The Ninth Circuit Court of Appeals today released an opinion in COUNTY LOS ANGELES v. LEAVITT, No. 06-55222, an appeal in a civil action against the United States. The panel consisted of Betty B. Fletcher, Stephen Reinhardt, and Pamela Ann Rymer, Circuit Judges.
RYMER, Circuit Judge:
This appeal, which involves Medicare reimbursement of indirect medical education expenses (IME) incurred by a public teaching hospital with an approved intern and resident program, presents two questions: first, whether it was arbitrary and capricious for the Secretary of Health and Human Services to interpret the Medicare statute and regulations providing for IME payment on the basis of “available beds” as presumptively meaning physical beds, when the hospital’s fiscal intermediary had previously accepted a calculation based on budgeted beds; and second, whether the Secretary’s findings in this case were supported by substantial evidence. Los Angeles County/University of Southern California Medical Center (County/USC or Med Center) appeals the district court’s judgment upholding a final determination by the Provider Reimbursement Review Board (PRRB) that County/ USC’s intermediary, Blue Cross and Blue Shield Association (Blue Cross), properly used a physical bed count in the formula for calculating the hospital’s IME adjustment for fiscal year ending (FYE) June 30, 1994. We conclude that the Sec. . .
REINHARDT, Circuit Judge, dissenting:
I agree with the majority that the Secretary did not act arbitrarily and capriciously when he switched from using the number of budgeted beds to using the number of physical beds for calculating the Medicare IME adjustment. I also agree that the Secretary’s interpretation of “available beds” as presumptively meaning physical beds is entitled to deference from this court and is reasonable as a general matter. However, because I believe that County/USC met its burden of rebutting the presumption and showing that certain beds should have been excluded from Med Center’s available bed count in the fiscal year ending June 30, 1994 (”FY1994) -namely the 123 beds that made up the difference between the number of physical beds and the number of budgeted beds -I would hold that the Provider Reimbursement Review Board’s (”Board”) decision was arbitrary and capricious. As the majority explains, the relevant interpretive regulation directs that “beds available at any time during the cost reporting period are presumed to be available during the entire cost reporting period.” PRM-1 Â§ 2405.3; Maj. Op. at 3231. However the majority relegates to a parenthetical a crucial caveat: hospitals may provide “evidence to the contrary” in order to “exclude beds from the count.” Id. In other words, hospitals have the opportunity to prove that certain beds should not be considered available and thus should be excluded from the count. At a hearing before the Board, County/USC presented evidence that the 123 physical beds that were not included in the budget should be excluded from the IME calculation because those beds were not actually available for patient use during the year. Disregarding the substantial evidence presented by County/USC, the Board concluded that all 1,320 physical beds should be considered . . .