Crossgates River Oaks Hosp. v. Miss. Div. of Medicaid & David J. Dzielak, 240 So. 3d 385

Twelve Medicaid-participating hospitals challenged the Mississippi Division of Medicaid's (DOM) 2010 recalculation of their FY2001 outpatient reimbursement rates, which produced lump-sum settlements reducing payments.
The FY2001 outpatient rates were to be set using Attachment 4.19-B of the State Medicaid Plan and each hospital’s 1999 cost report (including amendments).
Attachment 4.19-B required outpatient reimbursement as the lower of 75% of charges or a cost-to-charge ratio computed under Medicare methodology, expressly excluding outpatient laboratory and radiology services (those are paid fee-for-service).
DOM recalculated rates by (1) including some laboratory and radiology charges in the denominator and (2) substituting certain hospital-reported costs with Medicare “blended payment” amounts for ASC and ODP services, which were lower than reported costs.
Administrative hearings upheld DOM; the chancery court affirmed DOM’s interpretation that Medicare methodology (including blended rates) could be applied. The hospitals appealed to the Mississippi Supreme Court.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether DOM incorrectly included lab and radiology charges in the cost-to-charge denominator	Attachment 4.19-B unambiguously excludes lab and radiology charges; DOM improperly included them, lowering hospitals’ rates	DOM relied on Medicare Principles of Reimbursement and interpreted its State Plan to permit use of Medicare methodology, which it says justified inclusion	Court held DOM violated the State Plan; lab and radiology charges must be excluded
Whether DOM could substitute Medicare blended payment amounts for hospitals’ reported costs (ASC/ODP)	"Cost" in the State Plan means each hospital’s actual costs per its cost report; blended payments are not actual costs and are lower, so substitution is impermissible	DOM argued Medicare blended payment methodology applied and could be used in computing the ratio instead of reported costs	Court held DOM’s substitution was improper; DOM must use hospitals’ submitted costs from cost reports

Miss. Comm’n on Envtl. Quality v. Chickasaw Cty. Bd. of Supervisors, 621 So. 2d 1211 (Court reciting standard of review for chancery review of agency decisions)
Town of Enterprise v. Miss. Pub. Serv. Comm’n, 782 So. 2d 733 (standards for reversing agency decisions)
Sierra Club v. Miss. Envtl. Quality Permit Bd., 943 So. 2d 673 (agency interpretation of its rules reviewed de novo with deference)
McDerment v. Miss. Real Estate Comm’n, 748 So. 2d 114 (deference to agency interpretation of its rules)
Div. of Medicaid v. Mississippi Indep. Pharmacies Ass’n, 20 So. 3d 1236 (agency interpretation will not be upheld if plainly erroneous or inconsistent)
Buelow v. Glidewell, 757 So. 2d 216 (agency action arbitrary or capricious standard)