Opinion ID: 2226377
Heading Depth: 2
Heading Rank: 2

Heading: DHS's Compliance with the Boren Amendment.

Text: Madrid Home argues that DHS's February 1994 reimbursement rate and its use of a zero percent inflation factor for fiscal year 1992-93 violate the Boren Amendment. We reject Madrid Home's arguments and conclude that the actions of DHS complied with federal law. In arguing that DHS's actions are contrary to federal law, Madrid Home contends that DHS violated both the procedural and substantive components of the Boren Amendment. First, Madrid Home claims that DHS violated the Amendment's procedural mandate by failing to make the mandatory annual findings to support its February 1994 rate. It is true that DHS made no specific, formal, or written findings that its rebased reimbursement rate was reasonable and adequate to meet the costs of an efficiently operated skilled nursing facility. However, explicit findings are not required. Even though the findings requirement is mandatory, the Boren Amendment does not require a formal, detailed, or technical findings process. New Jersey Ass'n of Health Care Facilities, Inc. v. Gibbs, 838 F.Supp. 881, 894 (D.N.J.), aff'd mem., 14 F.3d 48 (3d Cir.1993). A state is free to create its own method of findings. Waldman, 73 F.3d at 518; Folden, 981 F.2d at 1057; Pinnacle Nursing Home v. Axelrod, 928 F.2d 1306, 1315 (2d Cir.1991); AMISUB, 879 F.2d at 797. In fact, the findings process does not even require special studies or written findings. Folden, 981 F.2d at 1057; Gibbs, 838 F.Supp. at 894; Colorado Health Care Ass'n v. Colorado Dep't of Soc. Servs., 842 F.2d 1158, 1168 (10th Cir.1988). It is sufficient if a state has considered, on the basis of some reasonably principled analysis, whether its payment rates meet the substantive requirements of the Boren Amendment. Folden, 981 F.2d at 1057; Gibbs, 838 F.Supp. at 895. In fact, there is a presumption that a state will engage in a bona fide finding process before it makes assurances to HCFA that the required findings have been made. Kansas Health Care, 31 F.3d at 1536; AMISUB, 879 F.2d at 797; Gibbs, 838 F.Supp. at 894. Madrid Home has failed to establish that DHS did not engage in a bona fide fact finding process. The evidence in the record indicates that DHS satisfied the findings requirements set forth in Kansas Health Care. During its rebasing process, DHS defined which facilities are efficient and economically operated. It revised its administrative rule to read that Effective February 1, 1994, a ceiling of allowable cost shall be established at . . . the sixty-ninth percentile for freestanding facilities. The allowable cost shall be weighted by Medicare patient days. Iowa Admin.Code r. 441-79.1(9)(d). This meant that DHS subjected its rates to a cap, set at the sixty-ninth percentile of all facilities' costs. In other words, DHS will not pay a skilled nursing care facility more than the costs of the facility that was at the sixty-ninth percentile. Madrid Home's costs are below this, so it is not affected by the cap. DHS also determined the costs that are incurred by the skilled nursing care facilities. The entire purpose of the rebasing process was to bring reimbursement rates in line with current costs of efficiently operated facilities. To do this, DHS took the most recent figures available, 1991 costs, and updated them to 1994. Finally, the evidence indicates that DHS conducted an objective analysis and fact-finding process to determine the effects of its rates on the level of care Medicaid patients receive. See Abbeville Gen. Hosp. v. Ramsey, 3 F.3d 797, 805 (5th Cir.1993). In response to requests by Madrid Home and HCFA, the DHS updated its reimbursement rates to reflect current costs. The rebasing process, as a whole, shows a nexus between the costs of operating efficient facilities and the reimbursement rate under the state plan. See Axelrod, 928 F.2d at 1314. We conclude that substantial evidence in the record indicates that DHS complied with the procedural requirements of the Boren Amendment. Madrid Home's second argument is that DHS violated the Boren Amendment by using an inflation factor based solely on alleged appropriations by the state legislature. Stated otherwise, Madrid Home is essentially claiming that DHS's methodology resulted in an unreasonable rate and violated the substantive component of the Amendment. Weconclude there was no violation. Budget considerations cannot excuse noncompliance with federal Medicaid law. Arkansas Med. Soc'y, Inc. v. Reynolds, 6 F.3d 519, 531 (8th Cir.1993); Ramsey, 3 F.3d at 809; AMISUB, 879 F.2d at 800. However, DHS may take state budget factors into consideration when setting its reimbursement methodology, even though it may not ignore federal requirements in order to suit budgetary needs. Reynolds, 6 F.3d at 531; AMISUB, 879 F.2d at 800-01. Further, individual components of a reimbursement rate do not determine compliance with the Boren Amendment. Kansas Health Care, 31 F.3d at 1540; Gibbs, 838 F.Supp. at 899. The resulting overall payment is what is evaluated for statutory compliance. Kansas Health Care, 31 F.3d at 1540; Colorado Health Care, 842 F.2d at 1167. We believe substantial evidence in the record supports DHS's conclusion that its February 1, 1994 reimbursement rate of $89.00 falls within the zone of reasonableness contemplated by the Boren Amendment. In updating its 1991 costs to 1994, DHS chose to use inflation factors established by legislative appropriations. Therefore, because the legislature did not appropriate a rate increase for fiscal year 1992-93, DHS used a zero percent increase for fiscal year 1992-93. However, DHS did not rely solely on budget considerations. It also examined the actual costs of facilities. The reimbursement rate merely represents DHS's judgment of what rates will both reflect the actual costs incurred, and also allow it to comply with its appropriations limitations. DHS considered more than just the amount of money to be saved. It defined what efficiently and economically operated facilities are and looked at actual cost data of those facilities. Its resulting payment falls within the range of what could be considered reasonable and adequate, as Congress mandated. See Colorado Health Care, 842 F.2d at 1168. Further, there are important policy reasons for allowing a state to consider budgetary constraints in determining its payment rates. In Gibbs, the United States District Court in New Jersey stated: the Boren Amendment does not require a state to guarantee that rates will increase in lock step with industry costs. The Boren Amendment was enacted in response to Congressional concerns that health care costs were increasing at rates far in excess of inflation. It would be contrary to the cost containment goals of the Boren Amendment to hold that states must ensure that payment rates to all facilities increase at the same rate at which nursing home costs increase. Gibbs, 838 F.Supp. at 915-16. It is important to remember that DHS's rebased rate, which became effective on February 1, 1994, increased 1991 costs by 4.3%, based on the legislature's appropriation for fiscal year 1993-94. The rate was again raised on July 1, 1994, by 4.9%. In addition, Madrid Home has failed to demonstrate that DHS's rebased reimbursement rate does not reasonably cover the costs incurred by an efficiently operated facility. We conclude substantial evidence in the record indicates that DHS complied with the substantive component of the Boren Amendment.