B-156510 February 23, 1971

B-156510 February 23, 1971

The Honorable Edward A. Garmatz, Chairman Committee on Merchant Marine and Fisheries House of Representatives

Dear Mr. Chairman:

Reference is made to your letter of January 25, 1971, directing our attention to a legal memorandum dated January 21, 1971, by the General Counsel of the Department of Health, Education, and Welfare which includes that HEW does have authority to close existing public health service hospitals and clinics throughout the country. You cite our letter of June 7, 1965, to the Chairman , Committee on Merchant Marine and Fisheries, holding to the contrary, and ask our current views on this and the other questions posed and answered in the HEW memorandum.

The question considered in the HEW memorandum are stated as follows:

"1. Does the Secretary of Health, Education, and Welfare have the authority to transfer PHS hospitals and out-patient clinics to non-federal owners?

"2. Does the Secretary of Health, Education, and Welfare have the authority to provide for the care of Public Health Service (PHS) beneficiaries at facilities other than those operated by the PHS?

"3. Can PHS beneficiaries be given priority in Veterans Administration (VA) hospitals ahead of veterans with non - service - connected disabilities?

"4. Can VA and PHS make cross - servicing arrangements to provide for the care of each other's beneficiaries?"

1. Authority to Transfer PES Facilities to Non - Federal Owners (Closing of PHS Hospitals).

In our decision of June 7, 1965, holding that the closing of all Public Health Service general hospitals was beyond the discretionary authority of the Department, we stated:

"The Surgeon General, who administers the Public Health Service, is empowered by the Public Health Service Act to control, manage, and operate all institutions, hospitals, and stations of the Service *** (Sec. 248 (a)).

Our examination of the act does not disclose a substantive basis for restrictively construing the general administrative powers thus conferred. Rather, in the context of providing medical care, involving professional judgement, we consider inherent in the power to control, manage, and operate the Service's various health facilities, the discretionary authority to close and convert to out - patient clinics one or more of the Service's general hospitals. The closing, however, of all Public Health Service general hospitals, with general referral of beneficiaries to facilities outside the Service, would in our opinion be an unwarranted extension of the Surgeon General's discretionary authority.

We find nothing in the HEW memorandum that would persuade us to reach a contrary view at this time. The essential thrust of the HEW memorandum is to the effect that the early statutory authority to which the PHS hospital system owes its existence intended contractual arrangements to be the primary basis for seamen medical care, and that the building and continued maintenance of a Federal hospital system was not contemplated. We cannot agree that such a system was not contemplated.

The PHS hospital Service traces its origin to the act of July 16, 1798, for the relief of sick and disabled seamen, 1 Stat. 605, which provided authority to the President to (1) receive donations of buildings or land upon which hospital buildings could be erected (section 4), (2) to erect hospital buildings specifically for the care of sick and disabled American seamen (section 3 and 4), and (3) to appoint Directors of the "marine hospital of the United States" (section 5).

The legislative history of the 1798 act indicates clearly that the construction of a marine hospital system was contemplated. One of the principle grounds of congressional opposition to the bill was the fear that cost of the hospital system authorized to be constructed would outweigh the benefits to be derived form such a system. See Annuals of Congress, 5th Congress, 1797 - 1799 Vol. II pp. 1386 - 1392, containing the following remarks excerpted from the house debate of the bill:

"Mr. SEWALL said *** the tax will fall upon no member of this House, but will be exclusively drawn from the earnings of a small part of the community, who, in all probability, will receive no advantages from it for fifty years to come as large and splendid buildings must first be erected, in order to exhibit to the world a specimen of public charity. (Id. p. 1386.)

"Mr. PINCKNEY was sorry to differ from his friend from Massachusetts ***. Relief to distress is the first thing to be attended to, and if after affording this relief, the tax produces a sufficient surplus, it is to be employed in the erection of suitable, not large and splendid - buildings, as hospitals (Id. p. 1387.)

"Besides, said Mr. S., this bill proposes the erection of public hospitals ***. (Id. p. 1389.)

"Mr. GALLATIN said *** /i/institutions of the kind recommended in this bill might be used in other countries ***. How far marine hospitals had been useful in Europe he could not tell; he knew there were many rotten public institutions of hospitals, etc., there ***. There was one part of the bill which he said he could not consent to vote for, viz: That part which directs the erection of buildings, as he was convinced that persons of every description may be better relieved by being dispersed through the country, than by being placed in a hospital." (Id. p. 1392.)

Also worth nothing are the numerous references throughout the congressional record describing the bill as one providing for the support or erection of marine hospitals. See id. p. 1345, 1383, 1386.

The obligation to provide medical care and the concomitant obligation to maintain a hospital sys tem to provide it have been characteristic of the PHS ever since the passage of the 1798 act , and, on the basis of this act numerous hospitals were constructed and maintained throughout the country during the 19th and 20th centuries.

In 1861, secretary of the Treasury Chase found that the number of marine hospitals "has been increased for beyond necessity or utility." Secretary of Treasury, Annual Report, 1861, p. 27. Subsequently, as noted in the HEW memorandum, the Secretary was authorized under the act of April 20, 1866, Revised Statutes, as amended June 27, 1866, section 4806, to sell or lease such marine hospital buildings and lands as he deemed advisable. Most important to mote, however, is the fact that Congress in giving such authority insured that the basic hospital system would be maintained by prohibiting the sale or lease of the hospitals at Portland, Maine, and Cleveland, Ohio, and provided that no hospital would be sold or leased if the relief furnished amounted to twenty cases a day. Moreover, only a few years later Congress passed the act of June 29, 1870, 16 Stat. 169, providing for a central administrative agency for the Marine Hospital Service and for the appointment of a supervising surgeon who was to supervise "all matters connected with the Marine Hospital Service," thereby making clear its intent that the hospital system continue to be maintained.

Today, under the Public Health Service Act of 1944, 42 U. S. C. 201 et seq., the statutory basic for the continued maintenance of the PHS hospital system, in our opinion remains. We agree with the view expressed in the HEW memorandum that the Congress in enacting the 1944 act assumed that the then existing PHS facilities would continue to be utilized, and thus maintained. )See page 7.)

A reading of the act shows it to be replete with references to the PHS hospital system and that a major portion of that law's provisions would be inoperable absent such a system. In reaching this conclusion, we are in agreement with a legal opinion prepared by Assistant General Counsel E. J. Rourke, Department of HEW dated December 17, 1963, and published in the 1965 Hearings on the proposed closing of PHS Hospitals before the Committee on Government Operations. In relevant part, the opinion states as follows:

"An indicated below, this conclusion rests in part upon a specific provision in the Public Health Service Act and more broadly on a variety of indications in that act that Congress intends the PHS to operate its own medical facilities. We do not think this intention is substantively qualified by the fact that provision is also made in the Public Service Health Act for the Service to obtain care for certain of its beneficiaries at other public or private facilities at Service expense.

"We may begin with the obligation of the Surgeon General to care for seamen and the other listed beneficiaries 'at hospitals and other stations of the Service' (Public Health Service Act, sec. 322(a)). We know of no reasonable way to read this provision except as imposing an obligation on the Surgeon General to establish and maintain medical facilities of the Service for the care of those who by statute are entitled to it. This literal reading of the provision is the only in accord with the ling history of the Marine Hospital Service which began in 1798 with an authority to construct hospitals specifically for the seaman beneficiary. The obligation to provide medical care and the concomitant obligation to maintain a hospital system to provide it have been characteristic of the PHS ever since.

"There are other provisions of the Public Health Service Act which are not operable in the absence of Service hospitals, institutions and stations. Thus the authority to admit and treat for purposes of study persons not otherwise eligible is an authority that can be exercised only at institutions, hospitals and stations of the Service (sec. 301 (f)). Also, the authority to provide medical, surgical, and hospital services to BEC beneficiaries can be exercised only at institutions, hospitals, and stations of the Service (sec. 324). Finally, the authority to provide for narcotic addicts may be exercised only at hospitals of the Service (sec. 341). While these provisions do mot require the exercise of the authority conferred, it seems obvious that Congress intended the authority to be exercised in appropriate situations; to this extent, appropriate medical facilities of the Service are required.

"Finally, there are other statutory provisions that certainly contemplate the operation of an appropriate PHS hospital system. Examples are the Surgeon General's authority to manage and operate hospitals and to establish new ones (sec. 321), the authority to care for certain persons at hospitals of the Service where detained by Immigration authority (sec. 502), and the authority to admit into any hospital, institution, or station of the Service insane persons entitled to Service treatment (sec. 504).

"We would thus conclude that there is no question but that the Public Health Services Act represents the congressional intent that a hospital system be operated and maintained by the Service to carry out the obligations imposed by or implicit in the several statutory provisions noted. (Underscoring added.)

"The fact that legal authority is given to the Service under section 322(e) to procure care at other than its own facilities in the case of specified beneficiaries, in our view does not reflect a congressional intention to offer the Service an alternative to the operation of its own hospital system. Rather this is a supplemental authority designed to assure prompt and adequate medical care to selected beneficiaries where Service facilities are not available. This conclusion is clearly supported first by the terms of the act which call for authorization by the medical officer in charge on application - an individualized determination. It is also supported by the legislative history of section 322(e).

"Thus in codifying the statutes relating to PHS in 1944, the significant committee report, that of the House, stated with respect to this subsection:

"'Subsection (e) would authorize treatment of Service beneficiaries in other hospitals, at the expense of the Service, as provided in regulations. This provision, which would afford a statutory basis for present regulations, is designed to meet overflow conditions and cases where beneficiaries may be remote from any Service facility.'"

As indicated in Mr. Rourke's opinion, 42 U. S. C. 248 (a) charges the Secretary with the management and operation of "all institutions, hospitals, and stations of the service" (emphasis added), and authorizes the Secretary, with Presidential approval, to "select sites for and establish institutions, hospitals, and stations" as deemed necessary. We find no provision in the act which authorizes the Secretary to close down the entire PHS hospital system by means of the utilization of contractual medical care arrangements.

With respect to the argument raised by the Department that the Federal Property and Administrative Services Act of 1949 authorizes the Secretary to transfer all hospital facilities to nonfederal ownership should he find such properties to be excess to the needs of the Department, we cannot agree.

"Excess property" is defined in the act, 40 U. S. C. 472 (e), as property of a Federal agency "not required for its needs and the discharge of its responsibilities, as determined by the head thereof." We find nothing in the legislative history of the Federal Property and Administrative Services Act to suggest that the Congress intended the authority to dispose of excess property to be used by Federal agency as a means of relieving itself of its statutory responsibilities. In our vies, the utilization of such act as a vehicle for closing down the entire PHS medical facility system, and thereby effectively terminating the hospital medical care role performed by the PHS for the past 170 years, would be wholly inappropriate. Such action would relive the agency of the function of maintaining a hospital system which, as we have shown above, has heretofore been considered by the Congress to be an essential statutory responsibility.

It is therefore our opinion that under the 1944 Public Health Service Act, the Congress intended that the hospital system characteristic of the Service since its inception in 1802 with the Marine Hospital is to be operated and maintained by the Service in order to carry out the functions and duties imposed by the 1944 act. In light of the foregoing, the Secretary may not, in our view use his discretionary powers under the 1944 Public Health Service Act or the Federal Property and Administrative Services Act of 1949 to effect the closing of all PHS hospital facilities by means of the transfer of these institutions to nonfederal ownership.

2. Authority to Provide for Care of PHS Beneficiaries in other than PHS Facilities.

Consistent with the foregoing, we stated in our June 7, 1965, decision that the Public Health Service Act "in the absence of Public Health Service facilities authorizes the referral of such beneficiaries, at the expense of the Service, to public or private hospitals (42 U. S. C. 249)." As pointed out above, the legislative history makes clear that this provision is designed to meet overflow conditions and cases where beneficiaries may be remote from any Service facility. 78th Congress, House Rept. 1364, April 28, 1944, of H. R. 4524. Accordingly, we would see no legal objection to the referral of PHS beneficiaries to other public or private facilities, under such limited circumstances.

3, 4. Priority of PHS Beneficiaries in VA Hospitals and Authority to Arrange for Cross - servicing of VA and PHS Beneficiaries.

Regarding the priority of PHS beneficiaries in VA hospitals, we stated in a letter dated June 22, 1965, copy enclosed, to Chairman Fountain, Intergovernmental Relations Subcommittee, House Committee on Government Operation, that the rendering of a service by an agency under section 601 of the Economy Act of 1932, 31 U. S. C. 682, which authorizes Federal department and agencies to place orders for goods and services with other Federal agencies, if it can be considered a function of the agency rendering the service, is at best a secondary or incidental function, and that section 601 certainly was not intended to be a basis for transferring a primary administrative function from an agent in which it is vested by Congress.

Since by statute the primary function of the PHS is to provide care for seamen and that of the VA to provide care for veterans, we could not then, and do not now, see a legal basis for admitting merchant seamen to VA hospitals ahead of veterans eligible for treatment of nonservice-connected disabilities.

Regarding the authority to arrange for cross-servicing of VA and PHS beneficiaries, we stated in our June 22, 1965, letter that the admission of merchant seamen to VA hospitals would involve interagency services under 31 U. S. C. 686, since merchant seamen are not beneficiaries of the Veterans Administration, and that "except as a humanitarian services in emergency cases," the Administrator of Veterans Affairs would otherwise not be authorized to admit merchant seaman. See 38 U. S. C. supply or equipped to render" the services requisitioned in accordance with the requirements of section 601 of the Economy Act, we see no legal objection to periodic arrangements for cross-servicing of VA and PHS beneficiaries.

We trust that the above is responsive to your request.

Sincerely yours,

(SIGNED) ELMER B. STAATS Comptroller General of the United States