legislative history, would seem to disregard and possibly
disrupt the overall purpose of Medicare.
The Supreme Court, on at least two occasions, has had the
opportunity to extend the due process analysis in
Goldberg to the Social Security Act. In Richardson v. Wright,
405 U.S. 208, 92 S.Ct. 788, 31 L.Ed.2d 151 (1972), a due
process challenge to the suspension of disability benefits was
avoided because the Secretary had adopted new regulations
regarding suspension while the suit was pending. The Court
deferred judicial action and remanded the case to the Secretary
because "(i)n the context of a comprehensive complex
administrative program, the administrative process must have a
reasonable opportunity to evolve procedures to meet needs as
they arise." 405 U.S. at 209, 92 S.Ct. at 789. Similarly in
Fusari v. Steinberg, 419 U.S. 379, 95 S.Ct. 533, 42 L.Ed.2d 521
(1975), a challenge to Connecticut's "seated interview"
procedures for assessing continuing eligibility for
unemployment compensation benefits was avoided by the remanding
of the case for reconsideration in the light of intervening
changes in Connecticut state law.
This court is now presented with a like opportunity to
avoid premature adjudication of the Constitutional issue by
relying upon the doctrine of exhaustion of administrative
remedies. The well known doctrine that administrative
remedies should be fully pursued prior to judicial review of
any agency action is both sound and applicable here.
See Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51,
58 S.Ct. 459, 82 L.Ed. 638 (1938). Administrative appeal
provides an added opportunity for plaintiff's claims to be
vindicated, thereby mooting the controversy. Moreover, the
statutory provision for a system of review provides at least
some evidence of congressional intent to achieve uniformity of
decision, to encourage development of agency expertise, to
leave a wide berth for the exercise of agency discretion, and
to prevent disruption of the administrative process. See McKart
v. United States, 395 U.S. 185 at 193-195, 89 S.Ct. 1657, 23
L.Ed.2d 194 (1969).
On March 4, 1974, the Secretary published in the Federal
Register, 39 F.R. 8166, a notice of proposed rule making,
with proposed amendments to Subparts D and R of Regulations
No. 5, 20 C.F.R. Part 405. Interested persons were given 30
days in which to submit written comments or suggestions
thereon. As a result of suggestions tendered, §§ 405.1809 and
405.1811 were modified, in the words of the Commissioner of
Social Security, "to show that the provider has the right to an
intermediary hearing where the disputed determination involves
a cost-reporting period ending prior to June 30, 1973, and the
amount in controversy is $1,000 or more." 39 F.R. 34514, Sept.
26, 1974 (emphasis added). Since the accounting periods in
dispute were prior to June 30, 1973, and the amount in
controversy exceeds $1,000, review in this case may be obtained
administratively pursuant to 20 C.F.R. §§ 405.1801 et seq.
(effective Oct. 26, 1974). A contrary interpretation of these
regulations, denying plaintiffs a right to administrative
review, would only require this court to resolve the due
process issue. The defendants have put forth no compelling
reasons whatsoever for denying plaintiffs some sort of
appropriate administrative hearing on the cost disputes.
Moreover, the extention of administrative review for accounting
periods ending prior to June 30, 1973, imposes no undue burden
on the intermediaries, since review is afforded as a matter of
right for periods after June 30, 1973.
Accordingly, it is ordered that plaintiffs are directed to
exhaust their available administrative remedies under
It is further ordered that defendants provide plaintiffs
promptly with a full and fair administrative hearing
pursuant to 20 C.F.R. Part 405.
It is further ordered that jurisdiction is retained in
this court pending the resolution of said hearing; and that,
in the absence of voluntary dismissal of this suit upon
resolution of the dispute prior thereto, plaintiffs and
defendants both file herein a report on status by May 15,
It is further ordered that both the preliminary injunction
issued on June 27, 1974, and the security previously
furnished shall continue and be maintained in effect until
further order of this court.
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