Briarcliff Haven, Inc. v. DEPARTMENT OF HUM. RES., GA.

• Decision Date: 30 October 1975
• Docket Number: No. C75—429A.,C75—429A.
• Parties: BRIARCLIFF HAVEN, INC., on behalf of itself and all others similarly situated, Plaintiff, v. DEPARTMENT OF HUMAN RESOURCES OF the STATE OF GEORGIA, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

403 F. Supp. 1355

BRIARCLIFF HAVEN, INC., on behalf of itself and all others similarly situated, Plaintiff, v. DEPARTMENT OF HUMAN RESOURCES OF the STATE OF GEORGIA, et al., Defendants.

No. C75—429A.

United States District Court, N. D. Georgia, Atlanta Division.

October 30, 1975.

COPYRIGHT MATERIAL OMITTED

J. Corbett Peek, Jr., Peek, Arnold, Whaley & Cate, Atlanta, Ga., for plaintiff.

Stephen L. Cotter, Deputy Asst. Atty. Gen., Julian Longley, Asst. U. S. Atty., Atlanta, Ga., for defendants.

ORDER OF COURT

MOYE, District Judge.

This is an action for declaratory, injunctive, and other relief filed by Briarcliff Haven, Inc. Briarcliff against the Department of Human Resources of the State of Georgia DHR, David Matthews, Secretary of the Department of Health, Education and Welfare HEW, and others, in which Briarcliff alleges two related causes of action. First, Briarcliff claims, in its original complaint, that provisions in the Georgia Medical Assistance Medicaid Plan which deal with reimbursements to nursing homes and intermediate care facilities are unfair to plaintiff and violate the Federal Medicaid Act, Title XIX of the Social Security Act, 42 U.S.C. 1396 et seq. the Act. Second, in its amended complaint, Briarcliff raises additional issues regarding the legal import of certain provisions of the Nursing Home Services Manual Manual and the Georgia Provider Agreement alleging that the subject provisions are in violation of Title XIX of the Social Security Act, 42 U.S.C. §§ 1396, 1396a.

Briarcliff has filed a motion for leave to amend complaint seeking to have David Matthews, newly appointed successor to Caspar Weinberger as Secretary of HEW, made a party defendant and seeking to strike certain paragraphs of the original complaint alleging sums due to the plaintiff for the year 1974. Plaintiff's motion to amend complaint is hereby granted.

The case is presently before the Court on the State and Federal defendants' motions to dismiss both the original and amended complaint. As a preliminary matter the Court notes that Briarcliff has failed to respond to the Federal defendants' motion to dismiss the original complaint filed on May 2, 1975. Therefore, the Court considers the motion unopposed. See Local Rule 91.2. Accordingly, defendant David Matthews's motion to dismiss is hereby ordered granted.

Briarcliff Haven, Inc., owns and operates a skilled nursing home that participates as a provider of skilled nursing home services under the Georgia Medicaid program. Defendant Georgia Department of Human Resources is the single state agency designated pursuant to the Medicaid Act to run the Medicaid program in Georgia. The federal-state Medicaid program, provided for under Title XIX of the Social Security Act, requires states wishing to participate in the program to submit a state plan which meets the conditions specified in the Act and in the implementing of federal regulations. Under the Act, upon acceptance of the state plan, each participating state has the responsibility for administering its own Medicaid program. Therefore, within the parameters established by the Act and the implementing regulations, the state determines the eligibility requirements for medical assistance; which state residents qualify as Medicaid recipients; the scope and duration of services for which the state Medicaid agency will make payment; the criteria which "providers of services" must meet before the state will enter into a "provider agreement" enabling a provider to participate in the program; and the amount of reimbursement that the state will make to participating providers for furnishing covered services to the state's Medicaid recipients.

The Georgia Title XIX Plan at issue, which became effective on December 1, 1974, established that reimbursement for skilled nursing facility services after December 1, 1974, be based on the Medicare, Title XVIII of the Social Security Act, "allowable cost" formula with certain adjustments. The "allowable cost" approach is essentially an attempt at reimbursing a provider on the basis of its actual cost of providing covered services to Medicaid patients, within statutory upper limits. However, in addition, the Georgia Title XIX Plan puts a ceiling on such costs at the level of $550 per patient per month for skilled nursing facilities and $500 per patient per month for intermediate care facilities.

Moreover, the Manual requires that each provider enter into a provider agreement before being permitted to participate in the Medicaid program. This provider agreement is best construed as a business contract between the State and each provider by which their participation in the Georgia Medicaid program is defined. In August 1975 the defendant DHR presented new provider agreements to the plaintiff and advised plaintiff that such agreements must be executed and returned to DHR on or before August 31, 1975, if plaintiff desired to continue participation in the Medicaid program. The provisions of the new Provider Agreement at issue state the following:

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"6. The amount of reimbursement authorized to be made by the State Agency to the Provider for medical or remedial care or services rendered pursuant hereto shall be determined by the provisions of the Manual and as otherwise provided herein. The State Agency may, after giving proper notice, reduce the amount of reimbursement which otherwise would be authorized but for the provisions of this paragraph. The State Agency may reduce the amount of reimbursement authorized for medical or remedial care or services rendered pursuant to paragraph 1 hereof by factoring the amount of reimbursement, which would otherwise be paid, by a fraction determined by the State Agency and approved by the Office of Planning and Budget of the State of Georgia. The State Agency may increase or decrease the amount of reimbursement authorized as often as it deems advisable during the term of this Provider Agreement. Increases or decreases in the amount of reimbursement authorized shall be determined by resolutions adopted by the Board of Human Resources. No decrease in the amount of reimbursement authorized shall be made for medical or remedial care or services rendered prior to the effective date of any decrease, which date shall be set forth in the Resolution of the Board of Human Resources authorizing the decrease. No reduction in the amount of reimbursement authorized shall be made for medical or remedial care or services rendered prior to the effective date of any decrease, which date shall be set forth in the Resolution of the Board of Human Resources authorizing the decrease. No reduction in the amount of reimbursement authorized shall be made effective for medical or remedial care or services rendered within thirty (30) days after the adoption of the resolution decreasing the amount of reimbursement authorized.

"7. Proper notice under the preceding paragraph shall consist of the adoption of a resolution by the Board of Human Resources reducing the amount of reimbursement authorized for described medical or remedial care or services rendered thirty (30) days after the date of the resolution. Within ten (10) days after the adoption of such a resolution, a copy thereof shall be mailed to the Provider's address set forth herein.

"8. Should the State Agency determine that it no longer desires to authorize reimbursement for the medical or remedial care or services described in the Manual under the Georgia Medical Assistance Program, proper notice of such a decision, given in accordance with the procedures set forth in the preceding paragraph 7, shall terminate this Provider Agreement.

"9. Notwithstanding any other provision of this Provider Agreement or of the Manual, in the event that either of the sources of reimbursement for medical assistance, appropriations from the General Assembly of the State of Georgia or the Congress of the United States of America, no longer exist or in the event the sum of all obligations of the State Agency incurred under this and all other Provider Agreements entered into pursuant to the Georgia State Plan for Medical Assistance equals or exceeds the balance, as of the date first written above, of such sources less one hundred dollars ($100.00), then this Provider Agreement shall immediately terminate without further obligation of the State Agency as of that moment. The certification by the Commissioner of the State Agency of the occurrence of either of the events stated above shall be conclusive."

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The challenged provision of the Manual, Section 104.2, provides that the State may immediately terminate nursing homes from Medicaid participation in cases of willful or grossly negligent noncompliance with the Manual's policies and procedures.

With regard to the reimbursement ceilings, plaintiff is not challenging the federal statutory provisions regarding reimbursement to nursing homes under the Medicaid Act. Rather, the issue before the Court is whether the maximum reimbursement ceilings established by the defendant DHR are in conflict with those statutory provisions.

Briarcliff contends that DHR's plan of reimbursement, particularly the ceilings placed on payments to providers, is in conflict with and contrary to the Act and implementing regulations. Briarcliff alleges that its actual costs per recipient exceed $550 per month and that it is unfair that the majority of participating nursing homes in Georgia, whose costs are below $550 per month, are reimbursed to the full extent of their costs while Briarcliff and other high cost nursing homes are not so reimbursed.

The plaintiff claims that Georgia's maximum reimbursement provision is contrary to the "free choice of provider" requirement found in the Medicaid Act at 42 U.S.C. § 1396a(a)(23). That section provides that a state plan for medical assistance must:

"provide that any individual eligible for medical assistance (including drugs) may obtain such assistance

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