Indiana State Bd. of Public Welfare v. Tioga Pines Living Center, Inc.

Decision Date22 July 1991
Docket NumberNo. 30A04-9006-CV-288,30A04-9006-CV-288
PartiesINDIANA STATE BOARD OF PUBLIC WELFARE, Indiana Department of Public Welfare, and Suzanne Magnant, in her capacity as Administrator of the Indiana Department of Public Welfare, Appellants-Defendants, v. TIOGA PINES LIVING CENTER, INC., Communicare of Indiana, Inc., d/b/a American Village Retirement Community, Bloomington Convalescent Center, Inc., Meadow Heights Nursing Center, Inc., d/b/a Lincoln Hills of New Albany, Appellees-Plaintiffs.
CourtIndiana Appellate Court
Opinion on Denial of Rehearing

Sept. 25, 1991.

Linley E. Pearson, Atty. Gen., Gordon E. White, Jr., Deputy Atty. Gen., Office of the Atty. Gen., Indianapolis, Charles A. Miller, Mark H. Lynch, Steven F. Reich, Richard W. Buchanan, Covington & Burling, Washington, D.C., for appellants-defendants.

David F. McNamar, Randall R. Fearnow, Steers, Sullivan, McNamar & Rogers, Indianapolis, Michael J. Tosick, Greenfield, for appellees-plaintiffs.

CONOVER, Judge.

Defendants-Appellants Indiana State Board of Public Welfare (IBPW), Indiana Department of Public Welfare (IDPW), and Suzanne Magnant, in her capacity as Administrator of the Indiana Department of Public Welfare (collectively, the State), interlocutorily appeal the Hancock Circuit Court's entry of a preliminary injunction and class certification of similarly-situated Indiana nursing homes, with Plaintiffs-Appellees Tioga Pines Living Center, Inc., Communicare of Indiana, Inc., d/b/a American Village Retirement Community, Bloomington Convalescent Center, Inc., Meadow Heights Nursing Center, Inc., d/b/a Lincoln Hills of New Albany, et al., as class representatives for class action purposes.

Reversed in part and affirmed in part.

This appeal presents the following issues:

Whether the trial court erred by

1. entering a preliminary injunction ordering the State to escrow monthly the monetary difference between the old and new cost control cap rates for reimbursing Indiana nursing homes under the Medicaid program, and 2. certifying as a class the approximately 785 skilled nursing facilities and intermediate care facilities (nursing homes) in Indiana qualified to receive Medicaid reimbursement payments from the State, with the captioned nursing homes as class representatives for class action purposes under Ind.Trial Rule 23.

The IDPW is charged with the duty of administering the reimbursement of Indiana nursing homes for the care of Medicaid patients. It sets reimbursement rates from time to time, using in part federal guidelines when so doing because the federal government provides matching funds to Indiana to be used for that purpose. Under the regulations promulgated by the State, qualified nursing homes must file annual reports with IDPW--stating their patient care and operating costs. IDPW then determines what costs are allowable for Medicaid reimbursement purposes as to each nursing home. One accounting factor always considered by IDPW when making reimbursement payments has been the amount of any annual increase in patient care costs reported by these qualified nursing homes to IDPW.

Medicaid reimbursement is currently based on a system of allowable costs as defined in the regulations, plus a potential incentive payment to promote efficient operation of participating nursing homes. Prior to 1983, the Medicaid reimbursement rate to each nursing home for annual increases in patient care and operating costs over its previous year's costs was capped at 9% per annum under a federal regulation requiring payment to nursing facilities "on a reasonable cost-related basis." Such facilities were reimbursed retrospectively for whatever reasonable costs they incurred. 42 U.S.C. Sec. 1396a(a)(13)(E) (1976). In 1980, however, as part of the Omnibus Budget Reconciliation Act of that year, the Boren Amendment was enacted by Congress. Its intent was to reduce the level of reimbursement paid by the states to Medicaid-qualified nursing homes to control spiraling health care costs that are notoriously inflationary. See, Charleston Memorial Hospital v. Conrad (4th Cir.1982) 693 F.2d 324, 331, and Illinois Council on Long Term Care v. Miller (N.D.Ill.1983) 579 F.Supp. 1140, 1147. The Boren Amendment provides a state's reimbursement methodology must yield rates that are "reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations and quality and safety standards." 42 U.S.C. Sec. 1396a(a)(13)(A). IDPW changed its method of Medicaid reimbursement to conform to Boren Amendment requirements in 1983.

In April of that year, acting on the recommendation of its accounting consultants, IBPW attempted to adopt, and IDPW to promulgate, an amendment to the regulations changing the method of capping annual rates by linking them to the preceding three year average of the Gross National Product Implicit Price Deflator. (R. 237). See 470 IAC 5-4.1-9(c)(3). Starting in October, 1983, IDPW began making payments to qualified nursing homes based on the new cap rate, rather than the old 9% one.

Subsequently in P.L. 80-1984, the legislature changed the former "reasonable cost-related basis" standard for reimbursement by adding a new section to the Medicaid reimbursement law, IND.CODE 12-1-7-17.2 (now 17.6), which provided in part

(b) Payment of skilled nursing facility and intermediate care facility services shall, under 42 U.S.C. 1396a(a)(13)(A), be determined in accordance with a prospective, ... payment rate that is reasonable and adequate to meet the costs that are incurred by efficiently and economically operated facilities in order to provide care and services in conformity with state and federal laws, rules, regulations, and quality and safety standards, with a growth or profit factor, as determined in accordance with generally accepted accounting principles, in accordance with rules adopted by the department [of public welfare].

The captioned nursing homes later filed this suit, claiming the new cap rate was not duly adopted and promulgated by the State because the applicable statutory procedure for doing so had not been followed. The suit also sought, among other things, (a) a preliminary injunction to prevent the State from reducing payments under the new cap rate, and (b) class certification of all similarly situated Indiana nursing homes for class action purposes under Ind.Rules of Proc., Trial Rule 23.

After a hearing, the trial court issued a preliminary injunction requiring the State to pay into escrow the difference between The State then filed this interlocutory appeal to challenge the trial court's entry of the preliminary injunction and certification of the cause as a class action. Additional facts, as necessary, appear in the later portions of this opinion.

the amounts paid to these nursing homes under the new cap rate and that which would have been paid under the old one, a sum estimated to be approximately $4,000,000 per month. Additionally, the trial court certified the cause as a class action, both as to issues and damages, and ordered appropriate notification to the class.

I

The grant or denial of a preliminary injunction rests within the equitable discretion of the trial court. Wells v. Auberry (1982) Ind.App., 429 N.E.2d 679, 682, reh. den'd., trans. den'd. The trial court's order will not be disturbed unless it is clearly erroneous, or is the result of an improvident exercise of judicial discretion. Id. We believe issuance of the preliminary injunction in this case was clearly erroneous because the appellees have an adequate remedy at law, and limit our discussion to that principle.

The purpose of a preliminary injunction is to maintain the status quo until the underlying claim can be adjudicated. As Ratliff, C.J. said

The necessity of maintaining the status quo is to prevent harm to the moving party which could not be corrected by a final judgment. If irreparable injury were to occur during the course of litigation, the judgment, in effect, would be rendered meaningless. Thus, it has been held that an injunction will not be granted where the law can provide a full, adequate, and complete method of redress. (citing case) It would appear that only harm which a court cannot remedy following a final determination on the merits may be deemed to constitute irreparable injury warranting issuance of a preliminary injunction. (citing case)

Wells, 429 N.E.2d at 683.

Our studied review of the trial court's findings in this regard reveals only monetary damage will occur to the nursing homes until a final judgment can be entered in this case. The trial court's Finding of Fact No. 17 states, in part

17. Plaintiffs and the class have no adequate remedy at law.... There is immediate and irreparable harm by the defendants continually utilizing such illegal regulations and/or unpromulgated policies as was established herein. Facilities are being sold or closing [sic] because of the imposition of these limiters which prohibit reasonable costs from being reimbursed. 1

Mere economic injury does not warrant the granting of a preliminary injunction. Whiteco Industries, Inc. v. Nickolick (1990), Ind.App., 549 N.E.2d 396; Wells, at 684. Thus, even the sale or closing of some facilities in the class does not justify the issuance of a preliminary injunction when there is an adequate remedy at law available to them. 2 In Indiana State Dept. of Welfare v. Stagner (1980), Ind.App., 410 N.E.2d 1348, it was said

This threatened business failure we conclude is not the sort of irreparable injury against which equity protects. It is clear that the temporary loss of income ultimately to be recovered if successful on the merits does not usually constitute irreparable harm. "The key word in this consideration is irreparable. Mere injuries, however substantial in terms of money, time and...

To continue reading

Request your trial
19 cases
  • Massachusetts Mut. v. Associated Dry Goods
    • United States
    • U.S. District Court — Northern District of Indiana
    • January 22, 1992
    ... ... United States District Court, N.D. Indiana, South Bend Division ... January 22, 1992. 786 ...  On October 4, 1971, Ayres Department Stores, Inc. (ADG's predecessor in interest) entered into a ... 's construction of an enclosed shopping center and gave the tenant additional rights to the mall ... MassMutual knew of this decision until the public announcement. Mr. Vaughan testified that in light ... Corp., 555 F.2d 1131, 1143 (3rd Cir.1977) (state law provides source of rule of substantive ... ; see also Indiana State Board of Public Welfare v. Tioga Pines Living Center, Inc., 575 N.E.2d ... ...
  • Community Care Centers, Inc. v. FSSA
    • United States
    • Indiana Appellate Court
    • September 22, 1999
    ... ... Home, Inc.; Bradner Village Health Care Center; Bradner Village, Inc.; DHE, Inc.; Houston ... INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, ... Counsel for the Class, Appellee, and ... Tioga Pines Living Center, Inc., Bloomington ... County Circuit Court against the Indiana State Board of Public Welfare, the Indiana Department ... ...
  • Tallahassee Memorial Regional Medical Center v. Cook
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • April 8, 1997
    ... ... Keystone Peer Review Organization, Inc., a foreign ... corporation licensed to do ...         The State pays the Plaintiffs an established per diem rate ... Ass'n, 856 P.2d 755, 758 (Alaska 1993); Indiana State Bd. of Pub. Welfare v. Tioga Pines Living ... Ass'n [v. Illinois Dept. of Public Aid, 576 F.Supp. 360, 368 (N.D.Ill.1983).] "If a ... ...
  • State v. Van Cleave
    • United States
    • Indiana Supreme Court
    • December 19, 1996
    ... ... 674 N.E.2d 1293 ... STATE of Indiana, Appellant-Respondent, ... Gregory VAN CLEAVE, ...         Susan K. Carpenter, Public Defender, Thomas C. Hinesley, Joseph M. Cleary, ... Indiana State Bd. of Public Welfare v. Tioga Pines Living Center, Inc., 575 N.E.2d ... ...
  • 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