# Amicus Curiae Brief — Your Home Visiting Nurse Services, Inc. v. Shalala > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0169%3A10 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1999 - **Citation:** 525 U.S. 449 ## Text Upc vvvy wewe : FILED | G ‘Jur 29 1998 No. 97-1489 © UF THE C.ERK In the Supreme Cok OF THE United States OCTOBER TERM, 1997 Your HOME VISITING NuRSE SERVICES, INC., Petitioner, Vv. DONNA E. SHALALA, Secretary of Health and Human Services, Respondent. BRIEF OF AMICI CURIAE The American Hospital Association and The Federation of American Health Systems DeNIse Rios RODRIGUEZ Mary R. GREALY Counsel of Record Senior Washington Counsel AMY BLUMBERG HAFEY American Hospital Association Foley & Lardner 325 Seventh Street, N.W. 2029 Century Park East, Washington, D.C. 20004 35th Floor (202) 638-1100 Los Angeles, CA 90067-3021 (310) 277-2223 LAURA STEEVES GOGAL FrReEDERIC J. ENTIN Vice President and General Counsel Chief Counsel American Hospital Federation of American Association Health Systems One North Franklin 1111 19th Street, N.W., Chicago, Illinois 60606 Suite 402 (312) 422-3000 Washington, D.C. 20036 (202) 833-3090 Bowne of Los Angeles, Inc., Law Printers (213) 627-2200 QUESTIONS PRESENTED 1. Whether there is jurisdiction for review of refusals by fiscal intermediaries to reopen Medicare providers’ cost reports under 42 U.S.C. § 139500, 28 U.S.C. § 1331, 28 U.S.C. § 1361 and/or 5 U.S.C. § 706? 2. Whether 42 C.F.R. § 405.1885(c) is based on a per- missible construction of the Medicare statute? TABLE OF CONTENTS QUESTIONS PRESENTED.............5555: TABLE OF AUTHORITIES..............555. INTEREST OF AMICI CURIAE ...........++: SUMMARY OF ARGUMENT ............... PIFUFIE 6 veh ace cc secrsesecccccccccccces I. MEDICARE PROVIDERS ARE ENTITLED TO ADMINISTRATIVE REVIEW OF REFUSALS TO REOPEN COST REPORTS UNDER THE MEDICARE STATUTE ................ A. The Secretary’s Inequitable Implementation Of The Administrative Ey ee B. The Plain Language And Clear Intent Of Section 139500 Provide For Review Of Reopening Determinations......... C. Review Of Reopening Denials Is Not Inconsistent With The 180-Day Appeal DEE La caciewesKecdinaGapbedeacerce D. The Secretary’s Interpretation Violates Fundamental Principles Of Fairness And Administrative Law ............. Il. IF JURISDICTION IS NOT AVAILABLE UNDER SECTION 139500, JURISDICTION LIES UNDER 28 U.S.C. § 1331, 28 U.S.C. § 1361 OR 5 U.S.C. § 706 Ill. AS INTERPRETED BY THE SECRETARY, THE REOPENING REGULATION IS INCONSISTENT WITH THE MEDICARE STATUTE..... CONCLUSION 2. cc ccccccccccccccscccvsceess 10 14 iii TABLE OF AUTHORITIES Cases Abbot Labs. v. Gardner, 387 U.S. 136 (1967) .. 21, 22 Ashland Reg'l Med. Cir. v. Shalala, ___ F. Supp. _ (E.D. Pa. 1998), reprinted in [1998-1 Transfer Binder] Medicare & Medicaid Guide (CCH) 4 46,201 (E.D. Pa. ME 6 Eb phdities Cae KOUESEy bDADOv ENR cHEec 20% 16 Athens Community Hosp., Inc. v. Schweiker, 743 ee Ae MD os cacccet Cneeeeese 9 Bailey v. United States, 516 U.S. 137 (1995).... 6 Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399 iG hitndnehet bsthiuis d diesndhcee aidan dns 6, 7,8 Beverly Hosp. v. Bowen, 872 F.2d 483 (D.C. Cir. PRUE sevacscddddenebddésercéeuseed 21 Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986).......... 9, 21, 22, 23 Califano v. Sanders, 430 U.S. 99 a Sabie 6 co tds dae bhail oaks dates 12, 13, 22, 24 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)... 8, 25 Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123 EE awn od. pd Ube bat bcddéiakeds 25 Good Samaritan Hosp. v. Shalala, 508 U.S. 402 Pht tieshGubcwabedhdasbcioeresion de 10 Good Samaritan Hosp. Reg'l Med. Cir. v. Shalala, 85 F.3d 1057 (2nd Cir. 1996) ....... 6,9 Heckler v. Ringer, 466 U.S. 602 (1984) ........ 22 Immigration and Naturalization Serv. v. Doherty, Se ees Se GE inle'd 6d cWebacun'e oo eens 22 Interstate Commerce Comm'n v. Brotherhood of Locomotive Eng’rs, 482 U.S. 270 (1987) ..... 13, 22 iv TABLE OF AUTHORITIES Cases Page Kootenai Hosp. Dist. v. Bowen, 650 F. Supp. oe, § ee eee Perey 14 Mem'l Hosp. v. Sullivan, 779 F. Supp. 1410 1 dh) RDS ae nae oS See 23 Nealon v. California Stevedore & Ballast Co., 996 PF») 4 * ya rere 25 Oregon v. Bowen, 854 F.2d 346 Le ey Perry ee 6, 7, 9, 10, 24, 26 Pauley v. BethEnergy Mines, Inc., 501 U.S. 680 (OSSD cnx tecdedaaes.obs shbbiabcotecdciees 26 Pistachio Group of the Ass'n of Food Indus. v. United States, 671 F. Supp 31 (Ct. Int'l Trade IGG) cb cacdacevicnengeevesdscauendsacer 15 Regions Hosp. v. Shalala, 118 S. Ct. 909 CORBIN 60s veccccvtécucbssctOdoue abe 8, 11, 12, 19, 20 R.H. Johnson & Co. v. Sec. & Exch Comm'n, 198 Fa GS CANE Oe. FOGG csicccccdevccedece 14 Saint Mary of Nazareth Hosp. Ctr. v. Schweiker, 741 F.2d 1447 (D.C, Cir. 1984)............. 9 Tallahassee Mem'l Reg'l Med. Cir. v. Bowen, 815 F.2d 1435 (ith Cir. 1987)................. 8, 26 Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 COTOD o.cbins vd nce tarebercncesien cases sede 26 United Black Fund, Inc. v. Hampton, 352 F. Summ. GOB CTAB. FSFED ho vied ceetecon 15 United States v. Erika, Inc., 456 U.S. 201 (OGRE Sic ks ci ddusbcbcsalbewdeiadidec: 14-15, 16, 22 United States v. Larionoff, 431 U.S. 864 (1977) .. 24 Washington Hosp. Ctr. v. Bowen, 795 F.2d 139 {lee B | Pee ee ye wr re. 25 TABLE OF AUTHORITIES Cases Page Weinberger v. Salfi, 422 U.S. 749 (1975) ....... 22 Western Med. Enters., Inc. v. Heckler, 783 F.2d Se aE ED 5 cid cc vindndbhessseces 11 Your Home Visiting Nurse Servs., Inc. v Secretary of Health and Human Servs., 132 Pee a Ge GS OUD cbcerceccecocccccre passim Statutes Administrative Procedure Act, Title 5, chapter 7 24 nr ici te seu Gubw¥dee t6dbsececese 21 PP c0 kd sbacb pane nok be ueep es 21, 22, 23, 24 eid oa eke seksi aekesabieus 21, 23 I iii ae wo ian wee cece é 23 GE Bice He GPO ROUOD ov cc ccccccccccccecs l ee et 17 42 U.S.C. § 1395x(v)(1)(A) (ii) ............-. 9, 10 rnp ae A a a a 9 Ge Bs PR an tC uae baa 8b os cccccccces 9 42 US.C. § 199SH(B)(1)(C).. 2... cece ceeees 15 Se I os. bo ceuseenccendéeéedeacés passim Le ED un ccdcencevecesedacact 4,5, 8,11 42 U.S.C. § 139S500(a)(1)(A)(i) ............. 6 I in oon von cedacent’ ees 14 EE anv cncchtcconsedeaes 9 A ee 9 er 9 Sas PIED do cocedvcccceccees 17 vi TABLE OF AUTHORITIES Regulations Page 42 C.F.R. § 405.1803 .. 5... cece cee eee ween 5 42 C.F.R. § 405.1835 ... 2... cece cece eee enee 5 42 C.F.R. § 405.1841 (a) ....... 6c eee eee ees 5 42 C.F.R. § 405.1841(b) . 2.6... eee eens 11 42 CPR. § GBS.1GES 2... ccc cccccccccccccccess 2, 20, 24 42 C.F.R. § 405.1885(a) ... 2.2... cee cece e eee 5 42 C.F.R. § 405.188S(c)... 1... cece eee eees 5-6, 24, 26 42 CPR. 6 GGG.1GED occ cccccccccccccccvees 5, 10 42 C.F.R. § 412.106(b) (4) . 2... 2. ee eee eee 20 42 CPR. S4UDFME])) 220 cccccccccccecccseces 5, 10 42 CIR. SEIDAME) 2 cess ccccccccccccvsese 5 42 C.F.R. § 413.40(¢) (4) .... 2... cece cece eens 10 42 C.F.R. § 413.40(€) (5) ... 2... cece ee eeeees 10 42 C.F.R. § 413.86(¢)(1) (ill) .... 62... 6. eee 20 42 C.F.R. §§ 421.120-421.124............500es 17 Federal Registers 63 Federal Register 13590, 13592 (March 20, DOGBD occ cdovccdbseectudntade coghgeeecne's 18 59 Federal Register 46258 (Sept. 7, 1994) ...... 17 54 Federal Register 40286, 40302 (Sept. 29, DOE boc kvccccctacccactesethgdeutans a . 18 actual and apparent conflicts of interest among Medicare contractors: In recent years, however, Medicare intermediaries and carriers, like most health insuring organiza- tions, have expanded their business and product lines to become large integrated health care deliv- ery systems .... This creates a conflict of interest when the contractor reviews claims ...and per- forms other payment safeguard activities for its . . . provider's and supplier’s competitors. We have been criticized for the lack of effective mechanisms to mitigate these conflicts of interest. Even when we are assured that proper mecha- nisms are in place, the appearance of a conflict remains in the eyes of competitors. 63 Federal Register 13590, 13592 (1998). The safeguards against conflicts of interest in the Medicare Integrity Pro- gram that have been included in the statute and proposed in the regulations were not in place to protect petitioner in this case and will not be available to other providers subject to intermediaries’ discretion in the reopening process. In- termediaries will be free to disadvantage their competitors by improperly denying them substantial sums of Medicare reimbursement with impunity. Even if there is no specific bias, the intermediary's em- ployee could flip a coin to determine whether a reopening would be granted and there would be no review process to identify or remedy the abuse of discretion. While the Secre- tary, at some point, considered the reopening determination important enough to issue criteria governing the decision, she apparently now is willing to risk the possibility that those criteria may be applied arbitrarily or ignored altogether. Further, the Secretary's interpretation leads to inconsis- tency among intermediaries in the application of the stan- 19 dards. This is particularly troublesome for the many multis- tate health care entities that are amici’s members. For example, a hospital in Michigan may be granted a reopening and receive payment for a substantial cost, while its sister hospital in Ohio may be denied reopening and payment for the same type of cost, under the same circumstances, by another intermediary, another employee of the same inter- mediary or even the same employee. Clearly there is no rational basis for this result. At first glance it may be difficult to understand why the Secretary would choose to allow such potential abuses to go totally unchecked where Section 139500 provides the obvi- ous means to assure the integrity of the reopening process through the availability of administrative and judicial re- view. The reason for the Secretary’s position becomes clear, however, upon an analysis of the budgetary consequences of her position. Under her view, when a provider has been overpaid she may reopen the cost report determination and recoup the overpayment. If the provider has been underpaid, however, she can either direct the intermediary not to reopen the cost report to pay the additional amount due, or may rely on the intermediary’s arbitrary denial of reopening to avoid payment. While this approach may be financially beneficial to the government, it is clearly inconsistent with the Secretary’s obligations under the Medicare statute and is patently unfair to providers that have served Medicare beneficiaries with the expectation of payment in accordance with the law. A comparison of the graduate medical education (“GME”) regulations at issue in Regions Hospital, with the Secretary's implementation of the disproportionate share hospital (“DSH”) adjustment calculation in HCFA Ruling 20 No. 97-2 (1997),'? clearly demonstrates the Secretary’s willingness to selectively use her skewed process to the detriment of providers.’ , “ At issue in Regions Hospital was the Secretary's “reau- dit” rule, under which she reaudited GME costs incurred in a base year to assure that future GME payments would be accurate. The reaudit rule was designed, in part, to permit recoupment of prior excess reimbursements for years in which cost reports had not become final, i.e., within the three year window. 54 Federal Register 40286, 40302 (1989); 118 S. Ct. at 914. As the Court noted, the revised costs determined on reaudit were applied to those cost reporting periods “still open” under Section 405.1885. 118 S. Ct. at 914; 42 C.F.R. § 413.86(e) (1) (iii). The Secre- tary’s authority to make such adjustments in the interest of accuracy and within the three year window was not chal- lenged by the petitioner and was not questioned by the Court. The concern for accuracy did not prevail, however, under HCFA Ruling No. 97-2. After four courts of appeals struck down an aspect of her calculation of special payments to DSH providers under 42 C.F.R. § 412.106(b) (4), the Sec- retary issued a ruling acquiescing in the courts’ interpreta- tion of the regulation. Application of the courts’ rulings would have required additional payments to providers. Not- withstanding the fact that prior determinations made under '2 Reprinted in {1997-1 Transfer Binder] Medicare & Medicaid Guide (CCH) $45,105 (1997). HCFA Ruling No. 97-2 can also be found at its Website, . HCFA Ruling No. 97-2 has been attached hereto for the Court's reference. '5GME and DSH represent special Medicare payments for hospitals that are intended to reimburse them for the costs of operating teaching programs and the high cost of treating unusually large numbers of poor patients, respectively. 21 the invalid policy were clearly inconsistent with law, and that reopening was therefore required under the Secretary's own criteria, HCFA Ruling No. 97-2 directs intermediaries not to reopen cost reports to pay the additional amounts due. HCFA Ruling No. 97-2 at 2 (Attachment at a-4). If the Secretary's position is upheld in this case, she will avoid administrative and judicial review when reopening requests are denied based on the directive of HCFA Ruling No. 97-2, even in those four circuits in which the courts of appeals have ruled her prior method of determining DSH payments to be inconsistent with law. Congress could not have intended to insulate such blatant inequities from judi- cial scrutiny.'* “Bureaucratic ordering of this sort should not go unchecked by a reviewing court.” Beverly Hosp. v. Bowen, 872 F.2d 483, 486 (D.C. Cir. 1989). IF JURISDICTION IS NOT AVAILABLE UNDER SECTION 139500, JURISDICTION LIES UNDER 28 U.S.C. § 1331, 28 U.S.C. § 1361 OR 5 U.S.C. § 706 If the Secretary’s construction of Section 139500 is up- held, amici support petitioner’s assertion that alternative bases for federal court jurisdiction are available to determine whether the intermediary abused its discretion in this case. As noted above, the Court has clearly and consistently recognized the strong presumption that Congress intends judicial review of administrative action. Michigan Academy, 476 U.S. at 670; Abbott Laboratories v. Gardner, 387 US. '*The Secretary in her brief before the Sixth Circuit asserts that she could do away with the reopening process altogether. (Respondent's Brief Before the Sixth Circuit at 24 n.9.) While amici question her authority to do so without articulating a rational basis for the change, it seems unlikely that she would eliminate a process that is so dramatically slanted in her favor. 22 136, 140 (1967). The Sixth Circuit in this case relied on the Court’s holding in Califano v. Sanders to overcome the presumption, suggesting that because the reopening process was created by regulation, rather than by statute, the pre- sumption does not apply. However, the Court’s action in Immigration and Naturalization Serv. v. Doherty suggests to the contrary. 502 U.S. 314, 322 (1992). In that case, the Court reviewed a decision to deny reopening of deportation proceedings under the abuse of discretion standard even though the reopening process is derived from regulations. Indeed, in numerous cases the Court has indicated that a decision in response to a request to reopen an administrative determination is subject to review, regardless of whether the reopening process is established by statute or regulation. See Locomotive Eng'rs, 482 U.S. at 292 n.7 (Stevens, J., con- curring), and cases cited therein. A review of the Court's decisions addressing federal court jurisdiction over claims arising under the Medicare statute indicates that, while the Court will scrupulously hold claim- ants to the statutorily created avenues to judicial review, where the statute provides no review process, federal ques- tion jurisdiction will be available. Compare Michigan Acad- emy, 476 U.S. 667 (1986) (Court found jurisdiction under Section 1331) with Heckler v. Ringer, 466 U.S. 602 (1984) and Weinberger v. Salfi, 422 U.S. 749 (1975) (claimants required to exhaust administrative remedies). Only where there is an unambiguous statement of congres- sional intent to preclude judicial review altogether, will access to the courts be denied. Erika, 456 U.S. 201. Here there is no evidence of a congressional intent to preclude jurisdiction. Therefore, if the statutorily established avenue to the courts through the Board is foreclosed in this case, jurisdiction to address the serious federal question presented by petitioner must lie under Section | 331. Even if the Court concludes that Section 139500 does not make 23 denials of reopenings reviewable, this conclusion alone is not sufficient to support an implication that such denials cannot be reviewed under other grants of jurisdiction. More specific evidence of congressional intent to preclude review would be required to support a jurisdictional bar. Michigan Academy, 476 U.S. at 674. The Secretary argues that 42 U.S.C. § 405(h) prevents any resort to Section 1331 as a source of jurisdiction. In the absence of persuasive evidence of legislative intent to dele- gate the reopening determination to the unfettered discre- tion of an intermediary's employee however, the Court should decline to indulge the government's extreme position that Congress intended no review at all of the substantial oy raised by petitioner. Michigan Academy, 476 U.S. at In concluding that jurisdiction is available to review a denial of reopening under both Section 1331 and Sec- tion 1361, the District Court of the District of Columbia aptly stated: [T)he Secretary cannot relegate providers to a dead-end procedure under the Medicare statute, and then argue that the provider loses because the Medicare statute is the exclusive means of redress. When such bureaucratic red tape strangles a pro- vider's right to judicial review, the Court may invoke its federal question jurisdiction and manda- mus power. Memorial Hosp. v. Sullivan, 779 F. Supp. 1410, 1412 (D.D.C. 1991). ‘*If the Court concludes that all judicial review is precluded in this case, it will ultimately be faced with the “serious constitutional ques- tion” that will arise if Section 405(h) denies a judicial forum for constitutional claims. Michigan Academy, 476 U.S. at 681 n.1 2. 24 In the event that the Court concludes, however, that review is not available under Section 1331, amici join the petitioner in urging the Court to find that the district court may exercise its mandamus power to assure that the Secre- tary complies with her statutory obligation. In the alterna- tive, amici urge the Court to reconsider its decision in Sanders and to find the Administrative Procedure Act, 5 U.S.C., chapter 7, as an independent source of jurisdiction. AS INTERPRETED BY THE SECRETARY, THE RE- OPENING REGULATION IS INCONSISTENT WITH THE MEDICARE STATUTE The reopening regulation, set forth at 42 C.F.R. § 405.1885, permits intermediaries to reopen cost reports within a three year period. Section 405.1885(c) states that “(j]urisdiction for reopening a determination or decision rests exclusively with that administrative body that rendered the last determination or decision.” Although this section of the regulation vests discretion with the intermediary to decide whether to reopen, nothing in this provision discusses the review of that determination. Oregon v. Bowen, 854 F.2d at 349. Section 405.1885(c) cannot be read implicitly to preclude review of reopening denials. Although the Sixth Circuit found the regulations “silent as to whether a decision not to reopen is subject to review,” it deferred to the language in the Manual that states that a refusal by the intermediary to grant a reopening request is not appealable to the Board. Your Home, 132 F.3d at 1138; Manual, supra, at Appen- dix A to § 2926, § B.4. However, to the extent the Secre- tary’s interpretation is inconsistent with the statute, it is unlawful. See, e.g., United States v. Larionoff, 431 U.S. 864, 872-73 (1977). As discussed above, the plain meaning of the statute, as well as the legislative history, mandate that 25 the Board be able to review all final determinations of the intermediary as to a provider’s total reimbursement. Ac- cordingly, the Manual section precluding review is invalid, and the court’s decision in Your Home must be reversed. Further, any construction of the regulation itself to prohibit Board review is also invalid because it directly contradicts Section 139Soo. The Sixth Circuit was persuaded to uphold the Secre- tary’s interpretation of Section 139500 and the reopening regulation, due in part, to its deference to the Secretary. Deference to the Secretary's interpretation, however, is inappropriate in this case. Courts remain the final authority on issues of statutory construction, and deference must yield to the clear meaning of the statute as revealed by its language, purpose and history. Chevron, 467 U.S. at 843 n.9. See also, Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1130 (7th Cir. 1989), modified, 866 F.2d 228 (7th Cir. 1989). bm ae is clear that the Board has jurisdiction over any rmination of the intermediary regarding a provider's Medicare reimbursement. An interpretation on conflicts with the statute is not entitled to deference. See Washington Hosp. Ctr. v. Bowen, 795 F.2d 139, 143 (D.C. Cir. 1986), citing Chevron, 467 U.S. at 842 (“If the intent of Congress is clear, that is the end of the matter.”). Even if the Court concludes that Section 139500 is ambiguous, however, no particular deference to the Secre- tary is warranted in this case. The traditional deference granted to agency interpretations is based on the Court's respect for the agency’s special competence regarding mat- ters within its area of expertise. Procedural issues, however, do not implicate that special competence and therefore are subject to less deference. See e.g, Nealon v. California Stevedore & Ballast Co., 996 F.2d 966, 969 (9th Cir. 1993). Because this issue pertains to an interpretation of the Board’s jurisdiction, rather than the complexities of the 26 Medicare program, this Court need not accord any particu- lar deference to the Secretary’s contention that the Board lacks jurisdiction over reopening denials. Tallahassee Mem'l Reg'l Med. Cir. v. Bowen, 815 F.2d at 1458 (Because Section 139500 is a jurisdictional statute—“a type of statute with which courts are quite familiar” — rather than one involving the Secretary’s interpretation of a “technical and complex” area, the court accorded less deference in order to “carefully consider any agency action that poten- tially has the effect of barring access to the federal courts.”) Cf, Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (Deference warranted because Medicare regulation regarding anti-distribution principle concerned “a complex and highly technical regulatory program” in which the identification and classification of relevant criteria required significant expertise.) (quoting Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697 (1991)). As interpreted by the Secretary in the Manual, supra, Section 405.1885(c) is inconsistent with the plain language of the statute. The Court should find that 42 C.F.R. § 405.1885(c) does not preclude the Board’s jurisdiction over reopening denials. CONCLUSION Amici urge the Court to adopt the reasoning of the Ninth Circuit in Oregon v. Bowen, rejecting the Secretary's inter- pretation of Section 139500 as inconsistent with the statute and congressional intent. Alternatively, the Court should find jurisdiction in the federal district court to review the denial of petitioner's claim under general federal question 27 jurisdiction, the court's mandamus powers or under the Administrative Procedure Act. Dated: July 29, 1998 Respectfully submitted, DENISE Rios RODRIGUEZ Counsel of Record AMY BLUMBERG HAFEY FoLey & LARDNER Altorneys for Amici Curiae The American Hospital Association and the Federation of American Health Systems 4 Se a ee os com ‘ — _——— * = oF — ——=— as ee ee Ruling No. 97-2 Date: February 1997 This Ruling states the policy of the Health Care Financing Administration concerning the determination to change its interpretation of section 1886(d)(5)(F)(vi) (II) of the So- cial Security Act (the Act) and 42 CFR 412.106(B)(4) to follow the holdings of the United States Courts of Appeals for the Fourth, Sixth, Eighth, and Ninth Circuits. Under the new interpretation, the Medicare disproportionate share ad- justment under the hospital inpatient prospective payment system will be calculated to include all inpatient hospital days for service for patients who were eligible on that day for medical assistance under a State Medicaid plan in the Medicaid fraction, whether or not the hospital received payment for those inpatient hospital services. _ MEDICARE PROGRAM Hospital Insurance (Part A). INTERPRETATION OF MEDICAID DAYS _IN- CLUDED IN THE MEDICARE DISPROPORTION- ATE SHARE ADJUSTMENT CALCULATION PURPOSE: This Ruling announces the Health Care Fi- nancing Administration’s (HCFA) determination to change its interpretation of section 1886(d)(5)(F)(vi)(I1) of the Social Security Act (the Act) and 42 CFR 412.106(B) (4) to follow the holdings of the United States Courts of Appeals for the Fourth, Sixth, Eighth, and Ninth Circuits. Under the new interpretation, the Medicare disproportionate share adjustment under the hospital inpatient prospective payment system will be calculated to include all inpatient hospital days of service for patients who were eligible on that day for medical assistance under a State Medicaid plan in a-2 the Medicaid fraction, whether or not the hospital received payment for those inpatient hospital services. CITATIONS: Section 1886(d)(5)(F) of the Social Se- curity Act and 42 CFR 412.106(b) (4). PERTINENT HISTORY: The Medicare disproportionate share hospital (DSH) adjustment calculation, which is set forth in section 1886(d)(5)(F) of the Act, has been the subject of a substantial amount of litigation. The adjustment is calculated by determining a hospital's disproportionate patient percentage which is the sum of two fractions, the Medicare fraction and the Medicaid fraction. In the Medi- care fraction, the number of patient days for patients who (for those days) were entitled to both Medicare Part A and Supplemental Security Income (SSI) under Title XVI of the Act is divided by the total number of patient days for patients entitled to Medicare Part A for that same period. The Medicaid fraction consists of the number of patient days for patients who for those days “were eligible for medical assistance under a State plan approved under Ti- tle XIX [Medicaid] but who were not entitled to benefits under Medicare Part A” (section 1886(d)(5)(F) (vi) (11) of the Act), divided by the total number of patient days for that same period. The Medicaid fraction is the subject of this ruling. In implementing the calculation of the Medicaid fraction, HCFA interpreted the statutory language to include as Medicaid patient days only those days for which the hospital received Medicaid payment for inpatient hospital services. This interpretation has been considered by the courts of appeals in four judicial circuits. The initial issue in the litigation was whether HCFA should have counted days for patients who had been found to be Medicaid eligible, but who had exceeded Medicaid coverage limitations on inpa- tient hospital days of service (and, consequently, no Medi- caid payment was made for those days). In later cases, a-3 plaintiffs challenged HCFA’s exclusion of any days of inpa- tient hospital services for patients who met Medicaid eligi- bility requirements, regardless of the reason for which no Medicaid payment was made. In each of the cases, the court declined to uphold HCFA’s interpretation, reasoning that the statutory language “eligible for medical assistance” would include days on which the patient meets Medicaid eligibility criteria regardless of whether payment is made. Although HCFA believes that its longstanding interpreta- tion of the statutory language was a permissible reading of the statutory language, HCFA recognizes that, as a result of the adverse court rulings, this interpretation is contrary to the applicable law in four judicial circuits. In order to ensure national uniformity in calculation of DSH adjustments, HCFA has determined that, on a prospective basis, HCFA will count in the Medicaid fraction the num- ber of days of inpatient hospital services for patients eligible for Medicaid on that day, whether or not the hospital received payment for those inpatient hospital services. This would not include days for which no Medicaid payment was made because of the patient’s spenddown liability, because an individual was not eligible for Medicaid at that point. Pursuant to this Ruling, Medicare fiscal intermediaries will determine the amounts due and make appropriate payments through normal procedures. Claims must, of course, meet all other applicable requirements. This includes the require- ment for data that are adequate to document the claimed days. The hospitals bear the burden of proof and must verify with the State that a patient was eligible for Medicaid (for some covered services) during each day of the patient's inpatient hospital stay. As the intermediaries may require, hospitals are responsible for and must furnish appropriate documentation to substantiate the number of patient days claimed. Days for patients that cannot be verified by State a-4 records to have fallen within a period wherein the patient was eligible for Medicaid cannot be counted. We will not reopen settled cost reports based on this issue. For hospital cost reports that are settled by fiscal in- termediaries on or after the effective date of this ruling, these days may be included. For hospital cost reports which have been settled prior to the effective date of this ruling, but for which the hospital has a jurisdictionally proper appeal pending on this issue pursuant to cither 42 CFR 405.1811 or 42 CFR 405.1835, these days may be included for purposes of resolving the appeal. RULING: For all cost reporting periods beginning on or after February 27, 1997, the Medicare disproportionate share adjustment will be determined by including in the calculation of the Medicaid fraction set forth in section 1886(d)(5)(F)(vi) (11) of the Act the additional days as set forth above. IV. EFFECTIVE DATE This Ruling is effective February 27, 1997. Dated: 2/27/97 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0169%3A10. Public record. Not legal advice.