Massachusetts Hosp. Ass'n, Inc. v. Department of Public Welfare

• Decision Date: 08 March 1995
• Docket Number: No. 06693,06693
• Parties: , 47 Soc.Sec.Rep.Ser. 113, Medicare & Medicaid Guide P 43,266 MASSACHUSETTS HOSPITAL ASSOCIATION, INC., & others. 1 v. DEPARTMENT OF PUBLIC WELFARE & others. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1044

646 N.E.2d 1044

419 Mass. 644, 47 Soc.Sec.Rep.Ser. 113,

Medicare & Medicaid Guide P 43,266

MASSACHUSETTS HOSPITAL ASSOCIATION, INC., & others.¹ v. DEPARTMENT OF PUBLIC WELFARE & others. ² No. 06693.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Dec. 6, 1994.

Decided March 8, 1995.

Kenneth A. Behar (Edward D. Kalman, with him), Boston for plaintiffs.

Douglas H. Wilkins, Asst. Atty. Gen., for defendants.

Present: LIACOS, C.J., and ABRAMS, NOLAN, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

This case arises from Massachusetts Hospital Association's (Association's) challenge to amendments to the State Medicaid plan and to the implementing regulations which establish changes in methodology to be used in setting Medicaid reimbursement rates for "non-acute" hospitals. ³ The Association moved for summary judgment seeking a declaration that the amendments to the State Medicaid plan and the resulting methodology to be used in setting Medicaid reimbursement rates were procedurally and substantively invalid. The motion further sought a declaration that the Rate Setting Commission (commission) may not apply the invalid methodology to rates for non-acute hospitals for fiscal year 1991. The Association also sought to compel reimbursement for the services provided in fiscal year 1991 at the rates which were established by the commission, according to the previous rate setting methods. A Superior Court judge granted summary judgment in favor of the Department of Public Welfare (department), ruling as follows: the department's disapproval of the fiscal year 1991 Medicaid reimbursement rates for non-acute hospitals established by the commission on June 29, 1990, was valid; the amendments to the State Medicaid plan which were submitted to the Health Care Financing Administration (HCFA) were supported by adequate findings; the amended regulations in 114.1 Code Mass.Regs. § 28.00 (1989) are not invalid as a result of any alleged defect in public notice; the implementation of the amended regulations in 114.1 Code Mass.Regs. § 28.00 would not be impermissibly retroactive and would not violate G.L. c. 6A, §§ 32, 36, 37, 37A, 39 (1992 ed.); the Association was not entitled to the payment of the two per cent wage increase mandated by G.L. c. 6A, § 37A(a), until HCFA approved a fiscal year 1991 inflation methodology. The Association filed a timely notice of appeal. We transferred the case here on our own motion, and now affirm.

A summary of the interplay between the State and Federal agencies involved in the implementation of the Medicaid program is helpful in understanding the facts of this case. Under Title XIX of the Social Security Act, often referred to as the Medicaid Act, 42 U.S.C. §§ 1396 et seq. (1988), States receive Federal grants to provide necessary medical assistance to the poor. If a State chooses to participate in the Medicaid program, it must submit to HCFA a State plan for medical assistance which satisfies the substantive requirements of 42 U.S.C. § 1396a(a)(13)(A), and the procedural requirements set forth in 42 C.F.R. § 447.200 (1987). Any changes in the payment rates established in the State plan require the State Medicaid agency to submit plan amendments to HCFA for approval. 45 C.F.R. § 205.5(a) (1988).

Massachusetts participates in the Medicaid program through two State entities, the department and the commission. The commission is responsible for setting the reimbursement rates for Medicaid providers, such as the plaintiff hospitals, pursuant to G.L. c. 6A, § 32. These hospitals submit their fiscal year budgets to the commission for review, and the commission approves the hospitals' reimbursable costs, as well as the amount of revenue needed from all payors to meet these costs. The department is responsible for approving the rates promulgated by the commission for administering the program, for submitting any changes in the State plan to the HCFA for approval, and for making sure that the State continues to comply with the Federal Medicaid regulations. See G.L. c. 118E, §§ 3, 4, 6 (1992 ed.); Quincy City Hosp. v. Rate Setting Comm'n, 406 Mass. 431, 433-434, 548 N.E.2d 869 (1990).

Following a public hearing, held on May 21, 1990, the commission promulgated new rates for non-acute hospitals based on the provisions of 114.1 Code Mass.Regs. § 28.00, the regulations governing the setting of rates for fiscal year 1990. On August 3, 1990, the department notified the commission that, pursuant to G.L. c. 118E, § 4A, it did not approve of the rates the commission had promulgated. The commission had set an inflation factor between 5.58% and 5.78% for all payors. The department preferred a 3.6% inflation factor.

On September 30, 1990, pursuant to Federal regulations, the department submitted to HCFA a proposed amendment to the State Medicaid plan. This amendment (TN90-19) proposed changes in the reimbursement methodology to be applied to medical services provided by non-acute hospitals. It proposed a change in the inflation factor to be used to update the reimbursement rates for non-acute hospitals each year. The changes were to take effect on July 1, 1990.

On November 7, 1990, HCFA notified the department that its failure to update fiscal year 1991 payment rates for non-acute hospitals' services to reflect inflation and costs beyond the control of the hospital was not in compliance with requirements of the Medicaid program or the approved State plan.

On December 31, 1990, the department submitted to HCFA a new amendment (TN90-24) to the State plan which was intended to take effect as of October 1, 1990. The amendment proposed that the adjusted base year costs of non-acute hospitals should be increased based on Data Resources, Inc.'s, lowest reasonable forecast of the Massachusetts consumer price index, which was stated to be 3.6%. ⁴ The amendment also proposed a delay in the two per cent add-on for wage inflation for fiscal year 1991 until an audit determined the wage costs actually incurred by each hospital. ⁵ Following the audit, if it was determined that the individual hospitals used the increase for its intended purpose, the two per cent increase would be restored to the hospital.

On January 18, 1991, the commission published notice of a public hearing on proposed amendments to 114.1 Code Mass.Regs. § 28.00, the State regulations governing Medicaid reimbursement that would implement the proposed amendments to the State plan. On March 1, 1991, this public hearing was held at which the Association presented testimony through counsel.

On August 15, 1991, the department presented its findings to HCFA that the rates calculated under the proposed methodology would cover the costs of the majority of non-acute hospitals.

On March 13, 1992, HCFA disapproved the department's first proposed amendment, TN90-19, because of the State's failure to publish a public notice of the amendment, in compliance with 42 C.F.R. § 447.205. HCFA approved the second proposed amendment, TN90-24, but set an effective date of January 19, 1991, the day after the commission published notice of the proposed changes in compliance with Federal regulations. The department did not contest the disapproval of the first proposed amendment or the delayed effective date of the later amendment.

On April 16, 1992, following HCFA's approval of the State plan amendments, the commission adopted revised 1991 Medicaid reimbursement rates for the period January 19, 1991, through the end of the fiscal year. For the period prior to the effective date of the amendments (July 1, 1990--January 18, 1991), rates were established pursuant to the methodology contained in the previous State plan.

Summary judgment shall be granted where there is no material facts in dispute, and the moving party is entitled to judgment as a matter of law. See Cassesso v. Commissioner of Correction, 390 Mass. 419, 422, 456 N.E.2d 1123 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553, 340 N.E.2d 877 (1976); Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974). Where the party moving for summary judgment does not have the burden of proof at trial, this burden may be met by either submitting affirmative evidence that negates an essential element of the opponent's case or "by demonstrating that proof of that element is unlikely to be forthcoming at trial." Flesner v. Technical Communications Corp., 410 Mass. 805, 809, 575 N.E.2d 1107 (1991). Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716, 575 N.E.2d 734 (1991).

1. The department's disapproval of the commission's proposed 1991 rates was valid. The department's disapproval of the 1991 fiscal year Medicaid reimbursement rates promulgated by the commission for non-acute hospitals was a valid exercise of authority pursuant to G.L. c. 118E, § 4A. ⁶ We do not regard this statute as in conflict with G.L. c. 6A, § 32. ⁷ Although both statutes deal with the same subject, they can be read together to effectuate a consistent body of law. See Boston Hous. Auth. v. Labor Relations Comm'n, 398 Mass. 715, 718, 500 N.E.2d 802 (1986); Hadley v. Amherst, 372 Mass. 46, 50-51, 360 N.E.2d 623 (1977). General Laws c. 118, § 4A, does not abridge the powers granted to the commission; the commission still maintains sole power to establish Medicaid reimbursement rates. The department has the authority to approve or to disapprove rates but does not have the authority itself to establish those rates. In reading these two statutes together, it is clear that the department has final authority over health care rates set by the commission.

We agree with the judge's determination that the department's disapproval of the rates proposed by the commission is effective even if the department failed to comply with the procedural mandates of G.L. c. 118E, § 4A. The statute requires that, if the department disapproves of a rate, it must submit reasons for its disapproval and provide recommendations for changes. These reasons and...