Opinion
No. CV 03-2445-PHX-PGR.
March 23, 2005
Logan T. Johnston, III (#009484), Johnston Law Offices, P.L.C., Phoenix, AZ.
Charles A. Miller, Covington Burling, Washington, D.C.
ORDER
THIS ORDER IS NOT FOR PUBLICATION
Pending before the Court are the defendants' Motion to Dismiss or for Summary Judgment (doc. #10), which the Court construes solely as a motion for summary judgment, and Plaintiffs' Cross-Motion for Summary Judgment (doc. #16). Having considered the parties' memoranda in light of the evidence of record and the oral argument of counsel, the Court finds that there are no genuine issues of material fact and that the plaintiffs are entitled to entry of judgment in their favor as a matter of law pursuant to Fed.R.Civ.P. 56.
Although the Court has deferred ruling on the pending motions due to the pendency of an appeal before the Eighth Circuit on the same legal issues presented here, as suggested by the parties at the hearing, the Eighth Circuit has yet to render its decision and the Court, in light of the Civil Justice Reform Act, concludes that it can no longer delaying the entry of this order.
The Court has discussed herein only those issues raised by the parties that the Court considers necessary to the resolution of the cross-motions.
Procedural and Factual Background
The plaintiffs, the Arizona Health Care Cost Containment System and its director, Anthony Rodgers (collectively AHCCCS), have sued the Centers for Medicare and Medicaid Services and its director, Thomas A. Scully, and the U.S. Department of Health and Human Services and the Secretary of DHHS, Tommy G. Thompson (collectively CMS) for declaratory and injunctive relief pursuant to the Administrative Procedure Act. AHCCCS, the state agency that operates Arizona's Medicaid program, is seeking to recover from CMS approximately $36.6 million in Medicaid costs it incurred in paying for medical services provided to Medicaid-enrolled Native Americans. CMS disallowed AHCCCS' claimed costs between 1999 and 2001 and those disallowances were affirmed in 2001 on administrative appeals through two final agency decisions of DHHS' Departmental Appeals Board (DAB).
Prior to July 31, 2001, the Centers for Medicare and Medicaid Services was known as the Health Care Financing Administration (HCFA). For purposes of consistency, the Court refers to the agency as the CMS notwithstanding that during most of the time at issue the agency was the HCFA.
Medicaid, a medical welfare program for low income or disabled individuals, was established in 1965 pursuant to Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. Under the program, state Medicaid agencies reimburse health care providers for the cost of covered services delivered to Medicaid enrollees, and the federal government, through DHHS, then reimburses the states for all or part of those expenditures. The federal share of a state's Medicaid costs is referred to as the federal medical assistance percentage (FMAP). Pursuant to 42 U.S.C. § 1396d(b), the normal FMAP rate is a partial reimbursement rate that varies yearly from state to state based on a statutory formula derived from the state's per capita income. However, § 1396d(b) also provides that the FMAP
At the time of the hearing on the parties' cross-motions, Arizona's FMAP was 67.45%.
shall be 100 per centum with respect to amounts expended as medical assistance for services which are received through an Indian Health Service facility whether operated by the Indian Health Service or by an Indian tribe or tribal organization[.]
In 1976, Congress enacted the Indian Health Care Improvement Act (IHCIA) in order to improve the deplorable state of Native American health care. Congress declared in the IHCIA that "it is the policy of this Nation, in fulfillment of its special responsibilities and legal obligation to the American Indian people, to meet the national goal of providing the highest possible health status to Indians and to provide existing Indian health services with all resources necessary to effect that policy." 25 U.S.C. § 1602. One of the principal ways in which Congress sought to do this was to add two new provisions to the Medicaid Act. First, Congress, through § 402(a) of the IHCIA, authorized IHS facilities to receive reimbursement for medical assistance provided under a state Medicaid program. The prior law had been that IHS facilities could not seek Medicaid reimbursement and had to pay for provided medical services through IHS' own appropriated funds, thus limiting the amount of funds IHS had available to spend on improving substandard Native American health care facilities. 42 U.S.C. § 1396j(a). Second, Congress, through § 402(e) of the IHCIA, added the 100% FMAP reimbursement rate at issue. 42 U.S.C. § 1396d(b) (amending § 1905(b) of the Social Security Act). Congress added this provision so that state Medicaid programs would not be burdened by costs which normally would have been borne by IHS.
In 1994, Congress passed the Indian Self-Determination and Education Assistance Act (PL 93-638). The Act in part required that tribal health facilities leased from IHS be treated as IHS facilities and that IHS was required to lease facilities on request. As a result, IHS and CMS issued a memorandum of understanding in 1996 that avoided the necessity of leases by making the 100% FMAP available to all facilities that would have been eligible had the required lease been entered into. The new policy expanded the 100% FMAP to cover expenses incurred for services provided by or through tribal health care facilities owned and operated by tribes and tribal organizations with authorized funding, commonly referred to as "638 facilities."
In addition to providing care at IHS facilities, many of which are neither equipped nor licensed to provide a full range of medical services, IHS also operates a contract care program designed to help Native Americans obtain health care services from non-IHS providers when needed services are not provided by IHS facilities. As part of the program, IHS contracts with non-IHS providers to accept referrals from IHS facilities and to provide services at reduced rates. The incurred costs that AHCCCS is seeking to recoup at the 100% FMAP rate stem from payments it made to non-IHS facilities participating in IHS' contract care program as a result of medical services provided to Native Americans referred by IHS; CMS disallowed the reimbursement of those payments to the extent they exceeded Arizona's normal FMAP rate.
In May 1997, CMS issued a memorandum to all state Medicaid directors in response to an inquiry from Arizona concerning whether non-emergency transportation provided to Native Americans was eligible for 100% FMAP. The CMS concluded in that memorandum that non-emergency transportation was not 100% reimbursable because it was not a service provided "through an IHS facility."
The CMS memorandum explained in relevant part:
. . . Our position on this issue is that in order for IHS services to qualify for 100% FMAP, the service must be: (1) provided by IHS, or a contractual agent of an IHS or tribal facility; (2) considered as a "facility service"; that is, a service that could be within the proper scope of services which can be claimed by that facility, and (3) claimed by the IHS facility as a service of that facility. . . .
For most facilities, services are furnished within the physical confines of the facility. Satellite facilities owned or leased, and operated by IHS or tribal 638 programs, are also considered to be within the physical confines of an IHS/tribal facility. Referred services, provided through a contractual arrangement, can also be considered provided "through an IHS facility" and reimbursed at the 100% FMAP rate as long as these are services that could be provided as a "facility service"[.] . . .
It is undisputed that prior to 1999, AHCCCS did not claim the 100% FMAP rate for Medicaid services provided to Native Americans through the contract care program. After a series of exchanges with CMS officials between August 1997 and September 1998, AHCCCS first submitted a 100% FMAP claim for the quarter ending March 31, 1999 in reliance on CMS' May 1997 memorandum; it sought 100% FMAP reimbursement for services that met five criteria: (1) they involved allowable medical services that were provided to Medicaid-eligible Native Americans who had chosen IHS as their health plan; (2) those Native Americans received medical services from a non-IHS provider; (3) the services were furnished pursuant to a contractual arrangement that existed between an IHS or 638 facility and the contract provider; (4) the services were limited to facility services as that term was used by CMS; and (5) the date of service was on or after May 15, 1997 (the date of the CMS memorandum).
The DAB, in its main decision at issue, concluded in relevant part: (1) that the term "received through" an IHS facility is ambiguous because it is "susceptible to either the reading that the services be obtained by the agency of an IHS facility or that they be obtained in an IHS facility[;]" (2) that the CMS' interpretation that the 100% FMAP rate is limited to services received through an IHS facility which offers, is responsible for, and bills Medicaid for the services provided is reasonable and permissible because it is supported by the legislative history and the agency's longstanding consistent application of the statute; (3) that CMS did not change its longstanding interpretation of the provision through its May 1997 memorandum; (4) that AHCCCS had notice of CMS' interpretation and operated consistently with that interpretation prior to 1997; (5) that AHCCCS did not reasonably rely on a different interpretation of the 100% FMAP provision to its detriment; and (6) that the disallowed costs were not eligible for the 100% FMAP rate under CMS' interpretation.
The DAB issued its main decision at issue, no. 1779, on August 7, 2001; that decision involved disallowed AHCCCS claims from the period January 1999 through December 2000, totaling $34,083,540. The second DAB decision, no. 1792, was issued on October 25, 2001; that decision, which merely incorporated by reference the DAB's reasoning in no. 1779, involved a disallowed AHCCCS claim for $2,517,942 for the quarter ending March 31, 2001.
Discussion
The Court's review of this matter is pursuant to the Administrative Procedure Act. The APA provides that a court may, inter alia, set aside a formal agency action if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law". 5 U.S.C. § 706(2)(A).
At issue is the propriety of CMS' interpretation of the phrase "services received through an Indian Health Service facility" in 42 U.S.C. § 1396d(b) as limiting the 100% FMAP reimbursement rate to those services provided by an IHS facility, either on-site or under arrangement with contractors who provide services as part of the offerings of the particular facility, i.e. services which the IHS facility is the provider because it offers the services, is responsible for those services, and directly bills the state Medicaid program for the services provided. AHCCCS contends that the 100% FMAP rate is also available for IHS "referred services claims", i.e. for services that are provided as a result of a referral from an IHS facility by private health care providers who bill the state Medicaid program for those services.
The Supreme Court has set forth a two-step test for judicial review of an administrative agency's interpretation of a federal statute pursuant to § 706(2)(A):
First . . . is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.Chevron. U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82 (1984) (Footnotes omitted).
I. Ambiguity of Statute
A. Statutory Language
Under the first Chevron step, which does not involve deference to an agency's interpretation of the statutory language, Arizona Cattle Growers' Ass'n v. U.S. Fish Wildlife Service, 273 F.3d 1229, 1237 (9th Cir. 2001), courts employ traditional canons of statutory construction to independently determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute at issue. Wilderness Society v. U.S. Fish Wildlife Service, 353 F.3d 1051, 1060 (9th Cir. 2003) (en banc). In determining the meaning of a statutory provision, a court must interpret undefined words in light of their "ordinary, contemporary, common meaning", and must read them in their context in light of the structure and purpose of the statute. Id.
At issue under the first Chevron step is whether "through" an IHS facility is ambiguous because it could mean such things as "at" or "in" or "by" an IHS facility. AHCCCS, relying onWebsters' Third New International Dictionary (1993), argues that the phrase at issue is not limited to those services that are "provided by" or "in" or "at" an IHS facility because "through" means "by means of; by the help or agency of," or "by the intermediary of." AHCCCS' contention is that the statute's plain language focuses not on the location where the services are provided, but rather on the role ("intermediary") that IHS facilities play in the receipt of those services.
CMS argues that "through" is unquestionably ambiguous because it has numerous dictionary definitions, including "by the agency of" and "in the name of"; it notes that the dictionary relied on by AHCCCS contains over two dozen different definitions of the word. CMS' contention is that "through" is used in the statute in an attributional sense and refers to services for which the IHS facility is the responsible agent.
The Court cannot conclude that the statute is ambiguous simply because the word "through" has more than one dictionary definition since if that were the case then little would remain of the first step of the Chevron analysis. The Ninth Circuit has stated that "because words can have alternative meanings depending on context, we interpret statutes, not by viewing individual words in isolation, but rather by reading the relevant statutory provisions as a whole." Leisnoi, Inc. v. Stratman, 154 F.3d 1062, 1066 (9th Cir. 1998); accord, Robinson v. Shell Oil Co., 519 U.S. 337, 340-41, 117 S.Ct. 843, 846 (1997) ("The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.")
Looking at the statutory language as a whole, CMS argues that § 402(a) (allowing IHS facilities to receive Medicaid reimbursements) and § 402(e) (providing for the 100% FMAP) of the IHCIA pertain to the same group of Medicaid services and that the purpose of § 402(e) was to provide the 100% FMAP only for the services described under § 402(a). AHCCCS, on the other hand, argues that Congress deliberately used a different term in § 402(e), i.e. "received through" a IHS facility, to distinguish the term used in § 402(b), i.e. "provided in" an IHS facility. AHCCCS contends that the structure of the IHCIA and the Medicaid statute supports its position in that Congress was well aware of the distinction between the term "through" and the terms "by" or "in" as used in the statutes and that Congress's use of different words underscore the difference between services "provided by" a facility and those "received through" a facility. For example, it points to the fact that through the same section of the IHCIA, Congress removed the prohibition on Medicaid reimbursement for services "provided in" IHS facilities while requiring that states be reimbursed 100% for services "received through" IHS facilities; it argues that these contrasting provisions, appearing in the same statute, must be given effect according to their terms. AHCCCS also argues that the difference between the terms is strengthened by examining other provisions of the Medicaid statute which restrict Medicaid coverage to services that are provided "by" or "in" a facility.
AHCCCS points out that "medical assistance" is defined in 42 U.S.C. § 1396d(a) as including rehabilitative services recommended by a physician that are "provided in a facility, a home, or other setting", and ambulatory services which are "offered by a rural health service", and that "primary care" is defined in § 1396d(t) in part as laboratory services "provided by or through" various types of physicians, which AHCCCS notes is a recognition by Congress that some large doctors' offices provide lab services in-house ("by") while others may send patients to outside vendors ("through").
CMS asserts that AHCCCS' argument that Congress would have used "in" or "by" if its intention was to use "through" in a manner consistent with CMS' interpretation ignores the fact that "by" and "through" are synonyms and thus largely interchangeable. It also argues that AHCCCS' focus on "through" ignores the term "facility" that Congress repeated used in the IHCIA and that whereas AHCCCS' interpretation renders the term superfluous, its interpretation evidences Congress' intent that the 100% FMAP rate was intended for Medicaid payments made to an IHS facility for services provided and billed to a state by such facility.
AHCCCS argues in reply that its interpretation does not overlook "facility" since its claims all involve services where Native Americans first sought treatment at an IHS facility and were then referred by that facility to a contract care provider. AHCCCS views its interpretation as being in accordance with the goal of the IHCIA because a main purpose of the statute is to improve the range and quality of services available to Native Americans on reservations without shifting to the states the federal government's historic responsibility to provide health care to Native Americans.
The Court concludes that AHCCCS' position is the more persuasive one on this issue because Congress' use of different phrases in the same statute does have a legal significance in terms of statutory construction. As the Ninth Circuit has stated:
[i]t is a well-established cannon of statutory construction that the use of different words or terms within a statute demonstrates that Congress intended to convey a different meaning for those words. . . . Congress's explicit decision to use one word over another in drafting a statute is material. . . . It is a decision that is imbued with legal significance and should not be presumed to be random or devoid of meaning. . . . Even words with remarkably similar definitions can still convey a unique or distinct meaning or flavor from words that are similar or even synonymous in nature because of their differing tone or usage within a sentence.S.E.C. v. McCarthy, 322 F.3d 650, 656 (9th Cir. 2003); see also,Russello v. U.S., 464 U.S. 16, 23, 104 S.Ct. 296, 300 (1983) ("We refrain from concluding here that the differing language in the two subsections has the same meaning in each. We would not presume to ascribe this difference to a simple mistake in draftmanship."); Leisnoi, Inc. v. Stratman, 154 F.3d at 1067 ("Congress's use of two distinct phrases leads us to conclude that two different meanings were intended.") CMS' interpretation does not really account for why Congress chose to use two different phrases; it in effect speculates that Congress was simply using interchangeable words, but that is not the presumption that is to be adopted under the above statutory interpretation canon.
The Court, concurring with the the North Dakota and South Dakota district courts, the only other two federal district courts that have resolved the same issue to date, concludes as a matter of law that the language of § 1396d(b) at issue is clear and unambiguous and that the phrase "received through" is properly interpreted as pertaining services that are provided as a result of a referral from an IHS facility by private health care providers who bill the state Medicaid program for those services.
The North Dakota and South Dakota district courts overruled the DAB decisions upholding CMS' interpretation, determining that the use of the word "through" does not render § 1396d(b) ambiguous. These are the cases currently before the Eighth Circuit in a consolidated appeal.
The North Dakota district court stated in part:
In enacting [ 42 U.S.C. § 1396d(b)], Congress used the word "through" when it could have used the word "at". The term is not ambiguous. . . . The Court concludes as a matter of law that [§ 1396d(b)], is not ambiguous. The statutory language is clear and unambiguous and in this case allows for the 100% FMAP reimbursement rate with respect to amounts expended as medical assistance for "services which are received through an Indian Health Service facility" whether directly operated by IHS or when the Native American is referred by an IHS provider to a non-IHS contract care provider. The language of the statute is clear. It is equally clear that Congress would have intended such a result to benefit those Medicaid-eligible Native Americans who first present themselves to an IHS facility and are then referred to as non-IHS facility or provider based on a pre-existing contractual arrangement. To hold otherwise would effectively defeat the purpose of the statute.North Dakota v. Centers for Medicare and Medicaid Services, 286 F.Supp.2d 1080, 1085-86 (D.N.Dakota 2003).
The South Dakota district court stated in part:
I find that the terms of the statute are unambiguous and that is the end of the matter. I reject the holding of the DAB and the Secretary that the statute is ambiguous. The language in the IHCIA to the effect that 100% reimbursement is to be provided for "services which are received through an [IHS] facility" is clear and unambiguous. "Through" does not mean "at." It does not mean "by." "Through" means coming in at one end (IHS facility) and passing out of that facility into (a) another IHS facility, or (b) tribal facility, or (c) a non-IHS facility providing in-patient or out-patient care based on a preexisting contract between IHS and the non-IHS facility and based on a referral from the IHS. It also means "in at the first step of a process, treatment, or method of handling, passing through subsequent steps or stages in order . . ." Random House Unabridged Dictionary (Second Edition).Ellenbecker v. Centers for Medicare and Medicaid Services, CV 02-3042, unpublished order at 14 (D.S.Dakota September 30, 2003).
B. Legislative History
If the statutory language itself does not resolve the interpretative issue due to a lack of clarity, then courts look to the statute's legislative history for interpretative assistance. S.E.C. v. McCarthy, 322 F.3d at 655. Although the Court need not reach this issue because of its conclusion that the statutory language is clear, the Court further concludes that the legislative history of the IHCIA supports the plaintiffs' position.
The parties' main disagreement concerning legislative history deals with the issue of cost burden-shifting. It is undisputed that the legislative rationale for the 100% reimbursement rate added by the IHCIA was to avoid shifting to the states costs that had always been borne by the federal government alone. CMS argues that implementing Congress's intent is straightforward because "[i]t is only necessary to determine whether the costs at issue in this case would have been paid by IHS at the time that Congress enacted the IHCIA: the simple answer is that they would not have been." CMS' position is that the services now at issue are not the sort that motivated Congress to enact IHCIA's special 100% FMAP rate because such costs were not previously borne solely by the federal government. This position is based on the fact that IHS, pursuant to its administrative "alternate resource rule" which has been in effect since 1956, has never paid for medical services by non-IHS providers who had contracts with IHS to provide referred services to Native Americans at reduced rates, except as a payor of last resort, i.e. IHS has never paid for such referred services to the extent any alternate source of funding, including Medicaid, was available — thus, as CMS argues, at the time IHCIA was enacted, IHS would not have paid for these referred services out of its own funds because the contract providers would have billed and been paid through the state Medicaid program which in turn would have been reimbursed by DHHS at the state's normal FMAP rate.
The IHCIA House committee report stated in part:
In adopting the 100% Medicaid reimbursement formula, the Committee took the view that it would be unfair and inequitable to burden a State Medicaid program with costs which normally would have been borne by the Indian Health Service. In this connection, the Committee notes that, in considering . . . the Social Security Amendments of 1973 in the 93rd Congress, the appropriate Senate and House Committees having primary jurisdiction over Medicare-Medicaid adopted a similar reimbursement provision. In the report accompanying that legislation, the Senate Finance Committee justified the 100% reimbursement method by noting that with respect to matters relating to Indians, the Federal Government has traditionally assumed major responsibility. The Committee wishes to assure that a State's election to participate in the Medicaid program will not result in a lessening of Federal support of health care services for this population group [Indians], or that the effect of Medicaid coverage be to shift to the States a financial burden previously borne by the Federal Government.
AHCCCS argues that the premise of CMS' burden-shifting argument is wrong because the House committee report is clear that prior to the enactment of the IHCIA the cost of IHS referred services received by Native Americans living on reservations was a federal responsibility, not one shared with the states, notwithstanding the enactment of Medicaid in 1965. The basis for AHCCCS' position that states were not sharing the cost of IHS referred services in 1976 are the statements in the House committee report to the effect that as a rule Native Americans living on reservations who were then eligible for Medicaid were not enrolled and participating in the Medicaid program because access to services supported by Medicaid was severely limited. CMS asserts that this argument is pure revisionism because, although the committee report contains such statements, there is nothing in the legislative history suggesting that the 100% FMAP rate was enacted because few Native Americans were actually exercising their existing right to enroll in Medicaid.
The House report stated in part regarding Native American participation in Medicare and Medicaid:
Although Indians are eligible for Medicare and Medicaid benefits in the same manner as any other citizens, they have experienced an inability to take advantage of those benefits.
This lack of participation in the Medicare and Medicaid Program is a result of inaccessibility. Since most Indians reside on remote reservations, access to services supported by either Medicare or Medicaid is severely limited. In most cases, the only available health delivery system is that of the Indian Health Service, yet the IHS, as a Federal facility, cannot, under existing law, receive payments from Medicare or reimbursements for services provided under Medicaid. As a result, Indian citizens are unable to receive Medicare or Medicaid payments for necessary care.
AHCCCS also argues that even if other states were sharing such costs in 1976, and it notes that the administrative record contains no evidence showing that any state paid a share of a single IHS referred service claim prior to 1976, Arizona was not sharing such costs because it did not even begin participating in the Medicaid program until after 1976. CMS argues that the fact of Arizona's non-participation in Medicaid in 1976 is irrelevant and that what's important is that when IHCIA was enacted state Medicaid programs were already responsible for Medicaid-covered referred services due to IHS' alternate resource rule.
The Court concurs with the North Dakota district court's reasoning for specifically rejecting CMS' argument that the cost of referred services was not borne entirely by the federal government at the time the IHCIA was enacted in 1976:
The services provided were billed to the North Dakota Medicaid program as required by the alternate resource rule. . . . This rule, which was promulgated by the IHS, makes IHS the payor of last resort. The rule says nothing as to the proper FMAP reimbursement for the state medicaid program. Nor does the rule provide that IHS will never have any responsibility for payment. The alternate resource rule cannot be relied upon by CMS for the proposition that medical services were not provided "through an [IHS] facility."
The Court believes that CMS cannot shirk its responsibility every time a Medicaid-eligible Native American patient leave an IHS facility. The HMO Act of 1973 authorized the IHS to contract with non-IHS facilities for services IHS did not provide. . . . The HMO Act predated the availability of Medicaid made allowable by the [IHCIA] in 1976. Thus, responsibility for referred health care services is one traditionally borne by the federal government which Congress sought to keep a federal responsibility by enacting Section 1905(b) of the Social Security Act.
The CMS interpretation is also in direct conflict with Congress' stated purpose in enacting Section 1905(b) to avoid shifting the cost of IHS facilities, which have always been an exclusively federal responsibility, to the states. . . . The provision of health care to Native Americans is primarily the responsibility of the federal government. McNabb v. Bowen, 829 F.2d 787, 792 (9th Cir. 1987). State responsibility is secondary. The CMS interpretation gives the state primary responsibility for referred services.North Dakota v. Centers for Medicare and Medicaid Services, 286 F.Supp.2d at 1086.
CMS further argues that the legislative history supports its interpretation because the House committee report repeatedly refers to services covered by the 100% FMAP rate as services provided "in IHS facilities." AHCCCS argues that the fact that Congress used a different phrase in the statute ultimately enacted, i.e. "received through", shows that Congress did not choose the restrictive application of the 100% FMAP provision urged by CMS. The Court is unpersuaded by CMS' position on this issue because courts must rely on the statutory language if there is a difference between language used in the enacted statute and language used in a Congressional committee report. See Landreth v. C.I.R., 859 F.2d 643, 646 n. 6 (9th Cir. 1988) (quoting fromMiller v. Commissioner, 836 F.2d 1274 (10th Cir. 1988) ("[W]e acknowledge that there is a reasonable inference that the Conference Committee may have intended one test, but Congress enacted another. If that is the case, we are without power to change the words of the statute. . . . Nor may we elevate the inconsistent language of the Conference Report to the status of law.")
For example, the House report stated that "section 402 would provide 100% Federal Medicaid matching funds for services provided to any Indian in an IHS facility[.]"
II. Reasonableness of CMS' Interpretation
If the clear meaning of the statutory language cannot be ascertained using traditional statutory interpretation rules, then the reviewing court proceeds to second Chrevon step inquiry, which is to decide whether the agency's interpretation is a permissible interpretation of the statute. Chevron, 467 U.S. at 843, 104 S.Ct. at 2782. The Court need not consider this step of the Chevron inquiry given its resolution of the issue under the first step of the inquiry. The Court nevertheless alternatively concludes that AHCCCS is entitled to the reimbursement it is seeking because CMS' interpretation of the statute is unreasonable as a matter of law.
Although the judiciary is the final arbiter of the issue of statutory construction, an administrative agency's interpretation of a statute it is charged with administering is accorded substantial deference. Brandt-Erichsen v. U.S. Dept. of Interior, 999 F.2d 1376, 1381 (9th Cir. 1993), cert. denied, 513 U.S. 826 (1994). Under Chevron, in order to uphold the agency's construction of the statute, the reviewing court need not conclude that the agency's construction was the only one it permissibly could have adopted or even the one that the court would have reached if the question initially had arisen in a judicial proceeding. Chevron, 467 U.S. at 843 n. 11, 104 S.Ct. at 2782 n. 11; rather, the court's role is to simply ask whether it is compelled to reject the agency's construction because it is inconsistent with the unambiguously expressed intent of Congress or is otherwise unreasonable. Leisnoi. Inc. v. Stratman, 154 F.3d at 1068-69. The Court concludes that it is so compelled here.
There is no dispute that under Chevron's second step, CMS' interpretation of the statutory language is a type that is entitled to deference because it was affirmed through a formal administrative adjudication, i.e. the appeal before the DAB. See St. Anthony Hospital v. U.S. Dept. of Health and Human Services, 309 F.3d 680 (10th Cir. 2002) (Applying Chevron deference to a DAB decision); cf., Community Hospital of Monterey Penisula v. Thompson, 323 F.3d 782, 790 (9th Cir. 2003) ("It is, thus, well settled that, if the Secretary [of DHHS] fills a gap that he is authorized to fill, his resolution in the course of formal adjudication of the kind we review [a decision of the Provider Reimbursement Review Board, DHHS' administrative appeal body for Medicare reimbursement issues] is controlling unless arbitrary, capricious, or manifestly contrary to the statute.")
AHCCCS argues that even if the statutory "received through" language were ambiguous, CMS' interpretation of it is not reasonable because it (1) fails to account for the contrasting language in the IHCIA and elsewhere in the Medicaid statute defining services provided "in" or "by" a facility, (2) it ignores the well understood distinction between Native Americans who resided on or near reservations and received their health care through IHS facilities and urban Indians who did not, (3) it yields arbitrary results on Medicaid reimbursement depending on whether the IHS facility happened to have an appropriate IHS doctor present at the facility when the Native American arrived for treatment or whether the IHS facility instead had to refer the patient to a contract provider, and (4) it is contrary to the intent shown by the legislative history in that it would shift a financial burden previously borne by the federal government to the states.
CMS argues that its interpretation of the statutory language is unquestionably reasonable because one of the ways in which "through" can be defined is in the manner in which it has done so, which under Chevron is all that is required. As part of its reasonableness argument, CMS argues that it has consistently interpreted the 100% FMAP rate as applying to IHS facilities and not to non-IHS facilities since the enactment of the IHCIA in 1976 and the states fully complied with that interpretation for some twenty years in that, to the best of its knowledge, no state sought or received the 100% FMAP for referred services provided and claimed by non-IHS providers prior to 1997 notwithstanding the tens of millions of dollars that were at stake.
The Court concurs with the conclusion of the North Dakota district court that "[i]t is not a reasonable interpretation of the statute for CMS to read the word "through" out of the statute and replace it with the word "at." 286 F.Supp.2d at 1085. As that court reasoned in part:
By presenting themselves to an IHS facility the native Americans were seeking services "through an Indian Health Service facility[,]" . . . [and that] [b]y disallowing such claims, CMS effectively requires the medical care to be provided at an IHS facility when the statute clearly states that services shall be reimbursed at 100% FMAP if such services are "received through an Indian Health Service facility."Id.
Therefore,
IT IS ORDERED that the defendants' Motion to Dismiss or for Summary Judgment (doc. #10), construed as a motion for summary judgment, is denied.
IT IS FURTHER ORDERED that Plaintiffs' Cross-Motion for Summary Judgment (doc. #16) is granted and that the decisions of the Department of Health and Human Services' Departmental Appeals Board, nos. 1779 and 1792, are reversed.
IT IS FURTHER ORDERED that the plaintiffs, after consultation with the defendants, shall submit a form of judgment no later than April 29, 2005.
FINAL JUDGMENT
This action came before the Court on defendants' motion to dismiss or for summary judgment and plaintiffs' cross-motion for summary judgment. Upon consideration of the parties cross-motions and related pleadings, arguments of counsel, and the administrative record in this case, and for the reasons set forth in the Court's Order dated March 23, 2005,IT IS ORDERED:
1. Judgment is entered in favor of plaintiffs Arizona Health Care Cost Containment System and Anthony Rodgers in his official capacity as Director of the Arizona Health Care Cost Containment System (collectively "plaintiffs"), and against defendants Centers for Medicare and Medicaid Services, Mark B. McClellan in his official capacity as Administrator of the Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, and Mike Leavitt in his official capacity as Secretary of the U.S. Department of Health and Human Services (collectively "defendants"), on plaintiffs' claim. Pursuant to 5 U.S.C. § 706(2), the Court holds unlawful and sets aside Departmental Appeals Board Decision Nos. 1779 and 1792.
2. Each party shall bear its own costs and counsel fees.