Miss. Methodist v. Miss. Div. Of Medicaid

• Decision Date: 24 September 2009
• Docket Number: No. 2008-CA-01558-SCT.,2008-CA-01558-SCT.
• Citation: 21 So.3d 600
• Parties: The MISSISSIPPI METHODIST HOSPITAL AND REHABILITATION CENTER, INC. d/b/a Methodist Specialty Care Center v. MISSISSIPPI DIVISION OF MEDICAID and Robert L. Robinson, in his official capacity as Director of Mississippi Division of Medicaid.
• Court: Mississippi Supreme Court

21 So.3d 600

The MISSISSIPPI METHODIST HOSPITAL AND REHABILITATION CENTER, INC. d/b/a Methodist Specialty Care Center v. MISSISSIPPI DIVISION OF MEDICAID and Robert L. Robinson, in his official capacity as Director of Mississippi Division of Medicaid.

No. 2008-CA-01558-SCT.

Supreme Court of Mississippi.

September 24, 2009.

Rehearing Denied December 3, 2009.

Thomas L. Kirkland, Jr., Tammy Middleton Voynik, Andy Lowry, Allison C. Simpson, Ridgeland, attorneys for appellant.

Charles Palmer Quarterman, Jackson, attorney for appellees.

EN BANC.

CHANDLER, Justice, for the Court.

¶ 1. The Mississippi Division of Medicaid (DOM) amended its regulations, known as the "State Plan," to reduce the reimbursement rate applicable to private nursing facilities for the severely disabled (PNFSDs). Specifically, State Plan Amendment 2006-006 (SPA 2006-006) placed a ceiling on the Medicaid reimbursement of a PNFSD for its administrative and operating costs. The only PNFSD in Mississippi is the Methodist Specialty Care Center, a division of the Mississippi Methodist Hospital and Rehabilitation Center (Methodist).

¶ 2. Aggrieved by the amendment reducing the reimbursement for its PNFSD, Methodist exhausted its administrative remedies with DOM and then appealed to the Chancery Court of Hinds County. The chancery court affirmed DOM's decision, and Methodist timely appealed to this Court. Methodist argues that SPA 2006-006 violated a statute that requires DOM to reimburse PNFSDs "as a separate category of nursing facilities." Miss.Code Ann. § 41-13-117(44)(b) (Rev.2004). Methodist also argues that, because DOM failed to comply with the notice provisions of either the Administrative Procedures Act or of the State Plan, the amendment is invalid.

¶ 3. This Court finds Methodist's first issue to be dispositive. We find that SPA 2006-006 violates the statutory requirement that a PNFSD be reimbursed as a separate category of nursing facility; consequently, it is void and of no effect. Therefore, we reverse the decisions of the chancery court and DOM, and we remand this case to the chancery court for further proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

¶ 4. In 1998, the Mississippi Legislature awarded Methodist a certificate of need to provide nursing facility services for the severely disabled. In 2001, the Legislature enacted a provision for the Medicaid reimbursement of Methodist's PNFSD. The provision stated Medicaid as authorized by this article shall include payment of part or all of the costs, at the discretion of the division, with approval of the Governor, of the following types of care and services rendered to eligible applicants who have been determined to be eligible for that care and services, within the limits of state appropriations and federal matching funds:

(44) Nursing facility services for the severely disabled.

(a) Severe disabilities include, but are not limited to, spinal cord injuries, closed head injuries and ventilator dependent patients.

(b) Those services must be provided in a long-term care nursing facility dedicated to the care and treatment of persons with severe disabilities, and shall be reimbursed as a separate category of nursing facilities.

Miss.Code Ann. § 43-13-117 (Rev.2004).

¶ 5. Subsequent to the enactment, DOM proposed a payment methodology for Methodist that provided that no cost ceilings would be applied to Methodist's Medicaid reimbursement until another PNFSD participated in the Medicaid program. Accordingly, DOM amended the State Plan to provide the following reimbursement for PNFSDs: "In years when the rate is calculated for only one PNFSD, reimbursement will be based upon allowable reported costs of the facility. Reimbursement for direct care, therapies, care related, and administrative and operating costs will be made at cost plus the applicable trend factors." Thus, no ceiling was applied to Methodist's reimbursement for any of the various expense categories, which include direct-care costs, therapies costs, care-related costs, and administrative and operating costs.¹

¶ 6. The State Plan provides for the use of each specific class of long-term care facilities "as a basis for evaluating the reasonableness of an individual provider's costs." State Plan, Attachment 4.19D, 1-2. The specific classes are: small nursing facilities (1-60 beds); large nursing facilities (61 or more beds); PNFSDs; Residential Psychiatric Treatment Facilities (PRTF); and Intermediate Care Facilities for the Mentally Retarded. (ICF-MR). State Plan, Attachment 4.19D, 1-2. The State Plan provides that "[i]t is the intent of the Division of Medicaid to reimburse nursing facilities at a rate that is adequate for an efficiently and economically operated facility." State Plan, Attachment

4.19D, 3-1.²

¶ 7. Methodist filed a reply brief in chancery court, with attachments from a prior proceeding, that supplies information relevant to the current dispute. Methodist opened its PNFSD in February 2004; it experienced a low initial patient occupancy rate of 26.34 percent. In January 2005, Methodist submitted a cost report to DOM that claimed $1,106.68 per patient per day. Of this amount, $454.42 was claimed for administrative and operating costs. Medicaid challenged Methodist's rate of reimbursement at a November 21, 2005, hearing. At the hearing, a DOM employee expressed concern that Methodist's costs per patient per day were too high. Medicaid sought to reimburse Methodist at a rate of $650 per diem. However, Medicaid subsequently performed a field audit that concluded that a reasonable per diem reimbursement rate for Methodist from February 27, 2004, to July 1, 2006, ranged between $989.52 and $1,156.15.³ On August 24, 2006, DOM confirmed the adjustment of the reimbursement rates in accordance with the audit.

¶ 8. On August 1, 2006, DOM promulgated State Plan Amendment 2006-006 (SPA 2006-006) to amend the rules applicable to the reimbursement of PNFSDs. The PNFSD reimbursement provision now stated:

In years when the rate is calculated for only one PNFSD, reimbursement will be based upon allowable reported costs of the facility. Reimbursement for direct care, therapies, care-related, and administrative and operating costs will be calculated at cost plus the applicable trend factors. Reimbursement for administrative and operating costs will be subject to the ceiling for the facility as described in Section 3-4E.

(Emphasis applied to amended language.) Section 3-4E, governing the per diem rate for administrative and operating costs, was amended to state: "For PNFSD's with 60 Medicaid certified beds or less, the ceiling calculated for the small nursing facility class will be used. For PNFSD's with greater than 60 Medicaid certified beds, the large nursing facility class will be used." Thus, SPA 2006-006 applied the reimbursement ceiling for either a small or a large nursing facility's administrative and operating costs to a PNFSD's administrative and operating costs.⁴ After SPA 2006-006, DOM calculated a per diem reimbursement rate for Methodist of $511.01.

¶ 9. DOM promulgated notice of the amendment by following the procedure prescribed by the Administrative Procedures Act (APA). As required by the APA, at least twenty-five days prior to the adoption of SPA 2006-006, DOM filed notice of the proposed rule adoption with the Secretary of State for publication in the administrative bulletin. Miss.Code Ann. § 25-43-3.103(1) (Rev.2006). The APA also requires an agency to mail a copy of the proposed rule change to any agency that has timely requested notice of proposed rule adoptions. Miss.Code Ann. § 25-43-3.103(2). This must be done within three days after filing with the Secretary of State. Id. Methodist did not request notice of proposed rule adoptions. However, further notice requirements were imposed upon DOM by the State Plan, which provides that all nursing facilities will receive a copy of the public notice of any significant proposed change to payment rates. State Plan, Attachment 4.19D, 1-8. Despite this regulation, DOM did not mail Methodist a copy of the proposed SPA 2006-006 before its adoption. Instead, Methodist first received notice of SPA 2006-006 in a January 30, 2007, letter that advised Methodist of its reduced reimbursement beginning in January 2007.

¶ 10. On February 27, 2007, Methodist filed a request for an appeal with DOM. Methodist argued that: (1) SPA 2006-006 did not comply with Section 43-13-117(44), which requires DOM to reimburse Methodist as a separate category of nursing facilities, (2) SPA-2006-006 was not a reasonable interpretation of the statute, and (3) SPA-2006-006 was void due to DOM's failure to afford proper notice to Methodist. On December 7, 2007, a hearing officer ruled in favor of DOM. The hearing officer found that SPA 2006-006 allowed DOM to reimburse Methodist as "a separate category of nursing facility" because, unlike any other type of facility, Methodist still had no ceiling for direct-care or care-related costs. The hearing officer found that DOM's administrative and operating costs were unreasonable, and that "DOM's actions allow Methodist to recover its reasonable administrative and operating costs by comparing its administrative and operating costs to a facility of similar size." The hearing officer found that DOM had provided adequate notice of SPA 2006-006 under the APA. DOM adopted the hearing officer's determinations as the final agency decision.

¶ 11. On January 2, 2008, Methodist filed a complaint in the Chancery Court of Hinds County. Methodist alleged that the ceiling "substantially and drastically lowers Methodist's reimbursement for administrative and operating costs (from $319.24 per day to $74.22) and it directly contradicts the plain language of both the statute and the [State] Plan which require that Methodist be treated as a separate category of nursing homes for purposes of reimbursement." Methodist also argued that...