McGee Guest Home v. Department of Social and Health Services

12 P.3d 144
CourtWashington Supreme Court
DecidedNovember 9, 2000
Docket68588-6
StatusPublished
Cited by53 cases

This text of 12 P.3d 144 (McGee Guest Home v. Department of Social and Health Services) is published on Counsel Stack Legal Research, covering Washington Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McGee Guest Home v. Department of Social and Health Services, 12 P.3d 144 (Wash. 2000).

Opinion

12 P.3d 144 (2000)
142 Wash.2d 316

McGEE GUEST HOME, INC., a Washington corporation; Gerald and Anntoni Pratt, husband and wife, d/b/a Valley Community Inn; Lynda Sadlier, d/b/a Court "C" Residential Center; IDE Congregate Care, Inc., a Washington corporation, d/b/a myhome; Tacoma Congregate Care, Inc., a Washington corporation; and Memory Lane/Oak Hill, Inc., a Washington corporation, d/b/a Memory Lane, Oak Hill and Hilltop Center, Respondents,
v.
DEPARTMENT OF SOCIAL AND HEALTH SERVICES OF THE STATE OF WASHINGTON; Pierce County, a municipal corporation; and Spokane County, a municipal corporation, Petitioners.

No. 68588-6.

Supreme Court of Washington, En Banc.

Argued September 21, 2000.
Decided November 9, 2000.

*146 John Francis Sullivan, Bellevue, for petitioners.

Christine Gregoire, Atty. Gen., Carl Berton Paul, Asst. Atty. Gen., Olympia, for respondents.

*145 TALMADGE, J.

We are asked in this case to decide if the Department of Social and Health Services (Department) violated Washington's Administrative Procedure Act (APA) chapter 34.05 RCW, in establishing and maintaining a two-tiered reimbursement system for congregate care facilities (CCFs) serving mentally ill people for whom the state was responsible. We hold the Department did not violate the APA, as the Legislature amended RCW 34.05 in 1994 to clarify its view that rule-making requirements do not apply to "reimbursement unit values, fee schedules, arithmetic conversion factors, and similar arithmetic factors used to determine payment rates that apply to goods and services purchased under contract for clients" eligible for state medical assistance. RCW 34.05.030(4). We find this legislative change applies retroactively to this controversy. We further hold the Legislature did not unconstitutionally delegate its power to the Department. We, therefore, remand the case to the trial court for entry of judgment in favor of the Department.

ISSUES

(1) Did the Department violate the APA in failing to adopt by rule the two-tiered reimbursement system for CCFs providing mental health services?

(2) If the Department violated the APA, what statute of limitations applies to the CCFs' claims for quantum meruit?

(3) If the Department did not violate the APA, did the Legislature make an unconstitutional delegation of its power to the Department with respect to the Department's rate setting for CCFs?

FACTS

The plaintiffs in this action are among the larger (16 beds or more) CCFs that provided residential services to Medicaid-qualified mentally ill people. They are seeking additional reimbursement for those services contending the Department established a two-tiered reimbursement structure, with a higher daily rate for smaller CCFs, in violation of the APA.

In 1969, the Legislature first enacted RCW 74.08.045 conferring authority on the Department to contract with CCFs for services. At times pertinent to this controversy, the statute stated that rates must be "reasonable":

The department may purchase such personal and special care at reasonable rates established by the department from substitute homes and intermediate care facilities providing [provided] this service is in compliance with standards of care established by the regulations of the department.

RCW 74.08.045.

In 1977, the Department first promulgated former WAC 388-29-130, repealed by WSR XX-XX-XXX (Apr. 6, 1994), which implemented the provisions of RCW 74.08.045. The next year, the Department advised CCFs by letter it was instituting the two-tiered reimbursement system effective July 1, 1978. The CCFs did not like the two-tiered system and made their views known to the Legislature and the Governor. Governor John Spellman's Advisory Committee on rates recommended the elimination of the two-tiered *147 structure. The Department in 1984 agreed with that recommendation and eliminated the two-tiered structure for all CCFs except those providing services to the mentally ill. The Department at that time amended WAC 388-29-130 to specifically allow the two-tiered reimbursement for CCFs providing services to mentally ill people. Subsequently, in 1985, the Department again amended WAC 388-29-130 to simply provide that the rates would be as established by the Department.[1] Beginning in 1991, the contracts between the Department and the CCFs did not specify rates but incorporated by reference the rates established by the Department.

Except for the period from July 1, 1984 to December 31, 1985, former WAC 388-29-130 did not specifically reference a two-tiered reimbursement structure for CCFs providing to the mentally ill.

In the late 1980s, the Legislature significantly restructured the mental health care system in Washington. Specifically, Regional Support Networks (RSNs) were created to provide services and contract with CCFs. RCW 71.24.025(14). The transition from DSHS to the RSNs was phased in over time, depending on when the local RSNs was created. RCW 71.24.035(15)-(17). The trial court stayed any consideration of obligations accrued after June 30, 1993 (the date many RSNs became solely responsible for contracting with CCFs) until after the completion of this action. Order Granting Partial Summary Judgment (April 3, 1998), CP 1232.

Although the CCFs lobbied the Legislature and Governor for more favorable reimbursement rates, they did not file the present suit to set aside the two-tiered structure of reimbursement until 1995. The CCFs' suit asked that their reimbursement contracts with the Department be invalidated, claiming the two-tiered reimbursement system should have been adopted as a rule pursuant to the APA. The CCFs contended they were entitled to the reasonable value of their services on the basis of quantum meruit if the contracts were invalid. They also argued the six-year statute of limitation for written contracts, RCW 4.16.040(1), applied to this controversy.

The CCFs and the Department both moved below for summary judgment. The trial court largely agreed with the CCFs, reserving only the issue of post 1993 claims for trial because there was a question of fact as to whether the Department or the RSNs controlled the reimbursement of CCFs.[2]

The Court of Appeals, Division Two, reversed the trial court concluding no APA rule making was required for the Department to utilize a two-tiered reimbursement scheme for CCFs. McGee Guest Home, Inc. v. Dep't of Soc. & Health Servs., 96 Wash.App. 804, 981 P.2d 459 (1999). The CCFs petitioned for review, which we granted.

ANALYSIS

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