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Crossgates River Oaks Hospital v. Mississippi Division of Medicaid

Supreme Court of Mississippi, En Banc

April 12, 2018

CROSSGATES RIVER OAKS HOSPITAL, GRENADA LAKE MEDICAL CENTER, RILEY MEMORIAL HOSPITAL, NATCHEZCOMMUNITY HOSPITAL, WOMAN'S HOSPITAL, NORTHWEST MISSISSIPPI REGIONAL MEDICAL CENTER, BILOXI REGIONAL MEDICAL CENTER, RIVER OAKS HOSPITAL, KING'S DAUGHTERS MEDICAL CENTER-BROOKHAVEN, ST. DOMINIC-JACKSON MEMORIAL HOSPITAL AND DELTA REGIONAL MEDICAL CENTER
v.
MISSISSIPPI DIVISION OF MEDICAID AND DAVID J. DZIELAK, Ph.D., IN HIS OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR OF MISSISSIPPI DIVISION OF MEDICAID

          DATE OF JUDGMENT: 10/31/2016

          HINDS COUNTY CHANCERY COURT, HON. PATRICIA D. WISE, TRIAL JUDGE

          TRIAL COURT ATTORNEYS: GEORGE H. RITTER JONATHAN ROBERT WERNE P. SCOTT PHILLIPS JANET D. McMURTRAY WILLIAM CLARK PURDIE CHARLES PALMER QUARTERMAN DION JEFFERY SHANLEY STEPHEN DEAN STAMBOULIEH JAMES D. BELL JOHN P. SNEED LAURA L. GIBBES

          ATTORNEYS FOR APPELLANTS: GEORGE H. RITTER, JOHN P. SNEED, JONATHAN ROBERT WERNE P. SCOTT PHILLIPS

          ATTORNEYS FOR APPELLEES: DION JEFFERY SHANLEY JANET D. McMURTRAY

          RANDOLPH, PRESIDING JUSTICE

         ¶1. Twelve Medicaid-participating hospitals ("Hospitals") filed an appeal in the Chancery Court of the First Judicial District of Hinds County, challenging the Department of Medicaid's ("DOM's") recalculation of their Medicaid outpatient rates for fiscal year 2001. The chancery court affirmed the opinion of the DOM. Finding error, we reverse the judgment of the chancery court and order the Executive Director of DOM to provide payments to the Hospitals consistent with this opinion.

         STATEMENT OF FACTS AND PROCEDURAL HISTORY

         ¶2. The DOM is a state agency responsible for administering the Medicaid program pursuant to the State Medical Plan ("State Plan") and applicable federal regulations. Pursuant to the State Plan, the Hospitals' outpatient rates for fiscal year 2001 were set based upon data provided in their 1999 hospital cost report and all subsequently amended reports.

         ¶3. In 2010, DOM sent each Hospital a notice of a lump-sum settlement, stating that DOM was amending the fiscal year 2001 outpatient rate. In response, the Hospitals filed requests for appeals and formal hearings, asserting that DOM did not follow the requirements of the State Plan. After the formal hearings were held, the hearing officer opined that the Hospitals' claims that DOM's calculations of the outpatient reimbursement rate did not follow the requirements of the State Plan were without merit. The hearing officer's decision was adopted by the Executive Director of DOM.

         ¶4. The Hospitals then appealed to the chancery court, challenging DOM's calculations of the outpatient rates for 2001.[1] The chancery court affirmed DOM's decision, finding that "DOM interpreted its own regulation - the State Plan, which is its contract with the federal government and which it is required to follow to receive federal funds to require Medicaid to calculate the cost to charge ratio by using Medicare Methodology, which at that time was using a blended rate."

         STATEMENT OF THE ISSUES

         ¶5. The Hospitals raise the following issues before this Court:

I. Whether DOM's decision to include a portion of laboratory and radiology charges in the denominator of the cost-to-charge ratio was arbitrary, capricious, and/or in violation of 4.19-B of the State Plan where the State Plan expressly provided, and DOM admitted, that all ...

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