Nebraska Health Care Ass'n v. Dunning

778 F.2d 1291, 1985 U.S. App. LEXIS 25549, 12 Soc. Serv. Rev. 45
CourtCourt of Appeals for the Eighth Circuit
DecidedDecember 9, 1985
DocketNo. 84-2397
StatusPublished
Cited by39 cases

This text of 778 F.2d 1291 (Nebraska Health Care Ass'n v. Dunning) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nebraska Health Care Ass'n v. Dunning, 778 F.2d 1291, 1985 U.S. App. LEXIS 25549, 12 Soc. Serv. Rev. 45 (8th Cir. 1985).

Opinion

ARNOLD, Circuit Judge.

The question presented is whether certain Nebraska statutes regulating reimbursement to providers of nursing-home services under the Medicaid program conflict with the requirement of the Social Security Act, 42 U.S.C. § 1396a(a)(13)(A) that reimbursement rates must be “reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities____” The plaintiffs, representing operators of long-term medical-care facilities, challenged the application of the state laws in question with respect to two fiscal years, 1982-83 and 1983-84. The District Court1 held both statutes unconstitutional under the Supremacy Clause, finding them inconsistent with federal law. On this appeal, defendants, who are state officials, have abandoned their attempt to uphold one of the challenged statutes. As to the other state law in question, we hold that the state’s submission seeking approval of its reimbursement plan for the fiscal year 1982-83 failed to comply with the plain terms of federal regulations. The judgment of the District Court, enjoining enforcement by the state of its plan, is therefore affirmed as to the first of the two fiscal years in question. As to the second fiscal year, we hold that the case is not yet ripe for judicial determination. An administrative proceeding is still pending within the Social Security Administration with respect to fiscal year 1983-84. We therefore affirm in part, vacate in part, and remand for further proceedings on the issue of attorneys’ fees.

I.

The Medicaid program is a joint venture between the federal government and participating states. When a state decides to participate, as Nebraska has, it must submit to the Department of Health and Human Services a satisfactory state plan which meets the payment standard of the Boren Amendment, codified at 42 U.S.C. § 1396a(a)(13)(A) (Supp.1985). That statute provides in relevant part:

(a) Contents
A State plan for medical assistance must—
(13) provide—
(A) for payment ... of the hospital, skilled nursing facility, and intermediate care facility services provided under the plan through the use of rates (determined in accordance with methods and standards developed by the State ...) which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable state and federal laws, regulations, and quality and safety standards____

In 1981, Nebraska established a payment plan including its definition of an efficiently and economically operated facility. Under this plan, the nursing homes would give the Nebraska Department of Public Welfare2 (DPW) a report of their costs for [1293]*1293Medicaid patients at the end of the fiscal year. DPW would then subtract any costs not allowed and compute each nursing home’s “allowable cost” per Medicaid patient day. This figure is then compared with other nursing homes in the same class, and they are ranked from the least expensive to the most expensive. The Department then selected the 65th percentile as the one at which it would pay all allowable costs. Under this plan, if nursing homes as a whole provided 100,000 days of Medicaid care, then the nursing homes with the least expensive 65,000 days would be paid their full allowable costs for the preceding year. Those in the 66th to 100th percentiles would be paid the same rate as those homes at the 65th percentile. Although the plan as written was designed to pay for a minimum of 65 per cent, of Medicaid patient days, DPW’s actual practice was to pay the full allowable costs up to the 82nd percentile.

In August 1982, DPW, pursuant to a new statute, Neb.Rev.Stat. § 68-720 (Supp. 1983) amended its plan for reimbursement to nursing homes. The amended plan provided that payments to a vendor of Medicaid services for fiscal year 1982-83 would be limited to the reimbursement allowed to that vendor on April 1, 1982, plus 3.75 per cent. This “cap” was later extended by the Legislature to a second fiscal year, 1983— 84.3

Late in July of 1982, the new state plan was sent to the regional office of the Health Care Financing Administration for approval. This administration is a part of the Department of Health and Human Services and is responsible for approving state Medicaid plans. 42 C.F.R. § 447.256. The plan contained a provision implementing § 68-720, the 3.75 per cent, “cap.” On September 22, 1982, the regional office approved the plan for the fiscal year 1982-83. It was provided that the new plan should be considered to have taken effect on August 1,1982.

Later, in the spring of 1983, the Nebraska Legislature extended the 3.75 per cent, “cap” until June 30, 1984. On February 15, 1984, after the case was tried in the District Court but before it was decided, the extension of the 3.75 per cent, limitation for a second fiscal year was disapproved, apparently by the regional office of the Health Care Financing Administration. We were informed at the oral argument that the propriety of this disapproval is now pending on some kind of administrative appeal within HHS, proceedings which HHS has stayed pending the outcome of this lawsuit.

The District Court held that the 3.75 per cent, limitation prevented proper reimbursement under § 1396a(a)(13)(A). It found as a fact that during the last five months of 1982, 177 facilities incurred allowable costs at or below the 65th percentile, but 34 of those facilities did not receive reimbursement for all of their allowable costs solely because of § 68-720. In 1983, the Court further found, “131 of the 177 facilities suffered the same fate.” The Nebraska Health Care Association v. Dunning, No. CV82-L-472 (D.Neb. July 10, 1984), slip op. 6. The state’s plan, the District Court reasoned, “said in effect that facilities whose adjusted allowable costs were equal to the 65th percentile costs were efficiently and economically operated facilities____” Id. at 7. A state statute whose operation prevented reimbursement of a significant number of facilities at a level found reasonable by the state did not satisfy the Boren Amendment. This appeal followed.

[1294]*1294II.

As to fiscal year 1982-83, we affirm, though on a somewhat different basis from that used by the District Court. The uncontradicted record in this case shows that the state’s submission of its plan for the fiscal year 1982-83 failed to submit crucial information required by regulations of the Health Care Financing Administration. HCFA’s purported approval of the 3.75 per cent, limitation was, therefore, invalid, and the state had no right to put this portion of its plan into effect, unless, of course, it chose to do so solely with its own funds, which it has not done.

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Bluebook (online)
778 F.2d 1291, 1985 U.S. App. LEXIS 25549, 12 Soc. Serv. Rev. 45, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nebraska-health-care-assn-v-dunning-ca8-1985.