Opinion
No. 1110 C.D. 2013
04-03-2014
Monongahela Valley Hospital, Inc., Petitioner v. Department of Public Welfare, Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY SENIOR JUDGE FRIEDMAN
Monongahela Valley Hospital, Inc. (Hospital) appeals from the June 3, 2013, order of the Department of Public Welfare (DPW), Bureau of Hearings and Appeals (BHA), which adopted an Administrative Law Judge's (ALJ) recommendation to deny Hospital's appeal of DPW's implementation of a new All Patient Refined-Diagnosis Related Group (APR-DRG) payment system. We affirm.
Medicaid is a cooperative state-federal program through which the federal government provides funds to the states to assist the poor, elderly, and disabled in receiving medical assistance (MA). 42 U.S.C. §1396. The states establish beneficiary groups, types and ranges of service, payment levels for services, administrative and operating procedures, and make payment for services directly to the individuals or entities furnishing the services. 42 C.F.R. §430.0. DPW provides Medicaid benefits through two payment systems: (1) fee-for-service (FFS), where the care is paid for on a claim-by-claim basis; and (2) managed care (MC), where a contracting organization is paid on a monthly, fixed-fee basis per enrollee.
In anticipation of the passage of the Act of July 9, 2010, P.L. 336 (Act 49), DPW modified its calculation of a hospital's base rate (base-rate methodology) so that instead of using a hospital's individual costs to determine a hospital's base rate, as was done before July 9, 2010, DPW first determines a statewide-average base rate that represents the statewide average cost-per-discharge multiplied by 90 percent. DPW then adjusts the statewide-average base rate to account for regional labor costs, teaching status, average capital costs, and MA patient levels to determine each hospital's base rate. See section 443.1(1.1)(ii) of the Code, 62 P.S. §443.1(1.1)(ii).
Act 49 amended section 443.1(1.1) of the Public Welfare Code (Code), Act of June 13, 1967, P.L. 31, as amended, added by Section 5 of the Act of July 31, 1968, P.L. 904, 62 P.S. §443.1(1.1).
Under the APR-DRG payment system, DPW places a compensable MA discharge into an appropriate category, which has a relative weight assigned to it. DPW multiplies this weight by the hospital's FFS inpatient APR-DRG base rate to determine the reimbursement amount for the MA provided.
Hospital is enrolled in the MA Program as an acute, inpatient care provider and is located in Washington County, a "HealthChoices" area in which MC is mandatory for MA beneficiaries. Patients covered by the MC system comprise 75-80% of the MA patients receiving services at Hospital.
DPW notified Hospital by letter dated February 22, 2011, that Hospital's base rate would be changed. Using the new base-rate methodology, DPW set Hospital's base rate at $6,521.49, effective July 1, 2010.
Hospital appealed to the BHA, and on October 18, 2012, the ALJ held a hearing. Hospital presented the testimony of Eric Carlson, the Assistant Controller at Hospital. Carlson described the process by which Hospital gets reimbursed for inpatient services and Act 49's impact on Hospital's finances. (N.T. at 19-21.) Carlson also provided an analysis comparing Hospital's actual MA earnings to its hypothetical MA earnings if it were not in a mandatory MC area. (Id. at 23-27.) Carlson's analysis indicated a shortfall in income for Hospital under the new base-rate methodology. (Id. at 26.)
DPW presented the testimony of Leesa Allen, the Chief of Staff for the Office of MA Programs at DPW, and Cassandra Ly, a DPW employee who works in the Division of Rate Setting in the Bureau of FFS Programs. Allen testified about the available service delivery methods, Act 49, and the new base-rate methodology. (Id. at 45-53.) Allen testified that DPW published the proposed changes to the base-rate methodology in the Pennsylvania Bulletin and received no comments. (Id. at 49-50.) Allen also noted that the Center for Medicare and Medicaid Services (CMS) approved DPW's state plan amendments. (Id. at 51-53.)
Participating states must devise and implement a plan that is approved by Health and Human Services, a federal agency.
Ly explained the base-rate methodology and described the MA dependency adjustment, which can be qualified for in six ways. (Id. at 66-74.) Ly outlined the calculation of Hospital's base rate and noted that Hospital did not qualify for the dependency adjustment. (Id. at 75-82.)
On May 15, 2013, the ALJ recommended that Hospital's appeal be denied. On June 3, 2013, the BHA adopted the ALJ's recommendation in its entirety. Hospital now appeals to this court.
Our scope of review is limited to determining whether constitutional rights were violated, whether an error of law was committed, or whether the findings of fact were unsupported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S. §704.
Hospital argues that the base-rate methodology violates: (1) section 443.1(1.1)(ii)(B) of the Code, 62 P.S. §443.1(1.1)(ii)(B); (2) 42 U.S.C. §1396a(a)(30)(A) of the federal Medicaid Act; and (3) the Equal Protection Clauses of the United States and Pennsylvania Constitutions. Recently, this court addressed identical arguments in Armstrong County Memorial Hospital v. Department of Public Welfare, 83 A.3d 317 (Pa. Cmwlth. 2014).
First, Hospital argues that its location in a HealthChoices area creates "additional burdens and issues" and that section 443.1(1.1)(ii)(B) of the Code, 62 P.S. §443.1(1.1)(ii)(B), requires DPW to consider these burdens in the base-rate methodology. We disagree.
Section 443.1(1.1) of the Code, 62 P.S. §443.1(1.1), addresses, inter alia, payment methods and standards by which DPW calculates payments to acute-care hospitals for inpatient services. Section 443.1(1.1)(ii) states that:
[DPW] shall use payment methods and standards that provide for all of the following:62 P.S. §443.1(1.1)(ii) (emphasis added).
(A) Use of the [APR/DRG] system for the classification of inpatient stays into DRGs.
(B) Calculation of base DRG rates, based upon a Statewide average cost, which are adjusted to account for a hospital's regional labor costs, teaching status, capital and medical assistance patient levels and such other factors as [DPW] determines may significantly impact the costs that a hospital incurs in delivering inpatient services and which may be adjusted based on the assessment revenue collected under Article VIII-G.
(C) Adjustments to payments for outlier cases where the costs of the inpatient stays either exceed or are below cost thresholds established by the department.
However, the base-rate methodology includes a cost adjustment for hospitals with high MA levels. As we stated in Armstrong:
DPW has fulfilled the mandate of the statute to adjust the base rate based upon MA patient levels. Nothing in the statute indicates that a hospital located in a HealthChoices area must be afforded a cost adjustment or that the proportion of FFS discharges to MC discharges must be considered by the base-rate methodology.83 A.3d at 320. Thus, DPW has met the requirements of section 443.1(1.1)(ii)(B) of the Code.
Second, Hospital argues that the new base-rate methodology violates 42 U.S.C. §1396a(a)(30)(A) of the federal Medicaid Act. Hospital asserts that DPW failed to assure that Hospital could enlist enough providers to provide care and services to the extent that such care and services are available to the general population in the geographic area. We disagree.
Under 42 U.S.C. §1396a(a)(30)(A), a state plan for MA must:
provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b(i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area . . . .42 U.S.C. §1396a(a)(30)(A) (emphasis added). In order to prove that DPW violated 42 U.S.C. §1396a(a)(30)(A), the burden is on Hospital to present evidence defining the appropriate geographic areas to consider and permitting a comparison of the access to services enjoyed by the general population to the access to services in the discrete geographical areas at issue. See Clark v. Richman, 339 F. Supp. 2d 631, 644 (M.D. Pa. 2004) (listing indicators through which a plaintiff may demonstrate unequal access); see also Armstrong, 83 A.3d at 321.
Section 1396a(a)(30)(A) only requires that a state achieve certain results and does not mandate a method or process by which the state must set its reimbursement rates. See Rite Aid of Pennsylvania, Inc. v. Houstoun, 171 F.3d 842, 853 (3d Cir. 1999) ("We will not read back from section [1396a(a)]30(A) to say that the section implicitly requires that a state follow a specific procedure or demonstrate that it has reviewed each factor."). Moreover, CMS's approval of the state plan amendments is entitled to deference. Centennial Spring Health Care Center v. Department of Public Welfare, 541 A.2d 806, 810 (Pa. Cmwlth. 1988). --------
Hospital presented Carlson's testimony, which indicated that Hospital would garner increased revenue if it were not in a mandatory MC zone. However, Hospital presented no empirical data of inadequate services, specific instances of unsatisfactory care, or other evidence permitting a comparison of service levels between MA beneficiaries and the general population with the degree of specificity discussed in Clark. Thus, Hospital failed to meet its burden.
Finally, Hospital argues that the base-rate methodology violates the Equal Protection Clauses of the United States and the Pennsylvania Constitutions. We disagree.
The Equal Protection Clause of the United States Constitution directs that no state shall "deny to any person . . . the equal protection of the laws." U.S. Const. amend. XIV, §1. The Pennsylvania Constitution, Article 1, Section 26 affords similar protection, and our analysis of both federal and state equality protections proceeds under the same standards. Burns v. Public School Employees' Retirement Board, 853 A.2d 1146, 1152 n.9 (Pa. Cmwlth. 2004). The Equal Protection Clause "does not obligate the government to treat all persons identically, but merely assures that all similarly situated persons are treated alike." Small v. Horn, 554 Pa. 600, 615, 722 A.2d 664, 672 (1998).
Because Act 49 does not burden a fundamental right or implicate a suspect class, the appropriate level of scrutiny is rational review. Burns, 853 A.2d at 1152. We find nothing irrational in the base-rate methodology's approach to furthering DPW's legitimate and complicated goal of administering MA in the Commonwealth. See Armstrong, 83 A.3d at 322 ("[T]he dependency adjustment has a rational and substantial relation to Act 49's requirement that DPW utilize a base-rate methodology that considers a hospital's MA patient level") Therefore, the APR-DRG payment system violates neither the federal nor the state Equal Protection Clause.
Accordingly, because substantial evidence supports the BHA's determinations, we affirm.
/s/_________
ROCHELLE S. FRIEDMAN, Senior Judge
ORDER
AND NOW, this 3rd day of April, 2014, we hereby affirm the June 3, 2013, order of the Department of Public Welfare, Bureau of Hearings and Appeals.
/s/_________
ROCHELLE S. FRIEDMAN, Senior Judge