Methodist Specialty Care Center v. Mississippi Division of Medicaid and Drew Snyder, in his official capacity as Director of the Mississippi Division of Medicaid

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2019-CC-00037-SCT
METHODIST SPECIALTY CARE CENTER
v.
MISSISSIPPI DIVISION OF MEDICAID AND
DREW SNYDER, IN HIS OFFICIAL CAPACITY
AS DIRECTOR OF THE MISSISSIPPI DIVISION
OF MEDICAID
DATE OF JUDGMENT: 12/14/2018
TRIAL JUDGE: HON. PATRICIA D. WISE
TRIAL COURT ATTORNEYS: JANET McMURTRAY
DION SHANLEY
THOMAS L. KIRKLAND
BEA TOLSDORF
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: ANDY LOWRY
THOMAS L. KIRKLAND
BEA TOLSDORF
ATTORNEYS FOR APPELLEES: JANET McMURTRAY
SAMUEL P. GOFF
OFFICE OF THE ATTORNEY GENERAL
BY: LAURA L. GIBBES
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: AFFIRMED - 05/28/2020
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE KITCHENS, P.J., MAXWELL AND CHAMBERLIN, JJ.
CHAMBERLIN, JUSTICE, FOR THE COURT:
¶1. Methodist Specialty Care Center is the only nursing facility for the severely disabled
(NFSD) in the state. NFSDs generally incur higher costs than other nursing facilities, and
because of this, Methodist receives a percentage adjustment to its new-bed-value (NBV)
calculation when the Mississippi Division of Medicaid (DOM) determines how much it
should reimburse Methodist for its property costs through the DOM’s fair-rental system. A
NBV is intended to reflect what it would cost to put a new bed into service in a nursing
facility today. Methodist had received a NBV adjustment of 328.178 percent added to the
standard NBV every year since it opened in 2004 until State Plan Amendment (SPA) 15-004
was enacted.
¶2. In 2012, the Mississippi Legislature directed the DOM to develop a plan to revise its
reimbursement methodology for nursing facilities. The DOM complied and submitted its
recommendations for revisions to the Legislature in January 2014. During the 2014 Regular
Session, the Legislature passed House Bill 1275, which authorized the DOM to update and
revise several provisions within the State Plan. In 2015, the DOM’s revisions were enacted
in SPA 15-004. SPA 15-004 substantially increased the standard, universally applied NBV
for all nursing facilities in the state. The amendment also changed the NFSD’s NBV
adjustment rate and formula. Since Methodist opened in 2004, the NFSD’s NBV had been
calculated by adding 328.178 percent to the standard NBV, but the originally intended
version of SPA 15-004 proposed to change the NFSD’s NBV to be 175 percent of the
standard NBV. These changes to Methodist’s adjustment rate made it experience a
substantial decrease in its NBV, while all other nursing facilities in the state were receiving
an increase in their NBVs.
¶3. Aggrieved by the decrease in its NBV, Methodist appealed the DOM’s changes to its
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NBV that were enacted in SPA 15-004. The DOM initially denied Methodist’s appeal based
on Methodist’s failure to take issue with the amendment during the public-notice and
comment period. After receiving notice of the denial, Methodist renewed its appeal, and the
DOM agreed to hold an administrative hearing on the matter.
¶4. After the hearing, the administrative hearing officer (AHO) submitted his opinion to
the DOM. The AHO found that the DOM had properly proposed and implemented SPA 15-
004 and upheld the decreased percentage adjustment to Methodist’s NBV. The AHO,
however, also determined that the DOM had miscalculated Methodist’s NBV adjustment.
The DOM had planned to calculate Methodist’s adjustment as 175 percent of the base NBV,
but the AHO found that Methodist’s adjusted NBV should be calculated in the same manner
as it was calculated preamendment—by taking 175 percent of the standard NBV and adding
that value to the standard NBV. The AHO’s correction to the formula adjusted Methodist’s
NBV for 2015 from $159,800 to $250,800.
¶5. The DOM’s executive director affirmed the AHO’s opinion and adopted it as the
DOM’s final decision on the matter. Methodist still felt aggrieved because its NBV
adjustment rate had not been restored to the preamendment rate. Methodist appealed the
DOM’s final decision to the Chancery Court of the First Judicial District of Hinds County.
The chancellor affirmed the DOM’s final decision. Methodist now appeals to this Court.
FACTS AND PROCEDURAL HISTORY
¶6. Methodist is the only NFSD in the state. An NFSD is a long-term-care facility that
specializes in the treatment of individuals with severe disabilities, including spinal-cord
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injuries, closed head injuries, permanent ventilator-dependent patients, permanent
tracheotomy patients, quadriplegia patients and other patients who require total and
maximum assistance with daily living activities.
¶7. In 2000, Methodist applied for a certificate of need (CON) seeking to construct
Mississippi’s first long-term nursing facility for the severely disabled and listed the projected
cost of building such a facility at approximately $7.5 million. Because no such facility had
been built within the state before, the DOM and Methodist worked together at the outset of
the NFSD’s creation to come up with a reimbursement methodology that would fairly
compensate Methodist for the cost of constructing the facility. Before the facility was ever
built, the two parties agreed that the DOM would need to adjust Methodist’s new-bed rate
by 328.178 percent in order to fairly compensate Methodist for its incurred property costs for
construction of the NFSD. Methodist’s adjustment rate was added to the State Plan at
Chapter 3-4.
¶8. Four categories of nursing facilities receive adjustments to their
NBVs—intermediate-care facilities for the intellectually disabled (ICF/IID), psychiatric
residential-treatment facilities (PRTF), Alzheimer’s units and NFSDs. Since Methodist first
began operating in 2004, its property-reimbursement rate was calculated by taking adding
328.178 percent of the standard NBV to the standard NBV amount. This manner of
calculation effectively set Methodist’s reimbursement rate at 428.178 percent of the standard
NBV. Alzheimer’s units are also calculated in this “percentage plus” manner, and
Alzheimer’s units’ adjustment percentage is also provided in Chapter 3-4 of the State Plan.
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The adjustment percentages for ICF/IIDs and PRTFs are not stated within Chapter 3-4. Both
ICF/IIDs and PRTFs have their NBV adjustments calculated by taking their stated
percentage adjustment of the standard NBV, but the standard NBV is not added to the
percentage.
¶9. In 2012, the Legislature passed House Bill 421. House Bill 421 directed the DOM
to “develop a plan providing revisions to the current reimbursement methodology for nursing
facility services.” H.B. 421, Reg. Sess., 2012 Miss. Laws ch. 530, § 5. In response to the
legislation, the DOM created a Nursing Facility Reimbursement Methodology Revision
Committee (Committee) comprised of DOM personnel, industry people and other concerned
stakeholders. The Committee reached an agreement on a new reimbursement plan, and the
DOM submitted its proposed plan to the Legislature in January 2014. The report stated that
the Committee recommended that updates be made to the DOM’s fair-rental-value
calculation, as follows:
• Increase the value of a nursing facility bed to $91,200,
• Increase the annual depreciation amount from 1% to 1.75% for all long-
term care facilities,
• Increase the maximum allowed depreciation from 30% to 50% for all
long term care facilities, and
• Decrease the rental factor from 7.5% to 5.35% while maintaining the
2% risk premium for all long-term care facilities.
The report did not include any proposed changes to percentage adjustments to the NBVs for
those facilities that received them.
¶10. After reviewing the Committee’s report, the Legislature passed House Bill 1275
during the 2014 session. House Bill 1275 stated that
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On or after January 1, 2015, the division shall update the case-mix payment
system resource utilization grouper and classifications and fair rental
reimbursement system. The division shall develop and implement a payment
add-on to reimburse nursing facilities for ventilator dependent resident
services.
H.B. 1275, Reg. Sess., 2014 Miss. Laws ch. 488, § 1 (codified as amended at Miss. Code
Ann. § 43-13-117(A)(4)(d) (Rev. 2015)). House Bill 1275 was signed by the governor, and
this portion of the bill became Mississippi Code Section 43-13-117(A)(4)(d).
¶11. After receiving the Legislature’s directive to update the nursing facility fair-rental-
reimbursement system, the DOM began drafting amendments to the State Plan in November
and December of 2014. It was not until the DOM actually started writing the amendments
to the State Plan that it first examined the adjusted-bed values of ICF/IIDs, PRTFs,
Alzheimer’s units, and NFSDs. While examining the adjusted NBVs, the DOM noticed that
under the old rates, Methodist had almost completely recouped its initial investment in just
eleven years. This fact, coupled with the DOM’s fear that Methodist would receive a
windfall as a result of the rebased NBV led the DOM to make one of its last changes to the
SPA before submitting it for approval to CMS and decreasing the NFSD’s adjustment from
328.178 percent to 175 percent. If Methodist’s NBV continued to be adjusted with a 328.178
percent add-on after the standard NBV was rebased as $91,000 in SPA 15-004, then
Methodist’s NBV would skyrocket from $226,638.92 in 2012 to $390,498.00 in 2015—an
increase of $163,859.08 per bed.
¶12. In December 2014, the DOM published notices in several newspapers of the proposed
changes to its long-term-care facility-reimbursement methods—SPA 15-004—as required
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by the public-notice requirements of 42 C.F.R. § 447.205, Westlaw (current through May 21,
2020). The public-notice and comment period ran for a month, from December 18, 2014, to
January 18, 2015. The public notice provided that a copy of the proposed SPA was available
for review in each county health-department office. The copies of the SPA that were
available for review included the change to Methodist’s NBV adjustment. Methodist claims,
however, that because it was expecting a slight increase to its per diem rate and because
changes implemented in the SPA were difficult to discern from one version of the State Plan
to its revised version, Methodist did not find out about the change in is property rate until
March 9, 2015—well after the public-notice and comment period had lapsed.
¶13. After the period lapsed and the DOM received no comments from the public on the
amendment, the DOM filed SPA 15-004 for approval with the federal Centers for Medicare
and Medicaid Services (CMS).
¶14. Methodist appealed its rate on April 8, 2015, and the DOM and Methodist met to
discuss the change in the adjustment on May 19, 2015. At the meeting Methodist argued that
this decreased adjustment rate was not based on construction costs, but the DOM was
unconvinced by its arguments. On July 7, 2015, the DOM notified Methodist that because
Methodist’s property-rate calculation complied with SPA 15-004 and because Methodist
failed to comment on the amendment when it was placed for public notice and opened for
comments, Methodist’s appeal had been denied. Upon receipt of the denial, Methodist
renewed its motion, and, on July 23, 2015, the DOM agreed to conduct an administrative
hearing on the matter.
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¶15. The administrative hearing was held on January 26 and 27, 2016. On the second day
of the hearing, the DOM filed SPA 16-0011 for public comment. The DOM testified that
it intended for SPA 16-0011 to clarify that the DOM originally intended for a 175 percent
multiplier, rather than the 175 percent add-on, to be used to calculate an NFSD’s NBV
adjustment under SPA 15-004. If approved, SPA 16-0011 was to retroactively take effect
on January 1, 2016.
¶16. At the hearing, the DOM explained its reasoning and basis for the changes made to
the State Plan by SPA 15-004 for the rebasing of the standard NBV and for the 175 percent
multiplier applied to NFSDs. Methodist argued that the DOM failed to appropriately publish
notice of the changes included in SPA 15-004, and Methodist further argued that the property
per diem rates must be based on new construction costs. Methodist had an expert testify that
the actual cost of building an NFSD in 2015 would amount to $17,717,169, or $295,268 per
new bed. This estimate included an approximate cost for acquiring the land upon which
Methodist currently stands and already owns. Methodist’s expert estimated that the cost to
acquire the land in 2015 would be $2,427,152 and based his approximation on recent sales
of nearby parcels of land. The AHO noted in his opinion that the resulting increase in the
estimated actual NBV could be the result of the “extraordinary increase in land acquisition
costs.” If the greatly increased value of the land that Methodist already owns, and therefore
would not have to purchase again, were taken out of the estimated actual construction-cost
equation, the estimated total actual cost to construct an NFSD in 2015 would amount to
$15,290,017, or $254,833.62 per bed.
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¶17. Following the hearing, the AHO issued his opinion and recommendations on May 26,
2016. The AHO upheld the 175 percent NBV adjustment for NFSDs but held that the NBV
adjustment for NFSDs should be calculated according to the formula that had been
implemented since the NFSDs first opened in Mississippi, by adding the standard NBV to
175 percent of the standard NBV. According to the AHO’s opinion, which was later
affirmed and adopted by the DOM as the DOM’s final decision, Methodist’s NBV
calculation for 2015 would be $91,200 + ($91,200 x 1.75), which would equal $250,800 per
new bed in 2015. The AHO’s NBV calculation puts Methodist’s adjusted NBV at an amount
slightly greater than 98 percent of its estimated actual cost to construct a new bed when the
cost of acquiring the land that Methodist already owns is taken out of the estimated total
construction costs.
¶18. According to Methodist’s own expert, the estimated actual cost to construct an NFSD
in 2015, including the cost to acquire land which Methodist already owns, brought the cost
to construct a new facility to $295,286 per new bed. The dissent points out that the AHO’s
prescribed NBV—$250,800—amounts to only 85 percent of the estimated actual cost to
construct a new NFSD in 2015, including the cost to acquire the land Methodist already
owns. But in 2004, right after Methodist and the DOM agreed that Methodist should receive
a 328.178 percent add-on adjustment to its NBV property payment, Methodist’s adjusted
NBV for 2004 amounted to $139,050.81 and the actual cost to construct Methodist came to
$169,108, making Methodist adjusted NBV property-payment amount only 79 percent of
Methodist’s actual construction costs.
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¶19. On June 24, 2016, the DOM’s executive director affirmed and adopted the AHO’s
opinion as the DOM’s final decision on the matter. Methodist is now appealing the DOM’s
final decision, which set Methodist’s NBV-adjustment calculation as the standard NBV
added to 175 percent of the NBV. In accordance with the AHO’s opinion, the DOM’s final
decision also held that SPA 15-004 had been properly published for public notice and that
the DOM complied with House Bill 421 and House Bill 1275.
¶20. Although, the DOM’s final decision adjusted Methodist’s reimbursement formula to
a rate more favorable for Methodist than what the DOM had originally intended with SPA
15-004, Methodist still felt aggrieved because its NBV was still being adjusted by a
percentage amount less than what it had been before the amendment was enacted.1
¶21. Methodist timely appealed the DOM’s final decision to the Hinds County Chancery
Court. The case was briefed in 2017, and a hearing was held in July 2017. On December 14,
2018, the chancellor issued her order and opinion, which affirmed the DOM’s final decision.
Methodist timely appealed to this Court.
STANDARD OF REVIEW
¶22. “When reviewing a chancellor’s ruling concerning an administrative agency decision,
this Court applies the same standard of review as the chancellor.” Crossgates River Oaks
Hosp. v. Miss. Div. of Medicaid, 240 So. 3d 385, 387 (Miss. 2018) (citing Miss. Comm’n
1
If Methodist were to receive its preamendment calculation and percentage-adjustment
rate after the standard NBV was rebased as $91,200, then Methodist would receive an
adjusted NBV amounting to $390,498, which exceeds Methodist’s own expert’s estimated
actual cost of construction per bed by $95,212 per bed.
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on Envtl. Quality v. Chickasaw Cty. Bd. of Supervisors, 621 So. 2d 1211, 1216 (Miss.
1993)). “This court has the authority to reverse the decision of DOM if we find that it (1)
was not supported by substantial evidence, (2) is arbitrary or capricious, (3) was beyond
DOM’s power to adopt, or (4) violates a constitutional or statutory provision.” Id. (citing
Town of Enterprise v. Miss. Pub. Serv. Comm’n, 782 So. 2d 733, 735 (Miss. 2001)).
¶23. An agency’s interpretation of a statute or an administrative regulation or rule
governing the agency’s operation is a matter of law reviewed de novo, but the level of
deference the Court will afford the agency’s interpretation of the law depends on whether the
agency is interpreting a statute or its own administrative regulation or rule. King v. Miss.
Military Dep’t, 245 So. 3d 404, 407 (Miss. 2018); see also Crossgates, 240 So. 3d at 388
(citing Sierra Club v. Miss. Envtl. Quality Permit Bd., 943 So. 2d 673, 678 (Miss. 2006)).
The Court will afford no deference to an agency’s interpretation of a statute governing the
agency’s operation. King, 245 So. 3d at 407–08. But, an agency’s interpretation of its own
administrative rules and regulations which govern the agency’s operations will generally be
afforded great deference by the Court. Crossgates, 240 So. 3d at 387–88. The Court will
not uphold nor will it afford any deference to an agency’s interpretation of its own
administrative regulation or rule if the interpretation is so erroneous or inconsistent with the
underlying rule or regulation as to make the agency’s interpretation arbitrary, capricious or
an abuse of discretion. Id.
¶24. The party challenging the decision of the agency has the burden to prove that the
agency’s decision should not be affirmed by the court because the agency’s decision was not
11
supported by substantial evidence, was arbitrary or capricious, was outside the scope of the
agency’s power or violated a statutory or constitutional right of the aggrieved party. Ray v.
Miss. Dep’t of Pub. Safety, 172 So. 3d 182, 187 (Miss. 2015) (citing Bd. of Law Enf’t
Officers Standards and Training v. Butler, 672 So. 2d 1196, 1199 (Miss. 1996); Montalvo
v. Miss. State Bd. of Med. Licensure, 671 So. 2d 53, 56 (Miss. 1996)).
¶25. “Our courts are not permitted to make administrative decisions and perform the
functions of an administrative agency. Administrative agencies must perform the functions
required of them by law.” Pub. Emps.’ Ret. Sys. v. Howard, 905 So. 2d 1279, 1284 (Miss.
2005) (quoting Miss. State Tax Comm’n v. Miss.-Ala. State Fair, 222 So. 2d 664, 665
(Miss. 1969)). “[T]he [reviewing] court is not authorized to substitute its judgment for that
of the [agency] where there is substantial (that is, more than a scintilla of) evidence to
support the finding.” Ray, 172 So. 3d at 187 (alterations in original) (internal quotation
marks omitted) (quoting Montalvo, 671 So. 2d at 56).
DISCUSSION
¶26. Methodist argues that the DOM erred by reaching and implementing its final decision2
to change Methodist’s NBV adjustment to a 175 percent add-on. Methodist also argues that
the DOM erred by violating state and federal laws of required notice for proposed changes
in agency rules and regulations and by failing to comply with the directives of House Bill 421
and House Bill 1275.
2
The opinion of the AHO was affirmed and adopted in totality by the DOM as the
agency’s final decision on the matter. Methodist is appealing the conclusions that were
reached by the AHO in his opinion and then later adopted as the DOM’s final decision.
12
I. Whether the DOM erred by adjusting Methodist’s NBV.
¶27. Methodist argues that the DOM’s adjustment of Methodist’s NBV was erroneous
because the adjustment was not based on new-construction costs or the fair-rental system and
because the DOM’s basis for changing the NBV was arbitrary and capricious. Methodist
asks that this Court hold that new-construction costs must be the basis for adjustments made
to NBVs.
A. Basis for Adjustment to Methodist’s NBV
¶28. Methodist argues that NBVs are based on what it would currently cost to build a new
facility and that the 175 percent add-on adjustment to the standard NBV that it receives was
not based on what it would cost to build a new NFSD in 2015. Methodist argues that the
DOM came up with the new 175 percent adjustment based on what it felt would be a fair and
reasonable property rate for Methodist or came up with this percentage based on Methodist’s
reported costs. But the AHO found that this 175 percent add-on would fairly reimburse
Methodist for what it would cost to construct an NFSD today. Additionally, the record
provides that the DOM’s discovery that Methodist had nearly recouped its entire initial
investment for constructing the NFSD in just eleven years under the old adjustment rate
coupled with the DOM’s fear that Methodist would receive a windfall from the rebased
NBVs led the DOM to make one of its last few changes to the SPA. The dissent mistakenly
claims that the DOM’s logic asks why the DOM pays Methodist, or any other facility that has
fully recouped the cost of building it, any amount for a property payment under the fair-rental
system after the facility has been completely reimbursed for what it actually cost to construct
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the facility. But this is clearly not the DOM’s logic because Methodist has nearly received
the total amount that it cost to construct it, and the DOM never suggests ceasing Methodist’s
property payments. The DOM merely seeks to analyze the property-payment data that had
been collected the past ten years for the state’s only NFSD to check that the NBV adjustment
that was agreed upon by the DOM and Methodist in 2004, when Methodist first opened, is
adequately reimbursing the NFSD and to reevaluate the NBV adjustment rate if not.
¶29. The DOM explains that the Committee used actual reported costs listed in recently
issued CONs to determine that the standard NBV of a nursing facility should be increased
to $91,200. The DOM explained that the standard NBV is the starting point for every
nursing facility’s fair-rental per diem calculation, then improvements are considered and a
depreciation factor is applied. All of this is done in an effort to reimburse providers for
construction costs based upon the age of the facility. The age of the facility is considered to
provide an incentive for facilities to continuously invest in and improve their facilities. The
dissent claims that the DOM’s position ignores the fair-rental system’s intention to promote
renovations and improvement to facilities, but this claim contradicts the language that the
dissent earlier quoted from the DOM’s own argument, stating that the “DOM calculated a
rate which would continue to compensate Methodist and encourage it to invest in and
maintain its facility.” Diss. Op. ¶¶ 104, 109.
¶30. We find Methodist’s claim that all percentage-adjustment rates that are afforded to
certain categories of nursing facilities’ NBVs must be based on what it would cost to
construct a new facility of that type today to be without merit. Methodist has cited no
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relevant authority to support that contention. While it is clear that NBVs are based on what
it would cost to construct a nursing facility today, no authority has been cited that mandates
that the additional percentage adjustments that NFSDs, ICF/IIDs, PRTFs or Alzheimer’s
units receive in their property-payment calculations must be based on construction costs.
¶31. Notwithstanding Methodist’s failure to cite authority to support its claim, we find that
the DOM’s final decision to calculate Methodist’s NBV adjustment with a 175 percent add-
on was reached by considering what it would cost to build a new NFSD today. Therefore,
Methodist’s argument that its new NBV-adjustment rate was reached in error because it was
not based on new-construction costs is moot. Any error the DOM may have originally made
in determining Methodist’s NBV adjustment in SPA 15-004 was ultimately harmless
because, as the AHO explained in his opinion, the 175 percent add-on would reasonably
compensate Methodist for what Methodist’s own expert estimated it would cost to construct
an NFSD today. The AHO’s reasoned analysis for why the 175 percent add-on reasonably
compensates Methodist for what it would cost to construct a new NFSD in 2015 was adopted
by the DOM as its final decision. Therefore, the DOM’s final decision reasoned that
Methodist’s new-construction costs would be met by adjusting Methodist’s NBV with a 175
percent add-on.
B. Were the DOM’s actions arbitrary and
capricious?
¶32. Methodist argues that the DOM acted arbitrarily and capriciously by singling out
Methodist for a reduction of its adjustment rate, by failing to apply a rule of general
applicability to Methodist in a consistent manner and by failing to articulate a reason for
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deviating from its prior norms and decisions.
¶33. “An administrative agency’s decision is ‘arbitrary’ when it is not done according to
reason or judgment, but depending on the will alone.” Pub. Emps.’ Ret. Sys. v. Marquez,
774 So. 2d 421, 429 (Miss. 2000) (citing Burks v. Amite Cty. Sch. Dist., 708 So. 2d 1366,
1370 (Miss. 1998); McGowan v. Miss. State Oil & Gas Bd., 604 So. 2d 312, 322 (Miss.
1992)). This Court has also stated that an act of an administrative agency “is ‘capricious’ if
it is done without reason, in a whimsical manner, implying either a lack of understanding of
or a disregard for the surround fact and settled controlling principles.” Id. at 429–30 (citing
Burks, 708 So. 2d at 1370; McGowan, 604 So. 2d at 322).
¶34. “[A]n agency must either conform to its prior norms and decision or explain the
reason for its departure from such precedent.” Miss. Methodist Hosp. and Rehab. Ctr., Inc.
v. Miss. Div. of Medicaid, 21 So. 3d 600, 609 (Miss. 2009) (internal quotation marks
omitted) (quoting Miss. Valley Gas Co. v. Fed. Energy Reg. Comm’n, 659 F.2d 488, 506
(5th Cir. 1981)), abrogated on other grounds by King, 245 So. 3d 404.
¶35. Methodist argues that the DOM’s explanation for such a departure from its previous
norms or decisions must be more than a mere placeholder and that “an agency changing its
course must supply a reasoned analysis indicating that prior policies and standards are being
deliberately changed, not casually ignored . . . .” Greater Boston Television Corp. v. FCC,
444 F.2d 841, 852 (D.C. Cir. 1971). Here, the DOM complied with both.
¶36. The DOM acted in accordance with its previous norms and decisions by basing
Methodist’s NBV-adjustment rate on what it would cost to construct an NFSD today. The
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DOM’s only departure from its previous practices relevant here was the change in
Methodist’s NBV-adjustment percentage amount. The DOM’s final decision adopting the
AHO’s opinion provided a well-reasoned analysis for why it was necessary to depart from
the 328.178 percent add-on adjustment and move to a 175 percent add-on for Methodist. The
DOM explained that if it were to conform with the 328.178 percent add-on after the standard
NBV was drastically increased, then the DOM would be overpaying Methodist for what it
would cost to construct the facility by nearly $100,000 per bed. The AHO’s opinion also
notes that because Methodist is the only NFSD in the state, the effort to establish a NBV is
complicated by the fact that there are few such comparable facilities in the country.
¶37. Methodist also asserts that the DOM’s actions were arbitrary and capricious because
it failed to apply a rule of general applicability. Methodist argues that the rule of general
applicability here is that the fair-rental value be based on the cost to construct a new facility
in the present day. Again, Methodist’s argument is without merit because its adjusted fair-
rental value was, in fact, based on what it would reasonably cost to construct a new NFSD
in the present day, as explained in the DOM’s final decision.
¶38. After reviewing the record, we find that the DOM’s final decision to change
Methodist’s adjustment rate to a 175 percent add-on was supported by substantial evidence
and was not arbitrary or capricious
C. Correct Basis for NBVs
¶39. Methodist asks that this Court hold that NBV adjustments must be based upon new
construction costs, arguing that the AHO’s formula was not supported by substantial
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evidence and that the DOM’s affirmation and adoption of the AHO’s opinion as the DOM’s
final decision was mere pretense.
¶40. This Court is not allowed to do the job of administrative agencies and cannot
substitute its own opinion in place of an agency decision. Ray, 172 So. 3d at 187.
Accordingly, we refuse to dictate how the DOM bases adjustments to NBVs absent any
showing that such a rule exists or that the DOM has failed to act in accordance with such
rule.
¶41. Methodist further argues that the DOM’s adoption of the AHO’s opinion as its final
decision on the matter was mere pretense because the DOM filed another SPA for public
notice and comment that attempted to clarify whether the 175 percent adjustment for
Methodist was a multiplier or an add-on. The amendment to which Methodist is referring
was to take effect January 1, 2016, but the DOM affirmed and adopted the AHO’s opinion
on June 24, 2016. The fact that the AHO’s opinion became the DOM’s final decision on the
matter well after the clarifying amendment took effect weighs heavily against a finding that
the DOM’s affirmation and adoption of the AHO’s opinion was mere pretense. The DOM’s
affirmation and adoption of AHO’s opinion as the DOM’s final decision on the matter was
clearly meant to overrule any preexisting rules or decisions on the matter. Therefore, we find
Methodist’s contention to be without merit.
II. Whether the DOM violated state and federal laws requiring
notice.
¶42. Methodist argues that the DOM failed to comply with 42 C.F.R. § 447.205, the federal
regulation requiring that state Medicaid agencies “provide public notice of any significant
18
proposed change in its methods and standards for setting payment rates for services.” 42
C.F.R. § 447.205(a), Westlaw (current through May 21, 2020). Methodist claims that the
DOM also failed to comply with several state laws requiring public notice of an agency’s
proposed rule changes.
A. Federal Law Requiring Public Notice
¶43. If a state chooses to participate in the Medicaid program, it must submit a State Plan
to CMS that satisfies the substantive requirements of 42 U.S.C. § 1396a (a)(13)(A) (2012),
and the procedural requirements set forth in 42 C.F.R. § 447.200, Westlaw (current through
May 21, 2020). Any later changes in the payment rates established in the State Plan require
the state Medicaid agency to submit proposed plan amendments to CMS for approval. 42
C.F.R. § 447.205 requires a state agency “provide public notice of a significant proposed
change in its methods and standards for setting payment rates for services.” 42 C.F.R. §
447.205, Westlaw (current through May 21, 2020). Subsection (c) of the regulation outlines
the content requirements of the public notice, stating that the notice must include a
description of the proposed change in methods and standards, estimates of any expected
increase or decrease in annual aggregate expenditures and an explanation for why the agency
is changing its methods and standards. 42 C.F.R. § 447.205(c), Westlaw (current through
May 21, 2020).
¶44. Here, the DOM’s published notice gave a detailed description of several of the
proposed changes that the SPA 15-004 would implement, stated that the “estimated annual
aggregate expenditure of the [DOM] are expected to be budget neutral” and explained that
19
the DOM was “implementing these changes to nursing facility reimbursement as authorized
by Miss. Code Ann. Section 43-13-117.”
¶45. “As their name suggests . . . ‘notice’ provisions are neither invariably nor primarily
designed to afford exhaustive disclosure, but to alert interested parties that their substantive
rights may be affected in a forthcoming public proceeding.” Visiting Nurse Ass’n of N.
Shore, Inc. v. Bullen, 93 F.3d 997, 1010 (1st Cir. 1996), abrogated on other grounds by
Long Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50 (1st Cir. 2004). “Notice
provisions require only that the agency ‘outline[] the substance of the plan in sufficient detail
to allow interested parties to decide how and whether to seek more information on the plan’s
particular aspects. The agency was not required to publish every minute detail of the plan.’”
Id, (quoting Miss. Hosp. Ass’n v. Heckler, 701 F.2d 511, 520 (5th Cir. 1983)).
¶46. Methodist relies on a case from the United States Court of Appeals for the Fourth
Circuit to argue that an agency’s failing to provide public notice of an amendment proposing
significant changes to the agency’s methods and standards renders the amendment ineffective
until proper public notice is published. N.C. Dep’t of Human Res. v. U.S. Dep’t of Health
& Human Servs., 999 F.2d 767, 768 (4th Cir. 1993). In that case, however, the portion of
the SPA at issue proposed a retroactive effective date. The Health Care Financial
Administration (HCFA) Administrator approved the substance of North Carolina’s SPA but
denied the portion that specified the retroactive effective date, reasoning that the significant
change to the agency’s methods and standards could not become effective retroactively
because it would be impossible to give public notice before the retroactive effective date.
20
Id. Therefore, any SPA proposing a retroactive effective date cannot be in compliance with
42 C.F.R. § 447.253(h), Westlaw (current through May 21, 2020), which requires that the
state Medicaid agency provide CMS with assurances that it has complied with the public-
notice requirements of 42 C.F.R § 447.205 before CMS will approve the plan change. Id.
¶47. Here, the AHO determined that “Methodist was aware that a general increase of
NBVs was imminent and that changes to its adjustment percentage were being considered.”
The AHO further found that the publication of the notice was proper and that the notice set
forth a comment period but that no comments were received.
¶48. Methodist argues that the AHO’s claim that Methodist knew that changes to its
percentage were being considered was pure fabrication. Although the AHO does not cite
specific evidence from the record to support his finding, it is evident from the record that
Methodist had actual knowledge that some change to their adjusted NBV was imminent. A
Methodist employee testified at the administrative hearing and stated that he had participated
in the webinars and had seen that Methodist’s proposed NBV was $299,298 for 2015. At this
moment, Methodist either knew or should have known that the manner in which Methodist’s
NBV adjustment was calculated was going to change under SPA 15-004. Methodist knew
that under SPA 15-004, the standard NBV would be rebased to $91,200, and according to the
simulation letters and the DOM’s training webinars, Methodist knew its expected NBV
would be $299,298. At the administrative hearing, a reimbursement consultant for Methodist
testified that Methodist’s expected NBV, $299,298, was consistent with the 328.178 percent
add-on that had been used to calculated Methodists adjusted NBV since 2004. This was not
21
true though. If Methodist had done the math, it would have realized that 328.128 percent of
$91,200 is $299,298 and that SPA 15-004 was proposing to change Methodist’s NBV
adjustment calculation to a 328.178 percent multiplier rather than the 328.178 percent add-on
that Methodist had received in past years. Methodist’s simulation letter from the DOM
calculated Methodist’s NBV adjustment with a 328.178 percent multiplier, instead of a
328.178 add-on as well. After receiving this notice, Methodist failed to raise an issue with
this change, but now Methodist insists that it is still entitled to a 328.178 percent add-on
adjustment for its NBV.
¶49. The DOM’s publication of notice included all of the information it was required to
address according to 42 C.F.R. § 447.205, including information about where a copy of the
SPA could be found to review the entire document. Pursuant to CMS’s requirements, the
DOM published the proposed SPA 15-004 on its website, which was accessible by all
Medicaid providers. And, as the published notice stated, the DOM provided a copy of the
SPA to each satellite Health Department location in all eighty-two counties. These copies
of the SPA, which were available to the public for review, included the change to
Methodist’s NBV adjustment to 175 percent.
¶50. After reviewing the record, we find that the DOM complied with federal laws
requiring notice of proposed changes to the State Plan.
B. State Laws Requiring Public Notice
¶51. Methodist argues that the DOM violated state laws that require public notice of
proposed changes to state agency rules, which are to be published through the Mississippi
22
Secretary of State’s office in the administrative bulletin.
¶52. “The [DOM] is an agency as defined under Section 25-43-3 and, therefore, must
comply in all respects with the Administrative Procedures Law, Section 25-43-1 et seq.”
Miss. Code Ann. § 43-13-137 (Rev. 2015). “At lease twenty-five (25) days before the
adoption of a rule an agency shall cause notice of its contemplated action to be properly filed
with the Secretary of State for publication in the administrative bulletin.” Miss. Code Ann.
§ 25-43-3.103(1) (Rev. 2018). The Mississippi Code further provides,
The Secretary of State retains the authority to reject proposed and newly
adopted rules not properly filed in accordance with the Secretary of State’s
rules prescribing the numbering system, form, style or transmitting format for
such filings. The Secretary of State shall not be empowered to reject filings
for reasons of the substance or content or any proposed or newly adopted rule.
The Secretary of State shall notify the agency of its rejection of a proposed or
newly adopted rule as expeditiously as possible and accompany such
notification with a stated reason for the rejection. A rejected filing of a
proposed or newly adopted rule does not constitute filing pursuant to Section
25-43-3.101 et seq. of this chapter.
Miss. Code Ann. § 25-43-2.101(4) (Rev. 2018). “A rule adopted after July 1, 2005 is invalid
unless adopted in substantial compliance with the provision of Sections 25-43-3.102 through
25-43-3.110.” Miss. Code Ann. § 25-43-3.111(1) (Rev. 2018).
¶53. Although Methodist correctly argues that the DOM is an agency subject to the same
requirements of other state agencies and is required to substantially comply with notice
requirements for newly adopted or proposed rules, the DOM argues that the State Plan is not
a “rule” of the agency but rather a contract between the Medicaid office and the federal
government that delineates how the state agency will appropriate the funding it receives from
the federal government.
23
¶54. The Centers for Medicare and Medicaid Services (CMS) is the federal agency
responsible for ensuring that state Medicare and Medicaid agencies comply with federal law
and the federal agency’s requirements for receiving funding. CMS describes the contractual
nature of state plans on its website, stating,
A Medicaid and CHIP state plan is an agreement between a state and the
Federal government describing how that state administers its Medicaid and
CHIP programs. It gives an assurance that a state will abide by Federal rules
and may claim Federal matching funds for its program activities. The state
plan sets out groups of individuals to be covered, services to be provided,
methodologies for providers to be reimbursed and the administrative activities
that are underway in the state.
When a state is planning to make a change to its program policies or
operational approach, states send state plan amendments (SPAs) to the Centers
for Medicare & Medicaid Services (CMS) for review and approval. States also
submit SPAs to request permissible program changes, make corrections, or
update their Medicaid or CHIP state plan with new information.
https://www.medicaid.gov/medicaid/medicaid-state-plan-amendments/index.html (last
visited Apr. 14, 2020).
¶55. The DOM offers further support for its argument that the State Plan is not a rule and
therefore is not subject to the public-notice requirements of the Mississippi Administrative
Procedures Act (APA) by citing a case in which the Louisiana Supreme Court held that “the
State Plan is not a rule under the [Louisiana Administrative Procedures Act].” Women’s and
Children’s Hosp. v. Dep’t of Health and Hosps., 2 So. 3d 397, 407 (La. 2009).
¶56. We find CMS’s description of SPAs to be controlling here. When CMS’s description
of SPAs is coupled with the highly persuasive language from the Louisiana Supreme Court,
we agree that the DOM’s State Plan is not a rule that must comply with the notice
24
requirements of the Mississippi APA.
III. Whether the DOM acted contrary to requirements set by the
Legislature.
¶57. In 2012, the Legislature directed the DOM to
develop a plan providing revisions to the current reimbursement methodology
for nursing facility services. . . . [DOM] shall not implement these plans, but
shall submit the plans to the Public Health and Welfare Committee of the
Senate and the Medicaid Committee of the House no later than October 15,
2012, including necessary legislative recommendations.
H.B. 421, Reg. Sess., 2012 Miss. Laws ch. 530, § 5.
¶58. Methodist argues that the DOM violated the letter and spirit of House Bill 421 and
acted outside the scope of its legislatively derived authority because the bill mandated that
all proposals to revise the reimbursement methodologies pertaining to nursing facilities be
submitted to the legislature for review and authorization before the DOM could implement
them. We find that the DOM complied with the legislature’s directives.
¶59. The DOM responded to House Bill 421 by creating the Nursing Facility
Reimbursement Methodology Revision Committee to assist in developing a revised
reimbursement methodology for nursing facilities. The DOM chose the option it thought
most appropriate and presented it to the Legislature in a legislative report in which the DOM
requested legislative authority to implement changes to the current reimbursement
methodology for nursing facilities and to revise several provisions of the State Plan,
including provisions of the fair-rental-value system.
¶60. We find that the DOM did not violate House Bill 421 or act beyond the scope of its
legislatively derived authority because the Legislature clearly limited the DOM to developing
25
a plan for revisions but not the power to implement them. And the DOM’s legislative report
clearly shows that the DOM never had any intention to implement the recommended changes
absent legislative approval.
¶61. “[A] statutory creation[] may only exercise those powers expressly granted or
necessarily implied by the Legislature and . . . such powers ‘must be found within the four
corners of the statute under which the agency operates.’” Green v. Cleary Water, Sewer &
Fire Dist., 910 So. 2d 1022, 1026 (Miss. 2005) (quoting Strong v. Bostick, 420 So. 2d 1356,
1361 (Miss. 1982)).
¶62. After receiving the DOM’s report and recommendations for changes to the State Plan
in January 2014, the Legislature drafted and passed House Bill 1275 during the 2014 Regular
Session. House Bill 1275 authorized the DOM to “update the case-mix payment system
resource utilization grouper and classifications and fair rental reimbursement system.” When
examining the four corners of the statute, it is clear that the legislature authorized the DOM
to update the fair-rental-reimbursement system without including any restrictive or qualifying
language. If the Legislature intended to limit the DOM only to enact changes pursuant to the
legislative report, then the Legislature would explicitly stated so in House Bill 1275.
CONCLUSION
¶63. After review, we find that the DOM’s final decision was supported by substantial
evidence, was not arbitrary or capricious, did not violate Methodist’s constitutional or
statutory rights and that the DOM was acting within its power in reaching and adopting its
final decision. We also find that the DOM’s final decision to set Methodist’s NBV
26
adjustment at a 175 percent add-on depicts what it would reasonably cost to construct a new
NFSD today.
¶64. We conclude that the DOM complied with federal requirements for providing public
notice of a proposed change in an agency’s methods or standards. We further find that the
State Plan is not a rule subject to publication requirements under the Mississippi
Administrative Procedures Act.
¶65. AFFIRMED.
RANDOLPH, C.J., KITCHENS AND KING, P.JJ., COLEMAN, MAXWELL,
BEAM AND ISHEE, JJ., CONCUR. GRIFFIS, J., DISSENTS WITH SEPARATE
WRITTEN OPINION.
GRIFFIS, JUSTICE, DISSENTING:
¶66. I respectfully dissent.
I. Standard of Review
¶67. In Beverly Enterprises v. Mississippi Division of Medicaid, 808 So. 2d 939, 943
(Miss. 2002), this Court examined the definitions of “arbitrary” and “capricious”:
In McGowan v. Miss. State Oil & Gas Bd., 604 So. 2d 312, 322 (Miss. 1992),
this Court defined arbitrary and capricious as follows:
“Arbitrary” means fixed or done capriciously or at pleasure. An
act is arbitrary when it is done without adequately determining
principal; not done according to reason or judgment, but
depending upon the will alone,—absolute in power, tyrannical,
despotic, non-rational,—implying either a lack of understanding
of or a disregard for the fundamental nature of things.
27
“Capricious” means freakish, fickle, or arbitrary. An act is
capricious when it is done without reason, in a whimsical
manner, implying either a lack of understanding of or a
disregard for the surrounding facts and settled controlling
principles.
II. Whether the Division of Medicaid (DOM) erred in adjusting
Methodist’s NBV.
¶68. The Medicaid reimbursement is complex calculation based on a formula. The
methodology at issue here is the computation of the per diem rate for long-term nursing-care
facilities. It is set out at chapter 3-4 of the 2015 State Plan. This per diem rate has six listed
components, A through F, such as direct-care costs (like caregivers’ salaries), case mix (the
relative severity of residents’ conditions), etc. Here, we consider component E of the per
diem rate—the property payment.
¶69. According to subsection E.1 of chapter 3-4, the property payment “includes the fair
rental per diem and the property taxes and insurance per diem.” Here, we need not consider
property taxes or insurance. Instead, we are focused on the “fair rental per diem,” which “is
a rental payment based on the age of each facility.” According to the State Plan, this “fair
rental system establishes a facility’s value based on its age. The newer the facility is aged,
the greater its value.” The use of “the fair rental system for property costs” has been
mandated by the Legislature since 1993.
¶70. In 2004, Methodist built Mississippi’s first and only nursing facility for the severely
disabled (NFSD). Methodist’s original construction costs totaled $13,580,518, or $169,108
per bed.
28
¶71. The DOM recognized that NFSDs generally incur higher costs than other nursing
facilities. As a result, the DOM and Methodist agreed that the DOM’s reimbursement would
not be the same as other nursing facilities. Instead, the DOM agreed to reimburse Methodist
for such increased costs through a higher new-bed-value (NBV) calculation in the
reimbursement formula. The DOM agreed to adjust the NBV and computed Methodist’s
NBV factor the standard NBV plus 328.178 percent of that amount (the payment add-on).
In 2004, the DOM’s calculation of the NBV plus the payment add-on was as follows:
$32,475 + ($32,475 × 3.28178) = $139,050.81. Thus, in 2004, the DOM’s valuation of
Methodist’s NBV was approximately $30,000 less than actual cost. In fact, actual cost was
not part of the DOM’s formula or the calculation. The formula for Methodist and any NFSD
was based on “new bed value.”
¶72. According to the DOM, from 2004 through 2014, the DOM paid Methodist
$11,851,093 in property payments. The DOM argues that when compared to Methodist’s
original construction costs, this means through property payments alone, the DOM had
almost fully paid for Methodist’s building, equipment, land, and renovation of Methodist’s
current facility before amending the State Plan in 2015, “a fact Methodist’s brief attempts
to obscure.”
¶73. I disagree with the majority and the DOM. I find, as I will explain later, that the
DOM’s rationale for the change in Methodist’s payment add-on from 328.178 percent to 175
percent was arbitrary and capricious. It is not supported by the State Plan or any other
authority. As the previous paragraph indicates, the DOM’s reasons for reducing the payment
29
add-on was because the DOM thought Methodist had been paid enough or had received a
windfall in the DOM reimbursements, neither of which is a reasonable or authorized criterion
to reduce the payment add-on factor.
¶74. My conclusion is based on the fact that the DOM’s rationale to make this change to
the formula solely considered actual-construction costs in comparison to total actual
payments received. There is no basis for this rationale. Medicaid does not reimburse based
on actual costs. If it did, in 2004, Methodist’s NBV would have been $169,108 per bed (the
actual cost) and not $138,933.83 (the estimated cost based on the NBV and the payment add-
on of 328.178 percent. The DOM gave no consideration to the actual costs of renovations,
improvements or other amounts expended by Methodist since 2004. In fact, there is
absolutely no authority for the DOM to consider total actual reimbursements paid. Here,
Methodist was singled out. In the applicable state-plan amendment (SPA), SPA 15-004, no
other category or provider was cut or had their formula reduced based on total actual
reimbursements paid.
¶75. Instead, the State Plan uses the term “new bed value.” The State Plan defines this a
the “new construction value per bed.” New-bed value and new-construction value per bed
requires that it is based on an estimated amount of current construction costs and inflation.
The formula also includes depreciation, which will offset the NBV calculation. The State
Plan simply does not authorize the DOM to single out Methodist’s total payment history and
say that is enough. There is no dispute that the property component of Methodist’s
reimbursement calculation is based on the estimate of new-bed value and new-construction
30
value per bed, not actual payment history. This is my difference of opinion with the majority,
and the majority does not cite authority for the DOM to conclude that Methodist has been
“paid enough.” At a minimum, based on the legislative authority for these changes, this
significant change could have been and should have been vetted by the Nursing Facility
Reimbursement Methodology Revision Committee (Committee) or through an actual
discussion with Methodist.
¶76. Therefore, I am of the opinion that the DOM’s amendment to Methodist’s NBV
payment add-on value was arbitrary and capricious. Methodist was held to a different
standard, and there is no support for the DOM’s accusation of Methodist’s having been paid
enough for property costs or receiving a windfall.
¶77. I will explain further.
A. The Hearing Officer’s Ruling
¶78. The hearing officer rejected the DOM’s calculation of the NBV. Instead, the hearing
officer ruled,
Under the old Plan language, as of 2014, Methodist’s new bed value was
$226,737.37 (new bed value, $52,954 plus 328.178%). Even though
Methodist’s own new bed cost estimate is $295,286, it is requesting a cost per
bed valuation of $390,498. Clearly, this is too high.
On the other hand, DOM assigned Methodist a new bed value of only
$159,600, which is less than the cost of building the facility in 2004. Costs did
not go down between 2004 and 2015. Clearly, this is too low.
Methodist was the only nursing home to receive a decrease in new bed value,
and its decrease is substantial. However, this decrease was the result of a
31
mistake in the calculation of the adjustment, as noted above. Using the proper
calculation under the new Plan (new bed value, $91,200 plus 175%) provides
a new bed calculation of $250,800, which provides Methodist an increase
which reasonably represents the competitive cost of constructing a new NFSD
bed.
(Emphasis added.)
¶79. The hearing officer gave very little detailed rationale for this decision. The hearing
officer gave us no information to base his conclusions of “too high” and “too low.” Unlike
the DOM, however, the hearing officer simply applied the NBV and the revised payment
add-on, as the DOM had done since 2004 in Methodist’s calculation. There is no doubt that
the hearing officer rejected the DOM’s calculation.
B. The DOM’s Rationale
¶80. The relevant change to SPA-015 considers the calculation of the NBV for Methodist.
¶81. As discussed earlier, the DOM recognized that NFSDs generally incur higher costs
than other nursing facilities. To compensate Methodist, DOM agreed to adjust Methodist’s
reimbursement formula by adding the 328.178 percent payment add-on. To calculate
Methodist’s NBV, you start with the “New Construction Value” table in the State Plan. For
example, in 2004, the standard nursing facility NBV was $32,475. Methodist’s NBV
calculation for 2004 was: $32,475 + ($32,475 × 3.28178) = $139,050.81.
¶82. Continuing this example, Methodist’s NBV calculation over the next several years
was approximately as follows:
2005 $36,617 + ($36,617 x 3.28178) = $156,785.94
32
2006 $38,174 + ($38,174 x 3.28178) = $163,452.67
2007 $40,759 + ($40,759 x 3.28178) = $174,521.07
2008 $47,552 + ($47,552 x 3.28178) = $203,607.20
2009 $52,622 + ($52,622 x 3.28178) = $225,315.83
2010 $50,999 + ($50,999 x 3.28178) = $218,366.50
2011 $50,700 + ($50,700 x 3.28178) = $217,086.25
2012 $52,954 + ($52,924 x 3.28178) = $226,638.92
The DOM agreed that this was the formula used to calculate Methodist’s NBV portion of the
reimbursement rate from 2004 through 2015.3
¶83. The Legislature began the revision process in 2012. The Legislature specifically
directed Medicaid to “develop a plan” for various reimbursement methodologies, including
“a plan providing revisions to the current reimbursement methodology for nursing facility
services.” The Legislature also directed that the DOM “shall not implement these plans, but
shall submit the plans” to the Legislature for its committees to review. Maj. Op. ¶¶ 9, 57
(emphasis added) (quoting H.B. 421, Reg. Sess., 2012 Miss. Laws ch. 530, § 5).
¶84. It is crucial that we recognize that these plans and revisions were based on suggestions
and recommendations from the Committee. The Committee included the “DOM personnel,
3
The 2020 NBV for a standard nursing facility is $102,927, Intermediate Care
Facilities for Individuals with Intellectual Disabilities (ICF-IID) is $123,512, Psychiatric
Residential Treatment Facilities (PRTF) is $123,512, and NFSD is $180,122.
33
industry people and other concerned stakeholders.” Maj. Op. ¶ 9. “The Committee reached
an agreement on a new reimbursement plan, and the DOM submitted its proposed plan to the
Legislature in January 2014.” Maj. Op. ¶ 9.
¶85. The report to the Legislature recommended an update to the “Fair Rental Value
calculation.” Among other recommendations, the report suggested the value of a nursing-
facility bed be increased to $91,200. The report did not recommend any change to the add-
on or percentage adjustments the DOM applied to the NBV calculation for ICF/IIDs, PRTFs,
Alzheimer’s units, or NFSDs (Methodist).
¶86. The DOM concedes that during the Committee’s evaluation process, Methodist was
not specifically evaluated for an adjustment to its property rate because of its unique position
as the only NFSD in the state of Mississippi.
¶87. The Legislature accepted this report and passed House Bill 1275 in 2014 session.
House Bill 1275 authorized the DOM to “update the . . . fair rental reimbursement system.”
H.B. 1275, Reg. Sess., 2014 Miss. Laws ch. 488, § 1 (codified as amended at Miss. Code
Ann. § 43-13-117(A)(4)(d) (Rev. 2015)). The Legislature also instructed the DOM to
“develop and implement a payment add-on to reimburse nursing facilities for ventilator
dependent resident services.” Id. In this last sentence, the Legislature referred to the
“payment add-on” for ventilators. The report did not suggest or recommend any change to
the “payment add-on for specialized nursing facilities.” Id.
¶88. At this point in the Legislatively mandated revision review, neither the Legislature,
34
the Committee, nor the DOM considered or discussed any possible revision to the NFSD
payment add-on factor.
¶89. The DOM admitted that it “first examined the adjusted bed values of specialized
nursing facilities, including ICF/IIDs, PRTFs, Alzheimer’s units, and the NFSDs
(Methodist)[,]” after it began drafting the changes. Maj. Op. ¶ 11. The DOM could have
and should have considered this issue with the Committee and made a recommendation in
the Legislative report. It did not. Despite this, it is clear that at this point, Methodist had no
reason to believe its NFSD payment add-on factor would change.
¶90. In fact, the DOM confirmed to Methodist that there would be no change, i.e., decrease
in its reimbursement rate. In February 2014, the DOM sent a simulation letter to Methodist
that explained how its reimbursement would change if the measures reported to the
Legislature were enacted. The letter stated that it presented only “estimates” but that it was
meant to show the effect of the proposed changes. Methodist was informed that in
comparison to its property per diem rate of $57 under the current system, it could expect a
new rate of approximately $69.86 under the new system, which the letter correctly described
as a 22.56 percent increase. Again, at this point, Methodist had no reason to believe its
NFSD payment add-on would change.
¶91. Further, in November 2014, Medicaid provided online training sessions to help
long-term-care providers, like Methodist, understand the proposed reimbursement changes.
Richard Lefoldt was a reimbursement consultant for Methodist, and he participated in these
sessions. Lefoldt testified that there was no mention of any change to the existing 328.178
35
percent payment add-on to Methodist’s NBV. Lefoldt testified about the training slides the
DOM presented online. These slides indicated that the general NBV would increase to
$91,200. The slides also indicated that while that would be the new-bed value for nursing
homes, $299,298 would be used for “NF – Severely disabled,” i.e., for Methodist. Finally,
Lefoldt testified that this figure was consistent with the 328.178 percent payment add-on that
had been used since 2004. Once again, at this point, Methodist had no reason to believe its
NFSD payment add-on would change.
¶92. On December 18, 2014, Medicaid published newspaper notices of the changes to its
long-term-care reimbursement methods—SPA 15-004. The published notice announced the
changes, including five changes to the “Property Rate calculation.” These included the NBV
increase to $91,200. But the notice did not mention any further change to the NBV
specifically for Methodist or for the NFSDs. Again, at this point, Methodist had no reason
to believe its NFSD payment add-on would change.
¶93. In fact, neither the hearing officer, the executive director, the chancellor, nor the
majority can identify exactly when the SPA 15-004 first included the language that decreased
Methodist’s payment add-on from 328.178 percent to 175 percent. The majority determined
that it was one of the last changes to the SPA 15-004 before it was submitted for approval.
Maj. Op. ¶ 11.4
4
This finding by the majority contradicts its conclusion later in the analysis of the
notice issue that Methodist either knew or should have known of the change. There is no
evidence in the record that clearly indicates when the DOM advised Methodist of any
change in its NBV and the payment add-on when that would be changed by SPA 15-004.
36
¶94. Instead, Methodist offered the only evidence about when the DOM decided to make
this change. The metadata in the Microsoft Word document of the publication of SPA
15-004 indicated that the DOM had changed SPA 15-004 to reduce Methodist’s NFSD
payment add-on from 328.178 percent to 175 percent on the same day as publication of the
notice. A DOM employee made this change and reduced the NFSB payment add-on from
328.178 percent to 175 percent (under SPA 15-004, Methodist’s NBV was $91,200 × 1.75).5
¶95. This revision was not presented to, discussed with, or vetted by the Committee or the
Legislature. This revision was not provided to Methodist. In 2004, the DOM and Methodist
worked together to set this payment add-on. Based on the Legislature’s directions, the DOM
clearly should have presented this proposed change to the Committee, the Legislature and,
at least, Methodist. Furthermore, this change was contrary to the DOM’s simulation letter
and the training slides. Actually, the simulation letter and the training slides told Methodist
to expect a modest increase of $12 to its per diem rate.
¶96. The question here is whether the DOM made this change in an arbitrary and capricious
manner. As discussed above, the fact that the DOM did not submit this change to the
Committee, the Legislature, or Methodist certainly creates a question as to the DOM’s
rationale and intentions. As in 2004, it would have been easy for the DOM to disclose this
5
The hearing officer found this was a misreading by Medicaid of its own plan: the
same provision that called for “adjustment to the new bed value” for Methodist also stated
that an “adjustment to the new bed value of 37.20% will be made for licensed Alzheimer’s
units.” Because that meant the Alzheimer’s units would receive a 37.20 percent add-on to
the regular new-bed value, it was likewise necessary to read the language to mean an add-on
(not multiplier) for Methodist.
37
change and meet with Methodist to discuss this proposed change. Methodist would have
been given an opportunity to change the DOM’s decision. More importantly, industry
professionals would have been given an opportunity to comment on this change. This
appears to be the clear intent of the Legislature.
¶97. I move to the DOM’s rationale for the change. The DOM claims that it began drafting
the amendments to the State Plan in November and December 2014. The draft amendments
were to reflect the recommendations reached by the Committee and the report to the
Legislature. But at this point, for the first time, the DOM decided to look at the new-bed
values of the ICF/IID, PRTF, and NFSD categories of nursing facilities.
¶98. With respect to the NFSD category, the DOM became concerned that as a result of
the rebased NBV of $91,200, NFSDs (Methodist was the only NFSD) would receive a
windfall that was inconsistent with the legislative directives and goals of House Bill 421.
Thus, the DOM reevaluated Methodist’s multiplier in an attempt to determine what was
systematically equitable to all Medicaid providers under the legislative goals presented to the
DOM when the process began.
¶99. The DOM reviewed both the ICF/IID and PRTF categories and concluded that a
$91,200 base new-bed value would adequately compensate these facilities. Since the base
new-bed value was being raised from $52,954 to $91,200 for all facilities, the DOM
amended the State Plan to decrease the ICF/IID and PRTF multipliers from 120 percent to
100 percent. But after appeals, the ICF/IID and PRTFs payment add-on were returned to 120
percent.
38
¶100. Similarly, the DOM evaluated what rate would fairly compensate a NFSD consistent
with the compensation rates received by all types of nursing facility providers. The DOM
ultimately determined that a fair rental-reimbursement rate for NFSD facilities (Methodist)
would be achieved by utilizing a 175 percent multiplier, for a total adjusted new-bed value
of $159,600 ($91,200 x 1.75%).
¶101. The DOM offered the testimony of its reimbursement director, Michael Daschbach.
He testified that the NBV payment add-on resulted in an excessive payment to Methodist and
would be unfair to other providers:
Q. And if we pay them $67.89, which is what they’ve asked for, what is
the amount—the gross amount that they would be paid?
A. I’d have to go back to this other sheet. They would be paid almost a
million and a half dollars for their property.
Q. And is that more or less than they’ve ever been paid before?
A. That would be much higher. That would be almost—it would be a
million dollars above their costs annually.
Q. And does Medicaid regard that as a fair amount for a property payment
for Methodist?
A. No.
Q. And why is that?
A. Because Methodist is the only facility in their class that gets the
accelerated payment of 175 percent. This is money that would be spent
in other areas. Medicaid is on a finite budget and we’ve responsible to
the taxpayers of Mississippi. We can’t just give excess money in one
area to the detriment of other areas. I mean, that money can go across
multiple programs or other—you know, all kinds of different—you
know, it’s not fair to other facilities and it’s not fair to other types of
facilities.
¶102. According to Daschbach, the DOM wanted to change Methodist’s NBV payment add-
39
on because it did not believe it was a fair amount for a property payment.6 So, he continued,
we should consider what would be a “fair amount for a property payment.”
¶103. Because Methodist was the only facility in this category, the DOM decided to use the
historical data it had for Methodist. The DOM claims that the rational to change the NBV
payment add-on to a 175 percent multiplier was supported by Methodist’s payment history.
¶104. According to the payment history, the DOM decided that Methodist has already been
hugely overcompensated for its capital improvements. After the construction
of Methodist’s NFSD was completed in 2004, and as the facility provided
services to Medicaid patients throughout the years, the property reimbursement
methodology for this facility was treated differently from the property
reimbursement formulas applied to other types of nursing facilities. For
example, unlike the PRTF or IFC/IID facilities, which had their reimbursement
rates periodically adjusted, Methodist’s multiplier was never adjusted, and it
remained at 328.178% from 2004 through 2012. By comparison, ICF/IID and
PRTF facilities were compensated prior to 2012 at a rate of 120% of the bed
value multiplied by the total number of beds in their facilities Alzheimer units
were paid the base bed value of all of its beds, plus 37.20% of the bed value
for each Alzheimer bed.
In part, the different treatment of the property reimbursement rate for NFSD
facilities was based on the recognition that it cost more for NFSD facilities to
house their patients. Thus, from 2004 until 2012, DOM continued to
compensate Methodist at this disproportionately high rate, in part because of
its status as the only nursing facility for the severely disabled in the state.
6
Interestingly, if we pause here to consider the notice requirement, 42 C.F.R. §
447.205(a) and (c), Westlaw (current through May 21, 2020) required DOM to “provide
public notice of any significant proposed change in its methods and standards for setting
payment rates for services” and to “[d]escribe the proposed change in methods and
standards,” “estimate the increase or decrease expected in annual expenditures (if any),” and
“[e]xplain why the agency is changing its methods and standards . . . .” As I will discuss in
the next section, the DOM did not provide such notice even though the DOM’s counsel
conceded at the hearing that the change “does drop their property rate. It drops it from $67
to roughly $29. It’s a significant drop. There’s no question about that.”
40
Based on Methodist’s Cost Reports, the total cost of construction for
Methodist, together with additions through 2016, totaled $13,207,300. Based
on the overages in the rate, Methodist was paid back $12,480,220.97 in
property reimbursement by Medicaid alone by 2015, assuming only a 175%
payment for 2015. It would have been far more, $13,325,936.29, if
Methodist’s suggested multiplier of 428.128% had been used for 2015.
Based on DOM’s calculations, from the time Methodist opened in 2004
through 2015, Medicaid had already reimbursed Methodist in property
payments alone more than the total original costs of constructing the entire
facility. This is based only on Medicaid reimbursements and does not include
any private pay patients or Medicare reimbursements. Thus, Methodist has
recouped almost the entire cost of its facility in a mere 11 years from the
property portion of the per diem that Medicaid pays on behalf of Medicaid
beneficiaries.
Eleven years is an unbelievably fast return on investment as most depreciation
tables are based on 30-40 years. Based on these historical numbers and in light
of the Mississippi legislature’s directive to tighten the reimbursement
methodologies for nursing facilities, DOM could not justify continuing to pay
Methodist 428.128% of the newly adjusted base bed value of $91,200, since
this would almost double Methodist’s property payment and allow Methodist
to receive a windfall that would have paid the total cost of its facility a second
time in a mere six years. This is not what the property rate is intended to do.
Accordingly, DOM calculated a rate which would continue to compensate
Methodist and encourage it to invest in and maintain its facility, but would not
continue to provide it an unearned windfall that the other nursing facilities did
not receive. This is consistent with the legislature’s removal of the language
that required that nursing facilities for the severely disabled be reimbursed as
a separate category of nursing facility.
¶105. Based on this information, it is clear that the DOM’s personnel decided that Methodist
had been paid enough. But this “paid enough” rationale is not included in the State Plan.
The State Plan formula to determine reimbursement, including SPA-015, is based on new-
construction costs and the fair-rental system, which includes a determination as to what is
the value of the facility—the cost of constructing a new facility, i.e., NBV. The State Plan
41
reimbursement formula does not support the significant reduction to Methodist based on the
DOM’s unilateral conclusion that Methodist has been paid enough.
¶106. The DOM presented no evidence to support the cost of new construction of an NFSD
facility. Methodist offered evidence of the current construction cost for an NFSD facility.
William Ware, a construction professional, was involved in the original construction of
Methodist in 2004. He used industry-cost indexes to estimate that the 2015 construction cost
would be $17,717,769. Ware’s testimony supported an actual NBV of $295,286 for
Methodist. The DOM’s revised calculation of NBV was $91,200 x 1.75 = $159,600. Thus,
the DOM’s revised calculation, based on its conclusion that Methodist had been paid enough,
was about half of the actual NBV for Methodist or any other NFSD. Even the hearing
officer’s NBV—the 175 percent payment add-on to $91,200 + ($91,200 x 1.75) =
$250,800—would be an amount that is 85 percent of the actual NBV.7
¶107. There is no authority for the DOM’s decision to use payment history and historical
construction costs to determine the NBV-reimbursement calculation. In fact, the DOM’s
rationale for the reduction in the payment add-on is because Methodist has been reimbursed
most or all of its initial building costs incurred in 2004. The DOM’s rationale did not
consider the cost of building a new facility. If this were a material consideration, it would
(or should) be written into the State Plan, for all facilities, e.g., reduce property rate after
startup costs, purchase costs, or construction costs are paid in full. Whether the amount of
7
This is the information that the Committee that consists of industry professionals
could have considered.
42
historical reimbursements cover the actual facility costs is not a consideration in Medicaid
reimbursement.
¶108. The DOM did not offer any evidence that this payment history versus actual facility
costs was used to calculate the reimbursement rate to any other nursing facility in this state.
The DOM did not use this rationale to deny the ICF/IDDs its 120 percent multiplier. Rather,
that multiplier was restored.
¶109. The DOM’s position ignores that the formula for fair-rental value is intended to
promote renovations and improvements to the Methodist facility. Methodist, through its
reimbursement rate, must expend capital to keep the facility up-to-date and to prevent it from
becoming obsolete. Daschbach testified that “a renovation is basically reducing the age of
the facility, and fair rental value is based on the age of the facility. The newer the facility, the
higher your property rate’s going to be because your facility is worth more money.” The
DOM’s reimbursement rate to the state’s only NSFD is intended to provide sufficient capital
for Methodist to renovate and upgrade its facilities to remain a state-of-the-art nursing
facility for the severely disabled, and it can provide long-term care for some of Mississippi’s
most vulnerable people: the victims of head and spine injuries, patients permanently attached
to ventilators, quadriplegics, and others who require total and maximum assistance with most
activities of daily living.
¶110. The DOM’s logic is as follows: why pay Methodist (or any other facility that has fully
collected what its facility cost to build) anything less than the property payment? That is not
how the fair-rental-value system is meant to work. The term “Fair Rental Value” (FRV) is
43
a calculation that compensates facilities for the use of the buildings, grounds, and equipment
needed to care for Medicaid residents, explaining why the terms “fair” and “rental” are used.
For example, if you have a building that is paid for and you decide to rent the building, you
would set the fair-rental value, or the amount of rent, at an amount that a reasonable lessee
was ready, willing, and able to pay to lease the building. To establish the rent amount, you
could use the current construction costs to build a similar building. You could use
comparative sales in the community to decide what a buyer may be willing to pay. Your
could also use comparative rentals in the community to see what others were paying for a
similar building. The mere fact that the building was paid for and you had covered actual
construction or purchase costs from many years ago would not be a factor used to establish
the fair-rental value.
¶111. The majority accepts the DOM’s conclusion that Methodist received a “windfall”
from these property payments. Yet no facts support that conclusion. The majority states that
the DOM
merely seeks to analyze the property-payment data that had been collected the
past ten years for the state’s only NFSD to check that the NBV adjustment that
was agreed upon by the DOM and Methodist in 2004, when Methodist first
opened, is adequately reimbursing the NFSD and to reevaluate the NBV
adjustment rate if not.
Maj. Op. ¶ 28. The DOM and the majority recognize that this was based only on the “data
that had been collected.” The actual and correct data would require Methodist to provide the
DOM with it’s capital costs and expenditures on the facility since 2004. To determine
whether Methodist actually received a “windfall” or was “adequately reimbursed,” the DOM
44
would have to use the correct “property data,” i.e., financial information from Methodist that
would show all costs of construction, all costs of improvements, all costs of renovations, all
costs of additions, and all amounts that Methodist had invested in the facility. The DOM’s
decision was arbitrary and capricious because neither the majority nor the DOM consider the
actual or real “property data”; instead, the majority and the DOM only use the “property
data” that it chose to use, knowing that such “property data” was not correct or up-to-date but
was available. The State Plan only authorized the consideration of fair-rental value. If the
DOM wanted to use actual “property data” then the DOM should have engaged in a
discussion of the change with Methodist and asked for the actual “property data.”
¶112. The State Plan says that the reimbursement formula is to be based on “new bed
value”—the “new construction value per bed.” The State Plan does not authorize the DOM
to consider Methodist’s payment history versus actual construction costs.
¶113. Therefore, I am of the opinion that the DOM’s amendment to Methodist’s NBV
payment add-on value was arbitrary and capricious. Methodist was held to a different
standard, and there is no support for the DOM’s accusation that Methodist is gaining a
“windfall.” Indeed, no evidence was presented to support the DOM’s claim that Methodist’s
overall costs were being excessively reimbursed.
¶114. This is exactly the type of consideration that the Legislature instructed the DOM to
undertake and to report back with its recommendations. The DOM failed to allow the
Committee to consider this issue. The DOM failed to notify Methodist of this consideration
and give Methodist or other industry professionals an opportunity to present information
45
about this significant issue. There can be no doubt that the DOM’s decision to make this
change, at the last minute, under the cover of darkness, and without advising the state’s only
NFSD of the proposed change cannot be allowed to stand.
III. Whether the DOM violated state and federal laws requiring notice.
A. Federal Law Requiring Public Notice
¶115. When a party asserts a lack-of-notice claim, the court should first examine the notice
that was required and then compare it to the notice actually given.
1. Notice Required
¶116. The DOM was required to publish notice of the amendment to the State Plan (SPA
15-004) under the requirements of 42 C.F.R. § 447.205. Under subsection (a), DOM was
required to “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). Under subsection
(c), the notice must “[d]escribe the proposed change in methods and standards,” estimate the
increase or decrease expected in annual expenditures (if any), and “[e]xplain why the agency
is changing its methods and standards . . . .” 42 C.F.R. § 447.205(c).
2. Notice Given.
¶117. There is no quotation or cite to any portion of DOM’s published notice. The hearing
officer ruled,
Methodist complains that it did not have adequate notice that its adjustment
would be reduced. However, Methodist was aware that a general increase of
46
new bed values was imminent and that changes to its adjustment percentage
were being considered. Notice of the change was properly published. The
Notice set forth a comment period. (Exhibit 16) No comments were received.
Methodist’s claim that the change was not properly noticed is without merit.
The majority concludes that the notice was sufficient because “it is evident from the record
that Methodist had actual knowledge that some change to their adjusted NBV was imminent.
. . . Methodist either knew or should have known that the manner in which Methodist’s NBV
adjustment was calculated was going to change under SPA 15-004. ” Maj. Op. ¶ 48. This
is correct. Methodist did have knowledge it would change. As discussed above, the
simulation letter advised Methodist that its reimbursement would increase by 22.56 percent.
And, the simulation letter did not indicate that there would be any change to the NBV
payment add-on.
¶118. The majority then rules that “[t]he DOM’s publication of notice included all of the
information it was required to address according to 42 C.F.R. § 447.205 . . . .” Maj. Op. ¶
49. But SPA-015 does not mention the reduction of Methodist’s NBV add-on.
¶119. The hearing officer and the majority disregard the DOM’s obligation under 42 C.F.R.
§ 447.205(a) to “provide public notice of any significant proposed change in its methods and
standards for setting payment rates for services.” (Emphasis added.) Likewise, they
disregard the fact that subsection (c) required the DOM to “[d]escribe the proposed change
in methods and standards,” estimate the increase or decrease expected in annual expenditures
(if any), and “[e]xplain why the agency is changing its methods and standards.”
¶120. The change in Methodist’s NBV calculation that reduced the payment add-on from
47
328.178 percent to a 175 percent multiplier was significant. In fact, at the hearing,
Medicaid’s counsel conceded that the change “does drop their property rate. It drops it from
$67 to roughly $29. It’s a significant drop. There’s no question about that.” Despite this,
the published notice did not give any reason for Methodist or anyone else to expect a
reduction in new-bed value for the state’s only NFSD.
¶121. If we consider what Methodist actually knew or should have known, instead of what
the DOM failed to include in the actual notice, we must consider additional facts. Neither
the hearing officer, the chancellor, nor the majority cite any evidence to support the
conclusion that Methodist had actual knowledge.
¶122. The Committee met and discussed possible draft plans. Shane Hariel, a Certified
Public Accountant specializing in healthcare reimbursement, attended the Committee’s
meetings on behalf of the Mississippi Health Care Association and chaired the cost
subcommittee, which focused on the issue of the new-bed value. He testified that the
subcommittee proposed to raise the new-bed value to a realistic market amount and to
compensate for this increase by lowering the rate of return on the new-bed value as well as
reducing a factor separate from the property payment (the “return on equity payment”). He
also testified that the discussion was focused on conventional nursing homes and their
construction costs for new beds, not on Methodist’s specialized facility, which Hariel did not
recall having even been mentioned in that context. Hariel also testified that he did not recall
that anyone from Medicaid ever discussed a change to the NBV payment add-on for
Methodist.
48
¶123. There is simply no evidence to support the majority’s conclusion that “[n]otice of the
change was properly published.” Neither the DOM, the hearing officer, the chancellor, nor
the majority cites any evidence in the record. Despite this lack of evidence, the chancellor’s
order stated, “The published notice [of December 14, 2014,] disclosed the 175% multiplier
challenged by Methodist in this appeal.” This is not correct.
¶124. Further, as the majority recognizes the facts support the conclusion that the DOM
decided to make this change just before the amendment was filed. Certainly, Methodist
cannot have actual or constructive notice of any change that the DOM decided to make just
before it was submitted.
¶125. I am of the opinion that the DOM failed to provide the proper public notice. I
respectfully dissent from the majority’s conclusion that notice was adequate.
B. State Law Requiring Public Notice
¶126. Because the earlier sections indicate my primary reasons to dissent, I do not believe
it is necessary to address this issue. But I believe this issue presents a question that needs to
be resolved. Is the DOM required to comply with Mississippi’s Administrative Procedures
Law? The majority says no; I say yes.
¶127. The Legislature expressly declared the public policy of this State as to Medicaid: “The
division is an agency as defined under Section 25-43-3 and, therefore, must comply in all
respects with the Administrative Procedures Law, Section 25-43-1 et seq.” Miss. Code. Ann.
§ 43-13-137 (Rev. 2015). Under Mississippi Code Section 25-43-3.103 (Rev. 2018), a state
49
agency is required to provide its proposed rule changes to the Mississippi Secretary of State’s
office so that the public can be notified. The record reflects that the DOM did not file its
proposed rule changes with the Secretary of State.
¶128. The DOM argues that the State Plan is not a “rule” under the Mississippi
Administrative Procedures Act but is instead a contract between Mississippi and the federal
government. Section 25-43-1.102(i) defines a “rule” as “the whole or a part of an agency
regulation or other statement of general applicability that implements, interprets or prescribes
. . . [l]aw or policy, or . . . [t]he organization, procedure or practice requirements of an
agency.” Miss. Code Ann. § 25-43-1.102(i) (Rev. 2018). The term “includes the
amendment, repeal or suspension of an existing rule.” Id.
¶129. The State Plan implements, interprets, and prescribes the law and policy of Medicaid
reimbursement to providers, and SPA 15-004 amended the previous rule regarding the
calculation of NBV for Methodist. Additionally, Section 25-43-1.102(i) has an exception
for any “compact or agreement between an agency of this state and one or more agencies of
another state or states,” but it does not include an exception for an agreement between a state
agency and a federal agency. Clearly the Legislature knows how to describe which
agreements are or are not rules, and it did not choose to define “rule” to include state-federal
compacts.
¶130. Either the State Plan is a rule or is not. Recently, in Mississippi Division of Medicaid
v. Windsor Place Nursing Center, Inc., I noted, “The majority finds no significance that the
DOM determined it was necessary to amend the State Plan and the Instructions. The DOM
50
followed the Administrative Procedures Act and the amendments became effective on May
12, 2009.” Miss. Div. of Medicaid v. Windsor Place Nursing Ctr., Inc., No.
2018-SA-01263-SCT, 2020 WL 2487330, at *10 (Miss. May 14, 2020) (Griffis, J.,
dissenting) (emphasis added). In that case, the DOM decided the amendments should be
submitted under the Administrative Procedures Law.
¶131. Here, the record shows that while the DOM determined it was necessary to amend the
State Plan, it did not follow the Administrative Procedures Law. Accordingly, I respectfully
dissent from the majority’s opinion and find that the DOM failed to give proper notice as
required by the Administrative Procedures Law.
¶132. For these reasons, I respectfully dissent.
51