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Ninth Circuit Holds DSH Calculation Should Include Patient Days Of Expanded Populations Under � 1115


HLD, v. 33, n. 4 (April 2005)

Ninth Circuit Holds DSH Calculation Should Include Patient Days Of Expanded Populations Under � 1115

Patient days of low-income individuals who are covered by Medicaid under a � 1115 waiver but who would not otherwise be eligible for the program should be accounted for in the Medicaid fraction used in the disproportionate share hospital (DSH) calculation, the Ninth Circuit ruled March 2. The appeals court affirmed a lower court ruling that granted summary judgment in favor of plaintiff hospitals that had excluded patient days of these so-called "expansion populations" from their DSH calculations. Plaintiffs sued the Department of Health and Human Services (DHHS) Secretary in federal district court, arguing they were improperly denied reimbursement for services to low-income individuals based on the Secretary's erroneous interpretation of the DSH calculation.

Congress enacted the DSH statute to provide an additional payment for hospitals that treat a disproportionate share of low-income patients. The DSH calculation is based in part on the Medicaid fraction, which includes all patient days during which an individual was entitled to Medicaid. Initial DHHS regulations interpreted the Medicaid fraction to exclude days of patients who were Medicaid eligible but for which Medicaid payments were not actually made. The rule was later amended to provide that DSH reimbursements should be based on patients' eligibility for Medicaid regardless of actual payment. Confusion continued, however, on whether expansion population days under � 1115 should be included in the calculation. The Secretary issued another rule, characterized as a policy change, that specified the DSH calculation should include individuals eligible for Medicaid under � 1115 waivers. The rule also stated that the Medicaid fraction had not included patients in expanded eligibility populations prior to January 2000.

The Secretary appealed the district court's holding that the DSH statute unambiguously required the Secretary to include expansion populations in the determination of the Medicaid fraction.

The Ninth Circuit affirmed. The DSH statute provides that the Medicaid fraction includes those days attributable to patients who "were eligible for medical assistance under a State plan approved under [title] XIX . . . ." The appeals court held that, contrary to the Secretary's contention, the statutory scheme unambiguously supported the conclusion that � 1115 expansion populations receive medical assistance "under a State plan."

According to the appeals court, the demonstration project statute expressly ties � 1115 waivers to approved state Medicaid plans by providing that their costs be treated as expenditures under a state plan. "[B]ecause expansion population patients are capable of receiving Title XIX assistance, they must be regarded as 'eligible' for it," the appeals court reasoned. In the appeals court's view, Congress clearly intended that expansion populations be included in the DSH calculation.

The appeals court rejected the Secretary's argument that � 1115 provides authority for excluding expansion populations from the DSH calculation because their eligibility derives not from Title XIX but from the demonstration statute itself. "Section 1115 does not establish a new, independent funding source," the appeals court said. Rather, that section allows the Secretary to waive certain federal requirements in approving demonstration projects. "The plain language of the statute requires us to conclude that � 1115 does not confer on the Secretary the discretion to characterize expenditures as Title XIX (Medicaid) expenditures for some purposes and not for others." Accordingly, the appeals court affirmed the district court's judgment.

Portland Adventist Med. Ctr. v. Thompson, No. 03-35612 (9th Cir. Mar. 2, 2005). To read the case, go to$file/0335612.pdf?openelement


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