North Carolina Department of Human Resources, DAB No. 333 (1982)

GAB Decision 333

June 30, 1982 North Carolina Department of Human Resources; Docket No.
81-138-NC-HC Settle, Norval; Teitz, Alexander Ford, Cecilia


At issue in this case is $88,375 in federal financial participation
(FFP) which North Carolina (State) claimed under Title XIX of the Social
Security Act for medically necessary hysterectomies it paid for without
obtaining prior written acknowledgements that the patients were told
that the hysterectomies would make them sterile. /1/ The Agency
disallowed the costs because the regulations at 42 CFR 441.255 and
441.256 condition payment of FFP for hysterectomies on the State's
obtaining these acknowledgements. The State argued that the Agency
should be estopped from disallowing the costs because the Agency caused
the State to misunderstand the regulations.


Based on the record, the Board finds that the Agency did not cause
the State to misinterpret the regulations, and therefore, this
disallowance is sustained.

I. The Regulations.

The regulations at 42 CFR Part 441 govern State plan requirements and
set limits on FFP for specific services. The provisions relevant here
appear in Subpart F of Part 441 (43 Fed. Reg. 52171, November 8, 1978).
Subpart F is entitled "Sterilizations," and in pertinent parts states:

Section 441.250. Applicability.

This subpart applies to sterilizations and hysterectomies reimbursed
under Medicaid.

(2) Section 441.251. Definitions.

As used in this subpart:

"Hysterectomy" means a medical procedure or operation for the purpose
of removing the uterus.

"Sterilization" means any medical procedure, treatment, or operation
for the purpose of rendering an individual permanently incapable of
reproducing.

Section 441.252. State plan requirements.

A State plan must provide that the Medicaid agency will make payment
under the plan for sterilization procedures and hysterectomies only if
all the requirements of this subpart were met.

Section 441.253. Sterilization of a mentally competent individual
aged 21 or older.

FFP is available in expenditures for the sterilization of an
individual only if --

(c) The individual has voluntarily given informed consent in
accordance with all the requirements prescribed in Secs. 441.257 through
258; . . .

Section 441.255. Sterilization by hysterectomy.

(a) FFP is not available in expenditures for a hysterectomy if --

(1) It was performed solely for the purpose of rendering an
individual permanently incapable of reproducing; or

(2) If there was more than one purpose to the procedure, it would not
have been performed, but for the purpose of rendering an individual
permanently incapable of reproducing.

(3) (b) FFP is available in expenditures for a hysterectomy not
covered by paragraph (a) of this section only if --

(1) The person who secured authorization to perform the hysterectomy
has informed the individual and her representative, if any, orally and
in writing, that the hysterectomy will render the individual permanently
incapable of reproducing; and

(2) The individual or her representative, if any, has signed either a
written acknowledgement of receipt of that information.

Section 441.256. Additional Condition for Federal financial
participation (FFP).

FFP is not available in expenditures for any sterilization or
hysterectomy unless the Medicaid agency, before making payment, obtained
documentation showing that the requirements of this subpart were met.
This documentation must include a consent form or an acknowledgement of
receipt of hysterectomy information.

Sections 441.257, 441.258, and the Appendix set forth informed
consent procedures for sterilizations and a model consent form for
sterilizations.

II. Whether the Agency misled and misinformed the State about the
hysterectomy requirements.

A. The State's Position: The regulations taken as a whole caused
the State to misinterpret the hysterectomy requirements.

The State admitted that it did not obtain the required
acknowledgements for medically necessary hysterectomies it paid for
during the period audited (March 8 to June 30, 1979), but contended that
the Agency should be estopped from denying FFP because the Ageny misled
and misinformed the State. The State said that it "did not
intentionally disreagard the regulations but simply overlooked and
misunderstood" them, and that it was "honestly unaware of the written
acknowledgement requirement for hysterectomies." Agency's Response,
Exhibit D (State's Response to Audit), pp. 1-2, 4. The State asserted
that it first learned that acknowledgements were required for medically
necessary hysterectomies from the Agency's auditors in July, 1979 and,
thereafter, inquired to the regional office about the regulations.

The thrust of the State's argument was that it did not perform
hysterectomies for the purpose of sterilization, and that the Agency
obscured the meaning of the regulations by placing the requirements for
hysterectomies not performed for sterilization in the subpart (4) on
"Sterilizations," without providing proper training on the meaning of
the regulations. The State argued that the regulations, together with
the language in the preambles to the proposed and final regulations, are
ambiguous and hide the meaning of the individual passages which the
Agency contended sould have informed them that the regulations applied
to medically necessary hysterectomies. See, State's Response to Board
Questions, pp. 8-9. The State argued that the regulations should be
construed as a whole, considering not only the words themselves, but
also the surrounding circumstances and the purposes of the regulations.

Specifically, the State asserted that its misunderstanding can be
attributed to the following factors which, considered as a whole, made
it reasonable for the State to interpret the regulations as not applying
to medically necessary hysterectomies. The State claimed that:

The purpose of the regulations was to deal with sterilizations; the
Agency's summary of the regulations published in the Federal Register
stated that the rules amended existing requirements for sterilizations
and did not mention medically necessary hysterectomies; and the subpart
(titled "Sterilizations") and relevant section (titled "Sterilization by
hysterectomy") did not on their face purport to apply to medically
necessary hysterectomies.

Subsection (a) of the "Sterilization by hysterectomy" section stated
that FFP was not available for hysterectomies performed for
sterilization and, since the State did not allow hysterectomies for that
purpose, it further appeared that that section did not apply to the
State. Subsection (b), which required acknowledgements, was hidden
within an apparently inapplicable section (442.255) of an apparently
inapplicable subpart (441.250 et seq.).

HHS training concerning the sterilization regulations further
obscured that the acknowledgement requirements applied to medically
necessary hysterectomies. The Agency did not refer to such requirements
during a training session on the sterilization regulations which the
Agency conducted on December 13, 1979, and an Agency Action Transmittal
concerning the regulations failed to clarify the requirements.
(HCFA-AT-79-31 (MMB) dated March 29, 1979)

The regulations are unreasonable because the acknowledgement
requirement is not consistent with the stated purpose of the regulation,
which was to permit reproductive choice, since (5) there is no
reproductive chocie in medically necessary hysterectomies.

See, e.g., State's Appeal File, Exhibit 15

B. The Agency's Position: The regulations are clear on their face.

The Agency argued that it "sufficiently informed the State of all
relevant hysterectomy regulatory requirements," and therefore, the
Agency can not be estopped from disallowing these costs. Agency
Response, p. 12. The Agency maintained that the regulations clearly
articulated the acknowledgement requirements and cited as support
repeated references to hysterectomies in the regulations and the
preambles to the proposed and final regulations. Id., pp. 15-17. The
Agency charged that any misunderstanding by the State of the
acknowledgement requirements was caused by "the State's own careless
reading of the regulations, not their 'placement . . . .'" Id., p. 15.

The Agency rejected the State's claim that its training efforts
misled the State. The Agency did not concede that medically necessary
hysterectomies were not discussed at the training session ((or did it
claim that they were), but instead argued that the Agency had, prior to
that date, "more than adequately notified the State of the hysterectomy
requirements through the rulemaking process." Id., p. 20. The Agency
maintained that publication of those requirements in the Federal
Register was sufficient notice to the State and argued that it would be
unreasonable for the State to rely on the alleged ommission at one
formal training session as a justification not to implement the
requirements set out in regulations. The Agency maintained that the
Action Transmittal to which the State referred indicated that
acknowledgements would be required for medically necessary
hysterectomies.

The Agency also argued that estoppel can not be applied against the
United States, but that, even if it could, the facts do not support its
application in this case.

C. The Board's analysis of whether the regulations are unclear.

The Board concludes that the State should have known from the clear
language in the regulations that the acknowledgement requirements
applied to all hysterectomies for which FFP was available, including
medically necessary hysterectomies not performed for sterilization
purposes. Further, the preambles to the proposed and final rules
informed the State that the regulations applied to hysterectomies not
performed for sterilization.

(6) Section 441.250 provides that:

This subpart applies to sterilizations and hysterectomies reimbursed
under Medicaid.

The regulation is clear that it applies to sterilizations and
hysterectomies which are reimbursed under Medicaid. The State did not
dispute that it knew that hysterectomies performed for sterilization
purposes would not be reimbursed under Medicaid, therefore, the State
should have known the regulation necessarily applied to hysterectomies
not performed for sterilization purposes. The regulation in no way
indicates that it applies to hysterectomies only if there is some
sterilization purpose, and further, Section 441.251 provides:

"Sterilization" means any medical procedure, treatment, or operation
done for the purpose of rendering an individual permanently incapable of
reproducing. (emphasis added)

The definition of sterilization encompasses hysterectomies done for
sterilization purposes. Since the subpart applies to sterilizations and
hysterectomies, it necessarily applied to hysterectomies performed for
other than sterilization purposes.

Subsection (b) of 441.255 provides that FFP is available for
hysterectomies not covered under subsection (a) if there is a written
acknowledgement that the patient was informed that the hysterectomy
would make her sterile. Subsection (a) provides that FFP is not
available for hysterectomies performed solely for sterilization
purposes, or, where there is more than one purpose, if the hysterectomy
would not have been performed but for the sterilization purpose.

The State maintained that subsection (b) did not clearly state that
it applied to medically necessary hysterectomies for which there was no
sterilization purpose. The State said that it read subsection (a) of
the regulation as prohibiting FFP where sterilization was the only or
decisive reason for the hysterectomy and read the requirements in
subsection (b) as applying to:

hysterectomies which were done for several reasons, sterilization
being one reason, though not the decisive one." Reply Brief, p. 9.

We do not find this to be a reasonable interpretation of the
regulation. While subsection (b) may apply in the circumstance
described by the State, it is not reasonable for the State to have
interpreted the subsection as applying only in that circumstance.
Subsection (b) (7) said only that FFP was available for hysterectomies
not covered in subsection (a) if certain conditions were met; nothing
in the express language of the regulation, or the State's arguments,
support the State's narrow reading of the provision. A more reasonable
reading of the regulation is that FFP is available, and the
acknowledgement requirements apply, for any hysterectomy which did not
fall within the categories described in subpart (a). This
interpretation is consistent with a stated purpose of requiring
acknowledgements for hysterectomies. The preamble to the proposed
regulations (under the text of the proposed acknowledgement requirements
for hysterectomies) stated that:

The Department wishes to ensure that patients fully understand the
family planning consequences of hysterectomies. 42 Fed. Reg. 62727,
December 13, 1977. /2/


It was not reasonable for the State to have assumed that the only
occasion on which the Agency would want a patient to be informed that a
hysterectomy would make her sterile was where sterilization was one of
the purposes of the operation.

There are other references in the preambles to the proposal and final
rule which indicated that subsection (b) applied to medically necessary
hysterectomies not performed for sterilization purposes. /3/ The
preamble (8) to the proposed regulation stated:

To accomplish this end (ensuring that patients fully understand the
family planning consequences of hysterectomies), the proposed rules
require that whenever a Federally funded hysterectomy is performed, the
person securing the patient's authorization for surgery . . . inform the
patient . . . that the hysterectomy will render the person permanently
incapable of reproducting. (emphasis added) Id.


This statement is clear that acknowledgements would be required
whenever the State intended to claim FFP for a hysterectomy, and not
just where sterilization was "one reason" for the operation.

There are several references in the preamble to the final regulations
which indicated that the acknowledgement requirements applied to
medically necesary hysterectomies. In summarizing the public comments
on the acknowledgement section (at no. 5), the Agency referred to that
section as:

relating to medically indicated hysterectomies 43 Fed. Reg. 52163.

In responding to suggestions that there be a provision permitting
hysterectomies for the physically handicapped where indicated by hygiene
or emotional health (at no. 3), the Agency said:

if the hysterectomy is medically necessary, the procedure would come
under (the acknowledgement regulation) . . . Id.

The State recognized that some of these passages are clear ("though
hidden"), but referred to other statements in the preambles which it
claimed created ambiguities. An examination of those specific
references indicates that the State misread them, not that they are
unclear. The State claimed that the following statement concerning the
definition for sterilizations which appeared in the Department's
Response (at no. 1), was misleading.

It should be emphasized that the definition as proposed and adopted
does not cover medical procedures which, while they may have the effect
of producing sterility, have an entirely different purpose, such as
removal of a cancerous uterus or prostate gland. In such a case, there
is no reasonable alternative to the procedure. The (9) point of the
informed consent and other procedural requirements of the regulations is
to permit exercise of a reproductive choice. However, since there is no
choice in such a situation, and imposition of such procedural
requirements could also be medically inadvisable, the rationale for
imposing the requirements does not apply. Since the "effect" test would
reach such situations, it was rejected as too broad. 43 Fed. Reg.
52149.

The State claimed that this preamble provision led it to believe that
"(the) regulations 'do not cover medical procedures which, while they
may have the effect of producing sterility, have an entirely different
purpose . . . .'" State's Responses to Board Questions, p. 10.
However, this interpretation ignores that the quoted portion refers to
the definition of sterilization, not the requirements as a whole.

The State also claimed that the Agency created an ambiguity in
responses to the public comments concerning the regulations. The State
said that the responses "seem to distinguish sterilizations by
hysterectomy from medically necessary hysterectomies." The State quoted
the comment and response in the preamble as follows:

Comment:

A number of (comments), however recommended that (medically indicated
hysterectomies) should be made subject to the consent requirements of
the rules or suggested special consent requirements. 42 Fed. Reg. 52163.

Response:

. . . The Department has not expanded the consent requirements
applicable to medically indicated hysterectomies as recommended by a
number of comments. . . . 43 Fed. Reg. 52164.

See, State's Reply Brief, p. 8.

The State's reliance on this response to support its position that
acknowledgements would not be required for medically necessary
hysterectomies is misplaced. In the sentence immediately following the
quoted portion, the response said that one of the reasons for not
applying the sterlization informed consent requirements to
hysterectomies which are medically indicated was that:

the requirement that women receiving such hysterectomies must be told
that their effect will be to render them sterile will insure that they
will be given the opportunity to consider the procedure in light of that
information. 43 Fed. Reg. 52164. (10) The response clearly stated that
requirements for informing patients that hysterectomies would make them
sterile (and obtaining acknowledgements that the information was given)
were applicable to medically necessary hysterectomies even though the
informed consent for sterilization form was not required.

As discussed above, the State should have known from the language of
the regulations that the acknowledgement requirements applied to
medically necessary hysterectomies not performed for sterilization
purposes. In addition, it was apparent from the preambles to the
proposed and final regulations that the Agency was concerned not only
with establishing requirements for informed consent for sterilizations
but also with monitoring the use of hysterectomies in general. The
rulemaking process, culminating in the publication of a clearly stated
final rule requiring the acknowledgements, reasonably placed the State
on notice of this requirement.

The State's main argument -- that the placement of the hysterectomy
regulations made them ambiguous since North Carolina did not perform
hysterectomies for sterlization purposes -- in effect asks us to
determine, not whether the regulations are clear on their face, but
whether they are clear when reading them from the State's perspective,
given the particular circumstances in that State. This would place on
the Agency an unreasonable burden to anticipate how particular
circumstances affecting any one state might cause that state to
misinterpret a regulation.

The preamble to the final regulations specifically addressed why the
the Department included the hysterectomy requirements in the context of
sterilization instead of developing separate rules for hysterectomies.
The preamble said that the hysterectomy requirements had been retained
in these rules because, even though the Department did not consider
hysterectomies appropriate for sterilization purposes, hysterectomies
were being performed for sterilization purposes in some areas and that
fact could not be ignored. 43 Fed. Reg. 52164, (no. 6).

The State therefore should have known that hysterectomies would be
treated in these regulations and was obligated to read what the
regulations said, even though North Carolina may not have performed
hysterectomies for sterilization purposes.

In reaching this decision, we are not unsympathetic to the State's
claim that it simply misunderstood what was required. We agree that the
titles to the subpart and the applicable section could have been more
descriptive. That does not, however, warrant reversing the Agency's
(11) disallowance where the regulations are otherwise clear; in such a
case, the State can not rely on the titles to avoid a requirement
clearly stated in the regulation.

D. Whether information the Agency provided about the regulations
reasonably caused the State to misinterpret them.

1. The training session.

The State claimed that it was misled as to the acknowledgement
requirements in part because the Agency did not discuss medically
necessary hysterectomies at a formal training session on these
regulations held in 1979. We agree with the Agency's position that,
even if the Agency training omitted a discussion of medically necessary
hysterectomies, that is an insufficient bsasis to overturn the
disallowance. While the Agency should always strive to present a clear
and complete statement of the regulatory requirements in its training,
the State must read and follow the regulations. As we discussed above,
the clear language of the regulations informed the State that
acknowledgements would be required for hysterectomies whenever FFP was
claimed. There is no indication in the record that the Agency knew at
the time of the training session that there was any misunderstanding
about the hysterectamy acknowledgement requirements which it needed to
address. In any event, the State could have questioned the Agency about
the requirements for a hysterectamy acknowledgement, but did not. The
omission by the Agency, if it did occur, was an insufficient basis for
the State to conclude that the regulations did not apply to medically
necessary hysterectomies.

2. HCFA Action Transmittal of March 29, 1979.

The Agency published some questions and answers relating to
sterilization policy under the Medicaid program which included the
following:

QUESTION8: Under 42 CFR 441.225, the regulations require that for
FFP to be available for a hysterectomy, the patient or her
representative must sign an acknowledgement that the patient and her
representative have been informed the hysterectomy will render the
individual permanently incapable of reproducing. Must the patient also
sign an informed consent form?

ANSWER: No. Under the regulations, FFP is not available in claims
for hysterectomies that fall within the definition of "sterilization."
Accordingly, the consent form which is (12) necessary for FFP to be paid
in claims for sterilizations should not be completed for hysterectamies.
Rather, the regulations require only the signing of the written
acknowledgement for FFP to be available in claims for those
hysterectomies which are covered under the regulations.

The State claimed that this transmittal did not clarify the
requirements because the State did not consider medically necessary
hysterectomies to be covered under the regulations. The Board has
already determined that the regulations clearly covered medically
necessary hysterectomies. Further, the Agency's answer was in the
context of a question which included an affirmative statement that the
acknowledgement must be obtained for FFP to be available for a
hysterectomy. The focus of the question was whether the patient must
"also" sign a sterilization consent form. It would be unreasonable to
interpret this transmittal as excluding from the acknowledgement
requirements hysterectomies which were medically necessary.

3. The Correspondence between the State and the Agency

The State referred to a series of letters, which the State initiated
on August 7, 1979, as evidence that the State attempted to learn the
requirements under the regulation and that the Agency's regional office
was "unaware of the sterilization regulations' application to
hysterectomies." Appeal letter, p. 3; Reply Brief, p. 7. We conclude
that the letters show only that the State sought clarification of the
regulations after Agency auditors identified a problem. We further
conclude that the letters to which the State referred do not support its
claim that the regional office was unaware of the regulations. In any
event, the correspondence could not have been basis for the State's
misunderstanding of the regulations during the disallowance period
(March 8 - June 30, 1979), because the correspondence was not initiated
until after that time.

An examination of the correspondence indicates that the Agency's
replies to questions posed by the State were consistent with the
Agency's interpretation of the regulations. The first letter from the
Agency responded to the State's question of whether the informed consent
requirements applied to hysterectomies, as follows:

The regulations do not apply to medical procedures, except as noted
infra regarding hysterectomies, (13) which while they may have the
effect of producing sterility, have an entirely different purpose.
(emphasis added)

State's Appeal File, Exhibit 5, Letter from Regional Attorney's
Office dated August 17, 1979, p. 4. The letter further said that "(the)
regulations also deal specifically with hysterectomies," and quoted the
acknowledgement requirements. Id. at p. 5. The State then wrote a
letter to the Agency dated September 12, and asked whether the
hysterectomy acknowledgements must be obtained if the hysterectomy was
performed to remove a cancerous uterus. The Regional Attorney's Office
replied:

The hysterectomy provisions are applicable to all hysterectomies.

State's Appeal File, Exhibit 7, Letter dated September 28, 1979, p.
1.

We therefore conclude that nothing in the correspondence discussed
above supports the State's contention that this disallowance should be
reversed.

E. Whether the regulations were so unreasonable as to obscure their
meaning.

The State argued that the acknowledgement requirements were
unreasonable when applied to certain medically necessary hysterectomies,
and that such unreasonableness caused the State to misinterpret them.
The State argued that the statement concerning the definition of
sterlization at 43 Fed. Reg. 52149 was misleading because it was
unreasonable to require acknowledgements for medically necessary
hysterectomies when the Agency does not require informed consent for
medically necessary procedures which could lead to sterility. The State
argued that it could result in a situation where a woman with cancer in
her ovaries and uterus could have the ovaries removed without her
consent but her uterus could not be removed without her acknowledgement
that the hysterectomy would make her sterile. State Response to Board
Questions, p. 11. The State also maintained that it was not reasonable
to require that a patient be informed of the reproductive consequences
of a hysterectomy (and sign an acknowledgement of receipt of that
information) where the patient was already sterile, in emergency
situations, or where the patient was too ill to have any reproductive
choice.(14) We are not persuaded that any value judgment on the worth of
these regulations obscured the fact that the Agency required that
acknowledgements be obtained in all hysterectomies for which FFP was
available. As we discussed above, the regulations clearly stated that
the acknowledgementss would be required. The Agency now agrees that its
purpose can be accomplished without requiring acknowledgements in all
cases, and has proposed amendments (not yet published in final form)
which provide exceptions to the acknowledgement requirement which would
accommodate some of the State's objections to the regulations. See 46
Fed. Reg. 5003, January 19, 1981. The proposed amendments provide that
the exceptions would be applied retroactively to March 8, 1979 (the
beginning of the disallowance period in this appeal) and would allow
states to reclaim for those hysterectomies which fall within the
exceptions to the acknowledgement rule. Until such amendments are
promulgated as final regulations, the Board is bound by its own
regulations to enforce the existing rules.See, 45 CFR 16.14 (1981).
Therefore, the Board sustains the disalloswance based on the existing
regulations. This ruling would not limit the State's right under the
proposed regulations, if promulgated, to resubmit claims for any of the
hysterectomies which would fall within the exceptions, or to appeal any
final Agency decision as to the allowability of the reclaimed costs.

III. Whether the Agency should be estopped from denying FFP.

The State argued that the Agency should be estopped from denying FFP
because: the Agency promulgated confusing regulations and did not give
reasonable training to clarify them; the State relied on that action
and acted on a reasonable construction of these regulations; and the
State's action conferred a benefit to the Agency by providing vital
medical care to poor women. The State also argued that estoppel can be
applied against the United States in appropriate circumstances, and that
it was appropriate in this case for the reaons stated above.

For the reasons discussed in part II. C. of this decision, the Board
concludes that the Agency did not promulgate confusing regulations which
misinformed the State and, therefore, is not estopped from enforcing
them. The Board does not therefore need to reach the issue of whether
estoppel can be applied against the government or any of the other
factual matters asserted by the State. (15) IV. Conclusion

For the reasons stated above, the disallowance of $88,375 in FFP is
upheld. /1/ The Agency reduced the disallowance from $112,860 to
$88,375 FFP when the State showed that $24,485 of the FFP claimed was
attributable to procedures or conditions other than the disallowed
hysterectomies. See, Agency memorandum, dated June 18, 1982. /2/
Subsection (b) as proposed said: (b) Federal financial participation is
available in a hysterectomy the purpose of which is other than to render
the patient permanently incapable of reproducing, provided that: (1)
The individual who secures the usual authorization from the patient or
her representative, if any, to perform the hysterectomy has informed the
patient and her representative, if any, orally and in writing, that the
hysterectomy will render the patient permanently incapable of
reproducing; and (2) The patient or her representative, if any, has
signed a written acknowledgement of receipt of the foregoing
information. 42 Fed. Reg. 62729. /3/ Although the regulations
standing alone are clear as to the acknowledgement requirements, we
consider and discuss portions of the preambles and the proposed rules
because the State claimed that they were, in part, responsible for the
State's misunderstanding of the requirements. The State did not dispute
that it read the preambles and proposed rules and, in fact, responded to
the request for comments on the proposed rules. See, State's Appeal
File, Exhibit 1.

OCTOBER 22, 1983