IN THE SUPREME COURT OF MISSISSIPPI CLC OF BILOXI, LLC D/B/A BILOXI COMMUNITY LIVING CENTER. No TS-01034

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1 E-Filed Document Mar :48: CC Pages: 46 IN THE SUPREME COURT OF MISSISSIPPI CLC OF BILOXI, LLC D/B/A BILOXI COMMUNITY LIVING CENTER APPELLANT VS. No TS MISSISSIPPI DIVISION OF MEDICAID DAVID J. DZIELAK, in his Official Capacity as Executive Director of Mississippi Division of Medicaid APPELLEES APPEAL FROM THE CHANCERY COURT OF HINDS COUNTY, MISSISSIPPI THE HONORABLE PATRICIA D. WISE, CHANCELLOR BRIEF OF APPELLANT ORAL ARGUMENT REQUESTED COUNSEL FOR APPELLANT: JAMES R. MOZINGO (MSB No. 3638) Post Office Box 4587 LYDIA M. QUARLES (MSB No. 4582) Jackson, Mississippi H. HUNTER TWIFORD, IV (MSB No ) Telephone: MOZINGO QUARLES, PLLC Telecopier: Highland Village, Suite Interstate 55 North Jackson, Mississippi

2 IN THE SUPREME COURT OF MISSISSIPPI CLC OF BILOXI, LLC, D/B/A BILOXI COMMUNITY LIVING CENTER APPELLANT VS. NO TS MISSISSIPPI DIVISION OF MEDICAID, DAVID J. DZIELAK, in his Official Capacity as Executive Director Mississippi Division of Medicaid APPELLEES BRIEF OF APPELLANT ORAL ARGUMENT REQUESTED JAMES R. MOZINGO (MSB No. 3638) H. HUNTER TWIFORD, IV (MSB No ) MOZINGO QUARLES PLLC Highland Village, Suite Interstate 55 North Jackson, Mississippi Post Office Box 4587 Jackson, Mississippi Telephone: Telecopier: COUNSEL FOR APPELLANT, CLC OF BILOXI, LLC

3 IN THE SUPREME COURT OF MISSISSIPPI CLC OF BILOXI, LLC D/B/A BILOXI COMMUNITY LIVING CENTER VS. MISSISSIPPI DIVISION OF MEDICAID DAVID J. DZIELAK, in his Official Capacity as Executive Director of Mississippi Division of Medicaid APPELLANT No TS APPELLEES CERTIFICATE OF INTERESTED PERSONS The undersigned counsel of record certifies that the following listed persons have an interest in the outcome of this case. These representations are made in order that the justices of the Supreme Court and/or the judges of the Court of Appeals may evaluate possible disqualification or recusal. 1. CLC of Biloxi, LLC d/b/a Biloxi Community Living Center, 2279 Atkinson Road, Biloxi, Mississippi 39531; 2. James R. Mozingo, Esq. and H. Hunter Twiford, IV, Esq., Mozingo Quarles, PLLC, Post Office Box 4587, Jackson, Mississippi , Counsel for Appellant; 3. The Mississippi Division of Medicaid and David J. Dzielak, Appellees; and 4. Janet D. McMurtray, Esq. and Laura L. Gibbes, Esq., Purdie & Metz, PLLC, Post Office Box 2659, Ridgeland, Mississippi , Counsel for the Mississippi Division of Medicaid. SO CERTIFIED, this the 10th day of March, /s/h. Hunter Twiford, IV H. Hunter Twiford, IV (MSB #103874) Counsel of record for Appellant, CLC of Biloxi, LLC i

4 TABLE OF CONTENTS CERTIFICATE OF INTERESTED PERSONS i Page TABLE OF CONTENTS TABLE OF AUTHORITIES ii iii STATEMENT ON ORAL ARGUMENT 1 I. STATEMENT OF ISSUES 2 II. STATEMENT OF ASSIGNMENT 3 III. STATEMENT OF THE CASE 4 1. Introduction 4 2. Procedural History 5 3. Statement of Relevant Facts 7 a. The State Medicaid Plan, Attachment 4.19-D 8 b. Provider Policy Manual IV. SUMMARY OF THE ARGUMENT 22 V. ARGUMENT STANDARD OF REVIEW MEDICAID S CONTROLLING STATUTE EXPRESSLY FORBIDS THE ADOPTION OF DOM S PROVIDER POLICY MANUAL BECAUSE IT VIOLATES THE PROHIBITION ON LIMITING A PATIENT S FREEDOM OF CHOICE OF HEALTH CARE PROVIDER THE CHANCELLOR ERRED IN ACCORDING DEFERENCE TO DOM S INTERPRETATION OF THE STATE PLAN AND INTERPRETIVE MANUALS DOM S WITHHOLDING OF ALLOWABLE REIMBURSEMENTS LEGITIMATELY OWED TO CLC IS AN UNCONSTITUTIONAL TAKING WITHOUT DUE PROCESS. 36 VI. CONCLUSION 37 CERTIFICATE OF SERVICE 39 ii

5 TABLE OF AUTHORITIES Page Cases Beverly Enterprises v. Mississippi Division of Medicaid, 808 So. 2d 939 (Miss. 2002) , 30, 33, 36, 37 Buelow v. Glidewell, 757 So. 2d 216 (Miss. 2000) Burks v. Amite County School District, 708 So. 2d 1366 (Miss. 1998) Gill v. Mississippi Department of Wildlife Conservation, 574 So. 2d 586 (Miss. 1990) Harris v. Mississippi Real Estate Commission, 500 So.2d 958 (Miss. 1986) McDerment v. Mississippi Real Estate Commission, 748 So. 2d 114 (Miss. 1999) McGowan v. Mississippi State Oil & Gas Board, 604 So. 2d 312 (Miss. 1992) Mississippi Department. of Environmental Quality v. Weems, 653 So. 2d 266 (Miss. 1995) , 24 Mississippi Division of Medicaid v. Alliance Health Center, 174 So.3d 254 (Miss. 2015) Mississippi Division of Medicaid v. Mississippi Independent Pharmacies, 20 So.3d 1236 (Miss. 2009) , 27, 33 Mississippi Methodist Hospital & Rehabilitation Center v. Mississippi Division of Medicaid, 21So.3d 600 (Miss. 2009) , 33, 34 Mississippi Real Estate Commission v. Ryan, 248 So.2d 790 (Miss. 1971) Mississippi State Department of Health v. Natchez Community Hospital, 743 So. 2d 973 (Miss. 1999) Mississippi Valley Gas Company v. Federal Energy Regulatory Commission, 659 F.2d 488 (5th Cir. 1981) iii

6 TABLE OF AUTHORITIES Page 2 Cases Page Sandefur v. Cherry, 718 F.2d 682, 1983 U.S. App. LEXIS (5th Cir. 1983) Sandefur v. Cherry, 455 So.2d 1350 (La. 1984) Sandefur v. Cherry, 721 F.2d 511 (5th Cir. 1983) Sandefur v. Cherry, 744 F.2d 1157, 1984 U.S. App. LEXIS (5th Cir. 1984) , 28, 33 Sierra Club v. Mississippi Environmental Quality Permit Board, 943 So. 2d 673 (Miss. 2006) State Tax Commission v. Earnest, 627 So.2d 313 (Miss. 1993) Constitutions Mississippi Constitution, Article 3 Section Federal Statutes 42 U.S.C.S. 1396(a)(19) State Statutes Mississippi Code Annotated (1972, as amended) , 3, 8, 12, 18, 19, 26, 28, 37 Mississippi Code Annotated et seq. (1972, as amended) Mississippi Code Annotated (1972, as amended) , 20 Mississippi Code Annotated (1)(a)(i) (1972, as amended) , 32, 35 iv

7 TABLE OF AUTHORITIES Page 3 Page State Statutes Mississippi Code Annotated (f) (1972, as amended) Mississippi Code Annotated (g)(iii) (1972, as amended) Mississippi Code Annotated (h) (1972, as amended) , 14 Mississippi Code Annotated (h)(iii) (1972, as amended) Manuals Mississippi State Medicaid Plan, Attachment 4.19-D Chapter 1, Section Chapter 2-1, Section A Section A(6) , 10, 28 Section A(15) , 4, 11, 12, 16, 20, 28, 33, 34, 36 Section A(18) , 4, 7, 10, 14, 16, 17, 21, 28, 30, 33, 34, 35, 37, 38 Chapter 2-1, Section B , 12 Chapters Chapter Medicaid s Provider Policy Manual, Section , 2, 4, 7, 20, 21, 22, 26, 28, 31, 32, 35 v

8 STATEMENT ON ORAL ARGUMENT CLC requests oral argument in order to assist the Court, if the Court be of the opinion that such is necessary. The Court may well find same helpful to understanding the cumbersome nature of the several different types of regulations involved, and how the Division of Medicaid has arbitrarily and capriciously issued an interpretative regulation which is beyond the agency s authority to issue - Provider Policy Manual 50.02, explained in detail, infra. The Court may also find oral argument beneficial to understanding precisely the relief CLC seeks and the justification for same. CLC potentially seeks to have this court order the Division of Medicaid to amend the Mississippi State Medicaid Plan and to make the Plan and any interpretive manual or other agency interpretive materials conform to a controlling statute, the Mississippi Medical Assistance for the Aged Law, Miss. Code Ann (1972, as amended). 1

9 I. STATEMENT OF ISSUES 1. Whether the chancery court erred in affirming DOM s decision to deny reimbursement of CLC of Biloxi s respiratory therapist s salary. 2. Whether DOM s interpretation of the State Medicaid Plan, Attachment 4.19-D, Sections A(15) and A(18) as not allowing respiratory therapists salaries to Large Nursing Facilities is arbitrary and capricious, unsupported by substantial evidence, or is beyond the agency s authority, or impermissibly limits a patient s freedom to choose their health care provider. 3. Whether DOM s promulgation of Provider Policy Manual ( PPM ) is beyond the agency s authority and is an unreasonable interpretation of the State Medicaid Plan. 4. Whether DOM has implemented PPM arbitrarily and capriciously against CLC of Biloxi where DOM inconsistently applies or ignores the regulation in regards to other classes of nursing facilities and hospitals. 5. Whether DOM s refusal to reimburse CLC of Biloxi s respiratory therapist s salary is unconstitutional or exceeds DOM s statutory authority where DOM reimburses respiratory therapists salaries at other types of health care facilities, thereby limiting a Medicaid beneficiary s choice of medical service provider. 2

10 II. STATEMENT OF ASSIGNMENT CLC of Biloxi requests relief which may only be granted under the authority specifically reserved to the Supreme Court. In particular, CLC of Biloxi asserts that the Mississippi State Medicaid Plan and other DOM interpretive manuals likely conflict with the Mississippi Medical Assistance for the Aged Law, Miss. Code Ann (1972, as amended) and that only the Supreme Court of Mississippi can order the Mississippi Division of Medicaid to amend the State Plan to bring it into conformity with Thus, CLC of Biloxi seeks relief potentially beyond error correction and application of settled law. 3

11 III. STATEMENT OF THE CASE 1. Introduction CLC of Biloxi filed its original Complaint against DOM in the Hinds County Chancery Court, seeking redress from DOM s interpretation and implementation of the State Medicaid Plan, Attachment 4.19-D, Chapter 2-1, Sections (A)(15) and (A)(18) (hereinafter Section (A(15) and Section A(18) ) and Provider Policy Manual (hereinafter PPM 50.02" or Section ), which DOM interprets as its authority for denying reimbursement to CLC for its respiratory therapist s salary. DOM s ultimate argument is that Provider Policy Manual denies direct reimbursement of a respiratory therapist, despite the fact that the State Medicaid Plan s Section A(18) expressly directs that therapy expenses for a Large Nursing Facility such as CLC, shall be paid directly. Section A(18) neither specifies what types of therapy are included nor excludes respiratory therapy or respiratory therapist s salaries. Thus, DOM argues it has authority and discretion to determine which types of therapists it will reimburse and that it has made such a determination regarding respiratory therapists by issuing PPM Conversely, CLC argues that its respiratory therapist s salary should be reimbursed indirectly under Section A(15) as other direct care staff. The State Plan is plain and unambiguous and controls over the DOM s contrary interpretation as promulgated in PPM As such, DOM s denial of reimbursement is: arbitrary and capricious; beyond the agency s authority; violates CLC s statutory and constitutional rights; and is unsupported by substantial evidence. DOM argues that it may refuse reimbursement even though the services provided by CLC were admittedly reasonable and necessary for its patients care. Reasonableness and necessity are the prerequisite standards for allowableness of a particular reimbursement, and the State Plan 4

12 contemplates that there are allowable expenses that will meet these prerequisites which have not been specifically enumerated. CLC asserts that its respiratory therapist s salary is just such a cost, and even DOM concedes that it may be allowable under the State Plan, but refuses to reimburse because DOM s interpretive regulations (the PPM and Cost Report Instructions) provide nowhere for them to get reimbursed. (Tr. 37:16-38:1) 2. Procedural History DOM reimburses Long Term Care Facilities, such as CLC of Biloxi, based off of the 1 facility s individual cost experience. The provider submits its end of the year Cost Reports to DOM and DOM reviews the Cost Report to determine the provider s entitlement to particular 2 reimbursements. CLC submitted its Cost Report for fiscal year 2008 to DOM on May 29, (Comm n Papers, Ex. 1 to Ex. B; R.E 43) DOM performed its internal audit, called a Desk Review, of CLC s Cost Reports and issued the Desk Review on October 26, (Comm n Papers, Ex. 7 to Ex. B; R.E. 53) Upon learning that DOM denied direct reimbursement for CLC s respiratory therapist s expenses, CLC amended its Cost Report and claimed the expense indirectly. (Comm n Papers, Ex. 8 to Ex. B; R.E. 65) DOM performed another Desk Review on the amended Cost Report and issued its Amended Desk Review on January 12, (Comm n Papers, Ex. 9 to Ex. B; R.E. 106) In that Amended Desk Review, DOM made adjustments to several other parts 1 DOM itself is responsible for the creation and promulgation of the Cost Report Forms, and the provider merely enters its relevant financial information on DOM s form. The Cost Report is then utilized to calculate and determine a provider s prospective per diem reimbursement rate, which is the rate that will be paid the provider two (2) years later. Thus, CLC s 2008 Cost Report becomes the basis for CLC s fiscal year 2010 per diem reimbursement rate. 2 Some reimbursements are made directly and others are made indirectly via their calculation into the facility s per diem rate. 5

13 3 of the Cost Report which are the subject of a different administrative proceeding. DOM did not take issue with the reclassification of respiratory therapist s salary. (Comm n Papers Ex. 9 to Ex. B, passim; R.E ) On March 2, 2012, DOM issued its Second Amended Desk Review, whereby DOM moved the reclassified respiratory therapist s salary back to its originally reported line, Form 6, Line (Comm n Papers, Ex. 10 to Ex. B; R.E ) Aggrieved by this decision, CLC sought an administrative appeal of the adjustment and disallowance of the respiratory therapist s salary. On October 31, 2012, DOM held an administrative hearing on the disallowance of the therapist s salary. (Comm n Papers, Ex. A, passim) At the conclusion of the administrative hearing, the Hearing Officer requested additional briefing on the issue of DOM s authority to alter or amend the terms of the State Plan by issuing the Provider Policy Manual. (Comm n Papers Ex. A, 101:3-103:1) Briefs from both parties were submitted. The Hearing Officer submitted his recommendation sustaining the agency s action to the Executive Director on February 25, (Clerk s Papers 66; R.E. 122) The Executive Director issued his Final Decision Letter on April 23, 2013 adopting the Hearing Officer s recommendation and opinion. (Clerk s Papers 64; R.E. 120) CLC filed its complaint seeking declaratory and injunctive relief to prevent DOM from breaching its contract with CLC and from adopting the arbitrary and capricious interpretation of its controlling regulations on October 23, (Clerk s Papers 6; R.E. 21) DOM filed a motion to dismiss which challenged the chancery court s jurisdiction to hear administrative appeals from DOM. (Clerk s Papers 56) The case was stayed pending the outcome of the interlocutory appeal 3 Those adjustments are pending before Hinds County Chancery Court, No. G T/1. 6

14 in Mississippi Division of Medicaid v. Alliance Health Center, 174 So. 3d 254 (Miss. 2015), whereby the Mississippi Supreme Court affirmed chancery s jurisdiction. On March 29, 2016, the chancery court, choosing to treat CLC s original complaint as an administrative appeal, heard oral argument on the dispute. (Tr. passim) The chancellor requested supplemental briefing, and the parties submitted the requested briefs. The chancery court rendered its judgment in favor of Defendants on June 21, (Clerk s Papers 730; R.E. 10) CLC perfected its appeal and the matter is properly before this Court. 3. Statement of Relevant Facts In preparing the Cost Report and reporting its respiratory therapist s salary on Cost Report Form 6, Line 2-04, CLC relied upon two instructive authorities: State Medicaid Plan, Attachment 4.19-D, Chapter 2-1, Section (A)(18) and Medicaid s Cost Report Instructions. The specific services that CLC s respiratory therapist provided were directly related to the care of CLC s tracheostomy patients and this was a necessary service, as DOM stipulated. (Comm n Papers Ex. A, 9:18-18:14) A tracheostomy or trach is a procedure whereby an incision is made in a patient s throat to create a hole through which a tracheostomy tube may be inserted to allow the patient to breathe. The care for a tracheostomy tube requires: the routine removal of the tracheostomy tube every other day for cleaning; cleaning and maintenance of the tracheostomy incision in the patient s throat, and suctioning fluid out of the trach patient s lungs and airway to prevent infection. Without this care, a trach patient runs an acute risk of developing grievous health problems. The Mississippi Respiratory Care Practice Act recognizes that performance of respiratory care by a licensed respiratory care practitioner includes insertion and maintenance of artificial airways and broncopulmonary hygiene. Miss. Code Ann (f) (1972, as 7

15 4 amended). Respiratory care includes respiratory therapy. Miss. Code Ann (h) (1972, as amended). a. The State Medicaid Plan, Attachment 4.19-D The State Medicaid Plan is promulgated and administered by the Mississippi Division of Medicaid pursuant to statutory authority granted it by Miss. Code Ann , et seq., and this State Medicaid Plan is then approved Mississippi s Attorney General, her Governor, and ultimately checked for compliance with federal medicaid regulations by the federal Centers for Medicare and Medicaid Serves (CMS). The Mississippi Division of Medicaid regularly proposes and adopts changes to the State Medicaid Plan, and those changes or adoptions must be approved by the same respective parties, supra. The Mississippi Division of Medicaid is granted wide latitude in its authority by Miss. Code Ann to adopt and promulgate reasonable rules, regulations and standards... [e]stablishing methods and procedures as may be necessary for the proper and efficient administration of this article. Miss. Code Ann (1)(a)(i). Such discretion by the agency is only narrowly limited in its statutory authority. See, e.g. Miss. Code Ann (providing that no regulation shall be promulgated which limits or abridges the recipient s free choice of the provider of medical and remedial care or service), infra. The State Medicaid Plan, Attachment 4.19-D is the portion of the State Plan which governs long-term care facilities, such as CLC of Biloxi. Attachment 4.19-D provides: 4 Throughout much of the administrative hearing, pleadings, and trial of this matter, counsel for both parties and the hearing officer and trial court judge have used the terms respiratory therapy and respiratory care interchangeably, and for purposes of the issues at hand, distinguishing the two terms is unnecessary. 8

16 1-1 General Principles A facility s direct care costs, therapy costs, care related costs, administrative and operating costs and property costs related to covered services will be considered in the findings and allocation of costs to the Medical Assistance Program for its eligible recipients. Costs included in the per diem rate will be those necessary to be incurred by efficiently and economically operated nursing facilities that comply with all requirements of participation in the Medicaid program with the exception of services provided that are reimbursed on a fee for service basis or as a direct payment outside of the per diem rate. Attachment 4.19-D, p. 14. (emphasis added)(comm n Papers Ex. 2 to Ex. B at p. 14) Chapter 2-1 provides the Standards for Allowable Costs. Attachment 4.19-D, p. 48, et seq. (Comm n Papers, Ex. 2 to Ex. B; R.E. 130) Section A of Chapter 2-1 provides examples of and enumeration of those Allowable Costs and Section B expressly excludes certain costs as non-allowable : A. Allowable Costs In order for a cost to be an allowable cost for Medicaid reimbursement purposes, it must be reasonable and necessary in the normal conduct of operations related to providing patient care in accordance with CMS PRM 15-1 guidelines. The following list of allowable costs is not comprehensive, but serves as a general guide and clarifies certain key expense areas. The absence of a particular cost does not necessarily mean that it is not an allowable cost. Attachment 4.19-D, p. 49. (emphasis added)(comm n Papers Ex. 2 to Ex. B; R.E. 132) Section A(6) specifically provides for the contracting of therapists: 6. Contract Labor. This includes, but is not limited to, payments for contract registered nurses, licensed practical nurse aides, therapists, dietary services, housekeeping services and maintenance services and agreements. Attachment 4.19-D, p. 54. (emphasis added)(comm n Papers Ex. 2 to Ex. B; R.E. 137) 9

17 Section A(18), which is a key regulation at issue here, specifically instructs that therapy expenses are reimbursable: 18. Therapy Expenses. Costs attributable to the administering of therapy services should be reported on Form 6, Line 2. Therapy expenses will be included in the per diem rate for PNFSD, PRTF and ICF/MR providers. Therapy expenses for Small Nursing Facilities and Large Nursing Facilities will be reimbursed on a fee for service basis. Attachment 4.19-D, p. 66. (emphasis added)(comm n Papers Ex. 2 to Ex. B; R.E. 149) Attachment 4.19-D also provides: Chapter 7 - Definitions - Care Related Costs - These costs include salaries and fringe benefits for activities, Director of Nurses, pharmacy, social services; food; Medical Director; consultants for activities, nursing, pharmacy, social services and therapies; related supplies; and personal hygiene supplies. Att D at p (Comm n Papers Ex. 2 to Ex. B) DOM claims that CLC is not entitled to claim a respiratory therapist s salary or expenses on a fee for service basis. (Tr. 61:8-25) This is a direct contradiction to the plain language of Section A(18), however, the issue is complicated by the fact that DOM s Cost Report Instructions and Cost Report Form 6, Line 2 expressly direct CLC to report its respiratory therapist s salary on Line 2-04 titled Salaries - Other therapists. (Comm n Papers Ex. 3 to Ex. B at p.17) DOM s expert T. J. Walker testified under oath that Section A(6) does not limit or qualify what types of therapists services are reimbursable. (Comm n Papers Ex. A, 58:4-6) Section A(18) does not qualify or limit the kind of therapy services which are reimbursable either. (Comm n Papers Ex. A, 59:24-60:3) The only limitations would be that a particular therapy must be reasonable and necessary and related to patient care. (Section A at p.49, supra) According to this Section of the State Plan, therapy services are to be paid through the per diem mechanism for PNFSD, PRTF and 10

18 5 ICF/MR providers and are to be directly reimbursed to Large Nursing Facilities such as CLC of Biloxi. (Comm n Papers Ex. A, 59:24-60:18) DOM s Walker testified that DOM compensates nursing homes therapy expenses via direct reimbursements [o]ther than respiratory therapists. 6 (Comm n Papers Ex. A, 60:7-22) Chapter 2, Section A(15) also provides for reimbursement for salaried employees. 15. Salaries and Fringe Benefits. Allowable costs include payments for salaries and fringe benefits for those employees who provide services in the normal conduct of operations related to patient care. These employees include, but are not limited to, registered nurses, licensed practical nurses, nurses aides, other salaried direct care staff, director of nursing, dietary employees, housekeeping employees, maintenance staff, laundry employees, activities staff, pharmacy employees, social workers, medical records staff, non-owner administrator, non-owner assistant administrator, accountants and bookkeepers and other clerical and secretarial staff. Attachment 4.19-D, p. 63. (emphasis added)(comm n Papers Ex. 2 to Ex. B; R.E.146) In discussing Section (A)15, DOM s expert Walker made the following observations: Q. All these employees are providing services in the normal conduct of patient care are to be reimbursed? I mean, it specifically says they re reimbursable; right? A. Yes. 5 These acronyms stand for Private Nursing Facility for the Severely Disabled, Psychiatric Residential Treatment Facility, and Intermediate Care Facility for the Mentally Retarded (now referred to as an Intermediate Care Facility for the Intellectually Disabled). These are facilities with patients which typically have a higher level of acuity than the standard Large Nursing Facility or Small Nursing Facility. 6 Walker s testimony as to why DOM excludes respiratory therapists from direct reimbursement is explained further, infra. 11

19 Q. Okay. These employees may include but are not limited to registered nurses, practical nurses, nurse s aides, other salaried direct care staff, et cetera, et cetera. Correct? A. Yes. (Comm n Papers Ex. A, 59:6-15) CLC believes it a reasonable interpretation of Section A(15) that CLC s respiratory therapist is a salaried direct care staff member, and, according to the State Plan, this is a reimbursable salary expense. Section 2-1(B) of 4.19-D lists specified non-allowable costs, none of which are related to providing medical care to patients, nor do these non-allowable costs in any way resemble respiratory therapy services or any type of medical service. Attachment 4.19-D, pp (Comm n Papers Ex. 2 to Ex. B; R.E ) In other words, Section B does not exclude respiratory therapist s services or salaries as a non-allowable cost. The unambiguous language of the State Plan states that a large nursing facility such as CLC of Biloxi shall be reimbursed for its therapy expenses. The entirety of Attachment 4.19-D provides no definition of therapy or therapy costs nor any distinction as to what types of therapy will be considered allowable therapy for reimbursement. DOM s Walker testified that respiratory therapy is a legitimate therapy. (Comm n Papers Ex. A, 51:9-11) Despite the hearing officer s 7 insinuation to the contrary, that DOM considers respiratory therapy a valid therapy treatment is borne out by DOM s paying Mississippi Methodist and other hospitals for same. (Tr. passim) 7 See Hearing Officer s opinion at p. 6 It is not the province of this hearing officer or this appeal to determine the merits of respiratory therapy or any other therapy. No disrespect is intended towards the field of respiratory therapy or its practitioners, but DOM does not have to immediately agree to pay for a service under the State Plan merely because service providers place the word therapy in front of the service they provide. (Clerk Papers 71; R.E. 127) Of course, the hearing officer is correct in one regard it is not within his province to determine the merits, as the Legislature has already done so by adopting the Mississippi Respiratory Care Practice Act, supra. 12

20 Attachment 4.19-D clearly contemplates that therapy costs are allowable, reimbursable costs and expenses so long as they are reasonable and necessary in the normal conduct of CLC s daily operation of providing care to its patients. Even DOM s expert Walker admits the above cited provisions do not generally qualify what kinds of therapists are reimbursable. (Comm n Papers Ex. A, 58:4-6, 59:45-60:3) When specifically questioned as to whether respiratory therapy services are excluded by the State Plan, Walker testified: Q....so what you re saying is, is Medicaid is actually compensating for therapy expenses? A. Other than respiratory therapists. Q. Okay. But it doesn t say there s nothing here in the [State Plan] that says that, right? A. It says it in the provider policy manual Q. Okay. A. as well as the cost report instructions, which the cost which the cost report was prepared by. Q. Okay. One thing at a time. It doesn t say that in the Plan, does it? A. No, it does not. (Comm n Papers Ex. A, 60:20-61:9)(emphasis added) DOM s attorney conceded the same at trial: MS. MCMURTRAY: Mr. Mozingo keeps [sic] saying that the State Plan is the only thing you look at. It s not. [The State Plan] is the general guideline. The Provider Policy Manual [sic] and the billing manual are much more detailed. They tell you what s covered and what s not covered. What the State Plan does is tell you what s allowable and what s not allowable. THE COURT: Following that position, is it anywhere in any plan that excludes respiratory therapy fees from a large nursing facility? MS. MCMURTRAY: There s nowhere that specifically says it s not that it s excluded. But it s not covered because there s nowhere for them to get reimbursed. (Tr. 37:16-38:1)(emphasis added) 13

21 THE COURT: What I m looking for is, where does [the State Plan] specifically exclude the respiratory therapy cost? MS. MCMURTRAY: It doesn t exclude respiratory therapy cost. But respiratory therapy cost and other therapy cost has to be paid on a [direct] fee-for-service basis. That s in the next line. You can t get fees for service for respiratory therapy because Medicaid doesn t cover respiratory therapy because we don t enroll respiratory therapists as a provider. (Tr. 18:29-19:11)(emphasis added) Despite the plain and unambiguous language of Section A(18), the lower court concluded: Among other services, Biloxi provides respiratory therapy to its nursing home patients. While respiratory therapy can be provided to patients by regular nursing staff, Biloxi chose to employ a separate category of employees designated as respiratory therapists to provide these services to Biloxi patients. Under Mississippi s Medicaid plan, respiratory therapists are not directly enrolled as Medicaid providers themselves; thus, Medicaid does not directly reimburse respiratory therapists for the services they provide to Medicaid beneficiaries on a [sic] fee for service basis. (Clerk Papers 731; R.E. 11) The chancellor s statement that respiratory therapy can be provided to patients by regular nursing staff is premised on some truth but has been generally overstated to the point that the assertion is incorrect. The misperception is understandable, as there were some representations made that certain nurses could perform some of the respiratory care services that CLC s licensed respiratory therapist was providing. (See, e.g., Comm n Papers Ex. A, 9:18-10:3; Tr. 47:5-9) This contention is only partially true, in that certain LPNs who undergo additional certification may assist under the direct supervision of a licensed respiratory care practitioner in providing certain services, such as administering breathing treatments. Miss. Code Ann (h) (1972, as amended). The Code instructs that a licensed respiratory care practitioner (i.e., therapist) may perform any of the functions within her area of practice unsupervised. Miss. Code Ann (g)(iii) (1972, as 14

22 amended). The LPN who is certified as a respiratory care assistant may only perform tracheostomy removal or cleaning of the airway or suctioning fluid from the bronco-pulmonary system under the direct supervision of a licensed respiratory care practitioner (i.e., respiratory therapist or licensed physician). Miss. Code Ann (h)(iii) (1972, as amended). DOM s counsel s representation that CLC s patients just need breathing treatment such as a nebulizer (Tr. 47:5-7, 58:24-26) is entirely unsupported by the record, and in fact, trach patients require much more care and maintenance in addition to nebulizer breathing treatments. DOM consistently concedes CLC s respiratory therapy was reasonable and necessary, they simply refuse to reimburse CLC for providing it: MS. MCMURTRAY: Respiratory therapy is simply helping somebody -- THE COURT: Breathe. MS. MCMURTRAY: It is simply helping somebody breathe. THE COURT: Right. What s what I thought it was. So if you can t breathe I m just trying to just break it down to its common denominator in terms of respiratory therapy is helping someone breathe. But if you re in a nursing facility such as Biloxi, then you need to be even if you were in an emergency can t breathe what if you were in an emergency can t breath and Biloxi provided the services, they don t get reimbursed for that? MS. MCMURTRAY: They don t get reimbursed for the respiratory therapist s salary, no, ma am. They get -- THE COURT: But it would have been reasonable and necessary to have provided it because, otherwise, the patient would have met its demise [sic]. MS. MCMURTRAY: Well, they get their per diem. That s what they get. That s what they signed on for. THE COURT: Okay. Okay. MS. MCMURTRAY: They just get their per diem. That s what nursing homes do. THE COURT: Okay. MS. MCMURTRAY: They re wanting something outside of their per diem. 15

23 (Tr. 41:19-42:20)(emphasis added) Counsel for DOM was partially correct, in that CLC did seek a direct reimbursement outside of its per diem, but that is a limited (mis)representation of what has fully transpired. CLC first sought direct reimbursement when it filed its initial cost report and reported the expense on Form 6, Line (Comm n Papers Ex. A; R.E. 46) When DOM withheld direct reimbursement, CLC sought it indirectly by amending and claiming the expense on Form 6, Line 1 pursuant to Section A(15). (Comm n Papers, Ex. 8 to Ex. B; R.E. 65, 72) DOM adjusted the expense and moved it back to Form 6, Line 2-04, which is still directly reimbursable under Section A(18). CLC seeks to be reimbursed indirectly under Section A(15) as part of its per diem because the respiratory therapist s salary is an other salaried direct care staff member. Alternatively, CLC seeks such, in the form of a direct reimbursement of its respiratory therapist s salary, as Section A(18) instructs. As to the necessity of the respiratory therapy service, DOM claims that either CLC must provide it absent reimbursement or send the patients to a different health care services provider whom DOM will reimburse: THE COURT: Because one day all of us may need Medicare or Medicaid, whatever it is. And I m just trying to understand it in the sense of you may not want to be in a nursing home like Biloxi if you really have a breathing problem. MS. MCMURTRAY: Well, the short answer to your question is, I think they have to give you what you need whether they get paid for it or not, but -- THE COURT: But if they re not on okay. We won t keep going. Because if they don t have a personnel [sic] staff to be able to do that, then you won t get what you need when you need it. You ll get taken to a called an ambulance and maybe taken to a 8 9 hospital or Methodist or whatever. 8 DOM conceded that under it s interpretation and scheme CLC s patients should be sent via ambulance to a hospital (Tr. 42:21-43:9) for the same services that CLC was providing in-house, even though the patients were in a non-emergency situation. But as CLC s counsel pointed out, 16

24 MS. MCMURTRAY: Yes, ma am. (Tr. 44:15-45:2)(emphasis added) DOM also asserted that CLC should transfer its trach patients to Mississippi Methodist Hospital because Methodist s bed rate is percent of everybody s else s bed rate so that they can provide a much higher degree of acuity than everybody else. (Tr. 60:9-11) The court responded: Just for the sake of responding to that, and this statement may be incorrect, and correct me if I m wrong, patients, in my understanding, have been known to not be able to get into Methodist, and they have had to wait for a bed to get into Methodist. Whereas Biloxi may say, or a facility similarly situated, Hello. I have a facility here and includinagbed for you right now, and I can provide whatever needs the respiratory therapy. Why does that not serve the actual reason why we re all here and pay taxes for the patients to be in a position to have the services that they need? (Tr. 60:12-24) DOM responded, Your Honor, I can t answer that question. (Tr. 60:25-26) The chancellor was very close to exposing several large aspects of the problem that DOM fails to consider. CLC of Biloxi s patients cannot reasonably be expected to wait to transfer to a high acuity providing the services in-house prevented the need to move the patient and incur the additional expense of an ambulance ride to and from the hospital every other day for a regular treatment. (Tr. 27:6-18) The logical implication here is that CLC was effectively providing the needed services at a substantially reduced cost to the agency by providing the services in-house, whilst simultaneously reducing the inconvenience, discomfort, and health risk to the patient of having to transport them to a hospital merely to have the services provided by a different respiratory therapist. CLC s interpretation comports with federal medicaid law. 42 U.S.C.S. 1396(a)(19)(the state plan must provide such safeguards as may be necessary to assure... that such care and services under the plan will be determined, and... will be provided, in a manner consistent with simplicity of administration and the best interests of the recipients.)(emphasis added). 9 Methodist refers to Mississippi Methodist Hospital in Jackson, Mississippi which has a long term care facility on its premises which qualifies as a Private Nursing Facility for the Severely Disabled (PNFSD) and is thus reimbursed its respiratory therapists salaries in its per diem pursuant to Attachment 4.19-D, Section A(18). Upon information and belief, there are no other PNFSDs south of Jackson, and certainly none anywhere near Biloxi. 17

25 facility such as Methodist where: 1) that facility is hundreds of miles away from the patient s home, family, and community; 2) CLC of Biloxi is capable of and has been immediately and conveniently providing the services on-site to the patients; 3) CLC is providing that service and maintaining its patients at a rate that is far beneath the 328% higher bed rate than Methodist; and, 4) the patient has a statutorily protected right to choose CLC s respiratory therapist over a hospital s or Methodist s therapists. The Mississippi Medical Assistance for the Aged Law, which subsumes the statutes that create and govern the Mississippi Medicaid Program, provides: The State Department of Public Welfare, after having made a determination with respect to eligibility with due regard to the resources and income of the applicant, may make vendor payments on behalf of eligible individuals for such care as may be authorized within the limits of available funds, provided that such medical or remedial care is rendered by or under the supervision of a licensed practitioner, and provided further that no regulation shall be promulgated which limits or abridges the recipient s free choice of the provider of medical and remedial care or service. Such recipients of medical assistance for the aged shall only be persons: (1) who shall have attained the age of sixty-five (65) years; (2) who are not receiving old age assistance; (3) who have net income and resources not exceeding amounts as may be set forth from time to time by the administering agency of the state; and (4) Who have not made a voluntary assignment or transfer of property for the purpose of qualifying for such assistance at any time within two (2) years immediately prior to the filing of an application for medical assistance for the aged. Medical assistance for the aged shall be payable under this article on behalf of any person who is a patient of an institution, public or private, where such payments are matchable under the provisions of the federal Social Security Act as amended and where such institution conforms to the requirements of the federal Social Security Act as amended and the applicable statutes of Mississippi. Miss. Code Ann (1972, as amended). (emphasis added) 18

26 DOM s prohibition of respiratory therapists in Large and Small Nursing Facilities, but approval of same in hospitals and higher acuity nursing facilities is a clear violation of 's mandate that no regulation may limit a patient s freedom of choice of their provider. Interestingly, since the administrative hearing in this matter was conducted, DOM has altered the State Plan to now include a new specific provision which does allow for the per diem reimbursement of a limited form of respiratory therapy in a Large Nursing Facility. That provision is Attachment 4.19-D Chapter 3, Section 5: A ventilator dependent care (VDC) per diem rate of $ is established for beneficiaries receiving VDC services in large and small nursing facilities. The VDC per diem rate will be reviewed for adjustment every fifth year. 10 State Medicaid Plan, Attachment 4.19-D at p.117. That respiratory therapy is now reimbursable for at least some Large Nursing Facility patients is borne out by DOM s concession at trial that [CLC s][r]espiratory therapy was not reimbursable at that particular point in time, and so the respiratory therapy costs were disallowed. (Tr. 3:12-15)(emphasis added) The fact that after the conclusion of CLC s administrative proceedings, the agency created the VDC per diem reimbursement to Large Nursing Facilities evidences that the agency recognized the benefits and efficiency of providing respiratory care in-house to at least some patients. It also recognizes the reality that Mississippi s Large and Small Nursing Facilities are housing higher acuity, ventilator dependent patients. This suggests that DOM is addressing the problem referenced by the chancellor, 10 This section of the Plan was submitted by DOM for CMS approval on March 11, 2015, some two and a half (2 1/2) years after CLC of Biloxi s administrative hearing, and thus is not part of the DOM administrative record, however, DOM fully and forthrightly informed the chancellor at trial of the change in the State Plan and the new existence of the VDC per diem. The latest version of Attachment 4.19-D, which shows this amendment as approved and effective retroactively to January 1, 2015 can be found on the Division of Medicaid s website at the following link: 19

27 supra, that the higher acuity facilities like Mississippi Methodist do not have enough beds to house the rising number of patients with higher acuity needs. The State Plan allows reimbursement of respiratory therapy and respiratory therapists salaries. DOM admits that it regularly pays respiratory therapy expenses and salaries to hospitals. DOM admits it reimburses these costs as part of the per diem to Private Nursing Facilities for the Severely Disabled (PNFSDs) such as Mississippi Methodist Hospital, and it implies that it pays these for Intermediate Care Facilities for the Intellectually Challenged (ICFICs, formerly mentally retarded ) and for Residential Psychiatric Facilities (RPFs). (Tr. 20:15-21:23) The State Plan clearly says that DOM shall reimburse Large Nursing Facilities such as CLC these fees directly on a fee for service basis. The salaries of the direct care employees providing these services, such as CLC s respiratory therapist, shall be allowed. State Plan Attachment 4.19-D, Ch. 2 2(A)(15) at p. 63. Simply stated, the State Plan allows CLC to provide the respiratory therapy treatment needed by its Medicaid covered patients for a promise of reimbursement of both the expenses and the salary of the therapist. 11 b. Provider Policy Manual Pursuant to its statutory authority in Miss. Code Ann , DOM authored the Provider Policy Manual ( PPM ) and promulgated it in an effort to interpret and further explain in 11 CLC is required to report its respiratory therapist s salary on DOM s Cost Report Form 6, Line Even the Cost Report Form shows that this line is an allowable cost, as evidenced by the heading of the column where the final numbers are entered. All the costs surrounding it are allowable costs. DOM s best argument is that the State Plan somehow implies that this line should not be allowable in CLC s case, but there is simply nothing anywhere in the State Plan that supports the presumption that it is implied. DOM had to concoct its interpretation of PPM to come to the conclusion that Line 2-04 is impliedly non-reimbursable, discussed infra. 20

28 greater detail the workings and nuances of the State Medicaid Plan. (Clerks Papers 737; R.E. 17) The PPM is intended to be utilized as a reference guide for participating providers. (Clerks Papers 737; R.E. 17) To the extent that the PPM properly implements the State Medicaid Plan, it can be a useful resource to providers. However, as DOM s Walker explained, any interpretive materials DOM promulgates, such as the PPM, must conform to the State Plan and cannot abridge or otherwise alter the Plan: Q: Mr. Walker, you would agree with me, would you not, that the State Plan is really the bible here; everything's got to be consistent with the State Plan because that's what Medicaid promises to reimburse. Right? A: Yes. Q: Anything inconsistent with the State Plan has got to be brought back consistent with what the State Plan provides? A: Yes. Q: If there's something inconsistent with the State Plan and in cost report instructions or on the cost report form or whatnot, if it's inconsistent with the State Plan, the State Plan would still govern? A: Yes. (Comm n Papers Ex. A, 47:15-48:6) The Provider Policy Manual states: Mississippi Medicaid does not enroll respiratory therapists as eligible providers and does not directly reimburse respiratory therapists for services provided to Medicaid beneficiaries. PPM (Comm n Papers, Ex. 5 to Ex. 3; R.E. 156)(emphasis added) 12 DOM interprets PPM to mean that they cannot reimburse a Large Nursing Facility directly for its respiratory therapist s salary. Further, DOM argues that when is viewed in conjunction with Section A(18) that this implies that Form 6, Line 2-04 is a non-reimbursable line Note that PPM indicates it was a new rule that had just become effective as of December 1, 21

29 but only for a Small or Large Nursing Facility. Yet, as DOM s hearing officer points out, I ve heard testimony that some facilities do, indeed, get reimbursed for respiratory therapists, even though they might show up on Form 6, Line 2... [a]nd it may be nonreimbursable to other facilities. (Comm n Papers Ex. A, 89:12-20) This is the Hearing Officer s own observation that DOM implements Section inconsistently. The lower court ultimately held that DOM was entitled to deference in its interpretation of the State Plan and its application of PPM Section and the Cost Report Instructions to deny reimbursement of CLC s respiratory therapist s salary. (Clerks Papers ; R.E ) IV. SUMMARY OF THE ARGUMENT CLC is entitled to be reimbursed for its respiratory therapist s salary and it is entitled to include that salary in its per diem rate because that salary is an allowable direct care employee s salary. Alternatively, CLC is entitled to be paid directly for that salary. CLC provided respiratory therapy services to its Medicaid residents which DOM stipulated at its administrative hearing were medically necessary, reasonable, and were for purposes of patient care. DOM s regulation, PPM Section is beyond the agency s authority to promulgate, as it directly conflicts with DOM s controlling statute which prohibits the agency from adopting any regulation which limits a patient s freedom of choice of health care provider. This regulation clearly violates that prohibition. Because the agency has no authority to so limit a patient s freedom of choice, DOM s implementation of PPM Section is arbitrary and capricious. DOM s notion that CLC may choose to provide the services, and often may have to provide them but cannot be reimbursed for them is entirely despotic. The State Plan, Attachment 4.19-D clearly states that direct care staff s salaries are allowable as part of a facility s per diem reimbursement rate, and CLC s respiratory therapist is inarguably a 22

30 direct care employee. DOM s Cost Report Instructions and Cost Report Form clearly instruct that a respiratory therapist s salary should be reported on Form 6, Line 2-04 and CLC contends that the plain and unambiguous language of the State Plan instructs that this item should be included in the calculation of CLC s per diem reimbursement rate or paid directly. V. ARGUMENT 1. STANDARD OF REVIEW The lower court determined to treat this matter as an appeal from an administrative agency. In adjudicating this appeal this Court must determine whether or not the order of the administrative agency was (1) supported by substantial evidence, (2) arbitrary or capricious, (3) beyond the power of the administrative agency to make, or (4) violated some statutory or constitutional right of the complaining party. Miss. Dept. of Environ. Qual. v. Weems, 653 So. 2d 266 (Miss. 1995)(citing State Tax Comm'n v. Earnest, 627 So.2d 313, (Miss. 1993)). The Weems Court stated: A problem in this analysis is determining what constitutes substantial evidence, arbitrary and capricious actions. The reviewing court is "only to determine whether substantial evidence supports the agency's decision and whether the agency exercised its discretion reasonably and with due consideration." 2 Am.Jur.2d Administrative Law 537 Substantial Evidence Standard (1994). Substantial evidence is "more than a mere scintilla of evidence" or "something less than a preponderance of the evidence but more than a scintilla or glimmer." Id. See also Harris v. Mississippi Real Estate Comm'n., 500 So.2d 958, 962 (Miss. 1986); Mississippi Real Estate Comm n v. Ryan, 248 So.2d 790 (Miss. 1971)(established meaning of substantial evidence as more than a scintilla, it must do more than create a suspicion especially where the proof must show bad faith). "The reviewing court is concerned only with the reasonableness of the administrative order, not its correctness." Id The 23