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Memorial Hospital at Gulfport v. Dzielak

Supreme Court of Mississippi, En Banc

July 26, 2018

MEMORIAL HOSPITAL AT GULFPORT AND SINGING RIVER HEALTH SYSTEM
v.
DAVID J. DZIELAK, Ph.D., IN HIS OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR OF THE DIVISION OF MEDICAID, OFFICE OF THE GOVERNOR, AND THE DIVISION OF MEDICAID, OFFICE OF THE GOVERNOR, STATE OF MISSISSIPPI

          DATE OF JUDGMENT: 02/22/2017

          COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT HON. DENISE OWENS CECIL MAISON HEIDELBERG ANDREW SETH ROBBINS CHARLES LUBAND JANET McMURTRAY TRIAL JUDGE

          ATTORNEYS FOR APPELLANTS: CECIL MAISON HEIDELBERG ANDREW SETH ROBBINS.

          ATTORNEYS FOR APPELLEES: JANET McMURTRAY LAURA L. GIBBES DION JEFFERY SHANLEY.

          RANDOLPH, PRESIDING JUSTICE.

         ¶1. Memorial Hospital at Gulfport and Singing River Health System ("Hospitals") filed a Complaint and Notice of Appeal in the Chancery Court of the First Judicial District of Hinds County, appealing and seeking judicial review of a June 24, 2016, administrative decision which found the Division of Medicaid's ("DOM's") 2014 Fiscal Year Methodology "correctly interprets statutes and regulations and is neither arbitrary or capricious." The chancellor affirmed the decision of DOM. Finding no evidence in the record before us that DOM failed to comply with Sections 43-13-117 and 43-13-145 in allocating and distributing supplemental payments to Mississippi hospitals, we affirm.

         FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         ¶2. In Fiscal Year 2014 ("FY 2014"), DOM distributed more than $700 million in supplemental Medicaid payments to aid 110 hospitals which provide hospital services for Mississippi Medicaid and uninsured patients. DOM's supplemental Medicaid payments are comprised of two categories: (a) Disproportionate Share Hospital ("DSH") payments, [1] and (b) upper payment limit ("UPL") hospital payments, [2] which should be disbursed pursuant to a formula consistent with both state and federal law (the "FY 2014 Methodology"). A federal law, known as the Omnibus Budget Reconciliation Act ("OBRA"), sets a cap on the amount each DSH-eligible hospital may receive in supplemental payments, once a DSH payment is received by that hospital. This is known as the "OBRA limit." The OBRA limit for a hospital is the difference between the total costs for serving Medicaid and uninsured patients less the total Medicaid payments made by or on behalf of Medicaid beneficiaries and the uninsured. Once a DSH-eligible hospital receives a DSH payment, any additional supplemental payments, whether UPL or DSH, may not exceed its OBRA limit. See 42 U.S.C.A. § 1396r-4. The UPL is not capped by the OBRA limit, as long as no DSH payments are made to that hospital.

         ¶3. The following history, taken from the Hearing Officer's recommendation, was developed during the administrative hearing:

In 2008, DOM and the legislature looked at restructuring the way the DSH and UPL monies were being distributed with the goal of maximizing the use of available federal funds. In order to do this, the Governor appointed an Advisory Board that consisted of industry members and included input from DOM. The Board was to study various methods of paying DSH and UPL and recommend a method of payment to the legislature.
The Board met several times and in February 2010, it considered a model proposed by DOM and a model proposed by the Healthcare Management Association (HMA), which had been retained by the Mississippi Hospital Association.
The HMA model paid the UPL money first, while DOM proposed paying DSH first. Which payment is made first is significant because UPL money was not limited by OBRA while DSH payments were limited by OBRA. There were Board members who did not believe that UPL could be paid first under federal requirements. Accordingly, several Board members and Kevin Londeen at Myers & Stauffer met with [the Center for Medicare and Medicaid Services] ("CMS") to discuss concerns over the payment models. The Board specifically asked CMS if UPL could be paid first, even if it meant that the UPL payment would exceed the OBRA limit. The Board recognized that making the UPL payment first would result in some hospitals being paid in excess of their OBRA limits and thus not receiving an additional DSH payment. CMS said that a model that allowed this to occur was perfectly fine.
Gary Marchand, who represented Memorial, was a member of the Board. After meeting with CMS, the Board then voted to recommend the HMA model rather than the DOM model. Mr. Marchand abstained rather than voting against the HMA model which paid UPL first. The legislature then adopted the Board's recommendation into the Mississippi statutes adopting the HMA model as HB71, [3] or Section 43-13-145.

         ¶4. After the Legislature adopted H.B. 71 in 2009, it adopted similar statutes each year thereafter, including Fiscal Year 2014, that paid UPL and DSH in this same way.[4] In 2013-2014, DOM began looking at different models in the event the Legislature changed the method of making the calculations and distributions. DOM hired a consultant to propose changes to eliminate the need to exhaust the UPL funds first. However, those proposed changes were rejected by the Senate, and the existing requirements of Mississippi Code Section 43-13-145 for uniform percentages were retained. DOM used this same model to distribute UPL payments before DSH payments in 2011, 2012, and 2013, and the Hospitals did not appeal their payments in these years.

         ¶5. In 2014, Singing River received a DSH payment of $18, 073, 635.22 and a UPL payment of $17, 928, 972.47, for a total of $36, 002, 607.69. Its OBRA limit was $45, 611, 951, a difference of approximately $9, 000, 000. Memorial received a DSH payment of $19, 542, 669.29 and a UPL payment of $23, 646, 206.03, for a total of $43, ...


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