TLC Home Health Care v. DHS

• Decision Date: 24 January 2002
• Docket Number: No. 00-0255.,00-0255.
• Citation: 638 N.W.2d 708
• Parties: TLC HOME HEALTH CARE, L.L.C., Appellant, v. IOWA DEPARTMENT OF HUMAN SERVICES, Appellee.
• Court: Iowa Supreme Court

638 N.W.2d 708

TLC HOME HEALTH CARE, L.L.C., Appellant, v. IOWA DEPARTMENT OF HUMAN SERVICES, Appellee.

No. 00-0255.

Supreme Court of Iowa.

January 24, 2002.

Robert Holz and Judith Boes of Davis, Brown, Koehn, Shors, & Roberts, P.C., Des Moines, for appellant.

Thomas J. Miller, Attorney General, and Janet Hoffman, Assistant Attorney General, for appellee.

STREIT, Justice.

This is an appeal from a ruling on judicial review of agency action by the Iowa Department of Human Services pursuant to Iowa Code section 17A.19 (1999). The district court affirmed the decision by an administrative law judge that had been adopted as the final agency decision. The administrative law judge's decision upheld the validity of the agency order finding that TLC Home Health Care, Inc. could not recover Medicaid payments at the rate of almost $14,000 per month for home health services rendered to Ardeth Blackwell and could not recover Medicare payments for the same services under Medicare's insulin services exception. We find the Department's denial of TLC's claims under the Medicare insulin services exception was supported by substantial evidence. We also find the Department is required to provide home health care services on both a part-time and intermittent basis. We therefore affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I. Facts

Ardeth Blackwell is an eighty-three-year-old woman suffering from diabetes. She has numerous other chronic illnesses. Due to some of these conditions, Blackwell is unable to administer her own insulin injections. She has no family willing or able to assist her with the injections. TLC Home Health Care provided home health care visits to Blackwell. Those visits included skilled nursing services providing Blackwell with insulin injections twice a day, with additional necessary injections depending on her blood glucose level. TLC charged nearly $14,000 a month to provide these home health care visits.

TLC first billed Medicare for the home health care services TLC provided to Blackwell. Medicare requires a person be considered homebound before he or she is eligible for Medicare coverage. See 42 U.S.C. § 1395f(a)(2)(C). Since Blackwell was not considered homebound, Medicare denied payment. Medicare is the primary source of payment for medical assistance for someone qualifying for both programs. After a denial of payment by Medicare, then an individual applies to Medicaid for coverage.¹ Accordingly, TLC then billed Medicaid for the home health visits. Medicaid will pay for the services if the applicable Medicaid regulations are satisfied. In Blackwell's case, Medicaid similarly refused payment because these particular home health visits were not a covered service under the Iowa Medicaid statutes.²

TLC appealed to the Iowa Department of Human Services and an administrative law judge affirmed the denial of the claims. The judge determined TLC's claims were not covered under Medicaid because Blackwell's care was not intermittent as required by the Iowa Medicaid statutes. Further, the court found the Medicare insulin exception for the homebound did not apply because TLC continually argued Blackwell was not homebound. TLC sought review of the judge's conclusions from the director of the Department of Human Services. The director affirmed the denial of the claims. TLC then petitioned for review in the district court and the court likewise affirmed. TLC appeals.

On appeal, TLC contends the Department erred in denying its claim for Medicaid payments because the federal Medicaid statute requires coverage of home health care services on both part-time and intermittent bases. TLC further argues the Medicare insulin exception applies to Blackwell. TLC contends the Department's decision to deny the claims was not supported by substantial evidence and is unreasonable, arbitrary, and an abuse of discretion. The Department characterizes this case as a cost-containment case and argues it involves inappropriate claims for unauthorized services under Iowa Medicaid policies.³

II. Scope of Review

Judicial review of agency action is guided by Iowa Code section 17A.19(8) (1999). Our review is limited "to determining whether the district court correctly applied the law in exercising its section 17A.19(8) judicial review function." Ahrendsen ex rel. Ahrendsen v. Iowa Dep't of Human Servs., 613 N.W.2d 674, 676 (Iowa 2000). The district court, as well as this court, is bound to the administrative law judge's findings of fact if they are supported by substantial evidence. IBP, Inc. v. Iowa Employment Appeal Bd., 604 N.W.2d 307, 311 (Iowa 1999). Evidence is substantial if a reasonable person would find it adequate to reach a conclusion. Id. The district court acts "in an appellate capacity to correct errors of law on the part of the agency. In our review of such action by the district court, we merely apply the standards of section 17A.19(8) to the agency action to determine whether our conclusions are the same as those of the district court." Teleconnect Co. v. Iowa State Commerce Comm'n, 404 N.W.2d 158, 161-62 (Iowa 1987) (citations omitted). If our conclusions are the same, we must affirm. Norland v. Iowa Dep't of Job Serv., 412 N.W.2d 904, 908 (Iowa 1987). When an agency interprets its own regulations, it is entitled to substantial deference. See, e.g., Shalala v. Guernsey Mem. Hosp., 514 U.S. 87, 94-95, 115 S.Ct. 1232, 1236, 131 L.Ed.2d 106, 116 (1995)

; Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 2386, 129 L.Ed.2d 405, 415 (1994).

Under section 17A.19(8), relief may be granted only if agency action was "unreasonable, arbitrary, or capricious," or is characterized by abuse of discretion. To be arbitrary or capricious, the agency action must be taken without regard to the law or consideration of the facts of the case. To constitute abuse of discretion, the action must be unreasonable and lack rationality.

Allen v. State, Dep't of Personnel, 528 N.W.2d 583, 587 (Iowa 1995) (citations omitted).

III. The Merits

TLC first contends the Department's denial of TLC's claim for Medicaid payments is contrary to the applicable federal statutes and regulations. TLC also contends the Department's decision to deny TLC's claim for Medicaid payments was not supported by substantial evidence. Finally, TLC argues the Department's decision to deny TLC's claim for Medicaid payments is unreasonable, arbitrary, and an abuse of discretion. We first examine whether Iowa Medicaid law covers both intermittent and part-time home health care services. We then address whether the Medicare exception for insulin regulation applies in this case.

A. Part-time Versus Intermittent Home Health Care Services

TLC argues the Department's interpretation of Iowa's Medicaid regulations directly conflicts with federal Medicare and Medicaid statutes. Additionally, TLC contends the services provided by TLC comply with both Iowa and federal law and should be covered by the Department. Finally, TLC contends if we uphold the Department's interpretation of 42 Code of Federal Regulations section 440.70, we must invalidate Iowa Administrative Code rule 441-78.9 because it directly conflicts with federal Medicaid statutes. Because it conflicts with federal law, TLC asserts we should apply Medicare regulations and overturn the agency finding denying TLC payment under Medicaid.

Before we turn to the merits of this issue, we first briefly examine the Medicaid program. The roots of Medicaid are found in federal legislation that became effective in 1967, which made grants available to the states for state-administered medical assistance programs. 42 U.S.C. §§ 1396 et seq. Medicaid is a "cooperative federal-state program through which the federal government provides financial assistance to states so that they may furnish medical care to needy individuals." Madrid Home for the Aging v. Iowa Dep't of Human Servs., 557 N.W.2d 507, 511 (Iowa 1996) (citing 42 U.S.C. § 1396 (1994)); Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 2513, 110 L.Ed.2d 455, 462 (1990). The Medicaid program was established by Congress as part of Title XIX of the Social Security Act. 42 U.S.C. §§ 1396-1696q. Medicaid is designed to "provid[e] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons." Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784, 794 (1980). States electing to participate in Medicaid must develop state Medicaid plans consistent with the federal Medicaid statute, regulations, and administrative rules. Id. As a condition of receipt of federal Medicaid funds, a state plan must comply with federal laws and regulations. See Madrid Home for the Aging,557 N.W.2d at 511 (citing Wilder, 496 U.S. at 502,110 S.Ct. at 2513,110 L.Ed.2d at 462). To qualify for federal assistance, a state must establish a plan and submit it to the Health Care Financing Administration (HCFA) for approval. Id. Upon approval of the state plan, the federal government will reimburse the state for a percentage of the program's expenses, including administrative costs and other program-related expenses. Madrid Home for the Aging,557 N.W.2d at 511 (citing Connecticut Hosp. Assn, v. Weicker, 46 F.3d 211, 213 (2d Cir.1995)).

We now turn to the issue before us. At the heart of this issue is 42 Code of Federal Regulations section 440.70 which defines covered home health services, in part, as follows:

Home Health Services.

(a) "Home health services" means the services in paragraph (b) of this section that are provided to a recipient —

(b) Home health services include the following services and items. Those listed in paragraphs (b)(1), (2), and (3) of this section are required services; those in paragraph (b)(4) of this section are optional.

(1) Nursing service, as defined in the State Nurse Practice Act, that is provided on a part-time or

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