ATLANTICARE REGIONAL MEDICAL CENTER VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES(DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0364-15T2
ATLANTICARE REGIONAL MEDICAL
CENTER, BAYSHORE COMMUNITY
HOSPITAL, CAPITAL HEALTH
MEDICAL CENTER – HOPEWELL,
CAPITAL HEALTH REGIONAL
MEDICAL CENTER, CHILTON
HOSPITAL, COOPER UNIVERSITY
HOSPITAL, DEBORAH HEART AND
LUNG CENTER, EAST ORANGE
GENERAL HOSPITAL, ENGLEWOOD
HOSPITAL AND MEDICAL CENTER,
HACKENSACK UNIVERSITY MEDICAL
CENTER, JERSEY SHORE
UNIVERSITY MEDICAL CENTER,
JFK MEDICAL CENTER, LOURDES
MEDICAL CENTER - BURLINGTON,
MORRISTOWN MEMORIAL HOSPITAL,
NEWTON MEMORIAL HOSPITAL,
OCEAN MEDICAL CENTER, OUR
LADY OF LOURDES MEDICAL
CENTER, OVERLOOK MEDICAL
CENTER, PALISADES MEDICAL
CENTER, RARITAN BAY MEDICAL
CENTER, RIVERVIEW MEDICAL
CENTER, SOMERSET MEDICAL
CENTER, SOUTHERN OCEAN
MEDICAL CENTER, ST. FRANCIS
MEDICAL CENTER, and ST.
MARY'S HOSPITAL,
Petitioners-Appellants,
v.
DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES,
Respondent-Respondent.
Argued October 3, 2017 – Decided October 25, 2017
Before Judges Yannotti, Carroll and Mawla.
On appeal from the Division of Medical
Assistance and Health Services, Docket Nos.
HMA 5152-14 to 5157-14, 5161-14, 5163-14 to
5164-14, 5166-14 to 5172-14, 5174-14 to 5175-
14, 5177-14, 5180-14, 5182-14, 5184-14 to
5185-14, 5188-14, 5191-14, 5194-14, 5252-14 to
5264-14, 5266-14, and 5268-14 to 5275-14.
James A. Robertson argued the cause for
appellants (McElroy, Deutsch, Mulvaney &
Carpenter, LLP, attorneys; Mr. Robertson, of
counsel and on the briefs; Paul L. Croce and
Marissa Koblitz Kingman, on the briefs).
Jacqueline R. D'Alessandro, Deputy Attorney
General, argued the cause for respondent
(Christopher S. Porrino, Attorney General,
attorney; Melissa H. Raksa, Assistant Attorney
General, of counsel; Jennifer L. Cavin and
Jennifer Simons, Deputy Attorneys General, on
the brief).
PER CURIAM
Atlanticare Regional Medical Center and twenty-four other New
Jersey hospitals (the Hospitals) appeal from a final decision of
the Director of the Division of Medical Assistance and Health
Services (Division) dismissing their administrative appeals
2 A-0364-15T2
regarding their Medicaid inpatient reimbursement rates for 2013.
We affirm.1
I.
We briefly summarize the relevant facts and procedural
history. On December 14, 2012, the Division informed the Hospitals
of their Medicaid rates for 2013. Under the Division's regulations,
hospitals may challenge the rates on the basis of: a calculation
error in the computation of the rate, N.J.A.C. 10:52-14.17(b), or
any other reason, including the methodology employed in setting
the rate, N.J.A.C. 10:52-14.17(c).
The hospital must inform the Division of its intent to submit
the appeal within twenty days after it has received its rates.
N.J.A.C. 10:52-14.17(c)(1). The hospital also must identify the
rate appeal issue that is being raised, and submit supporting
documentation within eighty calendar days after receiving the
rates. N.J.A.C. 10:52-14.17(c)(2). The hospital's submission must
detail the basis for the challenge and calculate the "financial
impact of the rate appeal issue on the hospital's final rate and
1
We note that in October 2016, the court consolidated this appeal
with Our Lady of Lourdes Hospital-Burlington v. Division of Med.
Assist. & Health Services, No. A-2919-15. We have determined that
the issues raised on appeal should be addressed in separate
opinions. Therefore, we vacate the order of consolidation.
3 A-0364-15T2
its estimated impact on the hospital's Medicaid inpatient
reimbursement for the rate year." N.J.A.C. 10:52-14.17(c)(3).
In January 2013, twenty-three hospitals submitted notices of
intent to file rate appeals pursuant to N.J.A.C. 10:52-14.17(c).
Twenty-five hospitals submitted calculation error appeals pursuant
to N.J.A.C. 10:52-14.17(b), and thirteen of those hospitals
alleged the Division had understated the inflation factor that had
been applied to their rates from 1995 to 1998. The hospitals
claimed the error had a compounding effect on the rates for the
subsequent years, including 2013. These hospitals also challenged
the Division's use of a zero inflation rate in setting the 2013
rates.
In March 2013, the twenty-three hospitals submitted
additional information to the Division in support of their rate
appeals. Each of these hospitals asserted that the statutory
mandate in N.J.S.A. 26:2H-18.64, which requires that they provide
care to all patients regardless of their ability to pay (charity
care), and the State's charity care subsidy payments, have resulted
in an unconstitutional taking of their property without just
compensation.
The hospitals asserted they were not in a position to provide
the Division with detailed calculations showing the financial
impact of the rate appeal issue, or determine the estimated impact
4 A-0364-15T2
the issue would have upon the hospitals' Medicaid reimbursement
rates for 2013. The hospitals asked the Division for information
about the methodology it used to set the rates, so that they could
"make the appropriate assessment of the issue."
In October 2013, the Division issued letters stating that
N.J.A.C. 10:52-14.17(b) precluded the hospitals from challenging
their 2013 rates based on an alleged calculation error regarding
the 1995 and 1998 rates. The Division also rejected the contention
that it improperly applied a zero percentage inflation rate for
2013.
In addition, the Division rejected the rate appeals on the
ground that no hospital which raised the issue had "demonstrated
that it will incur a marginal loss in providing care to Medicaid
inpatients under its rates [for] 2013." The Division also advised
that the appeal process was not an appropriate vehicle for seeking
information about the Division's rate methodology, which is set
forth in the regulations.
Thereafter, the Hospitals filed administrative appeals from
the Division's October 2013 determinations, which the Division
referred to the Office of Administrative Law (OAL) for
consideration as contested cases. The Administrative Law Judge
(ALJ) consolidated the appeals. The hospitals pursuing rate
appeals advised the ALJ that they were raising a single issue, and
5 A-0364-15T2
all twenty-five of the hospitals advised the ALJ that they would
be pursuing challenges based on either one or two calculation
errors.
The ALJ thereafter identified three issues in dispute: (1)
whether there was an error in the calculation of rates for 1995
to 1998, which resulted in incorrect Medicaid reimbursement rates
for 2013; (2) whether the application of a zero percent inflation
factor for 2013 was consistent with state and federal law; and (3)
whether the charity care mandate, the State's allegedly inadequate
charity care subsidies, and the 2013 Medicaid reimbursement rates
resulted in an unconstitutional taking of the Hospitals' property
without just compensation.
The Hospitals later filed a motion for summary decision on
these issues, and the Division filed a cross-motion seeking the
same relief. The ALJ issued an initial decision dated March 30,
2015. In that decision, the ALJ stated that since the Hospitals
were essentially raising a constitutional challenge to the charity
care statute, their dispute was not with the Division, but rather
with the Department of Health and Senior Services (Department),
which administers the charity care program. The ALJ therefore
found the Division did not have jurisdiction to consider these
claims.
6 A-0364-15T2
The ALJ also determined that the Division had properly applied
a zero inflation factor in setting the Hospital's 2013 rates. The
ALJ noted that in June 2012, the Governor signed the Annual
Appropriations Act for the 2012-2013 fiscal year (FY), which stated
in part that "effective January 1, 2013, the Medicaid inpatient
fee-for-service payment rates will not be adjusted to incorporate
the annual excluded hospital inflation factor, also referred to
as the economic factor recognized under" federal law. The ALJ
determined that the Division had implemented the amendment to the
State's plan in accordance with 42 U.S.C.A. § 1396a(a)(13) and 42
C.F.R. § 447.205, and properly applied the amendment in setting
the Hospitals' rates for 2013.
In addition, the ALJ determined that the Hospitals could not
assert a calculation error in the 2013 rates based on the alleged
error in setting the rates for 1995 to 1998. The ALJ found that
N.J.A.C. 10:52-14.17(b) precludes the Hospitals from raising this
issue with regard to the 2013 rates because the regulation limited
the Hospitals to challenges based on rate adjustments made since
the issuance of the 2012 rates, and the Hospitals had not preserved
the issue by raising it by pursuing a timely-filed appeal
challenging the rates for 2009.
The ALJ further found that the hospitals presenting rate
appeals failed to present sufficient evidence to show the financial
7 A-0364-15T2
impact of their appeals and the estimated impact the issue would
have upon the hospitals' Medicaid reimbursement rates in the rate
year. The ALJ rejected the Hospitals' application for leave to
supplement the record with additional evidence on these issues.
The ALJ noted, however, that the Division's regulatory
standard for rate appeals is "so vague as to be arbitrary" and the
standard "virtually guarantees that no party subject to its
parameters will be capable of compliance with its requirements."
The regulation provides that the Division will undertake a
financial review if the Division finds, based on the information
submitted, that the rate appeal has "merit." N.J.A.C. 10:52-
14.17(c)(4).
Citing In re Zurbrugg Memorial Hospital's 1995 Medicaid
Rates, 349 N.J. Super. 27, 36-38 (App. Div. 2002), the ALJ stated
that the rate appeals should be remanded to the Division for an
"interactive process" on the "merit" standard in N.J.A.C. 10:52-
14.17(c). In that process, the Division could explain its
definition of "merit" and the evidence required for a rate appeal.
The Director issued a final decision on August 11, 2015. The
Director adopted the ALJ's decision with regard to the alleged
calculation error in the rates for 1995 to 1998, the use of a zero
inflation factor for the 2013 rates, and the constitutional claims
based upon the charity care mandate.
8 A-0364-15T2
The Director rejected, however, the ALJ's decision regarding
the need to undertake an "interactive process" regarding the
"merit" standard in N.J.A.C. 10:52—14.17(c). The Director noted
that before the ALJ, the Hospitals had not argued that the "merit"
standard was vague. The Director found that there was no confusion
as to the meaning of the term "merit" and no need for a remand.
This appeal followed.
On appeal, the Hospitals argue: (1) the Division erroneously
denied the calculation error appeals on procedural grounds; (2)
the 2013 rates should be adjusted based on the alleged error in
the calculation of rates for 1995 to 1998; (3) the Division failed
to comply with the requirements of the federal Medicaid statute
and regulations when it implemented the zero percent inflation
factor for 2013; (4) they were denied due process because the
Director did not permit them to engage in an "interactive process"
regarding the "merit" standard in N.J.A.C. 10:52-14.17(c); and (5)
the Division erred by rejecting their constitutional claims.
II.
We turn first to the Hospitals' contention that the Director
erred by concluding that N.J.A.C. 10:52-14.17(b) bars the
challenges to the calculation of their 2013 rates, based on the
continuing effect of alleged errors in their rates from 1995 to
1998.
9 A-0364-15T2
We note that the scope of our review of an administrative
agency's decision is limited. Circus Liquors, Inc. v. Governing
Body of Middletown Twp., 199 N.J. 1, 9 (2009). In an appeal from
a final decision of an administrative agency, our inquiry is
limited to the following:
(1) whether the agency's action violates
express or implied legislative policies, that
is, did the agency follow the law; (2) whether
the record contains substantial evidence to
support the findings on which the agency based
its action; and (3) whether in applying the
legislative policies to the facts, the agency
clearly erred in reaching a conclusion that
could not reasonably have been made on a
showing of the relevant factors.
[In re Proposed Quest Acad. Charter Sch. of
Montclair Founders Grp., 216 N.J. 370, 385-86
(2013) (quoting Mazza v. Bd. of Trs., 143 N.J.
22, 25 (1995)).]
Although we are not bound by an agency's legal conclusions,
we generally defer to the agency's interpretation of its own
regulations and enabling statutes. Utley v. Bd. of Review, 194
N.J. 534, 551 (2008). We give considerable deference to the
agency's interpretation of its own rules "because the agency that
drafted and promulgated the rule should know [its] meaning
. . . ." N.J. Healthcare Coal. v. N.J. Dept. of Banking & Ins.,
440 N.J. Super. 129, 135 (App. Div.) (quoting In re Freshwater
Wetlands Gen. Permit No. 16, 379 N.J. Super. 331, 341-42 (App.
Div. 2005)), certif. denied, 222 N.J. 17 (2015).
10 A-0364-15T2
The regulation governing the time within which "calculation
error" appeals must be taken provides:
Each hospital, within 15 working days of
receipt of its Medicaid inpatient rate
package, including its final rate and
applicable add-on amounts, shall notify the
Division of any calculation errors in its
final rate. For years after the initial year
that rates are set under this system, and for
which no recalibration or rebasing has
occurred, only calculation errors that relate
to adjustments that have been made to the
rates since the previously announced schedule
of rates shall be permitted. For subsequent
years, calculation error appeals will be
limited to the mathematical accuracy or data
used for recalibration, rebasing or both.
Calculation errors are defined as mathematical
errors in the calculations, or data not
matching the actual source documents used to
calculate the DRG weights and rates as
specified in this subchapter. Hospitals shall
not use the calculation error appeal process
to revise data used to calculate the DRG
weights and rates.
[N.J.A.C. 10:52-14.17(b).]
"Recalibration" is "the adjustment of all DRG [Diagnosis
Related Group] weights to reflect changes in relative resource use
associated with all existing DRG categories and/or the creation
or elimination of DRG categories." N.J.A.C. 10:52-14.2. "Rebasing"
is "setting the Statewide base rate using a more current year's
claim payment data." Ibid. "Statewide base rate" is "a rate per
case, which applies to all general acute care hospitals based on
11 A-0364-15T2
the total Medicaid inpatient fee-for-service payment amount
estimated for a given rate year." Ibid.On appeal, the Hospitals argue that N.J.A.C. 10:52-14.17(b)
does not bar them from raising the alleged calculation error
related to the 1995 to 1998 rates in their challenges to the 2013
rates. The Hospitals argue that since they raised this calculation
error in their appeals for 1995 to 1998, and since those appeals
had not yet been resolved when they challenged the 2013 rates, the
issue was preserved for all subsequent rate years, including 2013.
We disagree.
It is undisputed that in 2009, the Division adopted new rules
that established an initial statewide base applicable to all
hospitals for the 2009 rate year. 41 N.J.R. 2921 (codified at
N.J.A.C. 10:52-14.6). The Division's regulation provides that if
any hospital wished to raise a calculation error pertaining to
proposed 2009 rates, it had to do so within fifteen days after
receipt of the rates. N.J.A.C. 10:52-14.17(b). It is undisputed
that the Hospitals did not pursue challenges to the 2009 rates
based on the alleged calculation error in the setting of the 1995
to 1998 rates.
As noted, N.J.A.C. 10:52-14.17(b) provides that for years
after the initial year of the new rate-making system, and for
years in which the rates have not been recalibrated or rebased,
12 A-0364-15T2
the Division will only consider calculation errors "that relate
to adjustments that have been made to the rates since the
previously announced schedule of rates . . . ." Because no
recalibration or rebasing occurred for the 2013 rate year, the
Hospitals could only challenge those rates based on adjustments
made since the issuance of the 2012 rate schedule, unless they had
preserved the issue by challenging the 2009 rates and subsequent
years on that basis.
The Hospitals argue that the Division's interpretation of
the rule is inconsistent with the explanation the Division provided
when it adopted the prior version of this regulation, which was
substantially the same. The Division had stated
Hospitals have an obligation to review their
rates annually and, if appeal of those rates
is appropriate, to appeal in a timely manner.
If a timely appeal of those rates has not been
filed, the rules do not permit a hospital to
challenge a prior year's rate calculation in
an appeal filed in a later year. It is a
hospital's responsibility to comply with
procedural appeal requirements. Separately,
with regard to rates which were appealed in a
timely manner and which have a decision
pending at the time of a second appeal, if a
hospital is successful in its appeal with
regard to specific issues, the amendment will
not be used as described with regard to those
issues. If a hospital receives an adverse
decision with regard to specific issues in a
particular appeal, those issues cannot be
raised again in subsequent appeals.
[37 N.J.R. 2508 (July 5, 2005).]
13 A-0364-15T2
The statement does not support the Hospitals' argument. The
Division explained that under the rule, a hospital could not raise
a calculation error in a rate appeal if the error was made in a
prior rate year and the hospital had not filed a timely appeal.
As we noted previously, a hospital must file an appeal challenging
the rates in the manner prescribed by N.J.A.C. 10:52-14.17(b).
The regulation required a hospital to raise any calculation
error pertaining to the rates for 1995 to 1998 in a timely appeal
challenging the 2009 rates. Here, it is undisputed that none of
the Hospitals pursued a challenge to the 2009 rates based on those
earlier alleged calculation errors. Therefore, the regulation
precluded the Hospitals from raising that issue in a challenge to
the 2013 rates.
In support of their argument, the Hospitals also rely upon
our unpublished decision in In re Adoption of Amendments to
N.J.A.C. 10:52, No. A-6649-04 (App. Div. Apr. 26, 2007) (slip op.
at 18-20), certif. denied, 192 N.J. 296 (2007), which upheld the
time limitations in the earlier version of the regulation. In that
case, we addressed the concern that the regulation would preclude
a hospital from raising a calculation error from a previous rate
year or years that the Division has not corrected and continues
to have an impact upon the hospital's current rates. Id. at 18.
14 A-0364-15T2
We found the concern was misplaced. Ibid. We stated that the
regulation was "merely [intended] to prevent the late recognition
of a long-standing calculation error that was not timely appealed
. . . ." We note that this was "a practice that could engender
difficult and financially unforeseeable retroactive rate
adjustments." Ibid.We added that the regulation was "not designed to prevent the
continuation of ongoing timely rate calculation appeals or the
application of favorable results from those appeals to subsequent
rates, when likewise appealed in a timely fashion." Ibid. (emphasis
added). Therefore, the regulation would bar only those issues that
had not been raised in a timely fashion. Id. at 19.
Therefore, our opinion makes clear that in order to preserve
a challenge to rates for a particular year based on an alleged
calculation error relating to a prior rate year, the hospital must
raise the issue in a timely manner. The Hospitals failed to do so.
Even if we were to conclude that N.J.A.C. 10:52-14.17(b) does
not preclude the Hospitals from raising the alleged calculation
error from 1995 to 1998 in their appeals challenging the 2013
rates, the Hospitals would not be entitled to any rate relief on
that basis. The alleged error pertains to the Division's
15 A-0364-15T2
interpretation and application of N.J.A.C. 10:52-5.17(a), the
"economic factor" regulation.2
The regulation provides that after the 1993 rate year, a
hospital's inpatient Medicaid rate will be updated annually by an
economic factor that "will be the factor recognized under the
TEFRA target limitations." Ibid. The term "TEFRA target
limitations" in N.J.A.C. 10:52-5.17(a) refers to the Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248,
§ 101, 96 Stat. 324, 331-36 (codified at 42 U.S.C.A. § 1395ww, but
later amended).
The Hospitals argue that the "economic factor" referenced in
the regulation is the "market basket percentage increase"
determined in accordance with the provisions of TEFRA that were
in effect in 1993, when the regulation was first adopted. In Our
Lady of Lourdes Hospital, supra, we reject that argument and
conclude that the Division properly interpreted the term "economic
factor" to mean "the applicable percentage increase" determined
in accordance with the provisions of TEFRA in effect at the time
the rates are set. (Slip op. at 13-21).
2
The regulation was later recodified at N.J.A.C. 10:52-5.13(a).
In this opinion, we refer to the regulation as N.J.A.C. 10:52-
5.17(a) because that was the regulation in effect when the dispute
concerning its interpretation and application first arose.
16 A-0364-15T2
Thus, even if the Division erred by refusing to entertain the
challenges to the 2013 rates based on the alleged calculation
error in setting the reimbursement rates for 1995 to 1998, the
hospitals have not suffered any harm from that determination. As
indicated by our decision in Our Lady of Lourdes Hospital, the
Division did not err in computing the Hospitals' rates for 1995
to 1998. Therefore, the Hospitals were not entitled to any rate
relief based on this alleged calculation error.
III.
We next consider the Hospitals' contention that the Division
did not have authority to apply a zero percent "economic factor"
to the 2013 rates. The Hospitals contend that the Division
implemented this change in the State's Medicaid plan without
complying with the applicable federal Medicaid statutes and
regulations. Again, we disagree.
Medicaid is a federally established, state-run program,
Estate of F.K. v. Div. of Med. Assistance & Health Servs., 374
N.J. Super. 126, 134 (App. Div.), certif. denied, 184 N.J. 209(2005), "designed to provide medical assistance," at public
expense, "to individuals 'whose income and resources are
insufficient to meet the cost of necessary medical services.'"
N.M. v. Div. of Med. Assistance & Health Servs., 405 N.J. Super.
353, 359 (App. Div.) (quoting 42 U.S.C.A. § 1396), certif. denied,
17 A-0364-15T2
199 N.J. 517 (2009). Participation in Medicaid is voluntary, but
the participating states must comply with the federal Medicaid
statute and any regulations promulgated by the federal agency to
implement the statute. Mistrick v. Div. of Med. Assistance & Health
Servs., 154 N.J. 158, 166 (1998).
States that participate in Medicaid must establish and adhere
to an approved state plan "specify[ing] comprehensively the
methods and standards" to be used in setting reimbursement rates.
42 C.F.R. § 447.252(b) (2017). Any changes in policy must be duly
authorized by amendment to the plan, subject to federal approval.
42 C.F.R. § 430.12 (2017).
To that end, the implementing state agency must provide public
notice of "any significant proposed change in its methods and
standards for setting payment rates for services." 42 C.F.R. §
447.205(a) (2017). The notice must:
(1) Describe the proposed change in methods
and standards;
(2) Give an estimate of any expected increase
or decrease in annual aggregate expenditures;
(3) Explain why the agency is changing its
methods and standards;
(4) Identify a local agency in each county
(such as the social services agency or health
department) where copies of the proposed
changes are available for public review;
(5) Give an address where written comments may
18 A-0364-15T2
be sent and reviewed by the public; and
(6) If there are public hearings, give the
location, date and time for hearings or tell
how this information may be obtained.
[42 C.F.R. § 447.205(c) (2017).]
In addition, the notice must be published "before the proposed
effective date of the change" in a state register, certain widely
circulated newspapers, or online at the agency's website. 42 C.F.R.
§ 447.205(d) (2017).
As noted previously, in June 2012, the Governor signed the
Annual Appropriations Act for FY 2012-2013, which stated that
effective January 1, 2013, Medicaid inpatient payment rates will
not be "adjusted to incorporate the annual excluded hospital
inflation factor, also referred to as the economic factor
recognized under" TEFRA. L. 2012, c. 18.
On December 11 and 12, 2012, a notice regarding the proposed
change in the Medicaid reimbursement rates was published in several
newspapers in the State, including the Star-Ledger, the Bergen
Record, the Trenton Times, and the Press of Atlantic City. The
notice stated:
TAKE NOTICE that the New Jersey Department of
Human Services (DHS), Division of Medical
Assistance and Health Services (DMAHS) intends
to seek approval from the United States
Department of Health and Human Services (HHS),
Centers for Medicare and Medicaid Services
(CMS), for amendments to the New Jersey
19 A-0364-15T2
Medicaid (Title XIX) State Plan, in order to
implement State Fiscal Year 2013 (SFY 2013)
budget provisions pursuant to the New Jersey
Fiscal Year 2013 Appropriations Act.
Medicaid Hospital Inpatient Services
exclusion of Annual Inflation Factor[.]
Notwithstanding the provisions of any law or
regulation to the contrary, of the amounts
appropriated to Payments for Medical
Assistance Recipients – Inpatient Hospitals,
effective January 1, 2013 the Medicaid
Inpatient Fee-For-Service payment rates will
not be adjusted to incorporate the annual
hospital inflation factor, also referred to
as the economic factor recognized under the
CMS TEFRA target limitations.
The above provision is expected to result in
an aggregate savings of $4.5 million (State
and Federal funds) for State Fiscal Year 2013.
DMAHS has determined that this action will not
impair client access.
The notice stated that it was meant to satisfy federal
statutory and regulatory requirements. The notice indicated that
a copy would be available for public review at medical assistance
customer centers, county welfare agencies, and online at the
Division's website. The notice also stated that comments and
questions may be submitted in writing within thirty days of the
notice.
On February 13, 2013, after the comment period had ended, the
State submitted its proposed amendment to the State's Medicaid
plan to CMS. CMS approved the proposed amendment on September 20,
20 A-0364-15T2
2013, and its approval was effective as of January 1, 2013, the
date specified by the Annual Appropriations Act for implementation
of the change.
On appeal, the Hospitals argue that they did not have an
opportunity to voice their concerns about the amendment before the
change was implemented or to adjust their budgets to address the
decreased revenues they would receive in 2013. They contend the
Division's alleged compliance with Medicaid's notice and comment
requirements was merely a pretext, and the Division never really
intended to consider the comments.
We are convinced these arguments are without sufficient merit
to warrant discussion. R. 2:11-3(e)(1)(E). We note, however, that
there is sufficient credible evidence in the record to support the
ALJ and the Director's finding that the Division complied with 42
C.F.R. § 447.205 when it eliminated the inflation factor for 2013.
Here, the Division published notice of the proposed change
to the State's Medicaid plan before the effective date of the
change, and the Division did not submit the plan amendment to CMS
until the comment period was complete. CMS approved the plan
amendment and allowed it to be implemented as of January 1, 2013.
Moreover, the Annual Appropriations Act for the 2012-2013 fiscal
year was enacted in June 2012. The Hospitals could reasonably have
anticipated that the State would be seeking CMS approval of a
21 A-0364-15T2
change in its Medicaid plan for 2013, and if CMS approved the
change, the 2013 Medicaid rates would not be adjusted for
inflation.
IV.
The Hospitals also argue that the facts clearly establish
that the charity care mandate and the limited reimbursement
received for the treatment of Medicaid and charity care patients
result in an unconstitutional taking of their property without
just compensation; the Director violated their right to due process
by denying them the opportunity to engage in an "interactive
process" regarding the merit standard for rate appeals in N.J.A.C.
10:52-14.17; the Division erred by finding that the constitutional
claims had been previously resolved by decisions of this court;
and the Director erred by finding that the Division did not have
jurisdiction to consider these claims.
At oral argument, counsel for the Hospitals advised the court
that since the filing of this appeal, the Hospitals have filed an
action in the Law Division in which they are raising their
constitutional claims regarding the State's charity care mandate
and the State's alleged inadequate charity care subsidies. Because
the Hospitals will be pursuing these claims in the trial court,
we need not address the Hospitals' additional arguments on appeal.
Therefore, we affirm the dismissal of the Hospital's
22 A-0364-15T2
constitutional claims with regard to the 2013 Medicaid
reimbursement rates, without prejudice to the assertion of these
claims in the Hospitals' pending Law Division action.
Affirmed.
23 A-0364-15T2