Memorial Rehabilitation Hospital of Santa Barbara v. Secretary of Health & Human Services

Memorial Rehabilitation Hospital of Santa Barbara (“Memorial”) challenges the conclusion of the Secretary of Health and Human Services (“the Secretary”) that it does not qualify as a “new hospital,” exempt from ceilings on hospital rates by regulations enacted under the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), 42 U.S.C. § 1395 . The district court granted summary judgment upholding the decision of the Secretary, and this appeal followed. We now affirm.

BACKGROUND

In 1978, Santa Barbara County (“the County”) operated Santa Barbara General Hospital (“the County Hospital”), a 180-bed acute care hospital. During that year, the County stopped operating several of its inpatient services because of reduced revenues resulting from California’s Proposition 13. In addition, the County agreed to lease property and equipment associated with the hospital’s rehabilitation service to the Memorial Rehabilitation Foundation (“the Foundation”). The next year, the hospital’s psychiatric services were relieensed and moved off campus, leaving the 45-bed rehabilitation service as the hospital’s only remaining inpatient service. This situation remained unchanged until January 1,…