Indiana Family and Social Services Admin. v. Hospitality House of Bedford

• Decision Date: 30 December 1998
• Docket Number: No. 49A05-9712-CV-506,49A05-9712-CV-506
• Citation: 704 N.E.2d 1050
• Parties: INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Jeff Richardson, Administrator, Division of Family and Children, Suzanne Turner, Director, Office of Medicaid Planning and Policy, James Verdier, Secretary, Appellants-Defendants, v. HOSPITALITY HOUSE OF BEDFORD, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 1050

704 N.E.2d 1050

INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Jeff

Richardson, Administrator, Division of Family and Children, Suzanne Turner, Director, Office of Medicaid Planning and Policy, James Verdier, Secretary, Appellants-Defendants, v. HOSPITALITY HOUSE OF BEDFORD, Appellee-Plaintiff.

No. 49A05-9712-CV-506.

Court of Appeals of Indiana.

Dec. 30, 1998.

Jeffrey A. Modisett, Attorney General of Indiana, Jon Laramore, Deputy Attorney General, Beth H. Henkel, Deputy Attorney General, Indianapolis, for Appellants-Defendants.

Randall R. Fearnow, Alastair J. Warr, Paul (Rick) Rauch, McNamar Fearnow & McSharar, P.C., Indianapolis, for Appellee-Plaintiff.

OPINION

FRIEDLANDER, Judge.

Indiana Family and Social Services Administration, Jeff Richardson, Administrator; the Division of Family and Children, Suzanne Turner, Director; and the Office of Medicaid Planning and Policy, James Verdier, Secretary (collectively FSSA), ¹ appeal the denial of their Ind. Trial Rule 60(B) motion for relief from a judgment rendered in favor of Hospitality House of Bedford (HH). HH is a Medicaid certified nursing facility in Lawrence County, Indiana. As restated, this appeal presents the following issues for review:

1. Did the trial court exceed its jurisdiction in the 1992 judgment by formulating an order with prospective application, and what effect should be given to HH's assertions of laches and res judicata?

2. Did changes in the Medicaid reimbursement regulations require alterations to the prospective judgment?

We reverse and remand.

The history of this protracted case includes inter alia a previous appeal to this court, see Scales v. Hospitality House of Bedford, 593 N.E.2d 1283 (Ind.Ct.App.1992), resulting in reversal and remand, a judgment in December 1992 in favor of HH, dismissal of FSSA's appeal of the 1992 order for failure to timely perfect the appeal, enforcement requests and agreed entries, a request for relief from the 1992 judgment upon which this appeal is based, and a motion for relief directed to this court after the current appeal was perfected.

Initially, it should be noted that Medicaid is a voluntary, cooperative program designed by Congress. Indiana State Bd. v. Tioga Pines, 637 N.E.2d 1306 (Ind.Ct.App.1994). The program provides financial assistance to participating states to defray the medical costs related to care of the needy. Id. Although the program is voluntary, once a state chooses to participate, it must comply with all federal Medicaid laws and regulations. Department of Pub. Welfare v. Lifelines of Indianapolis, 637 N.E.2d 1349 (Ind.Ct.App.1994), citing Lett v. Magnant, 965 F.2d 251, 252 (7th Cir.1992). The Medicaid laws in effect at the time of the 1992 judgment required states to devise a plan in compliance with what was commonly referred to as the Boren Amendment.

To qualify for assistance, a state must devise a scheme for reimbursing health care providers and have that plan approved by the Secretary of Health & Human Services. Presently, the state plan must comply with Section 1902(a)(13) of the Medicaid Act, 42 U.S.C. § 1396a(a)(13)(A) as amended by the Omnibus Budget Reconciliation Act of 1980, Pub.L. 96-499, § 962(a), 94 Stat. 2650 (1980), the revision now commonly referred to as the Boren Amendment.

Department of Pub.Welfare, 637 N.E.2d at 1351.

HH has a special wing which provides nursing care and active treatment to severely and profoundly mentally retarded residents. As found in the first decision in this case, Scales, 593 N.E.2d 1283, and in the order from which FSSA currently appeals, see infra, the costs of care for the mentally retarded residents exceeds the costs of care for those residents in traditional nursing facilities. ²

The case began in November 1989, when HH 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 ³ residents. See 470 IAC § 5-4.1-6(d) (allowing separate and distinct rate review due to an increase in services mandated by changes in federal or state law or regulation during a calendar year, which became 405 IAC § 1-14-6 effective in 1994, ⁴ then 405 IAC § 1-14.1-6); see also 42 C.F.R. § 483.440 (setting requirement for "active treatment" of mentally retarded patients). Although an administrative law judge found in favor of HH, review by FSSA resulted in rejection of HH's request for enhanced reimbursement.

HH pursued administrative remedies and was awarded a favorable decision by the trial court in 1992. FSSA failed to appeal the 1992 decision. After emergency petitions for enforcement by HH which resulted in agreed entries by the parties, in October 1996 FSSA filed a T.R. 60(B)(7) motion for relief from the 1992 judgment. In its order denying the motion for relief, the trial court reviewed the procedural history of the case. Excluding the formal portions, the order provides:

1. On December 15, 1992, this Court entered Findings of Fact, Conclusions of Law and an Order on judicial review in this case in favor of the Petitioner, Hospitality House of Bedford.... The Court's Judgment recognized various inadequacies in Medicaid reimbursement for the care of certain residents of a special unit for the mentally retarded located within [HH's] skilled nursing facility. The Court approved six (6) findings made earlier in the case by an Administrative Law Judge and ordered the retroactive and prospective relief requested by [HH].

2. [FSSA] sought to appeal this Court's December 15, 1992 Order (hereinafter the "Order") to the Indiana Court of Appeals by filing a praecipe. However, [FSSA] failed to perfect [its] appeal in a timely manner and the Court of Appeals denied [FSSA's] verified petition seeking a belated appeal.

3. On June 20, 1994, in the course of previous efforts by [HH] to enforce the Order, the parties entered into an Agreed Entry which was approved and so ordered by this Court. In the Agreed Entry, the following language was approved:

10. The parties agree that contemplated changes in the way [FSSA] reimburse [s] Medicaid certified nursing facilities may conflict with the order to pay $107.00 per patient per day. This court shall 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. The parties agree to attempt to settle any disputes over the application of this order to any changes in [FSSA's] reimbursement system through negotiation if possible.

The parties further agreed in paragraph 14 of the Agreed Entry as follows:

14. All future questions related to interpretation of this agreement or any previous order of this Court or compliance therewith shall remain subject to this court's jurisdiction to fashion appropriate remedies and to supervise compliance by the parties. [References to the Record omitted].

4. On July 25, 1994, [HH's] counsel corresponded with Deputy Attorney General Jon Laramore. The correspondence anticipated changes in the way in which Medicaid providers were to be reimbursed and invited Mr. Laramore to address the issue of therapy and supply reimbursement in compliance with the Order. The correspondence reads in part as follows:

... in the June 24, 1994 Agreed Entry ... [t]he parties agreed to attempt to settle any disputes over the application of [the Order] to any changes in the reimbursement system. We would like to begin this process as soon as possible. If a reimbursement system takes effect August 1, 1994 eliminating payments to the facility for therapy supplies, the facility will lose approximately $45.00 per patient per [day] in revenue. Such a change in reimbursement would conflict with [the Order] that the facility be paid a reasonable and adequate amount for the care of the pediatric residents and would require the facility to pursue further enforcement efforts in the absence of an agreement. I am interested in any thoughts you may have on this subject and as to whether your clients have discussed with you any proposal you are free to discuss with us. I look forward to hearing from you in this regard. August 1 is just around the corner.

5. [FSSA] did not reply to the above request and instead acquiesced without complaint in the reimbursement of [HH] for medical supplies at 150% of actual cost and therapies at 125% of cost. This compliance continued until September of 1996 when Respondents unilaterally stopped reimbursing Petitioner separately for supplies and therapies.

6. On October 18, 1996, [HH] filed a Verified Petition for Emergency Enforcement of Court Order. This was the second such petition [HH] had been required to file in this case and it was resolved in a similar fashion, through the execution of a second Agreed Entry on December 13, 1996. In the second Agreed Entry, [FSSA] agreed to resume reimbursement of medical supplies at 150f costs and therapies at either 125% of costs or at the therapy rate established for [HH] prior to August 1, 1994. [FSSA] also retained specifically their right to suspend or deny any of [HH's] claims in accordance with rules pertaining to medical necessity, adequate documentation and utilization control, and to perform an audit of any of [HH's] claims in accordance with applicable rules.

7. On October 25, 1996, [FSSA] filed a "Motion to Vacate, Clarify or Modify Injunction" pursuant to Ind.Trial Rule 60(B)(7). The motion alleged, inter alia, that changes had occurred in the State's Medicaid reimbursement methodology and applicable laws constituting changed circumstances justifying a modification of the Order. [FSSA] insist[s] the Order is actually an injunction which, because of changed circumstances, has become an "instrument of wrong."

8. The Order relied in part on the following...