Morning View Care Center-Fulton v. the Ohio Department of Human Services

• Decision Date: 06 June 2002
• Docket Number: 01AP-931,02-LW-2414
• Citation: 2002 Ohio 2878
• Parties: Morning View Care Center-Fulton, Plaintiff-Appellant v. The Ohio Department of Human Services et al., Defendants-Appellees
• Court: Ohio Court of Appeals

2002-Ohio-2878

Morning View Care Center-Fulton Plaintiff-Appellant v. The Ohio Department of Human Services et al Defendants-Appellees

No. 01AP-931

02-LW-2414 (10th)

Court of Appeals of Ohio, Tenth District, Franklin County.

June 6, 2002

APPEAL from the Franklin County Court of Common Pleas.

Geoffrey E. Webster, for appellant.

Betty D. Montgomery, Attorney General, and Rebecca L. Thomas, for appellees.

OPINION

PETREE J.

Plaintiff-appellant, Morning View Care Center-Fulton ("MVCC-Fulton"), appeals from a judgment of the Franklin County Court of Common Pleas in favor of defendants-appellees, the Ohio Department of Human Services (now the Ohio Department of Job and Family Services) Jacqueline Romer-Sensky (former director), and Barbara Edwards (a deputy director), in their respective official capacities (collectively "ODJFS"). A judgment entry dated August 3, 2001, incorporated the trial court's written decision granting summary judgment to ODJFS, and dismissing MVCC-Fulton's complaint for declaratory and injunctive relief in connection with the handling by ODJFS of its application for a Medicaid reimbursement rate adjustment as provided in R.C. Chapter 5111 and Ohio Adm.Code Chapter 5101:3.

MVCC-Fulton is an intermediate care facility for the mentally retarded located in Morrow County and licensed by the state of Ohio. It is among several such facilities in the state owned by a common management group, Morning View Care Centers, operated by Dearth Management, Inc. MVCC-Fulton's 33 beds are certified to participate in federal Medicaid programs administered by ODJFS. MVCC-Fulton and ODJFS have been parties to a series of provider agreements entered into pursuant to R.C. 5111.22. For a number of years prior to 1998, MVCC-Fulton was a 65-bed facility, similarly licensed and certified.

This case involves financial circumstances related to MVCC-Fulton's effort to downsize the capacity of its principal facility and to develop four 8-bed group homes to which former residents of the 65-bed home were transferred as each new building became ready for occupancy. The Ohio Department of Mental Retardation and Developmental Disabilities ("ODMRDD") initially approved the development request in September 1993. The process of constructing the smaller group homes and transferring residents took place during calendar years 1996 and 1997,^[1] but licensing changes were not effective until June 1, 1998. Annual provider agreements from September 1, 1995 through August 31, 1998 (extended to October 31, 1998) identified MVCC-Fulton's certification as a 65-bed intermediate care facility. More recent agreements indicate a certification for 33 beds.

The request for rate reconsideration, which pertains only to the main facility, was dated December 29, 1998, and was expressly grounded in "extreme hardship" under R.C. 5111.29(A)(3) and Ohio Adm.Code 5101:3-3-24(D). The application pointed primarily to costs related to the downsizing effort that exceeded reimbursements in two cost centers and capital and indirect costs as contributing to the hardship. MVCC-Fulton represented that the reduction in capacity to 33 beds was part of a statewide program of ODMRDD to downsize larger intermediate care facilities for the mentally retarded and that the reduction in number of residents at the main facility was a main cause of its hardship.

MVCC-Fulton suggested that fixed capital costs such as depreciation, amortization, interest expenses, and leasing costs for both real estate and equipment remained constant after the transfer of beds and, thus, caused an increase in the per diem cost per bed that was not adequately addressed by the reimbursements paid during fiscal years 1998 (July 1, 1997 to June 30, 1998) and 1999 (July 1, 1998 to June 30, 1999). MVCC-Fulton asserted that in spite of its aggressive attempts to reduce indirect costs, the size of the main facility and the continuing needs of its residents rendered it unable, during the period for which the rate adjustment was sought, to achieve a reduction proportional to the number of beds eliminated as the result of the downsizing. Disparity between those costs and the reimbursements received during that period fashioned additional financial hardship according to the application for relief. MVCC-Fulton acknowledged that the expenditures allocated to capital and indirect costs exceeded the cost ceilings then in effect for those categories.

In support of its request, MVCC-Fulton cited such improvements in the quality of life of its residents that resulted from the downsizing as an upgrading of common areas, a conversion from two-resident rooms to private rooms, and the creation of a less institutional environment. Those improvements did not require structural changes to the building. A letter from the outgoing^[2] director of ODMRDD accompanied the application for rate reconsideration. The letter confirmed those benefits and encouraged ODJFS to grant the request based upon extreme hardship. (January 10, 2001 Depositions Ex. 1).^[3] MVCC-Fulton also furnished the documentation required by Ohio Adm.Code 5101:3-3-24(D)(3), including a three-month cost report.

ODJFS reviewed the documentation and then requested additional information to explain certain issues the department identified within the initial request. The agency asked for clarification of the time period for which relief due to extreme hardship was being sought and confirmation of the facility's 1998 calendar year resident census. The department also asked for the following: (1) a copy of an operational plan detailing steps taken to prepare for downsizing; (2) a copy of a transition/downsizing budget; (3) a clearer explanation of the relationship between home office costs and the downsizing effort; (4) more detailed staffing information for both the main facility and the new group homes; (5) drawings of the facilities showing changes in usage and associated costs on a square foot basis; (6) copies of lease agreements, depreciation schedules and bank statements reflecting interest expense and principal debt; (7) more precise explanation of the figures presented under certain specific accounting codes; (8)_copies of budgets for the 1998 and 1999 fiscal years; and (9) any other pertinent documentation reflecting the hardship.

MVCC-Fulton responded in detail and specifically asked for an adjusted rate of $173.95 per patient per day based on the information included in its three-month cost report. A rate of $146.45 per patient per day was actually in effect during the same period. The total request was for approximately $734,354 in additional reimbursements for the two fiscal years addressed. After receiving this March 1, 1999 response to its request for additional information, ODJFS not only reviewed the financial data furnished but also performed its own calculations where discrepancies were perceived in an attempt to relate increased costs to the downsizing exclusive of other factors.

Based upon this analysis of all cost centers and a recalculation of allowable bed days during calendar year 1997, the period upon which the original rate for fiscal 1999 was determined, ODJFS granted a rate increase of $12.48 per diem, retroactively effective July 1, 1998. The approved adjustment amounted to a total increased reimbursement of approximately $222,456 for fiscal 1999 only. Relief for fiscal 1998 was denied because the application was deemed not timely for that year.

Over the signature of Director Romer-Sensky, ODJFS issued a 15-page report, with attachments, explaining the decision to grant a lesser adjustment than had been requested. Relying upon the language in Ohio Adm.Code 5101:3-3-24(D)(1) that "a request for a rate increase due to extreme hardship must be filed before the end of the fiscal year for which the rate is paid," ODJFS denied relief for fiscal year 1998 because the request for that year "should have been submitted *** on or before June 30, 1998." (January 10, 2001 Depositions Ex. 4, p. 2.) The director discussed standards ODJFS applied in reaching a decision regarding relief for fiscal year 1999. She specifically identified the necessity for a provider to demonstrate what circumstances are outside its control or a failure in the PPS (Prospective Payment System), and to document all the cost reduction steps implemented, along with the cost savings associated with those steps. (January 10, 2001 Depositions Ex. 4, p. 14.) The director also emphasized the inability of the department to verify the representation by MVCC-Fulton that downsizing of its main facility was mandated. (January 10, 2001 Depositions Ex. 4, p. 5.)

MVCC-Fulton requested that the department reconsider its decision to grant partial relief only. MVCC-Fulton argued that where a rate adjustment is requested on grounds of extreme hardship, the department has the discretion to grant reasonable and appropriate reimbursement of the added costs of downsizing without regard to whether or not a government mandate or circumstances beyond the provider's control precipitate the hardship. Under that standard, the provider argued that an adjustment in the full amount requested is justified. ODJFS did not revise its initial award. MVCC-Fulton then filed its complaint in the Franklin County Common Pleas Court instituting the action from which this appeal is taken.

MVCC-Fulton sought both declaratory and injunctive relief as to alleged violations by ODJFS of it rights under the Fifth and Fourteenth Amendments to the United States Constitution; Sections 1396 and 1983, Title 42, U.S.Code; Sections 1 and 2, Article I, Ohio Constitution; R.C. 5111.01 et seq.; and the provider agreements between the parties. MVCC-Fulton specifically complained that although it had accomplished its...