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DUGGAN v. BOWEN

August 1, 1988

KATHERINE DUGGAN, et al., Plaintiffs,
v.
OTIS R. BOWEN, et al., Defendant



The opinion of the court was delivered by: SPORKIN

 STANLEY SPORKIN, UNITED STATES DISTRICT JUDGE.

 Introduction

 This case involves a challenge to the Department of Health and Human Services' ("HHS") administration of the Medicare home health care program. Plaintiffs take issue with the agency's interpretation and application of the "part-time or intermittent" care provision. I agree with plaintiffs that defendants' policy is contrary to the plain language of the Medicare Act and was promulgated in violation of the procedures required by the Administrative Procedure Act. Appropriate relief requires the certification of a nationwide class, the issuance of a declaratory order and the imposition of an injunction against further implementation of the challenged policy.

 The named plaintiffs are seventeen elderly and sick Medicare patients, an association of home health care agencies, National Association for Home Care ("NAHC"), individual home health care agencies, and several members of Congress. They have brought this lawsuit on behalf of a nationwide class of elderly Medicare patients whom they claim are being injured by HHS' unlawful restriction of home health care coverage.

 Plaintiffs lodge two separate but related causes of action. First, plaintiffs assert that HHS is using an unlawfully narrow definition of "part-time or intermittent care" -- especially at the initial coverage determination stage of the four-step Medicare reimbursement process *fn1" -- to deny home health care benefits to deserving patients. Second, plaintiffs charge that HHS "has abdicated its legal responsibility and thwarted the Medicare statute by delegating primary decisionmaking authority to private fiscal intermediaries without adequate supervision or regulatory mandate." Complaint at 6.

 Plaintiffs contend that the upshot of their first cause of action is the unfair denial of benefits to a large class of elderly patients -- especially those that lack the financial means, physical and emotional strength and tenacity to pursue an appeal of an initial declination of coverage. They claim that the prime product of HHS' wrongful delegation of authority to private intermediaries is a standardless system of ad hoc decisionmaking which leads to irrational, contradictory and unexplained home health care coverage determinations. Complaint at 6.

 For their part, defendants contend that "plaintiffs raise vague, abstract, overbroad, premature and conflicting claims . . ." and "fail to present a specific, concrete controversy appropriate for resolution by this Court." Defendants' Motion to Dismiss at 1. Defendants have interposed the usual procedural defenses in order to stop plaintiffs from receiving a hearing on the merits. For instance, defendants maintain that none of the plaintiffs has standing, that plaintiffs' claims are not ripe for adjudication, that this court lacks subject matter jurisdiction to review plaintiffs' claims, and that plaintiffs' claims are moot. Defendants also contest plaintiffs' charges on the merits.

 Plaintiffs' causes of action are in very different procedural postures. Plaintiffs' "part-time or intermittent" care claim has been the subject of extensive briefing, a bench trial and several oral arguments. It is ripe for judgment. On the other hand, the broader "wrongful delegation" claim has now been stayed (before the completion of discovery) pursuant to the joint motion of the parties. See Order, May 16, 1988. Hence, this Memorandum Opinion and Order will focus exclusively on plaintiffs' part time or intermittent care claim; it constitutes my Findings of Fact and Conclusions of Law pursuant to Fed. R. Civ. P. 52(a).

 At stake in this case are fundamental issues of judicial review, administrative law, statutory interpretation and most importantly, the access of elderly, sick and needy individuals to much-needed medical care.

 A. The Medicare Program and the Home Health Benefit

 The Medicare program, established by Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq., is a system of health insurance for the aged and disabled. See generally Social Security Amendments of 1965, Pub. L. No. 89-97, Title I, 79 Stat. 286 (1965). It is administered by HHS through the Health Care Financing Administration ("HCFA"). The Medicare program consists of two basic parts. Medicare Part A provides coverage for the costs incurred by eligible beneficiaries for hospital care, extended care and home health care. See generally 42 U.S.C. §§ 1395c to 1395i-2. Medicare Part B is a voluntary program in which eligible beneficiaries who pay a monthly premium are entitled to reimbursement for physicians' and other medical services. See generally 42 U.S.C. §§ 1395j-1395w.

 This case involves Medicare Part A. Services are provided under Part A by home health agencies ("HHAs") which enter into agreements with the Secretary to provide health care to persons eligible for Medicare. HHAs provide Part A services in patients' homes rather than in an institutional setting for two principal reasons -- first, home services are more humane, and secondly, they are more economical. Home health services include: part-time or intermittent nursing care provided by or under the supervision of a registered nurse; physical, occupational or speech therapy; medical social services under the direction of a physician; and part-time or intermittent services of a home health aide. See 42 U.S.C. § 1395x(m).

 Under the Medicare Act a beneficiary must meet certain conditions to receive home health care coverage. The patient must need skilled care while "confined to his home." 42 U.S.C. § 1395f(a)(2)(C). *fn2" The care must be medically "reasonable and necessary." 42 U.S.C.§ 1395y(a)(1)(A). In addition, medicare coverage for home health care is limited to the "part-time or intermittent" care of a nurse and/or a home health aide. 42 U.S.C. § 1395x(m)(1) and (4). *fn3"

 
Covered Service. - The proposed post-hospital home health payment would meet the cost of part-time or intermittent nursing services, physical occupational, and speech therapy, and other related home health services furnished by visiting nurse agencies, hospital based home health programs and similar agencies. More or less full-time nursing care would not be paid for under the home health benefits provision.

 See H.R. Rep. No. 213, 89th Cong. 1st Sess. 29 (1965) and S. Rep. No. 404, 89th Cong., 1st Sess. 32 (1965) (emphasis added).

 The rationale for such an exclusion was simple: full time care generally would be provided more humanely and economically in an institutional setting. The dispute between the parties centers on what care is "part-time or intermittent" and hence appropriately rendered in the home, and what care is "full-time" and hence better provided in an institutional setting. Succinctly stated, plaintiffs have a different conception of what care qualifies as "part-time or intermittent" from that of defendants. The answer to this dispute, as discussed below, is found in the legislative history and the plain language and structure of the Medicare Act.

 B. The Administrative Process

 Pursuant to his responsibility to determine benefits claims under Medicare Part A "in accordance with regulations prescribed by him," 42 U.S.C. § 1395ff(a), the Secretary of HHS has delegated much of the day-to-day administration of the Medicare Part A program to private fiscal intermediaries. The Secretary has also issued regulations which provide that private intermediaries -- typically insurance companies -- make the initial determination as to whether a particular service is covered by Medicare Part A. The Secretary had contracted with 47 different private intermediaries at the start of 1987, but was ordered by Congress to reduce the number of regional intermediaries to no more than ten by July 1, 1987. See Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 2326(b) (codified at 42 U.S.C. § 1395h(e)(4)).

 The beneficiary has the right to appeal the private intermediary's initial coverage determination to the HCFA. The beneficiary has the right to pursue his or her appeal, if refused by the HCFA, before an Administrative Law Judge (ALJ), and ultimately to HHS' highest administrative appeals forum, the Appeals Council. Finally, if the beneficiary's claim exceeds $ 1,000, he or she has the right to judicial review of the Secretary's final decision in the same manner as is provided in 42 U.S.C. § 405(g) for social security claimants. See 42 U.S.C. § 1395ff(b)(2); 42 C.F.R. § 405.730; 20 C.F.R. §§ 404.981, 422.210.

 The Procedural History of this Litigation

 This lawsuit was filed by plaintiffs on February 17, 1987. They filed a motion for partial summary judgment regarding their claim that defendants' definition of "part time or intermittent care" was erroneous. After the motion was fully briefed, I held a hearing on July 1, 1987.

 Defendants took issue with the accuracy of plaintiffs' description of their policies and alleged that plaintiffs misunderstood their policy. Transcript at 27 and 31 ("They're mischaracterizing what the policy actually is."). According to defendants:

 
Defendants' policy on intermittent or part-time home health care is a long-standing one. It's been in effect in its present substance since 1966. . . . It doesn't say what plaintiffs claim it does.

 Id. at 28. Defendants' counsel adamantly insisted at this initital hearing that HHS' policy has been unchanged since 1966 and that HHS' current policy did not include any "rule of thumb" that intermediaries should deny home health care benefits to those (otherwise eligible) individuals needing services more than four days per week. After this hearing, seizing on the apparent possibility that this lawsuit arose from their misunderstanding of defendants' policies, plaintiffs proposed the following stipulation:

 
The Medicare Act provides for part-time or intermittent skilled nursing and home health aide services. See 42 U.S.C. § 1395x(m)(1), (4).
 
Skilled nursing and home health aide services are covered under Medicare as long as they are part-time in nature, regardless of how many days per week they are medically necessary.

 See Proposed Stipulated Partial Summary Judgment. Defendants rejected this proposal. It is thus clear to me that defendants have not been forthcoming about their position despite their protestations that they have no policy which would preclude such an interpretation.

 Accordingly, based on the foregoing, and after reviewing the parties' briefs and the oral argument, I came to the conclusion that material issues of fact needed to be resolved in order to decide the "part-time or intermittent" care issue. In particular, I found that Defendants' Statement of Genuine Issues set forth crucial factual issues which had to be settled. According to defendants, the following assertions made by plaintiffs were actually disputed issues of fact which were material to resolving plaintiffs' motion for partial summary judgment:

 
1. That "defendants' policy mandates care in excess of four times per week is to be considered 'daily' care."
 
2. That "defendants' policy, with a limited exception for short-term services generally of a 2-3 week period, excludes 'daily' care from Medicare home health coverage."
 
3. That "defendants' policy mandates that a Medicare patient demonstrate a need for part-time and intermittent care."
 
4. That the Appeals Council "has ruled that 'part-time' daily home health aide services are covered without limitation occasioned by defendants' intermittent care policy."

 Defendants' Statement of Genuine Issues (filed May 1, 1987); see also Plaintiffs' Memorandum in Support of Proposed Findings of Fact and Conclusions of Law at 3-4. Defendants contended that none of these assertions were true. Because these vigorously contested factual issues went right to the heart of plaintiffs' claims, I issued an Order scheduling an evidentiary hearing to consider HHS' policy regarding "part-time" or "intermittent" care. See Order, November 20, 1987 at 3. *fn5"

 The evidentiary hearing was held on February 3, 1988. The plaintiffs presented six witnesses, including Thomas Hoyer, the Director of the Division of Provider Services Coverage Policy in the Bureau of Eligibility and Reimbursement Coverage in HCFA (and the individual in HHS primarily responsible for the policies at issue). Plaintiffs submitted 29 exhibits into evidence, including the affidavits of several home health care providers. Defendants did not present any witnesses, but they submitted four exhibits, including three excerpts from administrative materials and information regarding the denial of coverage of one of the named plaintiffs (Lorraine Lis). After the hearing, the parties submitted post-trial briefs and proposed findings of fact and conclusions of law. A final oral argument was held on March 31, 1988.

 Upon consideration of the full record of this case, including the testimony and exhibits offered at the evidentiary hearing, the post trial briefs and the closing oral argument, I enter the following findings of fact and conclusions of law.

 Findings of Fact

 A. The Evolution of the Part-time or Intermittent Care Policy

 1. The Medicare Act was enacted by Congress in 1965 to provide eligible elderly and disabled persons access to necessary health services such as the home health care services at issue in this case. Eligible Medicare beneficiaries are entitled to home health care services including "part-time or intermittent" skilled nursing care and "part-time or intermittent" home health aide care. 42 U.S.C. § 1395x(m)(1,4). See supra, pp. 5-6, n.3. Congress has not changed the governing statutory language since the Act's passage.

 2. The only published regulations dealing with home health care essentially track the statutory language by providing for "part-time or intermittent" care. See 42 C.F.R. § 409.40 (1987).

 3. The bulk of defendants' policy statements regarding the home health care benefit are found in manuals and transmittals. None of these policies has been subject to public notice and comment.

 4. The principal home health care manuals are entitled Health Insurance Manual ("HIM")-11 and HIM-13. See Hoyer Deposition (Plaintiffs' Exhibit 1) at 13-14. The relevant coverage criteria in these two manuals are essentially the same, and hereafter I will refer solely to HIM-11.

 5. The first version of HIM-11 provided that:

 
Part-time or intermittent care is usually services for a few hours a day several times a week. Occasionally, service for a full day may be provided for a short period when, because of unusual circumstances, neither the alternative of part-time care nor hospitalization is feasible.

 HIM-11 § 205.1, at 14 (1966) (Plaintiff's Exhibit 3); see also Defendant's Post-Hearing Brief at 3.

 6. In mid-1966, defendants' predecessors proposed regulations for public notice and comment. They provided, in relevant part:

 
c. Definition of part-time or intermittent.
 
Most patients will require service a few hours a day, several times a week. Some may require longer service on one day than on other days and such adjustments are to be encouraged. Occasionally, service for a full day may need to be provided for a short time when, because of unusual circumstances, neither the alternative or part-time care nor hospitalization is feasible.

 7. HEW deleted this definition of "part-time or intermittent care" from its regulations in 1971. See Fed. Reg. 18,696 (Sept. 18, 1971). Defendants have offered no explanation for this action. There are currently no published regulations defining "part-time or intermittent care."

 8. In 1968, HEW issued a transmittal which stated that: "Part-time or intermittent home health aide services are defined to permit up to 20 hours of service in each week and up to 4 hours of home health aide care in a day (which may constitute one or more visits)." Plaintiffs' Exhibit 6 (March 29, 1968 letter from Thomas M. Tierney, Director, Bureau of Health Insurance, to Merritt W. Jacoby, Blue Cross Association, setting forth interim operating guideline). An attachment to the "Tierney letter" indicated that the transmittal did not establish limits, but rather, set forth guidelines. According to Tierney, "there are some situations where longer periods of service can be justified." Id.

 9. In 1975, HEW issued a revised version of HIM-II which reflected the Tierney letter and other transmittals issued during the late 1960s and early 1970s. It provided, in relevant part, as follows:

 
206.6 Part-Time or Intermittent Services. --
 
Part-time or intermittent services of professional personnel and home health aides is usually service for a few hours a day several times a week. Occasionally, more service, i.e., 8 hours may be provided for a limited period when the physician recommends and, when because of unusual circumstances, neither the alternative of part-time care nor institutionalization is feasible. . .
 
Home health aide visits usually will be provided two or three times a week for several hours. Thus, most agencies average 20 hours or less a week for the Medicare case load. This average reflects the planning and flexibility needed to provide up to 8 hours a day, 5 days a week, for a few very ill patients who need extensive care and have no family member present during the day.
 
In recognition of the span of normal practice followed in home care, reimbursement may ordinarily be made for up to 100 hours a month of home health aide service assuming no question exists regarding the coverage status of such services. By the same token, on an intermittent basis, service for up to 8 hours a day, 5 days a week, may be provided when medically necessary due to unusual circumstances, e.g., the patient has just returned from the hospital and must be oriented, along with his family, to various aspects of home care; the patient's condition is terminal; or he has suffered a relapse.

 HIM-11 § 206.6 (Plaintiffs' Exhibit 8) (emphasis added).

 10. Hence, prior to 1980, defendants' predecessors imposed no limits on the number of days a week an otherwise eligible beneficiary could receive home health services. See Hoyer Testimony, Transcript at 16. For instance, the agency would reimburse a patient for twenty hours of care rendered over the course of a week even if such care was provided on each of the seven days of the week. See Hoyer Testimony, Transcript at 29-32; Plaintiffs' Exhibit 6. Such care, although "daily" and therefore not "intermittent," would be eligible for coverage under the "part-time" prong of the statutory provision. *fn6" On the other hand, services needed more than eight hours per day were considered full-time and not part-time in nature. The central and prevailing theme common to the pre-1980 regulatory statements was to distinguish between full-time care and part-time services.

 11. In a May 1981 transmittal, HHS deleted the part of the HIM-II instruction which stated that "most agencies average 20 hours or less a week for the Medicare case load and that reimbursement could be made for up to 100 hours a month of home health services, since these figures were being erroneously applied in cases where less service was needed." Plaintiffs' Exhibit 9. The 1981 transmittal did not impose any hourly ceilings on services nor did it alter the prior 100 hours of services per month guideline. Rather, it stressed the need to make a case-by-case determination of whether a patient needed certain services. Hoyer Deposition (Plaintiffs' Exhibit 1) at 36-37.

 12. In June 1984, HCFA issued a transmittal given nationwide effect which provided that "daily skilled nursing care of an indefinite duration will not be considered to meet the intermittent requirement and such services are not covered under the Medicare home health benefit." Plaintiffs' Exhibit 12. A few months later, defendants instructed all Medicare fiscal intermediaries that "Medicare coverage for daily home health aide services are subject to the same intermittent guidelines as skilled nursing care." See Plaintiffs' Exhibit 13 (Transmittal dated November 20, 1984). The effect of these transmittals was to restrict Medicare coverage of home health services. This was a drastic change from prior requirements.

 13. In a November 14, 1986 letter, defendants further significantly restricted coverage of home health services. In that letter, which is the central document of this litigation, Robert Streimer, the Acting Director of the Bureau of Eligibility, Reimbursement and Coverage, responded to questions raised on behalf of all ten regional fiscal intermediaries about the concept of "daily" by stating:

 
You indicated that whether the term ["daily"] is defined as 5 days or 7 days makes a tremendous difference in both whether beneficiaries qualify for home health services and in the nature of the skilled nursing and home health services available to them. . . .
 
. . . we expect that daily would be defined as 5 days per week in most localities. . . . . We believe that it is appropriate to define "daily" as 5 days per week. Therefore, care which is ordered 5, 6 or 7 days per week would be considered "daily" care ...

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