774 N.E.2d 300 | Ohio Ct. App. | 2002
{¶ 2} MVCC-Fulton is an intermediate care facility for the mentally retarded located in Morrow County and licensed by the state of Ohio. It is among several such facilities in the state owned by a common management group, Morning View Care Centers, operated by Dearth Management, Inc. MVCC-Fulton's 33 beds are certified to participate in federal Medicaid programs administered by ODJFS. MVCC-Fulton and ODJFS have been parties to a series of provider agreements *521
entered into pursuant to R.C.
{¶ 3} This case involves financial circumstances related to MVCC-Fulton's effort to downsize the capacity of its principal facility and to develop four 8-bed group homes to which former residents of the 65-bed home were transferred as each new building became ready for occupancy. The Ohio Department of Mental Retardation and Developmental Disabilities ("ODMRDD") initially approved the development request in September 1993. The process of constructing the smaller group homes and transferring residents took place during calendar years 1996 and 1997,1 but licensing changes were not effective until June 1, 1998. Annual provider agreements from September 1, 1995 through August 31, 1998 (extended to October 31, 1998) identified MVCC-Fulton's certification as a 65-bed intermediate care facility. More recent agreements indicate a certification for 33 beds.
{¶ 4} The request for rate reconsideration, which pertains only to the main facility, was dated December 29, 1998, and was expressly grounded in "extreme hardship" under R.C.
{¶ 5} MVCC-Fulton suggested that fixed capital costs such as depreciation, amortization, interest expenses, and leasing costs for both real estate and equipment remained constant after the transfer of beds and, thus, caused an increase in the per diem cost per bed that was not adequately addressed by the reimbursements paid during fiscal years 1998 (July 1, 1997 to June 30, 1998) and 1999 (July 1, 1998 to June 30, 1999). MVCC-Fulton asserted that in spite of its aggressive attempts to reduce indirect costs, the size of the main facility and the continuing needs of its residents rendered it unable, during the period for which the rate adjustment was sought, to achieve a reduction proportional to the number of beds eliminated as the result of the downsizing. Disparity between those costs and the reimbursements received during that period fashioned additional financial hardship according to the application for relief. MVCC-Fulton acknowledged that the expenditures allocated to capital and indirect costs exceeded the cost ceilings then in effect for those categories. *522
{¶ 6} In support of its request, MVCC-Fulton cited such improvements in the quality of life of its residents that resulted from the downsizing as an upgrading of common areas, a conversion from two-resident rooms to private rooms, and the creation of a less institutional environment. Those improvements did not require structural changes to the building. A letter from the outgoing2 director of ODMRDD accompanied the application for rate reconsideration. The letter confirmed those benefits and encouraged ODJFS to grant the request based upon extreme hardship. (January 10, 2001 Depositions Ex.1).3 MVCC-Fulton also furnished the documentation required by Ohio Adm. Code 5101:3 -3-24(D)(3), including a three-month cost report.
{¶ 7} ODJFS reviewed the documentation and then requested additional information to explain certain issues the department identified within the initial request. The agency asked for clarification of the time period for which relief due to extreme hardship was being sought and confirmation of the facility's 1998 calendar year resident census. The department also asked for the following: (1) a copy of an operational plan detailing steps taken to prepare for downsizing; (2) a copy of a transition/downsizing budget; (3) a clearer explanation of the relationship between home office costs and the downsizing effort; (4) more detailed staffing information for both the main facility and the new group homes; (5) drawings of the facilities showing changes in usage and associated costs on a square-foot basis; (6) copies of lease agreements, depreciation schedules and bank statements reflecting interest expense and principal debt; (7) more precise explanation of the figures presented under certain specific accounting codes; (8) copies of budgets for the 1998 and 1999 fiscal years; and (9) any other pertinent documentation reflecting the hardship.
{¶ 8} MVCC-Fulton responded in detail and specifically asked for an adjusted rate of $173.95 per patient per day based on the information included in its three-month cost report. A rate of $146.45 per patient per day was actually in effect during the same period. The total request was for approximately $734,354 in additional reimbursements for the two fiscal years addressed. After receiving this March 1, 1999 response to its request for additional information, ODJFS not only reviewed the financial data furnished but also performed its own calculations *523 where discrepancies were perceived in an attempt to relate increased costs to the downsizing exclusive of other factors.
{¶ 9} Based upon this analysis of all cost centers and a recalculation of allowable bed days during calendar year 1997, the period upon which the original rate for fiscal 1999 was determined, ODJFS granted a rate increase of $12.48 per diem, retroactively effective July 1, 1998. The approved adjustment amounted to a total increased reimbursement of approximately $222,456 for fiscal 1999 only. Relief for fiscal 1998 was denied because the application was deemed not timely for that year.
{¶ 10} Over the signature of Director Romer-Sensky, ODJFS issued a 15-page report, with attachments, explaining the decision to grant a lesser adjustment than had been requested. Relying upon the language in Ohio Adm. Code
{¶ 11} MVCC-Fulton requested that the department reconsider its decision to grant partial relief only. MVCC-Fulton argued that where a rate adjustment is requested on grounds of extreme hardship, the department has the discretion to grant reasonable and appropriate reimbursement of the added costs of downsizing without regard to whether or not a government mandate or circumstances beyond the provider's control precipitate the hardship. Under that standard, the provider argued that an adjustment in the full amount requested is justified. ODJFS did not revise its initial award. MVCC-Fulton then filed its complaint in the Franklin County Common Pleas Court instituting the action from which this appeal is taken.
{¶ 12} MVCC-Fulton sought both declaratory and injunctive relief as to alleged violations by ODJFS of it rights under the
{¶ 13} On September 14, 2000, the trial court dismissed several of those claims pursuant to Civ.R. 12(B)(6)4 on the motion of ODJFS. The disposition of the motion to dismiss is not subject of this appeal. The court later granted summary judgment in favor of ODJFS on the remaining claims. In deciding the motion for summary judgment, the court held that ODJFS was entitled to judgment as a matter of law on MVCC-Fulton's due process and Section 1983, Title 42, U.S. Code claims because MVCC-Fulton could not prove it possessed a protected property interest in a higher Medicaid reimbursement rate than it received after ODJFS's partial granting of the reconsideration request. The court also noted that for purposes of a Section 1983, Title 42, U.S. Code action, the department is not a "person" as contemplated under that statute.
{¶ 14} The trial court found with respect to the state-law claims for an adjustment to the rate paid during fiscal 1998 that MVCC-Fulton did not request relief in a timely fashion and, therefore, ODJFS was entitled to judgment as a matter of law on any hardship alleged to have been experienced during that period. Finally, while recognizing that Ohio Adm. Code
{¶ 15} Appealing from that adverse judgment, MVCC-Fulton presents a single assignment of error for this court's consideration:
{¶ 16} The trial court erred in granting summary judgment in favor of appellees and against appellant when there remained genuine issues of material fact and movants were not otherwise entitled to judgment as a matter of law.
{¶ 17} For the reasons that follow, we affirm the trial court's judgment as to the due process claims brought by MVCC-Fulton pursuant to Section 1983, Title 42, U.S. Code, and as to the claims for relief under state law that relate to fiscal 1998. As to the claims for relief under state law for fiscal 1999, however, we find that MVCC-Fulton produced evidence in opposition to the motion for summary judgment sufficient, when viewed most favorably to it as the nonmoving party, to establish the existence of genuine issues of material fact to be litigated. We, therefore, reverse the trial court's judgment in the latter respect.
{¶ 18} The Medicaid program is a source of federal funding designed to supplement state reimbursement to providers of medical and long-term care services to the poor. Wilder v. Virginia Hospital Assn. (1990),
{¶ 19} Ohio has a prospective cost-related system of reimbursement under which the annual costs for services in the calendar year ending prior to the effective date of a current rate are utilized to calculate that rate. Ohio Academy of Nursing Homes, Inc. v. Creasy, supra. In this case, for example, the rate of reimbursement paid to MVCC-Fulton during fiscal 1998 was based upon its cost reports for calendar 1996, and the rate for fiscal 1999 was calculated from calendar 1997 cost reports. Absent one or more of the circumstances mentioned in R.C.
{¶ 20} R.C.
{¶ 21} `Reasonable' means that a cost is an actual cost that is appropriate and helpful to develop and maintain the operation of patient care facilities and activities, including normal standby costs, and that does not exceed what a prudent buyer pays for a given item or services. Reasonable costs may vary from provider to provider and from time to time for the same provider. [R.C.
{¶ 22} The Ohio General Assembly has provided a procedure by which a facility may seek reconsideration of its Medicaid reimbursement rate, but has vested the responsibility to adopt specific rules for establishment of the process to ODJFS.R.C.
{¶ 23} The rules shall provide that the department, through the rate reconsideration process, may increase a facility's rate as calculated under sections
{¶ 24} The department's decision at the conclusion of the reconsideration process is not subject to any administrative proceedings under Ohio Adm. Code Chapter 119 or any other provision of the Revised Code. R.C.
{¶ 25} As the legislature directed, ODJFS adopted Ohio Adm. Code
{¶ 26} The request, in writing, must give a detailed explanation as to why a rate adjustment due to extreme hardship is warranted, including steps taken to address the circumstances outside the rate reconsideration process. Ohio Adm. Code
{¶ 27} When an appellate court reviews a case that was concluded at the trial level by summary judgment, it does so de novo, applying the same standards as required of the trial court. Ryberg v. Allstate Ins. Co. (2001), Franklin App. No. 00AP-1243. The review must be undertaken independently and without deference to the lower court's determination. Al-Najjar v. R S Imports, Inc. (2000), Franklin App. No. 99AP-1391. Where the decision as to whether the trial court properly granted summary judgment involves only questions of law, a reviewing court has complete and independent authority. American Motorists Ins. Co. v. Olin Hunt Specialty Products, Inc. (2001), Franklin App. No. 00AP-1313, citing Village of Grafton v. Ohio Edison Co. (1996),
{¶ 28} Summary judgment is appropriate pursuant to Civ.R. 56 where: (1) no genuine issue of material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) when the evidence is viewed most strongly in favor of the nonmoving party, reasonable minds can come to but one conclusion, a conclusion adverse to the nonmoving party. Ryberg, supra, *528
citing Tokles Son, Inc. v. Midwestern Indemn. Co. (1992)
{¶ 29} The trial court correctly ruled that ODJFS, as an agency, is not a "person" subject to suit under Section 1983, Title 42, U.S.Code. This court previously held that one of the elements of a Section 1983 claim is that the conduct in controversy must be committed by a person acting under color of state law and that the state is not a "person" for purposes of Section 1983. Mankins v. Paxton (2001),
{¶ 30} To show that the former director and the deputy director of ODJFS violated its due process rights and that it is entitled to relief under Section 1983, Title 42, U.S. Code, MVCC-Fulton must identify a constitutionally protected property right in a higher adjusted rate than has been granted by ODJFS. That property interest must be based on a legitimate claim of entitlement, created not by the constitution, but instead by existing rules or understandings from an independent source such as state law that secures certain benefits and that supports claims of entitlement to those benefits. Drake Center, Inc. v. Dept. of Human Services (1998),
{¶ 31} To justify relief on grounds of procedural due process, MVCC-Fulton must establish not only a legitimate property interest, but also that it was deprived of that interest without a meaningful opportunity to be heard. Ohio Academy of Nursing Homes, Inc. v. Barry (1990),
{¶ 32} The essence of substantive due process is the protection from certain arbitrary, wrongful governmental actions irrespective of the fairness of the procedures used to implement them. Southern Health Facilities, Inc. v. Somani (1995), Franklin App. No. 95APE06-826. Generally, rules promulgated by an administrative agency have the force and effect of law unless they are unreasonable or are in conflict with related statutes enacted by the General Assembly. Ohio Academy of Nursing Homes, Inc. v. Barry, supra, at 127. They must have a reasonable relation to a proper legislative purpose and must not be arbitrary or discriminatory in their effect. Id. To satisfy substantive due process requirements, an administrative agency must interpret its own rules and apply them in a fashion that is neither arbitrary nor capricious. See Oswalt v. Ohio Adult Parole Auth. (2001), Franklin App. No. 01AP-363. Still, a party alleging that a public official has violated its rights to substantive due process must establish a legitimate claim of entitlement to a constitutionally protected property interest.
{¶ 33} The Ohio Supreme Court has determined that a licensed Medicaid provider has a legitimate property interest in the reimbursement rate provided for it under R.C.
{¶ 34} As was true in Drake Center, MVCC-Fulton does not challenge the state's reimbursement system as a whole. Drake Center, supra, at 687-689. Drake Center sought an adjustment in its reimbursement rate pursuant to R.C.
{¶ 35} We find no compelling reason to distinguish MVCC-Fulton's substantive due process claims from those of Drake Center. R.C.
{¶ 36} We also come to the same conclusion as the trial court with respect to the lack of timeliness by MVCC-Fulton in applying for relief for fiscal 1998. The plain language contained in Ohio Adm. Code
{¶ 37} The argument by MVCC-Fulton, that another rule vesting the department with discretion to determine the effective date of any rate adjustment granted due to extreme hardship excuses a provider from seeking relief in timely fashion, is not well-taken. If the application is not timely filed, it ought not be granted. The other rule that provides for discretion in determining the effective date for relief, if granted, does not apply if an application is denied as untimely. The conclusion by the trial court that ODJFS is entitled to judgment as a matter of law on the claims of MVCC-Fulton that pertain to fiscal 1998 is affirmed.
{¶ 38} As to MVCC-Fulton's R.C. Chapter 5111 claims for an adjustment of the rate paid to it during fiscal 1999, ODJFS, the party moving for summary judgment, bears the initial responsibility to inform the court of the basis for its motion and to identify those portions of the record that demonstrate the absence of a genuine issue of fact as to a material element of one or more of the nonmoving party's claims for relief. Christensen v. Ohio Mulch Supply, Inc. (2001), Franklin App. No. 00AP-1036, and Al-Najjar, supra, citing Dresher v. Burt (1996),
{¶ 39} If ODJFS satisfies this initial burden by presenting or identifying appropriate Civ.R. 56(C) evidence, MVCC-Fulton must then present similarly qualified evidence in rebuttal sufficient to establish that genuine issues of material fact must be preserved for trial. Id., citing Norris v. Ohio Standard Oil Co. (1982),
{¶ 40} To decide whether ODJFS is entitled to summary judgment on the claims of MVCC-Fulton that the department failed to comply with the requirements of R.C.
{¶ 41} Reviewing the Civ.R. 56(C) evidence presented by ODJFS in the light required, we conclude that the department satisfies its initial burden. The affidavit of Charlene Murphy, Technical Analysis Manager of the Reimbursement Section of the Bureau of Long Term Care Facilities, explains in detail the procedure followed by the department in reviewing the request by MVCC-Fulton for a rate adjustment grounded upon extreme hardship. Ms. Murphy identifies and qualifies as appropriate under Civ.R. 56(C) documents, which are attached to and incorporated in her affidavit and which the department considered, including information furnished by the applicant and reports generated by ODJFS. The evidence offered shows a thorough, comprehensive consideration of MVCC-Fulton's request for relief due to extreme hardship. Upon that evidence, absent additional evidence from MVCC-Fulton to rebut it, a conclusion that ODJFS is entitled to summary judgment as a matter of law would be proper. The burden, therefore, shifts to MVCC-Fulton to establish otherwise.
{¶ 42} In opposition to the motion for summary judgment, MVCC-Fulton provides an affidavit by Bert Cummins, C.P.A., and a properly authenticated copy of correspondence from the former director of ODMRDD in support of the application for rate adjustment due to extreme hardship. MVCC-Fulton also relies upon the depositions, with exhibits, of a number of witnesses, the transcripts of which were filed in the trial court record.
{¶ 43} Based upon his experience and his review of the documentation submitted to and considered by ODJFS, the analysis reports created by ODJFS personnel, and the transcripts of deposition testimony by ODJFS employees, Cummins concludes:
{¶ 44} The result of the Department of Job Family Services rate reconsideration review (to grant the minimal relief provided to Morning View Care Center) is completely unsupported by any of the data and analysis set forth in its letter to the provider stating its decision, the attachments to that correspondence and any of the other documents prepared by the Department. * * * [Cummins Affidavit, paragraph 11.]
{¶ 45} Cummins identifies several specific examples of ODJFS having abused its discretion, including an attempt to calculate an overpayment related to renovations, an audit function, and factor that calculation into the amount of capital relief granted. The witness opines that this calculation is "an abuse" and inappropriate within the context of the rate reconsideration process for determining a rate adjustment based upon extreme hardship. (Cummins Deposition, p. 91.) He also questions the department's emphasis on "MVCC-Fulton's failure to prepare a transition plan and adequately assess the downsizing feasibility" *533 (January 10, 2001 Depositions Ex. 4, p. 14), explaining that the concept of adequate planning is undefined and presents the provider with a "moving target if there's a target at all." (Cummins Deposition, p. 76.)
{¶ 46} Steven Stanisa, also a C.P.A. and a consultant to the long-term care industry, was deposed as a prospective expert witness on behalf of MVCC-Fulton. His testimony includes his opinion that "the department inappropriately exercised its discretion" in relation to its approval of the hardship request and "failed to reimburse the reasonable cost of the provider" in caring for its residents. (Stanisa deposition, p. 15.) The witness identifies the $12.48 per patient per day rate adjustment approved as an abuse of discretion inasmuch as he does not believe it to be based upon the costs detailed in the required three-month cost report that accompanied the application. (Stanisa deposition, pp. 50-51.)
{¶ 47} We recognize that generally a reviewing court will not intrude into areas of administrative discretion for the reason that a rebuttable presumption of validity attaches to actions of administrative agencies. Ohio Academy of Nursing Homes, Inc. v. Barry, supra, at 129; and Ohio Academy of Nursing Homes, Inc. v. Creasy, supra, quoting Country Club Home, Inc. v. Harder (1980),
{¶ 48} The agency's interpretation and application of its rules cannot be arbitrary, capricious or otherwise contrary to law; nor can the interpretation and application constitute an abuse of discretion. See Ohio Academy of Nursing Homes, Inc. v. Barry, supra, at 129. The agency must "articulate a satisfactory explanation for its action including a `rational connection between the facts found and the choice made.'" Motor Vehicle Manufacturers Assn of the United States, Inc. v. State Farm Mut. Auto. Ins. Co. (1983),
{¶ 49} Here, the department's announcement of its decision included the following explanation:
{¶ 50} In order for ODHS to grant a rate adjustment as a result of a request for rate reconsideration due to extreme hardship, a provider should clearly demonstrate the following:
{¶ 51} The financial hardship is the result of factors outside the provider's control[.]
{¶ 52} The PPS [Prospective Payment System] is failing to respond appropriately to the circumstances presented.
{¶ 53} MVCC-Fulton's failure to prepare a transition plan and adequately assess the downsizing feasibility is neither outside the provider's control nor a failure of the PPS. As such, the failure to effectively plan and analyze the proposed downsizing cannot serve as the basis for relief due to extreme hardship.
{¶ 54} The basic principles underlying the provisions of OAC Rule
{¶ 55} MVCC-Fulton did not fully demonstrate which circumstances neither were outside their control, a failure in the PPS, or documented all the cost reduction steps implemented by the provider, along with the associated cost savings with these steps. * * * [January 10, 2001 Depositions Ex. 4, p. 14.]
{¶ 56} The deposition testimony of Barbara Edwards and Harry Saxe is evidence of the extent to which ODJFS focused on the issue whether a mandate, either by direct order or statewide policy, was in effect that required MVCC-Fulton to downsize its primary facility. Susie Weber and Charlene Murphy acknowledge in their deposition testimony that, according to their respective understandings, the department rules do not require submission of transition plans in connection with an extreme hardship application. Also, in her second deposition, Charlene Murphy admitted that the department had not, to her knowledge, previously adjusted the number of patient days from a prior year that *535 used to calculate a provider's current rate of reimbursement in the context of ruling upon a request for that rate to be adjusted due to downsizing.
{¶ 57} In the course of completing the required de novo review of the trial court's judgment, we have considered a significant volume of evidence presented in support of and in opposition to the motion for summary judgment. We conclude from that evidence, viewing it, as we must, most favorably to the nonmoving party, that MVCC-Fulton has sustained its burden to establish the existence of genuine issues of material fact concerning whether ODJFS complied with the requirements of R.C.
{¶ 58} Even though the discretion vested in ODJFS by R.C.
{¶ 59} The explanation by ODJFS of its actions, together with deposition testimony describing some of the areas of agency focus in its analysis, is evidence that the department applied standards not applicable to the grounds upon which relief was requested. A decision to grant or deny relief requested under extreme hardship provisions should be reached according to the regulations governing that type of relief. To the extent that the agency emphasized issues pertaining to extreme circumstances, governed by Ohio Adm. Code
{¶ 60} ODJFS has argued, and the trial court found, that the decision by this court in The Ohio Academy of Nursing Homes, Inc. v. Creasy, supra, defines what are reasonable costs in the rate-setting context as being limited to only those costs that do not exceed the ceilings applicable to various cost centers. While we did find such ceilings to be reasonable in that case and to generally be an appropriate methodology for defining reasonable costs in a prospective cost-related system of reimbursement, we were deciding issues dissimilar to those presented here. We held that "it is not per se unreasonable that all nursing homes be reimbursed for specific cost centered ceilings based upon costs which ninety percent of the nursing homes incur * * *." Id.
{¶ 61} In this case, where the issues to be decided require a showing of extreme hardship and a determination whether the existing rate under the prospective payment system responds reasonably to an increase in costs related to the hardship, the correct measure of "reasonable" costs is that provided by the legislature in R.C.
{¶ 62} MVCC-Fulton is not necessarily entitled to an adjusted rate equal to its total request. ODJFS would have ignored its responsibility to determine what is reasonable had it simply paid the amount requested. Worthington Nursing Home, Inc. v. Creasy, supra, at 97. As we noted in that case, there is no presumption that all costs expended not in excess of fixed ceilings are reasonable. Id. Similarly, where in relation to extreme hardship rate reconsideration requests, a provider has the opportunity to show its increased costs to be reasonable and necessary even though they have risen above the applicable ceilings, ODJFS must determine what is reasonable independent of the ceilings. In such an instance, we view the ceilings to be evidence of what is reasonable, but not determinative in every case without regard to the circumstances presented by the provider.
{¶ 63} Because we conclude that ODJFS is not entitled to judgment as a matter of law on the claims of MVCC-Fulton under state law that the department failed to comply with the requirements of R.C.
Judgment affirmed in part, reversed in part, and cause remanded.
TYACK, P.J., and LAZARUS, J., concur.
