Country Club Home, Inc. v. Harder

• Decision Date: 06 December 1980
• Docket Number: No. 51997,51997
• Parties: COUNTRY CLUB HOME, INC., and Lawrence Sowers as Administrator, Appellee, v. Robert C. HARDER, as Secretary of Social and Rehabilitation Services, Appellant.
• Court: Kansas Supreme Court

Page 1140

620 P.2d 1140

228 Kan. 756

COUNTRY CLUB HOME, INC., and Lawrence Sowers as Administrator, Appellee, v. Robert C. HARDER, as Secretary of Social and Rehabilitation

Services, Appellant.

No. 51997.

Supreme Court of Kansas.

Dec. 6, 1980.

Opinion on Motion for Modification Jan. 17, 1980.

See 623 P.2d 505.

Syllabus by the Court

1. When a pretrial order is agreed on by the parties and followed by the trial court in deciding the issues as set forth in the order, the parties have acquiesced therein and cannot enlarge those issues on appeal. Such an order when entered controls the subsequent course of the action, unless modified at the trial to prevent manifest injustice.

2. The allowance or refusal of an application for a change of venue rests largely in the discretion of the trial court under K.S.A. 60-609.

3. A court may not substitute its judgment for that of the Secretary of Social and Rehabilitation Services in determining which method is preferable to determine a reasonable cost-related basis for reimbursing long term care facilities; a court should not intrude into areas of administrative discretion, and it must protect the director's right to select among effective options.

4. A rebuttable presumption of validity attaches to actions of administrative agencies; the burden of proof rests with the party or parties challenging the action of an administrative agency.

5. A state is not obligated to participate in the medicaid program; however, once it has voluntarily elected to participate, the state must comply with federal standards.

6. Inadequate funding does not excuse failure of a state to comply with federal standards, and there is no provision, express or implied, in the Social Security Act permitting a state to alter federal standards to suit the state's budgetary needs.

7. Under the federal regulations adopted in 1976 and as later amended, the Department of Health, Education and Welfare required a state medicaid agency to pay for long term care facility services on a reasonable cost-related basis. 45 C.F.R. § 250.30 (1976). Payment rates could not be set lower than rates the agency could reasonably find were adequate to reimburse in full the actual allowable costs of a facility that is economically and efficiently operated (42 C.F.R. § 447.302(b) (1978)).

8. The regulations of the Kansas Department of Social Welfare, now the Department of Social and Rehabilitation Services, for the period of July 28, 1972, to May 1, 1978, relating to charges for adult nursing home services under Title XIX, were invalid as an attempt to alter federal standards set in the Social Security Act to suit the department's budgetary needs.

9. In a declaratory judgment action under K.S.A. 77-434 to determine the validity and proper application of certain regulations adopted by the Kansas Department of Social Welfare and by its successor, The Kansas Department of Social and Rehabilitation Services, the record is examined and it is held the judgment of the district court declaring all such regulations invalid should be affirmed in part, reversed in part and the case should be remanded for further proceedings as set out in the opinion.

Bruce A. Roby, State Dept. of Social and Rehabilitation Services, Topeka, argued the cause and was on the briefs for appellant.

T. Richard Liebert, P. A., of Liebert & Liebert, Coffeyville, argued the cause and was on the brief for appellee.

Robert A. Coldsnow, Wichita, argued the cause and was on the amicus curiae brief for Kansas Legislative Coordinating Council.

FROMME, Justice:

This is an action brought by and on behalf of licensed nursing home facilities in the State of Kansas to obtain a declaratory judgment declaring certain regulations of the Kansas Department of Social and Rehabilitation Services invalid. These nursing home facilities rendered care and services under cooperative state-federal institutional care programs. The regulations of the Kansas Department of Social and Rehabilitation Services (formerly the State Board of Social Welfare of Kansas) being attacked are those for the period from July 1, 1971, to February 29, 1980.

This declaratory judgment action is authorized by K.S.A. 77-434 in which it is stated:

"The court shall declare the rule and regulation invalid if it finds that it violates constitutional or statutory provisions, or exceeds the statutory authority of the agency, or was adopted without substantial compliance with statutory rule-making procedures."

The action was filed on June 6, 1973, attacking regulations passed to implement federal social security programs authorized by K.S.A. 1971 Supp. 39-708x) and amendments. The statute, effective July 1, 1971, provided:

"The state board shall take such action as may be necessary to assure that persons, firms and corporations selling property or providing services and licensed practitioners, within the scope of their practice as defined by state law who provide professional services under the provisions of the federal social security act, shall be paid reasonable charges. Payment for other medical assistance under the provisions of the federal social security act shall be reasonable charges: Provided, however, That if such payments are otherwise limited by federal law, such payments shall be as near the reasonable charges as may be permitted by federal law." Emphasis supplied.

Since the original petition was filed over seven years ago the plaintiffs have filed both an amended petition and an amendment to the amended petition in an effort to keep abreast of changes in the statute and regulations implementing the medicaid program. Changes have occurred annually in both the statute and the regulations. The decision from which this appeal was taken has been delayed and complicated by the further fact that no less than three judges have presided over portions of the proceedings before a fourth judge was assigned to Morris County to complete the case. Before the assignment of the fourth judge, the case had been set for trial twice and continued each time. The present judgment appealed from was entered February 29, 1980. The judgment pertains solely to the first claim set forth in the amended petition. The second claim in the amended petition has not been tried by the lower court. In the second claim plaintiffs seek recovery in a class action for payments alleged to be due by reason of payments claimed to have been withheld in violation of law. The second claim remains for later trial, assuming plaintiffs are successful in this first claim. The sole decision to be reached in this appeal concerns the validity of the regulations of the former State Board of Social Welfare and of its successor, the present Department of Social and Rehabilitation Services of Kansas, covering the period of time from July 1, 1971, to February 29, 1980.

The provisions of K.S.A. 1971 Supp. 39-708(x) and amendments were passed by the legislature to implement certain grants-in-aid available to the states under the provisions of the federal Social Security Act, Public Law 92-603, § 249, 42 U.S.C.A. § 1396a(a)(13)(E). This law requires that a plan be submitted by the state agency and that it be approved by the Secretary of Health, Education and Welfare conforming to the requirements of the Social Security Act. Effective May 4, 1980, the federal Department of Health, Education and Welfare was redesignated the Department of Health and Human Services. Public Law 96-88, § 509(a). For purposes of this opinion we are concerned only with the time the Department and Secretary of Health, Education and Welfare (HEW) remained in existence.

Under these grant-in-aid programs, such as medicaid, payments are made by the designated state agency to nursing home facilities which have provided nursing care and medical services to qualified beneficiaries. The money for the payments comes from both state and federal sources and is to be paid in accordance with an approved plan. The federal Social Security Act requires that plans provide for reimbursement to both skilled nursing facilities and intermediate care facilities "on a reasonable cost related basis," as determined in accordance with methods and standards which shall be developed by the state on the basis of "reasonable cost-finding methods" approved and verified by the Secretary of HEW.

The federal Social Security Act consists of several enactments under which the federal government makes funds available to the states for the care of various categories of needy individuals. The section of the federal statute with which we are concerned is Title XIX (Medicaid) (Grants to States for Medical Assistance Programs) for indigent aged persons. 42 U.S.C.A. §§ 1396, et seq.

On appeal the Secretary of Social and Rehabilitation Services of Kansas, appellant herein, attacks the integrity and impartiality of the district judge assigned to hear this complicated and long delayed case. The Secretary launches a personal attack against the trial judge and his procedural orders. It is alleged the judge acted indecisively in first ordering a change of venue from Morris County to Shawnee County and later rescinding the order. It is suggested the proceedings are "perhaps invalid as a matter of venue and jurisdiction." It is alleged the judge blatantly and retroactively violated, abused and changed the pretrial order causing obvious and manifest injustice to the appellant. It is alleged the conduct of the judge indicated a friendliness toward the plaintiffs and a preconceived bias toward the defendant-appellant. It is further alleged the judge failed to timely rule on defendant's motion for summary judgment and failed to consider the full record stipulated by the parties.

According to the transcript of the pretrial hearing and the pretrial order, which the defendant-appellant prepared, the trial court on application for a change of venue granted the change on condition that the files not be transferred from...