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June 24, 1987

Carolyn Morgan, et al
Walter W. Cohen, et al.

The opinion of the court was delivered by: FULLAM


 This is a class action. Plaintiffs are Pennsylvania residents eligible to attend psychiatric partial hospitalization services subsidized by the medical assistance (Medicaid) program under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq.1 Defendants are Pennsylvania Department of Public Welfare (DPW) officials who run the Medicaid program in this Commonwealth. Plaintiffs challenge proposed modifications to, and past implementation of, defendants' plan that regulates Medicaid transportation services. I will grant equitable relief based on the following findings of fact and conclusions of law.


 A moderate to severe mental illness afflicts each plaintiff who, to attend a psychiatric partial hospitalization service, under 55 Pa. Code § 1153.52(b)(1), must:

(i) Have a mental disorder diagnosis that has been verified by a psychiatrist.
(ii) Have a psychiatric condition requiring more intensive treatment than that provided by an outpatient clinic.
(iii) Have a psychiatric condition requiring provision of a supervised, protective setting for a prescribed time period to prevent institutionalization or ease the transition from inpatient care to more independent living.

 With such conditions, psychiatric partial hospitalization service patients are too sick to be treated in short, infrequent visits to therapists, but need not be kept in state mental hospitals.

 Many such people have, however, at times been inpatients at state mental hospitals. Adults and children manifest diverse symptoms and may suffer additional handicaps, including mental retardation or physical disability.

 All told, about 20,000 patients at any given time attend psychiatric partial hospitalization services. These services aim to increase patients' ability to function in society, to bring them back to and keep them in their community using the least restrictive therapy. 55 Pa. Code § 5210.6. Available therapy differs at different services, because certain providers specialize; for example, some fill particular needs for children or adults or the elderly, persons suffering acute crises or chronic illnesses or mental retardation, or the physically disabled or drug abusers. Such specializations can facilitate therapy, because otherwise tensions between subpopulations -- such as the acutely and chronically ill or the young and old -- may disturb patients and distract providers from their primary tasks and because specialization allows providers to implement particularly effective therapies.

 The therapy at all services -- described generally in 55 Pa. Code Chap. 1150, Appendix A, as limited by 55 Pa. Code § 1153.14 -- typically requires attendance at sessions three to five days per week. Each visit lasts between three and six hours. 55 Pa. Code § 1153.53(2).

 These sessions may continue over a short or long time, depending on a patient's response. Success depends on both the total amount of time in therapy and the frequency of therapy.

 If therapy is cut off (or cut down) prematurely, as the time without (or with reduced) treatment lengthens, patients become increasingly likely to harm themselves or others. For example, children may establish patterns of juvenile delinquency and adults may become homeless. Significant deterioration of mental health, including activation of psychoses, can occur within two weeks without treatment, leading to a need for increased drug therapy, emergency care, or institutionalization. Sometimes the lost capacity cannot be recovered when therapy resumes. Even to the extent that later treatment can re-establish patients' equilibrium, during the interim the patient and society suffer.

 This cannot be avoided by increased use of inpatient or outpatient psychiatric services, the former being excessively restrictive for patients and expensive for society, the latter being ineffective. Psychiatric partial hospitalization services' inclusion within Pennsylvania's Medicaid program reflects awareness of the vital purposes fulfilled by this intermediate level of therapy.

 The availability of psychiatric partial hospitalization services, and the regularity of therapy provided, significantly depend on patients' access to transportation. Transportation needs reflect patients' mental and physical condition, personal resources, and proximity to an appropriate service.

 Many patients can walk, ride public transportation, drive or be driven to their services. Others -- either because of confusion when beginning therapy or because they are experiencing an acute phase of mental illness, or because of disability, age, or great distance to travel -- require paratransit, transport to a service by vans that may come with special equipment (such as wheelchair lifts) or with attendants.

 Whatever their means of transportation, some psychiatric partial hospitalization therapy patients can pay the necessary costs using family money or medical insurance. Few such resources exist for plaintiffs, however, whose therapy is funded through the Medicaid program.

 This program serves only poor people. See 42 U.S.C. § 1396a(a)(10 & 17). Their aid is paid for in part by the Commonwealth and, so long as the Commonwealth provides services in compliance with a plan approved by the Secretary of the United States Department of Health and Human Services (the Secretary), in part by the federal government. 42 U.S.C. § 1396. The relative share of costs depends on the type of service provided. 42 U.S.C. § 1396b(a). Medical services, under 42 U.S.C. § 1396b(a)(1), are more than half-paid-for by the federal government while administrative services, those "found necessary by the Secretary for the proper and efficient administration of the State plan" under 42 U.S.C. § 1396b(a)(7), are half-paid-for by the federal government.

 In Pennsylvania, ambulance transport is provided as a medical service, but all other transportation is provided as an administrative service. See 55 Pa. Code § 1101.31. For many years DPW has paid for ambulance transport under 55 Pa. Code § 1245.51 et seq., but for other Medicaid transportation over the past few years DPW has changed reimbursement plans several times.

 Before November 1983, under 55 Pa. Code § 175.23(b)(2)(ii) (superseded), DPW authorized cash grants to Medicaid recipients paying for necessary transportation, including transportation to psychiatric partial hospitalization services. Ultimately, this system proved too costly in DPW's view, providing little opportunity for either cost-containment or service coordination.

 By November 1983, DPW replaced the old rules governing transportation with the Public Assistance Transportation Block Grant plan. This plan provided for DPW to offer each county, through the commissioners, a sum of money to pay for all Medicaid recipients to be carried to their health-care providers; in those counties rejecting the offer, DPW would offer nongovernmental contractors the same deal; if neither county nor contractor accepted, DPW would reimburse Medicaid recipients as under the prior system. See 13 Pa. B. 2876-78 (September 24, 1983) and 55 Pa. Code Chap. 2070.

 Under this Block Grant plan, the name notwithstanding, if counties or contractors exhausted their funds for transportation during a year then they could apply to DPW for a supplemental grant. This process was not well publicized, however, and with DPW's encouragement various county-based transporters placed improper limits on the time, frequency, area, and mode of transportation services provided. When supplemental grants were requested by the contractor in Philadelphia, DPW failed to provide funds in a timely manner so that several times this contractor almost ceased operations. Thus, disrupted or reduced transportation services under the Block Grant plan harmed certain plaintiffs.

 Other plaintiffs, however, seem to have fared reasonably well under this system. The structure of county-based planning and coordination is praised by plaintiffs, who point out that under the Block Grant plan DPW's overall transportation outlays stopped escalating rapidly and, in spite of demand for psychiatric partial hospitalization services by recently de-institutionalized plaintiffs, held down (and probably cut) DPW's outlays for plaintiffs transportation. Savings were augmented by DPW's commitment to audit one contractor, and additional savings probably would have been realized if DPW had made a reasonable commitment to monitoring and supervising other county-based transporters. This was not done, however. Instead, based on limited operating experience with respect to plaintiffs, DPW concluded that the Block Grant plan cost more than desired.

 In May 1985, DPW decided to implement a new transportation plan called the Medical Assistance Transportation Program. The Transportation Program clarified that county-based transporters could obtain supplemental grants, but otherwise did not differ much from the Block Grant plan with respect to most Medicaid recipients. With respect to plaintiffs, however, the initial proposal would have required each service provider to assure round-trip transportation, in return for which the provider would receive $ 1.45 per plaintiff-hour of treatment in addition to the sums -- $ 6.50 per child-hour and $ 5.50 per adult-hour -- that previously had been paid for therapy sessions. This, for plaintiffs, constituted the first version of DPW's special transportation plan.

 The terms were incorporated in agreements that DPW sent out in June for acceptance by psychiatric partial hospitalization service providers. The providers' old agreements were set to expire June 30, 1985.

 Meanwhile, on June 1, 1985, plaintiffs commenced this litigation, the next day moving for a preliminary injunction against implementation of the special transportation plan. At a hearing on June 26, 1985, DPW announced a postponement of this special requirement for psychiatric partial hospitalization services. On June 27, 1985, plaintiffs' motion was denied without prejudice.

 For the next three months, a choice was given to psychiatric partial hospitalization service providers. They could continue to provide therapy under their pre-existing agreements with DPW, with plaintiffs obtaining transportation as other Medicaid recipients under the Transportation Program. Alternatively, they could negotiate new provider agreements, providing therapy and assuring plaintiffs' transportation in return for the greater payment per plaintiff-hour of therapy. The choice was set to disappear on October 1, 1985, however, when DPW would have required all psychiatric partial hospitalization service providers to implement the special transportation plan.

 This requirement was to have been authorized under an amendment to Pennsylvania's Medicaid plan. The plan's provision for "Methods Used to Assure Transportation of Recipients to and from Providers" would have been amended to add authorization for "the Commonwealth [to] require specific medical service providers, as a condition of participation in Medicaid, to assume the responsibility of assuring necessary transportation of recipients to and from the provider's place of service." (Emphasis added.) This proposed language was sent to the Secretary's regional office for approval in early September.

 On September 16, 1985, plaintiffs again moved for preliminary injunctive relief against implementation of the special transportation plan. DPW responded by recognizing that problems would be caused by uniform, mandatory application of their proposal for plaintiffs' transportation, and by noting their consideration of options to amend the special transportation plan. The implications of these options were unclear, however, and after a hearing on September 30, 1985, plaintiffs' motion was granted. Morgan v. Cohen, [1986-1 Transfer Binder] Medicare & Medicaid Guide (CCH) P35,082 (E.D. Pa. 1985). Defendants were "enjoined . . . from implementing or enforcing the terms of any Provider Agreement requiring the provider to assume responsibility for providing or assuring the transportation of patients . . . ." This Order was amended on October 18, 1985, so as not to "preclude defendants from paying a higher medical assistance fee to partial hospitalization programs that were prepared to provide or assure transportation to their patients on October 1, 1985, and that do provide or assure transportation to their patients and that certify under oath or equivalent, that all decisions to provide or refuse treatment, and all decisions relative to the nature of treatment, are unaffected by factors relating to the patient's transportation requirements." These Orders reflected plaintiffs' demonstration of a great likelihood of success on the merits and plaintiffs' possible harm if the court forced another short-notice change in extant transportation plans.

 During the next eight months, over 20% of the Commonwealth's licensed psychiatric partial hospitalization service providers declined to assure transportation and accepted the older, lower hourly fees. The rest took the newer, greater hourly fee and agreed to assure transportation.

 Meanwhile, the Secretary's regional office considered DPW's proposal to require providers to assure transportation. In November 1985, the regional office responded to DPW's September letter, stating that the proposal could not be approved without further description of how it would ensure that providers in fact assured transportation required under federal law, of the mechanism to be used to require providers to take on this responsibility, of what guidelines providers would be given, and of related details. In February 1986, DPW responded. First, DPW noted that, after this court's Order, it had amended its proposal so that "the Commonwealth may offer specific medical service providers . . . the option of . . . assuring transportation . . . ." (Emphasis added.) Next, DPW vaguely stated that it would ensure the assurance of transportation as part of its general oversight of providers, that "the incentive given [providers] to assume this responsibility may be a fee increase or some other benefit," and that the plan "incorporated . . . the wording . . . in federal regulations at 42 C.F.R. § 431.53 regarding assurance of transportation to make sure that federal guidelines are employed." This proposal, which nowhere outlines the final version of DPW's special transportation plan, described below, was approved by the Secretary's regional office on April 30, 1986.

 On May 27 & 28, 1986, after a postponement at the parties' request, a final hearing was held. Assessing the voluminous record, the parties submitted proposed fact-findings and briefs totaling about 300 pages during July and August 1986.

 This sets the context for plaintiffs' two sets of claims. First, relying on provisions of Title XIX and federal regulations thereunder, the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq., and the United States Constitution, plaintiffs seek an order prohibiting DPW from implementing the special transportation plan. Second, relying on the same federal law, plaintiffs seek declaratory judgments that in certain respects DPW illegally has administered the Block Grant plan and the Transportation Program. Plaintiffs do not, however, challenge the basic framework of county-based coordination of transportation as embodied in the Transportation Program as adapted from the Block Grant plan.


 All aspects of DPW's Medicaid plan "must comply with the requirements of Title XIX . . . ." Alexander v. Choate, 469 U.S. 287, 289 n.1, 83 L. Ed. 2d 661, 105 S. Ct. 712 (1985); Harris v. McRae, 448 U.S. 297, 301, 65 L. Ed. 2d 784, 100 S. Ct. 2671 (1980). These include a mandate that DPW "provide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined, and such care and services will be provided, in a manner consistent with simplicity of administration and the best interests of the recipients." 42 U.S.C. § 1396a(a)(19). This constitutes a limit on the "substantial discretion" accorded to DPW, Alexander v. Choate, 469 U.S. at 303; at least it requires that changes effected by the special transportation plan not be "irrational or arbitrary and counterproductive to the medical well-being of all Medicaid recipients . . . ." Budnicki v. Beal, 450 F. Supp. 546, 557 (E.D. Pa. 1978). Accord, Philadelphia Welfare Rights Organization v. O'Bannon, 517 F. Supp. 501, 508 (E.D. Pa. 1981), aff'd mem., 681 F.2d 808 (3d Cir. 1982); Kessler v. Blum, 591 F. Supp. 1013, 1029 (S.D.N.Y. 1984); see also Jennings v. Alexander, 715 F.2d 1036, 1045 (6th Cir. 1983), rev'd on other grounds, 469 U.S. 287, 105 S. Ct. 712, 83 L. Ed. 2d 661 (1985). Thus, "when a state decides to distribute a service as part of its participation in Title XIX, its discretion to decide how the service shall be distributed, while broad, is not unfettered: the service must be distributed in a manner which bears a rational relationship to the underlying federal purpose of providing the service to those in greatest need of it." White v. Beal, 555 F.2d 1146, 1151 (3d Cir. 1977); see also Roe v. Casey, 623 F.2d 829, 840 (3d Cir. 1980) (Hunter, J., concurring). This rationality requirement entails analysis of how the special transportation plan affects plaintiffs and how it affects the Commonwealth.


 The special transportation plan distinguishes two subclasses of plaintiffs, based on their attendance at either exempted or unexempted psychiatric partial hospitalization services. Members of both plaintiff subclasses would ...

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