Charlotte-Mecklenburg Hosp. Authority v. North Carolina Indus. Com'n

• Court: North Carolina Supreme Court
• Writing for the Court: WHICHARD; MEYER
• Citation: Charlotte-Mecklenburg Hosp. Authority v. North Carolina Indus. Com'n, 443 S.E.2d 716, 336 N.C. 200 (N.C. 1994)
• Decision Date: 06 May 1994
• Docket Number: CHARLOTTE-MECKLENBURG,No. 60PA93,60PA93
• Parties: HOSPITAL AUTHORITY, d/b/a Carolinas Medical Center; Charlotte Institute of Rehabilitation and University Hospital; Carolina Medicorp, Inc.; Forsyth Memorial Hospital, Inc.; Medical Park Hospital, Inc.; Duke Medical Center; High Point Regional Hospital, Inc.; Memorial Mission Hospital, Inc.; Moses H. Cone Memorial Hospital; and North Carolina Baptist Hospitals, Inc. v. NORTH CAROLINA INDUSTRIAL COMMISSION and James J. Booker, J. Harold Davis and J. Randolph Ward, in their official capacities as its Chairman and Members.

Page 716

443 S.E.2d 716

336 N.C. 200

CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY, d/b/a Carolinas Medical Center; Charlotte Institute of Rehabilitation and University Hospital; Carolina Medicorp, Inc.; Forsyth Memorial Hospital, Inc.; Medical Park Hospital, Inc.; Duke Medical Center; High Point Regional Hospital, Inc. Memorial Mission Hospital, Inc.; Moses H. Cone Memorial Hospital; and North Carolina Baptist Hospitals, Inc. v. NORTH CAROLINA INDUSTRIAL COMMISSION and James J. Booker, J Harold Davis and J. Randolph Ward, in their official capacities as its Chairman and Members.

No. 60PA93.

Supreme Court of North Carolina.

May 6, 1994.

Turner Enochs & Lloyd, P.A. by Wendell H. Ott and Laurie S. Truesdell, Greensboro, and Womble Carlyle Sandridge & Rice by Roddey M. Ligon, Jr., Anthony H. Brett, and Dale E. Nimmo, Winston-Salem, for plaintiffs-appellees.

Michael F. Easley, Atty. Gen. by Isham B. Hudson, Jr., Sr. Deputy Atty. Gen., for defendants-appellants.

WHICHARD, Justice.

The primary question is whether adoption of a per diem reimbursement rule and concomitant repeal of the Blue Cross and Blue Shield of North Carolina rule exceeded the North Carolina Industrial Commission's statutory authority to review and approve hospital charges for services rendered to patients entitled to care under the Workers' Compensation Act, N.C.G.S. Chapter 97 (1991) ("Act"). For reasons hereinafter stated, we hold that adoption of the per diem rule exceeded the Commission's statutory authority, but that repeal of the Blue Cross Blue Shield rule did not.

I.

The General Assembly enacted the Act in 1929 to both "provide swift and sure compensation to injured workers without the necessity of protracted litigation," and to "insure[ ] a limited and determinate liability for employers." E.g., Rorie v. Holly Farms, 306 N.C. 706, 709, 295 S.E.2d 458, 460 (1982).

The philosophy which supports the Work[ers'] Compensation Act is "that the wear and tear of human beings in modern industry should be charged to the industry, just as the wear and tear of machinery has always been charged. And while such compensation is presumably charged to the industry, and consequently to the employer or owner of the industry, eventually it becomes a part of the fair money cost of the industrial product, to be paid for by the general public patronizing such products."

Vause v. Equipment Co., 233 N.C. 88, 92, 63 S.E.2d 173, 176 (1951) (quoting Cox v. Kansas City Refining Co., 108 Kan. 320, 195 P. 863 (1921)); see also Barber v. Minges, 223 N.C. 213, 216, 25 S.E.2d 837, 839 (1943) ("The primary purpose of legislation of this kind is to compel industry to take care of its own wreckage.").

The basic operating principle of the Act is that an employee is automatically entitled to certain benefits whenever he suffers either a personal injury by accident occurring in the course of the employment and arising out of it, or incurs an occupational disease. Those benefits include both wage-based disability and medical compensation. "Medical compensation" includes hospital services "as may reasonably be required to effect a cure or give relief and for such additional time as, in the judgment of the Commission, will lessen the period of disability." N.C.G.S. § 97-2(19) (1991). "Medical compensation shall be provided by the employer." N.C.G.S. § 97-25 (1991). Medical compensation may be ordered by the Commission if not provided by the employer. Id. The pecuniary liability of the employer therefor "shall be limited to such charges as prevail in the same community for similar treatment of injured persons of a like standard of living when such treatment is paid for by the injured person." N.C.G.S. § 97-26 (1991). "[C]harges of hospitals for medical compensation ... shall be subject to the approval of the Commission." N.C.G.S. § 97-90(a) (1991). The General Assembly created the Industrial Commission, see N.C.G.S. § 97-77, to administer the provisions of the Act, Hanks v. Utilities Co., 210 N.C. 312, 319, 186 S.E. 252, 257 (1936), and authorized the Commission to "make rules, not inconsistent with [the Act], for carrying out the provisions [thereof]." N.C.G.S. § 97-80(a) (1991).

On 1 June 1992 the Industrial Commission announced that hospital charges for medical compensation rendered on or after 1 January 1993 would be approved, pursuant to N.C.G.S. § 97-90(a), under two alternative rules: a pre-existing fee schedule, which provided reimbursement according to a published schedule of uniform charges for inpatient services, and a per diem methodology. Charges in excess of these fees so scheduled or calculated would not be approved unless the hospital received prior approval thereof, or upon appeal to the full Commission.

In a memorandum dated 18 March 1992, the Commission described the per diem rule: the per diem "rate" would be set for each hospital by establishing the average daily hospital charge for five categories of in-patient services rendered to workers' compensation patients. Excluding any charges for treatment or services rendered to workers' compensation patients which are not paid or payable under the law, Category I aggregates all general, medical, and surgical charges, including rehabilitation, rendered to workers' compensation patients other than those covered by Categories II and III. Category II aggregates all intermediate or intensive care charges for medical intensive care unit or surgical intensive care unit services, including cardiac care, rendered to workers' compensation patients. Category III aggregates high cost specialty unit charges such as those for burn units, dialysis units, heart surgery or other specialty units. Category IV aggregates pain therapy care charges for pain therapy services, and Category V aggregates psychiatric care charges for psychiatric services rendered to workers' compensation patients. The first-year base per diem charge would be calculated for each category of cases by dividing the total workers' compensation in-patient charges for each separate category by the total number of workers' compensation in-patient days in each category for the most recent and complete fiscal year preceding the effective date, 1 January 1993. The resultant quotient, after adjustment for inflation by a factor equal to the Hospital Market Basket Index's annualized medical cost indicator for the South Atlantic Region, would be the per diem rate chargeable for such category during the first year. In subsequent years, that base year per diem would be adjusted for inflation by the Hospital Market Basket Index's indicator for the most recent year, not by an individual hospital's experience.

Further, the Commission advised, the per diem reimbursement system would replace a reimbursement rule in effect since 1 January 1990 whereby the Commission, furnished with a list of normal charges for services for that hospital by Blue Cross and Blue Shield of North Carolina, Inc. ("BCBSNC"), would approve charges for services rendered a workers' compensation patient which were the same as those for a BCBSNC patient.

Plaintiffs, a group of not-for-profit hospitals, addressed the Commission by letter on 14 July 1992, requesting an administrative forum by which they could "contest the regularity of the procedures used to adopt [the above] changes and the legal authority of the Commission to adopt or enforce a Per Diem or a Hospital Fee Schedule reimbursement system." The Commission did not respond to this letter.

Proceeding under the Declaratory Judgment Act, N.C.G.S. §§ 1-253 to -267 (1983 & Supp.1992), plaintiff hospitals then instituted this action in the Superior Court, Wake County, alleging that the Commission's actions in terminating the BCBSNC option and adopting the per diem option (1) failed to comply with applicable rulemaking procedures; (2) were arbitrary and capricious; (3) exceeded the Commission's statutory authority and were inconsistent with the Act, which provides that an employer's liability for medical services "shall be limited to such charges as prevail in the same community for similar treatment of injured persons"; and (4) deprived plaintiff hospitals of property without due process of law. Plaintiff hospitals requested that the court, pursuant to the Declaratory Judgment Act, declare the actions of the Commission null and void and enjoin the Commission from establishing or enforcing a reimbursement methodology for approval of inpatient hospital service charges except for the purpose of limiting such charges to the statutory standard contained in N.C.G.S. § 97-26, so that plaintiffs would be paid for inpatient hospital services provided to workers' compensation patients on the basis of the same schedule of charges applicable to the general patient population.

The trial court heard the case without a jury. It concluded that it had personal and subject matter jurisdiction pursuant to the Declaratory Judgment Act. It found that the Commission's actions exceeded its statutory authority to review and approve charges for hospital services based on prevailing community standards under the Act, and accordingly enjoined the Commission from implementing or enforcing the proposed changes in reimbursement options. It specifically excepted "the ... continued use of those hospital inpatient reimbursement mechanisms in effect prior to defendants' adoption of [the per diem option]," including the extant fee schedule. In a subsequent order, the trial court clarified that it was enjoining both adoption of the per diem rule and repeal of the BCBSNC rule.

From this judgment, defendants appealed to the Court of Appeals and petitioned this Court for discretionary review prior to a determination by the Court of Appeals. On 11 March 1993, we allowed defendants' petition 427 S.E.2d 619. We now affirm the determination that defendants' adoption of the per diem rule exceeded their statutory authority, but we reverse the determination that defendants'...