Pruitt v. Ga. Dept. of Community Health

• Decision Date: 11 July 2008
• Docket Number: No. S07G1252.,S07G1252.
• Citation: 284 Ga. 158,664 S.E.2d 223
• Parties: PRUITT CORPORATION, et al. v. GEORGIA DEPARTMENT OF COMMUNITY HEALTH, et al.
• Court: Georgia Supreme Court

664 S.E.2d 223

284 Ga. 158

PRUITT CORPORATION, et al. v. GEORGIA DEPARTMENT OF COMMUNITY HEALTH, et al.

No. S07G1252.

Supreme Court of Georgia.

July 11, 2008.

Glenn P. Hendrix, Ashley Steiner Kelly, Richard Ezra Gardner, III, Arnall, Golden & Gregory, LLP, Atlanta, for Appellant.

Michelle Townes, Asst. Atty. Gen., Thurbert E. Baker, Atty. Gen., Dennis R. Dunn, Deputy Atty. Gen., Shalen S. Nelson, Asst. Atty. Gen., for Appellee.

Alvin L. Toliver, Toliver & Gainer, Conyers, Robert B. Remar, Rogers & Hardin LLP, Atlanta, Donald J. Palmisano, Jr., Medical Assn. of Ga., Atlanta, Robert Andrew Renjel, Atlanta, Temple Sellers, Marietta, Janney E. Sanders, Sanders & Smith, P.C., Patrick B. Cates, Georgia Legal Services Program, Inc., Gainesville, Rebecca Rose Crowley, Dillard & Bower, Waycross, Robert Wayne Bush, Savannah, Phyllis J. Holmen, Atlanta, Lisa Jane Krisher, Atlanta, Vicky O. Kimbrell, Atlanta, amicus appellant.

BENHAM, Justice.

We granted a petition for a writ of certiorari to the Court of Appeals in this appeal from a superior court's review of the decision of an administrative agency because we were concerned about the standard of review employed by the Court of Appeals and the deference it afforded the Georgia Department of Community Health's interpretation of its manual. See Dept. of Community Health v. Pruitt Corp., 284 Ga.App. 888, 645 S.E.2d 13 (2007).

At the heart of the case is a dispute over the interpretation of the Department of Community Health's Medicaid reimbursement formula for nursing facilities. The Department of Community Health ("DCH") reimburses nursing facilities that participate in the state Medicaid program according to a per diem rate specific to each facility. In order to be reimbursed, the nursing facility must enter into an agreement with DCH, which agreement incorporates by reference DCH's manual on nursing facility policies and procedures. The manual contains the reimbursement formula which is based on the facility's annual cost report. Where, as here, a facility changes ownership with less than six months remaining in the fiscal year (July 1-June 30),¹ the new owner files an initial cost report covering its period of ownership in the fiscal year and, according to the DCH nursing facility manual, the new owner's reimbursement rate is "based on the previous owner's last approved cost report inflated to current costs, as determined by [DCH], or the costs from the new owner's initial cost report, whichever is lower."

Neither the manual nor the agreement into which it is incorporated defines "last approved cost report," and the meaning of that phrase is the crux of this case. Several interpretations have been employed at various stages of this litigation.² The Court of Appeals granted DCH's application for discretionary review of the superior court's decision reversing the administrative decision in favor of DCH, and issued an opinion that resulted in our grant of Pruitt Corporation's petition for a writ of certiorari.

Pointing out that an administrative agency's final decision was entitled to great deference in a judicial review, the Court of Appeals found fault with the superior court's apparent failure to consider whether the record contained any evidence to support the administrative decision, and the superior court's failure to give the proper deference to DCH's interpretation of its own rules. The Court of Appeals reversed the superior court's decision after concluding there was evidence to support the Commissioner's decision and giving judicial deference to the final departmental decision and the department's decisions regarding the interpretation and enforcement of its own rules.³

1. The administrative appeal procedure from the determination of the amount of reimbursement payable to a provider of medical assistance is set forth in OCGA § 49-4-153(b)(2)(A), (B), (D), (c). The latter expressly provides that judicial review of the administrative decision is governed by the same standards as are applicable to contested cases reviewable under OCGA § 50-13-19 of the Administrative Procedure Act.

2. We disagree with the Court of Appeals' holding that judicial deference had to be afforded DCH's interpretation of the phrase "last approved cost report." When an administrative agency decision is the subject of judicial review, judicial deference is to be afforded the agency's interpretation of statutes it is charged with enforcing or administering and the agency's interpretation of rules and regulations it has enacted to fulfill the function given it by the legislative branch. The Atlanta Journal & Constitution v. Babush, 257 Ga. 790, 792, 364 S.E.2d 560 (1988) ("in construing administrative rules, `the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the (rule)'"); Dept. of Community Health v. Gwinnett Hosp., 262 Ga.App. 879, 881-882, 586 S.E.2d 762 (2003); Hosp. Auth. of Gwinnett County v. State Health Planning Agency, 211 Ga.App. 407(2), 438 S.E.2d 912 (1993). The Court of Appeals gave the deference due a statute, rule or regulation to a term in a departmental manual, the terms of which had not undergone the scrutiny afforded a statute during the legislative process or the adoption process through which all rules and regulations must pass. See OCGA § 50-13-4. Inasmuch as the manual was not entitled to judicial deference since it was not a duly-enacted statute, rule or regulation, the Court of Appeals erred in affording judicial deference to DCH's interpretation of the manual's phrase in question. See also Ga. Dept. of Med. Assistance v. Beverly Enterprises, 261 Ga. 59(2), 401 S.E.2d 499 (1991) (a department publication containing policies and procedures for nursing home services was not a "rule" as that term is defined by the Administrative Procedure Act).

DCH asserts that its decisions on policy, as reflected in its manual, are entitled to judicial deference. We need not decide that issue in this case where the terms of the manual were incorporated into the terms of a contract. A provider of medical assistance which signs with DCH a statement of participation that incorporates by reference DCH's manual of policies and procedures enters into a contractual relationship with DCH. ABC Home Health Svcs.v. Ga. Dept. of Med. Assistance, 211 Ga.App. 461, 463, 439 S.E.2d 696 (1993). A Medicaid provider agreement entered into by a provider of skilled nursing home services and Georgia's state agency charged with administering the Medicaid program "is an arms length business contract. . . ." Briarcliff Haven v. Dept. of Human Resources, 403 F.Supp. 1355, 1364 (N.D.Ga.1975). The phrase "last approved cost report" is therefore a contractual provision, and its meaning is determined by application of the rules of contract construction.

3. We also disagree with the Court of Appeals's agreement with DCH's assertion that the final decision of the administrative agency was entitled to affirmance if there was any evidence to support it. Dept. of Community Health v. Pruitt Corp., supra, 284 Ga.App. at 890, 645 S.E.2d 13. Judicial review of an administrative decision requires the court to determine that the findings of fact are supported by "any evidence" and to examine the soundness of the conclusions of...