Medi-Cab of Massachusetts Bay, Inc. v. Rate Setting Com'n

• Decision Date: 21 December 1987
• Docket Number: MEDI-CAB
• Citation: 517 N.E.2d 122,401 Mass. 357
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: , Medicare & Medicaid Guide P 36,833 OF MASSACHUSETTS BAY, INC. v. RATE SETTING COMMISSION.

Page 122

517 N.E.2d 122

401 Mass. 357, Medicare & Medicaid Guide P 36,833

MEDI-CAB OF MASSACHUSETTS BAY, INC. v. RATE SETTING COMMISSION.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Sept. 11, 1987.

Decided Dec. 21, 1987.

Despena Fillios Billings, Asst. Atty. Gen., for Rate Setting com'n.

Jeffrey Swope (H. Virginia McIntyre, with him) for plaintiff.

Before HENNESSEY, C.J., and LIACOS, ABRAMS and LYNCH, JJ.

ABRAMS, Justice.

This is an appeal by the Rate Setting Commission (commission), pursuant to G.L. c. 30A, § 15, from a final judgment of the Superior Court affirming a decision of the Division of Administrative Law Appeals ¹ (division) in which the division approved for the appellee, Medi-Cab, an individual reimbursement rate higher than the class-based rate set for Medi-Cab by the commission. The commission also appeals from the Superior Court judge's order remanding the case to the commission for promulgation of regulations regarding inclusion of attorney's fees incurred in rate appeals from the class-based rate. ² We transferred the case to this court on our own motion. We modify the Superior Court judgment to order remand of the issue of attorneys' fees to the division instead of the commission, and, as modified, the decision of the Superior Court judge is affirmed.

I. Background. During the years 1975 through 1977, the period covered by this appeal, Medi-Cab provided nonemergency ambulance services (chair-car service) to persons confined in wheelchairs. Many of Medi-Cab's passengers were Medicaid or other publicly-aided persons. On June 20, 1975, the commission, by its regulation designated 14 C.H.S.R. § 401 (1975), ³ adopted a class-based (or industry-wide) reimbursement rate effective August 1, 1975, for Medicaid providers of chair-car services, including Medi-Cab. The commission, by § 401.18 of its regulations, adopted a flat rate of fourteen dollars per trip, plus fifty cents per mile after an initial five miles, plus five dollars for each trip involving two attendants.

Medi-Cab, the primary provider of after-hours and weekend services in its area of operation, believed that it was entitled to an individual cost-based rate, higher than the uniform "class-based" rate promulgated by the commission. Medi-Cab was uncertain, however, of the proper route by which to seek appeal of the fourteen-dollar rate. Two routes appeared open. First because the fourteen-dollar rate was embodied in a regulation which applied to an entire class of providers, Medi-Cab recognized that its only remedy might be to challenge the regulation by way of an action for declaratory judgment in the Superior Court pursuant to G.L. c. 30A, § 7, and G.L. c. 231A. Second, because it was seeking relief in the form of an individual rate, Medi-Cab recognized that it might have to appeal the fourteen-dollar rate to the division pursuant to G.L. c. 6A, § 36. ⁴ To be safe, it did both. Medi-Cab filed a complaint in the Superior Court, and filed an appeal with the division.

The commission moved to dismiss both proceedings. In doing so, it raised contradictory arguments which, if both were accepted, would have denied Medi-Cab an appeal in any forum. Before the Superior Court judge, the commission argued that Medi-Cab's remedy was to a "determination, if plaintiff is entitled to one, ... in the first instance by the Division of Hearing Officers under Mass.Gen.Law Ann. ch. 6A, § 36." A Superior Court judge agreed, and dismissed the complaint on grounds of Medi-Cab's failure to exhaust its administrative remedy before the division.

Before the division, the commission then argued that Medi-Cab's administrative appeal be dismissed on the ground that the division had no authority to review a class-based rate promulgated by regulation. Based on the decision of the Superior Court, the division denied the commission's motion to dismiss, and heard the appeal. Eight days of administrative hearings followed in the summer and fall of 1977 during which Medi-Cab introduced evidence concerning its costs.

On September 26, 1978, the division issued a 27-page decision in which it made two crucial rulings. First, the division found that the commission was required, under G.L. c. 6A, § 32, to establish for Medi-Cab "an individual rate of reimbursement based upon, among other things, [Medi-Cab's] actual costs." Second, the division found that the flat rate appearing at 14 C.H.S.R. § 401 (1975) did not satisfy the commission's statutory requirement under G.L. c. 6A, § 32. Based on these findings, the division remanded the case to the commission with orders that the commission promulgate a regulation specifying the manner of calculating an individual rate for Medi-Cab. The commission did not appeal from the division's decision at that time, but instead sent a letter to Medi-Cab's attorneys in which it "rejected" the decision. On November 21, 1978, Medi-Cab commenced the instant action in the Superior Court under G.L. c. 6A, § 36, seeking a declaration that the commission must comply with the division's order. ⁵

More than four years later, while this action still was pending before the Superior Court, the commission again changed its view as to the proper forum for Medi-Cab's appeal. On January 19, 1983, the commission filed a joint motion with Medi-Cab before the division, proposing that the division reopen Medi-Cab's administrative appeal. To make sure that all of the parties agreed to the limited scope of the renewed hearings, Medi-Cab's counsel orally presented the joint motion, stating that the sole purpose of the hearing was to establish an individual rate for Medi-Cab, and that the commission had waived any appeal from the issues decided in the division's first decision. ⁶ Thereafter, the motion was reduced to writing, and the following stipulation was before the division: "The parties to the above-entitled appeal move that the record in the appeal be reopened for the presentation of further evidence and a determination, based on all of the evidence in the record, whether the appealed rate is adequate, fair, and reasonable for [Medi-Cab], based, among other things, on the costs of such provider, and that if such a determination is not made, the Division determine a new rate for [Medi-Cab]. The [commission] waives any appeal from or regarding the issues decided in the decision of the Division of Hearings Officers dated September 26, 1978, in this appeal." The hearing officer allowed the motion to reopen the hearing on the narrow issue of setting an individual reimbursement rate for Medi-Cab.

On January 3, 1985, the division issued its decision, in which it determined (a) that Medi-Cab had established that the class rate "did not adequately, fairly and reasonably reimburse its costs"; (b) that Medi-Cab's methodology for arriving at an individual rate was "adequate and reasonable"; (c) that, although certain costs were "arguably unreasonable" on the evidence before the division, Medi-Cab's costs were reasonable; and (d) that Medi-Cab's basic trip rate be as proposed by Medi-Cab. ⁷

Thereafter, each party timely moved for reconsideration, Medi-Cab seeking inclusion of the legal fees generated in its protracted rate appeal as a reasonable cost for purposes of determining its rate (which would have increased its rate by ninety-six cents per trip), and the commission challenging the entire decision as erroneous. After hearing, the motions were denied. ⁸ On March 25, 1985, Medi-Cab moved in the Superior Court to restore its pending lawsuit to the docket of active cases. Each party petitioned for judicial review under G.L. c. 6A, § 36; Medi-Cab from the division's failure to rule on attorneys' fees, and the commission from the entire decision. A Superior Court judge affirmed the division's decision, and further ordered the commission to promulgate regulations regarding the inclusion of attorneys' fees in a provider's rate of reimbursement.

II. Discussion. Three issues are before this court: (a) the effect of the stipulation of the parties, including the commission's waiver; (b) whether the division, in its decision of January 3, 1985, set an appropriate reimbursement rate for Medi-Cab; and (c) whether the Superior Court properly ordered the commission to promulgate a regulation regarding inclusion of attorneys' fees in the reimbursement calculation for providers of chair-car service. We discuss these issues separately.

A. The stipulation and waiver. The stipulation filed by the parties on January 19, 1983, allowed the division to set a reasonable individual rate for Medi-Cab based, among other things, on Medi-Cab's costs. The commission now concedes, as a result of the stipulation, that the reopened proceedings were properly before the division as proceedings on an individual rate for Medi-Cab. ⁹ Nevertheless, in its brief the commission asserts to this court that the effect of the stipulation and the waiver was to render the division's decision of September 26, 1978, a nullity, and that the division was not authorized to determine for Medi-Cab an "increased rate beyond the class rate." We do not agree.

The parties stipulated that the division reopen its hearings on the sole issue whether the fourteen-dollar rate set by the commission was "adequate, fair and reasonable" for Medi-Cab based, among other things, on Medi-Cab's costs. The stipulation expressly permitted the division to determine an individual rate for Medi-Cab, if the division found the fourteen-dollar rate inadequate. The stipulation allowed the division to consider the evidence presented at the earlier hearing. It also permitted the division to consider further evidence. This stipulation precludes the commission from asserting on appeal that its class-based rate is valid and that the setting of an individual rate was error. See Murray v. Second Dist. Court of E. Middlesex, 389 Mass. 508, 515, 451 N.E.2d 408 (1983); Shamrock Liquors, Inc. v. Alcoholic Beverages...