American Senior Communities v. Indiana Family & Social Services Administration

• Court: Indiana Court of Appeals
• Decided: March 27, 2023
• Docket: 22A-PL-02556
• Status: Published

Opinion

FILED Mar 27 2023, 8:28 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE Randall R. Fearnow Theodore E. Rokita Quarles & Brady LLP Indiana Attorney General Chicago, Illinois Frances Barrow Deputy Attorney General Lucy R. Dollens Indianapolis, Indiana Roxanne M. Hilton Sarah T. Parks Quarles & Brady LLP Indianapolis, Indiana

IN THE COURT OF APPEALS OF INDIANA

American Senior Communities, March 27, 2023 Appellant-Petitioner, Court of Appeals Case No. 22A-PL-2556 v. Appeal from the Marion Superior Court Indiana Family & Social Services The Honorable Marc T. Administration, Rothenberg, Judge Appellee-Respondent Trial Court Cause No. 49D07-2109-PL-30994

Opinion by Judge Crone Judges Robb and Kenworthy concur.

Crone, Judge.

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 1 of 11 Case Summary [1] For purposes of Medicaid reimbursement, American Senior Communities

(ASC) submitted a Medicaid cost report that classified the Nursing Scheduler

Coordinator position as a direct care component. The Office of Medicaid Policy

and Planning (OMPP) reclassified the position as an administrative component.

ASC appealed, and the administrative law judge (ALJ) concluded that OMPP

had a reasonable basis for the reclassification. The ALJ’s order was upheld by

the Indiana Family and Social Services Administration (FSSA), which in turn

was affirmed by the trial court. ASC now appeals, arguing that the

reclassification of the Nursing Scheduler Coordinator position from the direct

care component to the administrative component was arbitrary and capricious.

We disagree and therefore affirm.

Facts and Procedural History [2] ASC operates seventy-eight nursing facilities, all of which employ a Nursing

Scheduler Coordinator. ASC classified the position of Nursing Scheduler

Coordinator as a direct care component in its 2016 and 2018 Medicaid cost

reports relating to Medicaid rate effective dates of July 1, 2017, and July 1,

2019, respectively. In brief, the “direct care component” refers to “direct patient

care services and supplies.” 405 Ind. Admin. Code (IAC) 1-14.6-2(p). OMPP

administers the Medicaid program for FSSA. OMPP contracted Myers &

Stauffer, LP, to perform compliance reviews of facilities’ cost reports, reviewing

allowable costs and correct classification of the reported costs. Myers & Stauffer

reviewed ASC’s Medicaid cost reports on behalf of OMPP and determined that

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 2 of 11 the Nursing Scheduler Coordinator position should be reclassified from the

direct care component to the administrative component. The administrative

component refers to “administrative services” and includes “[o]ffice and clerical

staff.” 405 IAC 1-14.6-2(b). These two components receive different Medicaid

reimbursement rates. Accordingly, Myers & Stauffer issued rate change notices

on the abovementioned Medicaid cost reports for all of ASC’s seventy-eight

nursing facilities. Myers & Stauffer’s reclassification resulted in a reduction in

Medicaid reimbursements to ASC of approximately $3.3 million.

[3] ASC requested reconsideration of the reclassification, which Myers & Stauffer

denied. ASC then filed petitions for administrative review of the

reclassification. After the appointed ALJ granted ASC’s request to consolidate

the two administrative appeals, ASC and OMPP each filed summary judgment

motions. The ALJ granted summary judgment in favor of OMPP. Appellant’s

App. Vol. 2 at 14-17. In sum, the ALJ concluded, “There is a clearly reasonable

basis for the [Nursing Scheduler Coordinator] position to be included within a

cost report’s administrative component rather than direct care component” and

“OMPP through its contractor did not act arbitrarily and capriciously by

reclassifying this position accordingly.” Id. at 17.

[4] ASC filed an objection to the ALJ’s decision. FSSA’s ultimate authority issued

a final agency order, in which it adopted the ALJ’s findings of fact and

concluded as follows:

All members of the staff at a nursing facility influence the care and well-being of the patients. Maintenance workers make sure

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 3 of 11 that the heat works during the winter; office staff make sure that the power bills are paid; and payroll staff make sure that the nurses are paid so that they can continue to work. Yet these staff persons clearly fall under the administrative designation and not the hands-on designation. Absent an express definition otherwise, logic dictates that the Nursing Schedule[r] Coordinator is another position whose services are vital, but administrative in nature.

Id. at 19. Accordingly, FSSA’s ultimate authority upheld the ALJ’s decision.

[5] ASC petitioned for judicial review of FSSA’s final order pursuant to the Indiana

Administrative Orders and Procedures Act (AOPA). Following a hearing, the

trial court issued findings of fact and conclusions of law, concluding that FSSA

“properly adjusted the payment rate for ASC’s [Nursing Scheduler

Coordinators] due to their lack of direct contact with patients.” Appealed Order

at 8. ASC now appeals. Additional facts will be provided as necessary.

Discussion and Decision [6] In an appeal involving an administrative agency’s decision, our standard of

review is governed by the AOPA, and we are bound by the same standard of

review as the trial court. Ind. Bd. of Pharmacy v. Elmer, 171 N.E.3d 1045, 1049

(Ind. Ct. App. 2021), trans. denied. “We do not try the case de novo and do not

substitute our judgment for that of the agency.” Walker v. State Bd. of Dentistry, 5

N.E.3d 445, 448 (Ind. Ct. App. 2014), trans. denied.

We will reverse the administrative decision only if it is: (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) contrary to a constitutional right,

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 4 of 11 power, privilege, or immunity; (3) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (4) without observance of procedure required by law; or (5) unsupported by substantial evidence.

Id. (citing Ind. Code § 4-21.5-5-14). “A decision is arbitrary and capricious

when it is made without consideration of the facts and lacks any basis that may

lead a reasonable person to make the decision made by the administrative

agency.” Ind. Real Estate Comm’n v. Martin, 836 N.E.2d 311, 313 (Ind. Ct. App.

2005), trans. denied (2006). “The burden of demonstrating the invalidity of the

agency action is on the party who asserts the invalidity.” Walker, 5 N.E.3d at

449.

[7] ASC argues that FSSA’s interpretation of 405 IAC 1-14.6-2 is arbitrary and

capricious. “Appellate courts review questions of regulatory interpretation in a

similar manner as questions of statutory interpretation.” Nat. Res. Def. Council v.

Poet Biorefining-N. Manchester, LLC, 15 N.E.3d 555, 564 (Ind. 2014). “An

interpretation of a statute by an administrative agency charged with the duty of

enforcing the statute is entitled to great weight, unless this interpretation would

be inconsistent with the statute itself.” City of Gary v. Ind. Dep’t of Env’t Mgmt.,

967 N.E.2d 1053, 1057 (Ind. Ct. App. 2012) (quoting Dev. Servs. Alts., Inc. v. Ind.

Family & Soc. Servs. Admin., 915 N.E.2d 169, 181 (Ind. Ct. App. 2009), trans.

denied (2010)).

If a court determines that an agency’s interpretation is reasonable, it should terminate its analysis and not address the reasonableness of the other party’s proposed interpretation.

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 5 of 11 Terminating the analysis recognizes the general policies of acknowledging the expertise of agencies empowered to interpret and enforce statutes and increasing public reliance on agency interpretations. However, an agency’s incorrect interpretation of a statute is entitled to no weight. If an agency misconstrues a statute, there is no reasonable basis for the agency’s ultimate action and the trial court is required to reverse the agency’s action as being arbitrary and capricious.

Id. (emphasis omitted) (quoting Dev. Servs. Alts., 915 N.E.2d 181). “[T]the

foremost goal of regulatory construction—like with statutory interpretation—is

to give the words and phrases in the regulations their plain and ordinary

meaning, within the context of the regulatory scheme in a way that reflects the

intent of the agency that promulgated the regulations.” Poet Biorefining, 15

N.E.3d at 564.

[8] OMPP classified the Nursing Scheduler Coordinator as an administrative

component, which is defined in 405 IAC 1-14.6-2(b)(3) as “the portion of the

Medicaid rate that shall reimburse providers for allowable administrative

services and supplies, including prorated employee benefits based on salaries

and wages. Administrative services and supplies includes … [o]ffice and

clerical staff.”

[9] ASC asserts that the position of Nursing Scheduler Coordinator “fits squarely

within the definition of the direct care component.” Appellant’s Br. at 20. 405

IAC 1-14.6-2(p) defines the direct care component as

the portion of the Medicaid rate that shall reimburse providers for allowable direct patient care services and supplies, including prorated

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 6 of 11 employee benefits based on salaries and wages. Direct care services and supplies include all of the following:

(1) Nursing and nursing aide services.

(2) Nurse consulting services directly related to the provision of hands-on resident care.

(3) Pharmacy consultants.

(4) Medical director services.

(5) Nurse aide training.

(Emphases added.)1

[10] ASC’s job description for the Nursing Scheduler Coordinator provides, “The

Nursing Scheduler Coordinator is responsible for the overall assurances of

appropriate staffing levels are met [sic] at all times with accordance to state and

federal regulations and budgetary settings.” Appellant’s App. Vol. 2 at 222. In

addition, the job description lists fourteen “Essential Position Functions,”

which, not surprisingly, include such functions as creating and adjusting the

staffing schedule for the nursing department, recommending new scheduling

practices to improve efficiency, advising the executive director and director of

nursing services of all staffing and scheduling needs, handling questions

1 We have included the most relevant of the sixteen services and supplies that are listed.

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 7 of 11 regarding scheduling needs, conducting initial interviews with nursing

applicants, completing reference checks on potential new nursing hires, serving

as a liaison with the payroll coordinator regarding payroll matters, and

scheduling new nursing assistants for skills validation and training. Id. We

observe that none of the listed functions involves “direct patient care services

and supplies.” 405 IAC 1-14.6-2(p). ASC concedes this point but asserts that the

Nursing Scheduler Coordinator provides “nurse consulting services directly

related to the provision of hands-on resident care.” See 405 IAC 1-14.6-2(p)(2).

[11] Based upon the plain and ordinary meanings of the terms administrative

services and nurse consulting services, ASC’s assertion is unavailing. Creating a

staffing schedule and the other functions of the Nursing Scheduler Coordinator

are commonly understood to be administrative duties performed by office and

clerical staff. Generally speaking, consulting services are commonly understood

to mean the provision of expert advice. We understand nurse consulting

services to be the provision of expert nursing advice or expert advice for

nursing. The fact that the Nursing Scheduler Coordinator makes the schedule

for the nursing staff does not transform the position into nurse consulting

services. We conclude that there is a reasonable basis for OMPP’s classification

of ASC’s Nursing Scheduler Coordinator as an administrative component

rather than a direct care component, and therefore the reclassification was not

arbitrary and capricious.

[12] ASC also contends that “[t]he ALJ arbitrarily and capriciously restricted the

definition of ‘direct care components’ based on his own, personal internet

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 8 of 11 research, which does not appear in the record.” Appellant’s Br. at 26. The

ALJ’s finding 11 reads,

Neither party provided significant guidance or argument on what “nurse consulting services” are and what that term should refer to. Based on the ALJ’s prior understanding and experience, an individual (or a company in some cases) providing nurse consulting services (i.e. a nurse consultant) would generally be someone with specialized education, expertise or experience with whom a nurse, other caregiver, or organization would consult 1) in individualized circumstances, in order to better care for a patient when they are uncertain what to do or need confirmation of a course of action, 2) in broader circumstances, in order to make unit- or organization-wide decisions about patient care and functional/operational issues. A brief general internet search of ‘nurse consulting services’ and ‘nurse consultant’ consistently and repeatedly confirmed this prior understanding. Nothing about this case or the arguments made by either side suggests that a significantly different meaning is intended by 405 IAC 1-14.6- 2(p)(2). The term does not reasonably describe someone with little more than a high school diploma or equivalent that hands out unit assignments for direct care nurses, even if they “consulted” with other Nursing Department personnel in order to do so. Based on the evidence provided including the Position Description, there is no meaningful resemblance between a nurse consultant as normally understood and ASC’s Nurse Schedule[r] Coordinators.

Appellant’s App. Vol. 2 at 16 (emphasis added).

[13] FSSA argues, and the trial court found, that the ALJ’s brief internet search

constitutes harmless error because the “research was only incidental to the final

decision.” Appealed Order at 7. We agree. Assuming, without deciding, that

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 9 of 11 the finding related to the internet search is improper, 2 the error is not prejudicial

because the finding is not necessary to support the ALJ’s judgment. See In re

B.J., 879 N.E.2d 7, 19-20 (Ind. Ct. App. 2008) (stating that a finding of fact is

not prejudicial to a party unless it directly supports a conclusion necessary to

sustain the judgment), trans. denied. The internet search was not the sole support

for the ALJ’s judgment. We note that the ALJ may rely on his knowledge and

experience. Ind. Code § 4-21.5-3-27(d). In addition, the ALJ relied on ASC’s

brief and the affidavit of ASC’s controller in finding that the “position at issue

consists of scheduling coordinators, which work in each facility’s Nursing

Department to make sure the facility’s residents have appropriate nurse staffing

available to them.” Appellant’s App. Vol. 2 at 15. ASC does not dispute this

finding.

[14] Moreover, the ALJ concluded that “[t]he term ‘schedule coordinator’ or

scheduler’ immediately connotes administrative functions,” and that even

though the Nursing Scheduler Coordinator works in the nursing department

and with the executive director and director of nursing “to provide appropriate

hands on nurse staffing levels,” the duties of the Nursing Scheduler Coordinator

remain administrative functions. Id. at 17. In addition, the ALJ concluded that

the Nursing Scheduler Coordinator is “centered around staffing and scheduling

tasks and concerns” and the services “barely” refer to “anything having to do

2 We observe that “a court may take judicial notice of a dictionary definition of a word, so long as the other conditions set out in [Indiana Evidence Rule 201] are met.” Campbell v. Shelton, 727 N.E.2d 495, 501 (Ind. Ct. App. 2000), trans. denied (2001).

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 10 of 11 with residents or resident care or somehow assisting nurses to perform their

hands-on duties.” Id. These conclusions do not rest on the internet search and

support the ALJ’s judgment. We conclude that the brief internet search, if error,

was harmless error. Based on the foregoing, we affirm the trial court’s

judgment.

[15] Affirmed.

Robb, J., and Kenworthy, J., concur.

Court of Appeals of Indiana | Opinion 22A-PL-2556 | March 27, 2023 Page 11 of 11