Legacy Healthcare, Inc. v. Barnes & Thornburg

• Citation: 837 N.E.2d 619
• Decision Date: 28 November 2005
• Docket Number: No. 18A02-0408-CV-646.,18A02-0408-CV-646.
• Parties: LEGACY HEALTHCARE, INC., Appellant (Defendant/Counter-Plaintiff), v. BARNES & THORNBURG, Appellee (Plaintiff/Counter-Defendant).
• Court: Supreme Court of Indiana

837 N.E.2d 619

LEGACY HEALTHCARE, INC., Appellant (Defendant/Counter-Plaintiff), v. BARNES & THORNBURG, Appellee (Plaintiff/Counter-Defendant).

No. 18A02-0408-CV-646.

Court of Appeals of Indiana.

November 28, 2005.

COPYRIGHT MATERIAL OMITTED

Bruce N. Munson, Muncie, IN, Attorney for Appellant.

Forrest Bowman, Jr., Bowman, Cosby & Bowman, Indianapolis, IN, Attorney for Appellee.

OPINION

SULLIVAN, Judge.

Appellant-Defendant/Counter-Plaintiff, Legacy Healthcare, Inc. ("Legacy"), filed a counter-claim against Appellee-Plaintiff/Counter-Defendant, Barnes & Thornburg ("B&T"), alleging malpractice in B&T's representation of Legacy concerning Legacy's participation in the Medicaid program. Specifically, Legacy alleged that B&T negligently failed to perfect appeals of certain administrative determinations adverse to Legacy. The trial court granted B&T's motion for summary judgment. Legacy now appeals,¹ presenting three issues, which we reorder and restate as whether the trial court erred in granting summary judgment in favor of B&T on Legacy's three claims of malpractice based upon the following three events:

(1) B&T's failure to file the Agency Record in the judicial review of the administrative agency decision to disqualify a certain administrative law judge ("ALJ");

(2) B&T's failure to timely challenge a September 21, 1999 notice from the Indiana State Department of Health ("ISDH") terminating Medicaid certification for Legacy's Community Care Center in North Vernon; and

(3) B&T's failure to challenge a September 2, 1999 notice from the ISDH terminating the Medicaid certification for Legacy's New Horizon Developmental Center ("New Horizon").

We affirm.

The resolution of this case involves the unfortunately convoluted and complex nature of the Medicaid system. Because of this, we first attempt a general overview of this system.² As is typical when dealing with governmental agencies, acronyms flourish. A listing of the acronyms frequently used follows:

• ISDH ..... Indiana State Department of Health.

• FSSA ..... Indiana Family and Social Services Administration.

• OMPP ..... Office of Medicaid Policy and Planning, part of the FSSA.

• ICF/MR ..... Intermediate Care Facility for the Mentally Retarded.

• FFP ..... Federal Financial Participation, i.e. federal funds for Medicaid.

Title XIX of the Social Security Act, popularly called "Medicaid," was enacted by the United States Congress in the Social Security Amendments of 1965, Pub.L. No. 89-97. Sullivan v. Day, 681 N.E.2d 713, 715 (Ind.1997). The Medicaid statutes create a comprehensive cooperative federal-state program for medical care under which participating states are federally financed for their medical assistance programs if they submit a state plan which comports with federal requirements. 81 C.J.S. Social Security & Public Welfare § 247 (2004). Although state participation in Medicaid is voluntary, if a state chooses to participate, it must comply with the federal statutes and regulations governing the program. Id.

As explained by the Seventh Circuit Court of Appeals in Legacy Healthcare, Inc. v. Feldman, 11 Fed.Appx. 589, 590 (7th Cir.2001),³ Medicaid service providers operate under a "provider agreement" with the state's "Medicaid Agency." In Indiana, the Medicaid Agency is the FSSA, which operates the Medicaid program through the OMPP. Id.; see also Sullivan v. Evergreen Healthcare Ltd., 678 N.E.2d 129 (Ind.Ct.App.1997). Federal law requires the participating states to designate a "survey agency" to evaluate facilities to determine whether the facilities meet the various requirements for participation in the Medicaid program. Feldman, 11 Fed.Appx. at 590 (citing 42 U.S.C. §§ 1396a(a)(9), (33)). In Indiana, the survey agency is the ISDH. Id.; Ind.Code § 16-28-12-1 (Burns Code Ed. Repl.2005). Pursuant to 42 C.F.R. § 442.101, before the OMPP may approve a provider agreement with a facility, it must obtain notice from the ISDH that the facility has met the requirements for certification in the Medicaid program. Feldman, 11 Fed.Appx. at 590; see also Ind.Code § 12-15-13-0.6 (Burns Code Ed. Repl.2001) (requiring Medicaid providers to be eligible to render service on the date for which the service is billed); 405 Ind. Admin. Code § 1-12-1(a)(1) (payments to ICFs/MR contingent upon "proper and current certification"); 405 Ind. Admin. Code § 1-1-3(e) (Medicaid only liable for the payment of claims filed by providers who were certified at the time the service was rendered).

There are generally two types of requirements for Medicaid certification. The first are referred to as "conditions of participation." See 42 C.F.R. § 483.400 through 483.480 (conditions of participation for ICFs/MR). To obtain Medicaid certification, the ISDH must find that an ICF/MR facility meets the conditions of participation. See 42 C.F.R. § 442.101(d)(1), (e). The second type of requirements are referred to as "standards of participation." According to the court in Lichtman v. Blom, 1994 WL 704799 (S.D.N.Y. Dec. 16, 1994),⁴ "Conditions of Participation, the more important standard, must be complied with in order to participate in the Medicaid Program. Standards of Participation combine to form a Condition of Participation." Id. at *3. See, e.g., 42 C.F.R. § 483.410 (condition of participation regarding governing body and management of ICF/MR contains five component standards of participation); see also 42 C.F.R. § 442.101(a)(3) (although facility may be certified as having "standard-level" deficiencies, all "conditions of participation" must be found to be met). The duration of a Medicaid provider agreement generally may not exceed twelve months.⁵ 42 C.F.R. § 442.15.

The ISDH may also terminate a facility's certification. See Feldman, 11 Fed.Appx. at 590. This is a two-step process: first, the ISDH, as the survey agency, determines that a facility's certification should be terminated when the ISDH finds that the facility's care is deficient and thus not in compliance with Medicaid standards. Id. Indeed, 42 C.F.R. § 442.117 provides that the survey agency "must terminate a facility's certification if it determines that... [t]he facility no longer meets the conditions of participation for ICFs/MR ... [or] [t]he facility's deficiencies pose immediate jeopardy to residents' health and safety." (emphasis supplied).

Next, if the ISDH does determine that the facility does not meet the necessary conditions, the OMPP then sends an official notice of "decertification"⁶ to the facility based upon the ISDH's determination, which notice terminates the Medicaid provider agreement and Medicaid funding. Feldman, 11 Fed.Appx. at 590. "With limited exceptions ... the OMPP cannot provide Medicaid funding to a facility that is not certified to participate in the Medicaid program." Id. (citing 42 C.F.R. § 442.12). However, the OMPP is under no obligation to enter into a provider agreement simply because the ISDH has found the facility in question to be certified. See Ind. State Dep't of Health v. Legacy Healthcare, Inc., 752 N.E.2d 185, 191 (Ind.Ct.App.2001).

Procedural History of Present Case

B&T filed suit against Legacy on April 10, 2001, asserting claims for unpaid legal fees. On September 18, 2001, Legacy filed an answer which admitted that it had incurred charges for legal services, but asserted a counter-claim alleging malpractice on the part of B&T. Eventually, on September 26, 2003, B&T moved for summary judgment with regard to the malpractice claims. Legacy filed its response in opposition to B&T's motion for summary judgment on October 27, 2003. Following a hearing held on January 23, 2004, the trial court, on March 30, 2004, entered an order granting summary judgment to B&T with respect to Legacy's malpractice claims. On July 2, 2004, the trial court entered judgment against Legacy with regard to the remaining issue of unpaid legal fees. Legacy filed its notice of appeal on August 8, 2004.

Standard of Review

The elements of attorney malpractice are: (1) employment of an attorney which creates a duty; (2) the failure of the attorney to exercise ordinary skill and knowledge (the breach of the duty); and (3) that such negligence was the proximate cause (4) of damage to the plaintiff. Beall v. Mooring Tax Asset Group, 813 N.E.2d 778, 781 (Ind.Ct.App.2004). Here, neither party disputes that Legacy employed B&T, thus creating the duty, and Legacy admits that it has the burden of proving the elements of legal malpractice. B&T correctly notes that so long as it negatives at least one element of Legacy's malpractice claim, summary judgment would be proper. See Arnold v. F.J. Hab. Inc., 745 N.E.2d 912, 915 (Ind.Ct.App.2001). Indeed, the focus of B&T's argument is that it established prima facie that Legacy cannot prove that B&T's alleged breach of duty caused Legacy any harm.⁷

As an appeal from the trial court's grant of summary judgment, our standard of review is well settled. Summary judgment is appropriate only where the designated evidentiary matter shows that there are no genuine issues as to any material fact and that the moving party is entitled to a judgment as a matter of law. Rector v. Oliver, 809 N.E.2d 887, 889 (Ind.Ct.App.2004) (citing Ind. Trial Rule 56(C)). When reviewing a grant of a motion for summary judgment, we stand in the shoes of the trial court. Id. Once the moving party demonstrates, prima facie, that there are no genuine issues of material fact as to any determinative issue, the burden falls upon the non-moving party to come forward with contrary evidence. Id. The non-moving party may not rest upon the pleadings but must instead set forth specific facts, using supporting materials contemplated under Trial Rule 56, which show the existence of a genuine issue for trial. Burgess v. E.L.C. Electric, Inc., 825 N.E.2d 1, 5 (Ind.Ct.App.2005), trans. denied. The party appealing the grant of summary judgment bears the burden of persuading this court that the...