The opinion
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Mulberry Square Elder Care :
and Rehabilitation Center, :
Petitioner : No. 371 C.D. 2017
: Argued: April 11, 2018
v. :
:
Department of Human Services, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION
BY JUDGE SIMPSON FILED: JULY 26, 2018
In this complex and mature litigation, Mulberry Square Elder Care and
Rehabilitation Center (Nursing Facility) petitions for review from an order of the
Secretary of the Department of Human Services (Department). The Secretary
affirmed the Bureau of Hearings and Appeals’ (BHA) order adopting the
Administrative Law Judge’s (ALJ) recommendation denying relief and rejecting
Nursing Facility’s billing practice. Specifically, the Department disallowed Nursing
Facility’s practice of recouping unpaid copayments from residents eligible for
medical assistance by billing the Department for the copays as medical expenses.
The Department also concluded this practice constituted balance-billing prohibited
by applicable law. Nursing Facility argues the Department did not promulgate a
regulation explicitly precluding its billing practice. Discerning no error below, we
affirm.
I. Background
This case involves the interplay between the Medicare and Medicaid
programs, and the ultimate source of funding for covered services, when a participating
provider renders services to individuals eligible for medical assistance under both
programs. Nursing Facility billed the Department for amounts corresponding to
services for which payment was limited to the Medicaid rate, resulting in the
Department paying more than the maximum Medicaid rate for the services.
A. Statutory Framework
1. Generally
Medicaid, established by Title XIX of the Social Security Act, 42
U.S.C. §§1396–1396v, is a cooperative federal-state program through which the
federal government funds the states to provide medical assistance to low-income
persons. Participating states1 must submit a “State Plan” to the federal Department
of Health and Human Services for approval. The State Plan establishes financial
eligibility criteria and identifies covered services and corresponding rates. The federal
Department of Health and Human Services approved Pennsylvania’s State Plan, the
Medical Assistance (MA) Program.
In addition to need-based Medicaid, medical assistance is available to
individuals aged 65 or older under Title XVIII of the Social Security Act through
Medicare. Medicare is comprised of two principle parts: Part A (for inpatient hospital
and post-hospital care), 42 U.S.C. §§1395c-1395i-5; and Part B (for physician
services and outpatient services), 42 U.S.C. §§1395j-1395w-4. Individual enrollment
1
States that elect to participate in Medicaid must comply with all applicable federal
statutory and regulatory requirements. See 42 U.S.C. §1396a; 42 C.F.R. Part 430.
2
in Medicare Part A is automatic based on age. Enrollment in Part B is voluntary,
offering participating individuals supplemental insurance for services not covered by
Part A.
2. Cost-Sharing/Copay Limits
Part B imposes cost-sharing obligations on participating individuals for
co-insurance, including deductibles, monthly premiums, and copays. Generally, this
means an individual enrolled in Medicare Part B will pay co-insurance amounts,
including copays corresponding to Part B services. As the elderly poor may not have
the financial means to pay cost-sharing amounts, Medicaid funds are used to enroll
individuals qualifying for both Medicare and Medicaid, known as “dual eligibles,”
in Medicare Part B by paying their cost-sharing obligations. 42 U.S.C. §1395v,
§1396a(a)(10)(E). Once dual eligibles are enrolled, Medicare directly reimburses
providers for 80% of the reasonable charges for Part B services. Part B copays,
including those payable through Medicaid, are intended to cover the remaining 20%.
However, Congress amended Medicaid through Section 4714 of the
Balanced Budget Act of 1997, regarding state liability for Medicare cost-sharing
(1997 Amendment), 42 U.S.C. §1396a(n). The 1997 Amendment clarified that a
state is not required to make any payment for any incurred expenses “relating to
payment for … copayments for [M]edicare cost-sharing to the extent the payment
under [Medicare] for the service would exceed the payment amount that otherwise
would be made under the State Plan.” Id. at §1396a(n)(2) (emphasis added).
3
The 1997 Amendment expressly caps a state’s payment at the Medicaid
rate for Medicare cost-sharing, including Part B copays. This Medicaid rate cap
applies even when the Medicare rate is equal to or greater than the rate set forth in
the State Plan, thereby eliminating a state’s payment obligation. 42 U.S.C.
§1396a(n)(3). The 1997 Amendment also provided in pertinent part:
(A) for purposes of applying any limitation under title XVIII
on the amount that the [qualified Medicare beneficiary] may
be billed or charged for the service, the amount of payment
made under title XVIII plus the amount of payment (if
any) under the State plan shall be considered to be
payment in full for the service;
(B) the [qualified Medicare beneficiary] shall not have any
legal liability to make payment to a provider … for the
service; and
(C) any lawful sanction that may be imposed upon a
provider … for excess charges under this title or title
XVIII shall apply to the imposition of any charge imposed
upon the individual in such case.
Id. (emphasis added). Thus, under this provision, the legal liability of a qualified
Medicare beneficiary, such as the legal liability of a resident in a nursing facility to
pay that facility, is limited.
The Department administers the MA Program (Medicaid) for the
Commonwealth. The Human Services Code (the Code)2 vests the Department with
the authority to establish rules, regulations, and standards for programs it administers.
The Department’s administration of the MA Program must comply with federal law.
Thus, the approved State Plan must comply with federal law.
2
Act of June 13, 1967, P.L. 31, as amended, 62 P.S. §§101-1503 (formerly the Public
Welfare Code, retitled in 2015 as the Human Services Code).
4
Shortly after enactment of the 1997 Amendment, the Department issued
a notice in the Pennsylvania Bulletin that it was amending the State Plan “to specify
that the Department will not pay Medicare cost-sharing amounts related to any
services to the extent that the payments made under the Medicare Program exceed
the payments that would be made by the [MA] Program for such services if provided
to an eligible [MA] recipient.” Reproduced Record (R.R.) at 745a (emphasis added).
The amendment to the State Plan, effective January 1, 1998, conformed to federal
law as set forth in the 1997 Amendment. Id.
As amended, the State Plan provides the MA Program will pay for
unsatisfied Medicare cost-sharing for Part B services provided to dual eligibles up
to the fee allowable under the MA Program for covered services. See R.R. at 750a.
It specified MA “will not pay Medicare cost-sharing” when the Medicare payment
for the service “exceeds the applicable [MA] fee or payment” for the service. Id.
(emphasis added).
The Department explained its change to the State Plan in MA Bulletin
No. 35-98-10, 36-98-10 (MA Bulletin). The MA Bulletin echoed the language of the
1997 Amendment, stating the MA fee – which is Pennsylvania’s Medicaid rate for
services – “is the maximum payment that may be received by the facility for
services provided to both [dual eligible] residents and non-QMB[3] MA residents.”
R.R. at 669a (bold in original). It also restated this Medicaid rate cap applied to
Medicare cost-sharing amounts, including Part B copays.
3
The abbreviation QMB refers to qualified Medicare beneficiaries.
5
B. MA Participation and Payments to Nursing Facilities
The MA Program pays nursing facility providers a “per diem rate” on
behalf of MA-eligible residents for room, board, and related services. 55 Pa. Code
§1187.2 (corresponding to facility rate of payment per resident day). The MA
Program also pays the allowable fees for Medicare Part B services provided to MA-
eligible residents in participating nursing facilities. However, the MA Program does
not pay any fees for Part B services if the amount paid to the nursing facility by
Medicare covers or exceeds the fee set by the MA Program. Because the MA fees
are “almost always lower” than the amount Medicare pays, participating providers
may receive only 80% of the reasonable charge for Part B services from Medicare,
with no payment from the MA Program for the remaining 20% (i.e., Part B copay).
R.R. at 1172a (ALJ Recommendation).
A patient “who is eligible for MA and has monthly income ([Social
Security], pensions, etc.) may be responsible for a patient pay liability to the facility.”
ALJ’s Recommendation, 7/28/16, Finding of Fact (F.F.) No. 7. The local County
Assistance Office calculates the amount based on the patient’s financial eligibility
(Patient Liability). This Patient Liability is subtracted from the per diem rate paid
to a nursing facility under the MA Program. For example, if the monthly Patient
Liability is $1,000, and the MA per diem rate is $200, equaling $6,000 (30 days x
$200/day), the Department will pay a nursing facility $5,000 ($6,000-$1,000). Id.
at n.2.
Providers that elect to participate in the MA Program enter into provider
agreements setting the terms for MA-covered services. Participating providers must
6
agree to accept reimbursement from the state at its Medicaid rate as “payment in full.”
42 C.F.R. §447.15. Providers are prohibited from demanding additional payment
from patients. 42 U.S.C. §1396a(a)(25)(C), §1396o, §1396(n)(3)(B).
In Pennsylvania, participating providers are subject to Pennsylvania’s
Provider Handbook, PROMISe™. Section 4.9 of the Provider Handbook explains that
for dual eligibles, “the Medicare [P]rogram must be billed first if the service is covered
by Medicare. Payment will be made by MA for the Medicare Part B deductible and
co[-]insurance [such as copays] up to the MA fee.” R.R. at 573a (emphasis added).
So when the MA fee is insufficient, Part B copays are left unpaid.
Deductions from the Patient Liability amount are permitted for “Other
Medical Expenses.” “Other Medical Expenses” are costs of medical goods or
services “incurred during that month.” F.F. No. 10 (emphasis added). The nursing
facility debits the Patient Liability for these “other medical expenses” that are
ultimately paid under the MA Program. The nursing facility then bills the MA
Program for the amount of the “other medical expenses” to offset the amount
subtracted from the Patient Liability. Billing for “other medical expenses” in this
manner, and deducting costs from Patient Liability, is permitted. F.F. No. 10.
In practice, when a nursing facility resident receives a pair of glasses
that costs $300, the glasses qualify as “other medical expenses.” Id. at n.3. In this
example, a nursing facility deducts the $300 cost incurred for the glasses from the
resident’s $1,000 Patient Liability, resulting in a Patient Liability of $700.
Importantly, a reduction in the otherwise unrecoverable Patient Liability for “other
7
medical expenses” effectively increases the amount paid to a nursing facility by the
MA Program. Using the eyeglasses example, because the Department pays the
nursing facility its per diem rate for room and board ($6,000) minus the Patient
Liability ($700) through the MA Program, the MA Program pays the nursing facility
$5,300, instead of $5,000 in the absence of a deduction for “other medical expenses.”
C. Disputed Billing Practice
This case involves Nursing Facility’s attempt to recover part of the
otherwise unrecoverable Part B copays by utilizing its residents’ Patient Liability
amounts.
In 2009, on the advice of counsel, Nursing Facility, and other nursing
facilities owned by Guardian Elder Care LLC (Guardian), began billing the MA
Program for dual eligible residents’ Part B copays by including them as an “other
medical expense” (Disputed Billing Practice).4 Most of Nursing Facility’s residents
are dual eligibles. Using the Disputed Billing Practice, Nursing Facility attempted
to recoup unpaid copays corresponding to Part B services by deducting the amount
of the copays from Patient Liability amounts as it is permitted to do for “other
medical expenses.” Then, Nursing Facility billed the Department for Part B copays
as for any other “other medical expenses.” Because they were included as routine
“other medical expenses,” the MA Program paid the Part B copays. In so billing,
Nursing Facility sought more than the MA fee for the Part B service. As a result,
the MA Program paid more than the maximum MA fee.
4
Prior to 2009, Nursing Facility did not bill the MA Program for Part B copays.
8
Nursing Facility receives 80% of the “reasonable charge” for Part B
services directly from Medicare. In almost all cases, the Medicare amount (80%) is
higher than the maximum allowed fee for the same service under the MA Program.
R.R. at 279a. Because providers agree to accept the MA fee as payment in full, and
Medicare paid the MA fee amount, providers may not recover the Part B cost-
sharing, i.e., copays, from the state. Nursing Facility engaged in the Disputed Billing
Practice in order to recoup the remaining 20% corresponding to Part B copays.
Nursing Facility executed a provider agreement with the Department,
to participate in the MA Program, effective January 1, 1997. R.R. at 757a (Provider
Agreement). Nursing Facility agreed to comply with applicable federal and state law
governing the Medicare and Medicaid programs. As a participating provider, Nursing
Facility received the Provider Handbook explaining proper billing practices.
D. Procedural History
This litigation stems from the Department’s review of Nursing Facility
in 2011 for the billing cycle of January 2009 through December 2009. During this
period, Nursing Facility and other Guardian-owned facilities engaged in the
Disputed Billing Practice.
The Department prepared a Field Operations Review Summary seeking
claims adjustments based on the Disputed Billing Practice. It disallowed the
Disputed Billing Practice for using incorrect Patient Liability amounts, and for
billing Part B copays as “other medical expenses.” Nursing Facility appealed the
Department’s Field Summary and related claims adjustments in April 2011.
9
Nursing Facility agreed to an administrative hearing to allow the
underlying appeal as a test case, such that the ruling would apply to all 22 Guardian
facilities that engaged in the Disputed Billing Practice.5
The ALJ held a two-part hearing in February 2015. The ALJ found the
testimony of all of the witnesses credible. F.F. No. 21. Based on the briefs and the
evidence, the ALJ determined the Department properly denied the claims in which
Nursing Facility used its Disputed Billing Practice to recoup Part B copays as “other
medical expenses.” Accordingly, the ALJ denied relief. Nursing Facility appealed
to the BHA.
The BHA issued an order adopting the ALJ’s recommendation.
Nursing Facility timely requested reconsideration. After granting reconsideration,
the Secretary upheld the BHA’s decision. Nursing Facility then petitioned this Court
for review.
After briefing and argument before this Court en banc, the matter is
ready for disposition.
II. Issues
The ultimate issue before this Court is whether the Department properly
disallowed Nursing Facility from recouping residents’ Part B (e.g., physician and
physical therapy services) copays by deducting them from Patient Liability, and
5
Guardian filed appeals related to the Disputed Billing Practice on behalf of three of its
other facilities: Jefferson Hills Manor (Dkt. #XXX-XX-XXXX); Lakeview Senior Care (Dkt. #006-
10-0196); and Scottsdale Manor (Dkt. #XXX-XX-XXXX).
10
billing the Department for the copays as “other medical expenses.” The parties also
dispute whether Nursing Facility engaged in balance-billing.
III. Discussion
On appeal,6 Nursing Facility argues the Department had no basis for
disallowing its attempt to recover Medicare Part B copays through the Disputed
Billing Practice. Specifically, it challenges the MA Bulletin as grounds to bar the
Disputed Billing Practice when the Department did not promulgate it as a regulation.
Further, it maintains the regulation pertaining to Medicare co-insurance, 55 Pa. Code
§1187.102, applies only to Medicare Part A (relating to inpatient facility care).
Nursing Facility also contends deducting Part B copays from the Patient Liability
does not constitute balance-billing because the MA Program pays the Part B copays,
not the residents.
The Department responds that the Disputed Billing Practice directly
violates federal and state law. The Department maintains it may enforce federal law
without implementing a specific regulation. It also argues the Nursing Facility’s
deduction of copays corresponding to Part B services (e.g., physical therapy) from
Patient Liability to recover the unpaid 20%, which is the balance of the reasonable
charge paid by Medicare for the Part B service, constitutes balance-billing.
6
Our review is limited to whether the “adjudicatio[n] [is] in accordance with the law as
well as agency regulations or procedures, whether any constitutional rights were violated, and
whether the findings of fact are supported by substantial evidence.” Univ. of Pittsburgh, Sys. of
Higher Educ.,W. Psychiatric Inst. & Clinic v. Dep’t of Pub. Welfare, 616 A.2d 149, 152 n.3 (Pa.
Cmwlth. 1992); see Schell v. Dep’t of Pub. Welfare, 80 A.3d 844 (Pa. Cmwlth. 2013).
11
A. Source of Agency Authority
First, we consider Nursing Facility’s contention that the Department
lacks authority for disallowing the Disputed Billing Practice. Essentially, it asserts
the sole source for the Department’s authority to disallow the practice is the MA
Bulletin. Because the MA Bulletin was not promulgated as a regulation, and is
instead a statement of policy, Nursing Facility maintains it is unenforceable.
We discern no merit in Nursing Facility’s contentions. At the outset,
we disagree that the Department’s position depends upon the MA Bulletin’s validity
as a regulation. The Department had additional legal grounds for disallowing the
Disputed Billing Practice, found in federal and state law and documents governing
Nursing Facility’s participation in the MA Program.
In focusing on the MA Bulletin, Nursing Facility digresses from the
ultimate issue in this case: whether the Disputed Billing Practice is disallowed.
Regardless, the MA Bulletin represents an example of the Department’s interpretive
authority.
1. MA Fee Cap
Under the Disputed Billing Practice, Nursing Facility received payments
from the MA Program – in excess of the MA fee – corresponding to Part B copays.
By so doing, Nursing Facility disregarded federal and state laws that provide the MA
Program shall be a payer of last resort and is not responsible to pay more than the
MA fee for a covered service. These laws apply regardless of any shortfall providers
experience when the MA fee is insufficient to cover 100% of the reasonable charge
for Part B services.
12
The 1997 Amendment clarified that Medicaid, 42 U.S.C. §1396a(n),
did not require state Medicaid programs to pay Medicare cost-sharing amounts when
to do so would require states to pay more than the Medicaid rate. Recognizing that
providers may not receive 100% of the reasonable charge with this limitation, the
1997 Amendment prohibited providers from holding patients liable for the shortfall.
In a series of cases decided around the time Congress enacted the 1997
Amendment, a number of our sister jurisdictions construed its effect. Most courts
held a state may limit its cost-sharing obligation to the Medicaid fee. See McCreary
v. Offner, 172 F.3d 76 (D.C. Cir. 1999); Paramount Health Sys., Inc. v. Wright, 138
F.3d 706 (7th Cir. 1998); Blecker v. State, 733 A.2d 540 (N.J. Super. 1999) (holding
federal amendment explicitly permitted states to limit their Medicare cost-sharing
payments to Medicaid rates; 1997 Amendment clarified existing law); Kulkarni v.
Leean, No. 96-C-884, 1997 WL 527674 (W.D. Wis. June 23, 1997) (upholding cap
on provider compensation at Medicaid rate).7 But see Williams v. Hank’s Amb.
Serv., Inc., 699 So.2d 1230 (Ala. 1997) (upholding trial court decision that state must
pay Medicare rate, not merely Medicaid rate). The courts recognized that while the
providers looked to the state Medicaid program for the 20% copay, the Medicaid
rates are typically less than the Medicare reasonable charges for the same service.
As a result, copays are not recoverable from the state.
Because dual eligibles are funded by both Medicare and Medicaid, a
provider’s ability to obtain the 20% copay from a dual eligible resident is restricted
7
Providers argued the state plan violated Medicaid because the state administrator did not
pay them the difference between the Medicare reasonable rate and the 80% paid by Medicare (i.e.,
Part B copay) for services rendered to dual eligibles. The federal district court disagreed, reasoning
the agency’s policy choice for administering Medicaid funds was proper and entitled to deference.
13
by the Medicaid cap contained in the 1997 Amendment. When a provider elects to
participate in the MA Program, it agrees to accept payments under the MA Program
as “payment in full.” 42 U.S.C. §1396a(n)(3); 42 C.F.R. §447.15. That rule applies
regardless of whether Medicare funded the entire amount of the MA Program fee
such that the MA Program paid nothing.
“By opting for reimbursement from Medicaid, a provider purchases
certainty; a guarantee of partial payment in lieu of possibly full payment or possibly
no payment at all.” Evanston Hosp. v. Hauck, 1 F.3d 540 (7th Cir. 1993). Should a
provider wish “to preserve its right to seek its entire customary charge,” the provider
may choose not to participate in the MA Program. Nickel v. Workers’ Comp.
Appeal Bd. (Agway Agronomy), 959 A.2d 498, 506 (Pa. Cmwlth. 2008).
Federal law precludes participating providers from receiving payment
above the amount paid by Medicaid. Id. “Service providers who participate in the
Medicaid program are required to accept payment of the state-denoted Medicaid fee
as payment in full ... and may not attempt to recover any additional amounts
elsewhere.” Id. at 507 (emphasis added) (quoting Rehab. Ass’n of Va., Inc. v.
Kozlowski, 42 F.3d 1444, 1447 (4th Cir. 1994), cert. denied, 516 U.S. 811 (1995));
see also Lizer v. Eagle Air Med Corp., 308 F. Supp. 2d 1006, 1009 (D. Ariz. 2004)
(federal regulations “preven[t] providers from billing any entity for the difference
between their customary charge and the amount paid by Medicaid.”).
Here, in conformity with federal law, the State Plan limits the MA
Program’s responsibility for Medicare cost-sharing to the MA fee. R.R. at 750a.
14
Indeed, the State Plan specifies that “[MA] will not pay Medicare cost-sharing
amounts related to any service to the extent that the payment made under the
Medicare Program for the service exceeds the applicable [MA] fee or payment.” Id.
(emphasis added). We “grant great deference to that plan ….” Presbyterian Med.
Ctr. of Oakmont v. Dep’t of Pub. Welfare, 792 A.2d 23, 27 (Pa. Cmwlth. 2002).
The State Plan authorized the Department to eliminate its obligations
for Medicare cost-sharing for dual eligibles when a provider received payment from
Medicare Part B in an amount equal to or greater than the MA fee. R.R. at 750a.
Importantly, Nursing Facility does not dispute that in almost all cases, the Medicare
payment for Part B services exceeds the MA fee for the same service. R.R. at 1172a.
Under the Disputed Billing Practice, Nursing Facility billed the
Department for Part B copays, causing the MA Program to pay more than the MA
fee for the service. Thus, Nursing Facility disregarded the MA cap in the State Plan.
Because the Disputed Billing Practice is contrary to federal law and the State Plan,
the Department properly denied Nursing Facility’s appeal.
2. Regulatory Authority
Notwithstanding that federal law and the State Plan limit providers to
payments up to the MA fee for Part B services, Nursing Facility asserts Department
regulation, 55 Pa. Code §1187.102 (Regulation), allows the Disputed Billing Practice.
We disagree.
15
Section 1187.102,8 entitled “Utilizing Medicare as a resource,” refers to
Medicare Part B and “per diem rates” corresponding to Medicare Part A. Id. The
parties agree the Regulation pertains primarily to Part A services. With regard to
Part B services, it provides Medicare benefits shall be exhausted before any payment
is made under the MA Program. 55 Pa. Code §1187.102(b). Unlike the provisions
pertaining to Part A (inpatient facility care), the Regulation does not set a cap for
Part B (physician/therapy services) co-insurance. Unlike the State Plan, the Regulation
does not address a cap on the MA Program’s responsibility for Part B cost-sharing.
8
Section 1187.102 states in full:
(a) An eligible resident who is a Medicare beneficiary, is receiving care
in a Medicare certified nursing facility and is authorized by the Medicare
Program to receive nursing facility services shall utilize available
Medicare benefits before payment will be made by the MA Program. If
the Medicare payment is less than the nursing facility’s MA per diem rate
for nursing facility services, the Department will participate in payment of
the co[-]insurance charge to the extent that the total of the Medicare
payment and the Department’s and other co[-]insurance payments do not
exceed the MA per diem rate for the nursing facility. The Department will
not pay more than the maximum co[-]insurance amount.
(b) If a resident has Medicare Part B coverage, the nursing facility shall
use available Medicare Part B resources for Medicare Part B services
before payment is made by the MA Program.
(c) The nursing facility may not seek or accept payment from a source
other than Medicare for any portion of the Medicare co[-]insurance
amount that is not paid by the Department on behalf of an eligible resident
because of the limit of the nursing facility’s MA per diem rate.
(d) The Department will recognize the Medicare payment as payment in
full for each day that a Medicare payment is made during the Medicare-
only benefit period.
(e) The cost of providing Medicare Part B type services to MA recipients
not eligible for Medicare Part B services which are otherwise allowable
costs under this part are reported in accordance with §1187.72 (relating to
cost reporting for Medicare Part B type services).
55 Pa. Code §1187.102.
16
However, the absence of an express cap on co-insurance with regard to
Part B services does not mean the Regulation authorizes billing the MA Program for
Part B copays, as Nursing Facility suggests. The Regulation is merely silent.
Moreover, the Department has other sources of authority, through rulemaking and
policy-making, at its disposal.
The Code vests the Department “with responsibility for administration
of the [MA] [P]rogram … and for ‘establish[ing] rules, regulations and standards ...
as to eligibility for assistance and as to its nature and extent.’” Dep’t of Pub. Welfare
v. Devereux Hosp. Tex. Treatment Network (K.C.), 855 A.2d 842, 846 (Pa. 2004)
(quoting Section 403(b) of the Code, 62 P.S. §403(b)). Pursuant to its authority, the
Department enacts regulations and policies to ensure the MA Program implements
the State Plan and is consistent with federal law. This Court defers to “[the
Department’s] interpretation of its own regulations unless they are unreasonable or
inconsistent with federal regulations.” Presbyterian Med. Ctr., 792 A.2d at 27.
Agency “regulations”9 must be promulgated pursuant to the notice and
comment procedures contained in the Commonwealth Documents Law10 in order to
9
Section 102 of the Commonwealth Documents Law defines “regulation” as:
[A]ny rule or regulation, or order in the nature of a rule or regulation,
promulgated by an agency under statutory authority in the administration
of any statute administered by or relating to the agency, or prescribing the
practice or procedure before such agency.
Act of July 31, 1968, P.L. 769, as amended, 45 P.S. §1102.
10
Act of July 31, 1968, P.L. 769, as amended, 45 P.S. §§1102–1602.
17
have the force and effect of law. Hillcrest Home, Inc. v. Dep’t of Pub. Welfare, 553
A.2d 1037 (Pa. Cmwlth. 1989). However, an agency may also set forth guidelines
in “statements of policy.”11
In terms of their practical effect, our Supreme Court explained the
distinction between statements of policy and regulations as follows: “A general
statement of policy … announces the course which the agency intends to follow in
future adjudications.” Pa. Human Relations Comm’n v. Norristown Area Sch. Dist.,
374 A.2d 671, 679 (Pa. 1977). By contrast, “[a] properly adopted substantive rule
establishes a standard of conduct which has the force of law,” establishing a “binding
norm.” Id.; see Prof’l Ins. Agents Ass’n of Pa., Md. & Del., Inc. v. Koken, 777 A.2d
1179, 1186 (Pa. Cmwlth. 2001).
The Department exercised its interpretive authority construing the 1997
Amendment in the MA Bulletin. In addition to emphasizing the MA rate cap
imposed on cost-sharing for Part B services quoted earlier in this opinion, the MA
Bulletin states, in pertinent part:
Nursing facilities are reminded that they may not seek or
accept payment for an MA-covered service or item from a
source other than Medicare for any portion of the
Medicare co[-]insurance amount [e.g., Part B copays] that
11
Section 102 of the Commonwealth Documents Law defines “statement of policy” as:
[A]ny document, except an adjudication or a regulation, promulgated by
an agency which sets forth substantive or procedural personal or property
rights, privileges, immunities, duties, liabilities or obligations of the public
or any part thereof, and includes, without limiting the generality of the
foregoing, any document interpreting or implementing any act of
Assembly enforced or administered by such agency.
45 P.S. §1102.
18
is not paid by the Department on behalf of an eligible
resident because of the limit of the nursing facilities MA
per diem rate or MA fee, and that they may not claim
unreimbursed cost-sharing amounts as deductions or
expenses against patient pay amounts on the [MA] Long
Term Care Invoice (MA 309C).
R.R. at 669a (emphasis added). The MA Bulletin describes the Disputed Billing
Practice and explains it is expressly proscribed by law.
The MA Bulletin is consistent with federal law and the State Plan which
provides that the MA Program will pay Medicare cost-sharing amounts (like Part B
copays) if the payment made by Medicare for the services is less than the maximum
allowable MA Fee. Indeed, the MA Bulletin cited the 1997 Amendment and
discussed its effect. It confirmed that the MA per diem rate or fee is the maximum
payment that may be received by a facility for services provided to MA residents.
In offering a specific example of prohibited billing, the MA Bulletin announced the
Department’s construction of federal law, and its intention for future adjudications.
As such, the MA Bulletin reflects the Department’s interpretive authority. Borough
of Bedford v. Dep’t of Envtl. Prot., 972 A.2d 53 (Pa. Cmwlth. 2009).
As a statement of policy, the MA Bulletin is not subject to the
publication requirements contained in Section 201 of the Commonwealth Documents
Law, 45 P.S. §1201. See Norristown Area Sch. Dist. Further, notice and comment
is not always required, particularly when agency practice brings the Commonwealth
into compliance with federal law. Montgomery Cty. Geriatric & Rehab. Ctr. v.
Dep’t of Pub. Welfare, 462 A.2d 325 (Pa. Cmwlth. 1983); see Section 204 of the
19
Commonwealth Documents Law, 45 P.S. §1204. Accordingly, we reject Nursing
Facility’s premise that the MA Bulletin constitutes a form of improper rulemaking.
Relevant here, the MA Bulletin is “remind[ing]” nursing facilities about
proper billing. R.R. at 669a. Indeed, for more than 10 years following issuance of
the MA Bulletin, Nursing Facility did not attempt to recoup Part B copays from the
MA Program. F.F. No. 12. Nursing Facility did not undertake the Disputed Billing
Practice until 2009, without any intervening change in law or billing procedures.
Moreover, rendering the MA Bulletin invalid would not change the
legality of the Disputed Billing Practice. The Department has a duty to implement
the MA Program in accordance with federal law. As a participating provider,
Nursing Facility has a duty to comply with applicable federal and state law,
including the State Plan. There is no dispute that the State Plan mirrors the 1997
Amendment and caps payments under the MA Program at the maximum allowable
fee. The Department explained its corresponding amendment to the State Plan in
practical terms in the MA Bulletin. Because the MA Bulletin merely explains how
the Department construed existing law, it does not constitute improper rulemaking.
In this procedural posture, Nursing Facility bore the burden to prove the
propriety of the Disputed Billing Practice. Harston Hall Nursing & Convalescent
Home, Inc. v. Dep’t of Pub. Welfare, 513 A.2d 1097 (Pa. Cmwlth. 1986); 55 Pa. Code
§41.153. The Department did not bear the burden of proving the propriety of its
rulemaking. Cf. Success Against All Odds v. Dep’t of Pub. Welfare, 700 A.2d 1340
20
(Pa. Cmwlth. 1997)12 (original jurisdiction action challenging Department’s proposed
rule change eliminating aid payments based on change in federal law eliminating
requirement that states make such payments).
Significantly, Nursing Facility cites no legal authority for recovering
more than the MA fee from the Department. The State Plan states the MA fee is the
maximum amount that may be paid for Part B services provided to dual eligibles.
By seeking more than the MA fee, Nursing Facility also violated its Provider
Agreement to accept Medicaid payments as payment in full. See 42 C.F.R. §447.15.
Further, Nursing Facility cites no authority for claiming Part B copays
as “other medical expenses.” We give the Department’s determination as to what
constitutes reimbursable expenses under the MA Program “controlling weight unless
plainly erroneous or inconsistent with the regulation or underlying statute.” Dep’t
of Pub. Welfare v. Forbes Health Sys., 422 A.2d 480, 482 (Pa. 1980). We discern
no such inconsistency here.
12
In Success Against All Odds v. Department of Public Welfare, 700 A.2d 1340 (Pa.
Cmwlth. 1997), the petitioners sought declaratory and injunctive relief to preclude the Department
from implementing a rule change following a change in federal law (Rule Change). Specifically,
the Rule Change eliminated pass-through payments for child support when federal law removed the
payment requirement. The prior law required states receiving federal aid to pay the family the first
$50 of support. The new law allowed states the discretion to continue or discontinue the payment.
The General Assembly amended the Code stating the Department would continue payment
of the pass-through only “as required by Federal law.” Id. at 1343 (bold in original; quoting
Code provision). Because federal law removed the requirement, upon which the payment was
contingent, this Court concluded the Rule Change eliminating the pass-through payment followed
the statutory mandate in the Code. Because the Code provision was self-executing, we reasoned
the Rule Change was not subject to the Commonwealth Documents Law.
Notwithstanding the procedural differences between this appeal and the validity challenge
in Success Against All Odds, like the Rule Change, the MA Bulletin did not alter existing law. It
did not impose a new requirement or procedure, necessitating notice and comment. Rather, it
explained the Department’s construction of the 1997 Amendment, which clarified existing law.
21
Ultimately, Nursing Facility failed to establish the Disputed Billing
Practice complied with federal and state law. Harston Hall Nursing & Convalescent
Home. Therefore, the Department did not err in denying Nursing Facility’s appeal.
B. Balance-Billing
Next, we consider the BHA’s conclusion that Nursing Facility engaged
in balance-billing.
Medicaid provides that dual eligibles shall have no “legal liability to
make payment to a provider” for Medicare cost-sharing expenses. 42 U.S.C.
§1396a(n)(3)(B) (emphasis added). Holding patients liable for charges that remain
unpaid by Medicare or Medicaid is balance-billing. This Court defined balance-
billing “as the practice whereby a provider bills the patient directly for the balance
of the reasonable costs and charges if the Medicare or Medicaid program does not
pay the full amount of the reasonable costs and charges.” Nickel, 959 A.2d at 504
n.10; see also Pa. Med. Soc’y v. Snider, 29 F.3d 886 (3d Cir. 1994), superseded by
statute, 1997 Amendment, as recognized in Beverly Cmty. Hosp. Ass’n v. Belshe,
132 F.3d 1259 (9th Cir. 1997).
Nursing Facility maintains that the Disputed Billing Practice of
debiting the Patient Liability by the amount of the Part B copay does not hold the
patient “legally liable” for the copay. Nursing Facility emphasizes that residents do
not pay more than their Patient Liability when the copays are charged against it, and
in fact, the Department pays the amount. However, this argument ignores testimony
regarding the Disputed Billing Practice and how the Patient Liability functions.
22
Nursing Facility held facility residents liable for the Part B copays by
deducting the amount of the copay from their Patient Liability. F.F. No. 14. Patient
Liability is the means through which a provider receives payment from a patient.
R.R. at 116a. It represents the amount a dual eligible “resident is required to pay for
their cost of care.” Id. The Department permits deductions from Patient Liability
for “other medical expenses,” which are monthly medical costs incurred13 by
residents. 55 Pa. Code §181.452. By classifying them as “other medical expenses,”
Nursing Facility deemed Part B copays a cost residents were required to pay toward
their care. R.R. at 121a (Guardian’s Chief Financial Officer described Part B copays
as an amount “the resident owes”).
For example, for a $1,000 Part B service, Medicare pays Nursing
Facility directly for 80%, or $800. The Part B copay is 20%, or $200. The amount
of the copay represents the portion of the Medicare reasonable charge that is unpaid
by Medicare or Medicaid (i.e., the balance). The MA Program does not pay the
copay because its liability is capped at the MA fee. To recover the unpaid copay,
Nursing Facility debits the Patient Liability by $200. By including the Part B copays
in a resident’s obligations, as a cost the resident owed, Nursing Facility holds the
resident liable for the payment of the unpaid balance of a bill.
Nursing Facility admitted that through the Patient Liability it billed the
resident for “other medical expenses,” including Part B copays. In describing its
sources of income, the Chief Financial Officer for Guardian testified, “[t]he resident
would see a bill for what monthly was their obligation [the Patient Liability], and
13
“Incur” is defined as “to become liable or subject to.” AM. HERITAGE DICTIONARY 653
(2nd Coll. ed. 1985).
23
then [the Department] was also be [sic] billed for the amount that [it] would owe the
facility.” R.R. at 136a-37a. He explained the Disputed Billing Practice thus billed
“[b]oth” the patient and the Department. Id. Based on the record, the ALJ found
Nursing Facility billed dual eligibles for Part B copays through Patient Liability.
F.F. No. 14.
That the amount is ultimately paid by the Department does not save the
Disputed Billing Practice from constituting balance-billing. Nursing Facility would
be unable to bill the Part B copays as “other medical expenses” if it did not first
deem them costs owed by the residents. Absent holding the patient liable for the
Part B copays through the Patient Liability (i.e., the amount the patient is responsible
to pay for care), Nursing Facility obtains no access to the Department’s MA Program
funds.
As a factual predicate, Nursing Facility’s billing of Part B copays as
“other medical expenses” depends on its entitlement to receive the amount of the
Part B copays as costs incurred by the resident. Pursuant to the 1997 Amendment,
and the State Plan implementing it, Nursing Facility is not permitted to bill Part B
copays to the Department if to do so exceeds the MA fee for the service; it is also
not permitted to bill the patients for the difference between the reasonable charge
and the MA fee. Here, Nursing Facility did both. See R.R. at 1179a (ALJ
Recommendation).
In sum, by deducting the amount of Part B copays from Patient Liability,
and representing them as costs incurred, Nursing Facility held patients liable for the
24
payments.14 Patient Liability is the means by which Nursing Facility billed residents.
R.R. at 136a-37a. By utilizing that mechanism, and including the Part B copays as
costs that residents incurred, Nursing Facility held dual eligibles legally liable for
their payment without collecting the amount from the residents. By so recouping
the unpaid balance of the Medicare reasonable charge through Patient Liability,
Nursing Facility engaged in balance-billing. Thus, the Department did not err in so
concluding.
C. Remand
Lastly, we address Nursing Facility’s request for a remand to the
Department to analyze the validity of the MA Bulletin. Nursing Facility argues the
Department abused its discretion when it did not issue any findings or conclusions
as to its validity challenge. Again, we disagree.
As explained above, the Disputed Billing Practice is not permitted by
federal law, the State Plan or the Provider Agreement. In the administrative appeal,
Nursing Facility bore the burden of proof, not the Department. Nursing Facility
failed to meet its burden. Accordingly, the alleged status of the MA Bulletin as an
unpromulgated regulation makes no difference to the outcome here. Because the
Department did not need to assess the MA Bulletin to decide Nursing Facility’s
appeal, a remand to address its validity is unnecessary.
14
Nursing Facility repeatedly asserts it “never sought to hold a dual eligible resident
‘legally liable’ for any Medicare cost-sharing amounts.” Pet’r’s Br. at 8, 16. It cites no legal
authority for imposing subjective intent as an element of balance-billing.
25
IV. Conclusion
For the foregoing reasons, we affirm the Department’s order denying
Nursing Facility’s appeal.
ROBERT SIMPSON, Judge
Judge McCullough dissents.
26
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Mulberry Square Elder Care :
and Rehabilitation Center, :
Petitioner : No. 371 C.D. 2017
:
v. :
:
Department of Human Services, :
Respondent :
ORDER
AND NOW, this 26th day of July, 2018, the order of the Department of
Human Services is AFFIRMED.
ROBERT SIMPSON, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Mulberry Square Elder Care :
and Rehabilitation Center, :
Petitioner :
:
v. : No. 371 C.D. 2017
: ARGUED: April 11, 2018
Department of Human Services, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
CONCURRING OPINION
BY JUDGE CEISLER FILED: July 26, 2018
I agree that the majority has accurately applied the Medicaid amendment
through Section 4714 of the Balanced Budget Act of 1997, regarding state liability
for Medicare cost-sharing (1997 Amendment), 42 U.S.C. §1396a(n), that clarified
and limited the legal liability of a qualified Medicare beneficiary such that Mulberry
Square Elder Care and Rehabilitation Center (Nursing Facility) could not recover
part of the otherwise unrecoverable Part B copay by utilizing its residents’ Patient
Liability amounts. As such, I concur in the result reached by this Court.
I write separately, however, because I respectfully disagree with the
majority’s view that the Secretary of the Department of Human Services
(Department’s) reliance on the Medical Assistance Bulletin (“MA Bulletin”) as
Pennsylvania’s State Plan is the appropriate method for enforcing the 1997
Amendment in the Commonwealth.
Pursuant to Section 102 of the Commonwealth Documents Law1, 45 P.S.
§1102, an agency may set forth guidelines in statements of policy. However, as
pointed out by Judge Simpson in his majority Opinion, agency regulations must be
promulgated pursuant to the notice and comment procedures contained in the
Commonwealth Documents Law in order to have the force and effect of law.
Hillcrest Home, Inc., v. Dep’t of Pub. Welfare, 553 A.2d 1037 (Pa. Cmwlth. 1989).
As the majority points out, and the parties here agree, the Regulation, 55 Pa.
Code §1187.102, pertains primarily to Part A services. That Regulation sets a cap
on payment for Part A (inpatient facility care). With regard to Part B services
(physician/therapy services), the Regulation provides that Medicare benefits shall be
exhausted before any payment is made under the MA Program, but the Regulation
does not set a cap on those Part B payments. As the majority further points out,
“[t]he Regulation is merely silent [on the cap for Part B payments].” Maj. Op. at 17.
That silence does not give a green light to implement a regulation through policy-
making.
As just stated, compliance with the Commonwealth Documents Law is
required where an agency promulgates a regulation. Naylor v. Dep’t of Pub.
Welfare, 54 A.3d 429, 433–34, 436 (Pa. Cmwlth. 2012), aff'd without op., 76 A.3d
536 (Pa. 2013); Borough of Bedford v. Dep’t of Envt’l. Prot., 972 A.2d 53, 61–63
(Pa. Cmwlth. 2009) (en banc). The distinction between statements of policy and
regulations is that a general statement of policy merely announces the course which
the agency intends to follow in future adjudications. Pa. Human Relations Comm’n
1
Act of July 31, 1968, P.L. 769, as amended, 45 P.S. §1102.
EC - 2
v. Norristown Area Sch. Dist., 374 A.2d 671, 679 (Pa. 1977). Agency action
constitutes a regulation where it is denominated by the agency as a regulation or,
even if not so labeled, where it purports to establish a “binding norm.” Northwestern
Youth Servs. Inc. v. Dep’t. of Pub. Welfare, 66 A.3d 301 (Pa. 2013).2
The MA Bulletin (as it pertains to Part B services) contains language that is
mandatory and restrictive, which is indicative of a regulation. For example, the
Discussion Section C of the MA Bulletin (pertaining to the MA per diem rate) states
that:
[DHS’s] payment of cost-sharing amounts for . . . Part B services
provided to MA residents on or after January 1, 1998 is governed by 55
Pa. Code §1187.102 and other applicable billing and payment
regulations. Effective January 1, 1998, the MA per diem rate or fee is
the maximum payment that may be received by the facility for services
provided to both . . . MA residents and non . . . MA residents.
(Emphasis added.)
Reproduced Record (R.R.) at 669a.
The Procedure Section C of the MA Bulletin (pertaining to cost-sharing
payments) states that: “[t]he invoices will be paid insofar as the amounts paid by
Medicare do not exceed the MA per diem rate or fee, up to the maximum cost-sharing
amount.” R.R. at 672a.
2
In Northwestern Youth Services, the entities furnishing out-of-home child welfare and/or
juvenile justice services (NWS) filed suit against the Department of Public Welfare (DPW),
predecessor of the Department, for changes to DPW’s practices and policies in determining
reimbursement for child welfare placement services. The original reimbursement scheme was
reflected in the Pennsylvania Code and published in DPW regulations. Thereafter, DPW made
unilateral changes to reimbursement via administrative bulletin, which were not vetted through the
formal procedures for promulgation of valid legislative regulations. The Pennsylvania Supreme
Court held that where DPW issues binding rules, which if not obeyed would deprive regulated
entities of reimbursement, any such mandatory requirements are in the nature of legislative
enactments and must comply with the formal notice, comment and review procedures set forth in
the Commonwealth Documents Law. Northwestern Youth Services, 66 A.3d at 307.
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Here, any limitation placed upon the applicable MA fee for Part B services
that are provided to a MA nursing home resident is a binding norm regulation, just
as Section 1187.102 is a binding norm Regulation as it pertains to Part A services.
55 Pa. Code §1187.102; Northwestern Youth Services.
The prospective incorporation of future changes into a regulation is not
necessarily a problem so long as it is clear that what may be incorporated in the
future is adopted in accordance with rulemaking procedures. Revisions to policy
statements, however, are not subject to such procedures. The majority correctly
applied the principles of the 1997 Amendment to Part B. However, the manner in
which the Department achieved the application of Part B, through a Department
Bulletin, appears to skirt the regulatory review procedures set forth in the
Commonwealth Documents Law, 45 P.S. §1102; Hillcrest Home, Inc.
The Department did not take the additional steps required by the
Commonwealth Documents Law, including formal notice, comment, and review
procedures to amend 55 Pa. Code §1187.102 to restrict the ability of regulated
nursing facilities to recoup outstanding Part B co-payment fees. Instead, the
Department imposed this limit on nursing facilities through the MA Bulletin, which
is merely a statement of policy.
While it is clear that the Department properly implemented the federal
regulations pertaining to state liability for Part A Medicare cost-sharing, it did not
do so as it relates to the changes in Part B. My concern is the slippery slope that can
be created by disregarding the procedural guidelines and protections inherent in the
Commonwealth Documents Law. For this reason, while I concur in the result that
the Nursing Facility cannot recover part of the otherwise unrecoverable Part B copay
EC - 4
by utilizing its residents’ Patient Liability amounts, I must respectfully disagree with
how the result was achieved.
__________________________________
ELLEN CEISLER, Judge
Judge McCullough joins in this concurring opinion.
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