Pennsylvania Department of Public Welfare, DAB No. 1042 (1989) DEPARTMENTAL APPEALS BOARD Department of Health and Human Services SUBJECT: Pennsylvania Department DATE: April 24, 1989 of Public Welfare Docket Nos. 88-150 88-237 Decision No. 1042 DECISION The Pennsylvania Department of Public Welfare (Pennsylvania) appealed disallowances by the Health Care Financing Administration (HCFA) of a total of $5,357,331 in federal financial participation (FFP) claimed under Title XIX (Medicaid) of the Social Security Act (Act) for the period from July 1, 1985 through March 31, 1988. The claims were based on payments made for alleged emergency hospital services, at the per diem rates generally applicable to inpatient psychiatric hospital services. The services were provided by institutions for mental diseases (IMDs) for inpatients between 22 and 65 years of age. We uphold the disallowance, based on statutory and regulatory provisions excluding from the scope of "medical assistance" under Title XIX all care or services provided to individuals between 22 and 65 years of age in an IMD. Applicable Laws and Regulations Title XIX of the Act authorizes federal grants to aid in financing state programs which provide medical assistance and related services to needy individuals, in accordance with an approved state plan. The Secretary of Health and Human Services (HHS) is required to pay a percentage of the "total amount expended as medical assistance under the State plan" and associated administrative costs. Section 1903(a) of the Act. "Medical assistance" is defined in section 1905(a) of the Act generally as payment for covered services provided to individuals who meet specified eligibility requirements. Among the services which may be covered in a state plan are "any other medical care, and any other type of remedial care recognized under State law, specified by the Secretary." Section 1905(a)(21). Following the list of eligible services, however, section 1905(a) explicitly excludes from the term "medical assistance" payment for "care or services for any individual who has not attained 65 years of age and who is a patient in an institution for mental diseases" (except for inpatient psychiatric hospital services for individuals under age 21). The IMD exclusion is also incorporated specifically into the definition of various levels of institutional service which qualify as "medical assistance." For example, "medical assistance" is defined to include "inpatient hospital services (other than services in an institution for mental diseases)." Section 1905(a)(1). HCFA's regulations at 42 C.F.R. Part 441, Subpart A, set out general limitations on payment of FFP. The provision at 42 C.F.R. 441.13(a)(2) states that FFP is not available in expenditures for services for individuals between ages 22 and 65 "in an institution for mental diseases." The current regulatory definition of "in an institution" is "admitted to live there and receive treatment or services provided there that are appropriate." 42 C.F.R. 435.1009. HCFA's regulations also specify what medical or remedial care may be covered (in addition to services expressly listed in section 1905(a)), and authorize coverage for "emergency hospital services." Under 42 C.F.R. 440.170(e), "emergency hospital services" are services: (1) necessary to prevent the death or serious impairment of the health of a recipient, and (2) because of this threat, necessarily provided at the most accessible hospital available that is equipped to furnish the needed services. FFP is available -- even if the hospital does not currently meet . . . the definitions of inpatient or outpatient hospital services under [42 C.F.R.] sections 440.10 [inpatient hospital services] and 440.20 [outpatient hospital services]. 42 C.F.R. 440.170(e)(ii) (emphasis added). The regulatory definition of "inpatient hospital services" includes a requirement that the services must be provided in a facility which is not an IMD. 42 C.F.R. 440.10(a)(3)(i). Case Background The Pennsylvania Medicaid State Plan provides coverage for "emergency hospital services" (although there is some dispute here as to the scope of that coverage). In an affidavit submitted by the State, an official of the State's Office of Mental Health (OMH), attests: Prior to 1985, OMH did not bill under Title XIX for emergency hospital services because it was unaware of the State plan provisions with respect to this category of services and because it had been led to believe that all services rendered in an IMD were precluded from Title XIX payments with respect to persons under 65 years of age. State's Ex. VIII. The affidavit further explains that in 1985, after the Supreme Court issued its decision in Connecticut Department of Income Maintenance, 471 U.S. 524 (1985), OMH requested a review of emergency hospital services provided by State hospitals to individuals between 22 and 64 years of age and that this review led the State to submit a retroactive claim for such services in 1987. State's Ex. VIII. The claims were made at the per diem rates generally used by the hospitals to claim for inpatient psychiatric hospital services. HCFA deferred and then disallowed federal funding for this claim and for subsequent claims submitted by the State for services provided by State mental hospitals as well as private psychiatric hospitals. Parties' Arguments Pennsylvania argued that the "emergency hospital services" regulation at 42 C.F.R. 440.170(e)(ii) created an exception to the IMD exclusion, authorizing FFP in all emergency hospital services by waiving requirements which normally apply to inpatient hospital services, including the requirement that the hospital not be an IMD. Pennsylvania also contended that the services were not within the overall IMD exclusion because the emergency patients were not "in" an IMD on a long-term basis. While Pennsylvania conceded that the patients had been "admitted" to IMDs, it alleged that the disputed services were provided to patients admitted to the facility only temporarily while receiving emergency care, and that the patients were then either discharged or provided long-term placement, as appropriate. Pennsylvania relied on a reference to "long-term care" in IMDs, cited in the Connecticut decision, to support its argument that Congress intended the IMD exclusion to exclude only services to patients who have been admitted to live in the facility on a long-term basis. HCFA responded that the general IMD exclusion applies to emergency hospital services, notwithstanding 42 C.F.R. 440.170(e). HCFA argued that patients staying longer than a single day would be patients "in" an IMD within the scope of the general IMD exclusion and the regulatory definition at 42 C.F.R. 435.1009 because these provisions are not restricted by their terms to long-term patients. HCFA pointed out that the facilities had claimed a per diem rate of reimbursement which includes room and board (rather than simply a fee for the particular services rendered), indicating that the patients had been in the facility for at least one full day. Specifically, HCFA alleged (and Pennsylvania did not deny) that the patients had actually been admitted to the facilities and remained from at least 2 to 20 days. HCFA also argued that emergency hospital services under HCFA's regulations and the State plan were limited to emergency room and outpatient procedures (even if provided in a facility which failed to meet the definition of inpatient hospital services for reasons other than IMD status). In particular, HCFA alleged that Pennsylvania's State plan provided for reimbursement of emergency hospital services only as an outpatient service on a fee basis, rather than at the per diem rate used to reimburse inpatient services. In response to a specific Board order, the State submitted its State plan provisions on "emergency hospital services," acknowledging that the plan did not specifically refer to inpatient emergency hospital services but arguing nonetheless that such services were covered. General Overview of Our Opinion The primary issues presented in this case are (1) whether the "emergency hospital services" regulation, in waiving facility characteristic requirements for emergency hospital services, created a regulatory exception to the statutory IMD exclusion; and (2) whether the patients here were "in" IMDs. The State's position on each of these issues rests on inferences which the State would have us draw from HCFA's choice of isolated words in its regulations. At most, however, these words introduce an ambiguity which must be resolved by reference to the context in which those words appear, and, more importantly, in a manner which does not conflict with the statute. Congress intended to exclude Medicaid funding for individuals in IMDs since those individuals were the traditional responsibility of the State. There is no question here that the State traditionally paid for all services in these IMDs irrespective of whether the patients were admitted on an emergency basis. To permit FFP in the payments would simply shift costs from the State to the federal government with no corresponding increase in services to Medicaid beneficiaries. Pennsylvania relied on the fact that HCFA used the phrase "to live" (in the definition of "in an institution") without specifying that this included receiving room and board on a temporary basis. We think it is clear from the context and history that the phrase "to live" was not used in the sense of formally taking up residence in a place. The evidence shows, moreover, that the State did not begin claiming for emergency services in IMDs when this language was introduced in 1978, but developed its claiming theory in 1985 based on the reference to "long-term care" in the Connecticut decision. As the U.S. Court of Appeals for the Seventh Circuit said in rejecting a similar attempt by Illinois to claim FFP for inpatient services in IMDs, any expectation the State had that it might receive FFP for these services "would seem to have nothing to recommend it other than the traditional desire to take advantage of a loophole." Illinois v. Bowen, 786 F.2d 288, 293 (7th Cir. 1986). Below, we explain our analysis of the statutory language and purpose, and also provide a detailed analysis of why we consider the State's reading of the regulations to be unreasonable. We also discuss the issue, raised by HCFA, concerning whether emergency hospital services were limited under the State plan to outpatient services. While the State provided enough information to call into question HCFA's assertion that the plan authorized only outpatient emergency services, the State's evidence falls far short of establishing that it officially interpreted its plan to include inpatient emergency services. In our view, the fact that the State provided nothing definitively showing that, as a matter of administrative practice, it paid for inpatient emergency hospital services in institutions which did not ordinarily qualify under the program suggests that the State's position that its plan covers inpatient emergency services may simply be part of the State's after-the-fact attempt at justifying these claims. Whether the emergency hospital services regulation provided an exception to the IMD exclusion As discussed above, section 1905(a) of the Act excludes coverage for "care or services for any individual" who is a patient in an IMD and not covered by the exceptions for the aged or children. As HCFA pointed out, the IMD exclusion was based on a general congressional belief that care in mental institutions was a traditional state responsibility and on a general distrust of the effectiveness and efficiency of care in IMDs. S. Rep. No. 404, 89th Cong, 1st Sess., pt. 1, pp. 145-56 (1965); Schweiker v. Wilson, 450 U.S. 221, 242 (1980). Thus, once a patient aged 22-65 had the status of being in an IMD (irrespective of that person's meeting the eligibility requirements for Medicaid), FFP would no longer be available for any care or services provided to that person. The State apparently considered HCFA to have authority to override the statutory exclusion under the authority in section 1905(a)(21) to specify other medical and remedial care which could be covered. Whether HCFA has such authority is not readily apparent; not only does the exclusion appear in the statute as a limit on all services, but Congress itself authorized funding for the aged and children in IMDs only under very carefully prescribed circumstances and has specifically declined to consider extending the exceptions to individuals in other age groups. See sections 1902(a)(20) and 1905(h) of the Act; H.R. Rep. No. 65, 92d Cong., 2d Sess. 65 (1972); see also section 1102 of the Act. The State did not deny here that it had traditionally paid for all care and services in IMDs, including for individuals admitted on an emergency basis. Instead, the State relied on the reference to "long-term care" in the legislative history of the IMD exclusion (also referred to in the Connecticut decision) as indicating that Congress did not intend to exclude emergency services. This reliance is misplaced because it ignores the wording of the statute itself which excludes care or services for any individual in an IMD irrespective of the duration of the care. Moreover, Congress specifically applied the exclusion not only to nursing facilities (which are normally identified with "long-term care"), but also to "inpatient hospital services," which would include acute care on a short-term basis. The key factor in deciding whether the exclusion applies is the overall character of the institution as being one "primarily for the care and treatment of persons with mental illness." 42 C.F.R. 435.1009. Even assuming, however, that HCFA could specify that inpatient services provided to individuals admitted to an IMD on an emergency basis could be a covered service, we would not find that HCFA exercised such authority in 42 C.F.R. 440.170(e) to cover the individuals in question here. Neither the emergency hospital services regulation nor any other authority in this record demonstrates an intent by HCFA to except emergency services from the general IMD exclusion at 42 C.F.R. 44l.13(a)(2), which by its terms applies to all services in an IMD. The mere fact that section 440.170(e) specifies that a hospital does not have to meet the definition of "inpatient hospital services" to provide emergency services does not indicate an intent to waive the IMD exclusion; rather, it can be explained by the fact that neither the Act nor the regulations contain a separate definition of "hospital"; thus, the only way to waive health and safety standards for hospitals providing emergency services is to refer to requirements for "inpatient hospital services." In addition, the history of the Medicaid regulations clearly indicates that the IMD exclusion must be applied as a limit on availability of FFP for emergency hospital services. The relevant provisions have been essentially unchanged since originally issued in 1968. 33 Fed. Reg. 16165 (November 5, 1968). The organization of the Medicaid regulations, however, was altered in 1978 when HCFA rewrote all existing Medicaid regulations "in clearer simpler language." 43 Fed. Reg. 45176 (September 29, 1978). HCFA stated, at that time, that it intended to make no substantive changes in the regulations. Under the old organization, the general IMD exclusion was at 45 C.F.R. 249.10(c) and was labeled "limitations." The exclusion applied to "medical and remedial care and services" listed in 45 C.F.R. 249.10(b). In that section were listed all covered Medicaid services, including emergency hospital services. 45 C.F.R. 249.10(b)(15)(vi), (c)(1968). This leaves no doubt that in the present version HCFA also intended that emergency hospital services would be subject to the general IMD exclusion. Finally, we note that, in response to arguments by various states (including Pennsylvania), that HCFA regulations authorized FFP in inpatient hospital services provided to individuals aged 22 to 65 during the months they were admitted to an IMD, HCFA amended the regulations at 42 C.F.R. 435.1008(b) and 435.1004(b) in 1985. HCFA explained in the preamble to the final rule that the purpose of these amendments was to clarify that no FFP is available "for any services furnished to certain institutionalized individuals." 50 Fed. Reg. 13196 (April 3, 1985). Thus, we conclude that the reference to the definition of "inpatient hospital services" in the "emergency hospital services" regulations cannot reasonably be read as overriding the IMD exclusion. Whether These Patients Were in an Institution Pennsylvania asserted that these services were allowable because the patients were admitted to the institutions only on an emergency basis, and thus were not "admitted to live there and receive treatment or services provided there that are appropriate" within the meaning of 42 C.F.R. 435.1009. Pennsylvania argued that receipt of inpatient services did not necessarily mean that an individual was admitted "to live" at the facility. Pennsylvania noted that the term "inpatient" is separately defined in 42 C.F.R. 435.1009, and argued that there would be no need for separate definitions unless the meanings were different. Pennsylvania asserted that HCFA's position made no distinction between the terms. Pennsylvania also alleged that there was no evidence here that the services were provided to individuals who had given up any residence outside of the institution, and concluded that the Board should find that the patients were not "admitted to live" in the IMDs and thus were not within the IMD exclusion. We reject Pennsylvania's position as we discuss below. The statutory language of the IMD exclusion, excluding all care and services provided to individuals "in an institution for mental diseases," is quite broad. The common meaning of the term "in" connotes "location or position in space or in some materially bounded object." Webster's Third New International Dictionary of the English Language 1139 (P. Gove, ed. 1976). The statutory term literally could include any person who sets foot within the bounds of an IMD. The regulatory definition is clearly more narrow than the literal terms of the statute, but is set forth to interpret the statutory language and must be read consistently with that language and congressional intent. As discussed above, we find that the State's reliance on the reference to "long-term care" in the legislative history of the exclusion is misplaced. We also find that the State reads an intent into the choice of the phrase "to live" which is simply unwarranted when the term is considered in context, and is unsupported by any evidence that HCFA specifically intended through use of that word to extend funding to individuals who had not previously been covered. "To live" commonly means to "reside" or to "dwell." Webster's Third New International Dictionary 1323 (P. Gove, ed. 1976). The State would have use read the regulation to mean that an individual must "reside" in an IMD to have the requisite institutional status. Since "dwell" can mean simply "to exist or be present," however, we find the phrase "to live" to be ambiguous; we find no basis for concluding that "to live" means formally taking up residence. Id., p. 706. If HCFA had wished to adopt this result, HCFA could have used the more precise "reside" instead. We think that HCFA's interpretation, that the individuals here receiving room and board for periods of 2 to 20 days (and, perhaps, longer) were admitted to live in the institution, is an interpretation which is more consistent with the language and purpose of the IMD exclusion than the interpretation the State proposed. HCFA's interpretation is also supported by the following factors: o The phrase "admitted to live there" first appeared in the 1978 recodification referenced above and, therefore, was not intended as a substantive change. Prior to 1978, the regulation contained the phrase "admitted to participate in the living arrangements." 45 C.F.R. 248.60 (1971); 42 C.F.R. 448.60 (1978); see 36 Fed. Reg. 3872 (February 27, 1971); 42 Fed. Reg. 52827 (September 30, 1977); 43 Fed Reg. 45176 (September 29, 1978). The earlier phrase supports the conclusion that "to live" was not intended to refer to permanent residence. o The term "to live there" was necessary to ensure that the definition included both individuals admitted as inpatients receiving medical treatment as well as other individuals placed in the facility for custodial, non-medical, care (but not outpatients receiving services at the institution). The differences in 42 C.F.R. 435.1009 between the definitions of "in an institution" and "inpatient" arise because "inpatient" is a more restrictive term. An "inpatient" means "a patient who has been admitted to a medical institution on recommendation of a physician or dentist and is receiving room, board, and professional services in the institution on a 24-hour basis." Since an IMD may not necessarily qualify as a "medical institution" under 42 C.F.R. 435.1009 (and, even if it did, may admit individuals for non-medical, custodial care), the definition of "in an institution" had to be broader so as to encompass inpatients as well as anyone who was admitted without a physician's recommendation or who was not receiving professional services on a 24-hour basis. o On the other hand, we find the difference between the definition of "in an institution" and "inmate of a public institution" under section 435.1009 to be significant. Although a person is an "inmate" if "living in" a public institution, the definition specifies that a person is not considered an "inmate" if in a public institution only "for a temporary period pending other arrangements appropriate to his needs." The specific limitation implies that the term "living" can otherwise include a temporary stay. No similar limitation appears in the definition of "in an institution." o Limiting the IMD exclusion to individuals who reside at a facility would make the IMD exclusion more difficult to apply. Standards would be necessary to determine at what point an individual resides at a facility, and facilities would have to keep separate records for patients who have given up other residence to stay at the facility, and those who do not reside at the facility. There might be conflicts between the intent of the individual, the facility, and the State over where the individual resides. o To limit the IMD exclusion to those who formally reside in a facility is contrary to longstanding policy and practice with respect to the definition of an IMD. Since 1975, when HCFA began to examine whether particular nursing facilities were IMDs, one factor which HCFA stated it considered relevant was whether the patient population as a whole was primarily at the institution for care and treatment of a mental disease. Joint Consideration: Institutions for Mental Diseases, DAB No. 231 (1981). No distinction was made between patients based on whether they "resided" at the facility. Finally, even if the phrase "in an institution" did not include individuals admitted to the IMD only temporarily, the record here would not support a blanket assumption that emergency admissions are always temporary. Pennsylvania conceded that there was no federal or State definition or interpretation which distinguished between emergency and ordinary admissions. Pennsylvania Letter to Board, dated December 6, 1989. It is not clear that the patients were only temporarily at the IMDs; HCFA alleged, and Pennsylvania did not deny, that some of the patients remained at the IMD after the 20-day period of "emergency treatment" under Pennsylvania law. See 55 Pa. Admin. Code 5100.86 and 5100.87 (Shepard's 1984), State's Ex. IX. Thus, we find that, in the context of the IMD exclusion, the only reasonable reading of the phrase "in an institution for mental diseases" includes any individual admitted to the facility either as an inpatient or for custodial care and room and board, whether for emergency treatment or not. The State plan As noted above, HCFA took the position that the State plan did not cover emergency hospital services on other than an outpatient basis. Since this factual allegation would have provided an independent basis for this disallowance, but Pennsylvania had not had an opportunity to rebut the allegation, the Board issued an order, directing Pennsylvania to show cause why the Board should not find that the services claimed were not in accordance with the State plan. In response, Pennsylvania provided parts of its State plan which generally authorized payment for emergency hospital services "with limitations" described in item 2.a.(2) of the State Plan. State's Ex. III. The limitations were included in the State plan under the category of "Outpatient Hospital Services," and contained references only to outpatient services, including a prohibition on payments to clinics or emergency rooms for services rendered in the hospital emergency room to a recipient admitted to the hospital the same day. State's Ex. VI. There was no mention, either in the general emergency hospital services authorization or in the limitations, of inpatient emergency services. Pennsylvania asserted that no reference was needed because there was no limitation on payments for inpatient emergency hospital services under the State plan. Although the Board had ordered Pennsylvania to provide copies of any State policies which interpreted its plan to include inpatient emergency hospital services, Pennsylvania submitted nothing except regulations which prescribe circumstances under which individuals who had not been formally committed could be involuntarily retained on an emergency basis in mental institutions for a maximum of 20 days. 55 Pa. Admin. Code 5100.86 and 5100.87 (Shepard's 1984), State's Ex. IX. Pennsylvania also cited a state regulation defining "emergency inpatient psychiatric hospital services." 55 Pa. Admin. Code 1151.2. Nothing in these regulations indicates that they were intended to be an interpretation of the scope of emergency hospital services covered under the State Medicaid plan, however. The lack of any written policies specifying that inpatient services could qualify as emergency hospital services, or any provisions related to how such services would be reimbursed (even though a hospital which was not generally qualified to provide inpatient services might not have an established Medicaid per diem rate) raises a substantial question about whether the State intended to cover such services, whether provided in an IMD or not. We do not need to decide this issue definitively since it is not necessary to our decision. We note, however, that the fact that nothing in the State plan or implementing State policies refers to inpatient emergency hospital services at all (much less to such services in an IMD), together with the fact that Pennsylvania never previously submitted claims for these services, indicates that Pennsylvania was not relying on either federal approval or a longstanding State interpretation of the emergency hospital services exception in providing the services here and claiming FFP for them. Conclusion For the reasons stated above, we uphold the disallowances in the full amount of $5,357,331. ________________________________ Norval D. (John) Settle ________________________________ Alexander G. Teitz ________________________________ Judith A. Ballard Presiding Board