The opinion of the court was delivered by: MCLAUGHLIN
This Court has jurisdiction over this civil action pursuant to 42 U.S.C. §§ 1331 and 1395oo. Bradford Hospital ("Bradford") challenges the validity of the regulations codified at 42 C.F.R. § 412.92(a)(3) which prevent it from being classified as a "sole community hospital." Presently pending before this Court are cross motions for summary judgment. For the reasons stated below, Plaintiff's motion is denied, Defendant's motion is granted, and judgment is entered in favor of the Secretary of the Department of Health and Human Services (the "Secretary").
In 1972, Congress authorized the Secretary to promulgate regulations limiting Medicare reimbursements to hospitals. Pub.L. No. 92-603 § 223, 86 Stat. 1329, 1393 (1972). However, Congress made it clear that such limitations should not be applied to providers serving communities with limited access to hospitals. H.R.Rep. No. 231, 92d Cong., 1st Sess. 84 (1971). See, also, S.Rep. No. 1230, 92 Cong., 2d Sess. 188 (1972), U.S.Code Cong. & Admin.News 1972, p. 4989. Consistent with this goal, the Secretary's regulations exempted "sole community hospitals" ("SCH") from the reimbursement limitations. The regulations defined an SCH as a hospital that:
20 C.F.R. § 405.460(f)(4) (1975).
The regulations alone continued to defined when a hospital qualified for SCH status until 1983. In 1983, in order to further cut costs, Congress revamped the method by which hospitals were reimbursed by instituting the "Prospective Payment System" ("PPS"). 42 U.S.C. § 1395ww(d). Rather than reimbursing hospitals the lesser of "reasonable costs" or "customary charges" for services rendered, the PPS method pays hospitals prospectively at a flat rate based on classification of Medicare beneficiaries treated. Id. The new reimbursement scheme continued to include an SCH exemption. However, this time, Congress provided a statutory definition of an SCH:
For purposes of this subparagraph, the term 'sole community hospital' means a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, or the absence of other hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to individuals in a geographic area who are entitled to benefits under part A.
Pub.L. No. 98-21 § 601(e), 97 Stat. 158 (1983) codified at 42 U.S.C. § 1395ww(d)(5)(C)(ii).
In response, the Secretary promulgated more comprehensive regulations defining when hospitals qualified for SCH status. Under those regulations, a hospital located in a rural area
could qualify for SCH status if it fell into one of the following categories:
(1) The hospital is located more than 50 miles from other like hospitals.
(2) The hospital is located between 25 and 50 miles from other like hospitals and meets one of the following criteria:
(i) No more than 25 percent of the residents or, if data on general resident utilization are not available, no more than 25 percent of the Medicare beneficiaries in the hospital's service area are admitted to other like hospitals for care;
(ii) The hospital has fewer than 50 beds and the intermediary certifies that the hospital would have met the criteria in paragraph (a)(2)(i) of this section were it not for the fact that some beneficiaries or residents where forced to seek care outside the service area due to the unavailability of necessary specialty services at the community hospital; or
(iii) Because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least one month out of each year.
(3) The hospital is located between 15 and 25 miles from other like hospitals but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least one month out of each year.
49 Fed.Reg 234, 270-72 codified at 42 C.F.R. § 412.96 (1986).
In 1989, the Secretary eased the requirements. The mileage radius to receive a per se SCH classification under subpart (1) was reduced to 35 miles and the inaccessibility requirement in subparts (2)(iii) and (3) was reduced to "at least 30 days in each 2 out of 3 years." 54 Fed. Reg. 36,452 and 36,494 (Sept. 1, 1989) codified at 42 C.F.R. 412.92 (1989).
Later that year, Congress passed the Omnibus Budget Reconciliation Act of 1989. The act amended the statutory definition of an SCH to take into consideration travel time and travel conditions to alternate facilities. The new definition provided:
The term 'sole community hospital' means a hospital that, by reason of factors such as time required for an individual to travel to the nearest alternative source of appropriate inpatient care (in accordance with standards promulgated by the Secretary) location, weather conditions, travel conditions, or the absence of other hospitals (as determined by the Secretary), is the sole source of ...