Opinion ID: 764672
Heading Depth: 2
Heading Rank: 2

Heading: De Facto Amendment

Text: 36 Concourse further declares that the Department's interpretation of the New York State Medicaid plan departs so far from the terms of the plan as to constitute a de facto amendment to the plan, requiring federal approval prior to implementation. Specifically, appellant asserts that the Audit Tool, both on its face and as applied, parts from the terms of the qualifier for restorative therapy to such a pronounced degree as to effect a de facto amendment to the State plan. First, it points to the Audit Tool's requirement that a patient be expected to improve significantly and notes that the restorative therapy qualifier speaks only of potential for improvement, without the strong adverb significantly, which connotes an important or weighty improvement. In addition, Concourse points to the Department's interpretation of the qualifier to require evidence of actual improvement in a patient's medical condition subsequent to diagnosis, and urges that this view contradicts the qualifier's requirement that there merely be positive potential for improved functional status (emphasis added). For these reasons, appellant maintains that the Department has changed the restorative therapy qualifier by de facto amendment, and in that way has brought into play the amendment approval provisions of 42 C.F.R. §§ 430.12(c) and 447.253(b).
37 As a preliminary matter, common sense, precedent, and the text of the regulations dictate that there must be some change in a State's Medicaid plan before the amendment provisions of §§ 430.12(c) and 447.253(b) will be activated. See United Cerebral Palsy Ass'ns v. Cuomo, 966 F.2d 743, 746 (2d Cir.1992) (finding these provisions inapplicable where there had been no change). In the present case, Concourse does not argue that the Department has changed the terms of the State Medicaid plan itself. Hence, its point that the Department has changed the State Medicaid plan must be understood to encompass two inquiries: first, as a question of fact, whether the State has changed its interpretation or application of the plan; and, second, as a question of law, whether a particular interpretation or application of the plan constitutes a change in the terms of the plan itself. 38 Addressing the first question, the district court found the Department has not changed the Audit Tool since its adoption ten years ago. See Concourse, slip op. at 10-11. Further, the court also made a finding that it was a change in Concourse's practices in 1994--a new emphasis on providing patients with restorative therapy--that made the critical difference between the favorable audits in 1991 and 1993 and the unfavorable audit of the 1995 Patient Reviews. See id. Concourse has presented nothing suggesting that these findings were clearly erroneous; accordingly, we leave them untouched. 39 Addressing the second question, the district court ruled that the Audit Tool's use of the term significantly did not constitute a change in the qualifier for restorative therapy. See id., slip op. at 8-10. It reasoned that inasmuch as the qualifier for maintenance therapy requires the absence of a potential for further or any significant improvement, it is consistent that the qualifier for restorative therapy, by way of contrast, should insist on the presence of a potential for significant improvement. Any other interpretation might eliminate the distinction between the two categories and render much of the qualifier language superfluous. Applying a de novo standard of review to this conclusion of law, we think the trial court's reasoning sound. 40 The remaining issue--one apparently not addressed by the district court--is whether the Department's requirement of actual improvement constitutes a change in the qualifier for restorative therapy. At first blush, the restorative therapy qualifier appears to embody a prospective viewpoint, in the sense that classification of a restorative therapy patient requires potential for improvement at some point in the future. Read in this manner, the qualifier is arguably inconsistent with the Department's adoption of a retrospective view requiring that, on audit, the patient show actual improvement after treatment to justify reimbursement for restorative therapy. The Department believes the two standards reconcilable. It points out that the phrase patient has potential/is improving is read to mean that newly admitted patients must show potential for improvement while patients admitted to the health care facility for some time should show signs that they are actually improving.
41 On a more fundamental level, determining whether the Department's interpretation constitutes a change to the State Medicaid plan implicates the analytical difficulty of distinguishing between an interpretation and an amendment generally. To some degree, every construction of a State Medicaid plan necessarily effects a change to the plan, since a construction that added nothing to the plan's terms would be redundant. On the other hand, insisting that an interpretive change be significant as a predicate to triggering the plan amendment regulations would be wholly inconsistent with the history of those provisions. See Medicaid Program, Revisions to Medicaid Payments for Hospital and Long-Term Care Facility Services, 52 Fed.Reg. 28,141, 28,142-43, 28,147 (July 28, 1987) (eliminating the requirement that changes be significant under 42 C.F.R. § 447.253(b)). 42 One approach to resolving this difficulty might be to analogize to federal administrative rulemaking and its longstanding distinction between interpretive rules (which are exempt from notice and comment requirements) and legislative rules (which are not) under the Administrative Procedure Act, 5 U.S.C. § 553 (1994). See, e.g., White v. Shalala, 7 F.3d 296, 303 (2d Cir.1993) (The central question is essentially whether an agency is exercising its rule-making power to clarify an existing statute or regulation, or to create new law, rights, or duties in what amounts to a legislative act.). But even this distinction, which has enjoyed several decades of judicial elucidation, has been described by courts and commentators as 'fuzzy,' 'tenuous,' 'blurred,' 'baffling,' and 'enshrouded in considerable smog.'  Elizabeth Williams, Annotation, What Constitutes Interpretative Rule of Agency so as to Exempt Such Action from Notice Requirements of Administrative Procedure Act (5 USCS § 553(b)(3)(A)), 126 A.L.R. Fed. 347, 375 (1995) (collecting cases). Given the inherent vagueness of this distinction, and given the additional problems that would arise were we to transplant this distinction to State law, we decline to infer--absent a clear expression to the contrary--that Congress meant to place the federal courts in such a tangle, and to ask us--as Alexander the Great was asked--to untie such a Gordian knot. 43 Indeed, 42 C.F.R. § 430.12(c) simply requires that a plan must provide that it will be amended whenever necessary to reflect certain [m]aterial changes (emphasis added). By its terms, this regulation is satisfied once a State plan includes the appropriate provision, and the failure of a State to adhere to that provision cannot give rise to a federal claim, for the reasons discussed earlier. Further, although § 447.253(b) appears to apply to any change in [the State's] methods and standards of payment, subsection (a) clarifies that subsection (b) applies only to a State plan change, suggesting in that way that the federal approval requirements are brought into play not simply by a change in the State's administration of the plan, but only by an alteration of the plan itself, i.e., its actual written terms. Compare Oregon Ass'n of Homes for the Aging, Inc. v. Oregon, 5 F.3d 1239, 1243-44 (9th Cir.1993) (holding that § 447.253(b) applied where a change to the State plan would have reclassified services under the plan), with United Cerebral Palsy Ass'ns, 966 F.2d at 746 (holding that a delay in the State's payment of Medicaid reimbursements was not a change in methods and standards of payment to which § 447.253(b) applied), and Illinois Council on Long Term Care v. Bradley, 957 F.2d 305, 309 (7th Cir.1992) (same). 44
45 Accordingly, we hold that a State's interpretation of its own Medicaid plan cannot constitute a change as that term is used in §§ 430.12(c) and 447.253(b) unless, at a minimum, the clear and unequivocal effect of the interpretation is actually to alter the written terms of the plan. Absent such an alteration, any de facto amendment claim reduces simply to an assertion that the State has misapplied its own plan, and as explained earlier, such claim fails to state a federal cause of action. 46 Turning to the case at hand, we can hardly say that the Department's interpretation clearly and unequivocally alters the terms of the restorative therapy qualifier. Concourse does not dispute that the terms of that qualifier remain intact, and on its face the interpretation does not purport to rewrite, to supersede, or to delete those terms. Although the Department's interpretation is perhaps not the most obvious reading, we cannot say that it constitutes a de facto amendment to the terms of the qualifier. 47 Because there has been no change in the State Medicaid plan such as to precipitate the federal Medicaid amendment provisions, Concourse has failed to demonstrate the sort of specific conflict with federal law necessary to support a federal cause of action. And, because the Eleventh Amendment bars our consideration of the purely State law claim that a State has misapplied its own regulations, we lack jurisdiction to decide this claim as well. 48 Nothing in our decision today, however, should be construed to preclude a health care provider from challenging a State's interpretation of its Medicaid plan insofar as the substance of that interpretation raises doubts whether the State's rates of reimbursement are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities under the Boren Amendment. 42 U.S.C. § 1396a(a)(13)(A) (1994) (rewritten applicable to services on or after Oct. 1, 1997); see also Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 509-10, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990) (holding that the Boren Amendment created a substantive right enforceable by health care providers under 42 U.S.C. § 1983); United Cerebral Palsy Ass'ns, 966 F.2d at 745-46 (reviewing a State plan under the Boren Amendment as the plan was applied, i.e., not merely on its face); Illinois Council on Long Term Care, 957 F.2d at 307-09 (same). 49 In other words, to the extent that we hold that a federal court is bound to accept that a State Medicaid plan means what the State says it means, this holding should not be taken ipso facto to imply that the plan, so interpreted, somehow becomes exempt from the Boren Amendment's substantive requirements. That question was neither addressed by the district court nor raised before us; hence, we do not purport to foreclose that avenue of relief. 50 Finally, one of the amici curiae to the appeal raises a novel argument suggesting that the Department's interpretation of the restorative therapy qualifier may be preempted by federal law insofar as its practical effect is to prevent health care providers from complying with 42 U.S.C. § 1396r and 42 C.F.R. § 483. This argument was neither addressed by the district court nor briefed in any detail by the parties. Although Concourse does raise the argument in a footnote to its reply brief,  '[w]e do not consider an argument mentioned only in a footnote to be adequately raised or preserved for appellate review.'  United States v. Barnes, 158 F.3d 662, 673 (2d Cir.1998) (alteration in original) (quoting United States v. Restrepo, 986 F.2d 1462, 1463 (2d Cir.1993)). For that reason, we also decline to address this argument.