Woodruff v. Ind. Family
| Decision Date | 11 April 2011 |
| Docket Number | No. 29A02–1002–PL–220.,29A02–1002–PL–220. |
| Parties | Randall L. WOODRUFF, Trustee, U.S. Bankruptcy Court, on behalf of Legacy Healthcare, Inc. d/b/a New Horizon Developmental Center, Appellant–Plaintiff,v.INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Office of Medicaid Policy and Planning, Appellee–Defendant. |
| Court | Indiana Appellate Court |
OPINION TEXT STARTS HERE
Bruce N. Munson, Muncie, IN, William P. Tedards, Jr., Washington, D.C., Attorneys for Appellant.Gregory F. Zoeller, Attorney General of Indiana, Frances Barrow, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.
Because of conditions at the facility, the Indiana Family and Social Services Administration, Office of Medicaid Policy and Planning, terminated its provider agreement with Legacy Healthcare, Inc., d/b/a New Horizon Developmental Center, which cared for some of the most severely and profoundly mentally retarded and developmentally disabled patients in Indiana, all of whom relied on Medicaid. For the next nine months, however, the Medicaid patients remained at New Horizon with New Horizon paying for their care and services until a receiver was appointed and the residents were finally transferred.
We conclude that once a provider agreement with a long-term care facility such as New Horizon has been voluntarily or involuntarily terminated, FSSA, as the State Medicaid Agency, has the primary responsibility for relocating the Medicaid patients and for ensuring their safe and orderly transfer from the old facility. In addition, FSSA is responsible for the care and services provided to the Medicaid patients during the transfer process. Because New Horizon paid these costs instead of FSSA, New Horizon is entitled to summary judgment on its nearly $4 million quantum meruit claim. We therefore reverse and remand this case.
This is the fifth time that an appeal arising out of this litigation has reached our Court.1 Legacy Healthcare, Inc., owned and operated New Horizon Developmental Center, an intermediate care facility for the mentally retarded (ICF/MR),2 in Arcadia, Indiana, from November 1, 1993, to November 6, 2000.3 New Horizon's president was Douglas A. Bradburn. The New Horizon residents were severely and profoundly mentally retarded, developmentally disabled, required extensive medical care, and were not able to function in society. Some were dangerous to themselves and others and required extensive expert supervision in a facility such as New Horizon, which was one of a limited number of ICF/MRs in Indiana at the time. Because all of the New Horizon residents received Medicaid funding, we highlight some of the key Medicaid provisions to help understand the complexities of this case.
The federal Medicaid statutes create a comprehensive and cooperative federal-state program for medical care under which participating states are federally financed for their medical assistance programs if they submit a state plan which comports with federal requirements. Legacy Healthcare, Inc. v. Barnes & Thornburg, 837 N.E.2d 619, 622 (Ind.Ct.App.2005), reh'g denied, trans. denied. Although state participation in Medicaid is voluntary, if a state chooses to participate, it must comply with the federal statutes and regulations governing the program. Id.
Medicaid service providers operate under a “provider agreement” with the state's “Medicaid Agency.” Id. at 622–23. In Indiana, the Medicaid Agency is the Indiana Family and Social Services Administration (FSSA), which operates the Medicaid program through the Office of Medicaid Policy and Planning (OMPP). 4 Id. at 623. Federal law requires the participating states to designate a “survey agency” to evaluate facilities to determine whether the facilities meet the various requirements for participation in the Medicaid program. Id. In Indiana, the survey agency is the Indiana State Department of Health (ISDH). Id. Before OMPP may approve a provider agreement with a facility, it must obtain notice from ISDH that the facility has met the requirements for certification in the Medicaid program. Id.
In addition, the Bureau of Developmental Disabilities Services (BDDS), which is part of FSSA's Division of Disability & Rehabilitative Services, provides services to individuals with developmental disabilities. Specifically, BDDS acts as a screening agency to determine whether an individual has a developmental disability. Ind.Code § 12–11–2.1–1. The agency then develops individual service plans for individuals, id. § 12–11–2.1–3, and “shall serve as the placement authority for individuals with a developmental disability ... including all placements in ... an intermediate care facility” such as New Horizon, id. § 12–11–2.1–4. The Indiana Administrative Code also provides several guidelines for admission and readmission to an ICF/MR, which are based upon BDDS's determination of the need for such care and includes a review to ensure that the facility can meet the needs of the patient. See 405 Ind. Admin. Code 5–13–7; see also Partlow v. Ind. Family & Soc. Servs. Admin., 717 N.E.2d 1212, 1216–17 (Ind.Ct.App.1999) ().
From October 31, 1993, to September 1, 1999, New Horizon was certified and licensed by ISDH as an ICF/MR. New Horizon then entered into a provider agreement with FSSA so that it could receive funds to operate its facility.
On September 2, 1999, ISDH notified New Horizon that it had conducted a survey and found that it did not meet program standards; therefore, New Horizon's Medicaid certification would be canceled effective September 1, 1999. Because New Horizon never filed an administrative appeal of ISDH's determination, New Horizon was decertified as a Medicaid provider on September 1, 1999.5
ISDH then recommended to FSSA that, given ISDH's decertification of New Horizon, FSSA should terminate its provider agreement with New Horizon. On September 9, 1999, FSSA notified New Horizon that its Medicaid provider agreement was terminated effective September 1, 1999. The notification also stated that provider payments could continue only for up to 30 days from the date of termination or 120 days if under appeal, whichever occurs last, with continued payments based on the condition that reasonable efforts were being made to transfer the residents to other facilities pursuant to 42 C.F.R. §§ 441.11 6 and 442.40(d)(2)(ii).
In September 1999, New Horizon filed a petition for review and petition for stay of FSSA's termination order.
FSSA's last Medicaid payment to New Horizon was on January 29, 2000. At this time, there were approximately 131 residents at New Horizon, all of whom relied on Medicaid. FSSA did not relocate or transfer any of the residents. New Horizon did not either; instead, it unsuccessfully sought recertification. Nearly all residents remained in the facility until the last day of operation under New Horizon's control, which was November 6, 2000. New Horizon provided care and services to these residents during these 281 days without any funding from FSSA. It is undisputed that abandonment of the residents was not an option for New Horizon; to do so would have put them in immediate danger. According to Bradburn, “On more than one occasion we were reminded [by ISDH employees] that we [could not] abandon the residents and if we did we would be charged and convicted of criminal neglect [of a dependent].” Appellant's App. p. 91 (affidavit).
FSSA moved for summary judgment on New Horizon's petition for judicial review in May 2000. An administrative law judge granted summary judgment in favor of FSSA in August. The ALJ concluded that because New Horizon did not file an administrative appeal of ISDH's determination, FSSA could not maintain a provider agreement with a provider which ISDH had found to be out of compliance with certification requirements. The ultimate authority of FSSA affirmed the ALJ in December. In January 2001, New Horizon sought judicial review of the final agency decision.
Meanwhile, New Horizon continued to operate the facility without Medicaid certification until ISDH filed an action for the appointment of a health care receiver, which the trial court granted in November 2000. Receiver Theresa Haynes took control of the facility on November 7, 2000. She was employed by Fourth Street Solutions and was not an employee of the State. The last New Horizon resident was finally transferred on December 17, 2001, at which point the facility closed. Id. at 140 (Bradburn affidavit). Haynes was in control of New Horizon for approximately 405 days. Although FSSA believed that New Horizon was required to pay the costs of the receivership, the receivership court directed FSSA to pay.
In 2002, New Horizon filed for Chapter 7 bankruptcy, and trustee Randall Woodruff was substituted for New Horizon as the real party in interest. 7 Ind. Family & Soc. Servs. Admin. v. Woodruff, No. 29A02–0410–CV–876, slip op. at 4, 831 N.E.2d 1264 (Ind.Ct.App. July 14, 2005). In 2004, the trial court reversed the final agency action, and FSSA appealed. On appeal, this Court reversed the trial court and dismissed the action. Id. at 7–8. At the conclusion of this opinion, we instructed:
In addition, we note that the actual issue before the trial court has become moot, inasmuch as New Horizon filed for bankruptcy under Chapter 7, also known as liquidation bankruptcy. Because New Horizon has been liquidated, it can no longer be a certified Medicaid Provider. This is not to say that the bankruptcy Trustee may not be entitled to recovery for Medicaid services that New Horizon provided during the appeal process. But the Trustee will have to bring a separate contract or quantum meruit action for that recovery.Id. at 8.
On January 27, 2006, New Horizon filed a complaint against FSSA, which it amended on ...
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Woodruff v. Indiana Family & Soc. Servs. Admin.
...of its motion for summary judgment on the quantum meruit claim, and in the application of the set-off. Woodruff v. Ind. Family & Soc. Servs. Admin., 947 N.E.2d 934 (Ind.Ct.App.2011). The Court of Appeals reversed, holding that New Horizon had no administrative remedies to exhaust and that i......