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, 346 So.3d 413

Background

The Mississippi Division of Medicaid (DOM) administers Medicaid reimbursement under the State Plan; county-owned nursing facilities may participate in a UPL program by making intergovernmental transfers (IGTs) to fund the state share.
Yalobusha County Nursing Home (YNH), a county-owned, hospital-based facility, paid $1,116,643 in IGTs for FY2012–FY2013 and received approximately $4.2 million in UPL supplemental payments; it reported the IGT on Line 4-43 (taxes/licenses) of its FY2013 cost report.
DOM performed multiple desk reviews, then amended the FY2013 report to disallow: (1) the $1,116,643 UPL/IGT, (2) $70,566 of Yalobusha Hospital’s assessment allocated to YNH, (3) $34,858 in social-services allocations, and (4) $68,221 in A&G overhead tied to the UPL disallowance.
An administrative hearing officer upheld DOM’s adjustments; the chancery court reversed the agency, finding DOM acted arbitrarily and capriciously.
The Mississippi Supreme Court reviewed statutory and State Plan interpretation, de novo where appropriate, and whether DOM’s decisions were supported by substantial evidence.
The Supreme Court reversed the chancery court and reinstated DOM’s final order on all four adjustments.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Whether the $1,116,643 IGT/UPL payment was an allowable tax/cost on Line 4-43	YNH: UPL was allowed in prior years/desk reviews; DOM’s retroactive removal is arbitrary, should apply prospectively, and equitable estoppel bars disallowance	DOM: IGT is not a tax or a permissible health-care-related tax, not listed as allowable in State Plan/Line 4-43, and not "actually incurred" because provider netted greater UPL payments	Court held DOM correct: IGT is not a tax or allowable cost; disallowance upheld; prior allowance was an error DOM could correct
2) Whether $70,566 of hospital assessment allocated to YNH was allowable	YNH: DOM training and historical practice permitted allocation; reliance supports allowability	DOM: hospital assessment is assessed to hospital/provider, not to separate nursing-facility provider; Mississippi Methodist controls	Court held DOM correct: allocation not allowable for nursing-facility cost report; followed Mississippi Methodist precedent
3) Whether $34,858 social-services allocation (mismatch) was allowable	YNH: timely amended its nursing-home cost report within 36 months; hospital could not validly amend its finalized Medicare/Medicaid report so DOM should accept nursing-home amendment	DOM: desk review must rely on finalized/audited Medicare hospital cost report on file; hospital’s unofficial report cannot supplant the finalized Medicare report	Court held DOM correct: use of finalized Medicare hospital cost report was reasonable; disallowance upheld
4) Whether $68,221 A&G overhead tied to UPL disallowance was proper	YNH: overhead removal penalizes provider for DOM’s prior allowance/error	DOM: overhead was attributable to the now-disallowed UPL cost and removal was appropriate	Court held DOM correct: A&G adjustment proper as consequence of disallowing the UPL assessment

Key Cases Cited

Mississippi Methodist Hosp. & Rehab. Ctr., Inc. v. Miss. Div. of Medicaid, 319 So. 3d 1049 (Miss. 2021) (upheld DOM disallowance of hospital assessment allocation to nursing facility; controls similar allocation issue)
Miss. Div. of Medicaid v. Windsor Place Nursing Ctr., Inc., 296 So. 3d 68 (Miss. 2020) (agencies may correct prior errors in cost-reporting even if providers relied to their detriment)
King v. Miss. Mil. Dep’t, 245 So. 3d 404 (Miss. 2018) (standard for judicial review of agency decisions)
Miss. Transp. Comm’n v. Anson, 879 So. 2d 958 (Miss. 2004) (presumption in favor of agency action; challenger bears burden)
Miss. Valley Gas Co. v. Fed. Energy Regul. Comm’n, 659 F.2d 488 (5th Cir. 1981) (agency must follow prior norms or explain departures)
Dixon v. United States, 381 U.S. 68 (U.S. 1965) (agencies may correct mistakes of law even when parties relied on prior practice)
Beverly Enters. v. Miss. Div. of Medicaid, 808 So. 2d 939 (Miss. 2002) (definition and application of "arbitrary and capricious" review)