Roger R. Maas, Jerome W. Hoffman, Tallahassee, FL, for Defendant-Appellant.
John D. Buchanan, Jr., Henry, Buchanan, Hudson, Suber Williams, P.A., Tallahassee, FL, Cynthia S. Tunnicliff, Pennington, Culpepper, Moore, Wilkinson, Dubar Dunlap, William E. Whitney, Tallahassee, FL, for Plaintiffs-Appellees.
Appeal from the United States District Court for the Northern District of Florida.
(No. 93-40463MMP), Maurice M. Paul, Chief Judge.
(a)(13)(A). We affirm on the basis of the well-reasoned district court order published in the Medicare Medicaid Guide at page 44,212, and attached as Appendix A, with the following exceptions.
[2] We vacate paragraph four of the “Ordered and Adjudged” section, which reads as follows:
[3] See U.S. Const. amend.
. We also vacate the language of the opinion that reads as follows: “As such, the Florida Legislature must amend its Medicaid plan to include reimbursement for medically necessary inappropriate level of care services, to bring the Medicaid into compliance with federal law.” Id. [4] We vacate the language of the opinion that reads “pending the adoption of such reimbursement provision by the Florida Legislature.” Id. [5] We further vacate the language of the opinion that reads as follows: “The interim rates shall remain in effect until such time as the Florida Legislature adopts a permanent inappropriate level of care reimbursement provision.” Id. [6] AFFIRMED in part and VACATED in part.
APPENDIX A IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
FLORIDA, TALLAHASSEE DIVISION
TALLAHASSEE MEMORIAL REGIONAL MEDICAL CENTER, INC., and FLORIDA
HOSPITAL MEDICAL CENTER,
Plaintiffs,
v.
DOUGLAS COOK, et al.,
Defendants.
CASE NO. TCA 93-40463-MMP
FINDINGS OF FACT AND CONCLUSIONS OF LAW
PAUL, Chief Judge.
This is a Boren Amendment challenge under
42 U.S.C. § 1396a(a)(13)(A). Plaintiffs in this action are two hospitals,
Tallahassee Memorial Regional Medical Center, Inc. (“TMRMC”), located in
Tallahassee, Florida and Florida Hospital Medical Center (“FHMC”),
located in Orlando, Florida, which are fully qualified to provide
in-patient psychiatric care for adults and adolescents under Florida’s
Medicaid program. Defendant Douglas Cook is the Director of the Florida
Agency for Health Care Administration, the single designated agency
responsible for the operation of Florida’s Medicaid program. See
1993 Fla. Laws ch. 93-129, Section(s) 58; Fla.Admin. Code Ann. r.
59G-4.150(1)(b), r. 59G-4.160(1)(c) (1994). Plaintiff also named as
defendants H. James Towey, Secretary of the Florida Department of Health
and Rehabilitative Services (“HRS”), and Keystone Peer Review
Organization (“KEPRO”), a non-profit corporation under contract by AHCA
to review Medicaid claims for adolescent psychiatric patients. These
defendants were dismissed in the Court’s January 12, 1995 order (Doc.
67).
A two day bench trial was concluded in this matter on August 15,
1995. The Court now sets out its findings of fact and conclusions of law
based upon all admissible evidence presented at trial, or otherwise
contained in the record.
I. THE PARTIES’ POSITIONS:
A. Plaintiffs’ Claims:
The State pays the Plaintiffs an established per diem rate for
the days in which medically necessary, in-patient psychiatric care is
provided to adolescent patients. Plaintiffs do not dispute the adequacy
of these rates per se, as they directly coincide with the number of
medically necessary days for each patient. However, when the medical
necessity for in-patient services ends, the patients medically require a
discharge into an alternative setting facility — not to their homes or
elsewhere. AHCA does not dispute
Page 696
the need for these patients to be thus
placed, and it compensates the alternative facilities with Medicaid
dollars. However, due to insufficient funding by the State for these
alternative settings and bureaucratic admission hurdles, patients often
have to wait weeks or even months for an opening in such a facility. In
the meantime, the hospitals cannot discharge the patients, even though
in-patient care is no longer medically necessary. KEPRO, and ultimately,
AHCA, denies any reimbursement for these “grace days.” Plaintiffs
concede that AHCA cannot be required to build additional facilities.
However, Plaintiffs assert that it is AHCA’s responsibility to provide
for a scheme of reimbursement under the state Medicaid plan so that
patient retention by the hospitals is compensated at an appropriate rate
when medical necessity for in-patient care ceases to exist, yet the
patients — through no fault of the hospitals — cannot be discharged as an
outpatient or to the home, but have no alternative facility available.
Plaintiffs argue that the state’s inefficiencies in its plan — and the
fiscal impact of those inefficiencies — have been transferred from the
state to the hospitals. According to Plaintiffs, since July 1992, the
fiscal impact of the recoupment or anticipated recoupment required by
KEPRO’s denial of reimbursement for adolescent psychiatric “grace days”
is $836,896.13 for TMRMC, and $389,754.00 for FHMC. Plaintiffs conclude
that the resulting impact on hospital daily per diem rates violates the
Boren Amendment requirements.
Plaintiffs contend that the State’s Medicaid plan fails to
comport with the requirements of the Boren Amendment in two respects:
First, Plaintiffs maintain that the Florida plan does not reimburse
hospitals for “administrative” or “grace days”[1] contrary to the
mandatory language of 42 U.S.C. §(s) 1396a(a)(13)(A), which
specifies that “in the case of hospital patients receiving services at
an inappropriate level of care” a State plan must provide “for lower
reimbursement rates reflecting the level of care actually received.”
Second, Plaintiffs assert that because of flaws in the State plan which
result in the unavailability of alternative setting care for adolescent
psychiatric patients upon discharge from the hospital, the hospitals are
required to retain such patients within their facilities beyond the
point of medical necessity. The State then disallows any reimbursement
for the “grace days” between the time medical necessity ends and the day
that discharge to an alternative setting is possible, because there is
no medical necessity for in-patient services during this waiting period.
Thus, under the guise of disallowing compensation for lack of medical
necessity, the State effectively shifts the fiscal impact of its flawed
Medicaid program to the hospitals, resulting in hospital per diem
reimbursement rates which are diluted to such an extent that they are
not “reasonable and adequate to meet the costs . . . of efficiently and
economically operated facilities,” contrary to the Boren Amendment
requirements.[2]
Plaintiffs therefore seek an injunction pursuant to the Boren
Amendment to Title XIX, 42 U.S.C. §(s) 1396a(a)(13)(A), and
42 U.S.C. § 1983, against the continued operation by the State of this
portion of its Medicaid plan and further seek a declaratory judgment
holding that the State must reimburse Plaintiffs for adolescent
psychiatric patient “grace days,” at a rate reflective of the level of
care received by the patients during the grace period.
B. Defendant AHCA’s Case:
AHCA first asserts that there is no case or controversy.
Defendant contends it has not recouped any money previously paid to
Plaintiffs for in-patient adolescent psychiatric care provided to
Medicaid recipients, but later determined by KEPRO to be not “medically
necessary” — in other words, recoupment for “administrative” or “grace
days.” According
Page 697
to Defendant, it has not yet determined whether to
recoup funds from Plaintiff TMRMC. Furthermore, Defendant points out
that Plaintiff FHMC has a pending request for a formal administrative
hearing to contest Defendant’s determination that FHMC was overpaid for
rendering services to eight (8) Medicaid recipients[3] . As a result,
Defendant concludes that Plaintiffs have not suffered any monetary
damage, any prospective damages to or suffered by Plaintiffs are too
speculative, and Plaintiffs have not exhausted their administrative
remedies pursuant to Florida Statutes Chapter 120. Consequently,
Defendant would have the Court hold that there has been no actual
dilution in either Plaintiff’s Medicaid per diem rates and, therefore,
there is no violation of the Boren Amendment.
Second, AHCA maintains that HRS, not it, is the proper defendant
in this action. Defendant asserts that HRS delays placement of
Plaintiffs’ adolescent psychiatric patients in outpatient facilities,
either because of administrative delays by HRS or the failure of HRS to
provide an adequate number of such facilities[4] . Furthermore,
Defendant contends that: (1) a substantial number of the adolescent
patients in question are in the custody of HRS; or (2) the adolescent
patients in question are still a danger to themselves or others fall and
within the care of HRS under Florida’s Baker Act[5] . Defendant
therefore concludes that HRS is responsible for the reimbursement
problems at issue in this case, and that Plaintiffs have therefore not
proven any Boren Amendment violations.
AHCA next asserts the inappropriate level of care reimbursement
provision of the Boren Amendment is optional, and that Florida has not
elected to provide such coverage[6] . In the absence of inappropriate
level of care coverage, Defendant states that medical necessity, or the
lack thereof, is the only pertinent criterion for determining the
compensability of the “grace days.” Since Plaintiffs do not dispute that
in-patient psychiatric care is not “medically necessary” for the
adolescent patients in question, Defendant argues the hospitals cannot
be reimbursed under Florida’s Medicaid for the “grace days” at issue.
Accordingly, Defendant would have the Court hold that Plaintiffs have
failed to demonstrate a violation of the Boren Amendment.
AHCA also argues that the Boren Amendment provides, by
definition, that the Plaintiff hospitals are not efficiently operated
when they continue to treat patients beyond medical necessity — i.e., when
in-patient care is no longer “medically necessary” for the adolescent
psychiatric patients in question. Defendant therefore states that its
failure to pay Plaintiffs for such services does not violate the Boren
Amendment.
Finally, AHCA states that Medicaid per diem rates are
established by it only after a hospital provider submits its cost of
care (including “charity” care), which is then divided by the
reimbursable Medicaid days to produce a per day/per bed cost for the
provider. Defendant reasons that even if this case raises a Boren
Amendment issue, the amount of the services not directly paid to
Plaintiffs will be recalculated as part of the “charity” care when any
subsequent per diem rates are set. Hence, no Boren Amendment violation
has occurred.
II. FINDINGS:
The factual matters of this case are largely undisputed. The
parties merely differ in their conclusions of whether a Boren Amendment
Page 698
violation has been demonstrated. The Court now makes the following
findings of fact and law:
A. Florida’s Medicaid System:
The Medicaid Act, Title XIX of the Social Security Act, is a
cooperative federal-state program designed to allow states to
receive matching funds from the federal government to finance
medical services to certain low-income persons. Schweiker v.
Gray Panthers, 453 U.S. 34, 36, 101 S.Ct. 2633, 2636,
69 L.Ed.2d 460 (1981). States may voluntarily choose to participate in the
Medicaid program. See 42 U.S.C. § 1396b(a). When a state, like Florida, has
elected to participate in the Medicaid program[7] , it must provide
certain services[8] , including early and periodic screening, diagnostic,
and treatment services (“EPSDT”) for qualified aid recipients under age
twenty-one[9] .
In Florida, EPSDT services include in-patient psychiatric
hospital services for individuals under age twenty-one[10] , such as
those provided by Plaintiffs. Federal law does not appear to require
states to provide in-patient psychiatric treatment in their EPSDT
programs. See 42 U.S.C. §(s) 1396d(r);
42 C.F.R. Section(s) 441.56(c). However, even when a state elects to provide an optional
service, that service becomes part of the state Medicaid plan and is
subject to the requirements of federal law. See Sobky v. Smoley,
855 F. Supp. 1123, 1127 (E.D.Cal. 1994) (collecting citations). In-patient
psychiatric care must therefore be provided by the hospitals to their
patients as long as medical necessity exists[11] . An adolescent
Medicaid recipient in an acute care facility is entitled to receive full
hospital services of room, board, medical supplies, diagnostic and
therapeutic services, use of the hospital facilities, drugs, nursing
care, and all supplies and equipment necessary to provide care (Pretrial
Stipulation, Doc. 89). There are no financial caps imposed upon such
services when provided to patients under the age of 21 years. See
Fla.Stat. Section(s) 409.908(1)(a).
Moreover, in administering EPSDT programs, participant states,
such as Florida, must comply with the Medicaid regulations, particularly
the 62 conditions set forth in 42 U.S.C. §(s) 1396a(a)[12] .
Specifically, the Boren Amendment[13] to Title XIX dictates that
although
Page 699
administration of Medicaid plans is the responsibility of the
states, a participating state must make payments for hospital services
through the use of [reimbursement] rates . . . which the State
finds, and makes assurances satisfactory to the Secretary [of
HHS], are reasonable and adequate to meet the costs which must
be incurred by efficiently and economically operated facilities
in order to provide care and services in conformity with applicable
State and Federal laws . . . and to assure that individuals
eligible for medical assistance have reasonable access . . . to
in-patient hospital services of adequate quality. . . .
42 U.S.C. §(s) 1396a(a)(13)(A). In other words, a
participant State must do two things to be in compliance with the Boren
Amendment: first, ensure individuals have “reasonable access” to
facilities of “adequate quality”; and second, reimburse health care
providers in a manner that is “reasonable and adequate” to meet the
costs of “efficiently and economically operated” facilities. The
Secretary of HHS, through the Health Care Financing Administration
(“HCFA”)[14] , then either approves or disapproves the State’s proposed
reimbursement system. See 42 U.S.C. §(s) 1396a(b).
In Florida, AHCA establishes and applies the methodology for
determining the per diem rate that a hospital receives for psychiatric
medicaid patients[15] . This formula is based upon allowable cost and
divided by allowable days, which results in the per diem rate for each
individual hospital. The per diem rate is not determined for each
service in a hospital which the hospital provides or performs, but is an
average of all services provided in that hospital from a prior year plus
an inflation factor for the current year; therefore, the per diem rate
is different for each hospital, and will change every year. Since the
Medicaid hospital reimbursement rate reflects an average cost of all
hospital services for each facility, the rate over-compensates for some
services and under-compensates for other services (Pretrial
Stipulation).
A state agency with oversight over an approved Medicaid
reimbursement system[16] is authorized to contract with peer review
organizations (“PROs”) to carry out its duty to promote “the effective,
efficient, and economical delivery of health care services . . . and the
quality of services of the type for which [Medicaid] payment may be
made.” 42 U.S.C. §(s) 1395y(g). See also id. at Section(s)
1320c-7(a) (authorizing states with approved Title XIX plans to contract
functions to PROs). PROs are only permitted to recommend making Medicaid
payments for services that are “reasonable and necessary for the
diagnosis or treatment of illness or injury.” See
42 U.S.C. §(s) 1395y(a)(1)(A). In addition, in determining whether Medicaid services
are necessary, PROs must review
some or all of the professional activities in the area . . . of
institutional . . . providers of health care services in the
provision of health care services and items for which payment may
be made . . . for the purpose of determining whether . . . (A)
such services and items are or were reasonable and medically
necessary . . .; (B) the quality of such services meets
professionally recognized standards of health care; and (C) in case
such services and items are proposed to be provided . . . on an
in-patient basis, such services and items could, consistent with
the provision of medical care, be effectively provided more
economically on an
Page 700
outpatient basis or in an in-patient health care
facility of a different type.
. . . .
42 U.S.C. §(s) 1320c-3(a)(1). The PRO determines through
its review whether Medicaid payments are to be made for the services
reviewed. 42 U.S.C. §(s) 1320c-3(a)(2). The PRO’s determination is
conclusive, unless the “determination is changed as the result of any
hearing or review of the determination.”
42 U.S.C. §(s) 1320c-3(a)(2)(C). See id. at Section(s) 1320c-4.
KEPRO is under contract with the State of Florida for this
purpose. On a retrospective basis, KEPRO reviews provider claims,
utilizing criteria which have been established by the State of Florida,
to determine whether payment for the services should be allowed,
disallowed or allowed for a reduced number of days. Florida’s Agency for
Health Care Administration (“AHCA”), relying on the KEPRO determination,
makes the final decision regarding reimbursement for the services. In
the meantime, the provider receives reimbursement for the services
provided on a monthly basis, so at the end of the fiscal year, if there
has been an adverse determination by KEPRO so that certain days or
admissions are denied, AHCA sends a recoupment letter to the provider
requesting that payment be disgorged. The provider either repays the
state, or funds are deducted from future payment, after administrative
remedies are exhausted.
Florida does not reimburse providers in any amount for what it
terms “administrative” or “grace days,” which are defined by regulation
as “days a patient remains in the hospital beyond the point of medical
necessity while awaiting placement in a nursing home or other place of
residence.” Fla.Admin. Code r. 59G-4.150(1)(a).
On the other hand, Florida reimburses Plaintiffs and the 23
other Medicaid providers of in-patient hospital care for the provision
of medically necessary psychiatric treatment to these patients. Florida
also reimburses providers of medically necessary psychiatric care in
alternative, lower level care facilities once the medical necessity for
in-patient treatment ends[17] . However, due to organizational[18] or
funding deficiencies in the state’s medical assistance program, there is
an extreme shortage of available spaces at alternative care facilities
for the adolescent psychiatric patients.
B. The Case At Bar:
Plaintiffs have therefore repeatedly found themselves forced
into the posture of retaining and caring for adolescent psychiatric
patients after the medical necessity for in-patient, acute care services
ceases, because treatment at an alternative facility was medically
necessary for the patient, but placement in such an alternative setting
was impossible or greatly delayed. Under these circumstances, the
Plaintiffs may not discharge the patients to the home, since they are
not medically able to return to such an unsupervised setting. In
addition, as Medicaid providers, the Plaintiffs cannot discriminate
against adolescent psychiatric patients at the point of admission, even
though the providers are aware of the possibility or likelihood of an
extended period of “grace days” for these patients once medical
necessity for in-patient services ends (Pretrial Stipulation). Thus, the
hospitals are forced, through no fault of
Page 701
their own, to retain these
patients until placement in an alternative setting is possible.
On retrospective review, KEPRO abides by Medicaid guidelines by
denying Plaintiffs payment for in-patient psychiatric services for
adolescents at the point those services are no longer medically
necessary. However, Florida’s failure to adopt a provision for payment
of inappropriate level of care services causes AHCA to deny any
reimbursement to the two hospitals for those “grace days,” regardless of
the duration the adolescent patient has to wait before an alternative
out-patient setting is available. AHCA, through its denial of
reimbursement to Plaintiffs for adolescent psychiatric patient “grace
days,” thereby shifts the deficiencies of the State’s medical assistance
program, and the resulting fiscal impact of the same, to the Plaintiff
hospitals.
The Court heard testimony about the disproportionate number of
denials by KEPRO for in-patient psychiatric services (both adult and
adolescent). For example, although psychiatric Medicaid services only
comprise 7.3 percent of all admissions and 15.2 percent of all patient
days, they comprised 65.4 percent of all denials and 78.3 percent of all
denial days (Pls.’ Ex. 11). The large number of denials are probably a
byproduct of the 100% retrospective review that KEPRO does for all
in-patient psychiatric services (Pretrial Stipulation). Again, however,
the net effect of the large number of denials is that the Plaintiff
hospitals recover only a portion of their costs of providing in-patient
psychiatric care, either through immediate reimbursement by AHCA, or as
reflected in the adjustment of the successive year’s overall in-patient
reimbursement rate.
Plaintiffs also presented evidence of the fiscal impact of the
denials on each of the two hospitals.
Carl Mahler, Administrator of TMRMC’s psychiatric facility,
testified that 25 percent of TMRMC’s psychiatric patients were on
Medicaid, includes 40 percent of all adolescent patients. Mr. Mahler
further stated that the average length of stay for all psychiatric
patients was 12 days. Annette Hurst, Director of Utilization Management
and Discharge Planning for Plaintiff TMRMC, testified that between
1989-1991, TMRMC had a total of 4 Medicaid denials out of 15 Medicaid
recoupments by HRS, out of 429 psychiatric admissions[19] for the same
period. Although the number of psychiatric admissions was constant,
there were a total of 146 denials for psychiatric patients during the
1992-1995 period. While not all of these denials during 1992-1995 were
adolescent patients, Ms. Hurst testified that the denials for adolescent
patients during this period totalled over $654,000.00. As of June, 1995,
TMRMC had an in-patient reimbursement rate of $723.00 per patient, per
day. However, AHCA had not attained any recoupment from TMRMC since
1992.
Karen Schimpf, Assistant Director of Systems Development for
Plaintiff FHMC, stated that the average length of stay for psychiatric
patients was 14 days[20] . FHMC had a total of $311,310.00 in
recoupment denials, and $475,985.00 in reconsideration denials for all
psychiatric patients[21] . Out of 9 psychiatric care cases pending
before AHCA’s Division of Administrative Hearings, 2 involve care for
adolescent patients totalling $257,000.00. FHMC has had a total of 120
psychiatric denials through June 20, 1995, including both adult and
adolescent patients. At the time of trial, FHMC’s in-patient
reimbursement rate was $833.90 per patient, per day. Again, it does not
appear that AHCA had
Page 702
attained any recoupment from FHMC for the cases in
question.
C. Conclusions:
Plaintiffs, as health care providers under the Florida Medicaid
program, have standing to sue AHCA for declaratory and injunctive relief
under 42 U.S.C. §(s) 1983, for an alleged violation of the Boren
Amendment of the federal Medicaid Act. Wilder, 496 U.S. at 498,
110 S.Ct. at 2510. This Court has jurisdiction pursuant to
28 U.S.C. Section(s) 1331 to consider such a challenge.
As an initial matter, the Court rejects out of hand Defendant
AHCA’s contention that there is no case or controversy because
Plaintiffs have failed to exhaust the state administrative appeals
process for denials of adolescent psychiatric care by AHCA and KEPRO. It
is well established that a claim under 42 U.S.C. §(s) 1983 cannot
be barred by a plaintiff’s failure to exhaust state remedies with
respect to unreviewed administrative actions. E.g., Patsy v. Florida Bd.
of Regents, 457 U.S. 496, 516, 102 S.Ct. 2557, 2568, 73 L.Ed.2d 172
(1982); Thornquest v. King, 61 F.3d 837, 841 n. 3 (11th Cir. 1995). The
courts that have considered the exhaustion argument in the context of
the Boren Amendment have found this rule applies with equal force to
cases under the Amendment. See, e.g., Virginia Hosp. Ass’n v. Baliles,
868 F.2d 653, 660-61 (4th Cir. 1989), aff’d, Wilder, 496 U.S. at 498,
110 S.Ct. at 2510; Department of Health and Social Serv. v. Alaska State
Hosp. Nursing Home Ass’n, 856 P.2d 755, 758 (Alaska 1993); Indiana
State Bd. of Pub. Welfare v. Tioga Pines Living Ctr., Inc.,
575 N.E.2d 303, 307 (Ind. 4th Ct.App. 1991). Moreover, even if
exhaustion were required, AHCA’s posture in this case indicates that
reliance on administrative action would be futile because Plaintiffs’
claims would likely be denied in whole or in part. See generally Deltona
Corp. v. Alexander, 682 F.2d 888, 893 (11th Cir. 1982) (no
exhaustion of administrative action required where it would be futile);
Linfors v. United States, 673 F.2d 332, 334 (11th Cir. 1982) (same).
The Court similarly rejects AHCA’s argument that HRS is the
proper party defendant. As this Court noted in its January 12, 1995
order, the Court cannot enter any relief against HRS under a Boren
Amendment claim fashioned as a Section(s) 1983 claim because HRS is not
the designated Medicaid authority for the State of Florida (see Doc. 67
at 14-15). In addition, the Court further found “that HRS does not
promulgate rules governing Medicaid reimbursement, semireimbursement
rates for Medicaid providers, or make assurances to HCFA that those
rates comply with the provisions of the Boren Amendment” (Id. at 15).
Rather, AHCA has the responsibility for each of these tasks. The Court
further disagrees with AHCA’s contention that Plaintiffs have a monetary
recourse against HRS for all the adolescent psychiatric patients in
question. The trial testimony shows that only a very small proportion,
if indeed any proportion at all, of the adolescent psychiatric patients
at issue would fall within the purview of HRS through the Baker Act or
some other scheme. The fact that Plaintiffs’ losses are exacerbated by
HRS’s failure to provide an adequate number of alternative outpatient
facilities to which Plaintiffs can discharge these patients, does not
defeat Plaintiffs’ claims against AHCA under the Boren Amendment.
The Court also disagrees with AHCA’s contention that the
provision of “inappropriate level of care services” are optional under
these circumstances. Although the federal regulation governing payment
for “grace days” (which the Boren Amendment terms “inappropriate level
of care reimbursement”) indicates that a state’s reimbursement for such
time is optional, 42 C.F.R. Section(s) 447.253(b)(1)(ii)(B), the
legislative history of this regulation indicates that it is mandatory
under the scenario at issue before this Court. The Boren Amendment to
the Medicaid Act, 42 U.S.C. §(s) 1396a(a)(13)(A), mandates
reimbursement to in-patient hospital providers who provide lower level
care to patients once the medical necessity for in-patient, acute care
ceases, but the required alternative care setting is unavailable. The
reimbursement must be at a lower rate than that received for in-patient
services, commensurate with the level of care provided.
Page 703
In Alabama Hospital Association v. Beasley, 702 F.2d 955 (11th
Cir. 1983), the Eleventh Circuit expressly held that the Alabama Medicaid
reimbursement plan was deficient for failing to provide for lower
payment rates for patients who did not need in-patient care. Id. at
961-62. The Beasley court therefore remanded the case to the district
court to impose an appropriate remedy accounting for inappropriate level
of care services, without requiring the suspension of the entire state
Medicaid plan. Id. at 962.
As the Eleventh Circuit recognized in Beasley, the history of
42 C.F.R. Section(s) 447.253(b)(1)(ii)(B) indicates that HCFA intended for
the option of reimbursing for inappropriate level of care be available
only in situations where lower level care facilities were available, but
hospitals elected to retain patients in the in-patient setting beyond
the point of medical necessity. 52 Fed.Reg. at 28,143 (1987);
51 Fed.Reg. at 5, 730 (1986); 48 Fed.Reg. at 56,048 (1983). The history of
this rule, taken together with the mandatory language of the Boren
Amendment and the holding in Beasley, requires that the Plaintiff
hospitals be reimbursed for the “grace days” spent by adolescent
psychiatric care patient in their in-patient facilities, when the sole
reason for retaining the patients in the upper level facility is the
unavailability of alternative settings to which the patient may be
discharged.
To the extent that the legislative history of
42 C.F.R. Section 447.253(b)(1)(ii)(B) may be read to sanction the state’s refusal to
reimburse the Plaintiff hospitals at any rate under this scenario,
HCFA’s determination is directly contrary to the express mandate of the
Boren Amendment and is accordingly not entitled to deference by this
Court. Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). As
already discussed, the Boren Amendment requires that states
participating in the Medicaid program reimburse in-patient hospital
providers at a rate which is “reasonable and adequate” to meet the costs
incurred by “efficiently and economically operated facilities in order
to provide care and services in conformity with applicable State and
Federal laws, regulations, and quality and safety standards . . .” The
wholesale failure to reimburse any monies to two in-patient providers of
psychiatric care for adolescents, when such care is only medically
necessary on an outpatient basis, does not comport with the strictures
of the Boren Amendment.
Plaintiffs do not challenge the adequacy of the per diem rates
reimbursed to them for the days in which adolescent psychiatric patients
receive medically necessary in-patient services; however, Plaintiffs do
assert that by denying any reimbursement to the hospitals during the
“grace days” which are necessitated through no fault of the Plaintiffs,
the state is so diluting the otherwise adequate per diem rates as to
make them unreasonable and inadequate to meet the costs of the efficient
and economical operation of the facilities. The Court does not entirely
agree with Plaintiffs on this point.
The Court disagrees with Plaintiffs’ conclusion that AHCA’s
failure to provide reimbursement for medically necessary outpatient
psychiatric services to adolescents in an in-patient setting, dilutes
the in-patient per diem rate that the Plaintiffs receive. All parties
stipulate that the initial in-patient per diem rate is adequate, and the
Court agrees with that stipulation. The Court is simply unwilling to mix
apples with oranges by saying that the per diem rate for all in-patient
services must be increased to account for the lack of compensation for
medically necessary outpatient services. At least one circuit has held
under somewhat similar circumstances that outpatient costs should not be
included in calculating reimbursement rates for in-patient services. See
New York v. Bowen, 811 F.2d 776, 777-79 (2d Cir. 1987).
Instead, AHCA has effectively created a situation where, in the
absence of the inappropriate level of care compensation, in-patient
psychiatric providers such as Plaintiffs are providing medically
necessary outpatient psychiatric services to adolescents in an
in-patient setting, but receiving an outpatient reimbursement rate of
zero. The Boren Amendment applies to outpatient rates, in addition to
in-patient rates. See generally Ohio Hosp. Ass’n v. Ohio Dep’t of Human
Page 704
Serv., 62 Ohio St.3d 97, 579 N.E.2d 695, 698 (1991) (“Although Wilder
involved a challenge to per-diem charges for in-patient care, the
selfsame analysis applies to the outpatient fees involved in this
case.”), cert. denied, 503 U.S. 940, 112 S.Ct. 1483, 117 L.Ed.2d 625
(1992). Accord, Orthopaedic Hosp. v. Kizer, No. 90-4209, 1992 WL 345652
(C.D.Cal. 1992) (same). The failure to compensate Plaintiffs at an
appropriate outpatient rate therefore violates the Boren Amendment.
While the Boren Amendment was intended to grant states a greater
degree of flexibility in establishing the methodology for their
reimbursement rates, the amendment was “not intended to encourage
arbitrary reductions in payment that would adversely affect the quality
of care.” S.Rep. No. 139, 97th Cong., 1st Sess. 478, reprinted in
1981 U.S. Code and Cong. Admin. News 396, 744. In this case, due to an
inadequate level of funding for inappropriate level of care services,
AHCA and the State of Florida have impermissibly shifted the
deficiencies of Florida’s Medicaid program, and the resulting fiscal
impact of the same, to the private sector hospitals. As discussed above,
since Plaintiffs are qualified providers under the Medicaid Act, they
cannot lawfully choose to discriminate against the adolescent patients
in question by refusing to admit them on the basis that Plaintiffs may
not recover all — or for that matter, any — of the costs of providing
psychiatric services from AHCA. Plaintiffs are therefore left with a
Hobson’s choice: either accept the adolescent psychiatric patients, and
risk recoupment by AHCA later on, or deny admission to the adolescent
psychiatric patients and risk being in noncompliance with federal
guidelines.
Defendant AHCA seems to concede that budgetary constraints and
the failure of the Legislature to adopt a provision for inappropriate
level of care services, have left it incapable of compensating
Plaintiffs for medically necessary outpatient psychiatric services
provided in an in-patient setting. However, as the Tenth Circuit has
held:
While budgetary constraints may be a factor to be considered by
a state when amending a current plan, implementing a new plan, or
making the annually mandated findings, budgetary constraints alone
can never be sufficient. Illinois Hosp. Ass’n [v. Illinois Dept.
of Public Aid, 576 F. Supp. 360 at 368 (N.D.Ill. 1983).] “If a state
could evade the requirements of the [Medicaid] Act simply by
failing to appropriate sufficient funds to meet them, it could
rewrite the Congressionally imposed standards at will.” Alabama
Nursing Home Ass’n v. Califano, 433 F. Supp. 1325, 1330 (M.D.Ala. 1977),
review and vacated in part on other grounds, sub nom., 617 F.2d 388
(5th Cir. 1980).
AMISUB (PSL), Inc. v. Colorado Dept. of Social Serv., 879 F.2d 789,
800-01 (10th Cir. 1989), cert. denied, 496 U.S. 935, 110 S.Ct. 3212,
110 L.Ed.2d 660 (1990). Yet, this is precisely what the State of Florida
has attempted to do in the case at bar.
Having found a violation under the Boren Amendment, the only
remaining question is what remedy is appropriate. There are two courses
that the Court will take.
First, the Court finds that AHCA’s failure to provide any
reimbursement for medically necessary inappropriate level of care
services constitutes a Boren Amendment violation. The absence of such a
reimbursement provision renders Florida’s Medicaid plan deficient. As
such, the Florida Legislature must amend its Medicaid plan to include
reimbursement for medically necessary inappropriate level of care
services, to bring the Medicaid plan into compliance with federal law.
See Beasley, 702 F.2d at 961-62.
Second, pending the adoption of such a reimbursement provision
by the Florida Legislature, Defendant AHCA is ordered to set an
appropriate outpatient rate for medically necessary outpatient
psychiatric services provided to adolescent Medicaid recipients at each
of the two Plaintiff hospitals. Such interim rates may be used pending
the adoption of permanent reimbursement rates that are compliance with
federal law. See, e.g., Mason Gen. Hosp. v. Secretary of Dep’t of
H.H.S., 809 F.2d 1220, 1223 (6th Cir. 1987); New England Memorial Hosp.
v. Rate Setting Comm’n, 394 Mass. 296, 475 N.E.2d 740, 745 (1985). In
setting the interim outpatient
Page 705
rate, AHCA shall use the same methodology
it applies to achieve appropriate rates for non-hospital providers of
such outpatient psychiatric services. Kizer, 1992 WL 345652, at *1. The
interim rates shall remain in effect until such time as the Florida
Legislature adopts a permanent inappropriate level of care reimbursement
provision.
Plaintiffs will continue to receive reimbursement for medically
necessary in-patient psychiatric services at their existing in-patient
per diem rates. To the extent that psychiatric services for adolescent
Medicaid recipients are only medically necessary at an outpatient rate,
Plaintiffs shall receive reimbursement for the appropriate number of
days at the outpatient rate set by AHCA.
Accordingly, it is hereby ORDERED AND ADJUDGED:
1. The Court finds that Plaintiffs have proven that the present
Medicaid reimbursement scheme overseen by Defendant AHCA fails to
adequately compensate Plaintiffs for medically necessary outpatient
psychiatric services to adolescents, such that the reimbursement rate
is not “reasonable and adequate to meet the costs . . . of efficiently
and economically operated facilities,” in violation of the Boren
Amendment to Title XIX of the Social Security Act,
42 U.S.C. Section(s) 1396a(a)(13)(A), and 42 U.S.C. §(s) 1983.
2. Based upon the foregoing, Plaintiffs are entitled to a
declaratory judgment holding the State of Florida’s Medicaid
reimbursement system to be deficient in that (i) it fails to pay
for the “grace days” spent by adolescent psychiatric care patients
at the Plaintiff hospitals’ facilities under the circumstances
described herein, and (ii) the effect of AHCA’s refusal to reimburse
the hospitals at a rate reflective of the medically necessary level of
care received by these patients during the “grace days” is to give
Plaintiffs an outpatient per diem rate of zero for the medically
necessary outpatient services provided in an in-patient setting, such
that the outpatient rate is unreasonable and inadequate to meet the
costs of an economically and efficiently run facility. Both
deficiencies constitute violations of the Boren Amendment, and the
Court so holds.
3. Defendant AHCA is enjoined from future violations of the
Boren Amendment, as set forth herein. AHCA shall adopt for each
Plaintiff hospital an interim outpatient reimbursement rate that is
reasonable and adequate to meet the costs of an economically and
efficient run facility. AHCA shall reimburse Plaintiffs in accordance
with the existing in-patient rate, or the interim outpatient rate, as
dictated by the medical necessity of each individual case. This
injunction is to remain in full force and effect until further order
of the Court.
4. Defendant AHCA, through the Florida Legislature, is directed
to amend Florida’s Medicaid plan in such a way as to be non-violative
of the Boren Amendment — namely, Florida’s Medicaid plan must be amended
to include reimbursement for inappropriate level of care services.
5. The Court retains jurisdiction for a period of 60 days for
the purposes of assessing attorney fees and costs.
6. Any application for attorney fees must be filed by Plaintiffs
by February 30, 1996.
7. The clerk is directed to enter judgment for Plaintiffs and
close this case, subject to the retained jurisdiction for the
limited purposes herein specified.
DONE AND ORDERED this 18th day of January, 1996.