DOCKET |
05-P-642 |
Dates: |
March 10, 2006. - June 8, 2006. |
Present |
Lenk, Cypher, & Graham, JJ. |
County |
Suffolk |
KEYWORDS |
Division of Medical Assistance. Medicaid. Hospital,
Medicaid reimbursement. Due Process of Law, Vagueness of
regulation. Administrative Law, Regulations. Words, "Medically
necessary." |
Civil action commenced in the Superior Court Department on July
9, 2003.
The case was heard by Nonnie S. Burnes, J., on a motion for
judgment on the pleadings.
James J. Arguin, Assistant Attorney General, for the
defendant.
Peter V. Kent (Charlene E. Kent with him) for the
plaintiff.
GRAHAM, J. On June 13, 2003, after an adjudicatory hearing, a
hearing officer of the Division of Medical Assistance (Division(1))
denied the plaintiff, Massachusetts General Hospital (MGH),
reimbursement for inpatient services it provided to three Medicaid
patients. The denial was based on a determination that the provision
of inpatient services was not "medically necessary," as required by
the regulations governing Medicaid reimbursement. MGH sought review
in the Superior Court pursuant to G. L. c. 30A, § 14(7), and moved
for judgment on the pleadings to vacate the Division's decision. A
judge of the Superior Court granted the motion and reversed the
Division's decision on the basis that the Division's regulations
violated MGH's due process rights because they failed to provide the
plaintiff with sufficient "guidance for determining whether a
patient admission is appropriate." The judge also determined that
the Division "improperly relied upon hindsight" in making its
determinations. The Division appeals from the Superior Court
judgment. We reverse and remand for further proceedings consistent
with this opinion.
1. Background. a. The patients. The reimbursements at issue were
sought by MGH for services provided to three Medicaid patients, whom
we call AC, DH, and EQ. In conjunction with making his determination
that denial of reimbursement for inpatient services was appropriate,
the Division's hearing officer made the following findings of fact
as to these patients.
"Member AC, a 58 year-old female with a history of
asthma, atrial fibrillation, hypertension, and status post an
atrial septal defect repair, was admitted to the emergency room
with low back pain after a fall. . . . [Her] X-rays showed a
compression fracture at L2. . . . [She] had no concerning
neurological signs, a temperature of 101 degrees, a pulse of 95, a
respiratory rate of 24, a blood pressure of 136/82, and an oxygen
saturation of 94%. She had mild left lower quadrant tenderness and
expiratory wheezes. A chest X-ray was normal, and urinalysis was
positive for white blood cells. . . . [She] was treated with oral
antibiotics, oral pain medications, and nebulizers. . . .
Compression fractures are usually managed in an outpatient
setting. . . . Member AC had limited social
supports."
"Member PH, a 61 year-old male, presented to the
hospital with a bulge in the left inguinal area. He underwent an
elective hernia repair on November 7, 2000 in the outpatient
setting. . . . [He] emerged from surgery without complications . .
. . [He] was upgraded to the inpatient setting on November 8 and
discharged on November 9. He had some nausea and one episode of
vomiting following IV hydration. . . . [I]n 1998 [he] also
experienced nausea following general anesthesia . . . . IV fluids,
antiemetics and antibiotics are routine following surgery and
could have been provided to P.H. in an outpatient setting. . . .
In Dr. Hopkins' [MGH's expert witness's] opinion, member PH's
vomiting 24 hours after surgery warranted his admission as an
inpatient."
"Member EQ, a 52 year-old male with [a] history of
diabetes, presented to the emergency room on February 2, 2002
following a two-day history of vomiting. . . . [He] was admitted
on February 2 and discharged on February 6 . . . [His] tests were
within normal limits, and there was no concern of intra-abdominal
issues. . . [He] was improving each day. In Dr. Siegel's [the
Division's expert witness's] opinion, the care provided to [him],
while appropriate, could have been provided to him in a specially
designated hospital observation bed. . . . Member EQ was a brittle
diabetic. In Dr. Hopkins['] opinion, his condition necessitated
active management of his glucose and insulin levels. However,
[his] condition did not require active
intervention."
b. The regulations. The Division is responsible for administering
the Massachusetts Medicaid program. Medicaid "is a joint Federal and
State program established under Title XIX of the Social Security Act
designed to provide medical services to those in financial need."
Athol Memorial Hosp. v. Commissioner of the Div. of Med. Assistance,
437 Mass. 417, 418 n.3 (2002). In order to receive Federal funds,
the Division is required by Federal law to establish administrative
mechanisms to "safeguard against unnecessary utilization of . . .
care and services and to assure that payments are consistent with
efficiency, economy, and quality of care. . . ." 42 U.S.C. §
1396a(a)(30)(A) (2000).
To comply with this requirement, the Division issued 130 Code
Mass. Regs. § 450.204 (2001), which provides that only "medically
necessary" services will be reimbursed. A service is medically
necessary if it is (1) reasonably appropriate to the patient's
medical needs (i.e., medically appropriate) and (2) provided in the
appropriate setting (i.e., outpatient or inpatient).(2) The Division
has also established a utilization management program to conduct
reviews of hospital admissions. This program is based on peer review
and is designed to ensure that the requirements of 130 Code Mass.
Regs. § 450.204 are met.(3) See 130 Code Mass. Regs. §§ 450.206,
450.207 (1999).
The Division denied reimbursement for services provided by MGH in
the three cases currently at issue based on MGH's failure to show
that the services it provided were "medically necessary" within the
meaning of 130 Code Mass. Regs. § 450.204. In each case, the
Division determined that the services provided to the patients
satisfied the first prong of the test, as they were "medically
appropriate," but did not satisfy the second prong of the test
because they should have been provided in an outpatient, rather than
an inpatient, setting.
MGH appealed from these determinations, arguing that the
Division's regulations governing the utilization management program
do not provide sufficient guidance on when inpatient services are
appropriate and allow the Division to make arbitrary decisions. The
Superior Court judge reversed the Division's decision based on her
determination that the regulations violated due process because they
do not provide hospitals with adequate guidance on the appropriate
standards applying to inpatient admissions. The judge also
determined that the Division's hearing officer improperly relied on
hindsight in making his determination. The Division contests both of
these determinations on appeal.(4)
2. Validity of regulations. On appeal, MGH relies on two legal
theories to support its argument that the Division's regulations are
invalid. First, it argues that the regulations are impermissibly
vague, in violation of the Fourteenth Amendment to the United States
Constitution. Second, it argues that the regulations, as
administered, are in conflict with the Federal legislative mandate
under 42 U.S.C. § 1396a(a)(30)(A).
a. Due process. We begin by reviewing MGH's due process argument.
"A law is void for vagueness if persons 'of common intelligence must
necessarily guess at its meaning and differ as to its application,'"
Caswell v. Licensing Commn. for Brockton, 387 Mass. 864, 873 (1983),
quoting from Connally v. General Constr. Co., 269 U.S. 385, 391
(1926), or if it "subjects people to an unascertainable standard."
Brookline v. Commissioner of the Dept. of Envtl. Quality Engr., 387
Mass. 372, 378 (1982).
Challenges for vagueness are usually raised in the criminal
context. See Massachusetts Fedn. of Teachers, AFT, AFL-CIO v. Board
of Educ., 436 Mass. 763, 780 (2002). While civil statutes are also
subject to scrutiny for vagueness, "[t]he test is less strict when
the law involves the regulation of business and economic activity
and does not inhibit the exercise of constitutionally protected
rights." Ibid. We also limit our analysis "to whether [the
regulations are] unconstitutionally vague as applied in this case,"
without considering its constitutionality as applied to other cases.
Caswell v. Licensing Commn. for Brockton, 387 Mass. at 873.
In addition, we recognize that "the practical necessities of
discharging the business of government inevitably limit the
specificity with which [a regulatory agency] can spell out
prohibitions." Brookline v. Commissioner of the Dept. Of Envtl.
Quality Engr., 387 Mass. at 378, quoting from Boyce Motor Lines,
Inc. v. United States, 342 U.S. 337, 340 (1952). We also recognize
that the "subject matter and the circumstances" will affect the
degree of certainty to which standards can be established. Burnham
v. Board of Appeals of Gloucester, 333 Mass. 114, 118
(1955).
The Division's regulations, as applied to the present case, do
not fall below this standard. In addition to defining the term
"medically necessary" in 130 Code Mass. Regs. § 450.204, the
regulations provide hospitals with several sources of guidance in
interpreting this definition. Title 130 Code Mass. Regs. § 415.402
(1999) provides definitions related to inpatient and outpatient
services.(5) Title 130 Code Mass. Regs. § 415.414(C) (2000) provides
a list of factors that doctors should consider when deciding whether
to admit an individual as an inpatient.(6) And the acute inpatient
admission guidelines, to which reference is made in 130 C.F.R. §
415.414(C)(7), provide concrete examples of situations in which
inpatient hospital admission would generally not be medically
necessary.(7)
The guidelines read in conjunction with the regulations do not
present an "unascertainable standard," nor do they require "persons
'of common intelligence [to] necessarily guess at [their] meaning
and differ as to [their] application." Caswell v. Licensing Commn.
for Brockton, 387 Mass. at 873, quoting from Smith v. Goguen, 415
U.S. 566, 572 n.8 (1974). See Brookline v. Commissioner of the Dept.
of Envtl. Quality Engr., 387 Mass. at 387. See also Gurry v. Board
of Pub. Accountancy, 394 Mass. 118, 126-130 (1985) (finding that
regulation disciplining accountants for acts "discreditable to the
profession" was not impermissibly vague); Cherubino v. Board of
Registration of Chiropractors, 403 Mass. 350, 356-358 (1988)
(finding that regulation disciplining chiropractor for
"[o]verutilization of practice" was not impermissibly
vague).
b. Compliance with Federal mandate. We now address the
plaintiff's claim that the Division's regulations were inconsistent
with the Federal legislative mandate. When reviewing the Division's
regulations "we must apply all rational presumptions in favor of the
validity of the administrative action and not declare it void unless
its provisions cannot by any reasonable construction be interpreted
in harmony with the legislative mandate." Consolidated Cigar Corp.
v. Department of Pub. Health, 372 Mass. 844, 855 (1977). However, "a
regulation that is irreconcilable with an agency's enabling
legislation cannot stand." Quincy v. Massachusetts Water Resources
Authy., 421 Mass. 463, 468 (1995).
In determining "whether the agency conformed with the controlling
statute[,] . . . . [w]e are limited to a determination whether the
State action is arbitrary, capricious, or contrary to law."
Massachusetts Hosp. Assn. v. Department of Pub. Welfare, 419 Mass.
644, 652 (1995). See Tarin v. Commissioner of the Div. of Med.
Assistance, 424 Mass. 743, 750 (1997). "[A] court cannot 'substitute
[its] judgment as to the need for a regulation, or the propriety of
the means chosen to implement the statutory goals, for that of the
agency, so long as the regulation is rationally related to those
goals.'" Massachusetts Fedn. of Teachers, AFT, AFL-CIO v. Board of
Educ., 436 Mass. 763, 772 (2002), quoting from American Family Life
Assur. Co. v. Commissioner of Ins., 388 Mass. 468, 477, cert.
denied, 464 U.S. 850 (1983).
Both the plaintiff and the judge below rely on the Supreme
Judicial Court's holding in Massachusetts Eye & Ear Infirmary v.
Commissioner of the Div. of Med. Assistance, 428 Mass. 805 (1999)
(Mass. Eye & Ear), to support their position that the Division's
regulations are "so lacking in standards as to be arbitrary." Id. at
814. In Mass. Eye & Ear, the court held that a prior version of
the presently disputed regulations did not "comport with the mandate
of the Federal statute" that they implemented. Id. at 817.
The court in Mass. Eye & Ear identified three areas where the
regulatory regime fell short: (1) the regulations "fail[ed] to
define '[m]edical [n]ecessity' in any meaningful manner," id. at
813; (2) the review process improperly relied on hindsight in
determining the appropriateness of a doctor's decision to admit,
rather than "tak[ing] into account the physician-assessed risk to
the particular patient at the time of admission," id. at 814-815;
and (3) the Division imposed a "severe all-or-nothing penalty on
providers who render appropriate treatment in the 'wrong' setting,"
id. at 816.(8) The Court then gave two alternatives for remedying
the problem:
"The division may operate on a case-by-case basis to
determine the appropriate level of care, defined in some
meaningful way, and allow reimbursement at that level, provided
there is adequate review of its decision. Or it may promulgate
clear rules and deny all reimbursement to providers who seek
reimbursement at levels not in compliance with those
rules."
Id. at 817. A thorough review of the Division's regulations,
considered in conjunction with the inpatient guidelines, note 7,
supra, convinces us that the current regulations comply with the
requirements set out by Mass. Eye & Ear.
As discussed, for purposes of authorizing reimbursement for
inpatient services, the regulations essentially define "medical
necessity" as a medically appropriate service that cannot
effectively be provided in a less costly outpatient setting. In view
of the specificity provided by the appropriate factors and the
guidelines (see notes 5-7, supra), we conclude that the regulations
sufficiently define "medical necessity" to allow providers to
determine in what circumstances an inpatient admission is
appropriate. In particular, we point to the inclusion of
"Observation Services" as defined in 130 Code Mass. Regs. § 415.402
(see note 5, supra), and the evident thrust of the regulatory scheme
favoring what might best be termed an intermediate level of care,
"outpatient hospital services provided . . . in an acute inpatient
hospital," affording a closer clinical observation and monitoring of
patients who may need it without the need (or cost) of an inpatient
admission, before resort to inpatient services. See guidelines at
note 7, supra. This thread runs throughout the regulations and
guidelines, which strike a balance between the need for medically
appropriate care and the use of the least expensive setting to
provide that care.
The plaintiff next asserts, and the judge concluded, that the
review process improperly relies upon hindsight. This is facially
incorrect. "Reviewers consider the medical-record documentation of
clinical information available to the admitting provider at the time
the decision to admit was made. Reviewers do not deny admissions
based on what happened to the member after the admission." 130 Code
Mass. Regs. § 415.414(B)(1) (2000).(9)
Unlike in Mass. Eye & Ear, the Division has "compl[ied] with
the Federal statutory mandate to provide utilization review that
'assure[s] that payments are consistent with efficiency, economy,
and quality of care.'" Mass. Eye & Ear, supra at 814, quoting
from 42 U.S.C. § 1396a(a)(30)(A). The regulatory scheme is
sufficient to meet the requirements set forth in Mass. Eye &
Ear, and is not "arbitrary, capricious, or contrary to law" as the
plaintiff suggests. Massachusetts Hosp. Assn. v. Department of Pub.
Welfare, 419 Mass. at 652.
3. Substantial evidence. MGH asserted below that the Division's
decision to deny reimbursement in each of the three cases was not
supported by substantial evidence. In light of her decision on
constitutional grounds, the Superior Court judge did not reach the
issue. Neither party addresses the issue before us,(10) which we do
not reach in the first instance on appeal. We remand this matter to
the Superior Court for a determination whether there is substantial
evidence to support the Division's decision in these cases.
The judgment is reversed, and the case is remanded to the
Superior Court for further proceedings consistent with this
opinion.
So ordered. Footnotes
(1) In 2003, the Division of Medical Assistance was renamed the
Office of Medicaid. As this action was begun before this name change
occurred, we refer to the Office of Medicaid by its former
title.
(2) Title 130 Code Mass. Regs. § 450.204 (2001) reads as
follows:
"A service is 'medically necessary' if:
"(1) it is reasonably calculated to prevent, diagnose, prevent
the worsening of, alleviate, correct, or cure conditions in the
member that endanger life, cause suffering or pain, cause physical
deformity or malfunction, threaten to cause or to aggravate a
handicap, or result in illness or infirmity; and
"(2) there is no other medical service or site of
service, comparable in effect, available, and suitable for the
member requesting the service, that is more conservative or less
costly to the Division. Services that are less costly to the
Division include, but are not limited to, health care reasonably
known by the provider, or identified by the Division pursuant to a
prior authorization request, to be available to the member through
sources described in 130 CMR 450.317(C), 503.007, or
517.007."
(3) The utilization management program prepayment review is
primarily administered by the Massachusetts peer review organization
(MassPRO), which the Division appointed to conduct this review. The
review occurs in several stages and is based on the medical records
submitted by the hospital to the Division, pursuant to 130 Code
Mass. Regs. § 450.209(B) (1999). A registered nurse conducts an
initial screening of the records; the nurse may either approve a
claim or refer it to a physician reviewer, but may not independently
deny a claim. The referred claims are then reviewed by a licensed
physician actively practicing in the same clinical discipline as the
care in question. If the reviewing physician determines that
reimbursement should be denied, a proposed initial determination is
sent to the hospital.
If the hospital disagrees with the determination, it must respond
by submitting additional documentation or by a teleconference with
the reviewing physician. The file is then reviewed by a second
physician. If the second physician upholds the initial
determination, an initial admission denial is sent to the
hospital.
The hospital may then file for reconsideration of the matter,
after which a third physician will evaluate the file. If this
physician concurs with the decision, a final determination letter is
sent to the hospital, notifying it of the decision. The hospital may
then file an appeal for a hearing before the Division to determine
whether the decision is erroneous.
When reviewing the file, each physician will review the
"inpatient services provided to members to determine the medical
necessity, pursuant to 130 CMR 450.204 . . . Reviewers consider the
medical-record documentation of clinical information available to
the admitting provider at the time the decision to admit was made.
Reviewers do not deny admissions based on what happened to the
member after the admission. However, if an admission was not
medically necessary at the time of the decision to admit, but the
medical record indicates that an inpatient admission later became
medically necessary, the admission will be approved as long as all
other Division requirements are met." 130 Code Mass. Regs. §
415.414(B)(1) (2000).
(4) MGH appealed from the Division's decision both on
constitutional grounds and on the basis that the decision was
unsupported by substantial evidence. The judge did not address the
question of substantial evidence because she reversed on
constitutional grounds pursuant to a motion for judgment on the
pleadings. Neither party raises the issue of substantial evidence on
appeal before us.
(5) "Acute Inpatient Hospital -- a facility that . . . provides
diagnosis and treatment for patients who have any of a variety of
medical conditions requiring daily physician intervention as well as
full-time availability of physician services . . . ."
"Inpatient Admission -- the admission of a member to
an acute inpatient hospital for the purposes of receiving
inpatient services in that hospital."
"Inpatient Services -- medical services provided to a
member admitted to an acute inpatient hospital."
"Observation Services -- outpatient hospital services
provided anywhere in an acute inpatient hospital, to evaluate a
member's condition and determine the need for admission to an
acute inpatient hospital. Observation services are provided under
the order of a physician, consist of the use of a bed and
intermittent monitoring by professional licensed clinical staff,
and may be provided for more than 24 hours."
"Outpatient Hospital Services -- medical services provided to a
member in a hospital outpatient department. Such services include,
but are not limited to, emergency services, primary-care services,
observation services, ancillary services, day-surgery services, and
recovery-room services."
"Outpatient Services -- medical services provided to a
member in an outpatient setting . . . ."
(6) Factors listed in 130 Code Mass. Regs. § 415.414(C) include
the "(1) member's medical history; (2) member's current medical
needs; (3) severity of the signs and symptoms exhibited by the
member; (4) medical predictability of an adverse clinical event
occurring with the member; (5) results of outpatient diagnostic
studies; (6) types of facilities available to inpatients and
outpatients . . . ."
(7) The guidelines include the following provisions:
"1. The admission occurs following observation services, and the
admitting provider has not documented at least one of the following
in the medical record at the time the decision to admit is
made:
[(a)] Failure to respond to outpatient treatment and a clear
deterioration of the patient's clinical status;
[(b)] a significant probability that the treatment plan will
continue to need frequent clinical modifications and what specific
modifications are necessary;
[(c)] instability of the patient that is a deviation from either
normal clinical parameters or the patient's baseline; or
[(d)] a requirement for more intensive services than were already
being delivered while the patient was on observation status, and a
physician's order for each specific new service.
* * *
"3. The admission is for further monitoring or observing for
potential complications when the member undergoes a procedure that
is appropriately performed in an outpatient setting according to the
current standards of care, the procedure is performed without
complications, and the member's clinical status is approaching
either normal clinical parameters or his or her baseline.
"4. The admission is primarily for providing or monitoring the
services and treatment of a member with multiple or complex medical
needs whose needs were adequately being met in a setting other than
an acute inpatient hospital prior to that admission.
* * *
"10. The admission is primarily for a continuation of treatment
or monitoring that has already been delivered effectively in the
home, hospital outpatient department, or other institutional
setting.
* * *
"12. The admission of a member who has simple, uncomplicated,
outpatient surgery and is being admitted primarily because of . . .
the need for postoperative observation.
"13. The admission is primarily due to the:
* * *
[(e)] need to . . . arrange home care or other noninstitutional
services;
[(f)] age of the member;
[(g)] convenience of the . . . member . . . ."
(8) This all-or-nothing provision has been eliminated. Under the
current regulatory scheme, if a request for reimbursement for
inpatient services is denied, the provider may resubmit a request
for reimbursement for outpatient services. 130 Code Mass. Regs. §
450.209(C)(1), (D) (2000).
(9) Nor do we find any constitutional violation respecting the
regulations as applied. The Division's hearing officer specifically
noted in his decision that he did not "consider[] the response times
of the patients in their inpatient settings." Rather, he looked at
the patients' medical information as "noted in their medical records
at the time the respective decisions to admit were made." Nothing in
the hearing officer's decision indicates that he did otherwise. We
also find no support for the plaintiff's argument that the nature of
the review process makes it impossible for evaluating physicians to
make unbiased evaluations once they are aware of the patients'
outcomes. There is nothing in the record before us to indicate that
the plaintiff has been denied due process.
(10) We do not regard the Division's bald assertion, in one line
of the conclusion of its appellate brief, that its decision was
supported by substantial evidence as rising to the level of
appellate argument. See Mass.R.A.P. 16(a)(4), as amended, 367 Mass.
921 (1975).
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