FSSA v. Hospitality House of Bedford

• Decision Date: 05 February 2003
• Docket Number: No. 49A02-0206-CV-467.,49A02-0206-CV-467.
• Citation: 783 N.E.2d 286
• Court: Indiana Appellate Court
• Parties: INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, John Hamilton, Secretary, Division of Family and Children, James Hmurovich, Director, Office of Medicaid Policy & Planning, Kathleen Gifford, Assistant Secretary, Appellants-Respondents, v. HOSPITALITY HOUSE OF BEDFORD, Appellee-Petitioner.

783 N.E.2d 286

INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, John Hamilton, Secretary, Division of Family and Children, James Hmurovich, Director, Office of Medicaid Policy & Planning, Kathleen Gifford, Assistant Secretary, Appellants-Respondents, v. HOSPITALITY HOUSE OF BEDFORD, Appellee-Petitioner.

No. 49A02-0206-CV-467.

Court of Appeals of Indiana.

February 5, 2003.

Randall R. Fearnow, Libby Y. Mote, Krieg DeVault LLP, Indianapolis, IN, Attorneys for Appellee.

Steve Carter, Attorney General of Indiana, David L. Steiner, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellants.

OPINION

BAKER, Judge.

Following a remand to the trial court, this case comes before us once again. Appellants-respondents Indiana Family and Social Services Administration (FSSA) et al., appeal the trial court's judgment entered in favor of the appellee-petitioner Hospitality House of Bedford (Hospitality House), claiming that remand instructions set forth by this court in Indiana Family & Social Services Administration v. Hospitality House of Bedford, 704 N.E.2d 1050 (Ind.Ct.App.1998),¹ were incorrectly followed. Specifically, the FSSA argues that the Medicaid reimbursement rate for Hospitality House was not supported by sufficient evidence, that the award of $524,549.47 in retroactive Medicaid reimbursement dating back to July 26, 2001, was improper, and that the trial court erred when it did not dissolve a former judgment that related to this action. Concluding that the trial court's findings of fact and conclusions of law were supported by the evidence, that the trial court's judgment was consistent with this court's instructions on remand and that the judgment is consistent with all applicable Medicaid regulations, we affirm.

FACTS

The FSSA is responsible for administering the Medicaid program aimed at providing health care to certain low-income individuals who would not otherwise be able to afford medical treatment. Hospitality House, 704 N.E.2d at 1053. Continuing Care, a not-for-profit corporation associated with Bloomington Hospital, owns and operates Hospitality House, a nursing facility in Bedford. Hospitality House is also a comprehensive care facility and is certified to provide nursing services in accordance with Medicaid, Title XIX of the Social Security Act under 42 U.S.C. § 1396. The federal Medicaid laws require states to institute and follow reimbursement formulae that comport with the federal mandates for participation in the program. Under such circumstances, a trial court is free to fashion a remedy to the extent that it remains within the framework of the state regulations that are in effect at the time. Hospitality House, 704 N.E.2d at 1064-65.

For years, Hospitality House has operated a unit for the treatment of a special group of pediatric residents² who require greater care than that which is normally provided in a skilled nursing home facility. As of November 2001, there were sixty-seven patients residing in Hospitality House's pediatric wing. Most of the residents are profoundly retarded and suffer from multiple physical disabilities, including cerebral palsy and seizure disorders. Beginning in 1989, Hospitality House was required to incur a substantial increase in operating costs as a result of changes in federal and state law mandating that it provide "active treatment" to the residents of the pediatric wing.³ This is a federal condition of participation in Medicaid that is enforced by the Indiana Department of Health and imposed on nursing facilities attempting to serve the needs of mentally retarded residents. To receive Medicaid funding, Hospitality House is required to provide a continuous active treatment program to each of its pediatric patients that includes aggressive, consistent implementation of a program of specialized and generic training, treatment, health services and related services.

In an effort to comply with the applicable federal and state regulations governing active treatment, Hospitality House has specifically employed, and continues to employ, a number of mental retardation specialists and nurses. These individuals are required to create plans and conduct active treatment in the pediatric wing. Hospitality House would not be required to retain these additional employees and would not have hired these additional employees had the facility operated only a geriatric wing.

Litigation commenced in this case in November 1989, when Hospitality House requested state agency review seeking a special Medicaid reimbursement rate due to the extraordinary costs it was mandated to incur by federal Medicaid laws when the State Department of Health began enforcing "active treatment" requirements for all mentally retarded pediatric residents. Hospitality House, 704 N.E.2d at 1053. Although an administrative law judge (ALJ) entered a judgment for Hospitality House, review by the FSSA resulted in rejection of Hospitality House's request for enhanced reimbursement. Id. at 1054. As a result, Hospitality House pursued administrative remedies and filed a verified petition for Judicial Review and Stay appealing the FSSA's denial of its request for enhanced Medicaid reimbursement.

The trial court awarded Hospitality House a judgment in 1992. Id. The FSSA failed to appeal that decision, but it filed a T.R. 60(B)(7) motion for relief from that judgment. The trial court subsequently denied the FSSA's request for relief. Id. On December 15, 1992, the trial court entered findings of fact and conclusions of law along with an order requiring the FSSA "to recalculate the Petitioner's Medicaid rate from the date of Petitioner's initial request for rate relief under 470 IAC 5-4.1-6(d) and to pay [Hospitality House] both retroactively and prospectively, through its Medicaid rate, for all costs reasonably incurred in complying with the additional active treatment requirements imposed by federal regulations and enforced by the Department of Health or otherwise incurred by Hospitality House in complying with state and federal regulations." Appellee's App. p. 65. The FSSA was also ordered to continue Medicaid reimbursement to Hospitality House at a minimum rate of $107 per patient per day with ancillary costs of supplies and therapies to be billed and reimbursed separately. Moreover, the trial court determined that "further revisions of this rate need to be calculated by [the FSSA] in response to any additional financial information to be submitted by [Hospitality House]." Appellee's App. p. 65.

The $107 per patient per day rate set in 1992 was based on 1989 data and the actual cost of care for the pediatric residents at Hospitality House exceeded the cost of care for those residents in traditional geriatric nursing facilities. It was established that more hours of direct care at Hospitality House were expended per patient per day in the pediatric wing as compared to those individuals in the geriatric wing. Under the $107 per patient per day reimbursement plan, it was demonstrated that the pediatric wing of Hospitality House was losing $33 per patient per day that amounted to an operating loss of approximately $70,000 per month.

On May 13, 1994, Hospitality House filed a verified petition for enforcement of the trial court's judgment in light of the FSSA's refusal to comply with the court's order. The parties ultimately entered into an Agreed Entry that was approved by the trial court on June 20, 1994. The order provided, among other things, that the FSSA was to reimburse Hospitality in the amount of at least $107 per patient per day for care provided to all residents of the pediatric unit. The court was to retain jurisdiction to resolve any future disputes between the parties related to compliance with the court's order either before or after the effective date of any changes in the Medicaid reimbursement system. Hospitality House was also entitled to payment of all legally allowed interest on sums requested by it from the FSSA if it was compelled to return to the trial court for assistance and if it was successful on its claim.

Hospitality House filed yet a second verified petition for enforcement of the trial court's 1992 order following the FSSA's unilateral decision to cease reimbursing Hospitality House separately for the costs of supplies and therapies. This petition was resolved in a similar fashion through the execution and approval of an agreed entry on December 13, 1996. In the 1996 agreed entry, the FSSA agreed to resume separate reimbursement of medical supplies and therapies in addition to the payment of the $107 per patient per day Medicaid rate.

In the meantime, the FSSA sought relief from the trial court's 1992 order, alleging that various changes in the State's Medicaid reimbursement methodology and applicable laws warranted clarification, modification or vacation of the order. The trial court denied the FSSA's motion on August 8, 1997, on the grounds that the motion was barred by laches and that the changes in Medicaid regulations were not substantive.

On appeal, we determined that the FSSA's request for relief was not barred by laches because the trial court and the parties "specifically contemplated alteration to the judgment based upon change in the laws and regulations" in the 1992 order as well as the agreed entries. Hospitality House, 704 N.E.2d at 1062. We also held that the FSSA's continued failure to reimburse Hospitality House for the reasonable costs incurred in providing active treatment and the trial court's findings that such actions were arbitrary and capricious "could support a continuation of enhanced reimbursement if based upon the Medicaid reimbursement laws in effect at the relevant times." Id. at 1064. We reversed and remanded the cause "for an assessment by the trial court of the correct [Medicaid] reimbursement formula in effect at the time of FSSA's request for relief [under Trial Rule 60(B)], and for alteration, if any, to the...