Opinion ID: 2101755
Heading Depth: 1
Heading Rank: 3

Heading: GNP/ipd

Text: Providers presented evidence to the Tioga Pines trial court regarding the GNP/ipd maximum annual rate limiter. This evidence can be summarized as follows: Rosacker, CPA, testified that 91.14% of facilities to which the GNP/ipd was applied in 1989, and 88.79% in 1990 had their rates limited by the GNP/ipd. Deane, economist, testified that the GNP/ipd is not an appropriate index of cost for the nursing home industry, because it does not relate to the nursing home industry, does not address itself to the geographic area or time period in question, and is a price index and not a cost index. Deane stated the GNP/ipd was the best measure of inflation of all goods and services produced in the economy. Blinzinger, former DPW Administrator, testified that DPW had initially recommended the medical component of the Consumer Price Index as the index to determine the maximum annual increase, but that index was rejected by the Governor in favor of the GNP/ipd as recommended by the State Budget Agency. Blinzinger further testified that the nursing home industry was intimately and comprehensively involved in the development of the new criteria in 1982-83, and agreed that an annual limiter was a requirement. Blinzinger stated that although the industry actively made their views known to him between April 1983 and early 1987, he did not receive any complaints about the use of the GNP/ipd or the overall level of reimbursement. Jazwiecki, CPA, testified that the GNP/ipd loses its relevancy to the actual costs incurred by the providers, because it has no relationship to the costs incurred during that time period. His testimony is that because the GNP/ipd has no relationship to actual costs incurred, the gap between rates paid and costs incurred increases. Jazwiecki testified that in 1987, 41.2% of facilities did not receive rates which covered their actual allowable costs and by 1990, 70.6% of facilities did not. Johnson, nurse and college professor, testified that in her experience the trend is that nursing home residents are sicker and more dependent. Although she conceded that she had not studied Indiana nursing homes in particular, she believed Indiana would be no different than anyplace else in this regard. She also testified that a large number of facilities in Indiana had difficulty meeting quality of care standards between 1987 and 1990. Buoy, CPA, testified that there are two ways for an existing facility to escape application of the GNP/ipd: 1) change of ownership, which includes selling or leasing facilities; and 2) capital expenditures, which results in adjustment of the GNP/ipd under certain circumstances. Buoy testified that of the 249 transactions since 1987, the majority (177) have involved leasing of facilities instead of outright selling of facilities. Buoy further testified that between 1985 and 1990, the GNP/ipd increased between 2.8 and 3.8% annually. Engquist, management consultant, testified that a flaw in the cost containment system in Indiana is the serious problem with changes of ownership. Engquist further testified that the GNP/ipd was an appropriate limiter for achieving the objectives of a prospective payment system. Other courts have ruled upon the question of whether a state plan satisfies Boren Amendment substantive standards. In Ohio Hosp. Ass'n v. Ohio Dept. of Human Services, 62 Ohio St.3d 97, 579 N.E.2d 695 (1991), a state plan amendment reducing a reimbursement rate to 88% of reasonable costs was held violative of the Boren Amendment and state law, because it was implemented solely for budgetary reasons, without consideration of its effect on the quality of care. A U.S. district court of appeals invalidated a plan where the state used a budget adjustment factor to divide its median cost of care in half. AMISUB, 879 F.2d 789. A federal district court enjoined Illinois from deferring 23.5 percent of the amount calculated pursuant to its final hospital reimbursement rate, because the plan failed to satisfy the federal requirement that Medicaid reimbursement rates be sufficient to ensure quality care. Illinois Hosp. Ass'n v. Illinois Dep't of Pub. Aid, 576 F. Supp. 360 (N.D.Ill. 1983). Another district court preliminarily enjoined a plan that limited current year reimbursement to previous year allowable costs, plus 1% for inflation. Kansas Health Care Ass'n v. Kansas Dep't of Social and Rehab. Servs., 822 F. Supp. 687 (D.Kan. 1993). Providers persuaded the trial courts that the GNP/ipd was unrelated to nursing home care, and was essentially and impermissibly budget-driven. Providers argued that the GNP/ipd was chosen by the State Budget Agency to effectively set the reimbursement rate at 90% of the class. The Tioga Pines trial court found the use of the GNP/ipd maximum annual rate limiter was an illegal aspect of the Medicaid reimbursement regulation because Providers were under-reimbursed for their reasonable costs. The Community Care trial court also found the State's reimbursement rate inadequate under the state statute. [4] This determination was based on evidence similar to that in Tioga Pines relating to the use of the GNP/ipd. The Community Care trial court specifically found that the GNP/ipd was the sole determinant in arriving at a provider's rate. The trial court found this impermissible, and enjoined the State from using the GNP/ipd as the sole determinant. These two cases fall outside the perimeters of the above cases that have found substantive Boren Amendment violation. There was a percentage annual rate increase limiter atop the Indiana plan before the Boren Amendment. The Boren Amendment standard encourages the State to sharpen its focus upon industry behavior and take steps to encourage more efficient and economical operation within that industry. It encouraged change. The State chose to decrease its longstanding annual rate limiter from 9% to the general rate of inflation, that is between 2.8% and 3.8% during the time applicable here, such limiter to be applied to a cost-driven initial or base rate. The changed plan received federal approval and was applied to the industry for five years before it was challenged in court. The rate increase permitted by the GNP/ipd is greater than the 1% cap condemned in the Kansas Health Care case above. Unlike the other cases noted, annual increases in Indiana using prior year rates, including the cost-driven initial rate, and consistent with the general rate of inflation, continued to be available. To condemn Indiana's reimbursement system for nursing homes on this basis would be to eviscerate the purpose and intent of Boren and the purpose of Indiana's statute. To do so would merely collapse the post-Boren language into the pre-Boren reasonable cost standard. Lett, 965 F.2d at 256. The trial court was in error in concluding that the Providers established that there was no nexus between the costs of operating efficient and economical nursing facilities and rates under the State's plan with the GNP/ipd. Likewise, Providers failed to establish that the DPW's rulemaking was outside the confines of its duly delegated authority, or that the administrative action was arbitrary and capricious.