Court Opinion

ID: 2707023
Source: CourtListenerOpinion
Date Created: 2014-08-05 13:22:34.47798+00
Date Added: 2024-06-11T12:57:09.066080
License: Public Domain

[Cite as Bryant Health Care Ctr., Inc. v. Ohio Dept. of Job & Family Servs., 2014-Ohio-92.]

                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT

Bryant Health Care Center, Inc.,                     :

                 Appellant-Appellant,                :
                                                                             No. 13AP-263
v.                                                   :                 (C.P.C. No. 06CVF10-14496)

Ohio Department of Job and Family       :                             (REGULAR CALENDAR)
Services [Ohio Department of Medicaid],
                                        :
              Appellee-Appellee.
                                        :

                                            D E C I S I O N

                                     Rendered on January 14, 2014

                 Webster & Associates Co., LPA, and Geoffrey E. Webster, for
                 appellant.

                 Michael DeWine, Attorney General, and Rebecca L. Thomas,
                 for appellee.

                   APPEAL from the Franklin County Court of Common Pleas

DORRIAN, J.
       {¶1}      Appellant, Bryant Health Care Center, Inc. ("appellant"), appeals pursuant
to R.C. 119.12 from a judgment of the Franklin County Court of Common Pleas affirming
an adjudication order issued by appellee, Ohio Department of Medicaid1 ("the
Department"). The order required that appellant repay to the Department a sum

1 In 1999, the 123rd General Assembly provided that the Ohio Department of Human Services (which
administered the Medicaid program at the time of many of the events underlying this appeal) would
thereafter be known as the Ohio Department of Job and Family Services. See 1999 H.B. No. 470, amending
R.C. 5101.01. Effective July 1, 2013, the Medicaid area within the Ohio Department of Job and Family
Services became a separate state agency known as the Ohio Department of Medicaid. See R.C. 121.02(T).
The parties in this appeal have used the term "the Department" to describe the agency that administered
Medicaid during the events of this case both before and after these changes, and we do so as well.
No. 13AP-263                                                                                              2

representing Medicaid overpayments made to appellant. We affirm the judgment of the
trial court.
I. Facts and Procedural History
       {¶2}     Appellant operates a 93-bed skilled nursing facility in Lawrence County and
was a party to an agreement with the Department to provide long-term care services to
qualified recipients pursuant to the state's Medical Assistance Program, commonly known
as the "Medicaid" program2. Under the terms of the agreement, appellant agreed to accept
Medicaid payments consistent with applicable state law as full payment for services
rendered to Medicaid-eligible care recipients.
       {¶3}     Ohio statutes governing the administration of the Medicaid program in
Ohio are codified in R.C. Chapter 5111.3 R.C. 5111.21 mandates that the Department pay
the reasonable costs of services provided to an eligible Medicaid recipient by a nursing
facility such as that operated by appellant. Reasonable costs include the expense of
delivering direct care services (such as nursing costs), indirect care costs (such as
administrative costs), and capital costs (such as lease or mortgage costs), R.C. 5111.23,
5111.24, and 5111.25. Workers' compensation ("WC") premiums constitute reasonable
costs and are categorized as either direct care costs or indirect care costs depending upon
the work performed by the employees on whose behalf the premiums are paid. See R.C.
5111.20(G)(1)(e) and 5111.20(I).
       {¶4}     Pursuant to R.C. 5111.26, appellant was required to file an annual cost
report with the Department within 90 days after the end of each calendar year ("CY")
during which appellant participated in the Medicaid program. The statute required
providers to prepare the annual cost report in accordance with administrative rules
established by the Department, e.g., Ohio Adm.Code 5111-3-3-20.

2 For an extensive discussion of the history and general administration of the Medicaid program in Ohio
during the period relevant to this appeal, including nursing home cost reimbursement, see Drake Ctr., Inc.
v. Ohio Dept. of Human Serv., 125 Ohio App.3d 678 (10th Dist.1998).
3 The Medicaid reimbursement statutes and rules have been revised since the time of the events in this case.

All references in this decision to sections of the Revised Code and the Ohio Administrative Code are to
provisions as in effect during that time.
No. 13AP-263                                                                                            3

       {¶5}     The Department used a nursing facility's annual cost report in applying a
statutory formula to determine a "per resident per day rate" ("per diem rate") payable to
providers for the cost of care of Medicaid residents. R.C. 5111.26 and 5111.27. In
determining the total per diem rate, the Department was required to consider the
facility's "desk-reviewed, actual, allowable, per diem direct care costs" for the relevant
CY. (Emphasis added.) R.C. 5111.23(B)(1). The Department was also                          required to
consider the facility's "desk-reviewed, actual, allowable, per diem indirect care costs
from the calendar year preceding the fiscal year ['FY']4 in which the rate will be paid,"
adjusted for inflation. (Emphasis added.) R.C. 5111.24(A)(1).
       {¶6}     The Medicaid reimbursement system was prospective in nature in that, in
determining a provider's total per diem rate for a particular FY, the Department used the
cost report filed by the provider for a prior CY. For example, appellant's CY 1995 cost
report was due in March 1996, and the Department used it to set the per diem rate for FY
1997. Similarly, in determining the FY 1996 per diem rates, the Department used the
provider's CY 1994 cost report; in determining a provider's FY 1995 per diem rate, the
Department used the provider's 1993 CY cost report, and so forth.
       {¶7}     In 1995, the Bureau of Workers' Compensation ("BWC") determined that
appellant was entitled to a partial refund of WC premiums appellant had paid during CYs
1991 through 1995.        On September 19, 1995, BWC issued appellant a refund of WC
premiums for those years, apportioned as follows:
                            1991                $ 14,207.74
                            1992                 20,095.77
                            1993                 12,731.53
                            1994                 11,189.98
                            1995                  4,263.56

The total amount of the refund was $62,488.58.
       {¶8}     As noted above, appellant did not receive the refund of WC premiums for
CYs 1991 through 1994 until September 1995—after it had filed its CYs 1991 through 1994
cost reports. Accordingly, appellant's CYs 1991 through 1994 cost reports reflected the
pre-refund amount of WC premiums paid in each of those years, and the Department

4
 For Medicaid purposes, a fiscal year runs from July 1 of the prior year through June 30 of the identified
fiscal year. That is, FY 1997 ran from July 1, 1996 through June 30, 1997.
No. 13AP-263                                                                                            4

used the pre-refund amount of WC costs in determining the per diem rates paid to
appellant for FYs 1993 through 1996. Had appellant's CYs 1991 through 1994 cost
reports reflected its WC premiums as adjusted by the amounts ultimately refunded to
appellant for those years, appellant's per diem reimbursement rates for FY 1993 through
1996 would have been lower, and appellant would have received less Medicaid
reimbursement for care provided in FY 1993 through 1996.
       {¶9}     In September 1995, when appellant received the WC premium refund, the
calculation of appellant's per diem reimbursement rates for FYs 1992 through 1995 had
not been finally calculated and closed. Rather, the rate recalculations and final
settlements for the prior FYs were still open in September 1995 when appellant received
the partial refund of appellant's 1991 through 1995 WC premiums. The parties do not
dispute that the per diem rates for those FYs became final on the following dates:
                            FY 1992     Final on 10-31-96
                            FY 1993     Final on 11-12-96
                            FY 1994     Final on 03-29-96
                            FY 1995     Final on 12-02-025

       {¶10} On March 31, 1996, appellant filed its cost report for the 1995 CY and
referenced the WC refund it had received in September 1995. It did not, however, report
any portion of the WC refund as an offset to its 1995 WC costs. Nor did appellant file
amended cost reports for CYs 1991 through 1994, or otherwise advise the Department
that it had received a WC refund attributable to those prior years, even though the FY
1993 through 1994 per diem reimbursement rates had not been finally closed on the date
of the refund nor on the date appellant filed the 1995 cost report.6 Instead, appellant
reported the WC refund on a schedule included in the 1995 cost report that identified the
$62,488.58 WC refund as "other revenue" received by appellant in 1995.
       {¶11} Pursuant to R.C. 5111.27(A), the Department conducted a mandatory desk
review of appellant's 1995 cost report to determine whether the reported costs were

5
   The record does not specify the date upon which the per diem rate for FY 1996 became final. However,
the hearing examiner noted in his amended report and recommendation that the FY 1996 rate had not been
finally settled at the time of his report and neither party has contested that finding.
6
  Although the parties do not dispute that the per diem rates for FY 1994 became final on March 29, 1996,
they also do not dispute the finding of the hearing examiner that the final FY 1994 reimbursement rate had
not been finally adjudicated on the date appellant filed its CY 1995 cost report.
No. 13AP-263                                                                             5

allowable, as well as a desk audit. The desk auditor noted in an August 18, 1998 narrative
audit summary that accompanied the desk audit report that:
              [Appellant] did receive a refund from the Bureau of Worker's
              Compensation, $62,488.58. This was due to various rate
              changes that were allowed for the period January 1, 1990-
              through June 30, 1995. However this amount was not
              recognized as a cost offset but as a revenue in error.

(State's Exhibit 15, Aug. 18, 1998 summary.)
      {¶12} Accordingly, the desk auditors determined that appellant's report of the
refund as income was "in error." The auditors concluded that the refund should instead
have been reported, in its full amount, as an offset to appellant's 1995 WC costs. The
proposed offset significantly reduced appellant's 1995 WC costs from approximately
$146,300 to approximately $83,600. Before the audit became final, appellant challenged
the desk auditor's conclusions relative to the WC refund. The auditors, however, did not
change their position.
      {¶13} On September 11, 2002, and consistent with the desk audit, the
Department issued a final rate recalculation and settlement for FY 1997. It recalculated
appellant's 1997 per diem rate based upon appellant's 1995 cost report as audited.
Offsetting the full amount of the WC refund against appellant's 1995 WC costs reduced
appellant's total 1995 reasonable costs and resulted in the Department finding that its
original calculation of the 1997 per diem rate (which ranged from $85.94 to $86.93) had
been too high. The Department determined that the per diem rate should have ranged
over the course of FY 1997 from $84.00 to $84.95. The Department determined that it
had overpaid appellant Medicaid in the amount of $57,375.68 for FY 1997 and ordered
appellant to repay that sum.
      {¶14} Appellant requested an R.C. Chapter 119 administrative hearing, and the
Department designated a hearing examiner to hear the dispute. The hearing took place
on September 25, 2003, and the parties agreed to submit the case on stipulated facts,
exhibits, and briefs. They stipulated that the case presented a single legal issue: whether
the Department acted in conformance with law in determining that the entire WC refund
received in 1995 should be used to offset appellant's 1995 WC costs. The parties further
No. 13AP-263                                                                                       6

stipulated that, if the Department's legal position were correct, then appellant owed the
Department $54,168.03.7
      {¶15} On March 25, 2004, the hearing examiner issued a report and
recommendation to the Director of the Department ("Director"). The hearing examiner
agreed with the appellant that the Department could adjust appellant's costs only on a
year-by-year basis and that applying the total amount of the 1991-1995 refund against
only the 1995 WC costs was inconsistent with the statutory reimbursement scheme and
controlling principles of finality. The hearing examiner recommended that the Director
recalculate the FY 1997 per diem rate after offsetting only the $4,264 WC refund
attributable to CY 1995.
      {¶16} On May 6, 2004, the Director ordered the hearing examiner to conduct a
second hearing for the presentation of further testimony and documentary evidence and
to thereafter prepare a supplemental or amended report and recommendation.
      {¶17} The hearing examiner conducted the second hearing on October 26, 2004
and thereafter issued an amended report and recommendation. Consistent with his
earlier report, he concluded that offsetting the entire WC refund against CY 1995 costs
would "contravene the statutory directive for the calculation of a prospective rate based
upon the actual costs incurred during the calendar year preceding the fiscal year in
which the rate is to be paid * * * [and] circumvent controlling principles of finality."
(Emphasis sic.) (June 30, 2005 Amended Report and Recommendation, 17.) That is, he
determined that only the 1995-related portion of the WC refund—a total of $4,263.56—
could be used to offset appellant's 1995 WC costs. He found the 1991 through 1994 per
diem amounts to be final at the time of his report and recommendation and concluded
that the Department therefore could no longer recover overpayments it had made to the
Department during those closed FYs. (Report and Recommendation, 17.) He observed,
however, that the Department might, at the time of his report and recommendation, yet
have proposed an adjustment to the CY 1994 costs for the purposes of recalculating the
reimbursement rate for FY 1996, as that rate calculation had not yet become final, but
"as to those audits that have been adjudicated and closed without any reservation of

7 The parties now agree that this figure may be subject to revision in the course of the Department's
recalculation of the 1995 per diem rate if the Department's adjudication order is upheld .
No. 13AP-263                                                                                      7

rights, the reimbursement Section cannot simply resort to the alternative of offsetting
the portions of the workers' compensation refund allocable to earlier calendar years
against the workers' compensation premiums reported by [appellant] on its 1995 cost
report." (Report and Recommendation, 11.)
       {¶18}    In finding that the Department was precluded from offsetting the
remaining $58,225.02 of the refund against appellant's 1997 WC premium costs, the
hearing officer effectively found that approximately 75 percent of the WC refund8 would
not be reflected in the per diem rate of any of the relevant periods, i.e., FYs 1993-1996.
       {¶19} In its October 23, 2006 adjudication order, the Director rejected the
hearing officer's reasoning and conclusion concerning the WC premium refund. The
Director acknowledged that this court had held in Ohio Academy of Nursing Homes, Inc.
v. Ohio Dept. of Job and Family Servs., 194 Ohio App.3d 413, 2002-Ohio-4721 (10th
Dist.), that the Department could not unilaterally re-open a settled, closed cost audit
period and adjust a provider's rate for that period. But the Director concluded that the
Department's action in offsetting the full amount of the 1995 WC refund against
appellant's 1995 WC costs did not constitute an attempt to re-open a closed period.
Rather, the Director concluded that the Department was statutorily required to offset the
total amount of the WC refund against appellant's 1995 WC costs, including the total
amount of the refund, even though that amount included refunds of prior 1991 through
1994 WC premium payments.
       {¶20} Accordingly, the Director ordered the Department to move the entire
amount of the WC refund to the WC lines of the salary and wage accounts in appellant's
1995 cost report and notify appellant of the amount of the resulting Medicaid
overpayment.     The Director further ordered appellant to repay the resulting 1997
Medicaid overpayment amount that had been calculated on the basis of the pre-audit
1995 cost report.
       {¶21} Appellant then filed an appeal of the Director's adjudication order in the
Franklin County Court of Common Pleas pursuant to R.C. Chapter 119. Final
determination of that appeal was delayed pending resolution by the Supreme Court of

8
  The 75 percent figure results from dividing the WC refund attributable to CYs 1991, 1992, and 1993
($47,033.00) by the total amount of the refund ($62,488.58.)
No. 13AP-263                                                                              8

Ohio of issues related to the applicability of Medcorp, Inc. v. Ohio Dept. of Job and Family
Servs., 121 Ohio St.3d 622, 2009-Ohio-2058. Ultimately, however, the common pleas
court affirmed the Department's adjudication order, finding it to be supported by
probative, substantial, and reliable evidence and in accordance with law.
       {¶22} Appellant timely appeals, asserting two assignments of error:
              [1.] The trial court erred in granting [the Department] far too
              much deference.

              2. The trial court erred in finding the Director's adjudication
              order was supported by reliable, probative and substantial
              evidence.

II. ANALYSIS
       {¶23} We first address the standard of review applicable in R.C. Chapter 119
appeals. In an administrative appeal filed pursuant to R.C. 119.12, the trial court must
"review[ ] [the] agency's order to determine whether it is supported by reliable, probative,
and substantial evidence and is in accordance with law." Fletcher v. Ohio Dept. of Transp.,
10th Dist. No. 12AP-46, 2012-Ohio-3920, ¶ 8. In reviewing the trial court's order, the
court of appeals must apply the following standard:
               In reviewing the trial court's determination that an order is
              supported by reliable, probative, and substantial evidence,
              our role is confined to determining whether the court of
              common pleas abused its discretion. [Citation omitted.]
              However, in determining whether an order was in
              accordance with law, this court's review is plenary.

(Emphasis added.) Id., citing Univ. Hosp., Univ. of Cincinnati College of Medicine v.
State Emp. Relations Bd., 63 Ohio St.3d 339, 343 (1992).
       {¶24} Accordingly, in an R.C. Chapter 119 appeal, this court conducts a de novo
review of questions of law. AmCare, Inc. v. Ohio Dept. of Job and Family Serv., 161 Ohio
App.3d 350, 2005-Ohio-2714 (10th Dist.), ¶ 10. In the case at bar, appellant and the
Department have stipulated that the issue between them is a question of law.
       {¶25} We first consider appellant's argument presented in support of its first
assignment of error that the Director exceeded her authority in ordering the hearing
examiner to take additional evidence in a second administrative hearing.
No. 13AP-263                                                                               9

       {¶26} The record reflects that, on May 6, 2004, after the hearing examiner had
issued its first report and recommendation, the Department entered an order directing
the hearing examiner to take additional testimony as authorized by R.C. 119.09 and Ohio
Adm.Code 5101:6-50-09(C)(1). Appellant contends that the parties had previously
agreed that the matter would be submitted for disposition on briefs and exhibits
submitted at the first hearing on September 25, 2003. It argues that the stipulation
barred the introduction of any additional evidence at a subsequent hearing.
       {¶27} The trial court found that the Director acted within her authority in
ordering the procurement of additional evidence, relying on R.C. 119.09, Ohio Adm.Code
5101:6-50-09(C)(1), and Alternative Residences, Two, Inc. v. Ohio Dept. of Job & Family
Servs., 10th Dist. No. 04AP-306, 2004-Ohio-6444. In Alternative Residences, this court
found that parties who had agreed to submit a stipulated question of law to the hearing
officer could not bind the hearing officer to their characterization of the legal issue.
       {¶28} R.C. 119.09 provides that an agency may appoint a hearing examiner to
conduct the administrative hearing after which the "examiner shall submit to the agency
a written report setting forth [his] findings of fact and conclusions of law and a
recommendation of the action to be taken by the agency." The statute then specifies that
the "agency may order additional testimony to be taken or permit the introduction of
further documentary evidence." R.C. 119.09. See also Ohio Adm.Code 5101:6-50-
09(C)(1). Moreover, that section states that the "recommendation of the referee or
examiner may be approved, modified, or disapproved by the agency."
       {¶29}   Appellant concedes that the Department has authority to order additional
testimony taken after an administrative hearing.           But appellant argues that the
Department waived that right in this case by stipulating to the evidence at the
September 25, 2003 hearing and contends that it should be bound to only the stipulated
documentary evidence presented at that first evidentiary hearing. We disagree.
       {¶30} We initially observe that the parties did not stipulate that only the exhibits
accepted by the hearing examiner at the September 25, 2003 hearing would ever be
considered in resolving the parties dispute, nor did the Department ever affirmatively
waive its right under R.C. 119.09 to thereafter order that the record be supplemented.
No. 13AP-263                                                                              10

Moreover, it is arguable that the parties could not have, by agreement, deprived the
Department of those rights. See Alternative Residences.
       {¶31} The appellant acknowledged in the oral argument of this appeal that it
suffered no prejudice by the introduction of additional evidence at the second,
October 26, 2004, hearing and, instead, characterized the second hearing as presenting
an opportunity for the Department to reargue its position to the hearing examiner. As
observed by the trial court, the facts surrounding this dispute are essentially undisputed.
Moreover, under R.C. 119.09, the Department could have simply disapproved the
hearing examiner's first report and recommendation based on the record before it. The
fact that the Department ordered a second hearing, which for the first time included the
testimony of witnesses, was specifically authorized by statute.
       {¶32} In the absence of prejudice to appellant, and in light of the Department's
express statutory authority to order additional evidence following a hearing examiner's
report and recommendation, we reject appellant's argument in support of its first
assignment of error.      The Department did not lack authority to order a second
administrative hearing.
       {¶33}    Appellant additionally argues in support of its first assignment of error
that the trial court granted the Department undue deference relative to calculation of
appellant's FY 1995 per diem reimbursement rate. It argues that the hearing examiner
was better qualified to interpret and apply the controlling statutory authority and that
the trial court therefore should have adopted the hearing examiner's reasoning.
       {¶34} We are not persuaded by appellant's argument. This court gives
"considerable deference to an agency's interpretation of rules that it administers."
Burden v. Ohio Dept. of Job and Family Servs., 10th Dist. No. 11AP-832, 2012-Ohio-
1552, ¶ 19.    " 'When interpreting statutes, courts must give due deference to those
interpretations by "an agency that has accumulated substantial expertise and to which
the General Assembly has delegated enforcement responsibility." ' " Shell v. Ohio
Veterinary Med. Licensing Bd., 105 Ohio St.3d 420, 2005-Ohio-2423, ¶ 34, quoting
Weiss v. Pub. Util. Comm. of Ohio, 90 Ohio St.3d 15, 17–18, 2000-Ohio-5. Moreover,
both parties suggest that "[a]n agency's interpretation of a statute that governs its actions
should be given deference so long as the interpretation is not irrational, unreasonable or
No. 13AP-263                                                                           11

inconsistent with the statutory purpose." Morning View Care Ctr.-Fulton v. Ohio Dept.
of Human Servs., 148 Ohio App.3d 518, 2002-Ohio-2878 (10th Dist.), ¶ 47-48, citing
Ellis Ctr. For Long Term Care v. DeBuono, 175 Misc.2d 443, 448, 669 N.Y.S.2d 782
(1998).
      {¶35} It is true that "an administrative agency should accord due deference to a
hearing examiner's findings and recommendations, especially where evidentiary
conflicts exist." Bennett v. State Med. Bd. of Ohio, 10th Dist. No. 10AP-833, 2011-Ohio-
3158, ¶ 31.    But in this case no evidentiary conflict existed as the evidence was
undisputed.   Moreover, "the standards of review of an administrative order do not
change because an agency rejects its hearing examiner's recommendation." Id. Clearly,
appellant prefers the hearing examiner's reasoning over that of the Department. But, as
discussed below relative to appellant's second assignment of error, the Department's
interpretation of the controlling statutes and rules was neither irrational, unreasonable
or inconsistent with the statutory purposes of the reimbursement statutes. Rather, its
interpretation was supported by reliable, probative, and substantial evidence and was in
accordance with law. Accordingly, we reject appellant's argument in support of its first
assignment of error that the trial court afforded the Director undue deference in
rejecting the amended report and recommendation of the hearing examiner.
      {¶36} We therefore overrule appellant's first assignment of error.
      {¶37} In its second assignment of error, appellant challenges the trial court's
acceptance of the Department's substantive legal conclusions. Appellant argues that
Ohio's regulatory framework does not allow the Department to offset the entire amount
of the WC refund against its 1995 premium costs. It contends that the Department could
offset against its CY 1995 WC costs only the portion of the WC refund attributable to CY
1995, i.e., $4,264. It further asserts that the hearing examiner correctly opined that
applying the total amount of the 1991-1995 refund against only the 1995 WC costs would
"contravene the statutory directive for the calculation of a prospective rate based upon
the actual costs incurred during the calendar year preceding the fiscal year in which the
rate is to be paid" [and] "circumvent controlling principles of finality." (Emphasis sic.)
(June 3, 2005 Amended Report and Recommendation, 17.)
No. 13AP-263                                                                                         12

       {¶38} As a long-term nursing facility, appellant was entitled to be paid a per
diem, per patient, reimbursment rate. In applying the statutory formulas to determine
that rate, R.C. 5111.23 (dealing with direct costs) and 5111.24 (dealing with indirect costs)
instructed the Department to consider the facility's desk-reviewed, actual, allowable, per
diem care costs for the CY preceding the FY at issue.
       {¶39} Ohio Adm.Code 5101:3-3-01(A) provided that, to be recognized as
allowable, costs must also be reasonable, as set forth in Ohio Adm.Code 5101:3-3(AA)9.
The rule further provided that:
               Unless otherwise enumerated in Chapter 5101:3-3 of the
               Administrative Code, allowable costs are also determined in
               accordance with the following reference material, as
               currently issued and updated, in the following priority:

               (1) Title 42 Code of Federal Regulations (C.F.R.), Chapter IV;

               (2) The provider reimbursement manual ("HCFA Manual
               15-1"); or

               (3) Generally accepted accounting principles[.]

       {¶40} Both appellant and the Department acknowledge that, pursuant to Ohio
Adm.Code 5101:3-3-01(A), actual, allowable costs are to be determined according to the
rules set forth in those three sources.
       {¶41} The parties further acknowledge that state and federal statutes and
regulations fail to address the issue of the accounting in cost reports of refunds
attributable to prior reporting years.         Both parties have agreed, as did the hearing
examiner, that Section 804 of HCFA Manual 15-1 ("Section 804") therefore provides
relevant guidance. Section 804 provides as follows:
               Discounts, allowances, refunds, and rebates are not to be
               considered a form of income. Rather, they should be used to
               reduce the specific costs to which they apply in the
               accounting period in which the purchase occurs.

9 Ohio Adm.Code 5103:303(AA) defined "reasonable" as meaning "that a cost is an actual cost that is

appropriate and helpful to develop and maintain the operation of patient care facilities and activities,
including normal standby costs, and that does not exceed what a prudent buyer pays for a given item or
services."
No. 13AP-263                                                                           13

              Where the purchase occurs in one accounting period and the
              related allowance or refund is not received until the
              subsequent period, where possible, an accrual in the initial
              period should be made of the amount if it is significant, and
              cost correspondingly reduced. However, if this cannot be
              readily accomplished, such amounts may be used to reduce
              comparable expenses in the period in which they are
              received.

      {¶42} Section 804 is contained within HCFA Manual 15-1, also known as the
federal Provider Reimbursement Manual, which contains interpretive guidelines for
implementing federal Medicare and Medicaid regulations. The manual, originally issued
by the Health Care Financing Administration, is maintained by its successor, the Centers
for Medicare and Medicaid Services ("CMS"). See http://www.cms.gov/Regulations-
and-Guidance/Guidance/Manuals/index.html (accessed Dec. 27, 2013) (describing CMS
manuals as being "used by CMS program components, partners, contractors, and State
Survey Agencies to administer CMS programs.             It offers day-to-day operating
instructions, policies, and procedures based on statutes and regulations, guidelines,
models, and directives.)" See also http://www.cms.gov/Regulations-and-Guidance/
Guidance/Manuals/Paper-Based-Manuals.html?DLSort=0&DLPage=1&DLSortDir=
ascending (specifically referencing the Provider Reimbursement Manual) (accessed on
December 27, 2013).
      {¶43} Appellant emphasizes the first sentence of Section 804 and contends that
the WC refund should "be used to reduce the specific costs to which they apply in the
accounting period in which the purchase occurs." The Director, however, points to the
second paragraph of Section 804, which provides that, where a refund is received in a
subsequent accounting period, the refund should be used to offset the corresponding
cost in the initial period "where possible," but "if this cannot be readily accomplished,"
the amount of the refund received in a subsequent period "may be used to reduce
comparable expenses in the period in which they are received."
      {¶44} The Director observed that appellant had received the WC premium
refund in 1995 and had incorrectly reported it as income—not as a cost offset—on its CY
1995 cost report, contrary to the first sentence of Section 804 of HCFA Manual 15-1. Had
appellant, at the time it received the WC refund in September 1995, instead elected to
No. 13AP-263                                                                                           14

have supplemented its cost reports for CYs 1991-1993 to reflect the refund, the
Department could have revised appellant's per diem rates for FY 1993-1995, as the rate
calculations for those periods had not yet become final. See R.C. 5111.27(B) and Ohio
Adm.Code 5101:3-3-20(E) (authorizing a provider to furnish additional relevant cost
information to the Department before calculation of an FY per diem rate has become
final, even if the provider is time-barred from amending a cost report as a matter of
right). But, appellant did not do so.
       {¶45} Appellant itself chose how it reported the refund. It did not advise the
Department that the total refund included amounts attributable to prior CYs. Rather, it
reported the refund as a single sum income item without breakdown.10 As observed by
the Department, until the desk audit, "only [appellant]—and not the Department—knew
about the refund and made the choice about how to report the refund." (Appellee's brief,
10.) Moreover, the Director noted that "[h]ad the Department not audited [appellant's]
cost report, the refund would never have come to [the Department's] attention." (Oct.
23, 2006 Adjudication Order, 8.)
       {¶46} Had appellant wanted the Department to allocate its refund to the years to
which it corresponded, it was appellant's obligation to timely provide the necessary
information to the Department to allow that allocation. Appellant simply did not do so,
but itself chose to report the total amount of the refund as a 1995 lump sum and did so
for the first time in its CY 1995 cost report filed on March 31, 1996. As correctly observed
by the trial court,"appellant initiated [the] outcome by choosing to report the refund as a
lump sum in the 1995 cost report." (Emphasis added.) (Feb. 27, 2013 Decision, 13.)
       {¶47} Appellant argues that Section 804 imposed an obligation on the
Department to itself reallocate the refunds to the earlier years.               We acknowledge that
both providers and agencies may consult Section 804 to ascertain whether a cost report
entry initially made by a provider is legally supportable.                 But we reject appellant's
contention that Section 804 imposed an affirmative obligation on the Department to

10 We note that BWC issued the refund at issue in this case as a rate adjustment specific to appellant
following a rate protest filed by appellant. BWC did not notify the Department of the refund nor the reason
for it. An employee of the BWC testified that BWC in 1995 issued a statewide rebate of premiums paid by
employers on the basis that the state fund was overfunded. However, the $62,480 rebate issued to appellant
in 1995 was not such a refund.
No. 13AP-263                                                                             15

itself reallocate the WC refunds to the earlier years or to unilaterally determine that
another method of accounting for the refund might have been of benefit to appellant.
       {¶48} We note that appellant now concedes that its "reported costs for BWC
premiums incurred in 1995 should have been reduced by $4,264.00, the amount of the
refund BWC attributed to 1995." (Appellant's Brief, 42.) However, it is also true that
appellant did not take that position until after the Department's audit and rejection of
inclusion of the refund as an income item. We will not apply the finality principle
established in Ohio Academy to allow a provider to benefit from its own decision
concerning its method of reporting costs, resulting in the calculation of a higher per diem
rate in earlier years, then claim, after the final adjudication orders for those years have
been issued, that the Department may no longer consider the effect of the chosen
reporting method in calculating the per diem rate for a subsequent year later when the
Department, in doing so, acts under the authority of relevant statutes, regulations or
other governing authority, including Section 804.
       {¶49} In summary, appellant at a minimum bore the burden of timely providing
relevant allocation information to the Department if it desired the Department to
allocate the CY 1991 and 1992 portions of the WC refund to impact the FY 1993 and 1994
per diem rates. Having not done so, appellant may not complain of the Department's
failure to have itself allocated the refund to prior rate calculations. Because the FY 1993-
1995 per diem rates had become final at the time of the hearing examiner's report and
recommendation, the Department could assure proper Medicaid reimbursement with
regard to appellant only by implementing the second option authorized by Section 804,
i.e., using the total refund to "reduce comparable expenses in the period in which they
are received," i.e., CY 1995.      That is, the Department could no longer "readily
accomplish" allocation of the refund to the accounting periods corresponding to the
refunds because the rates for those years had been finally adjudicated at the
administrative level and were no longer capable of being adjusted. Ohio Academy.
       {¶50} We further reject appellant's argument that its "actual" 1995 costs must be
deemed to be the difference between the amount of WC premiums paid in 1995 and the
amount of the refund attributable solely to 1995, i.e., $4,263.56. It was reasonable for the
Department to conclude that appellant's actual WC costs in 1995 totaled the amount of
No. 13AP-263                                                                            16

the premiums it had paid in 1995 offset by the total amount of the refund the BWC
received in 1995.
       {¶51} Ultimately, the issue in this case is whether appellant or the Department
(which distributes taxpayer-generated funds) should bear the cost of the fact that the FY
1994-1996 per diem rates were final at the time the Department became aware that the
WC premium refund included amounts attributable to WC premium payments made in
1991-1994. In view of the facts of this case, including the fact that appellant elected the
manner of reporting the refund to the Department, we find that the Department did not
violate Ohio's Medicaid reimbursement statutes in offsetting the entire amount of the
refund against appellant's 1995 WC costs, consistent with Section 804.
       {¶52} Appellant argues that the Director's adjudication order requiring
repayment of previously paid Medicaid reimbursements was irrational, unreasonable,
and inconsistent with the statutory purposes of Ohio's Medicaid statutes. We find, to the
contrary, that the Department's application of Section 804 to offset the full amount of
the WC refund against appellant's 1995 WC costs was reasonable in that neither it nor
appellant could any longer "readily accomplish" allocation of the refund to prior-year
closed audit periods.
       {¶53} We therefore overrule appellant's second assignment of error.
       {¶54} The trial court affirmed the Department's adjudication order as being
supported by reliable, probative, and substantial evidence and in accordance with law.
We find that the evidence was undisputed and sufficient to allow consideration of the
sole issue upon which the parties differed. That issue was whether the Department's
adjudication order was in accordance with law. We have found on de novo review of that
issue of law that the order was in accordance with law. Accordingly, the common pleas
court did not abuse its discretion.

III. Conclusion
No. 13AP-263                                                                       17

      {¶55} For the foregoing reasons, both of appellant's assignments of error are
overruled, and the judgment of the Franklin County Court of Common Pleas is affirmed.
                                                                  Judgment affirmed.
                         TYACK and T. BRYANT, JJ., concur.
             T. BRYANT, J., retired, of the Third Appellate District,
             assigned to active duty under the authority of the Ohio
             Constitution, Article IV, Section 6(C).

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