On appeal from the Department of Human Services, Division of Medical Assistance and Health Services.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Fuentes and Gilroy.
This appeal involves a challenge to the validity of a regulation adopted by respondent Division of Medical Assistance and Health Services (DMAHS), which established the method of calculation of the reimbursement rate paid to hospice providers for room and board for Medicaid recipients who reside in nursing facilities, on the ground that this method violates a provision of the federal statute governing the Medicaid program. We conclude that the regulation, which is reflected in the State Medicaid plan approved by the federal agency responsible for monitoring state compliance with the federal Medicaid statute, constitutes a permissible construction of the federal statute and therefore is valid.
The procedural route by which this challenge to the regulation comes before us is somewhat unusual. The regulation, which is N.J.A.C. 10:53A-4.2(c)(1)(i), was originally adopted by DMAHS in 1992. 24 N.J.R. 4036(a), 4045 (Oct. 9, 1992). In its original form, the regulation stated in pertinent part:
The room and board rate is calculated at 95 percent of the highest approved Medicaid NF [nursing facility] per diem rate (institutionally specific) effective at the time services are provided, and excluding retroactive rate adjustments, retroactive add-ons and special program rates.*fn1
In 2008, DMAHS added another sentence to the regulation, which states:
The "approved Medicaid NF per diem rate effective at the time services are provided," means the rate that was effective for the date of service, and shall not include any subsequent retroactive rate adjustments made between the date of service and the date of claim submission.
[40 N.J.R. 4578(a), 4580 (July 9, 2008).]
Following adoption of N.J.A.C. 10:53A-4.2(c)(1)(i), the State Medicaid plans submitted to and approved by the Center for Medicare and Medicaid Services (CMS), in the United States Department of Health and Human Services (HHS), specifically indicated, in conformity with this regulation, that retroactive adjustments in the nursing facility reimbursement rate would be excluded in the calculation of the hospice room and board reimbursement rate:
The hospice rate is the lesser of the NF [nursing facility] rate for the date of service at the time the claim is adjudicated or the NF rate billed by the hospice. Retroactive rate adjustments, retroactive add-ons and special program rates are excluded. [Emphasis added.]
Even though N.J.A.C. 10:53A-4.2(c)(1)(i) and the State Medicaid plans approved by CMS expressly stated that retroactive adjustments in the Medicaid reimbursement rate for nursing facilities would be excluded in calculating Medicaid payments for room and board to hospice providers, the fiscal intermediary DMAHS uses in administering the Medicaid program, called Unisys, had included those retroactive rate adjustments in its payments to hospice providers since at least 2001. DMAHS became aware of this practice sometime in 2008. As a result, DMAHS instructed Unisys to make future payments in conformity with N.J.A.C. 10:53A-4.2(c)(1)(i) and the State Medicaid ...