IN THE CONSOLIDATED MATTERS OF JERSEY SHORE NURSING v. DEPARTMENT OF HEALTH AND SENIOR SERVICES

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2433-08T22433-08T2

IN THE CONSOLIDATED MATTERS OF

JERSEY SHORE NURSING & REHAB,

MAPLE GLEN MANOR, INGLEMOOR CENTER

and SUMMIT RIDGE NURSING,

Petitioners-Appellants,

v.

DEPARTMENT OF HEALTH AND

SENIOR SERVICES,

Respondent-Respondent.

________________________________________________________________

 

Argued January 11, 2010 - Decided

Before Judges Lisa and Baxter.

On appeal from the Department of Health and Senior Services, No. 0127B.

W. Craig Knaup argued the cause for appellants.

Susan J. Dougherty, Deputy Attorney General, argued the cause for respondent (Anne Milgram, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Dougherty, on the brief).

PER CURIAM

In these consolidated appeals, four nursing homes, Jersey Shore Nursing and Rehabilitation, Inglemoor Center, Maple Glen Manor and Summit Ridge Nursing, appeal from a December 5, 2008 final agency decision of the Commissioner of the Department of Health and Senior Services (Commissioner or Department) in which the Commissioner affirmed the decision of an administrative law judge (ALJ). The ALJ concluded that the patient beds and mattresses used in these four nursing homes to prevent decubitous ulcers (bed sores) were special medical equipment not eligible to be included when calculating each facility's per diem Medicaid rate for routine care.

On appeal, the nursing homes maintain that: the Commissioner's decision to disallow rental costs for the beds in question was arbitrary, capricious and unreasonable; the Commissioner's conclusion that the equipment in question is a specialty item not generally used in nursing homes throughout the State is in error; and the ALJ's legal analysis, which the Commissioner adopted, failed to address the factual and legal issues raised by the nursing homes. We disagree and affirm.

I.

The trial before the ALJ included no witness testimony. Instead, the parties submitted a stipulated set of facts along with documentary submissions, after which both sides presented closing arguments. We derive our summary of the record from the stipulations and exhibits that were presented.

In April 2004, each of the four nursing homes submitted a costs report for the calendar year ending on December 31, 2003. Such cost reports are used by the Department to establish prospective per diem rates for the provision of routine nursing facility services to nursing home patients under the State's Medicaid Program. N.J.A.C. 8:85-3.1(a). The Department's regulatory framework used to set nursing home reimbursement rates is derived from the Cost Accounting and Rate Evaluation Guidelines, N.J.A.C. 8:85-3.1 to -4.3 (the CARE Regulations). The CARE Regulations specify that the reimbursement rate shall be "either a statistically 'reasonable' rate based upon a method of peer comparison within discrete categories or the facility's actual costs, whichever is lower." In re Medicaid Long Term Care Servs. Bulletin 84-2, 212 N.J. Super. 48, 52 (App. Div.), certif. denied, 107 N.J. 31 (1986).

Costs incurred by a nursing home cannot be included in the setting of the nursing home's per diem rate unless the equipment in question is routinely used in patient care. N.J.A.C. 8:85-2.15(c). In contrast, specialized medical equipment is not considered to be routinely used, and the cost of such specialized equipment is only reimbursable from Medicaid to the extent that such equipment is used to provide "medically necessary" care to Medicaid patients, and then only if the equipment is pre-authorized by the Medical Assistance Customer Center serving the county in which the nursing home is located. N.J.A.C. 8:85-2.15(d).

The CARE Regulations establish two broad categories of expenses related to beds and mattresses in a nursing home. One is eligible for consideration in setting the per diem rate; the other is not. Specifically, "[l]ow-end pressure relief systems, [which include] for example, mattress overlays, mattress replacements, powered mattress systems and powered flotation beds" are considered to be routinely used durable medical equipment and are an approved cost used to calculate a nursing facility's per diem reimbursement rate. N.J.A.C. 10:59-1.4(a)(xii); N.J.A.C. 10:59-1.14(c); N.J.A.C. 8:85-2.15(c).

In contrast, special medical equipment, such as air fluidized and low airloss therapy beds, are not considered routinely used medical equipment, and the cost of such equipment is only reimbursable from Medicaid if such use is pre-authorized. N.J.A.C. 8:85-2.15(d). In particular, the regulations define an "air fluidized therapy bed" as a device that circulates filtered air through ceramic spherules (small-round ceramic objects). N.J.A.C. 8:85-1.2. The same regulation defines a "low airloss therapy bed" as a bed frame that is "equipped with air sacs which are grouped into zones corresponding to various body areas. The air sacs are inflated by a constant flow of air, some of which is directed through the air sacs to the patient surface." Ibid. Thus, neither an "air fluidized therapy bed" nor a "low airloss therapy bed" is eligible to be included in the setting of the per diem rate. Ibid.

At issue in this appeal are six types of equipment, which we now describe by reference to the parties' stipulated facts:

The Clinitron Rite Hite Air Fluidized Therapy bed is an air fluidized therapy device that employs the circulation of filtered air through ceramic spherules.

The Clinitron 2 Air Fluidized Therapy bed is an air fluidized therapy device that employs the circulation of filtered air through ceramic spherules.

The Magnum II Bariatric Patient Care System is a bariatric patient care system designed specifically for the obese patient, and functions as a bed, chair and transport vehicle.

The Prime-Aire Therapy Surface device is a pressure relief system with zoned air cushion sections.

The Flexicair Eclipse Bariatric Low Airloss Therapy Unit is a bariatric low airloss mattress replacement system.

The Specialty Big Boy bed is also known as the Magnum II Bariatric Patient Care System, which is a bariatric care system designed specifically for the obese patient, and functions as a bed, chair and transport vehicle.

Applying the set of stipulated facts and documents contained in the parties' joint exhibits, the ALJ reviewed the Department's conclusion that the beds were non-routine and therefore non-allowable in the calculation of the per diem rate. The ALJ concluded that the Commissioner's decision was neither arbitrary nor capricious. In particular, the ALJ found that both the Clinitron Rite Hite beds and the Clinitron 2 Air Fluidized Therapy beds are "air fluidized therapy device[s] that employ the circulation of filtered air through ceramic spherules," thus falling within the definition of "air fluidized beds" that are not allowable in the calculation of a nursing home's per diem reimbursement rate. See N.J.A.C. 8:85-1.2. Second, the ALJ concluded that the Magnum II Bariatric Patient Care System beds and the Specialty Big Boy beds are "bariatric patient care systems designed specifically for the obese patient, and function as a bed, chair and transport vehicle." Because they are specialty beds for obese patients, these beds do not constitute routinely used durable medical equipment, and therefore, the costs associated with these beds are not reimbursable as part of the nursing homes' per diem reimbursement rate unless pre-authorization was obtained, which was not done. See N.J.A.C. 8:85-2.15(d).

Third, the ALJ concluded that the Flexicair Eclipse Bariatric Low Airloss Therapy Unit is a bariatric low airloss mattress replacement system for use with obese patients. For the same reason, she concluded that the Magnum II and Specialty Big Boy beds are not routinely used in the care of Medicaid patients and thus cannot be included in the calculation of the per diem rate.

Fourth, the ALJ determined that the Prime-Aire Therapy Surface device and the Flexicair Eclipse Unit do not fall within the definition of a "low-end" pressure relief system as defined in N.J.A.C. 10:59-1.4(a)(xii) because they are not inflated by a constant flow of air and therefore do not satisfy the definition of "low-end" pressure relief systems.

Moreover, because the equipment associated with all of these rental fees is specialized medical equipment, the ALJ held that the rental fees for this equipment must be excluded from the facilities' per diem rate calculation unless the facilities requested advance approval for their use, which, as we have discussed, was not done.

The ALJ entered judgment in the Department's favor. The Commissioner adopted the ALJ's decision on December 5, 2008.

II.

Our review of a final determination of an administrative agency is very limited. We will not interfere unless there is clear showing that the decision was arbitrary, capricious or unreasonable, or that it lacks fair support in the evidence. Barone v. Dep't of Human Servs., Div. of Med. Assistance & Health Servs., 210 N.J. Super. 276, 285 (App. Div. 1986), aff'd, 107 N.J. 355 (1987). Our review is restricted to "'whether the findings made could reasonably have been reached on sufficient credible evidence present in the record, considering the proofs as a whole, with due regard . . . to the agency's expertise where such expertise is a pertinent factor.'" Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 92-93 (1973) (quoting Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)). The burden of showing that an agency's decision was arbitrary, capricious or unreasonable lies with the appellant. Barone, supra, 210 N.J. Super. at 285. If an agency's decision meets those criteria, we are obliged to give substantial deference to the agency's superior expertise and knowledge in its particular field. In re License Issued to Zahl, 186 N.J. 341, 353 (2006).

Indeed, where an agency's interpretation of its own regulations is at issue, such interpretation is entitled to be accepted as against a competing interpretation so long as the agency's view does not contravene the scope of the regulation or otherwise results in arbitrary, capricious or unreasonable action. Bergen Pines County Hosp. v. N.J. Dep't of Human Servs., 96 N.J. 456, 478 (1984). "Since the reimbursement rates of healthcare facilities are within the peculiar competence of the agency that promulgated the rules and not the special competence of the courts, we must accord substantial deference to the administrative determinations." Ibid.

III.

The nursing homes urge us to reverse the Commissioner's decision, arguing that because the Department did not audit the cost reports they submitted or request further documentation regarding whether the subject equipment constituted routine or special medical equipment, the Department had no basis for determining the costs associated with that equipment were non-routine and therefore non-allowable. The record demonstrates that the cost reports and product codes the nursing homes submitted to the Department in connection with the calculation of the 2004 per diem rate plainly and unambiguously showed that the equipment in question constituted specialty beds. We thus reject this argument as meritless.

The nursing homes also argue that because the specialty beds are "routinely" used by nursing facilities to treat pressure ulcers, they constitute "routinely used medical equipment" and the costs associated with that equipment should therefore be included in the calculation of their per diem rates. However, as the Commissioner correctly argues, the fact that a piece of equipment is routinely used to address a particular condition does not mean that it qualifies as routinely used medical equipment. Costs associated with special medical equipment used to provide particularized care to residents with special needs, such as obese patients or patients with pressure ulcers, are not included in the per diem rate, and Medicaid's responsibility for those costs is addressed separately. See N.J.A.C. 8:85-2.15(d).

The nursing homes also contend that there is a genuine issue of material fact regarding the distinction in the regulations between air fluidized therapy beds and low airloss therapy beds on the one hand, and "mattress overlays, mattress replacements, powered mattress systems and powered flotation beds," on the other, and that expert testimony is necessary to resolve this issue. They therefore maintain that the ALJ wrongly granted summary decision in the Department's favor, and that the Commissioner erred by relying on the ALJ's decision. However, as is evident, the nursing homes have offered no explanation as to what type of testimony could shed light on this issue. Moreover, as the Department argues, if the regulations are unclear, that is a legal question, not a factual one.

The nursing home's remaining arguments lack sufficient merit to warrant discussion. R. 2:11-3(e)(1)(D) and (E).

 
Affirmed.

Because all four of the nursing homes are owned by the same parent company, Genesis Eldercare, and the administrative appeals involved the same issue, the Administrative Law Judge consolidated the four appeals for purposes of disposition. Therefore, the four matters come to us in a consolidated posture.

The Federal Medicaid statute requires participating states to develop methodologies for the calculation of rates to be used to reimburse nursing facilities for the reasonable costs of providing care to Medicaid patients. 42 U.S.C.A. 1396a(a)(30)(A). The CARE Regulations were issued in response to that federal mandate.

The term "bariatric" here refers to a piece of equipment used by persons who are obese.

(continued)

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A-2433-08T2

January 27, 2010