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 http://www.ca9.uscourts.gov/ca9/newopinions.nsf/CC9E6FCE60171BBD88256FB80059D3AB/$file/0335612.pdf?openelement