ST. ELIZABETH COMMUNITY HOSPITAL, Plaintiff-Appellant, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant-Appellee

This is an action for judicial review of a final decision of the Secretary of Health and Human Services that plaintiff, St. Elizabeth Community Hospital, does not qualify for a “sole community provider” exemption from the Medicare cost limits for cost years 1977 and 1978. The district court affirmed the final decision of the Secretary. Plaintiff appeals. We reverse.

I

A

In 1965 Congress enacted Public Law 89-97, 79 Stat. 291, Title XVIII of which has become known as the “Medicare Act.” 42 U.S.C. § 1395 et seq. Under this statute and applicable regulations promulgated pursuant thereto, the Medicare program reimburses providers of hospital care the “reasonable cost” of such care as determined by the Secretary of the Department of Health and Human Services. 42 U.S.C. § 1395x(v)(l)(A) (1982).

Amendments in 1972 to the Medicare statutes recognized that in smaller communities where only one hospital exists to provide needed care, program beneficiaries in fact may have no reasonable choice between a non-existent “non-luxury” hospital where Medicare would pay all of the beneficiaries’ expenses and those existing in the community whose charges and services may be deemed “first-class.”…