Opinion
NO. 2012-CA-000350-MR
04-19-2013
MARK S. BROWN, SECRETARY OF THE KENTUCKY LABOR CABINET OFFICE OF THE SECRETARY; DWIGHT T. LOVAN, COMMISSIONER OF THE KENTUCKY LABOR CABINET, DEPARTMENT OF WORKERS' CLAIMS APPELLANTS v. HARDIN COUNTY, KENTUCKY, D/B/A HARDIN MEMORIAL HOSPITAL APPELLEE
BRIEF FOR APPELLANT: Charles E. Lowther Frankfort, Kentucky BRIEF FOR APPELLEE: Mathew R. Klein Crestview Hills, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 11-CI-00566
OPINION
REVERSING
BEFORE: CLAYTON, COMBS, AND NICKELL, JUDGES. CLAYTON, JUDGE: This is an appeal from the order entered by Franklin Circuit Court on February 3, 2012. Based upon the following, we reverse the circuit court's decision.
FACTS AND PROCEDURAL HISTORY
This case began when Appellee, Hardin Memorial Hospital ("Hardin Memorial"), received notice of a cost-to-charge ratio in 2009 from the Commissioner of the Department of Workers' Claims ("DWC"). Kentucky Revised Statutes (KRS) 342.035 requires the Commissioner to set a fee schedule for employers or their insurers to pay healthcare providers for the services they provide to patients qualifying for workers' compensation benefits and coverage. 803 Kentucky Administrative Regulations (KAR) 25:091 requires employers or their insurers to pay providing hospitals based upon the hospital's adjusted cost-to-charge ratio, which is a percentage of the hospital's ordinary charges.
Pursuant to 803 KAR 25:091, a hospital's adjusted cost-to-charge ratio shall not exceed fifty percent unless it meets one of the exceptions set forth in 803 KAR 25:091 Section 3(1)(e)(2). The method of determining the ratio is a two-step process:
(1) Dividing the hospital's net expenses by the total patient revenues; and
(2) Multiplying the base ratio of step (1) by 132%.
On February 1, 2011, Hardin Memorial was informed that it qualified for a fifty percent cost-to-charge ratio for 2011. Hardin Memorial then appealed this determination to the DWC. In its appeal, Hardin Memorial asserted that its ratio was wrongfully capped. It requested the DWC consider the Kentucky Annual Hospital Utilization and Services Report (the "Utilization Report") instead of the HCFA-2552 form which is on file at the Kentucky Cabinet for Health and Family Services ("CHFS").
The DWC set forth in its Final Order that it had been informed by the CHFS that the Utilization Report was neither appropriate nor reliable. It then upheld the fifty percent cost-to-charge ratio. Hardin Memorial then appealed this decision to the Franklin Circuit Court. The circuit court initially upheld the DWC Order in the court's opinion and order of December 16, 2011, but upon further reconsideration the court set the judgment aside on February 3, 2012. The circuit court found that the DWC's Final Order was arbitrary and a violation of Section 2 of the Kentucky Constitution. The DWC now appeals the decision of the Franklin Circuit Court.
DISCUSSION
The Appellants first contend that the circuit court exceeded its authority in its review of the DWC's Final Order. Pursuant to KRS 194A.010(1), the CHFS is the primary agency for operating Medicaid programs within this Commonwealth. The DWC is not in the business of assessing this on its own. Instead, it relies upon the information given to it by the CHFS. The Appellees argue that, in relying upon HCFA-2552 in establishing the cost-to-charge ratio, the DWC had substantial evidence to support its decision.
In 500 Associates, Inc. v. Natural Resources and Environmental Protection Cabinet, 204 S.W.3d 121, 131 (Ky. App. 2006), a panel of our court held that in administrative appeals filed under KRS Chapter 13B, a court must review the agency's decision without reinterpreting or reconsidering the facts of the case. The reviewing court may not substitute its own judgment for that of the agency when weighing the evidence. Instead, the court must determine whether (1) "the findings of fact are supported by substantial evidence of probative value;" and (2) "the administrative agency has applied the correct rule of law to the facts so found." Southern Bell Telephone & Telegraph Co. v. Kentucky Unemployment Insurance Commission, 437 S.W.2d 775, 778 (Ky. 1969). As long as the reviewing court finds substantial evidence to support the agency decision, it must be affirmed. The court may not overturn the decision even if it would have found differently. 500 Associates, supra, at 132-133. The test of substantiality of evidence is whether it has sufficient probative value to convince the minds of reasonable people. 500 Associates, supra, at 131.
In its opinion and order, the Franklin Circuit Court found that a de novo review of the agency's decision was warranted pursuant to Aubrey v. Office of Attorney General, 994 S.W.2d 516, 519 (Ky. App. 1998). We agree with the court that any questions of law are subject to de novo review. Mill Street Church of Christ v. Hogan, 785 S.W.2d 263, 266 (Ky. App. 1990). We also agree with the appellees that a "court may substitute its judgment for the agency's ruling especially if that ruling was based on an incorrect view of the law." Id. We do not, however, agree that the Franklin Circuit Court can substitute its view of the evidence and what it indicated when establishing the cost-to-charge ratio at the center of the DWC's Final Order.
In relying on the information submitted by CHFS, the DWC was not acting arbitrarily. Instead, it was following the statutory guidelines as set forth in KRS 194A.010(1) and KRS 342.035. An administrative agency must be given great latitude as a fact-finder to evaluate the evidence submitted. Aubrey, supra, at 519. While Aubrey also provides that agency actions may be reversed if they are arbitrary, we find that the Franklin Circuit Court erred in finding the DWC's Final Order arbitrary. Thus, we reverse the decision of the Franklin Circuit Court and remand for reinstatement of the Final Order of the DWC.
ALL CONCUR. BRIEF FOR APPELLANT: Charles E. Lowther
Frankfort, Kentucky
BRIEF FOR APPELLEE: Mathew R. Klein
Crestview Hills, Kentucky