opponent, and (2) review by state courts would be consistent with the purposes of § 1122, whereas review by the federal courts would not.

The first reason appears to confuse the question whether judicial review is precluded with the equal protection issue (an issue discussed in the majority opinion at 120-121) as to a “fair hearing” within the DPA for an aggrieved proponent of a capital expenditure. It is one thing to hold, as the Court today does, that Congress may provide administrative hearings for proponents but not opponents of a capital expenditure by a medical facility. It is quite another to say, in attempting to discern congressional intent, that a DPA decision adverse to a proponent is not a “determination by the Secretary” for purposes of foreclosing judicial review, but a decision adverse to consumers is such a precluded determination.²⁸

The second reason adduced by the district court appears to obscure the distinction between procedures, on the one hand, and substantive principles for planning, on the other. Yet, this important difference was carefully etched by Congress and HEW and was incorporated into the agreement between HEW and the state; the state agency is to apply federal procedures and guidelines to a local situation. The plaintiffs allege that the DPA violated federally established procedures and guidelines. Moreover, adjudication on the merits, if the Court were to reach the merits, would require interpretation of federal law, which is within the special competence of the federal courts.²⁹

Both the district court and the majority on this appeal, perceive the issue of judicial review as a federalism conflict. The statutory arrangement establishing a functional division of labor, in which state or local entities make decisions according to federal law, is thus unnecessarily interpreted so as to draw rigid lines in this program between what is federal and what is state.

Congress’s intent in the one sentence of § 1122, which was part of a much larger legislative enactment, is admittedly not clear. Doubts, however, are to be resolved in favor of jurisdiction, for, as the Supreme Court has declared, the intention to foreclose review must be “clear and convincing.” Because I believe that neither the language of § 1122(f) nor the ascertainable congressional purpose precludes jurisdiction to adjudicate a federal cause of action brought against the DPA, I would reverse the order of the district court on this issue. In all other respects, however, I concur with the majority.

1 . Pub.L.No.89-749, 80 Stat. 1180 (1966) (codified at 42 U.S.C. § 246 (1976)).

2 . Social Security Amendments of 1972, § 1122, Pub.L.No.92-603, 86 Stat. 1386 (codified at 42 U.S.C. § 1320a-l (1976)).

3 . Pub.L.No.93-641, 88 Stat. 2225 (1975) (codified at 42 U.S.C. §§ 300k-300t (1976)).

4 . For a history and critique of health planning, see Rosenblatt, Health Care Reform and Administrative Law: A Structural Approach, 88 Yale L.J. 243, 304-30 (1978).

5 . For convenience, DPA, which stands for designated planning agency, refers to the two state defendants in this action: Amos Burke as director of the Delaware Bureau of Comprehensive Health Planning (the actual DPA here), and Robert Sweeney as head of the Interim State Comprehensive Health Planning Council, whose recommendation, it is alleged, was adopted by Burke.

6 . The complaint also alleged jurisdiction under 28 U.S.C. § 1361 (1976), which grants “jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” Although this jurisdictional grant might apply to HEW and its officials, it cannot reach the DPA, a state agency, or its officials. See the district court’s opinion, 458 F.Supp. at 628, 640 n.57 (D.Del.1978).

7 . Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976); See England v. Louisiana St. Bd. Med. Examiners, 375 U.S. 411, 415, 84 S.Ct. 461, 464-65, 11 L.Ed.2d 440 (1964) (quoting Willcox v. Consolidated Gas Co., 212 U.S. 19, 40, 29 S.Ct. 192, 195, 53 L.Ed. 382 (1909)) (“When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction.”) The constitutional structure of our government may, of course, weigh heavily in favor of delaying federal judicial jurisdiction for, e. g., exhaustion of state or administrative remedies. But what is at stake in this case is not a delay of jurisdiction because of deferral to another branch of the government or to the state on the possibility that a dispute may be settled on nonfederal or nonconstitutional grounds, but whether or not any judicial relief at all may be had for the alleged wrongs.

8 . Majority opinion at 119 (quoting district court opinion, 458 F.Supp. at 628).

9 . Barlow v. Collins, 397 U.S. 159, 166-67, 90 S.Ct. 832, 838, 25 L.Ed.2d 192 (1970) (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 140-41, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967)), quoted in majority opinion at 118.

10 . The entire legislative history addressing subsection (f) alone consists only of one sentence paraphrasing the statute. The section as a whole is not given much more extensive explanation, and that given is not especially instructive as to the judicial review issue. See pp. 115-116 & note 24 infra. The subsequent legislative history on the section as a whole, relied upon by the majority opinion at 119, seems to me to be simply a reiteration of the point that the nationwide health planning envisioned by Congress was an experiment in cooperative federalism — neither exclusively state nor federal. As such, it lends no illumination to the question whether § 1122(f) was intended to cut off review of DPA decisions.

11 . NAACP v. Medical Center, Inc., 584 F.2d 619, 628 (3rd Cir. 1978).

12 . Id.

13 . This Court stated:

Our understanding of § 1122 is in accord with that of the Secretary and in accord with the perceptions of the district court as well. “If [a § 1122] application has received complete approval when it reaches the Secretary, he then performs the ministerial act of assuring that the proper procedure has been followed. The Secretary, however, has no discretion as to whether the proposed expenditures are unwise. .

We agree with the district court’s holding that H.E.W. lacks discretionary power to override the decision of the designated state agency once the state agency has approved, by proper procedure, a capital expenditure proposal. We therefore conclude that the Secretary has mere ministerial duties in a state approved § 1122 application.”

Id. (quoting from the district court opinion, 436 F.Supp. 1194, 1198 (D.Del.1978)).

14 . Under the statute and HEW regulations, the DPA may be a state agency, “a public or nonprofit private agency or organization” responsible for regional, metropolitan, or local health planning, or such other public or nonprofit private agency found by the state agency to be performing similar functions. 42 C.F.R. § 100.-105 (1978); see 42 U.S.C. § 1320a-1(d)(l)(B)(ii)(I) (1976).

15 . As an example, take the acquisition of computerized axial tomography body (“CAT”) scanners. The federally set goal would be to avoid subsidization of unnecessary equipment. In formulating its local plan, a DPA would have to define community needs more specifically— e. g., in terms of one CAT scanner per X number of ascertainable patient use hours, X amount of population, or X miles of radius.

16 . See 458 F.Supp. at 640-41 & n.57 (relying on Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970); Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); and 5 U.S.C. § 701(b)(1) (1976)).

17 . H.R.Rep.No.231, 92d Cong., 2d Sess., reprinted in [1972] U.S.Code Cong. & Admin. News, pp. 4989, 5066 (quoted in majority op. at 13).

18 . 42 U.S.C. § 1320a-1(b) (1976).

19 . Id § 1320a-1(b)(1), (3); see 42 C.F.R. § 100.106 (1978) prescribing, pursuant to the statute, more detailed provisions on notice and procedure that must be in the agreements between HEW and state governors).

20 . 42 U.S.C. § 1320a-1(b)(2) (1976).

21 . The DPA is to determine whether or not a proposed capital expenditure is “consistent with the standards, criteria, or plans developed pursuant to the Public Health Service Act . . to meet the need for adequate health care facilities in the area covered by the plan or plans so developed.” Id § 1320a-l(b).

22 . Congress also provided for federal reimbursement to the DPA for expenses incurred in its § 1122 review. 42 U.S.C. § 1320a-l(c) (1976).

23 . See note 14 supra.

24 . H.R.Rep.No.231, supra note 17, at 5004, 5065, 5288 (quoted in majority op. at 17). The only specific reference to subsection (f) in the entire House report is one sentence that simply paraphrases the language of the statute. Id at 5290.

25 . Social Security Amendments of 1972, Pub.L. No.92-603, § 1122(a), 86 Stat. 1386 (codified at 42 U.S.C. § 1320a-l(a) (1976)). As this Court has observed, the statute has a dual purpose: “containment of hospital costs” and “encouragement of rational health planning by the states.” NAACP v. Medical Center, Inc., 584 F.2d 619, 627 (3d Cir. 1978).

26 . See generally Rosenblatt, supra note 4, at 304-07 (1978) (discussing evolution of congressional concerns in health planning efforts enacted prior as well as subsequent to the enactment of § 1122).

27 . 458 F.Supp. at 641 (citing 42 C.F.R. § 100.-106(c)(4) (1978)).

28 . Such reasoning does not comport with the language of the statute, for, as this Court has previously noted, the statute is silent as to what the Secretary does if a project is approved by the DPA. See NAACP v. Medical Center, Inc., 584 F.2d 619, 628 & n.13 (3d Cir. 1978). It could therefore be argued that when approval is granted, nothing is within the preclusion-of-review reach of § 1122(f). The majority concludes that the DPA’s approval of the Medical Center’s proposal, and the Secretary’s determination that the approval was procedurally sound, may not be reviewed because of § 1122(f)’s reference to a determination by the Secretary under that section. Yet the only determination by the Secretary mentioned in § 1122 is a determination by the Secretary when a proposed expenditure has not been approved by the DPA.

The sole reference to the meaning of “a determination by the Secretary under [§ 1122]” is subsection (d), which is headed “Determination of amount of exclusions from Federal payments.” A roadmap to that complex provision would read as follows: (1) If the Secretary determines that (A) the DPA was not given notice of a proposed capital expenditure or (B) the DPA was given notice and (i) has notified the proponent within a reasonable time that the expenditure is not approved, and (ii) has, prior to that decision (I) consulted with certain other agencies and (II) granted the provider an opportunity for a hearing, then the Secretary shall exclude from federal reimbursement any costs attributable to that expenditure. (2) Despite the DPA’s disapproval, the Secretary may still reimburse the provider if the Secretary submits the matter to a national “advisory council” and that council demonstrates the virtue of the expenditure. See 42 U.S.C. § 1320a-1(d) (1976).

Nothing in § 1122 refers to any procedure of the Secretary when the DPA approves the capital expenditure. The facts of this case, therefore, are totally outside the clear meaning of § 1122(f)’s preclusion of administrative or judicial review. As a subsidiary point, this analysis of the core of § 1122 underscores Congress’s exclusive focus in the statute on the means for saving federal money.

29 . At least one of the contentions of the plaintiffs is purely a matter of interpreting the federal statute. Contrary to the majority’s assertion that the Secretary determined that no new § 1122 review was required after the Medical Center altered its plan to comply with the finding of the Office of Civil Rights, see majority opinion at 119, the letter of Dr. Margulies as Acting Administrator of HEW’s Health Resources Administration simply asserted that “[t]he decision whether an expenditure warrants DPA review . is in the first instance one for the DPA.” The definition of a “capital expenditure,” though, is set by the statute. 42 U.S.C. § 1320a-l(g) (1976). It is questionable, therefore, whether HEW could give the DPA discretion to exempt from review, as it seems to have done in 42 C.F.R. § 100.-103(a)(2)(v) (1978), a capital expenditure that meets the statutory definition.

I do not suggest that federal jurisdiction on this matter should be exclusive. Indeed, state courts haye adjudicated challenges by providers to DPA decisions. See North Miami Gen. Hosp., Inc. v. Office of Community Medical Facilities, Dept. of Health & Rehabilitative Servs., 355 So.2d 1272 (Fla.App. 1978); Charter Med. Corp. v. Mississippi Health Planning & Dev. Corp., 362 So.2d 180 (Miss. 1978). But cf. Lakeside Mercy Hosp. v. Indiana St. Bd. Health, 421 F.Supp. 193, 198 (N.D.Ind.1976) (reviewing DPA decision; citing dismissal of action by state court on grounds that it could not review action of DPA “where, as here, it was acting as an agency of the federal government”).