Cedar Hill Manor v. Department of Soc. Serv.
| Decision Date | 13 July 2004 |
| Docket Number | No. WD 62782.,WD 62782. |
| Parties | CEDAR HILL MANOR, L.L.C. d/b/a Cedar Hill Manor, and Cedar Hill Terrace, L.L.C. d/b/a Cedar Hill Terrace, Appellants, v. DEPARTMENT OF SOCIAL SERVICES, DIVISION OF MEDICAL SERVICES, Respondent. |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court, Cole County, Thomas J., Brown, III, J Harvey M. Tettlebaum, Jane C. Drummond, Co-Counsel, Jefferson City, MO, for appellant.
Curtis F. Thompson, Jefferson City, MO, for respondent.
Before LOWENSTEIN, P.J., HOWARD and HARDWICK, JJ.
This case involves the tortured financial history of a skilled nursing home in Cedar Hill, Missouri (for the sake of simplicity, hereinafter referred to as Cedar Hill). There have been various names for the nursing home as well as various licensed operators. The ultimate issue in this appeal hinges on an administrative determination that an unsatisfied civil penalty levied by a federal agency against an earlier operator can now be collected by the Missouri Department of Social Services, and the Missouri Division of Medical Services (hereinafter collectively referred to as "Department" or "Respondent"), from Cedar Hill, the present licensed operator of the home. The chronology of the agreed upon events leading to this suit are as follows:
March 1997— A Civil Money Penalty (CMP or Penalty) of $24,565 was assessed against the operator of Cedar Hills by the federal Center for Medicare and Medicaid Services (CMS). Authorized under 42 U.S.C. Section 1320(a), the Secretary of Health and Human Services, acting through CMS, is authorized to assess these sanctions for violation of federal regulations. In May of the same year, the operator appealed the assessment.
June 1998— The federal agency to which the appeal had been filed found that the appeal had been abandoned. No appeal from this decision was filed.
July 1998— The licensed operator of Cedars Nursing Center, Inc., being unable to meet its payroll obligations, was placed in receivership by the state of Missouri. A secured creditor intervened and unsuccessfully attempted to keep the receiver from using the home's pledged accounts receivable as security to secure funds to pay employees in order to keep the skilled nursing facility open. That action is recounted in State v. Cedars Nursing Center, Inc. 3 S.W.3d 803 (Mo.App.1999).
August 1998— Another operator took over Cedar Hills, followed in January 2000, by yet another operator. The appellants, Cedar Hill Manor and Cedar Hills Terrace, became the licensed operators in June 2001, when they were assigned the Medicaid provider agreement between the respondent, Missouri Department of Social Services (Department) and the previous provider.
August 2001— Respondent, the Missouri Department, sent a letter to Cedar Hill stating that CMS had requested the state deduct the outstanding monetary Penalty from amounts owed to Cedar Hill from the Missouri Medicaid program. The letter relied on 42 C.F.R. Section 488.422(c) as authority for the respondent to collect the Penalty.
Cedar Hill filed a complaint with the Administrative Hearing Commission (AHC). In the complaint, Cedar Hill alleged that the set-off by CMS was improper because: (1) the agency did not have any state authority to collect penalties from a successor operator where the penalties were initially incurred by a previous operator; (2) the federal provision CMS intended to cite in the letter did not give CMS the authority to impose the penalties on Cedar Hill; (3) collecting the CMP from Cedar Hill violated its due process rights under the Fourteenth Amendment;1 and (4) the set-off was beyond CMS's jurisdiction and, thus, void, arbitrary, capricious or unreasonable.
The parties filed cross-motions for summary determination. The AHC denied Cedar Hill's motion, but granted CMS's. The trial court then affirmed the AHC's decision, and Cedar Hill filed this appeal.
As stated previously, there is no question as to the underlying facts. On appeal, there is no question about the amount of the penalty as found by CMS, nor that it was validly entered against a prior licensee. Cedar Hill does not contest that the proper federal entity has the ability to collect the amount, but only contests that any state agency, and particularly the respondent Department, has no authorization under federal or state laws and regulations to collect penalties from a successor state licensee-operator nursing home. Review here is of the decision of the Commission which allowed the Department to deduct the Penalty from Cedar Hill's federal reimbursement for care provided to Medicaid-eligible residents.
The court reviews the decision of the AHC as to the agency action under the seven questions outlined in Section 536.140.2, RSMo 2002.2 Questions of law are for the independent judgment of the reviewing court. State Bd. of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146, 152 (Mo. banc 2003). Since constitutional issues may not be ruled upon by the AHC, but only by the courts, where such issues have been addressed by the circuit court (in this case, Cedar Hill's point three on a due process violation), this court reviews the judgment of the trial court. Cocktail Fortune, Inc. v. Supervisor of Liquor Control, 994 S.W.2d 955, 957 (Mo. banc 1999).
Cedar Hill raises numerous issues that will, for the sake of clarity, be separately treated as follows: (1) Federal regulations do not give a state authority to collect CMPs without state enabling legislation, and the only Missouri statute allowing the collection of a civil money penalty (neither the former and present version of Section 198.067), requires the action be brought in circuit court where the court is to determine the amount of the penalty. This all being so, Cedar Hill concludes that the Tenth Amendment precludes the federal government from imposing this liability, "on the states which state law does not affirmatively ... authorize"; (2) Even if Missouri law permits, there is no specific state regulation that allows the respondent to impose CMP liability on a nursing home "thrice removed" from the violator; (3) The respondent's scheme for assigning provider numbers violates the due process rights of the successors by nullifying any "opportunity for hearing on the validity of..." CMPs; and (4) Allowing the result reached by the AHC and the trial court establishes a bad public policy of inhibiting investors from purchasing failing nursing homes.
II. Analysis
Cedar Hill contends that the Tenth Amendment forbids CMS from imposing the set-off in accordance with 42 C.F.R. § 442.14(b)(6) and 42 C.F.R. § 488.442(c). The argument fails for the following reasons:
(1) A private party such as Cedar Hill does not have standing3 to invoke the Tenth Amendment, at least where, as in this case, the private party's interests are not aligned with the state's. Tenn. Elec. Power Co. v. T.V.A., 306 U.S. 118, 144, 59 S.Ct. 366, 83 L.Ed. 543 (1939); Lomont v. O'Neill, 285 F.3d 9, 13 n. 3 (D.C.Cir.2002) (); Mountain States v. Costle, 630 F.2d 754, 761 (10th Cir.1980); Artichoke Joe's Cal. Grand Casino v. Norton, 278 F.Supp.2d 1174, 1181 (E.D.Cal.2003). But see Dillard v. Baldwin County Comm'rs, 225 F.3d 1271, 1276 (11th Cir.2000); Gillespie v. City of Indianapolis, 185 F.3d 693, 703-04 (7th Cir.1999).
(2) Cedar Hill's Tenth Amendment argument itself is unsound. The Tenth Amendment4 prohibits the federal government from compelling states or state officials to enact or enforce federal regulatory schemes. Printz v. United States, 521 U.S. 898, 935, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997). Cedar Hill claims that neither 42 C.F.R. § 442.14(b)(6) nor 42 C.F.R. § 488.442(c) is applicable here. If so, then the federal statutes do not compel the states to do anything — and without any federal compulsion, the Tenth Amendment does not come into play. Similarly unavailing is Cedar Hill's observation that state administrative agencies' powers exclusively come from the General Assembly. See Marston v. Juvenile Justice Ctr. of the Thirteenth Judicial Circuit, 88 S.W.3d 534, 538-39 (Mo.App.2002). If state statutes or regulations did not authorize CMS's set-off, then the set-off was ultra vires, even if set-off was purportedly authorized by federal law. But that doesn't mean the federal law compelled CMS to make the set-off. In fact, one of the regulations relied on by the trial court, 42 C.F.R. § 488.442(c) , is permissive, not compulsory. In any event, the predicate of Cedar Hill's Tenth Amendment argument, that the State of Missouri did not authorize CMS to impose the set-off, is incorrect. See infra.
Cedar Hill next contends that the set-off was not authorized by state law, because: (1) the state regulations supposedly authorizing the set-off, 13 C.S.R. 70-10.015(3)(I) and 13 C.S.R. 70-10.10.015(15)(A), exceed the Department's authority to promulgate and (2) these regulations were inapplicable. Cedar Hill is mistaken on both counts.
Both 13 C.S.R. 70-10.015(3)(I) and 13 C.S.R. 70-10.10.015(15)(A) authorized CMS to impose the set-off. 13 C.S.R. 70-10.015(3)(I) states:
Regardless of changes in control or ownership for any facility certified for participation in Medicaid, the division [of Medical Services]...
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