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From Health Law Daily, April 25, 2016

‘Exceptional Persons’ receive unexceptional ruling

By Harold Bishop, J.D.

The fact that the payment rules of Iowa’s Medicaid agency did not align with Iowa statutory requirements did not mean the payment rules as set forth in the statute should not be followed by the agency. The Iowa Supreme Court decided that the district court erred in concluding that the Medicaid agency’s failure to promulgate specific rules reducing the payment rates for certain Medicaid providers meant that the agency could not implement the statutory reduction. The decision of the court of appeals was vacated and the district court’s judgment was reversed (Exceptional Persons, Inc. v. Iowa Department of Human ServicesApril 22, 2016, Hecht, D.).

Background. On October 8, 2009, the Iowa governor signed an executive order mandating a 10 percent reduction of spending by all government departments and agencies. In response to the executive order, the Iowa Department of Human Services (IDHS), the state’s Medicaid agency, promulgated temporary rules adjusting the reimbursement rates paid to Medicaid service providers. Before the temporary IDHS rules expired, the Iowa legislature passed a statute directing the IDHS to continue for the next fiscal year the rate reductions specified under the 2009 executive order.

In its response to the statute, the IDHS promulgated permanent rules implementing certain rate reductions, but inadvertently omitted a reduction for one component of the rate calculation for various organizations providing home and community-based services (HCBS) to Iowa Medicaid waiver recipients. Nonetheless, it continued to reimburse the HCBS providers at the reduced rates established by the temporary rules.

Exceptional Persons, Inc. and several other HCBS providers filed suit in Iowa district court claiming that, even if the missing reduction for one component of the rate calculation in the permanent rule was a mere oversight, the IDHS cannot reimburse them at the reduced rate without a rule authorizing it to do so.

The Iowa district court ordered that the dispute be remanded to IDHS so that the rates could be recalculated. The Iowa Court of Appeals affirmed the district court, finding that the IDHS lacked the authority to make the rate reduction (see Iowa agency can’t make the cut—no rule, no rate reduction, October 16, 2015).

Iowa Supreme Court. The Iowa Supreme Court found that although the executive order prescribed no specific percentage of reduction for rates paid to the HCBS providers, the Iowa statute clearly indicated the legislature intended that the IDHS would continue the reduction in payments previously implemented in response to the executive order. The court concluded that the statute constituted a mandate that the IDHS maintain the status quo in calculating rates paid to Medicaid service providers for the fiscal year in question.

The court further found that although the IDHS failed to promulgate rules effectuating all the rate reductions required under the statute, the agency did actually implement all of the mandated reductions in calculating the rates paid to Exceptional Persons and other HCBS providers for the period in question. As such, the court declined to read the statute in a manner allowing IDHS’s rulemaking mistake to contravene legislative intent.

The case is No. 14-0569.

Attorneys: Thomas J. Miller, Attorney General, for Iowa Department of Human Services. Patrick B. White (White Law Office, PC) for Exceptional Persons, Inc. and New Choices, Inc.

Companies: Iowa Department of Human Services; Exceptional Persons, Inc.; New Choices, Inc.

MainStory: TopStory CaseDecisions MedicaidPaymentNews CMSNews MedicaidNews HomeNews IowaNews

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