Opinion
No. 79-1635
Decided July 16, 1980.
Mandamus — Public welfare — Medical assistance program — To compel statutory reimbursement to nursing homes — Issues to be decided.
APPEAL from the Court of Appeals for Franklin County.
Pursuant to R.C. 5101.51, the Ohio Department of Public Welfare (ODPW) administers the state plan of medical assistance under Title XIX of the Social Security Act (Section 1396, Title 42, U.S. Code). The General Assembly, in enacting the appropriation bill for the biennium July 1, 1975, to June 30, 1977, Am. Sub. H.B. No. 155, promulgated the state plan under Title XIX for that period.
The bill, in pertinent part, states:
"Payments to nursing homes which are licensed by the director of health pursuant to Chapter 3721 of the Revised Code, and certified by the director of health in accordance with the Social Security Act, 74 Stat. 1864(a) et. seq. (1965), as amended, including qualified public facilities for vendor nursing home care, shall be made for authorized care on a reasonable cost related basis to be determined, as follows:
"(A) Reimbursement for the reasonable cost incurred for the care, comfort, and safety of patients;
"(B) Reasonable costs considered ordinary and necessary and related to patient care shall not include any amounts for property or equipment and any interest paid on loans to finance or refinance such property or equipment. Reimbursement for cost of property and equipment and related interest expense shall be on a reasonable cost basis, as follows: Facilities (including beds within such facilities) constructed prior to and subsequently originally licensed prior to 1958 — $2.50 per available bed per day. Facilities (including beds within such facilities) constructed and subsequently originally licensed after 1957 but prior to 1968 — $3.50 per available bed per day. Facilities (including beds within such facilities) constructed and subsequently originally licensed January 1, 1968 and after, $4.50 per available bed per day.
"(C) Applicable rates shall include a profit allowance equal to ten percent of costs incurred for the care, comfort, and safety of patients not to exceed $1.50 per patient per day. Such allowance shall not include a return on the fixed cost factor referred to in paragraph (B), nor a return on salaries attributable to owners' services.
"Nursing homes shall file an operating expense statement quarterly which reasonably reflects all costs relative to effective rates being paid on the basis of such quarterly filings. The director of the department of public welfare may make adjustments in such rates for the current quarterly period if there exist significant differentials in costs and rates.
"Effective July 1, 1976 through June 30, 1977, nursing homes participating in the Ohio Medicaid vendor payment program shall utilize a uniform chart of accounts for the purpose of cost reporting as approved by the department of public welfare.
"The department of public welfare shall have authority to modify any section herein contained to the extent necessary in order to comply with federal regulations effective July 1, 1976, subject to the review and approval of the controlling board. In addition, the director of public welfare may determine reasonable limitations on nursing home vendor rates in accordance with cost reports filed each calendar year for the purpose of rate determination.***If sufficient funds are not available to fund the reimbursement rates provided by appropriations made herein, the director of public welfare, subject to the review and approval of the controlling board, may make pro rata reductions in vendor per diem payments to nursing homes."
In 1976, the ODPW issued Nursing Home Fiscal Policy and/or Procedure Bulletins No. 4 and 7. Under these bulletins, a nursing home could qualify for the higher per diem rates allowed under paragraph (B) of Am. Sub. H.B. No. 155, supra, for newer homes only if the cost of construction per bed exceeded a certain amount ($3,500 to qualify for payment of $3.50 per bed per day, $5,150 to qualify for $4.50 payments). These limitations were designed to correlate the per diem payments more closely to the cost of construction per bed. The department apparently determined that the limitations were in order because paragraph (B) states that the amounts paid are intended to be reimbursements.
The above provisions of Am. Sub. H.B. No. 155 were reenacted in Am. Sub. H.B. No. 1546 which made additional appropriations for the fiscal year ending June 30, 1977. The Governor vetoed the reenactment in Am. Sub. H.B. No. 1546 of paragraphs (B) and (C) of Am. Sub. H.B. No. 155, supra. This veto, however, was eventually overridden by the General Assembly. Am. Sub. H.B. No. 1546 also added a provision to R.C. 5101.51 which states:
"Reimbursement by the department of public welfare to a medical provider for any medical service rendered under the medicaid program shall not exceed the authorized reimbursement level for the same service under the medicare program established under Title XVIII of the `Social Security Act,' 49 Stat. 620 (1935), 42 U.S.C. § 301, as amended."
The Governor's veto of the relevant sections of Am. Sub. H.B. No. 1546 was overridden on November 9, 1976. On November 12, 1976, the ODPW submitted changes to the Controlling Board claiming that the changes were necessary to comply with federal regulations. The proposed changes would have deleted the profit allowance and would have reimbursed the cost of property at rates less than those prescribed under Am. Sub. H.B. No. 155. The proposed changes, however, were disapproved by the Controlling Board in January 1977, and apparently the change in the reimbursement method was never put into effect. However, the department did continue to follow the policy enumerated in Bulletins No. 4 and 7. The department had deleted the profit allowance from payments beginning October 1, 1976, and this practice continued until January 1, 1977.
The ODPW, by letter to nursing homes' administrators and operators dated February 3, 1977, notified the homes that it would begin payments pursuant to Am. Sub. H.B. Nos. 155 and 1546 and that it was taking steps to retroactively pay the profit allowance which had been deleted for the period between October 1 and December 31, 1976. The department apparently continued to reimburse for cost of property in accordance with Bulletins No. 4 and 7 even after this letter.
In November of 1976, Montrie Nursing Home, Inc., Worthington Nursing Home, Inc., and Norworth Convalescent Center, Inc., operators of nursing homes in Ohio, brought an action in mandamus in the Court of Appeals for Franklin County on behalf of themselves and a purported class of all other persons who own or operate licensed nursing homes in the state which provide services to the medically indigent under state and federal Medicaid programs. The complaint claimed that the state had an obligation to pay these homes pursuant to Am. Sub. H.B. Nos. 155 and 1546 of the 111th General Assembly.
Relators claimed that respondents, Kwegyir Aggrey, the Director of the Ohio Department of Public Welfare, Thomas Ferguson, Auditor of State, and Richard L. Krabach, Director of Administrative Services, had failed to make payments in accordance with these bills and should be compelled to do so, retroactively.
The Court of Appeals denied the writ, holding that mandamus was not in order because there was an adequate remedy at law. On June 21, 1978, this court reversed the judgment of the Court of Appeals in State, ex rel. Montrie Nursing Home, Inc., v. Aggrey (1978), 54 Ohio St.2d 394, holding that there was no adequate remedy at law and that respondents were under a clear legal duty to recompense relators in accordance with Am. Sub. H.B. No. 155 without the modifications made in the fiscal policy bulletins. As a consequence this court allowed the writ.
On August 16, 1978, the Court of Appeals, by journal entry, issued a writ of mandamus ordering respondents to pay relators and other nursing home providers from and after July 1, 1975, precisely in accordance with paragraphs (B) and (C) of Am. Sub. H.B. Nos. 155 and 1546, supra.
On June 27, 1978, relators filed a motion for payment of interest from July 1, 1975, by respondents. On August 18, 1978, the Court of Appeals overruled this motion.
The state has not as yet paid relators and other nursing homes any money pursuant to the writ. In an attempt to compel such payments, relators, on October 13, 1978, filed both a motion to compel respondents to show cause why they should not be held in contempt and a charge of contempt. Respondents answered by stating that they should not be held in contempt because complex, time-consuming calculations were required to make the payments. The court did not act to find respondents in contempt at that time.
On December 27, 1978, relators filed an application for attorney's fees to be calculated at between 25 and 30 percent of any amount recovered or at $100 for each chargeable hour plus 15 percent of any amount recovered. It was stipulated by the parties that nursing homes providing medical services under the state and federal Medicaid programs who had not been paid in accordance with Am. Sub. H.B. No. 155 constituted a proper class.
On May 3, 1979, relators filed a second motion to show cause. In response, on August 28, 1979, respondents filed a list of amounts the ODPW had determined were due the nursing home class which totalled $8,206,312.41.
On November 20, 1979, the Court of Appeals issued a decision which overruled the motion to show cause, dismissed the charge of contempt, and granted attorney's fees which were calculated by adding the attorney's ordinary hourly fee ($75 for 137 hours for a total of $10,275) with .5 percent of the $8,206,312.41 fund ($41,032) for a total award of $51,307. The court awarded .5 percent of the fund in order to account for the attorneys' risk in bringing the action.
Relators have appealed the cause to this court alleging error in the failure of the Court of Appeals to award interest, in the failure of the court to find respondents to be in contempt, and in the failure to award reasonable attorney's fees.
The cause is now before this court as a matter of right.
Messrs. Lucas, Prendergast, Albright, Gibson, Newman Gee, Mr. Rankin M. Gibson and Mr. W. Joseph Strapp, for appellants.
Mr. William J. Brown, attorney general, Mr. Thomas W. Hess, Mr. William J. McDonald and Mr. George E. Lord, for appellees.
Ordinarily, there are three prerequisites to the issuance of a writ of mandamus. As this court held in the first paragraph of the syllabus in State, ex rel. Heller, v. Miller (1980), 61 Ohio St.2d 6:
"In order to grant a writ of mandamus, the court must find that relator has a clear legal right to the relief prayed for, that respondent is under a clear legal duty to perform the requested act, and that relator has no plain and adequate remedy at law.***"
In addition, this court has held that in order for a relator to receive money due him by a state official, the amount recoverable must be established with certainty. State, ex rel. Dean, v. Huddle (1976), 45 Ohio St.2d 234; Monaghan v. Richley (1972), 32 Ohio St.2d 190.
In this court's first Montrie Nursing Home decision, we held that there was no adequate remedy at law and that there was a clear legal duty on the part of respondents to pay some amount of money. Neither the Court of Appeals nor this court ruled on the amount to be paid or on relators' or the class members' right to the relief prayed for.
In stating that the writ was allowed, we intended for the Court of Appeals to issue the writ only after it had disposed of these two undecided issues. Unfortunately, the Court of Appeals did not resolve these issues, but rather granted an invalid writ ordering payment of unliquidated sums to the whole class of nursing homes.
The issues of prejudgment interest, proper enforcement, and attorney's fees can only be decided if there is a valid writ. In the absence of a valid writ, neither the Court of Appeals nor this court has jurisdiction over these issues. This court will examine issues of jurisdiction on its own initiative. McHugh v. State (1884), 42 Ohio St. 154.
As a consequence we vacate the lower court's orders on the issues appealed and remand the cause in order that the other issues which are prerequisites to the issuance of a valid writ be decided.
On remand, the Court of Appeals should consider that two issues were decided by this court in the earlier Montrie Nursing Home decision for the entire class of nursing homes providing medical services to indigents under the Medicaid programs. The issues decided were that there was no adequate remedy at law and that the state was under a clear legal duty to make payments in accordance with Am. Sub. H.B. Nos. 155 and 1546 without the modifications made in fiscal policy Bulletins No. 4 and 7. The Court of Appeals should treat these issues as though they have been decided in a class action which was limited in scope pursuant to Civ. R. 23(C)(4).
The change in R.C. 5101.51 made by Am. Sub. H.B. No. 1546 did not affect the duty to reimburse costs under paragraph (B) of Am. Sub. H.B. No. 155, supra. The language added to R.C. 5101.51 limits payments for medical services, not reimbursements of the cost of property.
In our earlier decision we only held that there was a clear legal duty to make payments without the modifications in fiscal policy Bulletins No. 4 and 7. We did not rule on any other clear legal duty which respondents might have been under. If relators claim any other right to payments, the Court of Appeals must decide not only if relators are entitled to a definite amount of money, but also if there is a clear legal duty on the part of respondents to make such payments.
In any case, the Court of Appeals should initially determine if the issues before it are maintainable as a class action pursuant to Civ. R. 23(C)(1). The court can of course make any limitations which are appropriate pursuant to Civ. R. 23(C)(4). If the court finds that the issues can be decided in a class action, it should order that any required notice be sent.
The Court of Appeals should then decide if the named relators and any members of the class it has deemed properly before it have a clear legal right to a definite amount of money pursuant to respondents' duty to pay nursing homes in accordance with Am. Sub. H.B. Nos. 155 and 1546. If the court determines that such a right exists, it can issue a writ ordering payment of the amount due. Only when the court has reached this stage of the proceedings can it order payment of a reasonable amount of attorney's fees and interest, if such orders are required under the law.
Orders vacated and cause remanded.
CELEBREZZE, C.J., HERBERT, W. BROWN and SWEENEY, JJ., concur.
LOCHER, J., concurs in the judgment.
P. BROWN and HOLMES, JJ., dissent.
In the case of State, ex rel. Montrie Nursing Home, Inc., v. Aggrey (1978), 54 Ohio St.2d 394, this court allowed a writ of mandamus to compel appellees to pay nursing home providers according to mandatory rates set forth in Am. Sub. H.B. No. 155 of the 111th General Assembly. In that case I would have denied that writ for the argued reason that there was an adequate remedy at law.
After remand, on August 16, 1978, the Court of Appeals issued an order for appellees to make the payments to appellants according to a set schedule of rates. Thereafter, there were the usual bureaucratic delays occasioned in part by the complexity of an ill-conceived statutory scheme.
The appellants became impatient and moved for an order in the Court of Appeals for the agency to show cause why it was not in contempt. A contempt order was denied, the court finding that there had been no contemptuous conduct, but that in fact the delays were occasioned by the scheme, as stated, and also that delay was in part occasioned by a concomitant motion of the claimant's counsel for attorney fees of 15 to 30 percent out of $8.2 million payable to the more than 550 nursing home operators. Since such fee, if allowed, would have been payable out of the so-called fund, payment to the providers of the service had, of necessity, to be deferred until disposition of this claim. The court, finding no contemptuous conduct, conducted a hearing and granted attorney fees of $51,307 ($75 per hour, plus .5 percent of the fund which the action concerned). There is no claim that the court's failure to find the agency in contempt was an erroneous, appealable order. The appeal questions the adequacy of the attorney fee which was allowed by the Court of Appeals.
Appellants correctly point out that the rationale for the inherent equity power of a court to award attorney fees in a class action is to prevent unjust enrichment of those who have been benefited from class action litigation, but who have not actually contributed to the expense of litigation. See Dawson, Lawyers and Involuntary Clients: Attorney Fees From Funds, 87 Harv. L. Rev. 1597; Annotation 38 A.L.R. 3d 1384. This court has adopted that philosophy in the award of reasonable attorney fees in a class action. Smith v. Kroeger (1941), 138 Ohio St. 508.
Such an award of attorney fees has been analogized to the underlying reasons for allowing a contingent fee arrangement. The primary reason for such an arrangement is the risk factor involved when an attorney agrees to represent a person under such an agreement. In the instant action there does not appear to have been any real risk involved. The law was clear that the money was due the appellants.
It should be pointed out that although the parties stipulated this cause to be a class action, it has never been certified as one by a court. Whether it was a true class according to Civ. R. 23, is not an issue here. What is at issue is whether the fees granted by the Court of Appeals to the attorneys were "reasonable."
The Court of Appeals properly considered the knowledge, skill, and reputation of the attorneys, the complexity of the case, and the number of hours worked in setting the requested fee. The attorneys in this action had an agreement with a nursing home association, composed of about one-half of the nursing homes involved, to pay the attorneys if appellants lost. Thus, the attorneys were to be paid at least their hourly rate, win or lose. The Court of Appeals also determined that each nursing home provider should share proportionately in the costs of having these attorneys represent them. Thus, there is no unjust enrichment of any members of the class.
Since the Court of Appeals provided for a hearing regarding attorney fees, and determined a reasonable amount, I conclude that amount should not be disturbed. (See Judge Whiteside's dissent contending any attorney fees award here is unwarranted.)
There seems to me to be no reason for this court to remand the cause for reconsideration of the question of adequacy of the fee ordered, and there seems to be no other final order before us for review. In the event that there would have been further delays in payment or further unanswered questions as to unliquidated amounts due, an appropriate action could have been brought or the inherent power of the Court of Appeals could be invoked to compel enforcement of its orders. Wind v. State (1921), 102 Ohio St. 62; State v. Townley (1902), 67 Ohio St. 21.
I would affirm the judgment of the Court of Appeals.
HOLMES, J., concurs in the foregoing dissenting opinion.