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October 16, 1980

Daniel B. DeGREGORIO et al.
Helen B. O'BANNON et al.

The opinion of the court was delivered by: POLLAK

Presently for decision are cross-motions for summary judgment by plaintiffs, a class consisting of, inter alia, recipients of medical assistance who are eligible for care in skilled nursing facilities, but who have been unable to obtain beds in skilled nursing facilities which participate in the Pennsylvania Medical Assistance Program, and by defendants, officials of the Commonwealth responsible for the administration of that program. Although plaintiffs assert a number of statutory, regulatory and constitutional claims, all of which factually derive from the difficulty which they, as medical assistance (Medicaid) recipients have in procuring skilled nursing care in the Commonwealth, plaintiffs seek summary judgment on only one: that Pennsylvania's plan for medical assistance violates applicable federal regulatory guidelines in failing to set a level of payments to nursing homes which will ensure that skilled nursing care will be available to medical assistance recipients "at least to the extent that those services are available to the general population." See 42 C.F.R. 447.204. Defendants argue against plaintiffs' motion, and in support of their own summary judgment motion, that the Department of Health, Education and Welfare's (now Health and Human Services) approval of Pennsylvania's state plan, and the plan's provisions for setting rates on "a reasonable cost-related basis," as required by 42 U.S.C. § 1396a(a)(13)(E) and derivative regulations, "automatically (fulfill) the state's obligations regarding the provision of SNF (Skilled Nursing Facility) services." Brief in Support of Commonwealth Defendants' Motion for Summary Judgment, p. 6. An amicus brief filed by the Department of Health and Human Services endorses generally the defendants' position. *fn1"


 The preference which nursing homes demonstrate for private and medicare patients, and the consequent relative difficulty which medicaid patients have in obtaining care at skilled nursing facilities, is due, in very substantial measure, to the relatively low level of reimbursement which the homes receive for treating medicaid patients. At the time of the filing of plaintiffs' summary judgment motion, the reimbursement rate for medicaid patients was set at twenty-seven dollars a day (with an additional allowance of, on the average, $ 3.50 per day, where appropriate, for depreciation and interest). For medicare patients, reimbursement averaged thirty-four dollars a day. Private patients paid a daily tariff of up to forty-five dollars. *fn4" The economic incentive for preferring private (and medicare) patients over medicaid patients, even to the extent of leaving beds open for some time, despite requests for admission by medicaid recipients, with the expectation that private (or medicare) patients will be found to occupy those beds, is thus clear. And the economic equation which plaintiffs assert to be dispositive of this litigation is easily stated: Unless the state reimburses Pennsylvania's nursing homes at rates commensurate with those which private patients are willing to pay, medicaid patients will not achieve access to skilled nursing facilities comparable to the access afforded the general population. *fn5"

The agency's payments must be sufficient to enlist enough providers so that services under the plan are available to recipients at least to the extent that these services are available to the general population.

 Notwithstanding the apparent mandate of this regulation, and the uncontroverted relative disadvantage which medicaid patients have in obtaining skilled nursing care, defendants argue that the Commonwealth's reimbursement rates for skilled nursing facilities are fully consistent with the medicaid legislation, and the regulations promulgated thereunder, as those provisions focus on the reimbursement of skilled nursing facilities. Before considering in detail the Commonwealth's argument, it would be useful to set forth some additional statutory and regulatory background.


 The medicaid legislation, Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396g, established a cooperative Federal-State medical assistance program, operated and partially financed by the states, but subject to pervasive federal regulation. See Beal v. Doe, 432 U.S. 438, 97 S. Ct. 2366, 53 L. Ed. 2d 464 (1977); Aitchison v. Berger, 404 F. Supp. 1137 (S.D.N.Y.1975). Each year the federal government allocates funds to participating states "(f)or the purpose of enabling each state, as far as practicable under the conditions in such state, to furnish," medical assistance to certain categories of needy individuals. 42 U.S.C. § 1396. The state is then charged with the principal responsibility for administering the program; including the responsibility of determining the eligibility of recipients, enlisting medical service providers, and paying those providers for services rendered. The recipient is allowed to seek necessary services from any of the enlisted providers. 42 U.S.C. § 1396a(a)(23).

 State participation in the program is, of course, voluntary. But federal funds appropriated under Title XIX of the Social Security Act may only be dispersed to "states which have submitted, and had approved by the Secretary of Health and Human Services, state plans for medical assistance." 42 U.S.C. § 1396. Section 1396a sets forth the contents required of the state plan. Subsection 1396a(a)(13)(B) requires participating states to provide services within at least five general categories of medical treatment, including care offered at skilled nursing facilities. Subsection (a)(30) of 42 U.S.C. § 1396a requires participating states to establish procedures for monitoring utilization and costs:

((a) A state plan for medical assistance must-) ....
(30) provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan ... as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments ... are not in excess of reasonable charges consistent with efficiency, economy, and quality of care. (emphasis added)

 42 U.S.C. § 1396a(a)(30).

 In 1972, Congress amended Title XIX of the Social Security Act to require that the state plan provide,

effective July 1, 1976, for payment of the skilled nursing facility and intermediate care facility services provided under the plan on a reasonable cost related basis, as determined in accordance with methods and standards which shall be developed by the state on the ...

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