MARK D. BIRDWHISTELL, SECRETARY, CABINET FOR HEALTH AND FAMILY SERVICES v. BARBARA SWORD, FOR THE BENEFIT OF RONNIE SWORD
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RENDERED: NOVEMBER 21, 2007; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-001407-MR
MARK D. BIRDWHISTELL, SECRETARY,
CABINET FOR HEALTH AND FAMILY SERVICES
v.
APPELLANT
APPEAL FROM FLOYD CIRCUIT COURT
HONORABLE DANNY P. CAUDILL, JUDGE
ACTION NO. 05-CI-01034
BARBARA SWORD, FOR THE BENEFIT OF
RONNIE SWORD
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: COMBS, CHIEF JUDGE; ACREE, JUDGE; HENRY,1 SENIOR JUDGE.
COMBS, CHIEF JUDGE: Mark D. Birdwhistell, on behalf of the Cabinet for Health and
Family Services, appeals from a judgment of the Floyd Circuit Court entered June 5,
2006. The Cabinet's appeal board for public assistance had ruled that Ronnie Sword, a
mentally retarded adult, would be required to pay an increased amount for his care. The
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Senior Judge Michael L. Henry sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
Floyd Circuit Court reversed, and we conclude that it was correct in so ruling. Therefore,
we affirm.
Ronnie Sword has been diagnosed with severe mental retardation,
disruptive behavior disorder, and obsessive-compulsive disorder. He also suffers from a
metabolic or body chemistry disorder that interferes with the brain's ability to discern
when the stomach is full. As a result, Ronnie is morbidly obese and enjoys only limited
mobility. He also suffers with incontinence and severe skin breakdown.
Ronnie is the beneficiary of certain funding provided by the Cabinet's
Supports for Community Living (SCL) Program. The SCL program seeks to promote
home and community based services to mentally retarded persons as an alternative to
placement in an intermediate care facility. It is administered under the Medicaid
program, and recipients must meet Medicaid eligibility requirements. 907 Kentucky
Administrative Regulations (KAR) 1:145, Section 2(1)(d). Eligibility and patient liability
determinations for the SCL program are made by the Cabinet's Department for
Community Based Services (DCBS). Patricia Crider, a DCBS Family Support Specialist,
directly oversees and manages Ronnie's case.
Ronnie lives with his mother, Barbara Sword. On weekdays, while his
mother is at work, he attends Community Habilitation Day Program. This program is
administered by a registered nurse and is staffed by mental retardation specialists who
provide him with training in daily living skills. This facility participates in the SCL
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program and is reimbursed for the services that it provides to Ronnie under the provisions
of 907 KAR 1:155.
Until March of 2005, Ronnie was responsible for payment of $40.00 per
month for his care. Barbara was notified at that point that Ronnie's family income had
increased and that henceforward he would be charged $322.00 per month – more than
eight times his original payment. When Barbara asked Patricia Crider about the dramatic
increase in Ronnie's financial responsibility, she was told that the change followed a
formal audit of the DCBS office undertaken in February 2005. Barbara immediately
requested an administrative hearing to contest the increase.
An administrative hearing was conducted by the Cabinet in April 2005.
During the hearing, Patricia Crider conceded that Medicaid auditors apparently had not
been aware that Ronnie lives at home with his mother and that he receives services for
only a portion of the day. As a result, Crider presumed that the case reviewer concluded
that certain expenses related to Ronnie's care that had been paid directly by Barbara were
being paid instead by the facility rather than by Ronnie's household. During her
testimony, Tonya Sanders, an administrator with Community Habilitation Day Program,
confirmed that the facility was not residential in nature. She explained that the facility
was not reimbursed for expenses related to Ronnie's special diet or his personal care
needs – including the specialized laundry care, cleaning supplies, and body care products
that Barbara provided to Ronnie as directed by his physician. Sanders explained that
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these specialized diet expenses and personal care items were provided for Ronnie's
benefit directly by Barbara. Barbara alone paid for these expenses.
A new hearing officer, who had not presided during the April hearing,
issued a decision on June 21, 2005. In his decision, the hearing officer did not address
the apparent confusion over the nature of the services that Ronnie received at Community
Habilitation Day Program. Instead, he alluded to a complex mathematical formula and
concluded that the “personal needs allowance” that was regularly deducted from Ronnie's
social security income resulted in his “available income” for Medicaid purposes. That socalled income was then “expected to provide for normal living expenses such as food,
personal hygiene and laundry supplies.” In essence, that language meant that Ronnie
would no longer be eligible for reimbursement for the special foods and toiletries as
medical deductions.
Understandably disappointed with the hearing officer's decision, Barbara
filed an administrative appeal on Ronnie's behalf. On September 14, 2005, the threemember appeal board affirmed the hearing officer's decision. Citing the provisions of
907 KAR 1:145 and 907 KAR 3:130, the board concluded that the extra care items
purchased for Ronnie's benefit did not qualify as “medically necessary” as that phrase is
defined in the administrative regulations. Instead, the board held that these items
amounted to normal living expenses that were to be paid out of Ronnie's “personal needs
allowance.”
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Barbara then filed a petition for review of the appeal board's decision in
Floyd Circuit Court on October 11, 2005. She contended that the administrative decision
was arbitrary and capricious and that it had been rendered without reference to or an
understanding of the reality of Ronnie's medical exigencies.
On June 5, 2006, the Floyd Circuit Court entered findings of fact,
conclusions of law, and judgment. The court concluded that the Cabinet failed
procedurally to give Ronnie constitutionally adequate notice regarding the change to his
benefits. Additionally, it concluded that the board's decision was substantively arbitrary
and capricious. This appeal followed.
On appeal, the Cabinet contends that the circuit court applied the wrong
standard of review and erred in substituting its judgment for that of the administrative
agency. We disagree.
The provisions of KRS 13B.150 govern judicial review of a final order of
an administrative agency. That statute provides, in part, as follows:
The court shall not substitute its judgment for that of the
agency as to the weight of the evidence on questions of fact.
The court may affirm the final order or it may reverse the
final order, in whole or in part, and remand the case for
further proceedings if it finds the agency's final order is:
(a) In violation of constitutional or statutory provisions;
(b) In excess of the statutory authority of the agency;
(c) Without support of substantial evidence on the whole
record;
(d) Arbitrary, capricious, or characterized by abuse of
discretion;
(e) Based on an ex parte communication. . . ;
(f) Prejudiced by a failure of the person conducting a
proceeding to be disqualified. . . ; or
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(g) Deficient as otherwise provided by law.
The Cabinet contends that the correct legal standard requires the trial court to consider
“whether the decision by the board was supported by substantial evidence.” However,
the circuit court carefully analyzed the appeal board's decision in light of Ronnie's
unique medical condition and concluded that the board's opinion was wholly contrary to
the substantial weight of the evidence, reciting as follows: “that the items Mr. Sword
purchases for his medically ordered low-fat diet and toiletries are not a medical necessity
is against the substantial weight of the record, arbitrary, and capricious.”
In concluding that the board's decision was “against the substantial weight
of the record,” the court impliedly and logically held that the decision was not supported
by substantial evidence. The semantic distinction in phraseology is substantively
meaningless. Ronnie affirmatively produced evidence from his treating physician that
the specialized items at issue were necessary for his care. However, there was absolutely
no evidence presented by the Cabinet to refute the doctor's statement. In short, without
any evidence, the board summarily denied Ronnie's appeal.
907 KAR 3:130, Section 2 provides that the determination of whether a
benefit or service is medically necessary shall be based on an individualized assessment
of a recipient's medical needs. In order to qualify as medically necessary, a benefit shall
be:
1.
Reasonable and required to identify, diagnose, treat,
correct, cure, palliate, or prevent a disease, illness, injury,
disability or other medical condition . . .;
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2.
Appropriate in terms of the service, amount, scope, and
duration based on generally-accepted standards of good
medical practice;
3.
Provided for medical reasons rather than primarily for
the convenience of the individual, the individual's caregiver,
or the health care provider, or for cosmetic reasons;
4.
Provided in the most appropriate location, with regard
to generally-accepted standards of good medical practice,
where the service may, for practical purposes, be safely and
effectively provided;
****
His physician wrote in detail that Ronnie “requires much special care which
becomes very expensive for the household to provide and undertake.” The doctor's
statement indicated expressly that “the special care and additional cost is due to his
[diagnoses].” Clearly recognizing the burden of the added expense, the doctor
nevertheless strongly recommended an exceedingly low fat diet to help Ronnie reduce his
weight because substantial weight loss would likely increase Ronnie's mobility, decrease
his skin breakdown issues, and potentially mitigate his incontinence problems. The
doctor also commented on Ronnie's unusual body chemistry and explained that Ronnie is
unable to use regular soaps to keep clean. Additionally, because of his severe
incontinence, Ronnie requires special powders, lotions, and wipes to alleviate and prevent
skin breakdown. Special laundry aids are also necessary to permit daily washing of
Ronnie's linen.
The totality of this evidence meticulously linked the specialized items to
Ronnie's necessary medical care, rendering them “reasonable and required” as a result of
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his medical conditions in compliance with the requirements of 907 KAR 3:130. The
Cabinet made no attempt whatsoever to dispute the medical evidence.
When an agency's decision is not supported by substantial evidence, it is
considered arbitrary and capricious. Allen v. Kentucky Horse Racing Auth., 136 S.W.3d
54 (Ky. App. 2004). “No evidence” falls far short of the “substantial evidence” standard
in administrative review. Since there was no evidence to support the Cabinet's
unwarranted and unsubstantiated conclusion that Ronnie's requirements were nothing
more than normal living expenses, we hold that the circuit court correctly concluded that
the agency's decision was indeed arbitrary and capricious.
The heart of this case is the lack of substantial evidence to support the
Cabinet's position. While the timeliness of notice is not critical to our holding, it
nonetheless bolsters and reinforces the overall deficiency of the Cabinet's handling of this
case. We agree with the circuit court that the notice provided was so woefully inadequate
as to constitute a denial of fundamental due process.
We affirm the judgment of the Floyd Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Jon R. Klein
Cabinet for Health and Family Services
Frankfort, Kentucky
Sue Ellen Prater
Appalachian Research and Defense Fund
Prestonsburg, Kentucky
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