                                         No. 14554

                 I N THE S P E E C W O
                          UR M O      F           THE STATE: O MXJTANA
                                                              F

                                            1979




FLATHEAD l3EAliTH Cl3JIER e t al.,
                             P l a i n t i f f and Appellant,

           -vs-
CCNNIY OF   FZATHEAD e t a l . ,
                             Defendants and Respondents.



Appeal f r m :    D i s t r i c t Court of t h e Eleventh J d i c i a l D i s t r i c t ,
                  Honorable Jams M. Salansky, Judge presiding.

Counsel of Record:

    For Appellant:

          Smith Law Firm, H e l e n a , Wntana
          Hash, J e l l i s o n and O'Brien, Kalispell, Pbntana

    For Respondents:

          Leaphart Law Firm, H e l e n a , Wntana
          Randy K. Schwickert, Kalispell, Wntana



                                               Sutmitted on b r i e f s : March 21, 1979

                                                                Decided:      AUG    - 9 1979
Filed :
          m -9
          c          5.379
Mr. Justice John C. Sheehy delivered the Opinion of the Court.


     Flathead Health Center, doing business as Kalispell
Regional Hospital (hereinafter referred to as the "hospital")
appeals from an order of the Flathead District Court granting
summary judgment to the County of Flathead and the Montana
                     and
Department of SociaVRehabilitation Services (hereinafter
referred to as "County" and "SRS" respectively) in an action
for declaratory judgment.
     The hospital provides medicaid services, pursuant to
Title XIX of the Social Security Act, to qualified persons in
the County of Flathead.   As compensation for providing medicaid
services to eligible individuals for the fiscal years 1976
through 1979, SRS and the County have paid the hospital pursuant
to the "reasonable cost" formula of the medicaid program.    The
hospital contends that this form of reimbursement is insufficient
compensation and as a result has submitted to the County a demand
for payment under a "full and adequate" formula (i.e. the standard
charges of the hospital minus the reasonable costs already paid by
respondents).   Respondents maintain that the hospital has been
paid in full pursuant to the medicaid program.
     Following briefs by the parties in support of their respective
motions for summary judgment, the District Court heard oral
arguments on April 28, 1978 and thereafter entered its findings
of fact and conclusions of law and entered judgment for the
respondent on September 5, 1978.
     The District Court concluded that federal law governed and
rejected the arguments of the hospital that the County and SRS
were required by law to compensate further the hospital for
services rendered to medicaid patients in Flathead County.    We
affirm.
     The hospital presents 3 issues for our review:
     1.   Whether Title XIX (medicaid) of the Social Security
Act limits reimbursement for hospital care of eligible, indigent
patients to "reasonable costs" defined in federal regulations?
     2.   Whether section 53-3-103 MCA requires the County to
pay to the hospital the difference between its "full and adequate
costs" and the "reasonable cost" already paid to the hospital
under medicaid?
     3.   Whether SRS and the County of Flathead are bound by
implied contractual and equitable principles to pay "full and
adequate" costs to avoid unjust enrichment?
     The medicaid program, established in 1965 by Title XIX of
the Social Security Act is a program of federal reimbursement
to states which provide medical assistance to needy persons.        A

state desiring to participate in the medicaid program must submit
to the Department of Health, Education and Welfare (HEW) a plan
conforming to the requirements of the Social Security Act.         If
the plan is approved by HEW, the state is eligible to receive
reimbursement.    42 U.S.C.   61396.
     Montana began participating in the program in 1967, SRS
being charged with supervision thereof.   Section 53-6-111 MCA.
Beginning in the same year, SRS entered into written contracts
with various hospitals throughout the State.   Pursuant to these
contracts, SRS agreed to pay to the hospitals by supplement "full
and adequate costs11 the extent such costs exceeded "reasonable
                    to
costs".   Contrary to medicaid regulations, these contracts were
never approved by HEW as a part of Montana's medicaid plan, however,
they were construed by this Court to obligate SRS to reimburse
the hospitals to the extent of "full and adequate costs as
represented by the standard charges of the hospital."    See St.
James Community Hospital v. Dept. of SRS (1979),        Mont   .        I
     P. 2d       ,   36 St.Rep. 941; Montana Children's Home, et al.
v. Dept. of SRS (1979),           Mont     .        I         P.2d      I



36 St.Rep. 507; Montana Deaconess Hosp. v. Dept. of Soc. and
R. S. (1975), 167 Mont. 383, 538 P.2d 1021.
                                                                            t


     Title XIX of the Social Security Act, 42 U.S.C.                  §139&(a)
(13)(D) provides:

     "(a)     A State plan for medical assistance must-               ...
     "(13) provide-.      ..
             "(D) for payment of the reasonable cost of
             inpatient hospital services provided under
             the plan, as determined in accordance with
             methods and standards        ..
                                       . which shall be
             developed by the State and reviewed and
             approved by the Secretary and (after notice
             of approval by the Secretary) included in the
             plan, except that the reasonable cost of any
             such services as determined under such methods
             and standards shall not exceed the amount which
             would be determined under section 1395x(v) of
             this Title as the reasonable cost of such
             services for purposes of subchapter XYIII of
             this chapter; . . .I1 42 U.S.C. S1396j(a).
     The regulations promulgated by HEW pursuant to this statute
provides in part:

    " (a) State plan requirements. A State plan for
    medical assistance under title XIX of the Social
    Security Act must: .       ..

    "(8) Provide that participation in the program
    will be limited to providers of service who accept,
    as payment - -
                in full, the amounts paid in accordance
    5 t h the fee structure. (Emphasis added.) 45 C.F.R.
    S250.30 (1976).
     The next year the above cited regulation was redesignated
42 C.F.R. s450.30.      In 1978, this same section was again redesignated
but this time with "clarifying editorial changes."                   These changes
aid in determining the meaning of the regulation for the purposes
of this appeal.      The purpose of the changes was to "simplify and
clarify the existing regulations without making any substantive
change."     43 Fed. Reg. 45176   '   .   (1978).       The clarified regulation
states quite simply:
     "A State plan must provide that the medicaid
     agency must limit participation in the medicaid
     program to providers who accept, as payment in
     full, the amounts paid by the agency." 42 C.F.R.
     S447.15 (1978).
     Participation in the federal medicaid program is voluntary,
but if a state elects to participate, it must comply with the
requirements of the federal statutes and regulations in order

to remain eligible for federal funds.   See, Shea v. Vialpando
(1974), 416 U.S. 251, 253, 94 S.Ct. 1746; King v. Smith (1968),
392 U.S. 309, 317, 88 S.Ct. 2128; Aitchison v. Berger (N.Y. 1975),
404 F.Supp. 1137, 1141.   Montana as a participant in the medicaid
program must conform to the Social Security Act and all valid

regulations promulgated thereunder as long as it remains in the
program.

     Contrary to appellant's assertion, the above cited regulation
does prohibit supplementing the payments made under the "reasonable
cost" formula from any source.   In Johnson's Professional Nursing
Home v. Weinberger (5th Cir. 1974), 490 F.2d 841, 844, the Court
stated:
     "Nothing in the statutory scheme or in the
     statutory history indicates that Congress meant
     to preclude the reasonable cost standard as a
     measure of reasonable charges consistent with
     efficiency, economy, and quality of care. The
     statutory limit, reasonable charges, etc., applies
     to - state medicaid payments." (Emphasis added.)
        all
Federal law and regulations clearly proscribe supplementing State
medicaid payments beyond the amounts specified by the "reasonable
costs" formula.
     Under the second issue the appellant contends that section
53-3-103 MCA (1979), mandates the County to pay to the hospital
the balance due for services rendered to midicaid patients after
receiving credit on account for SRS medicaid payments.    The

statute reads in pertinent part as follows:
     "Medical aid and hospitalization for indigent.
     (1) Except as provided in other parts - -
                                            of this
     title, medical aid and hospitalization for county
     residents and nonresidents within the county
     unable to provide these necessities for themselves
     are the legal and financial duty and responsibility
     of the board of county commissioners and are payable
     from the county poor fund.. ,   ."  (Emphasis added.)
     The emphasized language in the cited statute was added by
amendment in 1965.   It was in that year that the State Legislature
implemented a program of medical assistance for the aged, by
enacting Section 1, Chapter 212, Laws of 1965 which was codified
as sections 71-1501 through 71-1510, R.C.M.   1947.   Both of these
measures were enacted in the same section.    It is apparent that
the additional language refers to,the new provisions of Chapter
15, Title 71 providing medical aid to the aged.
In 1967, the medicaid program was implemented in section 1,
Chapter 325, Laws of 1967.   These same provisions which implemented
medicaid for Montana also repealed sections 71-1501 through
71-1510, R.C.M.   However, no change was made in section 53-3-103
MCA in 1967 (formerly section   71-368 (1)(2)(4)(5), R.C.M.   1947).
Therefore, in the absence of any repealing language, it is presumed
that this language can only refer to the new Medicaid program which
was codified under the same title.
     Action by the recent legislature affirms this interpretation.
House Bill No. 692 added the following emphasized language to
section 53-3-103 MCA:
     "(3) The department may promulgate rules to
     determine under what circumstances persons in
     the county are unable to provide medical aid
     and hospitalization for themselves, including the
     power to define the term 'medically needy'.
     However, the definition may not allow payment
     by a county for general assistance - medical for
     persons whose income exceeds 300% of the limitation
     for obtaining regular county general relief assistance
     - - persons who - eligible for medicaid -
     or for         - are                          in
     accordance with Title 53, Chapter 6, - - 1, -
                                          part    or
                 - have the right -
     for persons who - - - -or are entitled to
     medical - - hospitalization -- federal
             aid and                 from the
     government - - agency thereof." Section 1,
                or any
     Chapter 707, Laws of 1979.
The House Bill states that it was introduced at the request of
the Code Commissioner for clarification purposes only, to ensure
that medicaid eligible persons may not receive County medical
assistance.
     This Court has no quarrel with appellant's contention that
the County has an obligation to provide medical assistance to
the indigent under section 53-3-103 MCA.     The Court does differ
however, with the contention of the appellant as to the financial
extent of reimbursement from federal sources when the county assumes
the obligation.   Contrary to appellant's assertion that the
regulations promulgated by SRS are not a substitute for the County's
obligation to provide medical services to the indigent but rather
is one of many resources which must be applied to reduce the
County's obligation, this Court views the regulations differently.
The ARM regulation refers to "eligibility" as well as "medical
resources."   The regulation states in pertinent part:
     "Eligibility, Medical Resources
     " (1) County Medical programs are not to be
     considered resources. Therefore, applicants
     or recipients who have access to medical
     resources will be required to - such resources.
                                   use
     Such resources include but are not limited to:
     "(a) Medical Assistance (Medicaid);"
     (Emphasis added.) Section 46-2.10(38)-~102030,
     ARM.
     In order for a person to qualify for medicaid, that person
must be eligible, and to be eligible a person must qualify under
a state plan which has been approved by the Director of HEW.
Such a plan must agree with all the statutes and regulations
promulgated under the Social Security Act.    In other words, use
of the plan implies legal use under federal regulations which
in turn means sole use by definition.
     Appellant also contends that such a construction will result
in higher charges to the cash-paying public in violation of
42 U.S.C. §1395x(v) (1)(A).    This argument was addressed by
this Court in St. James Community Hospital v. Dept. of SRS,
supra, 36 St-Rep. at 944:      "We note   . . .   that the 'reasonable
cost' limitation under the federal statute and regulation is
designed to encourage 'economy, efficiency and quality of
care'   . . .   (citations omitted.)   It is not for this Court
to modify this general policy by adopting a different standard
than that intended by Congress."       Hospital's remedy, if one
is to be obtained, is at the federal level.
    Appellant's last issue is also without merit.          The
principle underlying the implied contract doctrine is that
one person should not be permitted to be unjustly enriched
at the expense of another, but should be required to make
restitution for property or benefits received where it is
just and equitable that such restitution be made, and where
such action involves no violation or frustration of law or
opposition to public policy, either directly or indirectly.
66 Am.Jur.2d Restitution and Implied Contracts S3 (1973).
See also, Brown v. Thornton (1967), 150 Mont. 150, 156, 432
P.2d 386, 390.     The circumstances on the record do not
justify payment be made based on any other formula than the
"reasonable costs" formula.
    The decision of the District Court is affirmed.


                                                    Justice

We Concur:
