Cave City Nursing v. Dept. of Human Serv.

Decision Date21 November 2002
Docket NumberNo. 01-826.,01-826.
Citation351 Ark. 13,89 S.W.3d 884
CourtArkansas Supreme Court

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: Debby Thetford Nye and Elizabeth Andreoli, Little Rock, for appellant.

David S. Long, Little Rock, for appellee.


This is an appeal from an agency decision ordering Appellant Cave City Nursing Home to repay monies it received under the Wage Enhancement Program ("WEP") administered by Appellee Arkansas Department of Human Services. For reversal, Appellant argues that Appellee violated the provisions of the Arkansas Administrative Procedures Act ("APA"), codified at Ark.Code Ann. §§ 25-15-201 to -214 (Supp.1999), in that its decision exceeded the scope of its statutory authority, was arbitrary and capricious, and not supported by substantial evidence. This case was certified to us as one involving an issue of first impression and statutory interpretation; hence, our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(b)(1) and (6). We find no error and affirm.

This case centers on a dispute over the correct interpretation of the legislation creating the WEP. In 1999, the Arkansas General Assembly passed Act 1537, which was the appropriations bill for DHS. This act also serves as the enabling legislation for the WEP. Section 127 of Act 1537 contains special language providing in part:

a) Due to the need for enhanced staffing, improved recruitment and retention, and improved quality of direct care personnel, the Department of Human Services (DHS)Division of Medical Services (DMS) shall implement a facility specific wage enhancement program for nursing facilities effective July 1, 1999. The wage enhancement program's top priority shall be to increase the number of direct care staff, specifically Certified Nurse Assistants (CNAs), serving nursing facility residents, and shall be utilized to meet the minimum staffing requirements which are in effect by rule and are recorded in the Medicaid Long Term Care Provider Manual for the last day of each previous quarter.

The purpose of this legislation was to increase the number of direct care staff in the state's nursing homes by providing the facilities with extra funding for the recruitment and retention of direct care staff. It is undisputed that "direct care staff' encompasses certified nursing assistants ("CNAs"), as they are the employees primarily responsible for the direct care of nursing home patients. The legislation also provided, however, that nursing facilities would be subject to a forfeiture of WEP funds paid to them if they failed to meet the minimum staffing requirements as set forth in the Long Term Care Manual ("Manual"). The issue of what those "minimum staffing requirements" are and to whom they apply led to the dispute in the present case.

During the first quarter of the fiscal year, beginning July 1, 1999, Appellant experienced twelve occurrences of staffing shortages with regards to their registered nursing staff. The parties stipulated that there were no staffing shortages with regard to CNAs or LPNs. Due to the RN shortage, however, Appellee notified Appellant that they were seeking recoupment of $28,269 paid under the WEP for the quarter July 1 — September 30, 1999. Appellant appealed the decision, averring that the minimum staffing requirements required under the WEP referred only to the requirements for the staffing of CNAs, and not licensed personnel, such as RNs.

After DHS appointed a hearing officer to adjudicate the matter, a hearing was held on May 3, 2000. By agreement of both parties, testimony taken from a hearing held on April 28, 2000, was incorporated into the record and included in the transcript of the present matter. This included the testimony of Randy Helms, Chief Program Administrator with DMS. He testified that he serves as the administrator of the WEP. He explained that the requirements for the WEP are contained in the Manual. According to Helms, the failure of an institution to have the required staff for any month in the quarter resulted in a request from DHS that the facility repay the wage enhancement for the entire reporting quarter.

Also testifying at the April 28 hearing was Jim Cooper, President of the Arkansas Health Care Association ("AHCA"). He testified that as President of the AHCA he participated in the development of the WEP during the legislative session. According to Cooper, Act 1537 was tied to Act 1529, which provided for new minimum staffing requirements for nursing facilities.1 He conceded that Act 1529 addressed not only staffing requirements for CNAs, but also for RNs and LPNs. He maintained, however, that the WEP did not provide funding for all categories of staff identified in Act 1529. According to Cooper, the WEP was to apply specifically to CNAs, because there was not enough money to implement raises for other categories. Cooper further testified on cross-examination that a compromise was achieved during the legislative process that would allow DHS to recoup funds for an entire quarter.

Present and testifying at the May 3 hearing was Annetta Maupin, Administrator for Cave City Nursing Home. She explained that the RN shortages occurred as a result of their Director of Nurses suddenly quitting. She testified that her staff assumed that CNAs were the basis for the WEP, and if they had known that the RN shortage could cause them to forfeit the monies paid under the WEP, they would have paid a staffing agency to fill the position. According to Maupin, she was unaware that RNs and LPNs were going to be calculated for purposes of the WEP.

After taking the matter under advisement, the hearing officer determined that DHS followed the procedures of the APA in implementing the WEP. The hearing officer stated that it was clear from the language of section 127 that the top priority of the WEP was to provide additional funds for direct care staff. The hearing officer disagreed, however, with Appellant's assertion that the language "specifically CNAs" meant only that CNAs were to be considered, stating:

If there is a "top priority", there are also other priorities. Had the Legislature intended that only CNAs be the subject of the WEP, the language would have reflected that the "only priority" was CNAs, or that the program was to apply only to CNAs. It did not. The word "specifically" was used, not the words "solely" or "exclusively".

The hearing officer further noted that Act 1537 could not be considered in isolation, but rather had to be considered in light of Act 1529, which set out to improve the staffing ratios of both licensed and unlicensed personnel. The hearing officer also pointed out that because the purpose of Act 1537 was to improve and increase direct patient care in nursing facilities, it was not unreasonable to require those facilities to meet certain minimum staffing requirements. The hearing officer ultimately concluded, however, that the regulations enacted by DHS-DMS exceeded the scope of legislative authority by imposing penalties for a nursing facility's failure to meet the requirements for licensed nursing personnel, when Act 1537 envisioned application to direct care staff.

DHS reviewed the hearing officer's recommendation and accepted it with modifications. It determined that the hearing officer's conclusion that the adoption and application of minimum staffing standards with respect to licensed personnel was outside the scope of Act 1537 was directly in conflict with the hearing officer's conclusion that the WEP was intended to cover all direct care staff as set out in the Manual, including RNs. Thus, DHS's final order found that Appellant had failed to meet the minimum staffing requirements in place because of the RN shortage, and was thereby required to repay $28,269 in wage enhancement monies paid for the July 1 — September 30, 1999, quarter.

Appellant then appealed this final agency decision to the Pulaski County Circuit Court. A hearing was held on March 6, 2001, and each side argued the merits of their position. No further testimony was taken. An order entered on March 28, 2001, affirmed the DHS's decision that Appellant was required to repay the wage enhancement money. This order incorporated by reference a March 13, 2001, letter order from the court. Therein, the circuit court held that Act 1537 consistently tied the wage enhancement payments to the condition that the facilities meet the minimum staffing requirements, not the minimum requirements for CNAs. The circuit court further ruled that the act was quite clear that forfeiture of the wage enhancement was to be on a quarterly basis. This appeal followed.

It is well settled that this court's review is limited in scope and is directed not to the decision of the circuit court but to the decision of the administrative agency. Arkansas Prof'l Bail Bondsman Lic. Bd. v. Oudin, 348 Ark. 48, 69 S.W.3d 855 (2002); Arkansas Contractors Lic. Bd. v. Pegasus Renovation Co., 347 Ark. 320, 64 S.W.3d 241 (2001); Tomerlin v. Nickolich, 342 Ark. 325, 27 S.W.3d 746 (2000). As with all appeals from administrative decisions under the APA, the circuit court or appellate court may reverse the agency decision if it concludes:

[T]he substantial rights of the petitioner have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the agency's statutory authority;

(3) Made upon unlawful procedure;

(4) Affected by other error or law;

(5) Not supported by substantial evidence of record; or

(6) Arbitrary, capricious, or characterized by abuse of discretion.

Ark.Code Ann. § 25-15-212(h) (Repl. 2002). See also Arkansas Dep't of Human Servs. v. Thompson, 331 Ark. 181, 959 S.W.2d 46 (1998); Wright v. Arkansas State Plant Bd., 311 Ark. 125, 842 S.W.2d 42 ...

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