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Cedars Nursing Care Center v. Maine Department of Health and Human Services

Superior Court of Maine, Cumberland

July 11, 2016

CEDARS NURSING CARE CENTER d/b/a THE CEDARS, Petitioner,
v.
MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent, and THE AROOSTOOK MEDICAL CENTER/ AROOSTOOK HEALTH CENTER, Intervenor.

          ORDER ON RULE 80C APPEAL

          Lance E. Walker Justice.

         Before the court is Cedars Nursing Care Center d/b/a The Cedars' ("Cedars") petition for review of final agency action by the Maine Department of Health and Human Services ("DHHS" or the "Department") pursuant to the Maine Administrative Procedures Act (the "APA"), 5 M.R.S. § 11001 et seq., and Maine Rule of Civil Procedure 80C. Based on the following, DHHS's decision denying Cedars' request for informal review is reversed and remanded for further consideration.

         I. Background

         DHHS is a state agency responsible for implementing Maine's Medicaid program, known as MaineCare. 10-144 C.M.R. ch. 101 §§ 1.01-1.02, 10 (2014). Pursuant to its duty, DHHS reimburses nursing facilities for services provided to MaineCare members based on a rate established by DHHS. 10-144 C.M.R. ch. 101 § 37 (2014). DHHS classifies nursing facility providers into one of three Peer Groups for purposes of MaineCare reimbursement. 10-144 C.M.R. ch. 101 § 86 (2014); (R. Vol. 1, 204-207.) Cedars operates a nursing facility in Portland, Maine. (R. Vol. 1, 155.) Cedars is classified as a Peer Group II facility. (Id. at 207.) Aroostook Health Center ("AHC") operates a nursing facility in Mars Hill, Maine. (Id. at 8.) Before 2015, AHC was also classified as a Peer Group II facility. (Id. at 207.)

         In April 2013, AHC requested a change in its status from a free standing nursing facility (Peer Group II) to a hospital-based nursing facility (Peer Group III). (Id. at 1, 144); 10-144 C.M.R. ch. 101 § 86. On January 8, 2015, DHHS issued a Final Informal Review Decision informing AHC that it would be reclassified as a hospital-affiliated nursing facility (Peer Group III) and reimbursed at a higher rate (the "AHC Decision"). (R. Vol. 1, 137-39, 144.) Cedars did not receive notice of the AHC Decision. (Id. at 139.) Sometime thereafter, Cedars made a Freedom of Access request to DHHS regarding the AHC Decision. (Id. at 143.) DHHS provided Cedars with a copy of the AHC Decision on May 8, 2015. (Id.)

         On June 12, 2015, Cedars submitted written request for informal review and/or administrative hearing to DHHS regarding the AHC Decision. (Id. at 143-44.) In its June 12, 2015 request, Cedars asserted that AHC did not meet the definition of a "hospital-affiliated nursing facility" to be included in Peer Group III and should remain classified as a free standing nursing facility as part of Peer Group II. (Id. at 144.) Cedars asserted that it intended to put forth evidence showing how AHC's classification as a Peer Group III facility violated DHHS's rules and would "directly and adversely" impact Cedars' MaineCare reimbursement. (Id.)

         On June 24, 2015, DHHS issued a letter to Cedars denying its request for informal review. (Id. at 159-60.) In its letter, DHHS concluded the following: (1) Cedars' request for informal review was untimely under both § 140.1 and § 1.21-1 of the MaineCare Benefits Manual; (2) Cedars was not entitled to an informal review under § 140.1 of the MaineCare Benefits Manual because Cedars was not the nursing facility to which the AHC Decision was issued; and (3) Cedars was not a entitled to an informal review under § 1.21-1 of the MaineCare Benefits Manual because it was not aggrieved by the AHC Decision. (Id.)

         Cedars filed a Rule 80C petition appealing the AHC Decision on June 16, 2015. Following DHHS's denial of its request for informal review, Cedars moved to amend its petition on July 14, 2015, to address both the AHC Decision and the June 24, 2015 denial. DHHS moved to dismiss Cedars' petition on July 17, 2015. The court granted Cedars' motion to amend its petition and denied DHHS motion to dismiss on August 24, 2015. On September 3, 2015, AHC moved to intervene in this action, which the court granted.

         The administrative record was filed with the court on September 25, 2015. DHHS further supplemented the record on October 13, 2015. Cedars filed a motion to take additional evidence on October 5, 2015, which DHHS and AHC both opposed. The court denied Cedars motion to take additional evidence on February 29, 2016. In its order, the court ruled that the only issue properly before the court was whether DHHS erred in denying Cedars' June 12, 2015 request for informal review. The court stated that the AHC Decision was not a final agency action appealable by Cedars under the APA, because further agency review was available to Cedars. See 5 M.R.S. §§ 8002(4), 11001(1). Indeed, Cedars' June 12, 2015 request sought further agency review of the AHC Decision.

         Cedars field its Rule 80C brief on April 6, 2016. AHC and DHHS filed their responses on May 6, 2016. Cedars filed a reply on May 20, 2016.

          II. Standard of Review

         When acting in an appellate capacity pursuant to Rule 80C and the APA, the court reviews the agency's decision for abuse of discretion, error of law, or findings not supported by the evidence. Guar. Tr. Life Ins. Co. v. Superintendent of Ins., 2013 ME 102, ¶ 16, 82 A.3d 121. The standard for review of final agency action is provided by § 11007 of the APA. M.R. Civ. P. 80C(c). The court may reverse or modify any agency determination if the agency's findings, inferences, conclusions, or decisions: (1) violate constitutional or statutory provisions, (2) exceed the agency's statutory authority, (3) are made upon unlawful procedure, (4) are affected by bias or error of law, (5) are unsupported by substantial evidence in the record, or (6) are arbitrary, capricious, or an abuse of discretion. 5 M.R.S. § 11007(4)(C). The court may also remand the case for further proceedings, findings of fact or conclusions of law, or direct the agency to hold such proceedings or take such action as the court deems necessary. Id. § 11007(4)(B).

         An agency's interpretations of its own rules are given "considerable deference." Friends of the Boundary Mts. v. Land Use Regulation Comm'n, 2012 ME 53, ¶ 6, 40 A.3d 947. The court will not set aside an agency's interpretation of its own rules "unless the rule plainly compels a contrary result, or the rule interpretation is contrary to the governing statute." Id.

         An agency's findings of fact must be supported by substantial evidence in the record and cannot be based on unsupported speculation. Hannum v. Bd. of Envtt. Prot, 2003 ME 123, ¶ 15 n.6, 832 A.2d 765. To be supported by substantial evidence, the agency's findings of fact must be supported by "such relevant evidence as a reasonable mind might accept as adequate to support the resultant conclusion." Sinclair Builders, Inc. v. Unemployment Ins. Comm'n, 2013 ME 76, ¶ 9, 73 A.3d 1061 (internal quotation marks omitted). The court will not substitute its own judgment for that of the agency merely because the record could support more than one conclusion. Abrahamson v. Sec'y of State, 584 A.2d 668, 670 (Me. 1991). Similarly, an agency's decision is arbitrary and capricious if it is "unreasonable, has no rational factual basis justifying the conclusion or lacks substantial support in the evidence." Cent. Me. Power Co. v. Waterville Urban Renewal Autk, 281 A.2d 233, 242 (Me. 1971).

         III. Analysis

         Cedars asserts that DHHS erred in denying its June 12, 2015 request for informal review pursuant to § 1.21-1 of the MaineCare Benefits Manual.[1] (Pet. Br. 1.) Section 1.21-1 of ...


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