Commonwealth v. Appalachian Reg'l Healthcare, Inc.
| Decision Date | 29 March 2019 |
| Docket Number | NO. 2016-CA-001140-MR,2016-CA-001140-MR |
| Parties | Commonwealth of Kentucky, CABINET FOR HEALTH AND FAMILY SERVICES, Appellant v. APPALACHIAN REGIONAL HEALTHCARE, INC., d/b/a Harlan ARH Hospital, d/b/a Hazard ARH Regional Medical Center, d/b/a Middleboro ARH Hospital, d/b/a Whitesburg ARH Hospital, d/b/a Williamson ARH Hospital; Ashland Hospital Corporation, d/b/a King's Daughters Medical Center; Baptist Healthcare Affiliates, Inc.; Baptist Healthcare System, Inc.; Bourbon Community Hospital, LLC, d/b/a Bourbon Community Hospital; Bowling Green-Warren County Community Hospital Corporation ; Crittenden County Hospital; Clinton County Hospital, Inc.; Community United Methodist Hospital, Inc., d/b/a Methodist Hospital; Ephraim McDowell Regional Medical Center, Inc.; Flaget Healthcare, Inc., d/b/a Flaget Memorial Hospital; Fleming County Hospital Foundation, Inc.; Georgetown Community Hospital, LLC; Grayson County Hospital Foundation, Inc.; Hardin Memorial Hospital, Inc.; Harrison Memorial Hospital, Inc.; Highlands Hospital Corporation; Hospital of Fulton, Inc., d/b/a Parkway Regional Hospital; Hospital of Louisa, Inc., d/b/a Three Rivers Medical Center; Jackson Hospital Corporation, d/b/a Kentucky River Medical Center; Jennie Stuart Medical Center, Inc.; Jewish Hospital & St. Mary's Healthcare, Inc., d/b/a Jewish Hospital Shelbyville; Kentucky Hospital, LLC, d/b/a Clark Regional Medical Center, Inc.; Kentuckyone Health, Inc.; Lake Cumberland Regional Hospital, LLC, d/b/a Lake Cumberland Regional Hospital; Logan Memorial Hospital, LLC, d/b/a Logan Memorial Hospital; Meadowview Regional Medical Center, LLC, d/b/a Meadowview Regional Medical Center; Mercy Health Partners-Lourdes, Inc., d/b/a Lourdes Hospital; Muhlenberg Community Hospital; Murray-Calloway County Public Hospital Corporation, d/b/a Murray-Calloway County Hospital; Norton Hospitals, Inc., d/b/a Norton Hospital; Our Lady of Bellefonte Hospital, Inc.; Owensboro Medical Health Systems, Inc. ; Paintsville Hospital Company, LLC, d/b/a Paul B. Hall Regional Medical Center ; Pattie A. Clay Infirmary Association, d/b/a Pattie A. Clay Regional Medical Center; Pikeville Medical Center, Inc.; Pinelake Reginal Hospital, LLC, d/b/a Jackson Purchase Medical Center; Saint Elizabeth Medical Center, Inc.; Saint Joseph Health System, Inc., d/b/a Saint Joseph East, d/b/a Saint Joseph London, d/b/a Saint Joseph Hospital, Saint Joseph Mount Sterling; Springview Hospital, LLC, d/b/a Springview Hospital; St. Claire Medical Center, Inc.; T.J. Samson Community Hospital; Taylor County Hospital District Health Facilities Corporation d/b/a Taylor Regional Hosital; the Hardin Memorial Hospital Foundation; the Harrison Memorial Hospital, Inc.; the Trover Clinic Foundation, Inc., d/b/a Regional Medical Center of Hopkins County, Appellees |
| Court | Kentucky Court of Appeals |
BRIEFS FOR APPELLANT: Catherine York, Deputy General Counsel, Office of Legal Services, Frankfort, Kentucky.
The Cabinet for Health and Family Services ("Cabinet") has appealed from an opinion and order entered by the Franklin Circuit Court on July 7, 2016, regarding Medicaid reimbursement rates as well as administrative appeals of rates filed by fifty-eight acute care hospitals ("Hospitals"). The circuit court found the so-called "budget neutrality adjustment" ("BNA") in 907 KAR 2 1:8253 invalid and contrary to the "relate to cost" provision in KRS 4 205.560(2). The circuit court also enjoined the Cabinet to hold appropriate dispute resolution and administrative procedures, so the Hospitals' appeals receive a full and fair determination at the administrative agency. Following a careful review, we affirm.
Medicaid is a cooperative federal-state program which reimburses healthcare providers rendering covered services to Medicaid eligible individuals. Federal regulations require Medicaid reimbursement payments be "reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards." 42 C.F.R.5 447.253(b)(1)(i).
The Cabinet is the state agency charged by statute6 with administering the state's Medicaid program—including setting reimbursement rates and promulgating regulations to administer its duties. The Cabinet operates through its Department for Medicaid Services ("DMS") in administering the state's Medicaid program. The Cabinet uses a fee-for-service formula to reimburse its contractual Medicaid providers—including the Hospitals party to this action—on a "per discharge" or "per case" basis. The state adopted a Diagnostic Related Group ("DRG") prospective per-discharge reimbursement method which codes clinically similar groups of patients in determining base payments, which are further adjusted using the BNA, outlier payments for certain high-cost services, and high-volume payments based on how many Medicaid patients are discharged by the given facility. DMS approved the state plan including the DRG and its BNA methodology.
The Hospitals timely filed administrative appeals beginning with their October 15, 2007, rate notices raising issues about the adequacy and correctness of their individual reimbursement rates.7 Beginning in the spring of 2010, the Cabinet conducted individual dispute resolution meetings ("DRM's") concerning the Hospitals' rate appeals pursuant to 907 KAR 1:671, Section 8. Rather than issuing dispute resolution decisions, the Cabinet waited until May 31, 2013, to write the Hospitals letters that they did not have appeal rights, dismissing the same without administrative evidentiary hearings or further due process. In these letters the Cabinet stated, "[a]s the appeals ... concern only non-appealable issues, the [DMS] has determined no DRM response is required." The Hospitals requested administrative hearings from the Cabinet's dismissal letters within thirty days pursuant to 907 KAR 1:671, Section 9. The Cabinet responded to those requests with letters stating no administrative hearings would be conducted.
The same day it sent initial dismissal letters to the Hospitals, the Cabinet initiated a lawsuit against the Hospitals in Fayette Circuit Court.8 Its complaint sought a declaration that its Medicaid reimbursement rate methodologies were consistent with the "relate to cost" provision of KRS 205.560(2), which does not mandate that Medicaid reimbursement rate methodologies always result in rates meeting or exceeding 100 percent of a Medicaid provider's actual cost.
Within thirty days of the Cabinet's lawsuit, the Hospitals filed an action for declaratory relief, writ of mandamus, and KRS 13B appeal in the Franklin Circuit Court.9 Pertinent to this appeal, the Hospitals sought a declaration that the...
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River City Fraternal Order of Police Lodge 614, Inc. v. Ky. Ret. Sys.
...Rev. Stat. § 45A.245, Kentucky "waived its sovereign immunity for contract damages ...." Cabinet for Health & Family Servs. v. Appalachian Reg'l Healthcare , 606 S.W.3d 623, 634 (Ky. Ct. App. 2019). The remaining question is whether the district court's damages awards "follow[ed] the rules ......