N.H. Health Care Ass'n v. Governor

• Decision Date: 21 January 2011
• Docket Number: No. 2010–436.,2010–436.
• Parties: NEW HAMPSHIRE HEALTH CARE ASSOCIATION and anotherv.GOVERNOR and another.
• Court: New Hampshire Supreme Court

161 N.H. 378

13 A.3d 145

NEW HAMPSHIRE HEALTH CARE ASSOCIATION and another

v.GOVERNOR and another.

No. 2010–436.

Supreme Court of New Hampshire.

Argued: Dec. 9, 2010.Opinion Issued: Jan. 21, 2011.

Devine, Millimet & Branch, P.A., of Manchester (Daniel E. Will and another on the brief, and Mr. Will orally), for the petitioners.Michael A. Delaney, attorney general (Laura E.B. Lombardi, assistant attorney general, and Karen A. Schlitzer, assistant attorney general, on the brief, and Ms. Schlitzer orally), for the respondents.DALIANIS, C.J.

The petitioners, New Hampshire Health Care Association (NHHCA), Genesis Pleasant View, Villa Crest and Greenbriar Terrace Healthcare, appeal an order of the Superior Court ( Smukler, J.) ruling that the respondents, Governor John Lynch and the Commissioner of the New Hampshire Department of Health and Human Services (DHHS), did not act unconstitutionally by reducing DHHS expenditures for fiscal year 2008, which had the effect of eliminating certain payments the petitioners expected to receive. We affirm.

I. Background

The record reveals the following facts. Petitioner NHHCA is the trade association that represents New Hampshire's private nursing homes. The majority of its sixty-three members provide care to Medicaid recipients. The other petitioners are individual nursing homes that also provide care to Medicaid recipients.

DHHS is responsible for administering the Medicaid program in New Hampshire. Bel Air Assocs. v. N.H. Dep't of Health & Human Servs., 154 N.H. 228, 229, 910 A.2d 1232 (2006) ( Bel Air I ). This program provides federal and state funding of medical care for individuals who cannot afford to pay their own medical costs. Id. In New Hampshire, the Medicaid program receives half of its funding from the federal government and half from the State and its counties. Bel Air Assocs. v. N.H. Dep't of Health & Human Servs., 158 N.H. 104, 105, 960 A.2d 707 (2008) ( Bel Air II ).

DHHS establishes rates of reimbursement for nursing home providers of services to Medicaid-eligible persons prospectively, in accordance with the State Medicaid Plan and New Hampshire Administrative Rules, He–E Part 806. See Bel Air I, 154 N.H. at 230, 910 A.2d 1232. The rates are set twice per year. Pursuant to DHHS's rate-setting methodology, “nursing homes are reimbursed on the basis of per diem, per resident rates which are determined by totaling five rate components, including capital costs.” Bel Air II, 158 N.H. at 106, 960 A.2d 707; see N.H. Admin. Rules, He–E 806.31.

The legislature appropriates money in the biennial state budget for its share of the Medicaid nursing home reimbursement. When there is a gap between the legislative appropriation and the amount derived from the Medicaid reimbursement rates that DHHS calculates, DHHS reconciles it by using a “Budget Neutrality Factor” (BNF) that reduces the Medicaid reimbursement rate by a flat percentage. See RSA 9:19 (2003) (prohibiting state agencies from spending money “in excess of the amount voted by the legislature”); see also N.H. Admin. Rules, He–E 806.31(j)(3) (facility-specific per diem rates are subject to budget neutrality provision), He–E 806.31(p) (budget neutrality provision). As a result of the BNF, the amount of DHHS nursing home appropriations that lapse to the general fund at the end of the fiscal year may increase. See RSA 9:18 (Supp.2010) (pertaining to lapsed appropriations).

The petitioners claim that, historically, DHHS has manipulated the BNF “to create considerable surpluses of funds that would have been paid out as Medicaid reimbursement rates to nursing homes had the BNF been calculated ... to achieve true budget neutrality.” They allege: “Rather than using the BNF to tie the rates to the appropriation, DHHS instead was utilizing [it] ... to deprive the nursing homes of Medicaid funds so as to be able to claim a surplus.” The State counters that any such surplus was not intentionally created, explaining that “[b]ecause reimbursement rates are based upon assumptions regarding future utilization, it necessarily follows that there will be a surplus of funds at the end of the fiscal year if actual utilization is below the predicted amount.”

In June 2007, in an apparent effort to address DHHS's use of the BNF, the legislature enacted Laws 2007, 129:1 as a footnote to the operating budget for the appropriation to DHHS. Laws 2007, 129:1 provided, in pertinent part:

The appropriation in class 90 [Nursing Services] for the fiscal year ending June 30, 2007 shall be non-lapsing. Any balance remaining at the end of June 30, 2007 shall be paid to nursing homes as supplemental rates no later than October 1, 2007. The supplemental rates shall be based on the current rate setting methodology. The commissioner shall file a report with the legislative fiscal committee by October 1, 2007 which details the balance carried forward from fiscal year 2007 and the amounts to be paid as supplemental rates.

In 2008, as part of a bill that required certain operating budget reductions, the legislature amended Laws 2007, 129:1 to “[p]ermit [the] prior appropriation to the department of health and human services for nursing services to lapse on June 30, 2009.” Senate Bill 321, available at http:// www. gencourt. state. nh. us/ legislation/ 2008/ SB 0321. html. As amended, this provision now concludes with the following sentence: “If such funds are not expended by June 30, 2009, they shall lapse to the appropriate funds.” Laws 2008, 296:18.

The petitioners received no payments authorized by Laws 2007, 129:1 and Laws 2008, 296:18. DHHS took the position that it could not pay the supplemental rates without first receiving approval from the federal government to amend the State's Medicaid Plan. DHHS received federal approval to amend the State's Medicaid Plan on November 24, 2008. The approved amendment provided:

12a. Supplemental Payment

A one-time supplemental payment shall be paid as supplemental rates for the remaining encumbered balance of $8,868,563 from the nursing facility appropriation for the fiscal year ending June 30, 2007. The methodology for this payment will be to make a supplemental distribution in [State fiscal year] 2009 to the New Hampshire non-state government owned and privately owned licensed nursing facilities based upon the percentage of paid claims for each of these facilit[ies] with dates of services for the period of July 1 to October 31, 2008.

Three days earlier, however, on November 21, 2008, Governor Lynch issued Executive Order 2008–10, which, pursuant to RSA 9:16–b (2003) and Part II, Article 41 of the New Hampshire Constitution, directed a reduction in executive branch expenditures. The Governor issued Executive Order 2008–10 after determining “that the budgeted state revenues [were] insufficient to fund state budgeted expenditures as authorized by Chapter 262, N.H. Laws of 2007” and after obtaining approval from the legislative fiscal committee. See RSA 14:30–a (Supp.2010).

Executive Order 2008–10 reduced the planned expenditures of numerous state agencies and departments for the fiscal year ending June 30, 2009. DHHS's expenditures were reduced by $25,361,511. DHHS accomplished this reduction, in part, by eliminating $2,217,141 in state payments, $2,217,141 in county payments, and $4,434,251 in federal payments that otherwise would have been made to the petitioners pursuant to Laws 2007, 129:1 and Laws 2008, 296:18, an amount that aggregates to $8,868,563.

In May 2009, the petitioners brought the instant petition seeking declaratory relief, injunctive relief and a writ of mandamus. In June 2009, the petitioners moved for a preliminary injunction, which the trial court granted, enjoining the State from allowing the $8.8 million “surplus” funds to lapse to the general fund. Thereafter the parties filed cross-motions for partial summary judgment. The trial court granted the cross-motion filed by the respondents and denied that filed by the petitioners, ruling that the Governor and DHHS did not act unconstitutionally by reducing DHHS's planned expenditures for fiscal year 2008. This appeal followed.

II. Analysis

We review the trial court's rulings on summary judgment by considering the affidavits and other evidence in the light most favorable to the non-moving party. See S. N.H. Med. Ctr. v. Hayes, 159 N.H. 711, 715, 992 A.2d 596 (2010). If this review does not reveal any genuine issues of material fact, i.e., facts that would affect the outcome of the litigation, and if the moving party is entitled to judgment as a matter of law, we will affirm. Id. We review the trial court's application of law to fact de novo. Id.

A. RSA 9:16–b

The petitioners first challenge RSA 9:16–b, the statute under which the Governor promulgated Executive Order 2008–10. They argue that RSA 9:16–b is facially unconstitutional because it grants the Governor a “line item veto” in violation of the Separation of Powers and Presentment Clauses of the State Constitution. See N.H. CONST. pt. I, art. 37, pt. II, art. 44. They assert that RSA 9:16–b is unconstitutional as applied because it allowed the Governor to contravene the legislature's express mandate in Laws 2007, 129:1 and Laws 2008, 296:18. They contend that because RSA 9:16–b is unconstitutional, Executive Order 2008–10 is void ab initio. See Claremont School Dist. v. Governor (Costs and Attorney's Fees), 144 N.H. 590, 593, 761 A.2d 389 (1999).

1. Facial Challenge

We first address the petitioner's facial challenge to RSA 9:16–b. The constitutionality of a statute is a question of law, which we review de novo. Akins v. Sec'y of State, 154 N.H. 67, 70, 904 A.2d 702 (2006). “In reviewing a legislative act, we presume it to be constitutional and will not declare it invalid except upon inescapable grounds.” Baines v. N.H. Senate President, 152 N.H. 124, 133, 876 A.2d 768 (2005) (quotation omitted). This means that “we will not hold a statute to be unconstitutional...