Methodist Specialty Care Ctr. v. Miss. Div. of Medicaid

305 So.3d 1088

METHODIST SPECIALTY CARE CENTER

v.MISSISSIPPI DIVISION OF MEDICAID and Drew Snyder, in His Official Capacity as Director of the Mississippi Division of Medicaid

NO. 2019-CC-00037-SCT

Supreme Court of Mississippi.

May 28, 2020

ATTORNEYS FOR APPELLANT: ANDY LOWRY, THOMAS L. KIRKLAND, BEA TOLSDORF, Jackson

ATTORNEYS FOR APPELLEES: JANET McMURTRAY, SAMUEL P. GOFF, OFFICE OF THE ATTORNEY GENERAL BY: LAURA L. GIBBES

BEFORE KITCHENS, P.J., MAXWELL AND CHAMBERLIN, JJ.

CHAMBERLIN, JUSTICE, FOR THE COURT:

¶1. Methodist Specialty Care Center is the only nursing facility for the severely disabled (NFSD) in the state. NFSDs generally incur higher costs than other nursing facilities, and because of this, Methodist receives a percentage adjustment to its new-bed-value (NBV) calculation when the Mississippi Division of Medicaid (DOM) determines how much it should reimburse Methodist for its property costs through the DOM's fair-rental system. A NBV is intended to reflect what it would cost to put a new bed into service in a nursing facility today. Methodist had received a NBV adjustment of 328.178 percent added to the standard NBV every year since it opened in 2004 until State Plan Amendment (SPA) 15-004 was enacted.

¶2. In 2012, the Mississippi Legislature directed the DOM to develop a plan to revise its reimbursement methodology for nursing facilities. The DOM complied and submitted its recommendations for revisions to the Legislature in January 2014. During the 2014 Regular Session, the Legislature passed House Bill 1275, which authorized the DOM to update and revise several provisions within the State Plan. In 2015, the DOM's revisions were enacted in SPA 15-004. SPA 15-004 substantially increased the standard, universally applied NBV for all nursing facilities in the state. The amendment also changed the NFSD's NBV adjustment rate and formula. Since Methodist opened in 2004, the NFSD's NBV had been calculated by adding 328.178 percent to the standard NBV, but the originally intended version of SPA 15-004 proposed to change the NFSD's NBV to be 175 percent of the standard NBV. These changes to Methodist's adjustment rate made it experience a substantial decrease in its NBV, while all other nursing facilities in the state were receiving an increase in their NBVs.

¶3. Aggrieved by the decrease in its NBV, Methodist appealed the DOM's changes to its NBV that were enacted in SPA 15-004. The DOM initially denied Methodist's appeal based on Methodist's failure to take issue with the amendment during the public-notice and comment period. After receiving notice of the denial, Methodist renewed its appeal, and the DOM agreed to hold an administrative hearing on the matter.

¶4. After the hearing, the administrative hearing officer (AHO) submitted his opinion to the DOM. The AHO found that the DOM had properly proposed and implemented SPA 15-004 and upheld the decreased percentage adjustment to Methodist's NBV. The AHO, however, also determined that the DOM had miscalculated Methodist's NBV adjustment. The DOM had planned to calculate Methodist's adjustment as 175 percent of the base NBV, but the AHO found that Methodist's adjusted NBV should be calculated in the same manner as it was calculated preamendment—by taking 175 percent of the standard NBV and adding that value to the standard NBV. The AHO's correction to the formula adjusted Methodist's NBV for 2015 from $159,800 to $250,800.

¶5. The DOM's executive director affirmed the AHO's opinion and adopted it as the DOM's final decision on the matter.

Methodist still felt aggrieved because its NBV adjustment rate had not been restored to the preamendment rate. Methodist appealed the DOM's final decision to the Chancery Court of the First Judicial District of Hinds County. The chancellor affirmed the DOM's final decision. Methodist now appeals to this Court.

FACTS AND PROCEDURAL HISTORY

¶6. Methodist is the only NFSD in the state. An NFSD is a long-term-care facility that specializes in the treatment of individuals with severe disabilities, including spinal-cord injuries, closed head injuries, permanent ventilator-dependent patients, permanent tracheotomy patients, quadriplegia patients and other patients who require total and maximum assistance with daily living activities.

¶7. In 2000, Methodist applied for a certificate of need (CON) seeking to construct Mississippi's first long-term nursing facility for the severely disabled and listed the projected cost of building such a facility at approximately $7.5 million. Because no such facility had been built within the state before, the DOM and Methodist worked together at the outset of the NFSD's creation to come up with a reimbursement methodology that would fairly compensate Methodist for the cost of constructing the facility. Before the facility was ever built, the two parties agreed that the DOM would need to adjust Methodist's new-bed rate by 328.178 percent in order to fairly compensate Methodist for its incurred property costs for construction of the NFSD. Methodist's adjustment rate was added to the State Plan at Chapter 3-4.

¶8. Four categories of nursing facilities receive adjustments to their NBVs—intermediate-care facilities for the intellectually disabled (ICF/IID), psychiatric residential-treatment facilities (PRTF), Alzheimer's units and NFSDs. Since Methodist first began operating in 2004, its property-reimbursement rate was calculated by taking adding 328.178 percent of the standard NBV to the standard NBV amount. This manner of calculation effectively set Methodist's reimbursement rate at 428.178 percent of the standard NBV. Alzheimer's units are also calculated in this "percentage plus" manner, and Alzheimer's units’ adjustment percentage is also provided in Chapter 3-4 of the State Plan. The adjustment percentages for ICF/IIDs and PRTFs are not stated within Chapter 3-4. Both ICF/IIDs and PRTFs have their NBV adjustments calculated by taking their stated percentage adjustment of the standard NBV, but the standard NBV is not added to the percentage.

¶9. In 2012, the Legislature passed House Bill 421. House Bill 421 directed the DOM to "develop a plan providing revisions to the current reimbursement methodology for nursing facility services." H.B. 421, Reg. Sess., 2012 Miss. Laws ch. 530, § 5. In response to the legislation, the DOM created a Nursing Facility Reimbursement Methodology Revision Committee (Committee) comprised of DOM personnel, industry people and other concerned stakeholders. The Committee reached an agreement on a new reimbursement plan, and the DOM submitted its proposed plan to the Legislature in January 2014. The report stated that the Committee recommended that updates be made to the DOM's fair-rental-value calculation, as follows:

• Increase the value of a nursing facility bed to $91,200,

• Increase the annual depreciation amount from 1% to 1.75% for all long-term care facilities, • Increase the maximum allowed depreciation from 30% to 50% for all long term care facilities, and

• Decrease the rental factor from 7.5% to 5.35% while maintaining the 2% risk premium for all long-term care facilities.

The report did not include any proposed changes to percentage adjustments to the NBVs for those facilities that received them.

¶10. After reviewing the Committee's report, the Legislature passed House Bill 1275 during the 2014 session. House Bill 1275 stated that

On or after January 1, 2015, the division shall update the case-mix payment system resource utilization grouper and classifications and fair rental reimbursement system. The division shall develop and implement a payment add-on to reimburse nursing facilities for ventilator dependent resident services.

H.B. 1275, Reg. Sess., 2014 Miss. Laws ch. 488, § 1 (codified as amended at Miss. Code Ann. § 43-13-117(A)(4)(d) (Rev. 2015)). House Bill 1275 was signed by the governor, and this portion of the bill became Mississippi Code Section 43-13-117(A)(4)(d).

¶11. After receiving the Legislature's directive to update the nursing facility fair-rental-reimbursement system, the DOM began drafting amendments to the State Plan in November and December of 2014. It was not until the DOM actually started writing the amendments to the State Plan that it first examined the adjusted-bed values of ICF/IIDs, PRTFs, Alzheimer's units, and NFSDs. While examining the adjusted NBVs, the DOM noticed that under the old rates, Methodist had almost completely recouped its initial investment in just eleven years. This fact, coupled with the DOM's fear that Methodist would receive a windfall as a result of the rebased NBV led the DOM to make one of its last changes to the SPA before submitting it for approval to CMS and decreasing the NFSD's adjustment from 328.178 percent to 175 percent. If Methodist's NBV continued to be adjusted with a 328.178 percent add-on after the standard NBV was rebased as $91,000 in SPA 15-004, then Methodist's NBV would skyrocket from $226,638.92 in 2012 to $390,498.00 in 2015—an increase of $163,859.08 per bed.

¶12. In December 2014, the DOM published notices in several newspapers of the proposed changes to its long-term-care facility-reimbursement methods—SPA 15-004—as required by the public-notice requirements of 42 C.F.R. § 447.205, Westlaw (current through May 21, 2020). The public-notice and comment period ran for a month, from December 18, 2014, to January 18, 2015. The public notice provided that a copy of the proposed SPA was available for review in each county health-department office. The copies of the SPA that were available for review included the change to Methodist's NBV adjustment. Methodist claims, however, that because it was expecting a slight increase to its per diem rate and because changes implemented in the SPA were difficult to discern from one version of the State Plan to its revised version, Methodist did not find out about the change in is property rate until March 9, 2015—well after the public-notice and comment period had...