833 N.W.2d 216
Iowa2013Background
- Nursing homes submitted annual Financial and Statistical Reports to DHS to compute Medicaid per diem rates.
- DHS disallowed certain costs for Medicare Part A services (lab, x-ray, prescription drugs) in 2008 cost reports.
- An ALJ concluded these Medicare costs were properly reportable; DHS issued a final decision disallowing them.
- District court affirmed DHS decision; Court of Appeals reversed; DHS sought further review.
- Iowa Code chapter 249A governs Medicaid; DHS rules 81.6 and 81.1 define reporting and allowable costs but are silent on Medicare costs.
- Court held DHS misinterpreted rules; exclusion of Medicare costs unsupported; remanded for new rulemaking under chapter 17A.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exclusion of Medicare costs under rule 81.6(11). | Sunrise argues 81.6(11) does not authorize excluding Medicare costs. | DHS argues 81.6(11) is broad enough to exclude non-patient-care costs. | Agency misinterpreted; exclusion unsupported. |
| Applicability of 81.1's allowable cost definition to Medicare costs. | Definition does not address Medicare costs. | Definition implies costs a prudent buyer would pay; applies to all costs. | Definition cannot be read to exclude Medicare costs. |
| Payor structure implications for Medicare vs Medicaid costs. | Rules treat Medicare and Medicaid costs similarly; exclusion not justified. | Rules distinguish payors; could imply exclusion. | No dispositive payor-based limitation in rules. |
| Whether the new DHS interpretation constitutes new rulemaking. | Agency changing practice without rulemaking violates 17A. | Administration discretion to interpret rules. | Requires formal rulemaking; remand for 17A proceedings. |
Key Cases Cited
- Eyecare v. Dep’t of Human Servs., 770 N.W.2d 832 (Iowa 2009) (final agency action reviewed under Iowa APA; agency interpretations reviewed for reasonableness)