Cent. Miss. Med. Ctr. v. Miss. Div. of Medicaid & Drew L. Snyder

Citation294 So.3d 1121
Decision Date13 February 2020
Docket NumberNO. 2018-SA-01410-SCT,2018-SA-01410-SCT
Parties CENTRAL MISSISSIPPI MEDICAL CENTER v. MISSISSIPPI DIVISION OF MEDICAID and Drew L. Snyder, in His Official Capacity as Executive Director of Mississippi Division of Medicaid
CourtUnited States State Supreme Court of Mississippi

ATTORNEYS FOR APPELLANT: GEORGE H. RITTER, JACKSON, REBECCA L. HAWKINS

ATTORNEYS FOR APPELLEES: JANET McMURTRAY, SAMUEL PHILIP GOFF, LAURA L. GIBBES, DION JEFFERY SHANLEY

EN BANC.

RANDOLPH, CHIEF JUSTICE, FOR THE COURT:

¶1.Central Mississippi Medical Center (CMMC) appeals the Hinds County Chancery Court's decision denying its appeal of a Division of Medicaid (DOM) hearing. The DOM had determined that CMMC owed it $1.226 million due to overpayment. This Court recently decided a reimbursement dispute involving the DOM. See Crossgates River Oaks Hosp. v. Miss. Div. of Medicaid , 240 So. 3d 385 (Miss. 2018). In Crossgates , the hospitals prevailed because the DOM had failed to adhere to the Medicare State Plan Agreement. Applying the same legal principles today, the DOM prevails because the DOM adhered to the Plan. The chancellor found sufficient evidence to support the DOM's decision, decreed that it was neither arbitrary nor capricious, and decreed that it did not exceed the DOM's authority or violate any of CMMC's statutory or constitutional rights. We affirm the decision of the chancery court.

FACTS AND PROCEDURAL HISTORY

¶2. Federal appropriations for Medicaid are available to states that negotiate a plan with the secretary of the federal Department of Health and Human Services. See 42 U.S.C. § 1396 (2012). After a plan is approved, the state Medicaid entity (in Mississippi, the DOM is the entity) is bound to follow the plan and cannot deviate from it. See generally Crossgates River Oaks Hosp. , 240 So. 3d 385 (holding that the DOM acted improperly by disregarding the plain language of the Plan). See also Blanchard v. Forrest , 71 F.3d 1163, 1166 (5th Cir. 1996). The Mississippi State Plan Agreement (Plan) requires the DOM to use the Medicare Notice of Program Reimbursement (NPR) to establish the final reimbursement. In fiscal year 2000, intermediate reimbursement was premised on projected expenses based on prior cost reports the provider had submitted. Later, once final reports were obtained and the NPR generated, the DOM would issue notices to the providers, either requesting repayment of funds the provider had not earned or providing additional funds to address shortfalls.

¶3. In April of 1999, CMMC purchased the former Methodist Healthcare-Jackson Hospital which consisted of a North Campus in northeast Jackson and a Main Campus in south Jackson. Later in 1999, CMMC lost a certification of need for its North Campus hospital. CMMC closed the North Campus on December 31, 1999. The closing was problematic for CMMC's reimbursements for fiscal year 2000 for Medicare and Medicaid.

¶4. The North Campus was only in operation for eight of the months covered in fiscal year 2000, and all previous cost reports that the DOM could use to project costs had twelve months of costs included. Thus, the DOM requested that CMMC file an amended cost report to estimate costs taking into account the mid-fiscal-year closure. CMMC filed an amended cost report with the DOM that excluded both costs associated with the North Campus and the days in operation attributable to the North Campus. Based on this data, the DOM revised CMMC's reimbursement.

¶5. In 2003, Mutual of Omaha, at the time a designated Medicare Intermediary, issued to CMMC its NPR. The NPR was based on final adjustments to CMMC's Medicare cost reports. In the absence of appeal by CMMC, it was the declaration of CMMC's final Medicare reimbursement for the period described.1 CMMC acknowledged receipt of the NPR on September 23, 2003. The 180 days to amend the NPR formally or informally expired on March 22, 2004. Through no fault of the DOM or CMMC, the DOM did not receive its copy of the Medicare NPR until about seven years later. The delay was related to issues experienced by Mutual of Omaha and was compounded by other problems experienced by the DOM's claims processor, another third party, Affiliated Computer Services, Inc. The DOM notified CMMC early in 2004 of the delay in processing its claim.

¶6. In compliance with the Plan, once the DOM received the Medicare NPR, the DOM accepted it to establish final reimbursement. After the DOM received the NPR, it adjusted CMMC's reimbursement based on data from the NPR and requested repayment of $1.226 million. CMMC did not contest the accuracy of the NPR until October of 2010, more than seven years after CMMC received the NPR. CMMC claims as its reason not to appeal the NPR that the allegedly erroneous data in the NPR did not affect its Medicare reimbursement in a significant way. The DOM counters that if CMMC's characterization of the NPR data is correct, then CMMC's Medicare reimbursement was significantly inflated. The DOM argues that CMMC did not challenge the NPR before Medicare because correcting the data would have reduced its reimbursement. Regardless, CMMC knew the same data would be used by Medicare and the DOM.

¶7. CMMC filed an administrative appeal before the DOM. A hearing officer was assigned to hear CMMC's appeal, found no merit to its appeal, and issued findings and conclusions. CMMC then appealed the decision of the hearing officer to the Hinds County Chancery Court. Again, CMMC failed to prevail. The Hinds County Chancery Court held that the DOM's decision was supported by substantial evidence, was not arbitrary or capricious, and did not exceed the DOM's authority or violate CMMC's statutory or constitutional rights. CMMC appealed.

STANDARD OF REVIEW

¶8. In all cases in which we review a chancellor's opinion concerning a DOM hearing officer's decision, we must decide "whether the order of the agency 1) was supported by substantial evidence, 2) was arbitrary or capricious, 3) was beyond the power of the agency to make, or 4) violated some statutory or constitutional right of the complaining party." Adams v. Miss. State Oil & Gas Bd. , 139 So. 3d 58, 62 (Miss. 2014) (internal quotation mark omitted) (quoting Anadarko Petroleum Corp. v. State Oil & Gas Bd. of Miss. , 99 So. 3d 109, 111 (Miss. 2012) ).

¶9. This Court has stated that arbitrary means "fixed or done capriciously or at pleasure. An act is arbitrary when it is done without adequately determining principle; [it is] not done according to reason or judgment ...." Harrison Cty. Bd. of Supervisors v. Carlo Corp. , 833 So. 2d 582, 583 (Miss. 2002) (quoting McGowan v. Miss. State Oil & Gas Bd. , 604 So. 2d 312, 322 (Miss. 1992) ). We have also defined capricious to mean "freakish, fickle, or arbitrary. An act is capricious when it is done without reason, in a whimsical manner, implying either a lack of understanding of a disregard for the surrounding facts and settled controlling principles ...." Id. (quoting McGowan , 604 So. 2d at 322 ).

¶10. Further, "[a]n agency's interpretation of a rule governing the agency's operation is a matter of law that is reviewed de novo, but with great deference to the agency's interpretation." Crossgates River Oaks Hosp. , 240 So. 3d at 387 (citing Sierra Club v. Miss. Envtl. Quality Permit Bd. , 943 So. 2d 673, 678 (Miss. 2006) ). "Our courts are not permitted to make administrative decisions and perform the functions of an administrative agency. Administrative agencies must perform the functions required of them by law." Miss. State Tax Comm'n v. Miss.-Ala. State Fair , 222 So. 2d 664, 665 (Miss. 1969). This deference is not to be confused with the lack of deference accorded to an agency in the interpretation of a statute, which is properly reserved to the courts of this State. King v. Miss. Military Dep't , 245 So. 3d 404, 408 (Miss. 2018). The deference to the interpretation of a rule or regulation is obviated if the interpretation is clearly erroneous such that it is arbitrary, capricious, or an abuse of discretion. See Crossgates River Oaks Hosp. , 240 So. 3d at 387 (citing Div. of Medicaid v. Miss. Indep. Pharmacies Ass'n , 20 So. 3d 1236, 1238 (Miss. 2009) ).

ISSUES ON APPEAL

¶11. On appeal the parties contest three central issues:

I. Whether the DOM acted arbitrarily or capriciously by relying on the Medicare NPR to set CMMC's reimbursement rather than earlier submissions to the DOM by CMMC.
II. Whether Mississippi Code Sections 43-13-117(J) and 43-13-118 restrict the DOM's authority to adjust CMMC's reimbursement because the adjustment was a "cut" that occurred after the statutory period to make it.
III. Whether the DOM violated CMMC's due-process rights by adjusting CMMC's reimbursement.

ANALYSIS

I. Did the DOM act arbitrarily or capriciously by relying on the Medicare NPR to set CMMC's reimbursement rather than earlier submissions to the DOM by CMMC?

¶12. CMMC first contends that the DOM acted arbitrarily by using the NPR to determine the final reimbursement rather than accepting submissions that CMMC provided in revised cost reports. CMMC unconvincingly argues that the Plan does not require the DOM to utilize the NPR and, without authority, argues that nothing prevents the DOM from amending the NPR. Both contentions are easily dispelled by the plain language of the Plan then in force. Attachment 4.19–A of the Plan, effective in fiscal year 2000, reads,

The Division of Medicaid has entered into agreements with Medicare intermediaries for participation in a common audit program of Titles XVIII and XIX. Under this agreement, the intermediaries for participation in a common audit program shall provide DOM the results of the field audits of those hospitals located in Mississippi. DOM will prepare desk reviews based on those field audits. DOM will adjust the prospective rate paid to in-state hospitals based on these desk reviews and field audits.2

The DOM's interpretation of the Plan is sound. The clear and unambiguous language of Attachment 4.19–A of the Plan directs that the...

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