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Fryeburg Health Care v. DHS
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MAINE SUPREME JUDICIAL COURT				Reporter of Decisions 
Decision:	1999 ME 
Docket:	Ken-98-554
Argued:	June 9, 1999
Decided:	July 30, 1999


	[¶1] The Department of Human Services appeals from a judgment
entered in the Superior Court (Kennebec County, Marden, J.) in favor of
Fryeburg Health Care Center.  The court vacated a decision by the
Commissioner of Human Services affirming the Department's decision not
to reimburse Fryeburg for nursing facility services it provided to four
patients whose medical eligibility reassessments it failed to have conducted
by specific reclassification dates.  The court found that the Department's
decision was not supported by the applicable Medicaid regulations.  Because
we agree with the Department that its interpretation of the Medicaid
regulations is reasonable, we vacate the Superior Court's judgment.  
	[¶2]  Medicaid is a program jointly funded by the state and federal
governments in accordance with Title XIX of the Social Security Act,
42 U.S.C.A. ch. 7, subch. XIX (§§ 1396-99) (1992 & Pamph. 1999).  The
Department administers the program in Maine pursuant to
22 M.R.S.A. §§ 10 and 12, and ch. 855 (§§ 3172-91) (1992 & Supp. 1998). 
The Department pays for the medical care of eligible recipients by
reimbursing Medicaid "providers" for their expenses.  See 42 U.S.C.A.
§ 1396a(13)(A) (1992 & Pamph. 1999); 42 C.F.R. § 447.250 (1998);
22 M.R.S.A. § 1708(3) (1992 & Supp. 1998).  The Maine regulations for the
Medicaid program are contained in the Maine Medical Assistance Manual.
	[¶3] Fryeburg is a contractual provider of both nursing facility and
assisted living residential care facility services to Medicaid eligible patients. 
This case arose out of the Department's decision not to reimburse Fryeburg
for expenses totalling $36,883.55 that Fryeburg incurred providing nursing
facility services to four patients between March and September of 1996. 
Although it should have had medical eligibility reassessments for these
patients performed, respectively, by March 11, May 15, July 7, and August
8, it did not request the reassessments until September 12, 1996.  Once it
submitted the requests, Senior Spectrum, the independent assessment
agency designated by the Department, conducted the reassessments and
determined that while three of the four patients remained medically eligible
to receive the full nursing facility services they were receiving, one of the
patients was eligible only for a reduced level of nursing care.
	[¶4] The Department refused to reimburse Fryeburg for the services it
provided to these patients between the dates on which their reassessments
should have been performed and the dates on which their reassessments
were actually performed.  It interpreted Medicaid laws and regulations to
provide that a reclassification date acted as an eligibility termination date. 
Thus, because the eligibility of patients would lapse until they were
reassessed, nursing facilities would not be entitled to reimbursement for
providing services to those patients who were not reassessed on time.  
Consequently, it concluded that Fryeburg was not entitled to reimbursement
because it had provided services to ineligible patients.
	[¶5] Fryeburg challenged the disallowance through administrative
review procedures that culminated in an adjudicatory hearing before a
Department hearing officer.  See Maine Medical Assistance Manual, ch. I,
§ 1.19.  Concluding that the Department's construction was consistent with
the language of the regulations, the hearing officer recommended that the
Commissioner of Human Services affirm the Department's determination
that Fryeburg was not entitled to reimbursement.  The Commissioner
adopted the hearing officer's findings and decision as the final decision.
	[¶6]  Fryeburg filed an appeal pursuant to M.R. Civ. P. 80C and
5 M.R.S.A. §§ 11001 and 11004 (1989).  In vacating the Commissioner's
decision, the Superior Court held that the Commissioner made an error of
law in denying reimbursement because nothing in the applicable Medicaid
regulations explicitly provided that reclassification dates were eligibility
termination dates or that the Department could refuse to reimburse a
provider that failed to have its patients reassessed by those dates.  The
Department then filed this appeal.
	[¶7] On an appeal from an intermediate appellate review of an
administrative decision, we directly review an agency's decision for an abuse
of discretion, error of law, or findings not supported by the evidence. 
See 5 M.R.S.A. §11007(4)(C) (1989); Hale-Rice v. State Retirement System,
1997 ME 64, ¶ 8, 691 A.2d 1232, 1235.  We give considerable deference to
an agency's interpretation of its own internal rules, regulations, and
procedures and will not set it aside, unless the rule or regulation plainly
compels a contrary result.  See Hale-Rice, 1997 ME 64, ¶ 12,
691 A.2d at 1236; AFSCME Council 93 v. Maine Labor Relations Bd.,
678 A.2d 591, 593 (Me. 1996); Sebasticook Valley Health Care Facility, Inc.
v. State, 484 A.2d 595, 602 (Me. 1984).  The challenger has the burden of
showing that the Department's action is arbitrary or based on an error of
law.  See Medical Care Management, Inc. v. Department of Human Services,
632 A.2d 436, 436-37 (Me. 1993); Sebasticook Valley Health Care Facility,
484 A.2d at 602.
	[¶8] Fryeburg argues that the Department made an error of law in
disallowing reimbursement because it had not promulgated a formal rule
pursuant to the rule making provisions of the Maine Administrative
Procedure Act, 5 M.R.S.A. §§ 8052-54 (1989 & Pamph. 1998), explicitly
explaining the consequences of failing to have timely reassessments
conducted.  According to Fryeburg, the Department was not authorized to
deny reimbursement until it formally amended section 67.05-4(B) of
chapter II of the Manual in March of 1997, to provide that a nursing facility
must request eligibility reassessments "at least five calendar days prior to
the end date of the resident's current approved classification period in
order for a new classification period to be established and Medicaid
coverage to continue."
	[¶9] Contrary to Fryeburg's contention however, an agency is not
required to use the formal rule making procedures every time it makes a
decision interpreting an existing rule.  See Mitchell v. Maine Harnessing
Racing Comm'n, 662 A.2d 924, 927 (Me. 1995).  Here, Fryeburg concedes
that the regulations contained in the Manual are rules that the Department
promulgated in accordance with the formal rule making procedures.  The
Department did not create a new rule in rejecting Fryeburg's request for
reimbursement.  Rather, it interpreted the existing rules governing the
Medicaid program.  The Department was not required to amend the
regulations before it could refuse to reimburse Fryeburg, and the subsequent
amendment to section 67.05-4(B) merely reflects the Department's
decision to memorialize its interpretation of the rules.
	[¶10]  In determining not to reimburse Fryeburg, the Department
relied on state regulations contained in the Manual and on federal
regulations.  Section 1.04 of chapter I of the Manual permits the
Department to reimburse a Medicaid provider only for "Medicaid covered
services provided to individuals who are eligible for services provided on the
date the services are actually provided, or who have been granted retroactive
Medicaid eligibility after services have been provided."  A nursing facility
like Fryeburg must obtain a prior authorization before extending nursing
facility services to a patient.  Section 1.15-1 of chapter I of the Manual
	When a participating provider furnishes a service or
equipment and has . . . failed to request [prior
authorization] . . . that provider is liable for the costs of services
which that provider has furnished the recipient and that
provider may not bill either the Department or the recipient for
such care or services except in the following situation:
	Prior to the provision of the services, the recipient
acknowledges in writing that he or she is aware that [prior
authorization] has not been granted and, therefore, Medicaid will
not pay for the services and that he or she accepts financial
liability to pay for the services.
The prior authorization obligates the provider to have medical eligibility
assessments of its patients performed to establish they meet general
Medicaid eligibility requirements, medical requirements, and other specific
requirements.  See Maine Medical Assistance Manual, ch. I, § 1.15-1;
ch. II, §§ 67.02, 67.03.
	[¶11] In addition to these sections of the Manual, the Department
based its decision on the federal regulation that requires a Medicaid
recipient's eligibility to be redetermined at least every twelve months, see
42 C.F.R. § 435.916(a) (1998), and the Manual section that makes the
nursing facility "responsible for implementing a systematic review process
to monitor the service needs of each resident and to determine whether the
resident continues to require a Nursing Facility level of care pursuant to the
eligibility requirements set forth under Section 67.02," Maine Medical
Assistance Manual, ch. II, § 67.05-3.  The Department interpreted these
regulations to mean that timely medical eligibility reassessments must be
performed for a patient's eligibility to continue.{1}  If an assessment is not
performed, a patient's eligibility lapses unless and until the reassessment
occurs.  Accordingly, a nursing facility is not entitled to reimbursement for
providing services to a patient whose eligibility has lapsed until that patient
again is found eligible.  
	[¶12] The Department's interpretation reasonably comports with the
language of the regulations and is not clearly erroneous.  Here, Fryeburg
conceded that it had four of its patients examined well after their
reassessment dates had passed.  Consequently, the Department was not
obligated to reimburse Fryeburg for the nursing facility expenses.
	The entry is:
Judgment vacated.  Remanded to the Superior
Court for entry of a judgment in favor of the

Attorney for the plaintiff: Charles F. Dingman, Esq. (orally) Preti, Flaherty, Beliveau, Pachios & Haley 45 Memorial Circle P.O. Box 1058 Augusta, Maine 04332-1058 Attorneys for the defendant: Andrew Ketterer, Attorney General Jane B. Gregory, Asst. Atty. Gen. (orally) Marci Alexander, Asst. Atty. Gen. State House Station 6 Augusta, Maine 04333
FOOTNOTES******************************** {1} . The record shows that the Department notified providers about its interpretation of the regulations. This notification included a letter issued in September of 1995, explaining the eligibility assessment process and the providers' responsibility for ensuring the timely completion of that process; regular informational mailings to administrators; and an informational packet mailed in May of 1996, containing forms, instructions, and a question and answer booklet that all emphasized the providers' obligation to request timely reassessments to ensure continual payment.