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March 8, 1984


The opinion of the court was delivered by: VANARTSDALEN


 I. Introduction

 Plaintiffs in Civil Action 83-3534 filed a complaint on behalf of themselves and those similarly situated challenging the validity of the Pennsylvania Department of Welfare's recently adopted amendments to the regulations regarding skilled nursing care under Title XIX of the Social Security Act (commonly called Medicaid), 42 U.S.C. § 1396-1396p. The gravamen of plaintiffs' complaint is that the state's new definition of skilled care is impermissibly stricter than that provided by federal law, thus resulting in the reduction in the level of nursing care to thousands of low income elderly nursing home patients. Subsequent to the filing of the complaint in Civil Action 83-3534, a related action was filed and assigned to me under our local rules. This later case, Holland v. Cohen, Civil Action 83-5983, challenges the same regulations but the crux of the complaint is directed at various alleged infirmities in the administrative hearing process by which patients can challenge adverse decisions regarding the level of care to which they are entitled under state and federal law.

 Presently before the court is plaintiffs' application for a preliminary injunction which seeks an order directing defendants to continue certain interim measures that recently expired which, in effect, had allowed reimbursement to nursing homes for both skilled care and intermediate care patients at the skilled care rate and increased certain reimbursement ceilings.

 II. Background

 The Medicaid program is a cooperative federal-state program set up to provide medical services to the poor. It is a system for federal funding of state plans to furnish health care to needy persons through agreements with private and public individuals and institutions capable of providing those services. Harris v. McRae, 448 U.S. 297, 308-09, 65 L. Ed. 2d 784, 100 S. Ct. 2671 (1980). The program was created in 1965 when Congress added Title XIX to the Social Security Act, 79 Stat. 343, as amended, 42 U.S.C. § 1396-1396p, for the purpose of providing federal financial assistance to states that chose to reimburse certain costs of medical treatment for needy individuals. Id. at 301. Participation in the Medicaid program by the individual states is entirely optional. When a state chooses to participate, it must comply with the requirements of Title XIX.

 Once a state elects to participate, it must submit a plan which, in order to be approved by the Secretary of Health and Human Services (Secretary), must conform to the extensive specific requirements set forth in 42 U.S.C. § 1396a(a). One such requirement is that a participating state must provide financial assistance to the "categorically needy," *fn1" with respect to five general areas of medical treatment. One of the five mandatory services, and the only one involved in these actions, is skilled nursing facility services. 42 U.S.C. § 1396a(a)(10)(A). Although Title XIX does not require states to provide funding for all medical treatment falling within the five general categories, it does require that state plans establish "reasonable standards . . . for determining . . . the extent of medical assistance under the plan which . . . are consistent with the objectives of [Title XIX]." 42 U.S.C. § 1396(a)(17). Further, the state plan must provide:

For payment of the . . . skilled nursing facility, and intermediate care facility services provided under the plan through the use of rates . . . which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards.

 42 U.S.C. § 1396a(a)(13)(A).

 In addition to the five general categories of treatment required to be provided, the state can elect to provide, and the federal government will contribute funding for, other medical services. One such optional service involves the providing of intermediate nursing care facilities for patients whose condition does not require the skill and care of a skilled nursing facility. *fn2"

 The Secretary is also authorized to establish regulations regarding the Medicaid program. 42 U.S.C. § 1302. While the states retain substantial discretion in administering the program, they must adhere to the dictates of Congress in the operation of the program under Title XIX and to the Secretary's regulations. Smith v. Miller, 665 F.2d 172, 174 (7th Cir. 1981).

 The regulations governing skilled nursing facilities are located in Chapter IV of Title 42 of the Code of Federal Regulations. Title 42 is the Public Health title and Chapter IV deals with the Health Care Financing Administration (HCFA), the agency delegated the authority to administer the Medicaid program.

 Pennsylvania has elected to join the optional Medicaid program. As such, it has filed a state plan and as mandated by federal law, has named the Pennsylvania Department of Public Welfare (DPW) as the single state agency "to administer or supervise the administration of the plan." 42 U.S.C. § 1396a(a)(5). The applicable Pennsylvania statutes are located at Pa. Stat. Ann. tit. 62 §§ 101-1503 (Purdon's 1982) and 55 Pa. Admin. Code § 1101.11-.95 (Shepard's 1983). More specifically, Pennsylvania has created the Pennsylvania Medical Assistance Program which provides for both skilled and intermediate care facilities. Pa. Stat. Ann. tit. 62 §§ 443.4, 444.1; 55 Pa. Admin. Code § 1101.11-.95. With this general background as a preface, the specific facts which resulted in the present litigation are next set forth.

 III. Facts

 On January 8, 1983, DPW published a new set of regulations concerning skilled nursing facilities and intermediate care facilities in the Pennsylvania Bulletin. 13 Pa. Admin. Bull. 151 (1983). Prior to January 8, 1983, DPW defined skilled nursing care as:

A level of care ordered by and provided under the direction of a physician. Skilled nursing care is provided on a continuous 24 hour basis for a person who requires the professional and specialized technical administration of nursing and rehabilitative services, or skilled observation when a medical determination may be required. When the inherent complexity of a prescribed service is such that it must be performed by professional or technical personnel only, in order to insure the safety or effectiveness of the service, this constitutes a skilled procedure. (Examples of skilled nursing services are included in the Provider Handbook.)

 11 Pa. Admin. Bull. 2612 (1981). DPW maintains that the regulations were changed as a result of a 1980 audit by federal officials of the Allegheny County Nursing Home, a large county-operated nursing home located just south of Pittsburgh. The Allegheny County Nursing Home provided skilled nursing care for DPW under Medicaid and the federal government under Medicare. Evidently, the auditors discovered that in certain cases physicians were able to qualify patients for skilled care under Pennsylvania's Medicaid regulations who would not qualify under Medicare, controlled by federal regulations.

 The auditors, understandably concerned, pointed out to DPW that the Medicare and Medicaid definitions were supposed to be the same under the federal statute. Based upon the federal audit DPW agreed to return $ 118,000 in federal monies and to change DPW's regulations to conform with federal law.

 On January 8, 1983, the culmination of several years' work was published in the Pennsylvania Bulletin. The definition of skilled nursing care was replaced by a definition of skilled nursing facility services:

Skilled nursing facility services -- Skilled nursing and rehabilitation services which:
(i) are ordered by and under the direction of a physician;
(ii) are provided either directly by or under the supervision of medical professionals -- registered nurse, licensed practical nurse, physical therapist, occupational therapist, speech pathologist, or audiologist -- as defined in 42 C.F.R. § 405.1101(c), (k), (m), (q), (t);
(iii) are required and provided on a daily basis as defined at 42 C.F.R. § 405.128;
(iv) can only be provided, as a practical matter, on an inpatient basis as discussed at 42 C.F.R. 405.238a; and
(v) are provided in accordance with the Medicare requirements set forth at 42 C.F.R. §§ 405.127, 405.128, and 405.128(a) by a facility or distinct part of a facility that is certified to meet the requirements for participation at 42 C.F.R. Part 442, Subpart C, as evidenced by a valid agreement with the Department for providing skilled nursing facility services and making payments for those services.

 55 Pa. Admin. Code § 1181.2 (Shepard's 1983). In addition, Appendix E, relating to skilled nursing care assessment, was added to the regulations. Appendix E specifies the minimum medical care criteria a patient must meet in order to be determined medically eligible for skilled nursing care. Appendix E also contains a description of the general categories of skilled care services and the prerequisites of each. Finally, a list of specific services that comprise the general categories is included in the appendix. While ...

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