dissenting:
I must respectfully dissent from the Court’s opinion because the “hands-on” interpretation represents not merely the interpretation of an existing rule but reinterprets the meaning of the statutory phrase “costs peculiar to such care [for the mentally-retarded]”, I.C. § 56-110(a)(l). Accordingly, the decision of the hearing examiner should be reversed and the district court affirmed because the Idaho Department of Health and Welfare (Department) acted without first promulgating a rule as required by the Idaho Administrative Procedure Act (IDAPA), I.C. § 67-5201 et seq.
The Provider Reimbursement Manual (PRM) interpreted the statutory term “peculiar” costs by using the similar term “unique”. The provision at issue must be read in its entirety and is therefore' set forth in the margin.7 The introductory statement makes clear that costs unique to the care of ICF/MR residents “are limited to direct care costs ...” Section 01. then specifies what is meant by “direct care costs” both by a process of inclusion and exclusion. Included within direct care costs are “costs of direct care services required by state and federal regulations to be provided to ICF/MR residents ...” For a complete understanding of what is included in the definition of direct care costs, reference must be made to other state and federal regulations, as elaborated below. The excluded services are: (a) direct physi-clan care costs; (b) costs for such items as eyeglasses, hearing aids, and dental services, which are covered under a different portion of the Medicaid Program; and (c) costs of services covered by other parts of the Medicaid Program, such as drugs and ambulance transportation.
The “Rules and Regulations Governing ICF/MR’s,” at 16 IDAPA 02.17270.03, set forth the nursing services which must be provided to the mentally retarded living in an ICF. Such services must include, among others:
1. Providing contact with a resident’s responsible physician in the event of an unanticipated health related condition and to coordinate follow-up care;
2. Nurse participation in preadmission evaluation study and plan; evaluation study, program design, and placement of the resident at the time of admission to the facility;
3. Periodic reevaluation of the type, extent, and quality of services and programming;
4. The development of discharge plans; and
5. The control of communicable diseases and infections through identification, assessment, reporting to medical authorities and implementation appropriate protective and preventative measures.
*848These provisions were adopted in 1980 and thus predated the adoption of the “Patient Care Costs Unique to the Care of ICF/MR Residents” provision of the PRM, quoted above. See 16 IDAPA 02.17270.03, subsections (b) and (c). As noted, federal regulations were incorporated by reference into the definition of “direct care services.” These are found at 42 C.F.R. § 442.478 and provide for a substantially similar character of nursing services as detailed above.
The “hands-on” policy in the Department’s internal memorandum at issue reads in pertinent part as follows:
Direct care costs mean all costs for RNs, LPNs, Aides and Orderlies, contracted and professional services for “hands-on patient care [as opposed to services for the general benefit of the facility] ...
At the administrative hearing in this case, the Department’s auditor testified that the nursing care which he would consider “hands-on” would mean that “the nurse would be in direct contact with the patient.” He excluded from the definition of “hands-on” activities by a nurse such as making out a report, calling a physician, and talking with one of the other staff members on developing a plan. The auditor testified that he removed certain nursing costs from the unique to the capped category based on his understanding of the hands-on policy.
The hands-on policy, as explained and applied by the auditor, removes from the definition of direct care services certain nursing services pertaining to patient care planning, reporting, and interaction with physicians, required by the state and federal regulations set forth above. The hands-on policy thus works a substantial change on the direct care services provision of the PRM. That provision originally had broadly included all costs of direct care services required by state and federal regulations, except for the three specifically enumerated categories.8 The hands-on policy should appropriately have been included as the fourth exception to the broad definition of direct care services, assuming this could have been done without running afoul of other state and federal regulations. The hands-on policy has become a part of the exclusions and inclusions which make up the definition of “patient care costs unique to the care of ICF/MR residents,” the agency “statement of general applicability that implements or prescribes law or interprets a statute as the statement applies to the general public.” I.C. § 67-5201(7). It is thus a “rule” which should have been promulgated in accordance with the IDA-PA.
. PATIENT CARE COSTS UNIQUE TO THE CARE OF ICF/MR RESIDENTS. This cost is limited to direct care costs of ICF/MR residents. No administration [,] dietary, food, laundry, housekeeping or maintenance costs are to be reported in this cost area.
01. Direct Care Services. Costs of services to be included in this cost area would typically include costs of direct care services required by state and federal regulations to be provided to ICF/MR residents with the following exceptions:
a. Direct physician care costs. These costs are not includable as part of the nursing home costs. Physicians providing these services must bill the Medicaid Program direct on their own provider number.
b. Costs of services covered under the Early and Periodic Screening Diagnosis and Treatment (EPSDT) portion of the Medicaid Program. These services are enumerated in Idaho Department of Health and Welfare Rules and Regulations, Title 3, Chapter 9, "Rules Governing Medical Assistance Manual”, and include such items and services as eyeglasses, hearing aids, and dental services provided to Medicaid recipients under the age of twenty-one (21). The cost of the services is not includable as a part of nursing home costs. Reimbursement can be made to a professional providing these services through his billing the Medicaid Program on his own provider number,
c.Costs of services covered by other parts of the Medicaid Program. Examples of these items include legend drugs and ambulance transportation. These items must be billed to the Medicaid Program direct by the provider on his own provider number.
Provider Reimbursement Manual (PRM), 16 IDAPA 03.10000 et seq., 10253.
. An amendment to an existing agency rule is also considered a rule. I.C. § 67-5201(7): "rule” ... includes the amendment or repeal of a prior rule....