St. Louis South Park, Inc. v. Missouri Dept. of Social Services, Div. of Medical Services, WD

• Decision Date: 27 April 1993
• Docket Number: No. WD,WD
• Parties: ST. LOUIS SOUTH PARK, INC., d/b/a Mercy Convalescent, Respondent, v. MISSOURI DEPARTMENT OF SOCIAL SERVICES, DIVISION OF MEDICAL SERVICES, Appellant. 46944.
• Court: Missouri Court of Appeals

Page 304

857 S.W.2d 304

ST. LOUIS SOUTH PARK, INC., d/b/a Mercy Convalescent, Respondent, v. MISSOURI DEPARTMENT OF SOCIAL SERVICES, DIVISION OF MEDICAL SERVICES, Appellant.

No. WD 46944.

Missouri Court of Appeals Western District.

April 27, 1993.

Motion for Rehearing and/or Transfer to

Supreme Court Denied June 1, 1993.

Application to Transfer Denied Aug. 17, 1993.

Richard Beaver, Jefferson City, for appellant.

Harvey M. Tettlebaum, Jefferson City, for respondent.

Before FENNER, P.J., and ULRICH and SMART, JJ.

FENNER, Presiding Judge.

Appellant, Missouri Department of Social Services, Division of Medical Services (the Department), appeals the decision of the circuit court which held that the Department's regulation implementing a new method of calculating the per diem rates to be paid nursing homes (the New Plan) violated equal protection. Respondent, St. Louis South Park, Inc., d/b/a Mercy Convalescent Center (Mercy), is a licensed nursing facility certified to participate in the Missouri Medicaid Program. Mercy successfully argued to the trial court that the New Plan denied it equal protection under the law.

THE NEW PLAN

On June 18, 1990, the Department published an emergency regulation in the Missouri Register, 13 CSR 70-10.010, effective July 1, 1990, known here as the New Plan. The New Plan set per diem rates for nursing homes participating in the Medicaid program. The 1988 cost report of each participating facility was used as the basis for determining the allowable per diem rate for a given facility.

Each participating facility's 1988 cost report covered a twelve month period based upon the facility's fiscal year ending in 1988. In 1988 there were 376 nursing homes participating in the Medicaid program. Of the total homes, 208, or 55%, had fiscal years ending December 31st. Mercy's fiscal year ended April 30th and it was one of only 5% of the participating homes which had a fiscal year ending April 30th or before.

The criteria for allowable costs as established by the Department are set forth in 13 CSR 70-10.010. The participating facilities' 1988 cost report was used as a basis for establishing allowable costs because that was the most recent year that the Department had received and desk reviewed cost reports from all of the Medicaid participant nursing homes. ¹

Upon review of the facility's 1988 cost report, a base figure for allowable cost was determined. The base figure was multiplied by 111.1% (i.e. increased by 11.1%) and then $1.06 was added as a minimum wage adjustment. The greater of the rate determined by this calculation or the facility's rate in effect on June 30, 1990 became the facility's per diem rate effective for services provided on and after July 1, 1990. The Department then allowed another $.50 to reflect a laundry allowance, $.47 was added as a trend factor ², and $1.00 was added as a consultant adjustment. The result of these calculations became the facility's rebased rate effective July 1, 1990, subject to a ceiling of $54.95. ³

The 11.1% adjustment was determined by multiplying 3.7% per year for a three year period (July 1, 1988 to June 30, 1991). The 3.7% represents the average of eight quarters of Gross National Product Implicit Price Deflator. The Administrative Hearing Commission (Commission) found that the 11.1% increase was an inflation factor, but recognized that the Department presented evidence that the increase was tied to a number of economic indicators.

The Commission found that nursing homes experienced increased costs due to inflation between April 30, 1988 and December 31, 1988. The Commission further found that since Mercy's fiscal year ended April 30, 1988, Mercy's rate under the New Plan did not take into account the inflation between said date and December 31, 1988, while those nursing homes with a fiscal year ending December 31, 1988 were allowed under the regulation to have inflation for the entire year factored into their rebased rates. The Commission determined that it was without authority to declare the regulation unconstitutional. Thus, the Commission affirmed the Department's determination of a rebased rate for Mercy in the amount of $48.49 per diem. On appeal to the circuit court the court held that the Department's failure to factor in inflation from April 30, 1988 to December 31, 1988 denied Mercy equal protection under the law.

POINT ON APPEAL

In its sole point on appeal, the Department argues that the circuit court erred by finding that the Department violated Mercy's right to equal protection of the law by setting Mercy's Medicaid rate according to 13 CSR 70-10.010 because all Medicaid providers received a rate which reasonably reflects their cost experience.

Generally, in administrative review cases, an appellate court reviews the decision of the Administrative Hearing Commission. City of Cabool v. Missouri State Bd. of Mediation, 689 S.W.2d 51, 53 (Mo. banc 1985). However, administrative agency decisions based upon its interpretation of law are matters of independent judgment for a reviewing court. Golde's Dep't Stores, Inc. v. Director of Revenue, 791 S.W.2d 478, 480 (Mo.App.1990). Therefore, in the case at bar, the focus of our review turns to the equal protection question.

"The first principle of [an equitable protection] inquiry is that a duly enacted statute is presumed to be constitutional." Mahoney v. Doerhoff Surgical Services, Inc., 807 S.W.2d 503, 512 (Mo. banc 1991). A government action which neither creates suspect classifications nor impinges on a fundamental right will withstand scrutiny if the classification bears some rational relationship to a legitimate government interest. Id.

The equal protection guarantee is directed against invidious discrimination. Id. "Invidious" means "tending to excite odium, ill will, or envy; likely to give offense; esp., unjustly and irritatingly discriminating." Bray v. Alexandria Women's Health Clinic, 506 U.S. 263, ----, 113 S.Ct. 753, 761-62, 122 L.Ed.2d 34 (1993) (citations omitted). The constitutional safeguard of equal protection is offended only if the classification rests on grounds wholly irrelevant to the achievement of the state's objective. Mahoney, 807 S.W.2d at 512 (quoting McGowan v. Maryland, 366 U.S. 420, 425, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961)). In the area of economics and social welfare, a State does not violate the Equal Protection Clause merely because the...