Woodruff v. Indiana Family & Soc. Servs. Admin.

• Decision Date: 20 March 2012
• Docket Number: No. 29S02–1110–PL–598.,29S02–1110–PL–598.
• Citation: 964 N.E.2d 784
• Parties: Randall L. WOODRUFF, Trustee, U.S. Bankruptcy Court, on Behalf of Legacy Healthcare, Inc. d/b/a New Horizon Developmental Center, Appellant (Plaintiff below), v. INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Office of Medicaid Policy and Planning, Appellees (Defendants below).
• Court: Indiana Supreme Court

964 N.E.2d 784

Randall L. WOODRUFF, Trustee, U.S. Bankruptcy Court, on Behalf of Legacy Healthcare, Inc. d/b/a New Horizon Developmental Center, Appellant (Plaintiff below),
v.
INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION, Office of Medicaid Policy and Planning, Appellees (Defendants below).

No. 29S02–1110–PL–598.

Supreme Court of Indiana.

March 20, 2012.

[964 N.E.2d 787]

Bruce N. Munson, Muncie, IN, William P. Tedards, Jr., Washington, D.C., Attorneys for Appellant.

Gregory F. Zoeller, Attorney General of Indiana, Thomas M. Fisher, Solicitor General of Indiana, Frances Barrow, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana Court of Appeals, No. 29A02–1002–PL–00220 SHEPARD, Chief Justice.

After an inspection revealed deplorable health conditions for its residents, an intermediate care facility for a particularly vulnerable segment of the population was decertified for Medicaid reimbursement. As a result, until the State appointed a receiver nine months later, it operated without receiving federal or state dollars. The instant case is a common-law claim for expenses the facility laid out in the meantime for the individuals still residing there.

A trial court denied the facility restitution for the unpaid months under a theory of quantum meruit, afforded relief under related breach of contract claims, but offset that judgment by the amount the State paid for its receiver. The net result was a wash for both sides. We affirm.

Facts and Procedural History

To say this case has been complex would understate the matter. Counting this most recent decision, the Court of Appeals addressed issues in this action five times ¹ and the U.S. District Court for the Southern District of Indiana has done so at least once.² We attempt to lay out the underlying procedures and facts as concisely as possible here, with more detail later as needed.

A. Operation of the Medicaid Statutes. Federal statutes establish a joint federal-state scheme for administering Medicaid. If a state chooses to participate in Medicaid programs, it must comply with those federal statutes and related regulations. That regime requires the state to establish a Medicaid agency, through which the federal funding is channeled and the state program is administered. 42 U.S.C. § 1396a(5) (2006). Indiana's Medicaid agency is the Indiana Family and Social Services Administration, which runs the Medicaid program through its Office of Medicaid Policy and Planning. Ind.Code § 12–8–6–3 (2010).

[964 N.E.2d 788]

A health care provider seeking to receive Medicaid funds for its services must operate under a provider agreement with the state's Medicaid agency and be subject to regular inspections by a state survey agency to determine whether the provider complies with the federal regulations governing Medicaid certification. 42 U.S.C. § 1396a(9) (2006); 42 C.F.R. § 442.12 (2011). Indiana's survey agency is the State Department of Health. Ind.Code § 16–28–12–1 (2008).

Of particular relevance to this case are those health care providers established as Intermediate Care Facilities for the Mentally Retarded (ICF/MR). These facilities provide services to individuals who can be severely developmentally disabled, dangerous to themselves or others, and require such extensive medical care that they cannot function in society. 405 Ind. Admin. Code 1–1–11(1) (2008); 410 Ind. Admin. Code 16.2–1.1–33 (2008). The FSSA's Bureau of Developmental Disabilities Services screens such individuals, establishes treatment plans for them, and places them in state or private ICF/MRs. Ind.Code §§ 12–11–1.1–1, –2.1–4 (2004 & Supp.2011); 405 Ind. Admin. Code 5–13–7, –8 (2008). The ICF/MR must be capable of providing these treatments and meeting the needs of the patient before BDDS will place the patient there-in addition to the ICF/MR's obligations arising from its provider agreement with FSSA. 42 C.F.R. § 442.12(c); 405 Ind. Admin. Code 5–13–7.

B. The New Horizon Litigation. New Horizon Developmental Center ³ was just such an ICF/MR as described above. It was certified as such by ISDH and entered into a provider agreement with FSSA. It operated under this provider agreement until September 1, 1999. On September 2, 1999, ISDH informed New Horizon that the facility had failed an inspection and would thus lose its Medicaid certification effective September 1, 1999. New Horizon did not appeal the ISDH decision.

Following the decertification, FSSA did terminate its provider agreement with New Horizon, effective as of September 1, 1999. The notification provided that payments would continue under the provider agreement for only 30 days, or up to 120 days in the event of an appeal. Any payments beyond that point were contingent on New Horizon demonstrating reasonable attempts to transfer its resident to another certified ICF/MR. At the time of FSSA's final Medicaid payment to New Horizon on January 29, 2000, there were still 131 patients still residing at the New Horizon facility.

Neither New Horizon nor FSSA relocated those residents immediately; instead New Horizon filed for, and was denied, recertification. In November 2000, after 281 days of unfunded care, ISDH sought authority to appoint a health care receiver. The receiver—someone not employed by the State—operated the facility until the last patient was transferred in December 2001.

New Horizon petitioned for administrative review of FSSA's termination of the provider agreement, but an administrative law judge granted summary judgment in favor of FSSA because New Horizon had not appealed ISDH's inspection results in September 1999. FSSA's ultimate authority affirmed the ALJ in December 2000, and in January 2001 New Horizon sought judicial review of that decision. It was because of this administrative process that

[964 N.E.2d 789]

New Horizon continued receiving Medicaid payments until January 29, 2000.

In 2002, New Horizon filed for Chapter 7 bankruptcy protection and a trustee, Randall Woodruff, was substituted as the real party in interest in place of New Horizon. In 2004, a trial court reversed the final FSSA action, but on appeal by FSSA the Court of Appeals reversed and dismissed the action as moot because of New Horizon's bankruptcy. See Ind. Family & Soc. Servs. Admin. v. Woodruff, 831 N.E.2d 1264 (Ind.Ct.App.2005) (table).

New Horizon filed this suit in 2006 with two counts: a breach of contract claim alleging that FSSA failed to pay for the care of several New Horizon residents even before the decertification, and a quantum meruit claim seeking recovery for the care costs of the 131 New Horizon residents for whom New Horizon received no Medicaid funds during the post-decertification period. FSSA filed a counterclaim, seeking a set-off for the receivership costs it had been previously ordered to pay. FSSA filed a motion for judgment on the pleadings with respect to the quantum meruit claim, and New Horizon filed a motion for summary judgment on all of its claims.

The trial court granted FSSA's motion with respect to New Horizon's quantum meruit claim, finding that New Horizon was required to exhaust its administrative remedies by following the appeal process after ISDH decertified the facility. It further found that, regardless, New Horizon was responsible for transferring its residents after decertification, not FSSA, and was therefore not entitled to payment for the care it provided. Finally, the court granted New Horizon's motion with respect to its breach of contract claim, but only as to some of the pre-decertification reimbursement claims.

Following a bench trial, the court found FSSA had breached its contract with respect to the remaining pre-decertification claims and awarded New Horizon the sum of $93,666.09. Against this, though, it allowed FSSA an equal amount as a set-off for the receivership costs. The end result was that neither party walked away owing any money.

New Horizon appealed the trial court's dismissal of its quantum meruit claim on exhaustion grounds, the denial 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 it was further entitled to summary judgment on its quantum meruit claim. The Court of Appeals also reversed the trial court's award of a set-off.

We granted transfer, 962 N.E.2d 647 (Ind.2011) (table), thereby vacating the opinion of the Court of Appeals. Ind. Appellate Rule 58(A). We now affirm the trial court.

Standards of Review

This case presents issues determined at all three stages of the trial process, implicating multiple standards of review. At the earliest stage—a judgment on the pleadings—appellate courts review the trial court ruling de novo. Murray v. City of Lawrenceburg, 925 N.E.2d 728, 731 (Ind.2010). A motion for judgment on the pleadings is governed by Indiana Trial Rule 12(C), and “is to be granted ‘only where it is clear from the face of the complaint that under no circumstances could relief be granted.’ ” Id. (quoting Forte v. Connerwood Healthcare, Inc., 745 N.E.2d 796, 801 (Ind.2001)).

[964 N.E.2d 790]

Summary judgment, in turn, is proper when the party so moving demonstrates that there is no genuine issue of material fact with respect to a particular claim or element of a claim. Ind. Trial Rule 56(C); Town of Avon v. W. Cent. Conservancy Dist., 957 N.E.2d 598 (Ind.2011). Once this burden is satisfied, the non-moving party must come forward with properly designated evidence that affirmatively demonstrates a genuine issue of material fact. Town of Avon, 957 N.E.2d at 602. All evidence, and reasonable inferences drawn from it, must be construed in favor of the non-moving party. Id.

This analysis does not change on appellate review, but we review de novo disputes wherein the facts are...