ATTORNEYS FOR APPELLANT
: ATTORNEYS FOR APPELLEE:
KAREN M. FREEMAN-WILSON WILLIAM P. TEDARDS, JR.
Attorney General of Indiana Washington, D.C.
JON LARAMORE WILLIAM E. WENDLING, JR.
Deputy Attorney General Campbell Kyle Proffitt
Indianapolis, Indiana Carmel, Indiana
INDIANA STATE DEPARTMENT OF HEALTH, ) ) Appellant-Respondent, ) ) vs. ) No. 29A05-0007-CV-308 ) LEGACY HEALTHCARE, INC., d/b/a NEW ) HORIZON DEVELOPMENTAL CENTER, ) ) Appellee-Petitioner. )
OPINION - FOR PUBLICATION
To participate as a provider of services in the Medicaid program, an Intermediate Care Facility for the Mentally Retarded must meet all of the provisions of Title XIX of the Social Security Act and be in compliance with each of the Conditions of Participation established by the Secretary of Health and Human Services found in 42 [C.F.R.] 483.
The Division of Long Term Care staff has discussed with you the seriousness
of the deficiencies and the need for you to achieve immediate compliance.
The Division may consider rescission of this Order only if the determination is
made, either at a follow-up survey or at an informal reconsideration[,] that the
immediate jeopardy has been abated.
Once this Order is effective, and your certification is terminated, you may take
steps to achieve compliance with the Medicaid requirements and reapply for participation as
a provider of services under Title XIX of the Social Security Act.
Record at 69-71 (emphasis in original).
On July 23, 1999, New Horizon initiated an administrative appeal and sought to have the July 21, 1999 order dismissed, arguing that the Department lacked the authority to terminate Medicaid certification. On August 23, 1999, Administrative Law Judge (ALJ) William D. Christen issued findings of fact, conclusions of law, and a recommended order. ALJ Christen referred to Cause No. M-162-98See footnote and essentially determined that the Department lacked the authority to terminate New Horizons Medicaid certification, stating in pertinent part:
5. On June 30, 1999, an appeals panel, authorized by and acting on behalf of the Executive Board of the ISDH, issued a Final Order in CAUSE NO. AP-M-162-98, which involved the same parties, that stated: That the Department of Health does not have the authority to cancel Medicaid certification under the Interagency Agreement but may only recommend as the power to cancel rests with FSSA.
Record at 106. The ALJ concluded in pertinent part:
5. That the ORDER issued July 21, 1999 to terminate Medicaid participation is contrary to a FINAL ORDER of the Department/Divisions Ultimate Authority wherein it has been ruled that the Departments authority under the agreement is to recommend as the power to Terminate/Cancel rests with FSSA.
Id. The ALJs recommended order stated:
IT IS RECOMMENDED THAT THE ORDER, ISSUED JULY 21, 1999, TO TERMINATE NEW HORIZONS MEDICAID CERTIFICATION OR PARTICIPATION BE DISMISSED AS ISDH LACKS JURISDICTION.
In a letter dated August 31, 1999, Mary Louise Reynolds, the Enforcement Manager for the Departments Division of Long Term Care, notified New Horizons Administrator that the Department was rescinding the order to terminate New Horizons certification as of August 13, 1999. See footnote The letter stated in pertinent part:
RE: Rescind Order to Terminate Certification
15G669 706 W Main St
Dear Robert Owens [Administrator of New Horizon]:
Following the review of the information received at the follow-up survey completed August
13, 1999, the Division of Long Term care has determined that the facility
located at 706 W Main St, has met the requirements as an Intermediate
Care Facility for the Mentally Retarded under Title XIX of the Social Security
Act. Therefore, the 23 day termination action has been abated.
standards were still out and the cancellation date is now September 1, 1999
as your [sic] were notified in the letter dated July 21, 1999 [sic,
June 25, 1999?].
Record at 204 (emphasis in original).
See footnote See footnote
In a letter dated September 2, 1999, the Department again notified New Horizon that its certification for participation in the Medicaid program as an ICF/MR should be cancelled effective September 1, 1999 because the Departments survey inspections showed that New Horizon did not meet program standards. The Department also notified New Horizon that it would forward the letter to OMPP with a recommendation that OMPP terminate New Horizons Medicaid provider agreement. The Department advised New Horizon that it must file a request for review with the Department by September 19, 1999 in order to preserve its appeal rights of the decertification decision. New Horizon did not appeal the Departments September 2, 1999 decision. In a letter dated September 9, 1999, OMPP notified New Horizon that it had accepted the Departments recommendation and that New Horizons Medicaid provider agreement for participation in the Medicaid program as an ICF/MR was terminated effective September 1, 1999. New Horizon filed an administrative appeal of OMPPs September 9, 1999 decision to terminate its provider agreement. Because the provider agreement was terminated, Indiana was required to eventually cease paying Medicaid funds to New Horizon for eligible residents.See footnote
Despite the August 31, 1999 letter rescinding the order to terminate certification, on September 7, 1999, the Department filed objections to ALJ Christens August 23, 1999 findings of fact, conclusions of law, and recommended order and requested review by a Department appeals panel. The appeals panel thereafter issued a final order reversing ALJ Christens recommended order and ruling that the Department did have the authority to revoke New Horizons Medicaid certification. The appeals panel concluded that:
2. The changes between the 1995 Interagency Agreement and the 1999 Interagency Agreement are significant. Pursuant to the plain language of the 1999 Interagency Agreement, the ISDH has responsibility for certification of Medicaid programs in health facilities, and for imposing remedies for decertification.
Record at 166. The appeals panels final order stated in pertinent part:
IT IS HEREBY DETERMINED AND ORDERED that the Indiana State Department of Health does have the authority to terminate certification of Medicaid facilities.
Id. at 167.
New Horizon appealed the appeals panels decision to the trial court and filed a motion for summary judgment, which the trial court granted in an order dated July 19, 2000. The trial court concluded that the Departments decision in Cause No. M-162-98 controlled this case and was res judicata as to the parties here. This appeal ensued.
In this appeal, the Department argues that it has the authority to decertify health care facilities when its surveys show that such facilities do not meet Medicaid health and safety rules. It claims that federal law requires that it decertify when it, as the survey agency, finds immediate jeopardy and that it has the authority to decertify under state law. It claims that the Interagency Agreement also permits it to decertify New Horizon. The Department also argues that administrative res judicata does not apply in this case.
New Horizon argues that the issue is not whether the Department has the authority to survey facilities and determine compliance with Medicaid certification requirements. Rather, it argues that the issue is whether the Department has the additional regulatory authority to issue an order terminating a facilitys participation in the Medicaid program. Appellees Brief at 1. It relies upon the trial courts res judicata determination.
As our supreme court recently noted, judicial review of a state agencys actions is limited:
While the legislature has granted courts the power to review the action of state government agencies taken pursuant to the Administrative Orders and Procedures Act, this power of judicial review is limited. A court may only set aside agency action that is:
(1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
(2) contrary to constitutional right, power, privilege, or immunity;
(3) in excess of statutory jurisdiction, authority, or limitations, or short of statutory
(4) without observance of procedure required by law; or
(5) unsupported by substantial evidence.
While an appellate court grants deference to the administrative agency's findings of fact,
no such deference is accorded to the agency's conclusions of law.
See Ind. Code § 4-21.5-5-14(d).
LTV Steel Co. v. Griffin, 730 N.E.2d 1251, 1257 (Ind. 2000) (some citations
In Weiss v. Indiana Family & Soc. Servs. Admin., Div. Of Disability, Aging and Rehab. Servs., 741 N.E.2d 398, 402 (Ind. Ct. App. 2000), trans. denied, this court discussed the elements of administrative res judicata:
When determining whether administrative res judicata (claim preclusion) applies, we examine whether (1) the issues sought to be estopped were within the statutory jurisdiction of the agency; (2) the agency was acting in a judicial capacity; (3) both parties had a fair opportunity to litigate the issues; and (4) the decision of the administrative tribunal could be appealed to a judicial tribunal. Watson Rural Water Co. v. Indiana Cities Water Corp., 540 N.E.2d 131, 135 (Ind. Ct. App. 1989), trans. denied. . . . "The test generally applied when determining whether a suit is barred by claim preclusion is 'whether identical evidence will support the issues involved in both actions.'" Bojrab v. John Carr Agency, 597 N.E.2d 376, 378 (Ind. Ct. App. 1992) (citation omitted).
As noted previously, the appeals panels determination in Cause No. M-162-98 [t]hat the
Department of Health does not have authority to cancel Medicaid certification under the
Interagency Agreement but may only recommend as the power to cancel rests with
FSSA, Record at 201, was based upon language in the 1995 Interagency Agreement,
which was amended effective May 12, 1999. The amended Interagency Agreement clarified
that, pursuant to such agreement, the Department may do more than merely recommend
that a facility be decertified; it has the power to actually decertify ICF/MRs
when appropriate under federal law. Because OMPP and the Department amended the
Interagency Agreement after the appeals panels decision in Cause No. M-162-98, identical evidence
will not support the issues involved in both cases. Therefore, Cause No.
M-162-98 does not have res judicata effect in this case.
We next consider the Departments argument that it has the authority to decertify health care facilities when such facilities do not meet Medicaid health and safety rules. In an order denying an emergency motion for grant of injunction pending appeal, the United States District Court in Legacy Healthcare, Inc. v. Feldman, No. IP 00-0306-C M/S, 2000 WL 1428667, at *5-6 (S.D. Ind. Mar. 8, 2000), affd, 248 F.3d 1158 (7th Cir. 2001), explained the two-step process for a healthcare facility to become a Medicaid provider and the corresponding two-step process before such a facility loses its status as a Medicaid provider. It stated in pertinent part:
[I]t is apparent that the FSSA has established a two-step process for a healthcare facility to become a Medicaid provider and a two-step process before it loses its status as a provider. Each step is taken in conjunction with, and represents a distinct decision by, a separate State agency. The first step is for the ISDH (the states survey agency) to certify that the facility fully meets applicable requirements for participation in Medicaid. See 42 C.F.R. § 431.610(e)(1). A corresponding responsibility is for the ISDH to decertify a participating facility when it fails to meet those requirements. Once the certification step is accomplished, the OMPP takes the second step, exercising its discretion to enter a provider agreement with the ISDH-certified facility, which would entitle the facility to reimbursement for services rendered to a Medicaid-eligible patient. Although a certification for eligibility from the ISDH is a necessary condition for a facility to obtain a provider agreement with OMPP, it is not a sufficient one. See 42 C.F.R. § 442.12(a). The OMPP is not obligated to enter a provider agreement with a facility merely because it is certified as eligible by the ISDH. See 42 C.F.R. § 442.12(d) (if state Medicaid agency can show good cause, it may refuse to execute an agreement with a certified facility). If, however, the ISDH determines that a facility is no longer meeting the requirements of the Medicaid program and terminates its certification, the OMPP must terminate the provider agreement and follow the appeals procedure in 42 C.F.R. § 431.153. 42 C.F.R. § 442.117(b).
There is no question under federal law that, where appropriate, the Department has the authority to decertify ICF/MRs. In fact, the Department must terminate a ICF/MRs certification if it determines that such facility no longer meets the conditions of participation set forth in subpart I of part 483 of [42 C.F.R. Ch IV] or if [t]he facilitys deficiencies pose immediate jeopardy to residents health and safety. 42 C.F.R. § 442.117(a)(1) and (2) (2000). Thus, the Department had the authority under federal law to decertify New Horizon when it determined both that New Horizon was out of compliance with conditions of participation and that the deficiencies at the New Horizon facility posed immediate jeopardy to the residents there.
The trial court erred in reversing the appeals panels final order in this case, in which the panel determined that the Department has the authority to terminate the certification of Medicaid facilities, and in granting summary judgment in favor of New Horizon.
BAILEY, J., and MATTINGLY-MAY, J., concur.