UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


DC HOSP ASSN

v.

DC


99-7239a

D.C. Cir. 2000


*	*	*


United States Court of Appeals


FOR THE DISTRICT OF COLUMBIA CIRCUIT


Argued May 4, 2000 Decided July 21, 2000 


No. 99-7239


The District of Columbia Hospital Association, et al.,  Appellees


v.


District of Columbia and  Herbert Weldon, Deputy Director for Health
Care Finance  of Medical Assistance Administration,  Appellants


Appeal from the United States District Court  for the District of
Columbia  (No. 98cv02575)


---------


Donna M. Murasky, Senior Assistant Corporation Counsel,  with whom
Robert R. Rigsby, Corporation Counsel, and  Charles L. Reischel,
Deputy Corporation Counsel, were on  the briefs, argued the cause for
appellants.


Christopher L. Keough, with whom Ronald N. Sutter and  Kimberly N.
Brown were on the brief, argued the cause for  appellees.


Before Silberman and Sentelle, Circuit Judges, and  Buckley, Senior
Circuit Judge.


Opinion for the court filed by Senior Judge Buckley.


Buckley, Senior Judge: The District of Columbia appeals  the district
court's ruling that its method of computing certain  payments to
hospitals violated the federal Medicaid statute.  Because we agree
that the District of Columbia's interpreta- tion of the law is
contrary to its plain meaning, we affirm the  district court's grant
of summary judgment to the District of  Columbia Hospital


I. Background


A. Regulatory Framework


The Medicaid statute, Subchapter XIX of the Social Securi- ty Act,
establishes a cooperative plan between the federal  government and the
States to provide medical services to low- income individuals. 42
U.S.C. ss 1396-1396v (1994 & Supp.  III 1997). The program is jointly
funded by the Federal and  State governments and is administered by
the States pursu- ant to federal guidelines. See generally id. ss
1396a, 1396b;  42 C.F.R. s 430.0-.25 (1999). The statute treats the
District  of Columbia ("District") as a State. 42 U.S.C. s 1396d(b) 
(Supp. III 1997). To qualify for federal funding, a State must  have
its own Medicaid plan approved by the Health Care  Financing
Administration ("HCFA") of the United States  Department of Health and
Human Services. Id. s 1396; 42  C.F.R. s 430.10.


All State plans are required to provide Medicaid beneficia- ries with
inpatient hospital services. 42 U.S.C.  ss 1396a(a)(10)(A),
1396d(a)(1). Because of the greater costs  it found to be associated
with the treatment of indigent  patients, Congress has directed that
hospitals providing inpa- tient care must be compensated under the
Medicaid program 


at rates that "take into account ... the situation of hospitals  which
serve a disproportionate number of low-income patients  with special
needs." Id. s 1396a(a)(13)(A)(iv); see also H.R.  Rep. No. 100-391(1),
at 524, reprinted in 1987 U.S.C.C.A.N.  2313-1, 2313-344 (discussing
adjustments in payments to  "disproportionate share hospitals"
("DSH")). The adjust- ments mandated by Congress ("DSH adjustments" or
"DSH  payments") are achieved through increases in the "rate or 
amount of payment for such services." 42 U.S.C.  s 1396r-4(a)(1)(B).


States may select one of three complex formulae for calcu- lating the
DSH payments. Id. s 1396r-4(c)(1), (2), (3). Un- der the formula
selected by the District ("(c)(1) formula"), see  D.C. Mun. Regs. tit.
29, s 908.4(b) (1999), the DSH adjust- ment must equal "at least the
product of [ ] the amount paid  under the State plan to the hospital
for operating costs for  inpatient hospital services" ("base amount"),
multiplied by the  hospital's "disproportionate share adjustment
percentage."  42 U.S.C. s 1396r-4(c)(1). Because this case hinges on
the  calculation of the base amount, we will spare the reader the 
labyrinthine process by which the disproportionate share  adjustment
percentage is derived. We simply observe that it  alone would justify
the Supreme Court's description of the  Medicaid statute as "an
aggravated assault on the English  language, resistant to attempts to
understand it." Schweiker  v. Gray Panthers, 453 U.S. 34, 43 n.14
(1981) (quoting Fried- man v. Berger, 409 F. Supp. 1225, 1226


B. The District of Columbia's Plan


The District's Medicaid plan is administered by an agency  within the
Department of Human Services that was called the  Commission on Health
Care Finance ("CHCF") at the time  this controversy originated.
Although it has since been re- named the Medical Assistance
Administration, the parties  have continued to refer to the agency as
the CHCF, as will  we.


District of Columbia residents who qualify for Medicaid on  the basis
of their eligibility for assistance under the Tempo- rary Assistance
for Needy Families program (formerly Aid to 


Families with Dependent Children) are required by the Dis- trict's
Medicaid Managed Care Amendment Act of 1992 to  enroll in managed care
plans. D.C. Code Ann. s 1-359(d)(2)  (1999 Repl. & Supp. 2000). Other
Medicaid beneficiaries  continue to receive services on a
fee-for-service basis. The  District pays the managed care
organizations ("MCOs") that  administer the managed care plans a fixed
pre-paid amount  per Medicaid enrollee. The MCOs, in turn, are
responsible  for providing these enrollees with all the health care
services  to which they are entitled under the statute, including
inpa- tient hospital services provided under contract between the 
MCOs and participating hospitals. Id. s 1-359(d)(2), (3).


C. The Litigation


Without delving too deeply into the tortuous history of this 
litigation, it suffices to say that the District and the District of 
Columbia Hospital Association ("Association") have been en- gaged for
the better part of the past decade in an argument  over the District's
calculation of DSH payments. In 1994, the  Association filed a suit in
which it claimed, among other  things, that the District's method of
computing DSH adjust- ments violated the Medicaid statute by failing
to take into  account the services provided managed care patients
through  the MCOs. While the suit was pending, a newly appointed 
Commissioner of the CHCF agreed to revise the District's  methodology.
Because the parties believed this would re- solve their dispute, the
district court dismissed the suit as  moot. Subsequent to the
dismissal of the case, it became  apparent that the parties were not
in fact in accord as to how  DSH adjustments should be computed. The
bone remaining  in contention was the District's failure to include,
in the (c)(1)  formula's base amount, the operating costs incurred by
hospi- tals in providing inpatient services to Medicaid managed care 


In 1998, the Association initiated the present action seeking  a
declaratory judgment that the District's exclusion of Medic- aid
managed care patients from the base amount violated the  Medicaid
statute. The Association subsequently filed a mo- tion requesting the
district court to compel the District to 


comply with representations the Association claims the Dis- trict made
in settling the earlier litigation. The court grant- ed the
Association's motion for summary judgment based on  its holding that
the District's method of calculating DSH  payments was contrary to
law, and it granted the Associa- tion's motion to compel compliance
with its version of the  earlier understanding. District of Columbia
Hosp. Ass'n v.  District of Columbia, 73 F. Supp. 2d 8 (D.D.C. 1999).
The  District filed a timely appeal, and we have jurisdiction to 
review the district court's final order pursuant to 28 U.S.C.  s


II. Analysis


We review a grant of summary judgment de novo, applying  the same
standard as the district court. See, e.g., Everett v.  United States,
158 F.3d 1364, 1367 (D.C. Cir. 1998), cert.  denied, 526 U.S. 1132
(1999). Summary judgment is appro- priate where there is no genuine
issue as to any material fact  and the moving party is entitled to
judgment as a matter of  law. Fed. R. Civ. P. 56(c).


The dispositive question in this case is one of statutory 
interpretation. Specifically, we are concerned here with the  proper
application of the formula selected by the District for  the
computation of the DSH adjustment. That formula pro- vides that the


be in an amount equal to at least the product of (A) the  amount paid
under the State plan to the hospital for  operating costs for
inpatient hospital services (of the kind  described in section
1395ww(a)(4) of this title), and (B)  the hospital's disproportionate
share adjustment percent- age (established under section
1395ww(d)(5)(F)(iv) of this  title)[.]


42 U.S.C. s 1396r-4(c)(1) (emphasis added).


The controversy in this case centers on the meaning to be  given the
word "under" in the quoted text. The District  contends that it is not
required to include the cost of provid- ing inpatient services to
Medicaid managed care patients in 


the base amount because the hospitals receive payments for  those
services from MCOs rather than from the District.  Because the
payments are not made directly by the District,  it reasons that they
are not made "under the State plan."


It is axiomatic that "[t]he starting point in statutory inter-
pretation is the language of the statute itself." Ardestani v.  INS,
502 U.S. 129, 135 (1991) (internal quotation marks and  brackets
omitted). The Supreme Court has observed that  "[t]he word 'under' has
many dictionary definitions and must  draw its meaning from its
context." Id. We see nothing in  the context of the Medicaid statute,
however, that would  require us to give the word other than its
ordinary meaning.  "Under" is defined as "required by[,] in accordance
with[, or]  bound by." Webster's Third New International Dictionary 
2487 (1981); see also Ardestani, 502 U.S. at 135 (finding "the  most
natural reading" of "under" in context of Equal Access  to Justice Act
to mean " 'subject [or pursuant] to' or 'by  reason of the authority
of' ") (quoting St. Louis Fuel and  Supply Co. v. FERC, 890 F.2d 446,


Although payments from MCOs to hospitals for the care of  Medicaid
patients are not made directly by the District, they  are clearly made
pursuant to, and under the authority of, the  District's Medicaid
plan. MCOs may not receive payment for  services to Medicaid patients
unless they have completed a  Medicaid managed care provider agreement
with the District.  D.C. Mun. Regs. tit. 29, s 5308.1. The contracts
between the  MCOs and the hospitals that serve their Medicaid
enrollees  are closely regulated by the District. For example,
District  regulations require MCOs to submit their contracts with 
hospitals to the District for prior approval, id. s 5313.1; to  notify
the District before effecting any changes in such  agreements, id. s
5304.2-.3; to contract only with hospitals  located in the District,
id. s 5313.9; and to assure that  financial and programmatic
information maintained by the  hospital regarding Medicaid managed
care patients will be  available for inspection by the MCO or the


Moreover, we can find nothing in the statute that would  require us to
confine "the amount paid under [a] State plan to  [a] hospital" to
that paid by the State itself. To the contrary,  if Congress had so
intended, it could have specified that only  a State's "direct"
payments were to be taken into account, as  it did in the preceding
subsection of the statute. See 42  U.S.C. s 1396r-4(b)(3)(A)(i)(II)
(referring to "the amount of  the cash subsidies for patient services
received directly from  State and local governments") (emphasis
added). That it did  not do so here is compelling evidence that
Congress did not  intend to limit the computation of payments to those
made  directly by the District. See Russello v. United States, 464 
U.S. 16, 23 (1983) ("[W]here Congress includes particular  language in
one section of a statute but omits it in another  section of the same
Act, it is generally presumed that Con- gress acts intentionally and
purposely in the disparate inclu- sion or exclusion.") (internal
quotation marks and citation  omitted).


If more were required, our construction of the statutory  language is
wholly consistent with Congress's purpose in  creating the DSH
adjustment. See Holloway v. United  States, 526 U.S. 1, 6 (1999) ("In
interpreting the statute at  issue, we consider not only the bare
meaning of the critical  word or phrase but also its ... purpose in
the statutory  scheme.") (internal quotation marks and brackets
omitted).  "Congress's 'overarching intent' in passing the
disproportion- ate share provision was to supplement the ... payments
of  hospitals serving 'low income' persons." Legacy Emanuel  Hosp. and
Health Ctr. v. Shalala, 97 F.3d 1261, 1265 (9th Cir.  1996) (quoting
Jewish Hosp. v. Secretary of Health & Human  Serv., 19 F.3d 270, 275
(6th Cir. 1994)). As the Ninth Circuit  has noted, "[p]atients meeting
the statutory requirements for  Medicaid do not cease to be low-income
patients on days that  the state does not pay Medicaid inpatient
hospital benefits."  Id. at 1266. Similarly, patients who must be
enrolled in  MCOs pursuant to the District's Medicaid plan do not
cease  to impose higher costs on the hospitals that serve them.


Finally, we are unpersuaded by the District's offer of a  letter from
the General Accounting Office asserting that  States have the
discretion to exclude Medicaid managed care  patients from their
calculation of the maximum DSH adjust- ment a given hospital may
receive under another section of  the Medicaid statute. As the Supreme
Court has recently  made clear, "[i]nterpretations such as those in
opinion let- ters--like interpretations contained in policy
statements,  agency manuals, and enforcement guidelines, all of which
lack  the force of law--do not warrant Chevron-style deference." 
Christensen v. Harris County, 120 S. Ct. 1655, 1662 (2000).  This is a
reference to Chevron U.S.A. Inc. v. Natural Re- sources Defense
Council, Inc., 467 U.S. 837 (1984), which  holds that courts must
defer to an agency's permissible  construction of a statute it is
charged with administering  when "the statute is silent or ambiguous
with respect to the  specific issue" before the court. Id. at 843.
Because the  provision at issue here is unambiguous, we owe no
deference  to a contrary construction even if formally adopted by the 


III. Conclusion


Because the District's interpretation is contrary to the  plain meaning
and purpose of the Medicaid statute, we hold  that the District may
not exclude the operating costs incurred  by hospitals in their
service of Medicaid managed care pa- tients in calculating DSH
payments pursuant to the (c)(1)  formula. We have no need, therefore,
to reach the district  court's alternative holding based on the
Association's motion  to compel. The district court's grant of summary
judgment  to the Association is therefore


Affirmed.