On appeal from the Department of Health and Senior Services, No. 0127B.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lisa and Baxter.
In these consolidated appeals,*fn1 four nursing homes, Jersey Shore Nursing and Rehabilitation, Inglemoor Center, Maple Glen Manor and Summit Ridge Nursing, appeal from a December 5, 2008 final agency decision of the Commissioner of the Department of Health and Senior Services (Commissioner or Department) in which the Commissioner affirmed the decision of an administrative law judge (ALJ). The ALJ concluded that the patient beds and mattresses used in these four nursing homes to prevent decubitous ulcers (bed sores) were special medical equipment not eligible to be included when calculating each facility's per diem Medicaid rate for routine care.
On appeal, the nursing homes maintain that: the Commissioner's decision to disallow rental costs for the beds in question was arbitrary, capricious and unreasonable; the Commissioner's conclusion that the equipment in question is a specialty item not generally used in nursing homes throughout the State is in error; and the ALJ's legal analysis, which the Commissioner adopted, failed to address the factual and legal issues raised by the nursing homes. We disagree and affirm.
The trial before the ALJ included no witness testimony. Instead, the parties submitted a stipulated set of facts along with documentary submissions, after which both sides presented closing arguments. We derive our summary of the record from the stipulations and exhibits that were presented.
In April 2004, each of the four nursing homes submitted a costs report for the calendar year ending on December 31, 2003. Such cost reports are used by the Department to establish prospective per diem rates for the provision of routine nursing facility services to nursing home patients under the State's Medicaid Program. N.J.A.C. 8:85-3.1(a). The Department's regulatory framework used to set nursing home reimbursement rates is derived from the Cost Accounting and Rate Evaluation Guidelines, N.J.A.C. 8:85-3.1 to -4.3 (the CARE Regulations).*fn2
The CARE Regulations specify that the reimbursement rate shall be "either a statistically 'reasonable' rate based upon a method of peer comparison within discrete categories or the facility's actual costs, whichever is lower." In re Medicaid Long Term Care Servs. Bulletin 84-2, 212 N.J. Super. 48, 52 (App. Div.), certif. denied, 107 N.J. 31 (1986).
Costs incurred by a nursing home cannot be included in the setting of the nursing home's per diem rate unless the equipment in question is routinely used in patient care. N.J.A.C. 8:85-2.15(c). In contrast, specialized medical equipment is not considered to be routinely used, and the cost of such specialized equipment is only reimbursable from Medicaid to the extent that such equipment is used to provide "medically necessary" care to Medicaid patients, and then only if the equipment is pre-authorized by the Medical Assistance Customer Center serving the county in which the nursing home is located. N.J.A.C. 8:85-2.15(d).
The CARE Regulations establish two broad categories of expenses related to beds and mattresses in a nursing home. One is eligible for consideration in setting the per diem rate; the other is not. Specifically, "[l]ow-end pressure relief systems, [which include] for example, mattress overlays, mattress replacements, powered mattress systems and powered flotation beds" are considered to be routinely used durable medical equipment and are an approved cost used to calculate a nursing facility's per diem reimbursement rate. N.J.A.C. 10:59-1.4(a)(xii); N.J.A.C. 10:59-1.14(c); N.J.A.C. 8:85-2.15(c).
In contrast, special medical equipment, such as air fluidized and low airloss therapy beds, are not considered routinely used medical equipment, and the cost of such equipment is only reimbursable from Medicaid if such use is pre-authorized. N.J.A.C. 8:85-2.15(d). In particular, the regulations define an "air fluidized therapy bed" as a device that circulates filtered air through ceramic spherules (small-round ceramic objects). N.J.A.C. 8:85-1.2. The same regulation defines a "low airloss therapy bed" as a bed frame that is "equipped with air sacs which are grouped into zones corresponding to various body areas. The air sacs are inflated by a constant flow of air, some of which is directed through the air sacs to the patient surface." Ibid. Thus, neither an "air fluidized therapy bed" nor a "low airloss therapy bed" is eligible to be included in the setting of the per diem rate. Ibid.
At issue in this appeal are six types of equipment, which we now describe by reference to the ...