IN THE SUPREME COURT OF MISSISSIPPI
NO. 2017-CC-00399-SCT MEMORIAL HOSPITAL AT GULFPORT AND SINGING RIV

ER HEALTH SY

STEM

v. DAV ID J. DZIELAK, Ph.D., IN HIS OFFICIAL CAPACITY

AS EXECUTIV

E DIRECTOR OF THE DIV ISION OF MEDICAID, OFFICE OF THE GOV ERNOR, AND THE DIV ISION OF MEDICAID, OFFICE OF THE GOV ERNOR, STATE OF MISSISSIPPI

DATE OF JUDGMENT: 02/22/2017 TRIAL JUDGE: HON. DENISE OW ENS TRIAL COURT ATTORNEYS: CECIL MAISON HEIDELBERG ANDREW

SETH ROBBINS CHARLES LUBAND JANET McMURTRAY COURT FROM W HICH APPEALED: HINDS COUNTY CHANCERY COURT ATTORNEYS FOR APPELLANTS: CECIL MAISON HEIDELBERG ANDREW

SETH ROBBINS ATTORNEYS FOR APPELLEES: JANET McMURTRAY LAURA L. GIBBES DION JEFFERY SHANLEY NATURE OF THE CASE: CIVIL - OTHER DISPOSITION: AFFIRMED - 07/26/2018 MOTION FOR REHEARING FILED: MANDATE ISSUED:
EN BANC. RANDOLPH, PRESIDING JUSTICE, FOR THE COURT: ¶1. Mem orial Hospital at Gulf port and Singing River Health Sy stem (“Hospitals”) f iled

a Com plaint and N otice of A ppeal in the C hancery C o u r t o f the F irst Judicial D istrict ofHinds County , appealing and seeking judicial review of a June 24, 2016, adm inistrative

decision which f

ound the Division of Medicaid’s (“DOM’s”) 2 014 Fiscal Year Methodology “correctly interprets s t atutes a nd regulations and is neither arbitrary or capricious.” The chancellor af

f irm e d the decision of DOM. F inding no evidence in the record bef ore us that
DOM f ailed to com

ply with Sections 43-13-117 and 43-13-145 in allocating and distributing supplem ental pay

m ents to Mississippi hospitals, we af f irm

. FACTUAL BACKGROUND AND PROCEDURAL HISTORY ¶2. I n F i s c a l Y e a r 2014 (“FY 2014”), DOM d istributed m ore than $700 mi l l i o n i n supplem ental Medicaid pay m ents to aid 110 hospita l s which provide hospital services f or Mississippi Medicaid and uninsured patients. D OM’s supplem ental Medicaid pay m ents are

com prised of two categories: (a) Disproportionate Share Hospital (“DSH”) pay m ents, 1 and (b) u pper p ay m ent lim it ( “UPL”) hospital pay m ents, 2 which should be d isbursed pursuant to

a f orm ula consistent with both state and f ederal law (the “FY 2014 Methodology ”). A f ederal law, known as the Om n ibus Budget Reconciliation Act (“OBRA”), sets a cap on the am ount each D SH-eligible hospital m a y receive i n supplem ental pay m ents, once a DSH pay

m ent is received by that h o spital. This is known a s the “OBRA lim i t.” T he O BRA lim it f or a hospital is the d if f erence between the t otal costs f or serving M edicaid and uninsured p atients less the

1 T h e D S H p a y

m en t is d esig n ed to h elp h o sp itals co v e r u n co m p en sated o r u n m et co sts o f treatm en t f

o r u n in su red o r M e d icaid p atien ts. O n l y D S H

- elig ib le h o sp itals receiv e th ese p ay m en ts. D S H p ay

m en ts are co st-b ased

. 2 T h e U P L is th e g ap b e tw e en w h a t M e d icaid actu ally p aid h o sp itals f o r its serv ices a n d w h a t M ed i care w o u l d h av e p aid f o r th e sam e serv ices. U P L is d istrib u ted t o a l l h o sp itals. U P L p a y

m en ts are serv ice-b ased an d d istrib u ted u n if o rm ly b a s e d o n in p atien t p ay m en t. 2total Medicaid pay m e nts m ade by or on behalf of Medicaid b enef iciaries and the uninsured.
Once a DSH-eligible hospital receives a D SH pay m ent, any additional supplem ental
pay m ents, whether UPL or D SH, m ay not e xceed its OBRA lim it. See 4 2 U.S.C.A. §
1396r-4. The UPL is not capped by the OBRA lim i t, as l ong as no DSH pay m ents are m ade to that hospital. ¶3. The f

ollowing history , taken f rom t h e H e a r i n g O f

f i c e r ’ s r ecom m e ndation, was developed during the adm inistrative hearing:

In 2008, DOM a nd the legislature lo o k e d at restructuring the w ay the DSH and UPL m onies w ere being distributed with the goal of m a xim i zing the use of available f

ederal f unds. In order to do this, the Governor appointed an Advisory B oard that consisted of industry m em bers and included input f

rom DOM. T h e Board was to study various m ethods of p ay ing DSH and UPL and recom m e nd a m ethod of pay m ent to the legislature. The Board m et several tim e s a n d i n F e b r u a ry 2 010, it considered a m odel proposed by DOM and a m odel propo s e d by the Healthcare Managem ent Association (HMA), which had been r etained by the Mississippi Hospital Association.
T h e H M A mo d e l paid the UPL m oney f irst, while DOM p r o p o s e d pay ing DSH f

irst. Wh i c h p ay

m ent is m a d e f

irst is signif

icant because UPL m on e y was not lim ited by OBRA while DSH pay m e n ts were lim ited by OBRA. T here w e r e B o a r d m em bers who did not believe that UPL could be p a i d first under f

ederal requirem ents. Accordingly , s e v e r a l B o a r d m e m b e r s a n d Kevin Londeen at My ers & Stauf f er m et w ith [ the C enter f or M edicare and Medicaid S ervices] ( “ C M S”) t o discuss concerns o ver the pay m ent m odels. The B oard specif

ically asked CMS if UPL could be paid f i rst, even i f i t m eant that the UPL pay

m ent would exceed the OBRA lim it. The Board recognized that m aking the UPL pay

m ent f irst would result in som e hospitals being p aid in excess o f their OBRA lim its and t h u s not r eceiving an a dditional DSH pay m ent. CMS s aid that a m odel that allowed this to occur was perf ectly f ine.
G a r y M a r c h a n d , w h o represented M em orial, was a m em ber o f t h e Board. Af

t er m e eting with CMS, the Board then voted to recom m end the HMA m odel rather than the DOM m odel. Mr. Marchand abstained r ather than

3voting against the HMA m odel which paid U P L f i r s t

. The legislature then adopted the Board’s recom m endation i n t o t h e M i s s issippi statutes adopting the HMA m odel as HB71, 3 or Section 43-13-145. ¶4. Af ter the Legislature adopted H.B. 71 in 2009, it a d o pted sim i lar statutes each y ear
t h e r e a f ter, including Fiscal Year 2014, that paid UPL and DSH in this sam e way
. 4 I n 2013-2014, DOM began looking a t dif f erent m o dels in the e vent the Legislature changed the

m et h o d of m aking the calculations and distributions. DOM hired a c onsultant to propose changes to elim inate the need to e x h a u s t t h e UPL f unds f irst. However, those proposed changes were rejected by the Senate, and the existing requirem e n ts of Mississippi Code Section 43-13-145 f

or unif orm percentages w ere retained. DOM used this sam e mo del to distribute UPL pay

m e nts bef ore DSH pay

m ents i n 2011, 2012, and 2 013, a nd the Hospitals did not appeal their pay

m ents in these y ears. ¶5. In 2014, Singing River received a D S H p a y me n t o f $18,073,635.22 and a UPL
pay m ent of $17,928,972.47, f o r a total of $36,002,607.69. Its OBRA lim i t was $45,611,951,

a dif f erence of approxim ately $9,000,000. Mem orial received a DSH pay m e n t of $19,542,669.29 and a UPL pay m ent of $23,646,206.03, f o r a total o f $43, 1 8 8 ,875.32. Its OBRA lim it was $54,779,800, a dif f erence of approxim ately

$11,000,000. ¶6. T h e H o s p i t a l s a l l e g e d t h a t s i m ilarly situated hospitals received Me d i c a i d s u p p l e m e n t a l
pay m ents well in excess of their costs f or providing h ospital ser v ices to Medicaid and

3 H o u se B i ll 7 1 w as en a cted d u r i n g t h e 2 0 0 9 seco n d ex trao rd i n ary sessio n o f th e L e g i slatu re. S

ee 2 0 0 9 M i ss. L aw s 2 d E x . S ess. ch . 1 1 8

. 4 T h e o n ly relev an t ch an g es t o th e n ew ly ad o p ted statu tes w ere th e rep eal d at e a n d f iscal y ear in p atien t d ata d ate. S e e 2 0 1 2 M iss. L aw s ch

. 5 3 0 ; 2 0 1 3 M iss. L aw s 2 d E x . S ess. ch . 2 9 3 ; 2 0 1 4 M iss. L aw s ch

. 4 8 8 ; 2 0 1 5 M i ss. L aw s ch . 4 8 3

. 4uninsured patients. For exam ple, Forrest General Hospital was paid $17,947,943 m ore than

costs f o r providing hospital services to Medicaid a n d uninsured patients. The Ho s p i t als argued that the w ide shortf alls f or som e and wide windf

alls f or others were the result of DOM’s f ailure to f ollow governing law. ¶7. The Hearing Of

f icer agreed with D O M t h a t S e c t i o n 4 3

- 13-145 required DOM to exhaust UPL pay

m ents prior to m aking any DSH pay m ents. Consequently , the only w ay t o c o mp l y w i t h the s tatutory language is to pay U P L f i r s t and distribute DSH second because of the requirem ent that the exhaustion of UPL pay

m ents, af ter t h e i n i tial percentage required by statute are m et, be unif

o rm
. Exhausting UPL pay

m ents while keep i n g t h e U P L p a y me n t s u n if

orm as required by Section 43-13-145(10) cannot b e accom plished if DSH is paid f

irst because once a hospital m eets its OBRA lim it with a DSH pay m ent it cannot receive any

m ore DSH or UPL pay

m e nt[ s]. ¶8. DOM a ccepted the Hearing Of f icer’s f inding that the DSH and UPL p ay m ents were properly calculated and distributed to the Hospitals. ¶9. On appeal, the Hospitals asked t h e c h a n c e l l o r t o d e c l a r e D O M ’ s a c t i o n s in
im p lem enting the FY 2014 Methodology (1) violated M i s s i s s i p pi l aw and (2) were (a) arbitrary and c apricious, (b) unsupported by s u bstantial e vidence, (c) contrary t o the m anif est weight o f the evidence, and/or ( d) exceeded the statutory a uthority o f DOM. The Hospitals
f u r t h e r requested an injunction requiring D OM to m odif y its FY 2014 Methodology i n accordance with Mississippi law, com pelling D OM “to pay D SH t o al l D S H Eligible Hospitals notwithstanding a hospital’s UPL pay m ent and/or f

ur ther com

pel Def endants to

5reim

bur s e S i n ging River in the am ount of $9,609,343 and Mem orial in the am ount of $11,590,925.” ¶10. The chancellor f

o u n d t h at Section 4 3-13-145 was unam biguous a nd gave DOM “a pecking order o n how to pay UPL so that certain ty pes of hospitals w ould be paid f i rst bef ore the private hospitals, and governm ent nonstate hospitals w ere paid their u nif orm percentage of inpatient pay

m ents to exhaust all rem a ining available UPL f unds.”
ANALYSIS ¶11. The interpretation o f a statute presents a q uestion of law, which w e review de novo

. S e e N a tchez H osp. Co., LLC v. A dam s Cty. B d. o f Supervisors , 238 So. 3d 116 2 , 1 1 6 3 (Miss. 2018). “On appeal, the Court reviews the decision of an adm inistrative agency to determ ine whether the decision was supported by substantial evidence, was arbitrary or capricious, was bey ond the agency ’s power to adopt, or was violative o f a constitutional or statutory provision.” King v . Miss. Military Dep’t , No. 2 017-CC-00784-SCT, __ So. 3d __, 2018 W L 2731250, at *2 (Miss. June 7, 2018) (citing Watkins Dev., LLC v. Hosem ann , 214 So. 3d 1050, 1053 (Miss. 2017)). ¶12. On its f

ace, the argum ent presented is quite sim ple: Did the chancellor err i n f inding that DOM com

plied with Sections 43-13-117 and 43-13-145 in allocating and distributing UPL and DSH supplem ental pay m ents to Mississippi hospitals? ¶13. Section 43-13-117 of the Mississippi Code provides a list of f if ty -six ty p es of care and services which DOM m ay choose to of f er its benef

iciaries or pay its enrolled prov iders.
See M iss. Code Ann. § 43-13-117 (Rev. 2 015). Unlike m ost of the s e rvices listed, DOM is

6required to participate in the f ederally of

f ered D SH and UPL program s f ound in subsection (A)(18). W ithin that sam e subsection, Section 43-13-145(10) is ref e r enced. Section 43-13-
145 sets f orth the m ethod of how UPL and DSH supplem ental pay m ents are calculated and disbursed. Miss. Code Ann. § 43-13-145 (Rev. 2015). ¶14. The Hospitals argue that DOM’s FY 2014 Medicaid reim bursem ent f

orm ula violated Mis s i s s i p pi law, specif

ically Section 43-13-117(A)(18)(a) of the Mississippi Code. The Hospitals assert that n othing i n Subsection 117(A)(18)(b), w hich es t ablished the UPL
program , negated Section 117(A)(18)(a)’s m andate that “the division s h a l l ” p a y D SH to DSH Eligible Hospitals. T hey f u rthe r a r g ue that Section 117(A)(18)(a)’s m andate applied “notwithstanding any

provision in this section to the contrary .” 5 ¶15. Because UPL is service-based and DSH is c ost-based, DOM argues that distributing
DSH f i rst would take m oney a way f rom hospitals which earned it (by providing s ervices) and would award it to hospitals which m ay charge m ore f or those sam e services. Medicare has

5 T h e H o s p i t a l s c ite o n ly p artial lan g u ag e f ro m S e ctio n 4 3 -1 3 -1 1 7 (A )(1 8 ) (a). T h e f u ll tex t w h ich co n tain s th e clau s e s cited is: Notwithstanding any other provision o f this section to t h e c o n trary , as provided in the Medicaid sta t e plan am e ndm ent o r am endm ents as def ined in Section 43-13-145(10), t

he division shall make additional reimbursement t o hospitals that serve a d

i sproportionate s hare of low-income patients a nd that meet the federal requireme n t

s f o r t hose payments as provided in Section 1923 o f the federal Social Security Act and any applicable regulations. I t is the intent of the Legislature th a t the division shall draw down all available federal funds allotted to the state for disproportionate share hospitals. . . .
M iss. C o d e A n n . § 4 3 -1 3 -1 1 7 (A )(1 8 )(a) (R ev . 2 0 1 5 ) (em p h asis ad d ed ). 7m oved away f r om this ty

pe o f reim

bursem ent. 6 Moreover, UPL pay m ents are d istributed to hospitals pursuant t o a unif o r m percentage o f inpatient p ay m ents. That distribution m ust

rem ain unif

orm
. ¶16. DOM urges that it com plied with Section 43- 1 3

- 1 4 5 b y f ollowing the d ictates of subsections (a) through (f ) and exhausting all UPL m onies. D OM then m o ved to subsection (g) to allocate the D SH f unds, thus m axim izing both supplem ental f u nds as required by Section 43-13-145(12), which s t a t e s, “The division shall im plem ent DSH and UPL calculation m ethodologies that result in the m axim ization of a vailable f ederal f unds.” Miss. Code Ann. § 43-13-145(12) (Rev. 2015). 7 ¶17. In City of Natchez v. Sullivan , 612 S o. 2d 1087, 1089 (Miss. 1 992), this Court held,
In considering a statute passed by the Legislature,

. . . the f i rst question a court should decide is whether the statute is am biguous. If

it is not am

biguous, the court should sim

ply apply the statute according to its p lain m eaning and should not use p rinciples of s t a t u t ory construction. [ c itations om itted]. W hether the s t a t u t e is am

biguous or not, the ultim ate goal of this Court is to discer n a n d give ef f ect to the legislative intent.
See a lso Miss. Dep’t of Transp. v. Allred , 928 So. 2d 152, 154 ( Miss. 2006). The a pplicable

statutes are not am

biguous. Furtherm ore, whether U PL or DSH s h o u l d be paid f irst was decided by the Legislature and c om plied with by DOM. T he Advisory Board recom m ended

6 Initially , all inpatient and outpatient services were reim bursed by Medicare at the “reasonable cost” rate, which calculated the reim bursem ent based on the h ospital’s cost in providing the s ervices. See C ounty of Los Angeles v. Shalala , 192 F.3d 1005, 1 008 (D.C. Cir. 1999). “Experience proved, however, that this sy stem bred ‘little incentive f or hospitals to k e e p c o sts down’ b e cause ‘[ t]he m ore they spent, the m ore they w ere r eim bursed.’” Id. (citing Tucson Med. Ctr. v. Sullivan , 947 F.2d 971, 974 (D.C. Cir.1991)).

7 Uncontested by the Hospitals, their proposal would not f ully exhaust the available UPL f unding, leaving in excess of $60 m illion in UPL f

unds unspent. 8to DOM that it adopt the HMA m odel, which paid UPL f irst, and the Legislature am ended the statute to m irror the HMA’s recom m endation. ¶18. As both the chancellor and hearing of f icer determ ined: [ Section] 4 3

- 1 3

- 145 and the State P lan Am e ndm e nts direct DOM to m ake required UPL pay

m ents f irst because it requires all hospitals i n certain classes to receive an across the board unif or m percentage pay

m ent o f inpatient pay m ents t o exhaust available UPL f unds unlim ited by DSH or O BRA lim its. DSH pay m ents a r e alway s lim ited b y OBRA lim its, both under f ederal and state law. State law r ecognizes that lim itation in Section 4 3

- 1 3

- 145(g), 43-13-117(A)(l 8) and the State Plan. . . .
On the other hand, the hospitals m ust receive a D SH pay

m ent s o long a s they do not e xceed OBRA lim its under the f ederal law, f

ederal regulations, state law a nd the S tate Plan. If , however, the UPL p ay

m en t p u t s the hospital over its OBRA l im i t, they c annot receive an additional DSH pay m ent b ecause they have m et their OBRA lim i t. They receive a DSH pay

m ent of zero. ¶19. Since im

plem enting this m ethodology in 2010, DOM has com plied with the dictates of Sections 4 3-13-117 and 4 3-13-145, f ederal l aw, and its own State Plan. It has exhausted the m axim

um available DSH and UPL f unds, per the directive of

the Legislature. ¶20. The Hospitals have f a iled t o identif

y any error, f

actual or legal, by the c h ancellor. W e af f irm the judgm ent of the chancellor, af f irm ing DOM’s f

indings that DOM’s m ethodology
f or the distribution of DSH and UPL f un d s t o h ospitals in M ississippi com ports with this State’s law.
CONCLUSION ¶21. W e af

f irm the f inding o f the chancery court and DOM that DOM properly com p lied with state and f

e deral law as to the distribution of DSH and UPL f

unds. ¶22. AFFIRMED.

9WALLER, C.J., KITCHENS, P.J., K ING, COLEMAN, MAX WELL, BEAM,

CHAMBERLIN AND ISHEE, JJ., CONCUR.

1 0