PER CURIAM.
The question presented in this appeal is whether appellant Hudson Manor Health Care Center is entitled to continue to be overpaid by the State at the Medicaid reimbursement rate for Class II government-owned or operated nursing facilities even though appellant has always been a Class I privately-owned and operated facility that was never legally eligible to receive the higher Class II facility rate. Because we answer this question in the negative, we affirm the July 18, 2017 final decision of the Director of the Division of Aging that corrected the mistake that caused the overpayment.
By way of background, the Medicaid program is jointly funded by the federal and state governments. As a program participant, New Jersey is required to obtain federal approval for its "State Plan" which, among other things, describes the methodologies it will use to reimburse nursing facilities
The New Jersey Department of Human Services, Division of Medical Assistance and Health Services, was originally responsible for managing the State's Medicaid nursing facility reimbursement program. 42 N.J.R. 1793(A). Pursuant to Executive Reorganization Plan No. 001-1996, this responsibility was transferred to the Department of Health and Senior Services.
In New Jersey, there are two reimbursement "rate classes" for nursing facilities. N.J.A.C. 8:85-3.3(a). Privately-owned and operated facilities are paid at the Class I rate. N.J.A.C. 8:85-3.3(a)(1). "Governmental Nursing Facilities," meaning facilities that are government-owned or operated,
The State's nursing facility rate system and accompanying regulations were most recently revised in April 2011, and placed limits on how much a facility's reimbursement rate could fluctuate from year to year. N.J.A.C. 8:85-3.16(a) and (b). For State Fiscal Year 2010-2011 (FY 2011), a nursing facility's Medicaid reimbursement rate could not vary more than $5 from the rate it received on June 30, 2010. N.J.A.C. 8:85-3.16(a). This limitation was also included in the Appropriations Act for that year.
For FY 2011-2012 (FY 2012), the reimbursement rate could not vary more than $10 from the rate the facility received on June 30, 2010. N.J.A.C. 8:85-3.16(b). This limitation was also included in the Appropriations Act.
Turning to the present case, appellant is a private company that owns and operates a nursing facility. It purchased the facility from the County of Hudson in 2002. When the County owned and operated the facility, it was reimbursed at the Class II rate. In the contract for sale, the County agreed it would use its "best efforts to cooperate with [appellant] so that [it] continues to receive the" Class II rate. However, the contract stated that "[t]his is in no way to be construed to create any guarantee on behalf of the County . . . of same."
Even though appellant should have been paid at the lower, Class I rate after the 2002 sale, the Department of Health continued to pay appellant at the higher Class II rate.
The Department set appellant's Medicaid reimbursement rate at $217.45
Shortly thereafter, CMS notified the Division that an audit had revealed that appellant was being paid at the Class II rate even though there was no evidence that it was a government-owned or operated nursing facility. Upon receipt of this information, the Division contacted appellant and asked if it could provide any evidence that it was owned and operated by a government entity. Because it was privately owned and operated, appellant was unable to demonstrate its entitlement to the higher Class II rate.
As a result, the Division corrected the reimbursement error by properly classifying appellant as a Class I facility, and resetting its rate so that it was in line with the rate paid to other similarly-situated private facilities. On December 6, 2012, the Division set appellant's new, correct rate at $194.38 effective June 30, 2012, with that new rate then continuing into FY 2012 beginning on July 1, 2012. Significantly, the Division did not seek reimbursement from appellant for all of the Medicaid funds that had been overpaid to it over the ten-year period between 2002 and 2012.
Appellant filed an administrative appeal challenging the new rate. Even though it was a privately-owned and operated facility, appellant argued that it should have continued to be paid the incorrect rate because the language in the Appropriations Acts required it be reimbursed at the same rate it received in the prior year, even though that rate had been incorrectly set. Appellant also asserted that the Division was barred by the doctrine of equitable estoppel from correcting the rate when the error was discovered by CMS.
After the Division denied appellant's Level I appeal, the matter was transmitted to the Office of Administrative Law (OAL) for hearing as a contested case. N.J.A.C. 8:85-3.17(a)(1) and (2). Because there was no dispute as to any of the material facts, appellant and the Division filed cross-motions for summary decision.
On April 26, 2017, the ALJ rendered a comprehensive written Initial Decision, rejecting appellant's arguments, and concluding that the Division had properly recalculated appellant's Medicaid reimbursement rate. In so ruling, the ALJ found that the Department of Health had never made a substantive decision that appellant should be paid at the Class II rate in 2002 and, instead, the rate had been paid by mistake. The ALJ explained:
The ALJ next found that the Appropriations Acts did not bar the Division from correcting this mistake in order to ensure that appellant received the proper reimbursement rate. The ALJ stated that appellant's "reliance on the language of the Appropriations Act seems a weak branch to support its position. Surely, the intent of the language was not to freeze in place erroneous classifications and reimbursement rates calculated based upon such mistakes or misunderstandings."
In addition, the ALJ noted that the Division put appellant on notice on July 18, 2012 that its rates for that year were in doubt because it was not government-owned or operated and, in any event, appellant knew "from the very time of its negotiation of the Purchase Agreement that it was seeking treatment in a classification in which it did not fit and which the very Purchase Agreement recognized was not guaranteed."
Under these circumstances, ALJ found no basis to conclude that the Division should be equitably estopped from properly applying the governing law to set appellant's reimbursement rates at the proper level. Therefore, the ALJ granted the Division's cross-motion for summary decision, and ruled that the $194.38 reimbursement rate was entirely appropriate.
Appellant filed exceptions to the ALJ's decision.
The Director also determined that appellant's equitable estoppel argument lacked merit. She found that appellant was on notice from the beginning of July 2012 that its rate for that year was under review because it was not a government-owned or operated facility. In addition, appellant was aware when it purchased the facility in 2002 that it was not entitled to the Class II rate and that the County, which had no say in the setting of the rates in any event, made no guarantee that appellant would be paid at that rate. This appeal followed.
On appeal, appellant raises the same contentions it unsuccessfully pressed before the ALJ and the Director. It again asserts that the Director arbitrarily, capriciously, and unreasonably corrected its rate in violation of the Appropriations Act, and that it should have been equitably estopped from doing so. We disagree.
Our review of an agency decision is limited.
Thus, the burden of showing the agency acted in an arbitrary, capricious, or unreasonable manner rests on the party opposing the administrative action.
We must also "`defer to an agency's technical expertise, its superior knowledge of its subject matter area, and its fact-finding role,'" and therefore are "obliged to accept all factual findings that are supported by sufficient credible evidence."
Furthermore, "[i]t is settled that `[a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference.'"
Applying these principles, we discern no basis for disturbing the Division Director's reasonable determination that appellant's Medicaid reimbursement rate had to be corrected as soon as the mistake was discovered by CMS. We therefore affirm substantially for the reasons set forth in the Director's comprehensive written decision, and add the following comments.
We agree with the Director that the language in the Appropriations Acts placing limits on the amount a nursing facility's rate could vary from year to year only applied to rates that had been correctly established in accordance with law. It is well settled that "statutes are to be read sensibly rather than literally and the controlling legislative intent is to be presumed as `consonant to reason and good direction.'"
In short, "common sense should not be abandoned in interpreting a statute[.]"
Here, the overriding public purpose behind any Appropriations Act is to ensure that the State's limited funds are spent in a fiscally responsible manner.
Appellant's equitable estoppel argument is equally unavailing. "Equitable estoppel is `rarely invoked against a governmental entity[,]'"
The reliance must be "reasonable and justifiable" and the burden of proof is on the party asserting the estoppel.
Appellant cannot meet these requirements. The State was not a party to its contract with the County when it purchased its facility, and the State made no misrepresentations to appellant concerning its Medicaid reimbursement rates. Appellant obviously knew it was privately owned, and should have been paid at the Class I rate like all other similar facilities. When the mistake was discovered by the CMS, the Division properly corrected it to ensure that going forward, appellant received only the payments permitted by law.
Nothing in the circumstances of this case estopped the Division from taking that required, regulatory action, and its decision was clearly not arbitrary, capricious, or unreasonable. Therefore, we reject appellant's contention on this point.
Affirmed.
