Americana Healthcare Center v. North Dakota Dept. of Human Services, 930244

• Decision Date: 30 March 1994
• Docket Number: No. 930244,930244
• Citation: 513 N.W.2d 889
• Court: North Dakota Supreme Court
• Parties: Medicare & Medicaid Guide P 42,214 AMERICANA HEALTHCARE CENTER, Fargo, North Dakota, Plaintiff and Appellant, v. NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES, Defendant and Appellee. Civ.

Page 889

513 N.W.2d 889

Medicare & Medicaid Guide P 42,214

AMERICANA HEALTHCARE CENTER, Fargo, North Dakota, Plaintiff and Appellant, v. NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES, Defendant and Appellee.

Civ. No. 930244.

Supreme Court of North Dakota.

March 30, 1994.

Carol Ronning Kapsner of Kapsner and Kapsner, Bismarck, for plaintiff and appellant.

Scott K. Porsborg of Fleck, Mather & Strutz, Bismarck, for defendant and appellee.

LEVINE, Justice.

Americana Healthcare Center (Americana) appeals from a judgment of dismissal with prejudice. Because we conclude that Americana's claim for relief against the North Dakota Department of Human Services (DHS) is barred by the doctrine of res judicata, we affirm.

Americana is a long-term care provider which receives reimbursement for care of some of its residents under the Medicaid program. DHS administers the Medicaid program by determining a per diem rate for care of eligible residents and reimbursing the long-term care provider accordingly. DHS applies its ratesetting methods annually to each provider and assigns a new rate to each provider, which applies to the following year.

The dispute at the heart of this case arose out of changes made by DHS in its ratesetting methods in 1985. Before the changes, DHS calculated and paid rates according to each provider's fiscal year. At the end of its fiscal year, a provider estimated its own rate, which was effective until the provider submitted a cost report to DHS. Then, DHS assigned a "desk rate" to the provider, based on its cost report. Finally, DHS audited the provider and issued a "final rate order," which DHS applied retroactively to the provider's previous fiscal year. In 1985, DHS implemented a new ratesetting system which used a set "reporting year" and "rate year," without regard to a provider's fiscal year. During the reporting year, providers submitted their costs to DHS and DHS calculated each provider's desk rate. During the rate year, DHS paid providers according to their assigned desk rates, and it audited providers. The audits resulted in final rate orders, which DHS applied retroactively to the beginning of the rate year.

DHS notified Americana of its new ratesetting methods in 1985. It served final rate orders on Americana for each of the years in question. Americana did not appeal the final rates to DHS, under NDCC Secs. 50-24.4-17 and 50-24.4-18. ¹ Instead, it brought an action in district court for the amount it claims it was under-reimbursed, alleging a breach of contract. The district court granted summary judgment to DHS on the grounds that Americana's claim in district court was barred by the doctrines of collateral estoppel and res judicata, that Americana had failed to exhaust its administrative remedies, and that the statute of limitations had run on Americana's claim.

Americana appealed, arguing that its claim for relief in district court was not barred by collateral estoppel, failure to exhaust its administrative remedies, or the statute of limitations. Because we conclude that the final rate orders in question are res judicata and therefore preclude Americana's action in district court, we do not reach the issue of the applicable statute of limitations, and we discuss the issues of collateral estoppel and exhaustion only in relation to res judicata.

The doctrine of res judicata gives a valid, existing, and final judgment from a court of competent jurisdiction conclusive effect against the parties and their privies on issues raised or issues that could have been raised and determined in the previous action. ² E.g., United Hosp. v. D'Annunzio, 466 N.W.2d 595, 598 (N.D.1991); Peacock v. Sundre Township, 372 N.W.2d 877, 878 (N.D.1985). Res judicata "conserves scarce judicial resources and avoids wasteful expense and delay." Spilovoy v. Spilovoy, 511 N.W.2d 230, 234 n. 3 (N.D.1994) (quoting K & K Implement, Inc. v. First Nat'l Bank, 501 N.W.2d 734, 738 (N.D.1993) (footnote omitted in original)). Administrative res judicata is simply judicial res judicata applied to an administrative decision. Lamplighter v. State ex rel. Heitkamp, 510 N.W.2d 585, 591 (N.D.1994). However, we apply administrative res judicata more circumspectly, taking into account (1) the subject matter decided by the administrative agency, (2) the purpose of the administrative action, and (3) the reasons for the later proceeding. Hystad v. Mid-Con Exploration Co.-Exeter, 489 N.W.2d 571, 574 (N.D.1992); D'Annunzio, supra at 599. The applicability of res judicata is a question of law. E.g., Hofsommer v. Hofsommer Excavating, Inc., 488 N.W.2d 380, 383 (N.D.1992).

In considering the first factor, we take into account the technicality and complexity of the subject matter and whether the administrative action involves the agency's expertise. See, e.g., True v. Heitkamp, 470 N.W.2d 582, 587 (N.D.1991) [reiterating general rule that court gives appreciable deference to agency determinations of technical and complex nature]. In applying the second factor, we look at the purpose of the administrative action in order to determine whether the agency action promoted that purpose or was simply an aid to achieving some incidental goal necessary to the performance of the agency's duties and thus, not entitled to res judicata effect "for any other purpose." S.W. v. N.D. Dept. of Human Services, 420 N.W.2d 344, 347 (N.D.1988). With regard to the third factor, the preclusive effect of an administrative decision often depends upon the adequacy of remedies available to contest the administrative decision. Hystad, supra at 574; D'Annunzio, supra at 599.

The subject matter decided by DHS, ratesetting for long-term care, is within its exclusive jurisdiction. See NDCC Sec. 50-24.4-02; NDAdminC Sec. 75-02-06-16. It is complex, technical and specialized. See NDAdminC Sec. 75-02-06. The purpose of ratesetting is to administer the Medicaid program, in keeping with DHS's statutory duty "[t]o administer, allocate, and distribute any state and federal funds that may be made available for the purpose of providing financial assistance care, and services to eligible persons and families who do not have sufficient income or other resources to provide a reasonable subsistence compatible with decency and health." NDCC Sec. 50-06-05.1(2). The final rate orders fulfilled their central purpose as contemplated by the legislature. See NDCC Sec. 50-06-05.1(2).

The "reason[ ] for the later proceeding," Americana's claim for relief in district court, was ostensibly for damages arising from an alleged breach of contract, i.e., the old methods. However, the contract claim was intended to challenge the validity of the final rate orders issued by DHS. Indeed, Americana allowed at oral argument that it would be satisfied were we to remand this case to DHS for recalculation of the final rates in question. An appeal of the final rate orders would have been an adequate legal remedy to that end. See NDCC Secs. 28-32-15, 50-24.4-17, 50-24.4-18 [governing appeals from agency determinations].

But, Americana contends that the administrative appeals process is an inadequate remedy and that we should not require it to exhaust that remedy. In other words, we should allow a collateral attack on DHS's final rate orders. So many providers were under-reimbursed due to DHS's methods changes, Americana argues, that it would be burdensome to require each of them to have appealed its final rate orders. In support of this argument, Americana cites Continental Can Co., United States v. Marshall, 603 F.2d 590 (7th Cir.1979). In that case, the court held...