In a hybrid proceeding pursuant to Civil Procedure Laws and Rules, to review a determination of the State Health Department Commissioner and the Bureau of Financial Management and Information Support Director, which reduced a component of the petitioner’s Medicaid reimbursement rate following an audit, and an action for a judgment declaring that the guideline of the State Health Department for designating a diagnosis of quadriplegia (spinal injury that paralyze the four limbs) on a patient review instrument is invalid, the nursing home appeals from so much of a judgment of the Supreme Court, as failed to annul that portion of the determination which found that the petitioner had misclassified two of its residents in the special care group, failed to direct that the State Health Department permit the nursing home to submit the revised patient review instruments for certain of its residents, and declared that the challenged guideline does not constitute a rule or regulation subject to the provisions of the State Administrative Procedure Act, and the Commissioner and the Director cross-appeal from so much of the same judgment as annulled that portion of the determination which reclassified the two residents in the reduced physical functioning group and remitted the matter to the State Health Department to reclassify the two residents in the clinically complex group and to calculate the petitioner’s Medicaid reimbursement rate for the period covered by its patient review instruments accordingly.
The petitioner is a not-for-profit corporation owned by the United Cerebral Palsy Association which operates a 185-bed nursing home in Nassau County.
As part of the Medicaid reimbursement rate calculation, Patient Review Instruments are completed semiannually for each patient in the nursing home. Patient Review Instruments require detailed information assessing patients’ conditions, treatment, and dependencies and required care, needs, and services. These Patient Review Instruments place patients into 16 patient classification categories or resource utilization groups, corresponding roughly to the severity of the patients’ medical conditions and the intensity of the required care. The categories are further divided into five hierarchical groups which, in descending order of resource utilization, are heavy rehabilitation, special care, clinically complex, severe behavioral, and reduced physical functioning. Each category is assigned a numerical value, which reflects the relative resource utilization of patients in that group. The patient’s Case Mix Index of a nursing home is the weighted average of its patients in each category. Thus, the greater the resource utilization is the greater the associated Case Mix Index, and therefore the greater the reimbursement.
The New York City Department of Health publishes a clarification sheet to assist nursing homes in completing the Patient Review Instruments. One of the questions of the Patient Review Instruments requires nursing homes to designate a diagnosis code reflecting the resident’s primary medical condition requiring the largest amount of nursing time in the preceding four weeks. In 1999, the Department of Health issued a revised clarification sheet in which it explained that a diagnosis code of quadriplegia should not be used in instances where a resident has not incurred a spinal injury or spinal cord disease.
In August 2000 the petitioner nursing home submitted its Patient Review Instrument data to the Department of Health. In a subsequent audit, the Department of Health concluded that the petitioner had improperly designated a diagnosis code of quadriplegia on the Patient Review Instruments for two residents, who suffer from cerebral palsy with spastic quadriplegia, because their quadriplegia was not caused by spinal injury or disease. As a result of the audit, Department of Health downgraded the two residents from the special care group to the reduced physical functioning group and reduced the nursing home’s reimbursement rate accordingly.
The audit was in conformity with a clarification sheet issued by the Department of Health which advised that the Medicaid International Classification of Disease Code for quadriplegia could not be utilized in completing a PRI unless a resident’s quadriplegia was attributable to spinal injury.
The Westchester nursing home contends that in issuing the spinal cord etiology standard, the Department of Health changed its long-standing policy of reimbursing nursing homes at the same rate for all quadriplegic residents regardless of the etiology of their conditions and established a new rule without complying with the rule-making procedures outlined in the State Administrative Procedure Act. State Administrative Procedure Act, however, specifically excludes from the definition of a rule forms and instructions, interpretive statements and statements of general policy which in themselves have no legal effect but are merely explanatory. The spinal cord etiology standard sets forth the interpretation by the Department of Health of the particular medical condition that qualifies a resident for a quadriplegia diagnosis in response to question 30 of the PRI and, correspondingly, for classification in the special care group. As such, it is an explanatory statement and a technical instruction for meeting the regulatory requirement which has no legal effect standing alone. Moreover, even if it reflects a change in how the Department of Health interprets the prerequisites for a quadriplegia diagnosis it does not render it an unpromulgated rule.
The petitioner nursing home further contends that the spinal cord etiology standard is arbitrary and capricious, irrational, and contravenes the design and purpose of the Medicaid reimbursement system requiring that reimbursement rates be reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities. Generally, rate-setting actions of the Commissioner, being quasi-legislative in nature, may not be annulled except upon a compelling showing that the calculations from which they derived were unreasonable. Thus, a petitioner attempting to challenge the reasonableness of agency rate-setting action bears the burden of demonstrating that the adopted methodology is without a rational basis. The petitioner failed to meet its burden.
The nursing home maintains that there is no rational basis for excluding residents whose quadriplegia is not caused by a spinal cord etiology from the special care group because all quadriplegics, regardless of the etiology of their condition, require a high level of skilled nursing care. While not disputing that all quadriplegics require a high level of care, the Commissioner submitted an expert medical affidavit establishing that there are discrete medical and psychiatric conditions experienced by quadriplegics with spinal cord injury or disease requiring an associated increase in the level and intensity of care, treatment, and medications, as compared with quadriplegics with other etiologies. Reimbursing nursing homes at a lower rate for patients whose conditions, care needs, and resource utilization are less demanding is neither irrational nor inconsistent with the Medicaid reimbursement scheme, and the petitioner failed to demonstrate that the reduced reimbursement rate is unreasonable or inadequate to meet its costs. Contrary to the nursing homes’ contention, the doctrine of judicial estoppel does not bar the Commissioner from relying on the affidavit of their medical expert since the Department of Health did not secure a judgment in its favor in the unrelated proceeding brought in the Supreme Court, Albany County, nor is the Commissioner’s position in this proceeding inconsistent with the position the Department of Health took in that proceeding.
Finally, the State Health Department Commissioner’s determination to reclassify the two residents in the reduced physical functioning group based on the auditors’ findings was arbitrary and capricious. Accordingly, the Supreme Court properly directed the State Health Department Commissioner to reclassify the two residents in the appropriate category and to correct the petitioner’s Case Mix Index accordingly.
The law aims to protect each member of the society especially those who are physically incapable. Every form of incapability is given a corresponding damage claim. If you think that your injury claims are unjust, consult Stephen Bilkis and Associates for New York City Medical Malpractice Lawyers together with the New York Personal Injury Attorneys. You can also speak with the NYC Spine Injury Lawyers for spine related injury.