Miss. Div. of Medicaid v. Yalobusha Cnty. Nursing Home

346 So.3d 413

MISSISSIPPI DIVISION OF MEDICAID and Drew Snyder, in his official Capacity as the Executive Director of the Mississippi Division of Medicaid

v.YALOBUSHA COUNTY NURSING HOME

NO. 2021-SA-00030-SCT

Supreme Court of Mississippi.

August 25, 2022

ATTORNEYS FOR APPELLANTS: JANET McMURTRAY T. HUNT COLE, JR. OFFICE OF THE ATTORNEY GENERAL BY: SAMUEL PHILIP GOFF

ATTORNEYS FOR APPELLEE: THOMAS L. KIRKLAND, JR., MATTHEW DAVID SITTON, ALLISON CARTER SIMPSON, Ridgeland

BEFORE KING, P.J., COLEMAN AND BEAM, JJ.

KING, PRESIDING JUSTICE, FOR THE COURT:

¶1. The Mississippi Division of Medicaid (DOM) and Yalobusha County Nursing Home (YNH) dispute four costs submitted for reimbursement by YNH in its fiscal year 2013 Medicaid cost report. The DOM appeals the Hinds County Chancery Court's judgment ordering the DOM to reverse the four adjustments at issue. Because the DOM correctly interpreted the appropriate statutes and because its decisions were supported by substantial evidence, we reverse the chancery court's order and render judgment reinstating the decisions of the DOM.

FACTS AND PROCEDURAL HISTORY

¶2. The DOM "is a state and federal program created by the Social Security Amendments of 1965 ..., authorized by Title XIX of the Social Security Act to provide health coverage for eligible, low income populations." Mississippi Division of Medicaid, https://medicaid.ms.gov/about/ (last visited July 18, 2022). Each state administers its own version of Medicaid through a state plan and associated statutes and regulations. Id. "The Mississippi Medicaid State Plan (State Plan) is a detailed agreement between the State of Mississippi and the Federal Government that describes nature and scope of Mississippi's Medicaid Program." Mississippi Division of Medicaid, http://www.medicaid.ms.gov/about/state-plan/ (last visited Mar. 23, 2022). The State Plan is "for use by providers, their accountants, the [DOM], and its fiscal agent in determining the allowable and reasonable costs of and corresponding reimbursement for long-term care services furnished to Medicaid beneficiaries." State Plan Guidelines for the Reimbursement for Medical Assistance Beneficiaries of Long Term Care Facilities, https://medicaid.ms.gov/wp-content/uploads/2021/09/Attachment_4.19-D-Searchable-eff-07.1.21-revised-9.24.21.pdf (last visited Mar. 23, 2022). The Medicaid program is jointly funded by state and federal dollars.

¶3. Under Mississippi Code Section 43-13-117(A)(18)(b),

The division shall establish a Medicare Upper Payment Limits [UPL] Program ... for hospitals, and may establish a Medicare Upper Payment Limits Program for nursing facilities .... The division shall assess each hospital and, if the program is established for nursing facilities, shall assess each nursing facility, for the sole purpose of financing the state portion of the Medicare Upper Payment Limits Program.

Miss. Code Ann. § 43-13-117(A)(18)(b) (Rev. 2015) (emphasis added) ( Section 43-13-117(A)(18)(b) was changed by legislation effective from and after July 1, 2021). The UPL program is a federal supplemental payment program that allows hospitals and other facilities to receive the difference between what Medicaid paid for a particular service and what Medicare would have paid for that service.

¶4. All hospitals in Mississippi are eligible for the UPL program. Miss. Code Ann. § 43-13-117(A)(18)(b). However, under Mississippi Code Section 43-13-145(1), (2), and (3), nursing facilities are already taxed at the maximum rate under federal law. Mississippi Code Section 43-13-145(1)(a) directs that, "[u]pon each nursing facility licensed by the State of Mississippi, there is levied an assessment in an amount set by the division, equal to the maximum rate allowed by federal law or regulation, for each licensed and occupied bed of the facility." Miss. Code Ann. § 43-13-145(1)(a) (Rev. 2021).

¶5. Three classes of nursing facilities exist in the state: privately owned facilities, government non-state (county-owned) facilities, and state facilities. Because the nursing facilities were already taxed at the maximum rate allowed by federal law, the DOM could not impose any additional tax on nursing facilities to make all facilities in the state eligible for a UPL payment. Accordingly, the UPL program was not available for privately owned or state nursing homes, but only for county or other local government owned or operated nursing facilities. These facilities are able to make intergovernmental transfers (IGT) of the amount of the state's share of the UPL payment, which would not be considered a tax that would interfere with the 6 percent bed tax. The UPL assessment program for qualifying nursing homes first began in 2011. Approximately twenty nursing facilities in the state qualify for the nursing home UPL program.

¶6. YNH is a long-term care facility owned by Yalobusha County and located inside Yalobusha General Hospital, also owned by Yalobusha County. In May 2013, the DOM announced to YNH that it had received approval for the fiscal year (FY) 2012 and FY 2013 UPL models from the federal Centers for Medicare & Medicaid Services (CMS). For FY 2012, YNH was required to pay an IGT in the amount of $514,850 in order to receive a supplemental UPL payment of $1,937,713. For FY 2013, YNH was required to pay an IGT in the amount of $601,793 in order to receive a payment of $2,264,933. Therefore, YNH paid a total of $1,116,643 in IGT and, in turn, received payments totaling $4,202,646.

¶7. Under the State Plan, "[a]ll Nursing Facilities ... shall file cost reports based on a standard year end as prescribed by the provisions of this plan." State Plan 4.19-D, 1-3(A), https://medicaid.ms.gov/wp-content/uploads/2022/05/StatePlanEntireDocument-searchable-eff.-01.01.22-updated-05.05.22.pdf (last visited July 22, 2022). Nursing homes are paid by Medicaid based on a per diem rate. The cost report is required to determine the per diem rate and to receive a payment from the DOM. It lists the allowable costs it incurs in providing care to Medicaid beneficiaries. The nursing home cost report is filed with the DOM and is reviewed only by the DOM.

¶8. YNH timely submitted its FY 2013 cost report. Under State Plan 4.19-D, Section I, titled Desk Reviews, "[t]he Division of Medicaid will conduct cost report reviews, as deemed necessary, prior to rate determination. The objective of the desk reviews is to evaluate the necessity and reasonableness of facility costs in order to determine the allowable costs used in the calculation of the prospective per diem rate." The DOM conducted four desk reviews of YNH's FY 2013 cost report.

¶9. First, on May 19, 2014, the DOM sent a letter to YNH stating that its cost report for FY 2013 "appears to be filed in accordance with the Medicaid State Plan and applicable federal and state laws and regulations. Therefore, no adjustments were made to your reported cost per day and return on equity computation."

¶10. However, on October 20, 2014, the DOM wrote to YNH and stated that the DOM had conducted a desk review and amended YNH's FY 2013 cost report. The letter stated that "[y]our cost report is subject to additional adjustments brought to the attention of the [DOM] and may be selected for field review, which could result in changed and additional adjustments." The Amended I Desk Review is not at issue. On November 14, 2014, the DOM sent YNH an Amended II Desk Review, again not at issue. Amended II Desk Review also stated that the cost report was subject to additional adjustments.

¶11. On March 11, 2016, YNH received a letter stating that the DOM had "amended your facility's twice previously amended desk review report for the above reference period to remove the ‘MEDICAID NH UPL ASSESSMENTS’ cost." The Amended III Desk Review removed YNH's UPL payment in the amount of $1,116,643, listed on Form 6, Line number 4-43, under taxes and licenses. Prior to the third desk review, the DOM had allowed YNH's UPL assessment to be claimed as an allowable cost on the cost report.

¶12. On April 9, 2016, YNH, through its accountant Richard Lefoldt, appealed the Amended III Desk Review. Lefoldt stated that YNH was appealing the adjustment because it "was not in accordance with DOM policy that was in effect for this cost reporting period and the period prior to and at the time that this facility's nursing home rates were determined based on this cost report." Because the UPL payment had been allowed in the FY 2011 and FY 2012 cost reports, and because the UPL payment had been allowed in the two prior desk reviews, YNH took the position that the DOM had recently changed its policy on this issue and argued that the change should be applied prospectively and not retroactively.

¶13. In response, on April 20, 2016, the DOM stated that it denied YNH's appeal and reasoned that

According to, Mississippi Medicaid State Plan, 4.19-D, Chapter 3, 3-9, Upper payment Limit (UPL) "100 percent of the calculated UPL will be paid to the non-state government owned or operated facilities, in accordance with applicable state and federal laws and regulations, including any provisions specified in appropriations by the Mississippi Legislature."

Mississippi Code 43-13-145 "The Division shall assess each hospital and, if the program is established for nursing facilities, shall assess each nursing facility, for the sole purpose of financing the state portion of the Medicare Upper Payments Limits Program."

CFR Title 42, 433.51(c) Public Funds as the State Share of Financial Participation "The public funds are not Federal funds, or are Federal funds authorized by Federal law to be used to match other Federal funds."

In summary, including the inter-governmental transfer (IGT) for the facility's UPL payment on Line 4-43, reimbursable costs, is in violation of both state code and federal regulation, as the facility would be receiving state and federal funds to finance the facility's IGT. If the facility places the IGT on line 4-43 the IGT would be

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