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CASE | DECISION | JUDGE

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: Louisiana Department of Health and Hospitals

DATE: March 26, 2001
           

 


 

Docket No. A-2000-112
Control No. LA 00/001/MAP

Decision No. 1772
DECISION
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DECISION

The Louisiana Department of Health and Hospitals (LDHH) appealed a determination by the Health Care Financing Administration (HCFA) disallowing $41,928 in federal financial participation (FFP) claimed under title XIX (Medicaid) of the Social Security Act (Act) for the quarter ending June 30, 1999. The disallowed amount related to LDHH's claim for FFP for that portion of the disproportionate share hospital (DSH) payment adjustment representing otherwise uncompensated costs incurred by a state-operated facility, the Washington - St. Tammany Regional Medical Center (Hospital). The Hospital incurred the costs in providing antiretroviral and other human immunodeficiency virus (HIV) related drugs to uninsured patients treated through the Hospital's HIV disease-management program. HCFA disallowed LDHH's claim on the basis that the provision of HIV drugs did not constitute a "hospital service" that could be included in a DSH adjustment under the relevant sections of the Act.

For the reasons discussed below, we conclude that the Act and the implementing regulations do not provide for the drugs at issue to be included in a DSH payment adjustment. Accordingly, we sustain the disallowance.

Statutory and Regulatory Background

In accordance with section 1903(a) of the Act, a state with an approved Medicaid State plan may receive FFP for expenditures for "medical assistance" under the State plan. Various types of medical services and supplies that qualify as "medical assistance" are defined in section 1905(a) of the Act, including inpatient hospital services (§ 1905(a)(1)), outpatient hospital services (§ 1905(a)(2)) and prescription drugs (§ 1905(a)(12)).

Section 1902(a)(13) of the Act requires that a State plan provide for the payment of hospital services provided under the plan through the use of rates which take into account the situation of hospitals serving a disproportionate share of low-income patients with special needs. Section 1923(g) of the Act limits a hospital's DSH payment adjustment to the otherwise uncompensated costs of "furnishing hospital services" to uninsured patients and patients eligible for medical assistance.

"Outpatient hospital services" are defined in the Medicaid regulations as "preventive, diagnostic, therapeutic, rehabilitative, or palliative services" that are "furnished to outpatients . . . by or under the direction of a physician" and by a licensed institution. 42 C.F.R. § 440.20.

Factual Background

The Hospital instituted a comprehensive outpatient program for the management of patients with HIV. The HIV patients participating in the outpatient program received various services including clinic visits and medical testing, but HCFA disallowed only the cost of the prescription medications, for purposes of determining the DSH payment adjustment. LDHH described the program as follows. Patients who test positive for HIV are seen by an infectious disease specialist in regularly scheduled visits at the Hospital's outpatient clinic. During a patient's clinic visit, the patient sees a physician, a nurse, and others who provide assistance and education to the patient. The clinic physician makes a determination whether and when the patient should begin antiretroviral therapy, determining the dosage and combination of drugs needed by the patient. The patient receives periodic viral load testing to determine the efficacy of the drug treatment. During the outpatient visit, the physician writes prescriptions for the drugs, which are then filled at the Hospital's pharmacy. The drugs are for a one-month period, with five refills. The drugs are self-administered by the patient. On each return visit to the pharmacy, the pharmacist provides education related to drug interactions; if any drug-related problems are noted, the patient is referred to the HIV clinic staff, which contacts the physician, who addresses any problems either by phone or in person.

In its disallowance determination that the costs of the drugs could not be included in the DSH payment adjustment, HCFA found that prescriptions for HIV drugs distributed in the Hospital's pharmacy did not constitute an outpatient hospital service. HCFA stated that the HIV drugs were self-administered drugs and not part of the services provided during an outpatient visit because the drugs were not required to be administered in an outpatient setting.

Discussion

Both parties acknowledged that the facts of this case present an ambiguity under the "furnishing hospital services" language of section 1923(g) of the Act. Each party asserted that its interpretation of the Act is entitled to deference.

HCFA asserted that its interpretation that prescription drugs furnished to outpatients did not constitute "hospital services" under section 1923(g) was a permissible and appropriate interpretation, consistent with other sections of the Act and with prior instructions to LDHH on whether the questioned drugs qualified for a DSH adjustment. HCFA maintained that the Act evidences that the costs of prescription medications furnished to outpatients are not to be included as "outpatient hospital services" because prescription drugs are expressly enumerated in section 1905(a)(12) of the Act as a category of medical assistance, so as not to be subsumed under the separate category of reimbursable outpatient services in section 1905(a)(2). HCFA further noted that the one exception to the policy that prescription medications are not included in outpatient hospital services occurs in the Medicare program, but there the Act and implementing regulations expressly provide that the drugs must be administered by qualified medical personnel, with self-administered drugs not to be considered hospital services for outpatients. Section 1861(s)(2)(B) of the Act; 42 C.F.R. § 410.29. As the drugs in question here were administered by the patients themselves off hospital premises, HCFA argued, the drugs did not qualify as outpatient hospital services and thus their cost was not eligible for a DSH adjustment. HCFA maintained that under the standard of review set forth in Chevron, U.S.A., Inc. v. Natural Resources Council, Inc., 467 U.S. 837 (1984), a federal agency's interpretation is entitled to deference where a statute is silent or ambiguous with respect to the precise question in issue. HCFA stated that its interpretation of section 1923(g) of the Act and the implementing regulations was not arbitrary, capricious, or contrary to the statute, so that it should be upheld by the Board.

LDHH argued that, given the broad discretion of states to craft DSH programs, it was well within its authority in including the costs of antiretroviral drugs used in the Hospital's HIV treatment program in calculating the DSH payment adjustment. LDHH contended that HCFA adopted an overly narrow interpretation of what may be included as a "hospital service" for purposes of section 1923(g). LDHH argued that HCFA's position, that the costs incurred by the Hospital in providing drugs to the HIV patients in its program did not constitute costs of "providing hospital services" because the drugs were self-administered, contradicts the meaning and purpose of section 1923(g), namely, to ensure that DSH payments reflect actual expenses incurred by hospitals in providing services to the indigent. LDHH maintained that HCFA's denial of FFP was based on its interpretation of technical Medicaid and Medicare regulations that had no relevance in the context of calculating DSH limits. LDHH argued that the provision of drugs through its pharmacy was an integral part of the outpatient hospital services provided by the Hospital's HIV treatment program, thereby meeting the "furnishing hospital services" criterion of section 1923(g). LDHH contended that HCFA's view of the prescription drug component of the program as not constituting "hospital services" under section 1923(g) was "flawed because it inappropriately mixes authority drawn from divergent Medicare and Medicaid sources." Reply Br. at 4. LDHH maintained that under the applicable Medicaid statutes and regulations it was therefore within its discretion in including the cost of the drugs in its DSH adjustment. LDHH further argued that HCFA's interpretation therefore did not warrant the deference to agency construction set forth in Chevron. Additionally, according to LDHH, HCFA's narrow interpretation is in conflict with HCFA's policy of promoting antiretroviral drugs as an integral part of an effective HIV treatment program.

I. HCFA's interpretation that the Hospital's provision of antiretroviral drugs to its HIV outpatients did not constitute a "hospital service" within the meaning of the Act and regulations for the purpose of determining a DSH adjustment was reasonable and LDHH had timely notice of that interpretation.

In order for a cost to be included in a DSH adjustment, the cost must be for "furnishing hospital services." Section 1923(g) of the Act. The issue in this case then is whether the Hospital's distribution of antiretroviral drugs amounted to "furnishing hospital services" within the meaning of the Act and regulations.

The courts have consistently held that they will defer to a federal agency's interpretation of a statute or regulation if it is reasonable and not inconsistent with congressional intent. See, e.g., Petersen v. Dole, 956 F.2d 1219 (D.C. Cir. 1992), and Conecuh-Monroe Community Action Agency v. Bowen, 852 F.2d 581 (D.C.Cir. 1988), both citing Chevron. The Board has held that, where a statute or regulation is subject to more than one interpretation, the HHS operating division's interpretation is entitled to deference as long as the interpretation is reasonable and the grantee had adequate notice of that interpretation or, in the absence of notice, did not reasonably rely on its own contrary interpretation. Community Action Agency of Franklin County, DAB No. 1581 (1996), and decisions cited therein.

We find that HCFA's interpretation that the prescription drugs at issue do not qualify as "hospital services" under section 1923(g) was reasonable for the following reasons.

HCFA's interpretation is consistent with other sections of the Act in treating prescription drugs as a distinct category of medical assistance apart from outpatient hospital services. See section 1905(a)(12) of the Act. Moreover, while it is admittedly a Medicare and not a Medicaid provision, under section 1861(s)(2)(B) of the Act, a self-administered drug may not be considered a hospital service. As Congress delineated prescription drugs in other sections of the Act as a separate category of medical assistance from hospital services, we conclude that Congress did not intend prescription drugs to be included as "hospital services" for purposes of the DSH payment adjustment. We see no basis, without more explicit direction from Congress, for expanding the meaning of "hospital services" in section 1923(g) beyond what it means in other sections of the Act to include self-administered prescription drugs.

The legislative history of the Omnibus Budget Reconciliation Act of 1993, the origin of section 1923(g), does not lend support to LDHH's contrary position. The House Budget Committee stated in pertinent part:

The purpose of the Medicaid DSH payment adjustment is to assist those facilities with high volumes of Medicaid patients in meeting the costs of providing care to the uninsured patients they serve . . .

The Committee bill limits the amount of payment adjustments to State or locally-owned or operated DSH hospitals to the costs (as determined by the Secretary) these facilities incur in furnishing inpatient or outpatient services to Medicaid-eligible patients and uninsured patients, net of any payments received by the facility under Medicaid (other than the DSH payment adjustment) and any out-of-pocket payments received from the uninsured individuals.

H.R. Rep. No. 111, 103d Cong., 1st Sess., at 211-12 (1993), reprinted in 1993 U.S.C.C.A.N. 378, 538-39 (LDHH Ex. 14).

The House Conference Report on the Omnibus Budget Reconciliation Act of 1993 repeats this view and states that the legislation -

Limits disproportionate share hospital (DSH) payment adjustments to no more than the costs of providing inpatient and outpatient services to Medicaid and uninsured patients, less payments from Medicaid (other than DSH payment adjustments) and uninsured patients.

H.R. Conf. Rep. No. 213, 103d Cong., 1st Sess., at 835 (1993), reprinted in 1993 U.S.C.C.A.N. 1088, 1524 (LDHH Ex. 13).

Although LDHH argued that the legislative history shows that section 1923(g) was meant to ensure that hospitals receive a DSH payment adjustment consistent with actual uncompensated costs of providing hospital services while preventing payments in excess of those costs, that proposition is not in dispute and still leaves open the question of what constitutes "outpatient hospital services." To the extent that it provides any guidance, the language quoted above indicates that Congress intended to limit the amount of funds that can be claimed as DSH payment adjustments for hospital services, rather than expand the types of medical assistance that can be claimed.

The difficulty with LDHH's position is its failure to supply any specific authority under the Act or the regulations for its argument that the cost of the drugs at issue here should be considered for a DSH payment adjustment. Under LDHH's theory, it could be postulated that any reasonable medical cost, not otherwise reimbursable as "hospital services" under the Medicaid program, could qualify as a cost suitable for a DSH adjustment as long as it was part of a DSH hospital's outpatient treatment program. The treatment program here involved HIV management, but the treatment costs of other diseases could also be included in the DSH payment adjustment under LDHH's argument. For example, if a DSH hospital had an outpatient program offering a new treatment for diabetes and it distributed insulin through its pharmacy for the outpatients to inject at home, costs of insulin would be eligible for inclusion in the hospital's DSH payment adjustment. This would expand the scope of the DSH payment adjustment to make it a prescription payment plan for indigent patients, a result Congress likely did not intend. Thus, even though the prescription drugs might have been an integral part of the Hospital's HIV treatment program, as LDHH argued, that is not sufficient in itself to elevate the drugs to the status of "furnishing hospital services" within the meaning of section 1923(g).

Moreover, LDHH did not dispute that LDHH had notice of HCFA's interpretation prior to LDHH's claiming the disputed DSH payment adjustment on its June 30, 1999 QER. On December 5, 1997, LDHH wrote to HCFA inquiring whether the costs of antiretroviral drugs could be included in the DSH payment adjustment. LDHH Ex. 2. The record shows that HCFA then informed LDHH in writing on three occasions in 1998 that the costs of antiretroviral drugs provided to uninsured outpatients by the Hospital could not be included in a DSH adjustment. LDHH Exs. 3, 4, and 6.

LDHH is correct that states have some discretion in deciding what services they will provide under their Medicaid State plans. Here, however, LDHH did not point to any language in its approved State plan defining the services LDHH provides as "outpatient hospital services" to include self-administered drugs prescribed as part of an outpatient disease management program.

Accordingly, we conclude that HCFA's interpretation that self-administered prescription drugs could not be included under the "hospital services" language of section 1923(g) was reasonable and that LDHH had actual, timely notice of that interpretation.

II. The fact that the Department and HCFA have encouraged the use of antiretroviral drugs in the treatment of HIV is irrelevant to the issue of whether the costs of those drugs can be claimed as part of a DSH payment adjustment.

LDHH argued that HCFA's interpretation of the regulations and its refusal to treat the provision of antiretroviral drugs to outpatients as a cost of "furnishing hospital services" were inconsistent with the Department's public promotion of such drugs as an integral component of HIV treatment. LDHH produced numerous announcements in which both the Department and HCFA advocated the use of antiretroviral drugs in the treatment of HIV patients. LDHH Exs. 15 - 22.

The issue before us, however, is not whether antiretroviral drugs are beneficial in the treatment of HIV patients, but whether the Act and implementing regulations provide FFP in a DSH payment adjustment for the drugs issued to outpatients in the program operated by the Hospital. No matter how meritorious the Department or HCFA may in its public pronouncements view a treatment for a public health concern, there is no basis for the provision of FFP for the treatment in the absence of any statutory or regulatory authorization for the payment of FFP for that particular treatment.

The mere fact that the Department and HCFA may have taken public positions that a particular treatment is beneficial does not translate into the availability of federal funds for that treatment as a DSH payment adjustment. Even if the pronouncements by the Department and HCFA on the efficacy of antiretroviral drugs could have been viewed as an indication that FFP might be available for those drugs in a DSH payment adjustment, here LDHH was advised that FFP was not in fact available. As discussed above, the record shows that, prior to LDHH's claiming of the costs of the drugs on its June 30, 1999 QER, HCFA had informed LDHH on at least three occasions, beginning on February 18, 1998, that the costs of antiretroviral drugs provided to uninsured outpatients by the Hospital could not be included in a DSH payment adjustment. LDHH Exs. 3, 4, and 6.

Accordingly, we find no merit in any assertion that policy pronouncements on the use of antiretroviral drugs provide a basis for including the costs of those drugs in a DSH payment adjustment.

Conclusion

For the reasons discussed above, we sustain the disallowance of $41,928.

 

JUDGE
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Judith A. Ballard

M. Terry Johnson

Marc R. Hillson
Presiding Board Member

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