Opinion ID: 3030590
Heading Depth: 3
Heading Rank: 1

Heading: Text and Purposes of the DSH Provision

Text: The Secretary contends that the DSH provision is at least ambiguous, entitling his interpretation to deference. He points to the statutory language that covered patients must have been “eligible for medical assistance under a State plan” and argues that § 1115 patients, who receive assistance only because he has waived their compliance with the Act’s general requirements, may be regarded as not “eligible for medical assistance under a State plan.”3 Plaintiffs in turn argue, and the district court held, that the 3 The Secretary also argues that a § 1115 plan is approved under Title XI, rather than Title XIX. This argument is unpersuasive. The demonstration project provision is codified in Title XI, but this does not mean that a project is approved “under” Title XI. Rather, the Secretary is directed to approve it according to its conformity with the objectives of Title XIX. See 42 U.S.C. § 1315(a)(1). 2438 PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON statutory scheme is unambiguous and supports only the conclusion that expansion populations eligible under § 1115 receive medical assistance “under a State plan.” We agree. [1] In the demonstration project statute, Congress expressly tied § 1115 waivers to approved state Medicaid plans by providing that the costs of such demonstration projects “shall . . . be regarded as expenditures under the State plan.” 42 U.S.C. § 1315(a)(2)(A). Thus, the statute defines low-income individuals receiving medical assistance under a § 1115 plan as receiving medical assistance under a Title XIX plan. Id. As a result, because expansion population patients are capable of receiving Title XIX assistance, they must be regarded as “eligible” for it. See, e.g., Jewish Hosp., Inc. v. Sec’y of Health & Human Servs., 19 F.3d 270, 274 (6th Cir. 1994) (“ ‘[E]ligibility’ refers to the ‘qualification’ for benefits or the capability of receiving those benefits.”). [2] This understanding finds support in our discussion of the purposes of the DSH provision in Legacy Emanuel. 97 F.3d at 1265-66. There, we held that all treatment days for qualifying low-income patients must be included in the Medicaid fraction of the DSH calculation, whether or not the costs of those patients’ treatment had actually been paid by Medicaid. We observed: Congress’s “overarching intent” in passing the disproportionate share provision was to supplement the prospective payment system payments of hospitals serving “low income” persons. The DSH provision directs the Secretary to provide an additional payment to hospitals serving a disproportionate number of low-income patients. . . . Congress intended the Medicare and Medicaid fractions to serve as a proxy for all low-income patients. 97 F.3d at 1265 (emphasis added) (citations omitted). Other circuits have reached similar conclusions. See, e.g., Cabell PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON 2439 Huntington Hosp., Inc. v. Shalala, 101 F.3d 984, 991 (4th Cir. 1996) (following Legacy Emanuel); Jewish Hosp., 19 F.3d at 275 (“Congress wanted to ensure the continued operation of these facilities for the benefit of those persons who have no other health care alternative.”). [3] The situation presented in Legacy Emanuel is analogous and our conclusion there foreshadows the correct result in the present case. Here, as there, we are required to decide whether the statute permits an interpretation that would deny hospitals the benefit of the DSH formula with respect to parts of the low-income populations they serve.4 In Legacy Emanuel, we noted that “[p]atients meeting the statutory requirements for Medicaid do not cease to be low-income patients on days that the state does not pay Medicaid inpatient hospital benefits.” 97 F.3d at 1266. So here, patients receiving medical assistance under a § 1115 waiver program do not cease to be lowincome patients by reason of being in the expansion population.5 Given the intent behind the DSH provision, they must be included in the Medicaid fraction. The district court correctly concluded that Congress clearly expressed its intent that expansion populations be included in 4 In Legacy Emanuel, we refused to permit the Secretary to exclude from the DSH calculation low-income patients who were eligible but had not been paid for by Medicaid. See 97 F.3d at 1266. In this case, the Secretary would exclude low-income patients who are eligible for Title XIX funds by virtue of a § 1115 waiver. 5 Further evidence of Congress’s intent regarding inclusion of expansion population patients is found in the Balanced Budget Act of 1997, which refers to individuals who receive medical assistance under the State plan under title XIX of [the Social Security] Act and are not entitled to benefits [under Medicare] (including individuals . . . who receive medical assistance under [Title XIX] pursuant to a waiver approved by the Secretary under section 1115 . . .). Pub. L. No. 105-33 § 4403(b), 111 Stat. 251, 399 (1997) (emphasis added). 2440 PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON DSH calculations. We therefore need not inquire whether the Secretary’s interpretation of the provision is reasonable. See Chevron, 467 U.S. at 863. B. Scope of the Secretary’s Discretion Under § 1115 The Secretary also contends that § 1115 itself provides authority for excluding expansion populations from the DSH calculation. He argues that the expansion populations’ eligibility for medical care derives not from Title XIX but from the demonstration statute, § 1115, which is part of Title XI. This argument rests on the premise that the Act contemplates two types of medical assistance: one under Title XIX state plans and another under § 1115 waivers. The Secretary further argues that the language of § 1115 confers on the Secretary discretion to choose to characterize demonstration project expenditures as Title XIX expenditures for purposes of Medicaid reimbursement but not for purposes of DSH calculation. According to the Secretary, this discretion also confirms the difference between the two types of medical assistance. We reject these arguments. [4] Section 1115 does not establish a new, independent funding source. It authorizes the Secretary to “waive compliance with any of the requirements of” a series of provisions of the Social Security Act in approving demonstration projects.6 42 U.S.C. § 1315(a)(1). Neither this provision nor any other 6 The cross-referenced provisions are 42 U.S.C. §§ 302 (setting forth requirements for approval of state plans for “old-age assistance”), 602 (setting forth restrictions on states’ use of federal grants under Social Security Act), 654 (setting forth requirements for approval of state plans for “child and spousal support”), 1202 (setting forth requirements for approval of state plans for “aid to the blind”), 1352 (setting forth requirements for approval of state plans for aid to the “permanently and totally disabled”), 1382 (setting forth restrictions on and definitions of “eligibility” for benefits under the Social Security Act), 1396a (setting forth requirements for approval of state plans for “medical assistance,” i.e., Medicaid). PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON 2441 authorizes appropriation of any sums for purposes of funding projects approved under § 1115. When Congress has established separate funding sources, it has done so with specific language, see, e.g., 42 U.S.C. §§ 301 (authorizing appropriations for state “old-age assistance” plans), 1396 (authorizing appropriations for Medicaid payments to states); and it has done the same with respect to demonstration projects. See 42 U.S.C. § 300z-9 (authorizing appropriations for adolescent family life demonstration projects). Because Congress did not incorporate authorizing language in § 1115, it clearly did not intend § 1115 to be a funding source. [5] Nor does this section confer on the Secretary discretion to interpret it as creating a funding source. Indeed, § 1115 constrains the Secretary’s discretion in a number of ways. As noted above, the Act expressly states that the costs of § 1115 demonstration projects “shall . . . be regarded as expenditures under the State plan . . . approved under [Title XIX].” 42 U.S.C. § 1315(a)(2)(A) (emphasis added). Use of the term “shall” creates a mandatory equivalence between expenditures under a § 1115 project and Title XIX expenditures. See, e.g., Hanson v. Marine Terminals Corp., 307 F.3d 1139, 1142 (9th Cir. 2002) (interpreting “shall” as a “mandatory” term). Section 1115 also unambiguously requires the Secretary, as a condition of approval of a demonstration project, to find that the project “is likely to assist in promoting the objectives of [Title] . . . XIX.” Id. § 1315(a). It is true that § 1115 also provides for demonstration projects designed to serve populations other than low-income medical patients, such as children and the unemployed. See, e.g., id. §§ 1315(b), 1315(c). But § 1115 also clearly requires that such projects be tied to and fully consistent with those portions of the Act creating programs for those specific populations. The provision’s breadth and flexibility in this regard cannot be read as conferring discretion on the Secretary to interpret § 1115 as establishing a new, freestanding assistance scheme. 2442 PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON The Secretary also points to language in § 1115 that, he argues, gives him authority to determine “the extent” and “the period” for which the costs of benefits provided under a demonstration project shall be regarded as expenditures under a state plan. See 42 U.S.C. § 1315(a)(2)(A). This argument misconstrues the statute’s “extent” and “period” language, which clearly refers to the scope and duration of the demonstration project and identifies these as matters left to the Secretary. Id. § 1315(a)(1) (permitting the Secretary to waive compliance with certain statutory requirements “to the extent and for the period he finds necessary to enable such State . . . to carry out such project”). It is true that the statute also provides that the costs of an approved project “shall, to the extent and for the period prescribed by the Secretary, be regarded as expenditures under the State plan.” Id. § 1315(a)(2)(A). But this “extent” and “period” language, following and modifying the mandatory term “shall,” plainly also refers to the lifespan of a project—the period during which the equivalence between § 1115 and Title XIX expenditures is required. No other placement of the “extent” and “period” phrase would unambiguously convey this meaning, which is consistent with the plain meaning of the rest of § 1115.7 The Secretary’s interpretation, in contrast, would have us read this portion of § 1115 as though it provided that costs of a project “shall be regarded, to the extent and for the period prescribed by the Secretary, as expenditures under the State plan.” We decline to rewrite the statute.8 7 Placement of the language at the end of the provision (“shall be regarded as expenditures under the State plan, to the extent and for the period prescribed by the Secretary”) while supporting the same interpretation, would introduce an ambiguity. 8 We note in addition, simply as further illustration of the clarity of the statute’s language, that the Secretary himself has previously recognized the limited nature of his discretion under the “extent” and “period” language of § 1115. In 1994 he maintained that “the ‘extent and period’ inquiry [in 42 U.S.C. § 1315(a)(1)] is simply a nondiscretionary, rote review of which federal statutes conflict with the experiment and must be PORTLAND ADVENTIST MEDICAL CENTER v. THOMPSON 2443 [6] The plain language of the statute requires us to conclude that § 1115 does not confer on the Secretary discretion to characterize expenditures as Title XIX (Medicaid) expenditures for some purposes and not for others. On the contrary, while the provision gives the Secretary discretion in approving projects, the provision requires the Secretary to regard expenditures under § 1115 projects designed to assist lowincome patients as Title XIX expenditures for the duration of such projects, and therefore to regard § 1115 expansion populations as receiving medical assistance under a state plan approved under Title XIX.9