Opinion ID: 774356
Heading Depth: 2
Heading Rank: 2

Heading: The Plain Language of the Relevant Regulation

Text: 22 The relevant regulation states,The number of patient days includes only those days attributable to areas of the hospital that are subject to the prospective payment system and excludes all others. 42 C.F.R. §§ 412.106(a)(1)(ii) (emphasis added). The regulation as written is not ambiguous. The definitional boundary, chosen by HCFA, is geographic: If a Medicaid patient day is attributable to an area of the hospital subject to PPS, it is included; if not, it is excluded. 23 The sole issue in this case is whether the Hospitals' sub-acute Medicaid patient days are attributable to areas of the hospital that are subject to PPS. To determine whether an area of the hospital is subject to PPS, we must turn to other regulations. The scope of PPS is defined by 42 C.F.R. §§ 412.20(a): 24 Except for services described in paragraph (b) of this section, all covered inpatient hospital services furnished to beneficiaries during subject cost reporting periods are paid for under the prospective payment systems. 25 That is, all covered inpatient services are presumed to be covered under PPS, unless they meet specific requirements for an exception. Under these requirements, SNF units must meet strict requirements to be excluded from the PPS system. 42 C.F.R. §§§§ 412.25, 412.29. An SNF that does not meet these requirements will not receive the benefit of exemption from PPS. 26 Obviously, an area of a hospital is either subject to PPS or it is not. The regulations begin with the presumption that an area is covered by PPS, unless specifically exempted. The Hospitals here have never applied to exempt these units from PPS as SNFs, nor has Medicare ever certified these units as PPS exempt. The only plausible reading of the governing regulations is that these subacute units are subject to PPS. If we were to adopt the Secretary's interpretation, the entire frame-work established in §§§§ 412.25 and 412.29 for PPS exemption would be meaningless. These provisions only make sense against a background assumption of PPS coverage. An SNF that fails to comply with the strict requirements for exemption is subject to PPS. 2 There is no rational reason why subacute units would be treated any differently. Since the Hospitals' subacute units were subject to PPS, the patient days attributable to these units should have been included as part of the DSH calculation. 27 We are unpersuaded by the Secretary's arguments to the contrary. The Secretary argues that these subacute units did not need to be specifically exempted from PPS because sub-acute care is not a covered inpatient hospital service under Medicare. The HCFA Administrator concluded: 28 [T]o be included in the Medicare DSH calculation, the bed day must be an inpatient subsection (d)hospital bed day. Although the SNF beds at issue are not excluded Medicare-certified SNF beds, the beds, for similar reasons cannot be counted as an inpatient PPS hospital bed day. Just as the Medicare-certified SNF beds are excluded, inter alia because they are not hospital beds, and thus are not subject to inpatient hospital PPS, similarly, the beds at issue here are not inpatient hospital beds and thus are not subject to inpatient hospital PPS. 29 According to the Secretary, only areas that provide Medicare-covered services need to be specifically exempted from PPS. 30 This argument might be relevant in a case about the scope of Medicare coverage for inpatient services. But it is entirely beside the point in the context of the DSH reimbursement. By definition, the DSH reimbursement is calculated on the basis of services that not only are not covered by Medicare, but are actually prohibited from reimbursement through Medicare. The statute explicitly states that the Medicaid proxy includes those patient days for which the patient was eligible for Medicaid, but who were not entitled to benefits under part A of this subchapter. 42 U.S.C. §§ 1395ww(d)(5)(F)(vi)(II) (emphasis added). Therefore, no patient days included in the Medicare proxy are ever payable under PPS. 31 This basic fact about Medicare coverage is reflected in the regulation at issue. It refers to areas of the hospital that are subject to the prospective payment system. 42 C.F.R. §§ 412.106(a)(1)(ii) (emphasis added). It does not refer to services of the hospital that are subject to the prospective payment system or to patients of the hospital that are subject to the prospective payment system. The regulation by its terms requires an analysis of particular units. Whether the subacute units provide Medicare services to inpatients is wholly irrelevant for determining what counts as a Medicaid patient day. 3 32 The overriding intent of Congress in establishing the DSH reimbursement was to supplement the prospective payment system payments of hospitals serving low-income persons. Legacy Emanuel Hosp. & Health Center v. Shalala, 97 F.3d 1262, 1265 (9th Cir. 1996) (quoting Jewish Hosp., Inc. v. Sec'y of Health & Human Serv., 19 F.3d 270, 272 (6th Cir. 1994)). 4 The DSH payments are in addition to, and separate from, the ordinary PPS payments. Hospitals that treat a significant number of low-income patients incur higher costs because those patients historically require comparatively greater resources in their care. Jewish Hosp., 19 F.3d at 275. 5 33 In sum, since the Medicaid proxy is never calculated or based on its effect on Medicare reimbursement, the Secretary's contention that subacute services are excluded because Medicare supposedly does not cover them is an impermissible reading of the regulation. Cf. Clark Reg'l Med. Ctr. v. Shalala, 136 F. Supp.2d 667, 676 (E.D. Ky. 2001) (holding, in an analogous context, that the Secretary's refusal to include swing-bed facilities in the DSH adjustmenttortures the plain language of the regulation, and statinga plain and common sense reading of the regulation requires that all beds and all bed days be included in the calculation unless they are in one of the specifically enumerated categories of excluded beds).