403 Mass. 736 | Mass. | 1989
This is an action by Goddard Memorial Hospital of Stoughton (Goddard), pursuant to G. L. c. 176A, § 5, seventeenth par. (1986 ed. & Supp. 1988), challenging a decision of the Rate Setting Commission (commission). The commission disapproved the annualization of certain costs under a reimbursement agreement between Goddard and Blue Cross of Massachusetts, Inc. (Blue Cross). The costs in dispute had been submitted to arbitration, but the commission declined to be bound by the arbitrator’s award. Goddard argues that the commission’s earlier approval of the reimbursement agreement should bar its review of the arbitrator’s decision and award under that agreement. Goodard also argues that the commission’s decision is arbitrary, capricious, and unsupported by the evidence.
The facts are as follows. In June, 1981, the commission approved an industry-wide master reimbursement agreement, known as HA-29, between hospitals and Blue Cross.
The parties agree that HA-29 was an unprecedented agreement. It appears that the goal of HA-29 is to provide “an incentive to achieve greater efficiency and economy in the manner of providing health care services without adversely affecting the quality of such services,” in the words of the eleventh paragraph of G. L. c. 176A, § 5. The distinctive mechanism of HA-29 is to base reimbursement on a hospital’s Maximum Allowable Cost (MAC). A hospital’s MAC is based initially on its actual, reasonable costs for fiscal year 1981, the base year. This basis is adjusted by a formula, contained in the agreement, for inflation and certain other acceptable expenses. In subsequent years, if a hospital’s actual costs exceed its MAC, it must absorb the loss. Conversely, if its actual costs are less than its MAC, a hospital may retain the difference. Thus, the hospital is rewarded for improved efficiency and cost containment. Counsel for Goddard and the commission agreed in oral argument that, under HA-29 and successor agreements, the hospital’s costs for 1981 will largely determine the MAC for the following ten years.
In computing the MAC, Goddard was permitted, under HA-29, to “annualize” certain costs. Thus, “[wjage and fringe benefits increases which depart from normal wage and salary policies of the Hospital . . . will be annualized if one of the following criteria is met. [1] The increases or costs were included in the Hospital’s budget for the base year [or] [2] The increases or costs were approved or under consideration by the Hospital prior to May 11, 1981 (for the first base year only).” In addition, HA-29 provides that “[a]ny cost which is annualized is subject to review by Blue Cross for determination of reasonableness, and any dispute concerning annualized costs may be resolved by the Dispute Procedure under Article VII.” Article VII provides the dispute procedure under which the arbitrator issued his decision.
In 1981, Goddard gave its employees two wage increases. The hospital had begun a major renovation and construction project during that year, and its average occupancy rate had
Blue Cross refused to annualize the July 1, 1981, wage increase. It took the position that, even if the increase was reasonable, the annualization was not. Goddard then invoked the dispute process of HA-29, Article VII, to resolve whether Blue Cross properly had exercised its function under the provision that “[a]ny cost which is annualized is subject to review by Blue Cross for determination of reasonableness.” The arbitrator rendered his decision and award on November 14, 1984. The arbitrator construed HA-29 to permit Blue Cross to review only the reasonableness of the cost to Goddard in fiscal year 1981 of the July 1,1981, wage increase, rather than the reasonableness of annualizing that cost, or the reasonableness of including the annualized cost in the base year costs for the purpose of recalculating the MCAs for later years.
In compliance with the arbitrator’s award, in January, 1985, Blue Cross submitted an adjustment to the commission in the amount of $536,847 to Goddard’s base year costs under HA-29.
In October, 1986, the commissioner submitted his recommendation to the commission. He concluded that the commission was not bound by the arbitrator’s decision, that it could reexamine the “record and rulings compiled by the Arbitrator,” and that the arbitrator’s interpretation of HA-29 was incorrect. He also concluded that the commission possessed the “power to review the continuing reasonableness of rates of payment under the contracts between hospitals and Blue Cross.” The commissioner then addressed the reasonableness of the rate of payment that would result from annualizing Goddard’s July 1, 1981, wage increase. The commissioner found that Goddard’s employees received, “in effect, a normal cost-of-living increase of 10 percent in November 1981 (pursuant to the hospital’s past policy and practice) and a one-time bonus of 1.67 percent of annual salary (5 percent of their annual salary for four months).”
1. Goddard argues that the commission’s reversal of the arbitrator’s award is not authorized by, and is inconsistent with, HA-29. Goddard argues that the commission is bound by the dispute procedures of HA-29 because it approved HA-29. Goddard’s argument seems premised on the notion that, by its regulatory approval of HA-29, the commission became a
2. We turn next to the commission’s statutory authority to review the reasonableness of the rate of payment that resulted from annualizing Goddard’s wage increase of July 1, 1981. General Laws c. 176A, § 5, tenth par., provides in part:
*742 “No rates of payment shall be approved, nor their continuance be permitted by the commission, unless such rates reflect reasonable costs or are based on charges made to the general public, whichever is lower.”
Goddard argues that the commission cannot act pursuant to this language because it approved HA-29 under the eleventh paragraph and not under the tenth paragraph. Even if we were to assume that the commission approved HA-29 under the eleventh paragraph, we do no accept Goddard’s argument.
General Laws c. 176A, § 5, eleventh par., provides, in its entirety:
“Other requirements of this section notwithstanding the commission may approve any rate of payment to any provider or class of providers if such rate, in the opinion of the commission, contains an incentive to achieve greater efficiency and economy in the manner of providing health care services without adversely affecting the quality of. such services.”
Goddard argues that the phrase, “[ojther requirements of this section notwithstanding,” means that the commission is not authorized to review the rates of payment for reasonableness, as required under the tenth paragraph. In support of this argument, Goddard cites the rule, as stated in Beeler v. Downey, 387 Mass. 609, 616 (1982), that, “where the Legislature has employed specific language in one paragraph, but not in another, the language should not be implied where it is not present.”
This argument misperceives the statutory policy embodied in § 5, namely, to seek to contain hospital costs. A traditional method, as set forth in the tenth paragraph, requires hospital rates to be primarily based on “reasonable costs.” New England Medical Center, Inc. v. Rate Setting Comm’n, 384 Mass. 46, 51 (1981).
We cannot credit the argument that the Legislature, in furtherance of the commission’s power under the eleventh paragraph to achieve greater efficiency and economy, released the commission from its obligation to implement the public policy of hospital service cost containment. To do so would leave the eleventh paragraph devoid of efficacy or meaning. We must read the statute in a way to give it a sensible meaning in furtherance of the aims and objectives of the legislation. Lexington v. Bedford, 378 Mass. 562, 570 (1979).
Goddard argues, citing Commonwealth v. Mercy Hosp., 364 Mass. 515 (1974), that the commission cannot impinge on the voluntariness of the contractual relationship between Goddard and Blue Cross. In that case, we held that G. L. c. 176A does not require hospitals to accept payments from Blue Cross as payments in full for services performed for subscribers. In reaching that holding, we stated that G. L. c. 176A, § 1, “plainly evinces an intention to regulate a relationship which is voluntary on both sides.” Id. at 518. Goddard would have us ignore the intention of the Legislature to regulate hospital costs and would have us focus solely on the voluntariness of the relationship between Goddard and Blue Cross. This we refuse to do, for to do so would skew the statutory scheme. Per
3. Finally, we consider Goddard’s claims that the commission’s actions were arbitrary, capricious, or unsupported by substantial evidence. We consider both the commission’s interpretation and application of HA-29 and the commission’s determination of the reasonableness of rates of payment under G. L. c. 176A, § 5.
a. In reviewing the commission’s interpretation of HA-29, we accord that interpretation substantial deference. “ ‘Although we must examine the entire record, including any evidence that detracts from the weight of the [commission’s] decision ... we may not substitute our judgment for that of the [commission] . . .’ (citations omitted). 1001 Plays, Inc. v. Mayor of Boston, 387 Mass. 879, 885 (1983).” Craven v. State Ethics Comm’n, 390 Mass. 191, 201 (1983). The commission focused on two sentences of HA-29 relating to annualization: “Wage . . . increases which depart from normal wage . . . poli
b. In determining whether rates of payment reflect reasonable costs, the commission, in January, 1986, solicited Goddard’s views and arguments concerning the recommendation of its staff that annualization of the July 1,1981, wage increase be disapproved. The commission indicated that it would pro
So ordered.
Goddard argued, in addition, that the commission has no jurisdiction under G. L. c. 251 (1986 ed.) to review an arbitration award. In the view we take of the case, G. L. c. 251 is inapplicable to this kind of proceeding.
The negotiations that led to HA-29 were protracted. For a history of the negotiations which were an antecedent to HA-29, see New England Medical Center, Inc. v. Rate Setting Comm’n, 384 Mass. 46,48-50 (1981).
Blue Cross maintains that, as a result of this adjustment, its increased payments would amount to over $1.9 million over the ten years affected by the base year costs.
In its brief, the commission states that the increase was in effect for only the final three months of Fiscal Year 1981, and that therefore the nominal 5% increase was actually a 1.25% increase. Goddard does not address this discrepancy, nor do we.
The record does not show any attempt by Goddard to confirm the arbitrator’s award in the Superior Court. G. L. c. 251, § 12. We do not imply by this comment that such an effort would have been appropriate.
Goddard’s reference to Baystate Medical Center v. Blue Cross of Mass., Inc., 382 Mass. 485, 487 n.6 (1981), does not assist its argument. The commission was not a party to that action, and we noted only that the parties had bound themselves to resolve disputes concerning the interpretation or application of the agreement by arbitration. Cf. Tyman, supra at 115 (school committee was party to collective bargaining agreement).
General Laws c. 176A, § 5, fourth par., has similar provisions as to “reimbursement for health services other than hospital services” by requiring