Carolinas Medical Center v. Employers & Carriers Listed in Exhibit A

616 S.E.2d 588, 172 N.C. App. 549, 2005 N.C. App. LEXIS 1773
CourtCourt of Appeals of North Carolina
DecidedAugust 16, 2005
DocketCOA04-707
StatusPublished
Cited by17 cases

This text of 616 S.E.2d 588 (Carolinas Medical Center v. Employers & Carriers Listed in Exhibit A) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Carolinas Medical Center v. Employers & Carriers Listed in Exhibit A, 616 S.E.2d 588, 172 N.C. App. 549, 2005 N.C. App. LEXIS 1773 (N.C. Ct. App. 2005).

Opinions

STEELMAN, Judge.

The North Carolina Industrial Commission entered an order on 18 December 2003 declaring that the provisions of N.C. Gen. Stat. § 97-26(b) as they existed from 1 July 1995 to 1 April 1996 were unconstitutional. We hold that the North Carolina Industrial commission is without authority to declare statutes of the State unconstitutional and vacate its order.

Factual Background

On 6 May 1994, the North Carolina Supreme Court filed its decision in the Case of Charlotte-Mecklenburg Hosp. Auth. v. North Carolina Indus. Comm’n, 336 N.C. 200, 443 S.E.2d 716 (1994), declaring that the North Carolina Industrial Commission did not have authority under N.C. Gen. Stat. § 97-26 to require hospitals to accept payment for medical services on a per diem basis. In response to the questions surrounding its authority to set hospital rates leading up to the Charlotte-Mecklenburg decision, the Industrial Commission sought additional authority from the North Carolina General Assembly. The result of these efforts was an amendment to N.C. Gen. Stat. § 97-26. Act of April 19, 1993, ch. 679, sec. 2.3, 1993 N.C. Sess. Laws 398. As amended N.C. Gen. Stat. § 97-26(b), effective 1 October 1994, read as follows: “Hospital Fees. — Payment for medical compensation rendered by a hospital participating in the State Plan shall be equal to the payment the hospital receives for the same treatment and services under the State Plan.”

At the time of this amendment to N.C. Gen. Stat. § 97-26(b), the State Plan utilized a complex diagnostic related grouping-based reimbursement system (DRG) to compute amounts due to hospitals for treatment of patients under N.C. Gen. Stat. § 135-40.4. Hospitals compute patient charges on a standard UB-92 form, which states the [551]*551amount that a patient is expected to pay for hospital services. However, under the DRG reimbursement system, the actual charges set forth in the UB-92 form are modified, based upon how efficiently a hospital provides services for patients. To the extent that a patient is hospitalized for a shorter period of time, the DRG will reward that hospital with a greater payment. Conversely, if the patient is hospitalized for a greater period of time, that hospital is penalized. The result of the DRG system is that for some patients the hospital is reimbursed more than the UB-92 amount, and in some cases, the hospital is reimbursed less than the UB-92 amount.

As the DRG system was implemented, the Administrator of the Industrial Commission began to receive complaints from the worker’s compensation insurance carriers that the amount of payments approved by the Industrial Commission was exceeding the amount shown on the UB-92 forms. At some point, the Administrator directed the Industrial Commission to stop approving payments to hospitals in excess of the amounts shown on the UB-92 form. Prior to this decision, a number of payments to hospitals were approved by the Industrial Commission for an amount in excess of the amount shown on form UB-92.

Plaintiffs are hospitals that provided services to workers whose injuries were covered under the North Carolina Worker’s Compensation Act (Chapter 97 of the North Carolina General Statutes). Defendants are the employers of the injured workers, or their worker’s compensation insurance carriers. The parties have stipulated that all workers suffered injuries that were compensable under Chapter 97, and received treatment from the hospitals for those injuries. There was a further stipulation that in each case, the Industrial Commission approved payment to the hospital in an amount in excess of the amount shown on form UB-92. Finally, defendants stipulated that they would not challenge that

the payment amount approved by the Industrial commission is the amount the hospital would have received under the DRG reimbursement system as implemented by the administrators of the State Health Plan for the services described by the UB-92 claims form, if those had been covered by the State Health Plan.

Defendants refused to pay the amounts approved by the Industrial Commission in excess of the amounts shown on form [552]*552UB-92. Plaintiffs sought payment for the full amount approved by the Industrial Commission. A large number of cases, involving hospital treatment provided between 1 July 1995 and 1 April 1996, were consolidated for hearing before the Industrial Commission.

In the conclusions of law of its opinion and award, the Industrial Commission ultimately concluded that the “changes to N.C. Gen. Stat. § 97-26 enacted in 1994 did not reasonably or rationally relate to the purpose of the statute and were patently unfair to the employers and their carriers who were subject to the Worker’s Compensation Act, [and therefore] the statute violated the due process clause of the Constitution. U.S. CONST, amend. XIV; 16B Am Jur 2d, Constitutional Law § 912.” The Commission based this ultimate conclusion on additional conclusions of law in which they determined that under the provisions of N.C. Gen. Stat. § 97-26(b) they were required to authorize payments according to the State Health Plan, and that these mandated payments were fundamentally unfair in that they were “not directly related to the actual cost of the care provided.” They further concluded that the system as mandated by statute included no adequate remedy to address the individual situations where employers or their insurance carriers were required under the system to pay out “sums which were not otherwise due as payment for relevant hospital treatment and services],]” and therefore N.C. Gen. Stat. § 97-26(b), as it was then written, “deprived employers and their carriers of property without due process of law.”

The Commission ordered that “plaintiff hospitals are not entitled to receive the additional amounts approved by the Industrial Commission over and above the actual hospital charges.” Commissioner Pamela T. Young dissented, asserting that the Industrial Commission had no authority to determine the constitutionality of acts of the General Assembly.

From this opinion and award, plaintiffs appeal, asserting that the Industrial Commission lacked authority to declare an act of the General Assembly unconstitutional, and erred in doing so. Defendants purported to cross-appeal asserting additional bases that would support the Commission’s decision in favor of defendants.

Discussion of Legal Issues Presented

In plaintiffs’ first argument they contend that the Full Commission erred in ruling that it had the authority to decide the constitutionality of former N.C. Gen. Stat. § 97-26(b). We agree.

[553]*553The Industrial Commission is not a court of general jurisdiction, it is an administrative agency of the State, created by statute. Hogan v. Cone Mills Corp., 315 N.C. 127, 137, 337 S.E.2d 477, 483 (1985). It is a “well-settled rule that a statute’s constitutionality shall be determined by the judiciary, not an administrative board.” Meads v. North Carolina Dep’t of Agric., Food & Drug Protection Div., Pesticide Sec. (In re Pesticide Bd. File Nos. IR94-128, IR94-151, IR94-155), 349 N.C. 656, 670, 509 S.E.2d 165, 174 (1998); see also State ex rel. Utilities Comm’n v. Carolina Util.

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Carolinas Medical Center v. Employers & Carriers Listed in Exhibit A
616 S.E.2d 588 (Court of Appeals of North Carolina, 2005)

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Bluebook (online)
616 S.E.2d 588, 172 N.C. App. 549, 2005 N.C. App. LEXIS 1773, Counsel Stack Legal Research, https://law.counselstack.com/opinion/carolinas-medical-center-v-employers-carriers-listed-in-exhibit-a-ncctapp-2005.