B-174930, MAR 3, 1972

B-174930, MAR 3, 1972

CONTRACTS - PER DIEM RATE - METHOD OF COMPUTATION CONCERNING THE ENFORCEMENT OF A CONTRACT AWARDED TO THE HATO REY PSYCHIATRIC HOSPITAL, INC., FOR HOSPITAL CARE AND TREATMENT OF ELIGIBLE VETERANS WHEN AUTHORIZED BY THE VETERANS ADMINISTRATION (VA) CENTER, SAN JUAN, P.R. THE HOSPITAL MAINTAINS THAT ITS USE OF VETERAN IN-PATIENT DAYS RATHER THAN THE ALL INCLUSIVE NUMBER OF IN-PATIENT DAYS FOR PURPOSES OF COMPUTING THE APPLICABLE PER DIEM RATE, WAS ACCEPTED BY THE VA AND THEREFORE, BROUGHT INTO EXISTENCE A MUTUALLY BINDING AGREEMENT. IT IS THE OPINION OF THE COMP. GEN. THAT ACCEPTANCE OF SUPPLEMENT NO. 26 DID NOT EFFECT AN AMENDMENT OF THE ORIGINAL METHOD OF COMPUTATION, SINCE IT HAS BEEN CONSISTENTLY HELD THAT GOVERNMENT EMPLOYEES HAVE NO AUTHORITY TO MODIFY CONTRACT TERMS ABSENT A COMPENSATING BENEFIT TO THE UNITED STATES. COMP. GEN. 684, 688 (1961). ACCORDINGLY, THE TERMS OF THE ORIGINAL CONTRACT SHOULD BE ENFORCED AND ANY RECLAIM VOUCHERS FROM THE HOSPITAL MUST BE DISALLOWED. WITH REGARD TO COLLECTION OF THE OVERCHARGE, SINCE IT APPEARS THAT THE HOSPITAL HAS REFUSED TO MAKE ITS RECORDS AVAILABLE, AN APPROXIMATE ADDITIONAL AMOUNT DUE SHOULD BE RECONSTRUCTED FROM RECORDS THAT ARE AVAILABLE AND INCLUDED IN THE DEMAND FOR PAYMENT. IF THE COLLECTION EFFORTS OF THE VA AND GAO PROVE UNSUCCESSFUL, A DECISION OF THE ATTORNEY GENERAL TO BRING SUIT IN THE U.S. DISTRICT COURT OF PUERTO RICO WOULD APPEAR TO BE THE SOLE RECOURSE AVAILABLE TO THE GOVERNMENT.

TO MR. DONALD E. JOHNSON:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 10, 1972, WITH ENCLOSURES, REQUESTING THAT OUR OFFICE EXPRESS AN OPINION ON CERTAIN QUESTIONS DISCUSSED BELOW, RELATING TO CONTRACT NO. V4055P-635 WHICH YOUR DEPARTMENT ENTERED INTO WITH THE HATO REY PSYCHIATRIC HOSPITAL, INC., SAN JUAN, PUERTO RICO.

THE CONTRACT IN QUESTION WAS EXECUTED BY THE PARTIES ON JULY 15, 1959, AND PROVIDED FOR HOSPITAL CARE AND TREATMENT OF ELIGIBLE VETERANS WHEN AUTHORIZED BY THE VETERANS ADMINISTRATION (VA) CENTER, SAN JUAN, FOR THE INITIAL CONTRACT PERIOD OF AUGUST 1, 1959, THROUGH JUNE 30, 1962. IT WAS SUBSEQUENTLY RENEWED FOR ADDITIONAL THREE-YEAR PERIODS UNTIL THE LAST PERIOD EXPIRED ON JUNE 30, 1971.

THE PARAGRAPHS OF THE CONTRACT PERTINENT TO OUR CONSIDERATION HERE PROVIDED:

"4. (A) PAYMENTS FOR AUTHORIZED HOSPITAL OR SANATORIUM CARE AND TREATMENT WILL BE MADE ON AN ALL-INCLUSIVE INPATIENT DAY COST BASIS. THIS IN-PATIENT DAY COST WILL BE DETERMINED BY THE HOSPITAL FROM ITS RECORDS OF IN-PATIENT OPERATING EXPENSES AND PATIENT DAYS FOR ITS MOST RECENT ACCOUNTING PERIOD OF SIX (6) MONTHS OR MORE. THE FORMULA FOR DETERMINING SUCH REIMBURSABLE IN-PATIENT DAY COST IS THE CURRENT EDITION OF HOSPITAL STATEMENT OF REIMBURSABLE COST (JOINT HOSPITAL FORM 1), KNOWN AS THE GOVERNMENT REIMBURSABLE COST FORMULA. A PROPERLY PREPARED AND EXECUTED COPY OF JOINT HOSPITAL FORM 1 WILL BE REQUIRED AS A PART OF THIS CONTRACT EXCEPT WHEN THE PER DIEM RATE FOR HOSPITAL SERVICE HAS BEEN ESTABLISHED BY STATUTE OR UNDER A FORMULA PRESCRIBED BY STATUTE FOR A PUBLICLY-OWNED HOSPITAL. IN THIS LATTER CASE THE HOSPITAL WILL SUBMIT A CERTIFICATION STATING WHEN, BY WHOM, AND UNDER WHAT AUTHORITY THE RATE WAS ESTABLISHED.

"(C) WHENEVER ANY RATE IS APPROVED UNDER THIS CONTRACT THE EFFECTIVE DATE WILL BE STIPULATED IN A NOTICE OF ACCEPTANCE FURNISHED THE HOSPITAL.

"6. IT IS UNDERSTOOD THAT THE PER DIEM RATE IS SUBJECT TO ADJUSTMENT DURING THE LIFE OF THIS CONTRACT IN ACCORDANCE WITH THE FOLLOWING:

"(B) WHEN A JOINT HOSPITAL FORM 1 IS REQUIRED (SEE PARAGRAPH 4 (A)), THE HOSPITAL AGREES TO SUBMIT A JOINT HOSPITAL FORM 1 TO THE VETERANS ADMINISTRATION AT LEAST EVERY TWELVE (12) MONTHS FROM THE EFFECTIVE DATE OF AN APPROVED PER DIEM COST RATE, AND ONE MAY BE SUBMITTED MORE FREQUENTLY BUT NOT MORE OFTEN THAN EVERY SIX (6) MONTHS FROM SUCH EFFECTIVE DATE. THE HOSPITAL ALSO AGREES THAT ALL FUTURE SUBMISSIONS OF JOINT HOSPITAL FORM 1 WILL COVER CONSECUTIVE ACCOUNTING PERIODS OF EITHER SIX (6) OR TWELVE (12) MONTHS DURING THE LIFE OF THIS CONTRACT. SUBSEQUENT SUBMISSIONS BY THE HOSPITAL OF JOINT HOSPITAL FORM 1 WILL BE IN SEXTUPLE AND WILL BE ACCOMPANIED BY A HOSPITAL STATEMENT OF SERVICE (VA FORM 11-1269A).

"7. EACH APPROVED REQUEST FOR AN ADJUSTMENT IN THE PER DIEM RATE OR SUBSEQUENT SUBMISSION OF JOINT HOSPITAL FORM 1, TOGETHER WITH THE REQUIRED HOSPITAL STATEMENT OF SERVICE, WILL BECOME A PART OF THIS CONTRACT. SUCH REQUESTS OR SUBSEQUENT SUBMISSIONS WILL BE SENT TO THE VETERANS ADMINISTRATION OFFICE THROUGH WHICH THIS CONTRACT WAS SOLICITED. WHENEVER A NEW RATE IS APPROVED IT SHALL BE EFFECTIVE AS OF THE DATE STIPULATED IN THE NOTICE OF ACCEPTANCE, AND NOT PRIOR TO SUCH DATE.

"13. THE HOSPITAL WARRANTS THAT THE ALL-INCLUSIVE PER DIEM COST RATES COMPUTED ON JOINT HOSPITAL FORM 1 AND CHARGED HEREIN ARE NOT IN EXCESS OF THE ALL-INCLUSIVE PER DIEM COST RATES SIMILARLY COMPUTED AND CHARGED OTHER PRIVATE PATIENTS, WHO ARE NOT VETERANS ADMINISTRATION PATIENTS, FOR THE SAME SERVICE. THE HOSPITAL ALSO WARRANTS THAT THE FEES CHARGED BY IT FOR SERVICES OR PORTIONS THEREOF WHICH ARE NOT INCLUDED IN THE ALL-INCLUSIVE PER DIEM RATE ARE NOT IN EXCESS OF FEES CHARGED THE GENERAL PUBLIC FOR THE SAME SERVICES."

JOINT HOSPITAL FORM 1 (JH1) REFERENCED ABOVE ALSO PROVIDED THAT THE PAYMENT FOR HOSPITAL CARE OF VETERANS WAS TO BE MADE ON AN ALL INCLUSIVE PATIENT DAY BASIS, AND THUS THE CHARGE TO VA FOR EACH VETERAN PATIENT DAY WAS TO BE DETERMINED BY DIVIDING THE TOTAL AMOUNT OF HOSPITAL IN-PATIENT SERVICE EXPENSE BY THE ALL-INCLUSIVE IN-PATIENT DAYS. FOOTNOTE 15 TO JH1 REFERENCED AT PARAGRAPH D THEREOF ENTITLED "HOSPITAL EXPENSES FOR CALCULATING REIMBURSABLE COSTS," PROVIDED:

"THE ACTUAL EXPENSES FOR ALL SERVICES PROVIDED BY THE HOSPITAL TO ALL PATIENTS ARE TO BE RECOGNIZED IN COMPUTING THE PATIENT DAY COST, AND ARE TO BE INCLUDED IN THIS SECTION."

YOU ADVISE THAT OVER THE YEARS THE HOSPITAL TIMELY SUBMITTED THE REQUIRED JH1 FORMS SHOWING THE COMPUTATION OF THE PER DIEM RATE; THAT PERSONNEL OF THE VA CENTER ACCEPTED THEM; THAT A NEW SUPPLEMENT NUMBER WAS GIVEN THE CONTRACT; AND THAT PAYMENT WAS MADE TO THE HOSPITAL BASED ON THE CURRENT RATE. THE LAST SUCH SUPPLEMENT WAS NUMBERED 26 FOR THE PERIOD AUGUST 1, 1970, THROUGH FEBRUARY 28, 1971.

IT IS REPORTED THAT IN THE COURSE OF AN AUDIT OF THE VA CENTER IN NOVEMBER 1970, CONDUCTED BY YOUR AGENCY'S FISCAL AUDIT STAFF, A REVIEW OF SUPPLEMENT NO. 26 TO THE CONTRACT DISCLOSED THAT THE FIGURE USED BY THE HOSPITAL ON THE JH1 IN COMPUTING THE PER DIEM RATE WAS THE TOTAL NUMBER OF VETERAN IN-PATIENT DAYS RATHER THAN THE ALL INCLUSIVE NUMBER OF IN-PATIENT DAYS REFERENCED IN THE CONTRACT AND THE APPLICABLE FORM. THE HOSPITAL'S COMPUTATION THEREFORE RESULTED IN AN OVERCHARGE OF $6.66 PER DAY OF CARE FOR EACH VETERAN PATIENT FOR THE PERIOD COVERED BY SUPPLEMENT 26, FOR A TOTAL OVERCHARGE OF $397,455.48.

BY LETTER DATED FEBRUARY 4, 1971, THE CENTER'S DIRECTOR ADVISED THE HOSPITAL, AMONG OTHER THINGS, THAT THE CONTRACT WOULD HAVE TO BE REVISED AND UPDATED AND THAT IT WOULD BE NECESSARY FOR THE HOSPITAL TO SUBMIT A CORRECTED JOINT HOSPITAL FORM 1 TO SHOW THE TOTAL HOSPITAL IN PATIENT DAYS, RATHER THAN ONLY THE TOTAL VETERAN IN-PATIENT DAYS. THERE FOLLOWED A SERIES OF MEETINGS BETWEEN PERSONNEL OF THE CENTER AND THE HOSPITAL IN AN EFFORT TO REACH AN AGREEMENT. HOWEVER, THEY PROVED FRUITLESS, AND FOR THE MONTHS OF MARCH, APRIL, MAY AND JUNE 1971, THE HOSPITAL SUBMITTED INVOICES AT THE OLD RATE AND THE CENTER PAID THEM AT THE NEW RATE; THE DIFFERENCE OF WHICH TOTALS $233,752.68, FOR WHICH THE HOSPITAL HAS SUBMITTED FOUR RECLAIM VOUCHERS. ON APRIL 8, 1971, THE CENTER SUBMITTED A BILL FOR COLLECTION, NO. FIN-71-14 IN THE AMOUNT OF $397,455.48 TO THE HOSPITAL FOR THE OVERPAYMENTS MADE TO IT FOR THE PERIOD OF AUGUST 1, 1970 TO FEBRUARY 28, 1971. NEITHER THE RECLAIM VOUCHERS, NOR THE BILL FOR COLLECTION HAS BEEN HONORED BY EITHER PARTY TO THE CONTROVERSY.

BASED UPON THESE FACTS YOU REQUEST OUR OPINION AS TO WHETHER APPROVAL BY THE VA CENTER OF THE PER DIEM RATE IN SUPPLEMENT 26, EFFECTIVE AUGUST 1, 1970, CONSTITUTED A LEGAL AND BINDING CONTRACT DESPITE THE FACT THAT THE HOSPITAL USED THE INCORRECT NUMBER OF IN-PATIENT DAYS IN ESTABLISHING THE RATE.

THE HOSPITAL'S POSITION IN SUPPORT OF ITS CLAIM FOR THE MONIES WITHHELD FROM ITS MARCH THROUGH JUNE 1971 VOUCHERS, AS WELL AS ITS DENIAL OF LIABILITY FOR OVERPAYMENT FOR THE PERIOD AUGUST 1, 1970, TO FEBRUARY 28, 1971, IS, IN PERTINENT PART AS FOLLOWS:

"THE BILATERAL CONTRACT ENTERED INTO BY THE PARTIES WAS IN THE NATURE OF A BID. ONCE SUBMITTED BY THE HOSPITAL AND ACCEPTED BY THE VETERANS ADMINISTRATION, IT WAS MUTUALLY BINDING. JOINT HOSPITAL FORM 1 WAS TIMELY AND TRUTHFULLY FILLED IN AND SUBMITTED BY THE HOSPITAL. THE FIGURES AS TO HOSPITAL COST AND NUMBER OF VETERANS IN-PATIENT DAYS ARE TRUE AND CORRECT. THEY WERE SUBMITTED BY THE HOSPITAL TO THE VETERANS ADMINISTRATION, WHICH IN TURN HAD AMPLE TIME AND OPPORTUNITY TO CONSIDER, STUDY, REVIEW, QUESTION AND DISCUSS THEM WITH THE HOSPITAL.

"AS A MATTER OF FACT, THE CRITERIA UTILIZED BY THE HOSPITAL TO DETERMINE THE IN-PATIENT DAY COST BY DIVIDING THE TOTAL HOSPITAL EXPENSES BY TOTAL VETERANS IN-PATIENT DAYS, HAD BEEN SUBMITTED TIME AND AGAIN WITH THE ACCEPTANCE OF THE VETERANS ADMINISTRATION. A MERE GLANCE AT JOINT HOSPITAL FORM 1 EVIDENCED THE FORMULA OR CRITERIA USED BY THE HOSPITAL. NOTHING IN THE TERMS OF THE CONTRACT IS CONTRARY TO THE UTILIZATION OF THIS CRITERIA *** ."

AS NOTED EARLIER, THE COGNIZANT CONTRACT PERSONNEL OF THE VA CENTER DID ACCEPT AS ACCURATE THE JH1 FORMS SUBMITTED BY THE HOSPITAL, WHICH WERE CERTIFIED AS CORRECT BY A CERTIFIED PUBLIC ACCOUNTANT (CPA) HIRED BY THE HOSPITAL. HOWEVER, THE CERTIFICATION BY THE CPA WAS ONLY ADDRESSED TO THE ACCURACY OF THE HOSPITAL'S COSTS, AND NOT TO THE NUMBER OF IN-PATIENT DAYS EMPLOYED BY THE HOSPITAL IN ARRIVING AT ITS PER DIEM RATE. FURTHER, A STUDY OF THE JH1 FORM ALONE WOULD NOT REVEAL THAT THE NUMBER OF IN-PATIENT DAYS USED BY THE HOSPITAL IN COMPUTING THE DAILY RATE WAS NOT, IN FACT, THE ALL INCLUSIVE NUMBER OF IN-PATIENT DAYS REQUIRED BY THE CONTRACT. THIS CONNECTION, WE UNDERSTAND THAT ONLY IF SIX OF THE MONTHLY VOUCHERS HAD BEEN ADDED UP AND THEN COMPARED TO THE JH1 FORM FOR THE SAME 6-MONTH PERIOD COULD IT HAVE BEEN ASCERTAINED THAT THE PER DIEM RATE WAS BEING COMPUTED ON THE BASIS OF TOTAL VETERAN PATIENT DAYS RATHER THAN THE ALL INCLUSIVE IN-PATIENT DAYS. HOWEVER, THIS WAS NOT DONE, AND IT WAS ONLY AFTER THE NOVEMBER 1970 AUDIT REPORT THAT IT BECAME APPARENT THAT THE PARTIES INTERPRETED THE TERMS OF THE CONTRACT DIFFERENTLY.

WE TURN THEN TO THE HOSPITAL'S CONTENTION THAT ONCE THE FORMS SUBMITTED BY THE HOSPITAL WERE ACCEPTED BY VA A MUTUALLY BINDING CONTRACT EXISTED. REGARDLESS OF WHETHER THE VA EMPLOYEES COULD HAVE DISCOVERED THE HOSPITAL'S DIFFERENT INTERPRETATION, THE CONTRACT (TOGETHER WITH THE CONDITIONS SET OUT IN THE JH1 FORMS MADE A PART THEREOF) VESTED IN THE UNITED STATES FOR CONSECUTIVE THREE YEAR PERIODS RIGHTS TO HOSPITALIZATION OF VETERANS AT RATES COMPUTED IN ACCORDANCE WITH THE EXPRESS TERMS PROVIDED THEREIN. WHERE CONTRACTUAL RIGHTS HAVE VESTED IN THE GOVERNMENT, WE HAVE CONSISTENTLY HELD THAT AGENTS AND OFFICERS OF THE UNITED STATES HAVE NO AUTHORITY TO MODIFY THE CONTRACT, OR TO SURRENDER OR WAIVE SUCH RIGHTS, WITHOUT A COMPENSATING BENEFIT TO THE UNITED STATES. 40 COMP. GEN. 684, 688 (1961) AND CASES CITED THEREIN. WE MUST THEREFORE CONCLUDE THAT ACCEPTANCE OF SUPPLEMENT NO. 26 DID NOT OPERATE TO AMEND THAT PORTION OF THE BASIC CONTRACT WHICH REQUIRED USE OF THE ALL INCLUSIVE NUMBER OF IN -PATIENT DAYS IN COMPUTING THE VA RATE. ACCORDINGLY, YOUR FIRST QUESTION IS ANSWERED IN THE NEGATIVE, AND THE TERMS OF THE ORIGINAL CONTRACT SHOULD THEREFORE BE ENFORCED. CONSEQUENTLY, THE RECLAIM VOUCHERS FROM THE HOSPITAL TOTALING $233,752.68 SHOULD BE DISALLOWED, AND FURTHER ADMINISTRATIVE ACTION SHOULD BE PURSUED FOR PAYMENT OF BILL FOR COLLECTION NO. FIN-71 14 IN THE SUM OF $397,455.48. SEE 31 U.S.C. 951-953.

YOU ALSO REQUEST OUR ADVICE AS TO WHAT ACTION YOUR AGENCY SHOULD TAKE WITH RESPECT TO PAYMENTS TO THE HOSPITAL COVERING THE PERIOD AUGUST 1, 1959 TO AUGUST 1, 1970.

AS YOUR LETTER OF JANUARY 10 POINTS OUT, NONE OF THE CONTRACTS IN QUESTION CONTAINED AN EXAMINATION OF RECORDS CLAUSE AS PRESCRIBED BY PART 1-20 OF THE FEDERAL PROCUREMENT REGULATIONS. ALSO, IT IS REPORTED THAT THE HOSPITAL REFUSES TO MAKE AVAILABLE SUCH RECORDS. HOWEVER, IT WOULD APPEAR FROM THE AVAILABLE RECORDS THAT THE HOSPITAL DID COMMENCE, NO LATER THAN FEBRUARY 1, 1969, USING THE TOTAL VETERAN IN-PATIENT DAYS INSTEAD OF THE ALL INCLUSIVE IN-PATIENT DAYS IN THE FORMULA WHICH ESTABLISHED THE RATE. THEREFORE, WE ARE IN AGREEMENT WITH THE SUGGESTION MADE AT AN INFORMAL MEETING ON JANUARY 25, 1972, BETWEEN MEMBERS OF OUR RESPECTIVE STAFFS THAT YOUR AGENCY ATTEMPT TO RECONSTRUCT FROM THE RECORDS THAT ARE AVAILABLE AN APPROXIMATE ADDITIONAL AMOUNT DUE, AND INCLUDE THAT SUM IN YOUR DEMAND FOR PAYMENT. ABSENT THE HOSPITAL'S AGREEMENT TO MAKE PAYMENT AND/OR TO MAKE AVAILABLE THE PERTINENT RECORDS, THE ONLY MEANS WE CAN PERCEIVE OF PURSUING THE MATTER FURTHER WOULD BE BY WAY OF SUIT IN THE UNITED STATES DISTRICT COURT FOR PUERTO RICO WITH THE CONCOMITANT DISCOVERY PROCEEDINGS THAT WOULD BE MADE AVAILABLE. OF COURSE, A DECISION TO FOLLOW THIS COURSE OF ACTION MUST BE MADE BY THE ATTORNEY GENERAL, IF AND WHEN COLLECTION EFFORTS BY YOUR ADMINISTRATION AND BY THIS OFFICE PROVE TO BE UNSUCCESSFUL.

THE ATTACHMENTS TO YOUR LETTER OF JANUARY 10, INCLUDING THE RECLAIM VOUCHERS AND THE COLLECTION VOUCHER, ARE RETURNED.