Department of Social Services v. Villa Capri Homes, Inc.

Decision Date15 January 1985
Docket NumberNo. 65786,65786
Citation684 S.W.2d 327
CourtMissouri Supreme Court
Parties, Medicare & Medicaid Guide P 34,472 DEPARTMENT OF SOCIAL SERVICES, et al., Appellants-Cross-Respondents, v. VILLA CAPRI HOMES, INC., et al., Respondents-Cross-Appellants.

Andrew Rothschild, St. Louis, for respondents-cross-appellants.

Gregory W. Schroeder, Dept. of Social Services, Gen. Counsel Div., Jefferson City, for appellants-cross-respondents.

Harvey Tettlebaum, Jefferson City, for amicus curiae.

WELLIVER, Judge.

Eleven nursing homes 1 participating in Missouri's Title XIX Medicaid program initiated a proceeding before the Administrative Hearing Commission challenging the amount of state reimbursements received under the Medicaid program. The homes contended that reimbursements for the years of 1977 and 1978 should have been computed on the basis of an informal agreement covering that period for the reason that the Medicaid plan and regulations could not be applied retroactively to claims prior to May 11, 1978. The Commission ruled this issue for the Homes and as to this issue the Department of Social Services appeals. The Homes also challenged the amount of reimbursements after May 11, 1978 alleging misinterpretation of the Medicaid plan and regulations. The Commission ruled this issue in favor of the Department and from this ruling the Homes appeal. Resolution of this issue may apply to reimbursements made both prior to and after May 11, 1978, if the plan is applied retroactively. In the interest of clarity, the parties will be referred to as the "Department" and the "Homes" except in the final judgment.

Petition for review was sought on both appeal and cross-appeal pursuant to § 536.100-140, RSMo 1978. The circuit court affirmed both of the rulings made by the Commission. The appeal before this Court involves the construction and application of a state regulation, the State's Medicaid Plan, 13 C.S.R. 40-81.080. in light of settled constitutional principles and accordingly is not within our exclusive jurisdiction. We retain jurisdiction, however, in the interest of judicial economy. Rule 83.06. State v. Higgins, 592 S.W.2d 152, 153, n. 1 (Mo. banc 1979). We reverse in part and affirm in part.

On or about December 20, 1979, each of the Homes filed a petition before the Administrative Hearing Commission. These petitions alleged that the Department improperly interpreted the State's Medicaid plan, 13 C.S.R. 40-81.080, when it denied reimbursement by stipulated amounts for costs incurred during 1977 and 1978. The Homes also contested the Department's reduction of the amount sought for certain reimbursement under the Medicaid program following May 11, 1978. The reductions were made by the Department by deducting certain expenses for inter alia, management fees, podiatrist fees and amounts in excess of an upper limit set by the Department. Additionally, the Homes objected to the Department's reducing their reimbursements by the amount the Homes had received from providing room reservations and barber and beauty shop services. The Homes also unsuccessfully petitioned for a stay of the disallowance of reimbursement, claiming that they would be irreparably harmed unless the State reimbursed the questioned amounts.

In September 1980, the Administrative Hearing Commission granted the Homes' motion to consolidate the eleven cases. The Commission held its hearing on December 16, 1980. The Department chose not to present any evidence and elected to rest upon the factual matters developed on cross-examination. The Homes subsequently filed a post-hearing brief in which, for the first time, they argued that the Medicaid plan in 13 C.S.R. 40-81.080 could not be applied to the reimbursement claims prior to May 11, 1978, the date when the rule became an effective state regulation. The Administrative Hearing Commission issued its findings of fact and conclusions of law in January 1983. The Commission accepted respondents' argument and ruled that retroactive application of 13 C.S.R. 40-81.080 violated both the Missouri constitutional prohibition against retrospective laws, Article I, § 13, and certain federal regulations. In lieu of 13 C.S.R. 40-81.080 the Commission applied an informal Medicaid plan which it held governed reimbursements prior to May 11, 1978 and granted the Homes their claimed reimbursements. The Commission, however, held that claims for reimbursement of costs after May 11, 1978 were governed by 13 C.S.R. 40-81.080, and it upheld the Department's treatment of the claims under the regulation.

The Department appealed the Commission's conclusion that 13 C.S.R. 40-81.080 could not be applied retroactively and that an informal Medicaid plan existed during the stated period. The Homes cross-appealed the Commission's finding that the Department properly reduced the amount of reimbursement by the profit portion of room reservation revenues and barber and beauty shop revenues, pursuant to 13 C.S.R. 40-81.080(13)(A) for the period from May 11, 1978 to December 31, 1978. They also cross-appealed the Commission's finding that the Department could impose an "upper limit" on the amount of reimbursement, pursuant to 13 C.S.R. 40-81.080(23) for the period from May 11, 1978 to December 31, 1978.

The hearing before the Commission focused on the Department's interpretation of its 13 C.S.R. 40-81.080. Only after the Commission completed hearing evidence did the Homes challenge the retroactive application of 13 C.S.R. 40-81.080 and assert the existence of an informal cost plan covering the period between July 1, 1976 and May 11, 1978. The only germane evidence concerning this period is a one page memorandum and a short description of the memo by its author.

Congress created the Medicaid program by enacting Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. The program establishes a cooperative effort between the states and the federal government to provide "financial assistance to participating States to aid them in furnishing health care to needy persons." Harris v. McRae, 448 U.S. 297, 100 S.Ct. 2671, 2683, 65 L.Ed.2d 784 (1980). If a state adopts a Medicaid plan in compliance with Title XIX and duly promulgated federal regulations, "[t]he federal government provides matching funds to ... states which ... locally administer their own programs and transmit payments to providers of nursing home services." AGI-Bloomfield Convalescent Center, Inc. v. Toan, 679 S.W.2d 294 at 298 (Mo.App.1984). See also Illinois Council on Long Term Care v. Miller, 579 F.Supp. 1140, 1142 (N.D.Ill.1983). In 1967, Missouri elected to participate in this venture in cooperative federalism. 1967 Mo.Laws 325-28.

The thrust of this litigation centers around the State's attempt to comply with a change in the federal Medicaid program. In 1972, Congress passed an amendment to Title XIX, adding Public Law 92-603, § 249, 42 U.S.C. § 1396a(a)(13)(E). The amendment required all states participating in the Medicaid program to adopt plans for reimbursement for skilled nursing facilities and intermediate care facilities based 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 cost-finding methods approved and verified by the Secretary." Pursuant to the amendment, states were to adopt conforming reimbursement plans by July 1, 1976. The amendment was designed to facilitate higher quality medical care and foster more efficient use of Medicaid funds by reducing overpayments and underpayments that resulted from use of flat rates. 41 Fed.Reg. 27,300, July 1, 1976. One of the functions of this amendment was to encourage "state flexibility in the development of cost related reimbursement schemes." American Health Care Association, Inc. v. Califano, 443 F.Supp. 612, 614 (D.C.D.C.1977). See also Illinois Council For Long Term Care v. Miller, 503 F.Supp. 1091, 1093 (N.D.Ill.1980); United Nursing Home, Inc., v. McNutt, 35 Wash.App. 632, 669 P.2d 476, 480 (1983). States could set "reasonable cost related rates on either a prospective or retrospective basis." Alabama Nursing Home Ass'n v. Harris, 617 F.2d 388, 392 (5th Cir.1980). The 1972 amendment contemplated promulgation of federal regulations prior to 1976; these regulations would outline the parameters of an acceptable plan. By June 1976, however, the federal government had failed to issue any regulations.

Since its entry into the Medicaid program, the State has required that payments by the State are "to be made on the basis of the reasonable cost of the care or reasonable charge for the services as defined and determined by the Division of Family Services." § 208.152, RSMo 1978. 2 The Division of Family Services is also given authority to promulgate regulations defining reasonable costs. § 208.153 RSMo 1978. 3 Prior to July 1, 1976, the State operated under what it called a negotiated rate system. The provider would approach the appropriate state agency and request a certain rate which reflected the amount sought for each Medicaid patient per diem. The two parties would thereupon negotiate and agree upon a rate until it was time to negotiate again. The Division of Family Services determined that this process could not be followed under the standard mandated by 42 U.S.C. § 1396(a)(13)(E). Left without any formal guidance by the federal government as of June 1976, the Department on June 26, 1976 sent an informal memorandum to all participating skilled nursing facilities and intermediate care facilities. The memorandum indicated that the Department would implement cost related reimbursement effective July 1, 1976, but the plan would not be filed with the Secretary of State's Office until the final federal regulations were published by the Department of Health, Education and Welfare. The memorandum expressly stated that "[t]he plan will be retroactive to ...

To continue reading

Request your trial
31 cases
  • Hess v. Chase Manhattan Bank USA, N.A., No. WD 64370 (MO 3/28/2006), WD 64370
    • United States
    • United States State Supreme Court of Missouri
    • March 28, 2006
    ...operation clearly appears from the express language of the act or by necessary or unavoidable implication." Dep't of Soc. Servs. v. Villa Capri Homes, Inc., 684 S.W.2d 327, 332 (Mo. banc 1985) (citation omitted).3 However, even if this presumption is overcome, a statute cannot be applied re......
  • State v. Thomaston, WD
    • United States
    • Court of Appeal of Missouri (US)
    • March 10, 1987
    ...Research Medical Center v. Peters, 631 S.W.2d 938, 946 (Mo.App.1982); Lincoln Credit Co. v. Peach, supra; Department of Social Services v. Villa Capri Homes, Inc., 684 S.W.2d 327, 332 (Mo. banc 1985); and State ex rel. St. Louis-San Francisco Ry. Co. v. Buder, 515 S.W.2d 409, 410 (Mo. banc ......
  • Doe v. Roman Catholic Diocese of Jefferson City, No. 75493
    • United States
    • United States State Supreme Court of Missouri
    • September 28, 1993
    ...Francisco Ry. Co. v. Buder, 515 S.W.2d 409 (Mo. banc 1974), that has since been clarified by this Court in Dept. of Social Services v. Villa Capri Homes, Inc., 684 S.W.2d 327 (Mo. banc 1985). In Villa Capri, the Department of Social Services contended that if there is a clear legislative in......
  • MISSOURI REAL ESTATE COM'N v. Rayford, WD 70723.
    • United States
    • Court of Appeal of Missouri (US)
    • April 13, 2010
    ...operation clearly appears from the express language of the act or by necessary or unavoidable implication.'" Dep't of Soc. Servs. v. Villa Capri Homes, Inc., 684 S.W.2d 327, 332 (Mo. banc 1985) (quoting Lincoln Credit Co. v. Peach, 636 S.W.2d 31, 34 (Mo. banc 1982) (appeal dismissed 459 U.S......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT