IN THE MATTER ADOPTION OF AMENDMENTS TO N.J.A.C. 10:52

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6649-04T36649-04T3

IN THE MATTER OF THE

ADOPTION OF AMENDMENTS

TO N.J.A.C. 10:52 BY THE

NEW JERSEY DEPARTMENT OF

HUMAN SERVICES, DIVISION

OF MEDICAL ASSISTANCE AND

HEALTH SERVICES.

_________________________________________________

 

Argued November 14, 2006 - Decided April 26, 2007

Before Judges Kestin, Payne and Graves.

On appeal from Department of Human Services,

Division of Medical Assistance and Health

Services.

Paul R. Murphy argued the cause for

appellants Atlantic City Medical Center, Barnert Hospital, Capital Health System at Fuld, Capital Health System at Mercer, Cathedral Healthcare System (St. Michaels/St. James), CentraState Healthcare System, Columbus Hospital, Cooper Hospital/University Medical Center, Deborah Heart & Lung Center, Englewood Hospital and Medical Center, Hackensack University Medical Center, Hackettstown Community Hospital, Hospital Center at Orange, Liberty Health System - Greenville Hospital, Liberty Health System - Jersey City Medical Center, Liberty Health System - Meadowlands Hospital, Our Lady of Lourdes Medical Center, Our Lady of Lourdes/Rancocas, Raritan Bay Medical Center, Somerset Medical Center, St. Clare's Hospital at Dover, St. Clare's Hospital at Riverside/Denville, St. Clare's Hospital at Wallkill Valley, St. Francis Hospital - Jersey City, St. Francis Medical Center - Trenton, St. Mary's Hospital - Hoboken, St. Mary's Hospital - Passaic, St. Peter's University Hospital, and UMDNJ - University Hospital (Kalison, McBride, Jackson & Murphy, attorneys; Mr. Murphy, of counsel and on the brief with James A. Robertson, Barry Liss, and Loretta M. Orlando).

Michael J. Haas, Assistant Attorney General,

argued the cause for respondent Division

of Medical Assistance and Health Services

(Stuart Rabner, Attorney General, attorney;

Mr. Haas, of counsel, Elisabeth Doyle,

Deputy Attorney General, on the brief).

PER CURIAM

In this appeal, many of the New Jersey acute care hospitals (the Hospitals) that participate in the Medicaid program and also receive supplemental payments because they serve a disproportionate share of the State's low-income population (DSH payments) challenge, as constituting arbitrary and unreasonable agency action, the adoption of three amendments to N.J.A.C. 10:52, which set forth the methodology for determining the rates received by the Hospitals for the provision of Medicaid inpatient services and the means of appeal from calculation errors. Each of the amendments was promulgated in 2005 by the Division of Medical Assistance and Health Services (Division) of the New Jersey Department of Human Services. The amendments at issue are N.J.A.C. 10:52-9.1(a), which governs appeals from errors in rate calculations; N.J.A.C. 10:52-9.1(b)2, which includes Graduate Medical Education (GME) and DSH payments as revenue when calculating marginal loss for Medicaid rate-setting purposes; and N.J.A.C. 10:52-5.10(f), which removes GME and Indirect Medical Education (IME) costs from the basis for Medicaid rates and establishes the methodology for the calculation of those costs.

On appeal, the Hospitals argue that the amendments are inconsistent with relevant federal Medicaid law and policies; they were unsupported by sufficient evidence to warrant adoption; their adoption violated procedural, substantive and administrative rights; they violate the Contract Clause of the United States Constitution; and they effect an unconstitutional taking of property. The Hospitals additionally argue that the application of the newly amended regulations to prior rate years constitutes impermissible retroactive rulemaking.

We affirm.

I.

The present appeal constitutes a further challenge by the Hospitals to the perceived inadequacy of Medicaid reimbursement rates that the hospitals commenced in 1995. While this appeal was pending, we issued an opinion in In re Hospitals' Petitions for Adjustment of Rates for Reimbursement of In-Patient Services to Medicaid Beneficiaries (Hospitals' Petitions), 383 N.J. Super. 219 (App. Div.), certif. denied, 187 N.J. 82 (2006), in which we affirmed, against various facial challenges, the manner in which revenue and costs are to be calculated under N.J.A.C. 10:52-9.1(b)2 for purposes of determining whether the appellant hospitals had sustained a "marginal loss" as the result of incremental costs incurred in providing inpatient services to Medicaid and NJ FamilyCare-Plan A fee-for-service beneficiaries, thereby entitling the hospitals to rate relief in the years 1996 through 2001. Because of its relevance to the present appeal, we discuss our prior rate appeal decision in some detail.

In order to prevail on such an appeal, a hospital must demonstrate that (1) it would sustain a "marginal loss" in providing inpatient services to Medicaid fee-for-service beneficiaries at the "rates under appeal" even if it were an economically and efficiently operated hospital; (2) the costs it must incur in providing services to Medicaid recipients; and (3) the extent to which the hospital has taken all reasonable steps to contain or reduce the costs of providing inpatient hospital services. N.J.A.C. 10:52-9.1(b)2; In re Zurbrugg Mem. Hosp., 349 N.J. Super. 27, 31 (App. Div. 2002). In Hospitals' Petitions, the hospitals argued that because N.J.A.C. 10:52-9.1(b)2 requires that they demonstrate a marginal loss at the "rates under appeal," they were entitled to an increase in rates whenever their marginal costs exceeded the total per-patient reimbursement that they received pursuant to the diagnostic related group (DRG) methodology set forth in N.J.A.C. 10:52-4.1 through 10:52-7.3. The hospitals contended that DSH payments, provided in recognition of their disproportionate share of indigent care, did not constitute an element of the "rates under appeal."

We rejected the hospitals' argument, finding it inconsistent with federal and New Jersey law and applicable precedent. Hospitals' Petitions, supra, 383 N.J. Super. at 239-41. Instead, we affirmed the Division's position that, when calculating marginal loss, the hospitals must include as revenue their entire "Medicaid reimbursement for inpatient services," a sum that includes not only DRG reimbursements but also the lump-sum DSH and other payments that the hospitals receive as Medicaid rate supplements because they serve a disproportionate share of the State's indigent population. Id. at 241-42.

After a review of the federal/state Medicaid program underlying the challenged rates, we concluded:

The federal/state Medicaid program

. . . contains, at its core, a recognition that the DRG rates paid as reimbursement for individual inpatient Medicaid care may provide inadequate compensation for the costs of treating Medicaid patients incurred by hospitals providing a disproportionate share of indigent care. Thus, the "appropriate reimbursement rate" . . . paid by the federal government as matching funds has, since the early 1980s, included a payment adjustment for such care as an element of inpatient Medicaid reimbursement. Because these Medicaid adjustments constitute a supplement to per-patient DRG inpatient rates applicable to Medicaid recipients, even if those DRG rates prove to be lower than actual costs, total revenue after receipt of any DSH supplements is designed to exceed such costs so that no hospital is worse off as the result of treating Medicaid patients. DSH payments are made to hospitals because they serve a disproportionate share of the indigent. However, 42 U.S.C.A. 1396r-4(a)(1)(B) provides that the increase in rates reflecting DSH payments is effective only for rates applicable to inpatient hospital services to Medicaid patients. That increase thus serves as an incentive to the provision of continued inpatient Medicaid care.

[Id. at 239-40 (footnote omitted).]

We recognized that, in accordance with federal law, DSH payments, however they may be used by a hospital, are not payments for services to low-income patients who are not recipients of Medicaid. They are considered Medicaid payments arising from a hospital's provision of Medicaid services, and would not be available but for the provision of such services. As stated previously, their inclusion as income when determining marginal loss serves to ensure that no hospital will be worse off because it treats Medicaid beneficiaries. Hospitals' Petitions, supra, 383 N.J. Super. at 240-41. We thus rejected the hospital's argument that the Division's interpretation of the marginal loss provisions of N.J.A.C. 10:52-9.1(b)2 so as to include DSH payments as revenue for purposes of calculating marginal loss was arbitrary or capricious. Id. at 241-42. Additionally, we concluded that the Division's determination not to subtract the costs of indigent care that is unrelated to Medicaid inpatient treatment from DSH payments in determining marginal loss was, similarly, non-arbitrary. Id. at 242. "The fact that DSH funds may have been used, in part, to provide inpatient and outpatient indigent care in addition to Medicaid-eligible inpatient fee-for-service care does not affect the conclusion, derived from federal statutes, that the funds are Medicaid supplemental allotments and can be considered as such by the Director." Ibid.

We also rejected the hospitals' argument that their administrative due process rights to fundamental fairness were denied as the result of the Division's "shifting" application of the marginal loss regulation, and that as a result, they were never afforded the opportunity to have their rate appeals heard within a meaningful time and in a meaningful manner, finding that the hospitals' due process rights had been fully protected. Id. at 245-46. And, finally, we rejected the hospitals' argument that the inclusion of DSH funds as revenue in marginal loss calculations constituted de facto rulemaking in violation of the Administrative Procedures Act (APA) as construed in Metromedia, Inc. v. Director, Div. of Taxation, 97 N.J. 313, 328-37 (1984). We stated:

What distinguishes the record here from that in Metromedia is that, in this case, a regulation in the form of N.J.A.C. 10:52-9.1(b)2 existed with respect to the calculation of marginal loss at the time of the initial appeals in 1995 and remains in somewhat amended form. In Zurbrugg, where an issue raised was the extent and nature of fixed costs that could be considered in determining marginal loss, we characterized the applicable regulation as lacking a
"definition of terms." 349 N.J. Super. at 37. However, in that case, we did not demand further rulemaking, but instead observed: "These regulations were in their first year of application, and no body of administrative decision-making existed to provide guidance to the hospitals regarding the limits of marginal loss including any consideration of fixed costs. Given this context, the agency cannot simply decline to consider the merits of any application without providing guidance to assure compliance with this newly enacted regulatory scheme." Ibid.

We construe Zurbrugg as evidence that the present matter, involving the same regulation that was at issue in Zurbrugg, is not one in which rulemaking in accordance with the APA was absent, as in Metromedia. It is a case in which the rulemaking resulted in a regulation that the hospitals claim is susceptible to interpretation in a manner that favors their position, whereas the Division, relying on statutory language, contends otherwise.

We find in this context that the Division's construction of its own rule did not require it to engage in additional rulemaking in accordance with the APA, but rather the interpretive process that occurred at the administrative level and is culminating here.

[Id. at 248-49.]

We thus affirmed the final agency determinations to utilize DSH payments as revenue in calculating marginal loss pursuant to N.J.A.C. 10:52-9.1(b)2 and to utilize Medicaid costs contained in hospital Medicare cost reports in such calculations. Id. at 250.

II.

In 2005, the Division promulgated the challenged amendments to the marginal loss, GME/IME cost calculation, and calculation error appeal regulations, inserting the indicated language into existing regulations, as follows:

N.J.A.C. 10:52-9.1(b)2, defining marginal loss for Medicaid rate purposes, was amended to provide, in relevant part:

The Division will not approve an increase in a hospital's rates unless the hospital demonstrates that it would sustain a marginal loss in providing inpatient services to Medicaid and NJ FamilyCare-Plan A fee-for-service beneficiaries at the rates under appeal even [if it] were an economically and efficiently operated hospital. Marginal loss is the amount by which a hospital's rate year's Medicaid and NJ FamilyCare-Plan A fee-for-service reimbursement for inpatient services including Graduate Medical Education (GME) and Disproportionate Share Hospital (DSH) payments is expected to fall short of the incremental costs, defined as the variable or additional out of pocket costs, that the hospital expects to incur providing inpatient services to Medicaid and NJ FamilyCare-Plan A fee-for-service patients during the rate year. These incremental costs are over and above the inpatient costs the hospitals would expect to incur during the rate year even if it did not provide service to Medicaid and NJ FamilyCare-Plan A fee-for-service patients. Any hospital seeking a rate increase must demonstrate the cost it must incur in providing services to Medicaid and NJ FamilyCare-Plan A fee-for- service beneficiaries and the extent to which it has taken all reasonable steps to contain or reduce the costs of providing inpatient hospital services.

N.J.A.C. 10:52-5.10(f), governing the calculation and removal of GME and IME costs from the hospitals' rate base, and providing for their separate reimbursement, was amended to provide:

Effective for services provided on or after October 1, 1996, GME and IME shall no longer be reimbursed through the Medicaid/NJ FamilyCare fee-for-service hospital inpatient DRG rates. After all indirect costs have been fully allocated to the using cost centers, GME and IME costs shall be removed from the cost base before calculating the standards and Medicaid/NJ FamilyCare fee-for service hospital inpatient rates. GME is removed by removing cost centers that contain adjusted GME costs before the direct patient care (DPC) rate is set. IME is removed from the DPC rate by multiplying by one minus the Indirect Medical Education (IME) factor based on the Medicare cost report and the fiscal agent's settlement data. GME and IME shall be reimbursed in accordance with N.J.A.C. 10:52-8.

The final challenged regulation, N.J.A.C. 10:52-9.1(a), governing appeals from calculation errors, was amended to state:

All hospitals, within 15 working days of receipt of the Proposed Schedule of Rates shall notify the Division of any calculation errors in the rate schedule that relate to adjustments that have been made to the rates since the previously announced schedule of rates. If upon review it is determined by the Division that the error is of substantial value, a revised rate will be issued to the hospital within 10 working days. If the discrepancy is determined to be substantial and a revised Schedule of Rates is not issued by the Division within 10 working days, notification time frames above will not become effective until the hospital receives a revised Schedule of Rates.

III.

In the present appeal, the Hospitals have challenged the amendment to N.J.A.C. 10:52-9.1(b)2, which defines reimbursements, for purposes of calculating marginal loss, as including GME and DSH payments, asserting that the amendment constitutes arbitrary and capricious agency action that was inconsistent with the express and implied policies of federal and state Medicaid statutes. They argue, as previously in Hospitals' Petitions, that DSH and GME payments should not be considered as marginal revenues because they are not patient specific, are utilized to pay for services to non-Medicaid patients, and can cover both inpatient and outpatient costs. 383 N.J. Super. at 238. They further argue, as before, that the Division acted arbitrarily in failing to request and consider cost data associated with the actual use of these distinct DSH and GME funds. Ibid. We addressed these arguments at length in our prior opinion, and we rejected them. Id. at 241-42. See also, Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d 908, 923-24 (5th Cir. 2000), reh'g en banc denied, 247 F.3d 243 (5th Cir 2001) (addressing similar issues). We perceive nothing in the Hospitals' arguments in support of the present appeal that would cause us to modify or rescind our conclusions in that regard.

We similarly reject the Hospitals' argument that the inclusion of DSH and GME payments as marginal revenue serves to undermine the purpose of Medicaid reimbursement regulations, which is to assure that hospitals receive adequate reimbursement for the services provided to Medicaid beneficiaries. As we noted in Hospitals' Petitions, such adjustments constitute a supplement to DRG inpatient rates applicable to Medicaid recipients, which rates may prove to be lower than actual costs, that is designed to ensure that no hospital is worse off as the result of treating Medicaid patients. Id. at 240. It would be illogical under the existing Medicaid statutory scheme not to include such supplementary payments as revenue, since they constitute a benefit from participation in the Medicaid program in the form of an unallocated reimbursements for inpatient Medicaid care. Id. at 241.

The Hospitals further challenge the amendment to N.J.A.C. 10:52-9.1(b)2 by arguing that the Division violated the APA because it failed to address the comments submitted by objectors to the method chosen by the Division for calculating marginal loss. However, our review of the comments to which the Hospitals refer, along with the responses of the Division, discloses that the Hospitals' complaint arises from their disagreement with the Division's position - a position that we have previously sustained - not with the level of the Division's response.

IV.

The Hospitals also object to the amendment to N.J.A.C. 10:52-5.10(f) that removes GME and IME costs from the cost base before calculating Medicaid reimbursement rates, contending that, because the IME calculation results in a smaller cost figure than would exist if the calculation were accomplished by fully utilizing Medicare reimbursement methodology, it contains an uncorrected "mathematical error" and is thus arbitrary and capricious. We disagree.

"[I]ndirect costs for medical education are those additional operating (that is patient care) costs incurred by hospitals with medical education programs (for example, added costs caused by the ordering of an increased number of tests by interns and residents in hospitals with approved programs)." 50 Fed. Reg. 21026 (May 21, 1985). In 1997, the GME/IME regulations were amended to provide, prospectively, that GME/IME expenses would be removed from a hospital's inpatient rates, and those expenses would then be separately reimbursed to hospitals in monthly payments. N.J.A.C. 10:52-5.14(f) (1997); N.J.A.C. 10:52-12.1 and -12.2 (1997) (distribution of GME/IME reimbursement); 29 N.J.R. 354-56 (January 21, 1997). The 2005 amendment to N.J.A.C. 10:52-5.10(f) was proposed to clarify the manner in which GME/IME costs would be removed. See Summary of Specific Changes Proposed, Subchapter 5, 37 N.J.R. 441 (February 7, 2005).

The proposed methodology for removing IME costs generated the comment that "[t]he proposed IME methodology described in proposed N.J.A.C. 10:52-5.10(f) is not consistent with the manner in which IME costs are calculated under Medicare reimbursement principles." Comment 14, 37 N.J.R. 2507 (July 5, 2005). That comment generated a response by the Department of Human Services that referred to its prior explanation of the 1997 Medicaid payment methodology, which it summarized by stating in relevant part:

The Department . . . explained that it removed IME costs from the costs used to set DRG rates based on Medicare's IME factor and that this removal is consistent with the Medicare methodology of excluding an allowance for IME from the costs used to set DRG rates and reimbursing IME outside of DRG rates.

The Department did not state or intend that it would remove IME costs in a manner identical to the Medicare method. The Medicare DRG rate setting methodology is based on an average cost per discharge standard (rather than a median cost per case standard) and utilizes adjustments (such as outlier and budget neutrality adjustments) that are different from those used in the New Jersey Medicaid DRG rate methodology. Because of such differences, particular adjustments may have an impact on Medicare reimbursement that is very different from the impact they would have on Medicaid reimbursement. Therefore, there is no reason for the Department to completely mirror Medicare rate-setting methods for purposes of Medicaid rate-setting. Nevertheless, the method that the Division has consistently used to remove IME costs is in fact based on the Medicare IME factor because, as the revised N.J.A.C. 10:52-5.10(f) clarifies, the removal of IME costs is accomplished by multiplying direct patient care costs by one minus the Medicare indirect medical education factor.

[Id. at 2508.]

In response to the comment that the proposed methodology "understates the Hospital's non-teaching costs for purposes of calculating standard costs per case," the Division responded that "[t]he IME factor is a proxy for cost factors that are difficult to quantify." Comment 15 and Response, 37 N.J.R. 2508. Although it admitted the "possibility that non-teaching costs will be understated or overstated," the Department concluded that its methodology was reasonable in the circumstances. Ibid.

The Division additionally declined to give only prospective effect to this cost calculation regulation, stating in response to another comment that "the methods which are clarified in the rules have been used for over eight years and are currently in use. Therefore, their continuation will not be given prospective effect only." Comment 16 and Response, 37 N.J.R. 2508.

We are aware of no statute or precedent that requires the Division to adhere strictly to Medicare reimbursement procedures when determining IME costs for purposes of Medicaid reimbursement or to adopt any particular methodology in this regard. In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 489 (2004); In the Matter of the N.J. Individual Health Coverage Program's Readoption of N.J.A.C. 11:20-1 et seq., 179 N.J. 570, 579 (2004) (placing the burden on the challenger to demonstrate that a regulation is inconsistent with its enabling statute). Nor are we persuaded that the Hospitals have met their heavy burden of demonstrating that the Division's method for calculating inherently unquantifiable costs is so unreasonable as to constitute arbitrary and capricious administrative action. New Jersey State League of Municipalities v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999); In the Matter of the Protest of Coastal Permit Program Rules, 354 N.J. Super. 293, 329-30 (App. Div. 2002).

V.

In challenging the amendment to N.J.A.C. 10:52-9.1(a), which governs appeals from calculation errors, the Hospitals claim that, by limiting appeals to claims for relief "that relate to adjustments that have been made to the rates since the previously announced schedule of rates," the amendment would "prohibit a hospital from addressing a calculation error from a previous rate year or years that has not been corrected by the Division and continues to impact the hospital in the current rate year."

We find the Hospitals' concerns to be misplaced, construing the amendment merely to prevent the late recognition of a long-standing calculation error that was not timely appealed - a practice that could engender difficult and financially unforeseeable retroactive rate adjustments. See Summary of Specific Changes Proposed, Subchapter 9, 37 N.J.R. 442. The amendment was not designed to prevent the continuation of ongoing timely rate calculation appeals or the application of favorable results from those appeals to subsequent rates, when likewise appealed in a timely fashion. The Department's responses to comments at the time the amendment to N.J.A.C. 10:52-9.1(a) was proposed provide the foundation for our conclusion that such a result was not intended. In response to a comment that mirrors the Hospitals' position on appeal, the Department stated:

Hospitals have an obligation to review their rates annually and, if appeal of those rates is appropriate, to appeal in a timely manner. If a timely appeal of those rates has not been filed, the rules do not permit a hospital to challenge a prior year's rate calculation in an appeal filed in a later year. It is a hospital's responsibility to comply with procedural appeal requirements. Separately, with regard to rates which were appealed in a timely manner and which have a decision pending at the time of a second appeal, if a hospital is successful in its appeal with regard to specific issues, the amendment will not be used as described with regard to those issues. If a hospital receives an adverse decision with regard to specific issues in a particular appeal, those issues cannot be raised again in subsequent appeals.

[Comment 18 and Response, 37 N.J.R. 2508.]

The Department further assured hospitals that it would not change its administrative practices in connection with calculation rate appeals so as to deny such appeals on a procedural basis that had not been previously recognized. Comment 19 and Response, 37 N.J.R. 2508. It stated that the "Division will continue to address issues that are appealed in a timely manner." Ibid. Only "[i]ssues that were not appealed in a timely manner" would be barred from review. Ibid. Because no change in procedures was envisioned, the Division declined to implement the amendment on a prospective basis only. Comment 20 and Response, 37 N.J.R. 2508.

Contrary to their arguments, the Hospitals have not been deprived of their rights of appeal. Those rights are limited, as they always have been, by appeal deadlines of a type commonly established by procedural rules. No other restraint on the Hospitals' rights exists. In this circumstance, we find nothing arbitrary or capricious in the Division's action in amending N.J.A.C. 10:52-9.1(a).

VI.

We summarily address the Hospitals' constitutional arguments, which we regard as lacking in merit. The Hospitals first claim a denial of procedural due process. However, as we have demonstrated, a right to timely appeal rate calculation errors remains intact, and the existence of a right to appeal from the substance of the rate-setting regulations is manifest as the result of the present and prior appeals to this court. We thus do not find the deprivation that the Hospitals assert. Doe v. Poritz, 142 N.J. 1, 99 (1995); Div. of Youth & Fam. Servs. v. M.Y.J.P., 360 N.J. Super. 426, 464-65 (App. Div), certif. denied, 177 N.J. 575 (2003), cert. denied, 540 U.S. 1162, 124 S. Ct. 1176, 157 L. Ed. 2d 1207 (2004).

The Hospitals likewise claim a deprivation of substantive due process. However, the "guarantee of substantive due process requires only that the legislative enactment not be unreasonable, arbitrary or capricious and that the means selected to achieve the governmental objectives bear a rational relationship to those objectives." Singer v. Twp. of Princeton, 373 N.J. Super. 10, 20 (App. Div. 2004). A statute or regulation that "does not affect a fundamental right, and is supported by a conceivable rational basis . . . will withstand a substantive due process challenge." Id. at 21. Because a regulation should be sustained if it has any conceivable rational purpose, a challenge to it can be successful only if every basis that supports its adoption is eliminated. Ibid. An entity's substantive due process rights are not violated if the regulations at issue are "'reasonably related to a legitimate legislative purpose and [are] not arbitrary or discriminatory.'" In re Certif. of Need Granted to the Harborage, 300 N.J. Super. 363, 386-87 (App. Div. 1997) (quoting In re Plan for Orderly Withdrawal from N.J. of Twin City Fire Ins. Co., 129 N.J. 389, 406 (1992), cert. denied, 506 U.S. 1086, 113 S. Ct. 1066, 122 L. Ed. 2d 370 (1993)). Our prior discussion of the regulations at issue here and in Hospitals' Petitions demonstrates the absence of a sufficient foundation for the Hospitals' constitutional claim in this regard.

The Hospitals further contend that "by failing to correct the GME/IME calculation, limiting a hospital's calculation error appeals, and including DHS and GME/IME payments in the marginal loss calculation, the Division has essentially eviscerated the rate appeal process and made it completely meaningless" thereby violating their federal and state administrative due process rights. In light of our resolution of the substantive issues in this matter and in Hospitals' Petitions, we see no more merit in this argument than in the previous ones.

The Hospitals additionally argue that the 2005 amendments violate the Contract Clause of the United States and New Jersey Constitutions and that the amendments constitute an unconstitutional taking of the Hospitals' property without just compensation. We decline to address these arguments, finding that they lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

VII.

As a final matter, we do not accept the Hospitals' argument that the regulatory amendments at issue should have a solely prospective application, determining instead, in accordance with the expressed intent of the Division, that they should be applied retroactively because they do not effect a substantial change in administrative practices. No manifest injustice or interference with a vested right will occur as the result of such retroactive application. State Troopers Fraternal Ass'n v. State, 149 N.J. 38, 54 (1997); Rahway Hosp. v. Horizon Blue Cross Blue Shield of NJ, 374 N.J. Super. 101, 112 (App. Div.), certif. denied, 183 N.J. 217 (2005). As our prior discussion has revealed, the amendments to the error calculation and the IME cost regulations do nothing more than codify procedures that have been long in place and thus effect no change in existing procedures. Although, in Hospitals' Petitions, we did not specifically address the 2005 amendment to N.J.A.C. 10:52-9.1(b)2, 383 N.J. Super. at 226 n.3, we approved the Division's long-standing methodology of including DSH and GRE/IME payments as revenue when calculating marginal loss and permitted the application of that methodology to the appeals from rates established for the years 1996 to 2001. Id. at 238-43. We find no principled basis for determining, now that the methodology has been codified, that the codification lacks retroactive application.

 
Affirmed.

DRG rates are figured on a median cost basis.

The referenced comments are 22, 23, 26, 30, and 32, set forth at 37 N.J.R. 2508-09 (July 5, 2005).

The regulation was subsequently renumbered N.J.A.C. 10:52-5.10(f).

Outlier cases are those at the extreme of a range, such as very high-cost cases. The Department contends that it utilizes median values for Medicaid purposes, because they are less affected by such extremes than are mean values. 29 N.J.R. 352 (January 21, 1997).

(continued)

(continued)

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April 26, 2007