Sunrise Retirement Community, Friendship Haven, Presbyterian Village, Rose Vista Home, Longview Home, United Presbyterian Home, Riceville Community Rest Home, Hubbard Care Center, and Happy Siesta Care Center v. Iowa Department of Human Services
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)