Preview:

IN THE COURT OF APPEALS OF IOWA No. 2-297 / 11-1145 Filed June 27, 2012

SUNRISE RETIREMENT COMMUNITY, FRIENDSHIP HAVEN, PRESBYTERIAN VILLAGE, ROSE VISTA HOME, LONGVIEW HOME, UNITED PRESBYTERIAN HOME, RICEVILLE COMMUNITY REST HOME, HUBBARD CARE CENTER and HAPPY SIESTA CARE CENTER, Petitioners-Appellants, vs. IOWA DEPARTMENT OF HUMAN SERVICES, Respondent-Appellee. ________________________________________________________________ Appeal from the Iowa District Court for Polk County, Arthur E. Gamble, Judge. Petitioners, nursing facilities, appeal from the district court's ruling on judicial review affirming the Iowa Department of Human Services' decision that changed a previous practice in ruling that required cost reports could not include their payments to outside vendors for medical services provided to their Medicare Part A patients. REVERSED AND REMANDED WITH DIRECTIONS. Patrick B. White of White Law Office, P.C., Des Moines, for appellants. Thomas J. Miller, Attorney General, and Timothy L. Vavricek, Assistant Attorney General, for appellee.

Heard by Eisenhauer, C.J., and Potterfield and Doyle, JJ.

2 POTTERFIELD, J. This is an administrative law appeal from a decision by the director of the Iowa Department of Human Services (DHS), which was affirmed on judicial review by the district court. The director's decision upheld the disallowance by its auditors of costs for laboratory services, x-rays, and prescription drugs traditionally included on the annual reports required to be filed by nursing homes. All parties agree that the costs listed on the reports had been incurred on behalf of Medicare patients for lab services, x-rays, and prescription drugs received by the patients, and had been paid by the nursing homes. The issue is whether the director's decision to disallow the costs is in compliance with the administrative rules governing the cost reports and whether the change in practice is within the scope of Iowa Code section 17A.19(10)(h) (2011) (providing that the court "shall reverse, modify, or grant other appropriate relief from agency action . . . if it determines that substantial rights of the person seeking judicial relief have been prejudiced because the agency action is . . . action other than a rule that is inconsistent with the agency's prior practice or precedents, unless the agency has justified that inconsistency by stating credible reasons sufficient to indicate a fair and rational basis for the inconsistency"). The district court acknowledged the change, but concluded that the director had appropriately justified the inconsistency per section 17A.19(10)(h). Because administrative rules governing the payment rate for nursing facilities do not exclude the costs expended for Medicare Part A patient lab, xray, and prescription drug services, which the facilities must annually report as

3 costs--and in the past had been considered by DHS to be "allowable costs"--we reverse and remand with directions to return this matter to the agency. I. General Background. Petitioners are Iowa nursing facilities that are residences for both Medicare Part A and Medicaid patients. The federal government prospectively pays the facilities for Medicare patients based on consolidated billing from which standardized federal per diem rates are calculated. The State pays the facilities for Medicaid patients on the basis of a per diem rate calculated by DHS from the information in an annual financial report required to be filed by the facilities. The annual report is a single report covering both Medicare and Medicaid patients. A. Medicaid versus Medicare. Medicaid is a medical assistance program jointly financed by state and federal governments for low-income individuals. Medicare is a federally funded system of health and hospital insurance for U.S. citizens age sixty-five or older, for younger people receiving Social Security benefits, and for persons needing dialysis or kidney transplants for the treatment of end-stage renal disease. B. Primary payment source. All residents of nursing facilities are admitted with an identified primary payment source. Some residents are private-pay

residents, some are Medicare Part A residents, some residents have private insurance, and the rest rely upon Medicaid. Regardless of primary payor source, federal and state laws require that every nursing facility participating in Medicare and Medicaid provide certain services to every resident. See 42 U.S.C.

Download SUNRISE RETIREMENT COMMUNITY, FRIENDSHIP HAVEN, PRESBYTERIAN VILLAGE, ROSE VISTA

Iowa Law