Toal v. Dekalb Medical Center, Inc.

542 S.E.2d 184, 247 Ga. App. 349, 2001 Fulton County D. Rep. 23, 2000 Ga. App. LEXIS 1352
CourtCourt of Appeals of Georgia
DecidedNovember 13, 2000
DocketA00A1654, A00A1655
StatusPublished
Cited by3 cases

This text of 542 S.E.2d 184 (Toal v. Dekalb Medical Center, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Toal v. Dekalb Medical Center, Inc., 542 S.E.2d 184, 247 Ga. App. 349, 2001 Fulton County D. Rep. 23, 2000 Ga. App. LEXIS 1352 (Ga. Ct. App. 2000).

Opinion

Ruffin, Judge.

DeKalb Medical Center and various other hospitals sued the Georgia Department of Medical Assistance (DMA), claiming, among other things, that DMA’s Medicaid reimbursements to the hospitals breached the terms of their respective provider agreements. 1 The trial court granted summary judgment to the hospitals on certain [350]*350issues and to DMA on others. Both sides appeal aspects of the trial court’s ruling.

Medicaid is a federal-state program under which the federal government provides financial assistance to states to enable them to provide medical care to needy individuals.2 To qualify for federal assistance, a state must formulate a plan and submit it for approval to the federal Health Care Financing Agency (HCFA), an agency of the Department of Health & Human Services (HHS).3 Among other things, the plan must contain a scheme for reimbursing health care providers who provide services to Medicaid patients.4 During the time period relevant in this case, a provision of the Medicaid Act known as the Boren Amendment required that state plans must provide for hospitals to be reimbursed at rates “which the State finds, and makes assurances satisfactory to the Secretary [of HHS], are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities.”5 The Boren Amendment has both a procedural and a substantive component — i.e., the State must make the requisite findings and assurances, and must also adopt rates that are in fact reasonable and adequate.6

DMA is the state agency that administers the Medicaid program in Georgia, and it enters into “provider agreements” with various hospitals that render services to Medicaid patients. Up until August 1996, DMA would reimburse hospitals for Medicaid patients treated on a “per case” basis — i.e., it would pay hospitals a certain amount per Medicaid patient admitted, regardless of the treatment provided or length of stay. This “per case rate” differed for each hospital, and was calculated by taking the hospital’s total audited Medicaid costs in a base year (typically three years before the reimbursement year), adjusting these costs for inflation to predict Medicaid costs in the reimbursement year, and dividing the resulting amount by the number of Medicaid admissions in the base year. This methodology was developed in part to encourage cost efficiency, since hospitals that reduced their costs during a particular year could keep the difference between their actual costs and the costs reflected in the per case rate. Cost efficiencies would also act in the State’s interest, since an efficient hospital’s reduced costs would serve as the basis for setting its [351]*351future per case rates. During 1992 and 1993, and presumably in other years, certain institutions (including the plaintiffs in this case) thus received reimbursements from DMA that exceeded their actual Medicaid costs.

Effective August 15, 1996, the DMA adopted an amended reimbursement plan that sought to recoup the “excess” reimbursements garnered by some hospitals in 1992 and 1993. This amended plan retained the same basic structure as the prior plan, providing that per case rates would be based on hospitals’ audited costs in 1993, adjusted for inflation. With respect to those hospitals that had garnered “excess” Medicaid reimbursements in 1992 and 1993, however, the plan provided that “[p] respective per case rates will be adjusted to deduct an amount per case for 90% of the average amount that Medicaid payments exceeded the cost of services provided during fiscal years 1992 and 1993.” Thus, these hospitals would suffer two consequences: (1) their base per case rates would be reduced to reflect the fact that their actual costs per patient in 1993 were lower than anticipated, and (2) their per case rates would be further reduced due to the “excess” payments they had received in 1992 and 1993. The resulting per case rates for these hospitals would thus be less than the actual cost per patient incurred in 1993, adjusted for inflation.

In response to HCFA’s requests for clarification, DMA provided written assurances that the aggregate payments to hospitals under the amended plan would “meet the costs that must be incurred by efficiently and economically operated hospitals.” DMA subsequently informed HCFA that it estimated that 125 hospitals would receive payments greater than their actual costs, while 38 hospitals would receive payments less than their actual costs. HCFA approved the plan in a May 28, 1997 letter, which referenced DMA’s written responses and also stated that DMA had

in a subsequent telephone call indicated that all efficiently and economically operated facilities are expected to be paid 100 percent of allowable costs. . . . Based on this additional clarification, the State’s assurances and related rate information, we have approved [the amended plan].

The plaintiffs sued the DMA, alleging, among other things, that the 1996 plan violated the terms of their 1997 provider agreements.7 [352]*352They note that the provider agreements require DMA to reimburse the hospitals “for such claims, and in such amounts, as meet the provisions of the Georgia State Plan for Medical Assistance and attachments thereto [and] applicable federal and state law.” They assert that the reference to “applicable federal law” requires compliance with the Boren Amendment. According to the hospitals, the 1996 plan violated the Boren Amendment both procedurally and substantively, because (1) the state did not make the requisite “findings” or “assurances” that the rates were adequate to meet the costs incurred by an efficient hospital, and (2) the rates were not in fact sufficient to cover such costs. The hospitals also claim that the recoupment of past profits constituted an unconstitutional taking of private property.

The trial court granted partial summary judgment to the hospitals, holding that the 1996 plan amendment violated the Boren Amendment both substantively and procedurally. The court did not, however, address whether such violations constituted a breach of the hospitals’ provider agreements, nor did it purport to grant summary judgment on the hospitals’ claim for breach of contract. The court did state in one sentence that “[t]he remedy for the violation is reimbursement of all actual allowable costs from August 15, 1996, through October, 1997,” but it did not purport to grant summary judgment as to damages. Indeed, the court expressly stated that it denied all aspects of the hospitals’ summary judgment motion except to the extent that it found a violation of the Boren Amendment. The court granted summary judgment to DMA on all other issues, including the “takings” claim.

On appeal, DMA contends that the 1996 plan did not violate the Boren Amendment, and that, even if it did, the trial court erred in fashioning a remedy. In their cross-appeal, the hospitals also contend that the trial court’s remedy was improper. In addition, they claim that the trial court erred in granting summary judgment to DMA on their takings claim.

1. Violation of Boren Amendment. DMA does not deny that the Boren Amendment was incorporated into the provider agreement,8 or that failure to comply with the Boren Amendment would constitute a breach thereof.9

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Bluebook (online)
542 S.E.2d 184, 247 Ga. App. 349, 2001 Fulton County D. Rep. 23, 2000 Ga. App. LEXIS 1352, Counsel Stack Legal Research, https://law.counselstack.com/opinion/toal-v-dekalb-medical-center-inc-gactapp-2000.