El Paso Healthcare System, LTD v. Molina Healthcare of New Mexico, Inc.
ORDER DENYING 40 Motion for Partial Summary Judgment; GRANTING IN PART AND DENYING IN PART 42 Motion for Summary Judgment Signed by Judge Kathleen Cardone. (me, )
I N THE UNITED STATES DISTRICT COURT\ F O R THE WESTERN DISTRICT OF TEXAS E L PASO DIVISION
E L PASO HEALTHCARE SYSTEM, LTD,
§ § §
M O L I N A HEALTHCARE OF NEW M E X I C O , INC.,
§ § §
O R D E R CONCERNING MOTIONS FOR SUMMARY JUDGMENT O n this day, the Court considered Plaintiff El Paso Healthcare System's Motion for Partial S u m m a ry Judgment ("EPH Mot.") (Doc No. 40) and Defendant Molina Healthcare's Motion for S u m m a ry Judgement ("Molina Mot.") (Doc. No. 42). For the reasons set forth herein, El Paso H e a lth c a r e System's Motion is DENIED and Molina Heathcare's Motion is GRANTED in part a n d DENIED in part.
BACKGROUND A. P r o c e d u r a l Posture
E l Paso Healthcare System, Ltd. ("EPH"), which owns Las Palmas Medical Center and D e l Sol Medical Center two hospitals in El Paso, Texas (the "Hospitals") is suing Molina H e a l t h c a r e of New Mexico ("Molina"), an insurance company which provides managed care o rgan iz a tio n ("MCO") health coverage to certain New Mexico Medicaid beneficiaries. See N o t ic e of Removal (Doc. No. 1) 1-2; see also generally N.M. ADMIN. CODE §§ 8.301.5, 8.305.14 (implementing a policy of shifting Medicaid beneficiaries from a directly-state-paid fee-fors e rv ic e system to privately-run managed care programs which receive predetermined capitation p re m i u m s from the state for each enrollee). Pending before the Court are cross motions for s u m m a ry judgment. See EPH Mot.; see also Molina Mot. Each side has filed a Response to the o p p o s in g Motion. See Def.'s Resp. to Pl.'s Mot. ("Molina Resp.") (Doc. No. 44); see also Pl.'s R e s p . to Def.'s Mot. ("EPH Resp.") (Doc. No. 46). Each side has also filed a Reply in support of its own Motion. See Pl.s Reply to Def.'s Resp. ("EPH Reply") (Doc. No. 47); see also Def.'s R e p l y to Pl.'s Resp. ("Molina Reply") (Doc. No. 49). To the extent discussed below, the Court d e n ie s EPH's Motion and grants in part and denies in part Molina's Motion. B. F a cts
A t the center of this suit is EPH's claim that, since at least 2006, Molina has underpaid (a n d continues to underpay) it for certain services rendered at the Hospitals to Molina-covered N e w Mexico Medicaid beneficiaries. See Notice of Removal 1-2; see also Pl.'s Orig. Pet. (Doc. N o . 1 Ex. A) ¶ 9. At this point in the litigation, a number of issues have been privately resolved, a n d the dispute now boils down to a single subject alleged underpayments for emergency
o u tp a tie n t services. See EPH Mot. 1 ("Plaintiff respectfully requests that the Court determine . . . th e application of a New Mexico  regulation setting the Medicaid reimbursement rate for o u t p a t ie n t hospital services."); see also Molina Resp. 1 ("The parties have effectively resolved all d i s p u t e s regarding the reimbursement of inpatient hospital services."). In connection with this s in gle disputed area, EPH has requested, in its pleadings, a judgment against Molina in the a m o u n t of the alleged payment deficiencies plus interest, fees and costs, as well as declaratory ju d gm e n t and injunctive relief to prevent Molina from underpaying in the future. See Pl.'s Orig. P e t. ¶¶ 22-32. This dispute about emergency outpatient services reimbursement rates stems from the fo llo w i n g circumstances: MCO plans generally require patients to seek medical services from c o n t ra c t e d ("in-network") physicians and hospitals, who have privately agreed, in advance, to a c c e p t certain payment levels and reimbursement procedures from the insurer for the furnished s e rv ic e s . See EPH Mot. 2; see also Molina Mot. 2-3; N.M. ADMIN. CODE § 8.311.2.11(C). Such a gre e m e n ts would, logically, greatly reduce the opportunity for disputes over regulatory payment ra te s . The rules governing New Mexico Medicaid, however, provide that patients may go to any in -n e tw o rk or out-of-network hospital in an emergency situation and have the MCO pay for that c a re . See N.M. ADMIN. CODE § 8.305.7.11(F). Another rule provides that when a facility is outo f- n e t w o r k and has no rate-setting contract with the insurer, the payment owed by the insurer is e q u a l to that paid by the state 1 to the facility for the same type of care given to Medicaid
The Court understands this requirement as referring to the a m o u n t the state is obligated to pay under the relevant r e g u l a t i o n s and program rules. See Molina Mot. Ex. A ("New M e x ic o Provider Participation Agreement" or "Provider A g r e e m e n t" ) § 1.15 (stating that providers agree to be r e i m b u r s e d for services provided to Medicaid patients "in a c c o r d with the reimbursement structure in effect" at the time
b e n e fic ia rie s whose care is paid for directly by the state. See N.M. ADMIN. CODE § 8.311.2.11(C)(2). As there is no private rate-setting contract between EPH and Molina, and as M o lin a patients have allegedly been regularly obtaining emergency care at the Hospitals, the d i s p u te principally concerns the definition and calculation of this "default" government-set re im b u rs e m e n t rate. See EPH Mot. 2; see also Molina Mot. 4. The parties also dispute whether t h e causes of action cited by EPH in its Original Petition actually provide standing to sue and/or a b a s is for private recovery of amounts due under the regulatory reimbursement rate. See Molina M o t . 5-6, 13-17; see also EPH Resp. 9-10. M o lin a seeks summary judgment in its favor, denying EPH any monetary recovery or d e c l a r a t o r y and injunctive relief. It argues, first, that it is subject to no privately enforceable o b liga tio n to pay, and second, that if it is subject to such an obligation, it has fully discharged it b y making certain payments to EPH in the past payments smaller than what EPH deems correct. See generally Molina Mot.; see also Aff. of Julie Perez ("Perez Aff.") (Doc. No. 40-3) ¶ 8 ( h o s p i ta l official acknowledging that Molina made some payments to EPH). E P H , by contrast, only seeks partial summary judgment. It moves for the Court to hold t h a t the rate of payment or method for calculating payment, under the regulations, is a certain s im p l e r and more generous formula, rather than the more complex and less-generous one favored b y Molina. See generally EPH Mot.2 The precise amount owed under any such formula cannot b e ascertained by the Court at this time because specific evidence concerning each outstanding
the service is rendered).
EPH's overall position calls for the recognition of a binding a n d enforceable obligation to pay, but EPH never explicitly a s k s for summary judgment on this point. See generally EPH. M o t . ; see also generally EPH Resp.
c la im for each service performed has not been placed before the Court and EPH does not r e q u e s t that the Court make such a specific finding at this time. While EPH has brought affidavit e v i d e n c e showing that the alleged payment deficiencies under its formula total at least $ 3 ,4 0 0 , 0 0 0 , and Molina does not bring evidence to dispute this calculation, EPH has not asked th e Court to enter a final judgment in that amount at this time. See Perez Aff. ¶ 8; see also EPH M o t. 1-2. As these cross motions deal with essentially the same issues and arguments, though d i ffe r i n g somewhat in the scope of requested relief, they are discussed here together. II. D ISC U SSIO N : A. Standard of Review
S u m m a ry judgment is required "if the pleadings, depositions, answers to interrogatories, a n d admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R . CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Warfield v. Byron, 436 F.3d 5 5 1 , 557 (5th Cir. 2006). The substantive law identifies which facts are material. See Anderson v . Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ellison v. Software Spectrum, Inc., 85 F.3d 187, 1 8 9 (5th Cir. 1996). A dispute about a material fact is genuine only "if the evidence is such that a re a s o n a b l e jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248; E llis o n , 85 F.3d at 189. " [T h e] party seeking summary judgment always bears the initial responsibility of in fo rm i n g the district court of the basis for its motion, and identifying those portions of [the re c o r d ] which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 4 7 7 U.S. at 323; Wallace v. Texas Tech. Univ., 80 F.3d 1042, 1046-47 (5th Cir. 1996). If the
m o v in g party meets its initial burden, the nonmoving party "must set forth specific facts showing th a t there is a genuine issue for trial." FED. R. CIV. P. 56(e). The nonmovant's burden may not b e satisfied by "conclusory allegations, unsubstantiated assertions, or only a scintilla of e v i d e n c e ." Warfield, 436 F.3d at 557 (quoting Freeman v. Texas Dep't of Crim. Justice, 369 F.3d 8 5 4 , 860 (5th Cir. 2004)). Factual controversies are to be resolved in favor of the nonmovant, " b u t only when there is an actual controversy, that is, when both parties have submitted evidence o f contradictory facts." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Thus, the ultimate inquiry in a summary judgment motion is "whether the evidence presents a s u ffi c i e n t disagreement to require submission to a jury or whether it is so one-sided that one party m u s t prevail as a matter of law." Anderson, 477 U.S. at 251-52. B. Obligation to Pay
E P H asserts three distinct legal theories on which they are entitled to receive payment fro m Molina and to sue if payment is not forthcoming: (1) contract, (2) quantum meruit and (3) re gu la to ry rates. See Pl.'s Orig. Compl. ¶¶ 11-21. Molina argues in response that none of these t h e o r ie s supports a legally-enforceable obligation, on its part, to pay the hospitals, and that it is e n title d to summary judgment on that point. See Molina Mot. 5, 13-18. The nature of the b r ie fi n g and the submitted evidence, however, reveal that resolving this question is not a simple t a s k and is not feasible at this time; the Court cannot now state whether some or all of EPH's th eo rie s conclusively support an obligation to pay and standing to sue on such an obligation. At t h e same time, the evidence is such that the Court cannot accept Molina's proposition that there i s no obligation to pay, and no standing to sue, under any of EPH's three theories. At the very le a s t, Molina's history of paying EPH at least some amount for these claims suggests that it has
re c o gn iz e d some obligation to pay though this simple course of conduct is hardly conclusive. See Perez Aff. ¶ 8. Accordingly, the Court disagrees with Molina's contention that there is no b in d in g and enforceable obligation to pay, and therefore the Court reserves the issue for trial. In t h e subsections that follow, each of EPH's three alternative causes of action will be discussed, in o r d e r to more fully explain why genuine issues of material fact continue to exist, which require t h e s e issues to be decided at trial. 1. Contract
E P H pleads that Molina is obligated to pay it for emergency outpatient services under a c o n tra c t law theory. See Pl.'s Orig. Pet. ¶¶ 17-21. Specifically, EPH contends that Molina and its plan members entered into contracts which, inter alia, required Molina to pay for their e m e rge n c y care, and that these plan members validly assigned these rights to the Hospitals at the tim e they sought treatment. See id. ¶¶ 19-21; see also Conditions of Admis. ¶ 3 (Doc. No. 46 Ex. P 9 ) (example of an assignment of insurance benefits from a patient to one of the Hospitals). EPH c o n c lu d e s this point by arguing that, as the assignee of these rights, it is in a position to sue M o lin a for any breach of its obligations. See id. ¶ 21. Molina points out that EPH has yet to furnish any evidence as to the existence of or terms o f such member contracts. See Molina Mot. 15-16. This objection is well taken, to the extent t h a t the lack of such evidence precludes the Court from holding, on summary judgment, that there i s no issue of material fact as to the existence or terms of these contracts and that EPH should p r e v a i l as a matter of law. Clearly, EPH must prove that these contracts exist, and must d e m o n s tra te their contents, before judgment can be entered in its favor on such a theory. But by th e same token, Molina has not brought evidence tending to show affirmatively that such
c o n t ra c t s do not exist, or that their terms would preclude EPH's claims under them. Rather, giv e n what is before the Court, including both Molina's history of making past payments and the s t a n d a r d industry practice of insurers having patient contracts with assignable and enforceable righ ts , the most that can be said is that there is some likelihood that some relevant contracts do e x is t. See Perez Aff. ¶ 8 (past payments from Molina to EPH over these claims); see also C o n d i ti o n s of Admission ¶¶ 2-3 (evidence that patients with insurance often have assignable righ ts of reimbursement for services). This factual uncertainty over what the terms of these c o n tra c ts are or whether they even exist must be resolved against summary judgment, and t h u s the issue must be deferred until trial.3 See Little, 37 F.3d at 1075. Molina further argues that, even if such member contracts are found to exist, the p u rp o rte d assignments described above are void for lack of consideration, and thus, EPH has no s ta n d in g to sue over them. See Molina Mot. 16-17. This argument fails on two distinct grounds. First, as a matter of hornbook law, contractual rights may be assigned gratuitously such an a s s ign m e n t is not void for lack of consideration, and the assignee has standing to sue to enforce o r protect those gratuitously obtained rights. See Restatement (Second) of Contracts § 332 ( " R e s t a t e m e n t § 332"); see also Univ. of Tex. Med. Branch v. Allan, 777 S.W.2d 450, 453 (Tex.
It is entirely possible that individual contracts between M o lin a a n d plan beneficiaries do not in fact exist, but instead the r e le v a n t contract is one between Molina and the state of New M e x ic o , which retains Molina to run the managed care plan a n d puts the plan members in the position of being third party b e n e f i c i a r i e s ; those third party rights may then be assignable. See N.M . ADMIN. CODE § 8.305.3.10 (indicating that New M e x ic o 's Human Services Department is to enter into master c o n t r a c t s with insurance companies to provide MCO plans to M e d ic a id beneficiaries). Such a scenario, though, is close e n o u g h in substance to the facts and theories put forward by E P H , in its pleadings, to be reasonably contemplated at this j u n c t u r e or at trial.
C t. App. 1989) (recognizing the validity of Restatement § 332 in Texas). The difference is that a gra tu ito u s assignment may be revoked absent certain formalities in its granting, while a nongratu ito u s one cannot. See Restatement § 332. This is what separates the two categories, not any q u e s tio n of the underlying validity of the assignment. Molina urges a contrary result, citing the " w e l l known principle of contract law" that an "assignment is `void if without valid c o n s id e ra tio n .' " Molina Mot. 16 (citing Indep. E. Torpedo Co. v. Herrington, 128 Tex. 17, 26 ( 1 9 3 6 ) ). Far from being "well known," this obscure, seventy-four year old result which flatly c o n t ra d i c t s modern contract law cannot control in this case. Instead, the modern view clearly a rtic u la te d in Restatement § 332, the overall validity of which was recognized in Allan, must be giv e n precedence. See Allan, 777 S.W.2d at 453. S e c o n d , the assignments in question here were not actually gratuitous; they were made as p a rt of an equal, consideration-backed exchange. Molina states that the purported consideration fu rn is h e d by the Hospitals in exchange for these assignments was emergency medical care and a rgu e s that such consideration is actually no consideration at all, under the pre-existing duty rule, b e c a u s e the Hospitals were obligated under federal law to treat emergency patients as they a rriv e d without consideration of their ability to pay. See Molina Mot. 16-17 (citing JOSEPH C A LA M A R I, CONTRACTS § 4-9(a) (3d ed. 1987) for the pre-existing duty rule); see also 42 U.S.C. § 1395dd ("EMTALA") (requiring hospitals to treat arriving emergency patients without regard to ability to pay). This argument is misplaced. EMTALA does not extinguish an emergency patient's o b liga tio n to pay for treatment under Texas law; rather, it only prohibits a hospital from turning a w a y an emergency patient on the basis of ability to pay. See TEX. HEATH & SAFETY CODE
§ 773.092(a)(3) (stating that hospitals may use personal information to help collect unpaid e m e r ge n c y room bills); see also TEX. PROP. CODE § 55.001 et seq. (Hospital Lien Act). Because t h e patients retained the obligation to pay for their emergency care, the Hospitals' agreement to a c c e p t lower-than-standard payment rates in return for third-party-payments, or the Hospitals' re n d e rin g services in carrying out the mechanics of filing claims and processing payments from t h i r d party payers, could easily provide the consideration necessary to support a contractually b in d in g assignment of benefits. See Conditions of Admis. ¶ 2 (stating that the hospital may a c c e p t a lower-than-standard payment amount if the patient is enrolled in an insurance or g o v e r n m e n t benefit program, and that the hospital may, at its option, file payment claims directly w i th the payer,4 which would relieve the patient of this clerical burden). In cases where the h o s p ita l does not make these compromises or provide these processing services in connection w ith a patient's bill, the consideration arguably fails but such is not the present circumstance. E P H further argues that it most likely provided services beyond those required by E M T A LA to the patients whose claims are at issue in this case, which would provide another re a s o n why the assignments were not gratuitous. See EPH Resp. 15-16. To settle this issue c o n c lu s iv e ly would require more evidence than is before the Court at this time. For the foregoing re a s o n s , then, the assignments in question do not fail for being gratuitous, and Molina is not e n title d to summary judgment on this point. There is thus a genuine issue concerning the material fact of which contracts exist and
A patient's assignment of insurance payment rights is standard t y p i c a l hospital practice. While it may appear to conflict with N . M . STAT. § 27-2-21 ("Assistance granted under this act shall n o t be transferrable or assignable . . ."), the better view is that th is practice is permitted by N.M . STAT. § 27-2-7(B) ( "[ P ] r o g r a m payments may be made . . . [directly] to the v e n d o r of goods or services provided to the recipient.").
w h a t their precise terms are. Molina is not entitled to summary judgment on the proposition that t h e r e is no possible contractual obligation for it to pay in this case, because the evidence, if a n yt h i n g , suggests that Molina possibly does have a contractual obligation to pay. EPH, in s e e k i n g only partial summary judgment, has not even asked the Court for a declaration, at this t im e , that it is indisputably owed payment by Molina under a contracts theory. Accordingly, this i s s u e will be saved for trial. 2. Quantum meruit
EPH pleads, in the alternative, that Molina is obligated to pay it on a theory of quantum m e ru it. Pl.'s Orig. Pet. ¶¶ 11-13. Molina has asked for summary judgment declaring that no p o s s ib le grounds for recovery exists under this theory. See Molina Mot. 13-15. Unlike the c o n t ra c t s theory, the Court finds that there are no disputes regarding any material facts that p e r ta in to the essential elements of quantum meruit, but two major legal points remain. The first i s whether, on the given facts, the hospitals can satisfy the four-prong test for quantum meruit u n d e r Texas state law. The second, which involves a peripheral fact question, is whether re c o v e ry under quantum meruit is blocked by the existence of an underlying contract which go v e rn s the relationship in question. R e ga rd i n g the first point, it is clear, based on the evidence on the record, that EPH has s a t i s fi e d the four-prong test for quantum meruit; Molina is therefore not entitled to summary j u d g m e n t against EPH on this point. The four prongs of quantum meruit are: (1) that valuable s e rv i c e s were rendered; (2) for the person sought to be charged; (3) which were accepted, used a n d enjoyed by that person; (4) under circumstances that reasonably notified that person that the p ro v id e r was expecting to be paid by that person. Vortt Exploration Co. v. Chevron U.S.A., Inc.,
7 8 7 S.W.2d 942, 944 (Tex. 1990). There is no reasonable dispute regarding prongs one and four; s p e c ific a lly, that the medical services provided were valuable, and that Molina knew the H o s p ita ls were expecting to be paid by Molina for them. See, e.g., EPH Mot. Ex. P1 ("Allen D e p . ") 6:20-23, Sept. 10, 2009 (Molina official acknowledging that "we should offer n o n c o n t ra c t e d border hospitals" some amount of "reimbursement" for the services at issue). T h e r e is some dispute concerning the middle two prongs, but in the final legal analysis th e y fall in favor of EPH. Molina argues that the medical services were provided to, and a c c e p te d by, the patients not Molina. See Molina Mot. 14. This, Molina argues, defeats the e le m e n ts of the services being provided "for the person charged," and acceptance or enjoyment b y the person charged. Id. While it is true that the immediate beneficiaries of the medical s e rv ic e s were the patients, and not Molina, that company did receive the benefit of having its o b ligati o n s to its plan members, and to the state in the interests of plan members, discharged. See N .M . ADMIN. CODE § 8.305.7.9-11 (setting forth the medical services which a Medicaid MCO in s u re r has an obligation to cover). Molina describes this discharging-of-obligations benefit as " in c id e n ta l," but the Court finds this benefit material, due to the aforementioned obligations. See M o lin a Mot. 14 (describing the discharge of obligations as an "incidental benefit"). Indeed, M o l in a ' s very reason for existence is to ensure that such services are provided to plan members; s e e in g this core obligation fulfilled is hardly incidental. See N.M. ADMIN. CODE § 8.305.1.7(M)(1) (defining a "Managed Care Organization" as an "organization licensed to m a n a g e, coordinate and assume financial risk on a capitated basis for the delivery of specified s e r v ic e s to enrolled members") (emphasis added). If these obligations are not deemed material a n d central to the Medicaid managed care scheme, how is such a system supposed to function?
In sum, these discharges were furnished for the benefit of Molina, which enjoyed them and a c c e p t e d them, and Molina even acknowledged as much when it tendered payment for them at a ra te it deemed to be proper. Thus, prongs two and three have been fulfilled as well as one and fo u r, even though Molina disputes this characterization of the facts. O n e thing which could stand in the way of a quantum meruit claim is the existence of a c o n tra c t which covers the relationship and obligations at issue in the claim, as Molina points out. See Vortt Exploration, 787 S.W.2d at 944; see also Molina Mot. 14-15. But Molina cannot eat i ts cake and then have it, too. Having previously argued that no contractual obligation exists w h i c h requires it to pay out-of-network hospitals for plan members' emergency care, Molina c a n n o t then proceed to argue that a governing contract does exist, which would undercut a q u a n tu m meruit theory of obligation. Compare Molina Mot. 15-16 with Molina Mot. 14-15. Molina tries to split the difference by arguing that, on the one hand, no privity of contract exists b e tw e en it and EPH, but on the other hand, outside contracts like the ones between EPH and th e state of New Mexico which set up the Hospitals as recognized Medicaid providers (but not as p a rt of Molina's network) are enough to "fairly distribute the risks among the parties involved" a n d cut off quantim meruit. Molina Mot. 15. But this Janus-headed argument misses the point. While these outside contracts might affect the reimbursement rates that EPH could reasonably e x p e c t under the circumstances, and thus affect the extent of Molina's obligation under quantum m e ru i t, they cannot undercut the basic obligation to pay created by quantum meruit. That is, they c a n n o t do so unless these contracts specifically govern the relationship and obligation to pay b e tw e e n Molina and EPH which they do not, as Molina itself has argued. See Molina Mot. 141 5 (arguing that there is no contract that would require Molina to pay EPH).
T h e availability of quantum meruit rests on whether there are contracts that govern the re la tio n s h i p at issue here. While the parties have acknowledged that Molina and EPH have never e x e c u t e d a contract together, if EPH is the assignee of contract rights issued by Molina to its e n r o l le e s as disputed by Molina and discussed above then its recovery would proceed under th o s e contracts and not quantum meruit. Thus, the resolution of this quantum meruit question m u s t await trial, where the facts surrounding the related contract question can be ascertained. Accordingly, Molina is not entitled to a finding that, as a matter of law, EPH is not entitled to p a ym e n t under the theory of quantum meruit. 3. Recovery of regulatory rates
E P H also pleads that it is entitled to sue Molina for payment on a cause of action arising fro m the state regulations which govern the New Mexico Medicaid program. See Pl.'s Orig. Pet. ¶ ¶ 14-16. Molina argues that it is entitled to summary judgment declaring that EPH cannot re c o v e r under such a theory as a matter of law. Molina Mot. 5-6. While EPH's theory has some p la u s ib ility, it is not entirely clear, as a matter of law, whether the regulations at issue can be p r o p e r l y construed as implying a cause of action. To begin with, the Court observes that there is n o explicit cause of action under the relevant New Mexico regulations or statutes; the rules direct in s u re rs like Molina to pay, but provide no specific consequences for a failure to do so. See, e.g., N.M. ADMIN. CODE § 8.305.7.11(F) ("Either provider type [i.e. in-network or out-of-network] s h a l l be paid [by the MCO] for the provision of [emergency] services on a timely basis."). Other p ro v is io n s in the rules allow the managing state agency to impose various sanctions and c o rre c tio n s on insurers who err, but such sections are silent as to private rights of action by a ggriev e d service providers seeking past-due reimbursements. See, e.g., N.M. ADMIN. CODE
§ 8.305.3.11(B)(8) (stating that the Human Services Department may enforce contractual and re gu la to ry requirements by imposing sanctions such as requiring plans of correction, imposing p l a n s of correction, imposing monetary penalties, suspending new enrollment, allowing members to terminate enrollment, suspending the agreement, and the like). To support the instant claim, the Court would have to find that the regulations imply a c a u s e of action under New Mexico law. The next hurdle, which arises in this connection, is that th e re are apparently no New Mexico state cases which have considered this particular question a n d ruled on whether or not this regulation creates a private cause of action. Nevertheless, im p l yin g a cause of action under New Mexico law is not an impossible feat. The New Mexico s ta te courts have emphasized that state common law is considerably more liberal in implying c a u s e s of action from legislative enactments when compared to the federal standard; state courts m a y look to legislation "solely to demonstrate what is public policy," which then forms the " p r e d i c ate for a common-law cause of action." Nat'l Trust v. City of Albuquerque, 874 P.2d 798, 8 0 1 (N.M. Ct. App. 1994). A court can also use the first three factors in the federal case of Cort v . Ash, 422 U.S. 66 (1975), to help in this analysis, but it is not limited or bound by those factors. Nat'l Trust, 874 P.2d at 801. Referring to the instant case, the regulatory language quoted above makes clear New M e x i c o public policy supports prompt payments from Medicaid MCOs to out-of-network e m e rgen c y services providers. See N.M. ADMIN. CODE § 8.305.7.11(F). A suit between the p r o v i d e r and MCO insurer would appear to be the most direct way of carrying that policy into e x e c u tio n . Thus, under the "public policy" approach described in National Trust, New Mexico la w would likely imply a private cause of action. 874 P.2d at 801. See also Michaels v. Anglo
A m . Auto Auctions, Inc., 869 P.2d 279 (N.M. 1994) (recognizing an implied cause of action based o n the public policy embodied in a statute that proscribed certain conduct but did not explicitly p r o v i d e for a private cause of action to sue over said conduct). U s in g the first three factors of Cort v. Ash would also support an implied cause of action h e re . Those factors concern whether (1) the legislation was enacted for the special benefit of a c la s s of which the plaintiff is a member; (2) there is any indication of legislative intent, explicit or im p l ic it, to create or deny a private remedy; (3) a private remedy would either frustrate or assist th e underlying purpose of the legislative scheme. Cort, 422 U.S. at 78. In the instant case, fa c to rs (1) and (3) clearly favor an implied cause of action. The Hospitals are members of the p r o t e c t e d "out-of-network" provider class, and a private suit for collection would seem clearly to a s s i s t the purpose of seeing that they get paid. Factor (2) is, at worst, neutral. Thus, the public p o lic y test and the modified Cort v. Ash test together would both support an implied cause of a c tio n under New Mexico law. O n e complicating factor is that the enactment upon which this cause of action would be b a s e d is a regulation promulgated by an agency, not a statute enacted by the legislature. New M e x i c o courts have expressed some uncertainty regarding whether agency regulations which seek e x p l ic i t ly to confer a private right of action are effective in doing so. See Nat'l Trust, 874 P.2d at 8 0 0 -0 1 . Inferring a common law cause of action from the policy embodied in a regulation may be ye t another step into the unknown. In National Trust, the court found that, notwithstanding the re gu l a tio n at issue, which purported to confer upon private parties the right to seek judicial e n fo rc e m e n t of a historical landmarks preservation law, the underlying statutes standing alone (w h i c h were silent as to who had a right of action but clear that an action for injunction could be
u s e d for enforcement) could support standing for private organizations and an implied private righ t of action. Id. That decision bracketed the question of how much weight courts should put o n regulations, as opposed to legislation, when creating standing and causes of action. Id. Here, the underlying legislation, as well as the regulations, do not have any language w h i c h contemplates private lawsuits. The most on-point language available is a statute which a llo w s direct payments to service providers that provide goods and services to public-assistance re c ip i e n t s , and the regulation cited above, specifying in detail that out-of-network emergency h o s p ita ls are to be timely paid. See N.M. STAT. § 27-2-7(B) (stating the direct payments to s e r v i c e providers on behalf of pubic-assistance recipients are permitted); see also N.M. ADMIN. C O D E § 8.305.7.11(F) (stating that hospitals are to be timely paid). Read together, that statute a n d regulation may fairly spell out a specific public policy in favor of timely and complete p a ym e n t s directly from Medicaid MCOs to out-of-network hospitals for emergency care rendered to Medicaid beneficiaries, which would support an implied right of action under the common law to collect such payments. But reaching this conclusion requires taking a number of seeminglyre a s o n a b l e but uncharted steps into the common law of a neighboring state. In this connection, Molina disputes that a cause of action may be implied from these s t a t u t e s and regulations, arguing that there exists a blanket rule, under federal law, that health c a re providers do not have a right to sue under Medicare or Medicaid statutes. Molina Mot. 5-6. It cites a number of cases in an attempt to support this proposition. See, e.g., Long Term Care P h a r m a c y Alliance v. Ferguson, 362 F.3d 50 (1st Cir. 2004). But Molina's proposition is overb ro a d , and the cases Molina cites actually stand for a narrower proposition that is inapposite here. Specifically, those cases hold that health care providers do not have the right to sue the
go v e rn m e n t over a claim that the offered Medicare or Medicaid reimbursement rates are too low, s e e k in g to have the court force the government to offer higher rates. Id. at 59. Courts have c o n s is te n tly held that these programs are a take-it-or-leave-it proposition. Id. Providers have no r ig h t to sue to force the government to sweeten the offer price their only remedy is to "vote with th e ir feet" and cease participating in Medicare or Medicaid programs, treating only patients who fu rn is h non-governmental payment. Id. Those cited cases say nothing about the question of s u in g to collect money allegedly owed under the settled rate for work already done, or seeking a c o u r t' s assistance to determine what the rate actually is, when the laws or regulations setting it fo rth are unclear or subject to dispute. Accordingly, there is no federal law standing in the way of th e claims found in the instant suit and no federal law barring a cause of action from being im p lie d under New Mexico public policy in this connection. F o r the foregoing reasons, then, the Court finds that there is a possibility that an implied p r iv a t e right of action exists under the New Mexico Medicaid statutes and regulations which w o u l d entitle EPH to recover reimbursements owed to it. The Court, however, does not need to a n s w e r this question of sister-state law at the present time. Molina should not be granted s u m m a ry judgment; rather, the entire issue of which theory or theories support a suit, and w h eth er such an obligation is broad enough to support recovery on all the disputed claims re fe rre d to by EPH, or just a subset of them, should be decided at trial when sufficient evidence w ill be available to address all three theories. C. Determining Reimbursement Rates
M u c h of the briefing and argument in the case has essentially assumed that Molina has
s o m e obligation to pay the Hospitals for emergency services rendered to plan members,5 and that th e real crux of the dispute is what the correct rate of payment is. 1. New Mexico regulatory rates apply
B o t h parties have agreed that the applicable rates are derived from the New Mexico M e d ic a id regulations, even though the services were rendered in El Paso, Texas. See EPH Mot. 2 (" [T ]h e parties agree that the regulatory default rate applicable to the outpatient services the H o s p i ta l s provide Molina's enrollees is the same rate the State of New Mexico pay the Hospitals fo r patients enrolled in the traditional New Mexico Medicaid program."); see also Molina Resp. 3 ; see also Allen Dep. 76:7-10 ("Q [T]here's just a disagreement over what the regulation how yo u convert those words into numbers. A Sure."). The best objective support for this shared v i e w is the fact that the Hospitals executed agreements with the New Mexico Medicaid d e p a rtm e n t specifying that, in exchange for the right to bill New Mexico Medicaid for the tre a tm e n t of program beneficiaries, the Hospitals agree that they will limit their prices and accept " a s payment in full the amount paid by [Medicaid] for services furnished to clients in accord with th e reimbursement structure in effect for the period during which the services are provided as per th e [department's] reimbursement policy." Molina Mot. Ex. A ("New Mexico Provider P a rtic ip atio n Agreement" or "Provider Agreement") § 1.15. Though Molina is a private MCO, a n d most of the care it provides its plan members is furnished by providers who have privately n e g o t ia te d reimbursement rates, Molina essentially steps into the shoes of the New Mexico
W h e t h e r all the services performed by the Hospitals, billed to M o l i n a , and covered by the instant dispute are properly c l a s s e d in the allegedly reimbursable "emergency services" c a te g o r y appears to be a question of great practical im p o r ta n c e , but it is one for which substantially no evidence h a s been placed before the Court. Accordingly, it is reserved f o r trial.
M e d ic a id department when reimbursing out-of-network hospitals for emergency care. See EPH M o t . 2; see also N.M. ADMIN. CODE § 8.311.2.11(C)(2). Thus, it pays at rates determined by the re gu la tio n s , as those are the rates under the agreements between the Hospitals and the state. Id. T h e services currently disputed by the parties in this case are emergency services. See E P H Mot. 1; see also Molina Mot. 4. Emergency services are generally covered by Medicaid and u s u a lly reimbursed on an outpatient basis; every relevant regulation notes this. See, e.g., 8 N.M. A D M IN. CODE § 4.MAD.721.75 (1995) ("Emergency services furnished by eligible providers are r e i m b u r s e d at the outpatient rate."); see also N.M. ADMIN. CODE § 8.311.2.16(E) 6 ("An e m e r ge n c y service furnished by an eligible provider is reimbursed at the outpatient rate."); see a l s o N.M. ADMIN. CODE § 8.305.7.11(F) ("Either provider type [i.e. in-network or out-ofn e tw o rk ] shall be paid for the provision of [emergency] services on a timely basis."). The fo llo w i n g therefore centers on the policies applicable to outpatient services reimbursement s ys t e m s , as opposed to inpatient services reimbursement or other categories of reimbursement. 2. What are the outpatient rates?
A s discussed above, both sides have agreed that, assuming there is an obligation to pay at a ll, the reimbursement rate would be the New Mexico regulatory rate for outpatient services. EPH has urged that this rate has been, and continues to be, 75.845% of billed charges,7 and has
As discussed below, certain parts of the New Mexico M e d i c a i d regulations have been re-written and renumbered in r e c e n t years but often retain much of the old structure and m a n y of the old policies. Thus § 8.311.2.16 is the direct s u c c e ss o r of § 4.MAD.721.75. T h e rate mentioned in the relevant regulations, as discussed b e lo w , is actually 77%. It was reduced to 75.845% on July 1, 2 0 0 4 , due to state budgetary shortfalls. See N.M. Medical A s s is ta n c e Program Manual Supplement 04-09 (June 14, 2 0 0 9 ) . These two numbers may be used interchangeably to r e fe r to the same basic reimbursement method. This rate was fu r th e r reduced to 50% on December 1, 2009, which was after
m o v e d for summary judgment on this point. See EPH Mot. 3 ("[T]he regulations set the rate at 7 7 % of charges, but the rate was reduced to 75.845%."). This means, that for all the services at is s u e , EPH claims payment at 75.845% of the Hospitals' published prices, no matter how high th e s e prices are, or what relation they bear to costs. See EPH Reply 1. A number of outpatient s e rv ic e s are reimbursed on a separate state-mandated fee schedule and have been carved out for p re s e n t purposes. See EPH Mot. 3 ("[F]ee schedule services are not the subject of this Motion."). Molina argues that 75.845% of billed charges is not the applicable outpatient re im b u rs e m e n t rate; rather, it argues, the correct reimbursement amount under the New Mexico re gu la tio n s is based on the federally-defined Medicare allowable costs method, which reflects the a c tu a l costs incurred by the hospital in treating patients. See Molina Resp. 4-7. Molina goes on to argue that this method contemplates multiplying a hospital's billed price by its "cost-to-charge ra tio ," a concept defined below, in order to arrive at the proper final payment. Id. at 7. Molina h a s also moved for summary judgment on this question. See Molina Mot. 5-13. F o r the reasons set forth below, the Court finds that EPH is not entitled to summary ju d gm e n t on its view of the outpatient reimbursement rate. The regulations do not support the th e o ry that it is entitled to 75.845% of billed charges as final payment. But the Court also finds t h a t Molina is only entitled to partial summary judgment on this point. While it is correct in a r gu i n g that EPH is entitled to payment based on a Medicare allowable costs model, its in te rp re ta tio n of that model is incorrect and runs the risk of specifying a reimbursement amount th at is unjustifiably low. 3. Two generations of two sets of regulations
the time frame in which the instant Motions were filed with the C o u r t . See N.M. Medical Assistance Program Manual S u p p l e m e n t 09-09 (November 19, 2009).
T h e reason why these two parties have had such difficulty resolving the meaning of the o u t p a t ie n t reimbursement rate is that the regulations provide several different applicable o u t p a t ie n t rates; the correct choice depends on the circumstances. But even before delving into th e exact provisions of these regulations, the Court notes that there exist, for present purposes, tw o important sets of regulations, each of which has gone through two major versions in recent ye a rs . One set of regulations, the old 8 N.M. ADMIN. CODE § 4.MAD.704, now codified at N.M. A D M IN. CODE § 8.302.4, is specifically focused on setting out rules for the participation of out-ofs ta te medical providers in the New Mexico Medicaid program, and is most central to the instant c a s e . The old version was effective starting February 1, 1995, until the new version superseded it o n August 14, 2008. See 19 N.M. Reg. 739 (August 14, 2008). The other set of regulations, the o ld 8 N.M. ADMIN. CODE § 4.MAD.721, now codified at N.M. ADMIN. CODE § 8.311.2, is c o n c e rn e d with the rules for furnishing, and paying for, hospital services more generally. It m a in ly applies to reimbursement rates for in-state hospitals. The old version was also effective fro m February 1, 1995, while the revised version superseded it on January 1, 2009. See 20 N.M. R e g. 11 (January 15, 2009). The parties have gone to some effort to highlight this progression, b u t, after a close examination, the Court finds that the key policies at issue here have remained th e same through all these revisions. T h e revisions to the out-of-state regulations changed the wording somewhat, but this was i n t e n d e d , according to the published statements of the regulatory body, "to clarify regulatory la n gu a ge and accuracy with existing rules," and not as a major substantive shift in policy. See 19 N .M . Reg. 74 (March 14, 2008). Moreover, based on the three public comments made in c o n n ec tio n with the hearing for the proposed changes, it is clear that none of the participants or o b s e rv e rs understood the re-wording to be a major shift in policy. See 31 N.M. Human Serv.
R e g. No. 30 (July 14, 2008). Finally, the Medical Assistance Division Departmental M e m o r a n d u m commenting on the changes is also consonant with the view that the basic policies a t issue in this case did not change with the revision. See N.M. Human Serv. Dep't, Med. A s s is ta n c e Div., Dep't Memorandum MAD-MR 08-09 (May 22, 2008) ("Dep't Memo"). That M e m o ra n d u m does state that the new rules "expand access to . . . services [beneficiaries] may n e e d if they are traveling out of state or if their closest provider practices in a border area c o m m u n ity." Id. But, as discussed below, this does not appear to be referring to any change in th e basic definition of out-of-state and border area providers.8 Rather, this language seems to be h igh ligh tin g two smaller expansions of coverage which are not of major concern here: (1) adding tw o new services to those covered when delivered "out-of-state" and (2) removing psychosocial re h a b ilita tio n services for juveniles from the list of services not covered when performed either o u t-o f-s ta te or by a border area provider. Compare 8 N.M. ADMIN. CODE § 4.MAD.704.3-4 with N .M . ADMIN. CODE § 8.302.12-13. The regulators, in the Register, have stated that they consider th e new language to be equivalent in meaning to the old language. 19 N.M. Reg. 74 (March 14, 2 0 0 8 ). The Memorandum noted above characterizes small, self-contained changes, without c o n tra d ic tin g the broader notion that the new language is meant to be generally equivalent to the " e x i s tin g rules." The one unaccounted-for major change between the old and new versions of the re gu la tio n s appears at N.M. ADMIN. CODE § 8.302.4.17 ("Reimbursement to an out-of-state or b o rd e r provider is made at the same rate as for an in-state provider . . . ."). As pertains to out-ofs ta te providers, this is a clear shift in policy from the previous version of the regulations, which
These terms are defined and discussed more fully in the next s e c tio n .
p ro v id e d that out-of-state providers were to be reimbursed at a flat 77% of billed charges, and not a t the same rate as in-state providers. See 8 N.M. ADMIN. CODE § 4.MAD.704.6(D). This change w a s even included in the first published proposal concerning the new version of the regulations. See 31 N.M. Human Serv. Reg. No. 6 (February 18, 2008). The Court cannot account for the fact t h a t the regulators stated that the changes were not meant to be substantial, but seemingly were s u b s ta n tia l in this one respect. The revisions to the general hospital regulations do make major changes they set out a n e w outpatient reimbursement system for future use, called the Outpatient Prospective Payment S ys te m (OPPS). See N.M. ADMIN. CODE § 8.311.2.15(D). But those regulations specifically r e q u i re that certain federal approvals be obtained before that system takes effect on fee-fors e rv ic e providers, such as the Hospitals. Id. There is no evidence that such approvals have been is s u e d , and the few pieces of evidence on the subject positively suggest that they have not yet b e e n issued, at least as of the filing of the instant Motions. See, e.g., EPH Mot. Ex. P7 (New M e x ic o Human Services Department letter dated August 26, 2009, stating, inter alia, that there is n o correspondence between New Mexico and the federal Center for Medicare and Medicaid S e rv ic e s on the subject of approvals for the OPPS change). Thus, the old version's system of re im b u rs e m e n t remains in place for the time being under the explicit terms of the new v e rs io n . See N.M. ADMIN. CODE § 8.311.2.15(D)(4). This consistency can also be observed by noting that the old version of the hospital s e rv ic e s regulations states that, for outpatient services at in-state hospitals, "the amount paid by M e d i c a i d . . . is determined under methods and procedures furnished for determining allowable p a ym e n t for outpatient hospital services under Title XVIII (Medicare) . . . reduce[d] by three (3 % ) percent." 8 N.M. ADMIN. CODE § 4.MAD.721.64. The new version states that, pending
fe d e r a l approval of OPPS, fee-for-service providers will be reimbursed "using the medicare a llo w a b le cost method, reducing medicare allowable costs by three percent (3%)." N.M. ADMIN. C O D E § 18.104.22.168(D)(4). Because OPPS has yet to be approved, the old and new versions p r o v id e for substantially the same thing. Having explained why the Court believes that each m a jo r section of regulations should be read as having constant policies over time, the discussion t u r n s to the details of each particular section the out-of-state providers section, and the in-state h o s p i ta l reimbursement section, to ascertain the rules and methodologies that apply to re im b u rs e m e n t s of outpatient services to the El Paso area hospitals in this case. 4. "Out-of-State" and "Border Area" providers defined, reimbursed
T h e New Mexico Medicaid regulations recognize three geographical categories of m e d i c a l service providers: In-state, border area, and out-of-state. "In-state" refers to providers w h o furnish services physically within New Mexico, no matter where their billing offices or c o rp o ra te parent headquarters is located. See N.M. ADMIN. CODE §§ 8.302.4.9, 8.302.4.16. "Border area" providers are those who provide services in geographic locations that are out-ofs ta te but within 100 miles of the New Mexico state line, excluding Mexico. See N.M. ADMIN. C ODE § 8.302.4.9. "Out-of-state" providers are those who provide services within the United S ta te s but more than 100 miles from the New Mexico state line. Id. Medical centers in El Paso a re thus border area providers, because they are well within 100 miles of the New Mexico line. S i n c e the August 2008 revisions, the regulations have stated that New Mexico Medicaid " p a ys for border area services to the same extent and subject to the same rules and requirements th a t such services are covered when provided within the state." N.M. ADMIN. CODE § 8.302.4.9; s e e also N.M. ADMIN. CODE § 8.302.4.17 ("Reimbursement to an out-of-state or border provider is made at the same rate as for an in-state provider. . . ."). These sections are the direct
s u c c e s s o rs to the old regulations on the same subject, 8 N.M. ADMIN CODE § 4.MAD.704, d i s c u s s e d below. It is perfectly clear that, since the revision, border area providers are generally a p p ro v e d to provide the same broad range of services as in-state providers and are to be paid on t h e same basis as in-state providers.9 How that in-state method works will be described in s u b s e q u e n t sections. For now, the Court must address the fact that the older version of the same re gu la tio n is less clear, making it the major source of legitimate disagreement in this case. Though it has been established above that the older and newer versions of this regulation were m e an t to have essentially the same meaning, this question is further addressed by a close reading o f the regulatory text at issue. An extensive extract from those regulations, codified at 8 N.M. A D M IN. CODE § 4.MAD.704, is set forth below in order to better understand the structure and c o n te x t of the reimbursement provisions:
7 0 4 OUT-OF-STATE PROVIDERS: p a y s for services furnished p r o v i d e r s in instances when S t a t e of New Mexico or when n e e d medical attention. The New Mexico medicaid program (medicaid) by border providers and out-of-state the needed services are not available in the recipients are traveling out-of-state and
T h i s section describes eligible providers, covered services, service l i m i t a t i o n s , and general reimbursement methodology. 7 0 4 . 1 Eligible Providers: Out-of-state and border providers must be l i c e n s e d and certified by their respective states to be considered e l i g i b l e to provide services to New Mexico recipients. To be reimbursed f o r furnishing services to New Mexico Medicaid recipients, out-of-state o r border providers must complete the New Mexico Medical Assistance P r o g r a m Provider Participation Application and have the application
EPH acknowledges this regulation at one point, but in so doing t r i e s to avoid its plain meaning. See EPH Mot. 7 ("The most r e a s o n a b le interpretation of these regulations is that MAD in te n d e d to pay border area hospitals, as a final rate, the i n t e r i m rate for in-state hospitals of 75.845% of charges."). Replacing the word "interim" with its antonym, "final," hardly s e e m s to be a reasonable interpretive strategy. The regulation h e re indicates that border area providers are to be " r e im b u r s e d " at the same rate as in-state providers not f i n a l l y -r e i m b u r s e d at the interim rate. EPH's reading would h a v e the effect of turning the plain meaning of the regulation o n its head.
a p p r o v e d by the New Mexico Medical Assistance Division (MAD). ( A ) Out-of-state providers are those providers who render services i n an are more than 100 miles from the New Mexico border (Mexico e x c l u d e d ) . Border providers, those providers located within 100 m i l e s of the New Mexico border (Mexico excluded), are subject to t h e rules governing the provision of services for in-state providers. ( B ) The claim filing limit for out-of-state and border providers is 1 2 0 days. 7 0 4 . 2 Provider Responsibilities: . . . *** 7 0 4 . 3 Covered Services: Medicaid covers medical services furnished by o u t - o f - s t a t e providers only when: *** 7 0 [ 4 ] . 4 1 0 Noncovered Services: Services furnished by out-of-state and b o r d e r providers are subject to the limitations and coverage restrictions w h i c h exist for other Medicaid services. . . . Medicaid does not cover t h e following specific services when furnished by an out-of-state and/or b o r d e r provider: 1. Services furnished outside the boundaries of the United States;
2 . Services furnished in out-of-state or border nursing facilities a n d intermediate care facilities for the mentally retarded, or o u t p a t i e n t rehabilitation services; and *** 7 0 4 . 5 Prior Approval and Utilization Review: . . . *** 7 0 4 . 6 Reimbursement: Out-of-state providers must submit claims for r e i m b u r s e m e n t on the claim form appropriate for the service type f u r n i s h e d to the recipient. . . . Once enrolled, providers receive b i l l i n g instructions and other material from MAD for processing of claims. R e i m b u r s e m e n t for out-of-state providers is made at the lesser of the following: 1 . The provider's billed charge; or 2 . The MAD fee schedule for the specific services or p r o c e d u r e when performed by an in-state provider. (A) . . . (B) . . .
The original reads "705.4," which is clearly a typo.
(C) . . . ( D ) Outpatient services furnished by out-of-state hospitals, not s u b j e c t to reimbursement limitations, are reimbursed at seventys e v e n percent (77%) of billed charges. All hospital billings must r e f l e c t the hospital's usual and customary charges for the services furnished. ( E ) Out-of-state hospital emergency room claims must have the e m e r g e n c y room report attached to the claim.
The key point of contention revolves around § 704.6(D), which is a reimbursement c l a u s e . EPH claims that the phrase "out-of-state hospitals," in that subsection, refers to all h o s p i ta ls outside of the boundaries of New Mexico; that is, both "border area" and "out-of-state" h o s p i ta ls , as defined in § 704.1(A), would be "out-of-state" for the purposes of being reimbursed u n d e r § 704.6(D). See EPH Mot. 4-5. If § 704.6(D) applies to the Hospitals, then they would i n d e e d be entitled to a 77% of billed charges as their final payment, without regard to their u n d e r lyin g costs or what other insurers or government programs pay, at least for services r e n d e r e d before the August 2008 revisions made it perfectly clear that all providers out-ofs ta te , border area or in-state get paid in-state rates. See N.M. ADMIN. CODE § 8.302.4.17 ( " R e i m b u r s e m e n t to an out-of-state or border provider is made at the same rate as for an in-state p r o v i d e r . . . .").11 M o l in a contends that the phrase "out-of-state hospitals" in § 704.6(D) refers only to "outo f- s t a t e " hospitals as defined in 704.1(A), meaning hospitals more than 100 miles from the state lin e . See Molina Reply 3-4. As such, the Hospitals would not be reimbursed under the terms of
Now that payment rates are equalized, the remaining d i s t i n c t i o n between border-area and out-of-state providers is th a t the full range of medical services may be obtained at b o r d e r area providers, but only a more limited range of s e r v i c e s may be obtained at out-of-state providers. Compare N . M . ADMIN. CODE § 8.302.4.9 ("[Medicaid] pays for border a r e a services to the same extent . . . that such services are c o v e r e d when provided within the state.") with N.M . ADM IN . C O D E § 8.302.4.12 (providing for more limited circumstances in which "out-of-state" services are covered).
§ 704.6(D), because they are "border" hospitals and not "out-of-state" hospitals. See id. Molina o ffe r s a different source for determining what the reimbursement rates for border area hospitals s h o u l d be. It points to the provisions of § 704.1(A): "Border providers, those providers located w ith i n 100 miles of the New Mexico border (Mexico excluded), are subject to the rules g o v e r n i n g the provision of services for in-state providers" and argues that the phrase "subject to th e rules governing the provision of services for in-state providers" means that border area p ro v id e rs , among other things, are paid at the same rate as in-state providers. Molina Resp. 3-4. This may be supported if one holds that the "rules" mentioned in § 704.1(A) include the rules c o v e rin g all the subjects set out in the introductory text to § 704 "[t]his section describes e ligib le providers, covered services, service limitations, and general reimbursement m e th o d o lo g y " (emphasis added). EPH does not accept this reading; it argues that the "rules" re fe rre d to in § 704.1(A) are things like excluded services rules and licensing requirements, not re im b u rs e m e n t methodologies. See EPH Resp. 3-4. Molina has the better of this argument. As established above, the New Mexico Human S e r v i c es Department expressly considers the new, less ambiguous regulations on this subject as e q u iv a le n t to, and a mere clarification of, the older regulations on this subject. Imputing the c u rre n t, clear meaning backward to the older, less clear language would instantly settle the m a tte r, and that is what the agency's understanding of the revisions it made to its own rules w o u ld suggest. See Cont'l Cas. Co. v. Rivera, 124 S.W.3d 705, 710 (Tex. Ct. App. 2003) (h o ld in g that an administrative agency's interpretation of its own rules is "entitled to great weight a n d deference" unless its construction is "plainly erroneous or inconsistent").12 However,
The Court adopts EPH's position that Texas precedent on the s u b j e c t of rules of statutory construction and deference to a g e n c y interpretation of regulations is applicable to this case. See EPH Mot. 6 n.2 (citing Duncan v. Cessna Aircraft Co.,
b e c a u s e the agency did not account for the shift in out-of-state reimbursement policy between the o ld and new versions of the regulations while proclaiming that the two versions were meant to be s u b s t a n t ia l l y equivalent, as discussed above, the force of the argument is weakened and the Court c a n n o t rest its conclusion entirely on this point. Regarding the textual argument, the Court observes that the language of the old re gu l a tio n s is clearly compatible with Molina's view. In fact, even without resort to the new r e gu l a t io n s , reading the old regulations as specifying that border area and in-state providers are to b e paid on the same basis is more natural than the position that border area and out-of-state p ro v id e rs are to be paid on the same basis. The old regulations, like the new ones, clearly define " o u t-o f-s ta te " as a term of art, meaning more than 100 miles from the state line. The authors of th e old regulations also knew how to employ the distinction that they created: § 704.3 sets out w h i c h services are covered when "out-of-state providers" furnish them, while the succeeding s e c tio n , § 704.4, defines which services are not covered when "furnished by out-of-state and b o rd e r providers." 8 N.M. ADMIN. CODE §§ 4.MAD.704.3, 4.MAD.704.4. This shows that the r e gu l a t io n writers did not regard the term "out-of-state" as referring to any provider physically o u ts id e of New Mexico, because in such a case the term "border," used in § 704.4 alongside the te rm "out-of-state," would be superfluous which is a disfavored result. See Duarte v. Disanti, 2 9 2 S.W.3d 733, 735 (Tex. Ct. App. 2009) (holding that courts should construe legislative la n g u a ge so that "no part" of the text is "rendered superfluous"). Thus, when New Mexico re gu la to rs extend a 77% reimbursement rate to "out-of-state" hospitals performing outpatient s e rv ic e s , the Court holds that "border area" hospitals are not covered by this reimbursement rule. See 8 N.M. ADMIN. CODE § 4.MAD.704.6(D). Had the regulators intended to include "border
665 S.W.2d 414, 420 (Tex. 1984)).
a r e a " hospitals in the 77% reimbursement rate category, the precise words "border area" would h a v e appeared in § 704.6(D) but they do not.13 T h es e uses of the distinction, moreover, are consonant with the apparent reason behind t h e creation of the "border area" category. It appears that the intent of that category is to enable N e w Mexico Medicaid recipients to enjoy a large choice of healthcare options available near th e ir homes, even if that means a short trip across a state line. See Dep't Memo (stating that the p u rp o s e of a recent rule revision was to "expand access to . . . services [beneficiaries] may need . . . if their closest provider practices in a border area community"). In light of this policy, the re s tric tiv e list of "out-of-state" covered services contained in § 704.3 makes sense only when a p p lie d to providers more than 100 miles from the state line. This is because applying a re s tric tiv e policy to both border-area and out-of-state hospitals would nullify the very purpose of th e "border area" category, by preventing broad access to nearby providers in border areas. By contrast, the restrictions contained in § 704.4, applicable to both "border area" and " o u t-o f-s ta te " providers, refer mainly to the list of services that are not covered even in-state, w h i c h is sensible things that are categorically medically unnecessary, or otherwise deemed not w o r th y of coverage, are such no matter where they are done. The text of § 704.4 only subjects a fe w otherwise-covered items to the strict state-line rule the out-of-U.S. restriction is set out
The pre-1995 version of this rule also reflects the distinction b e t w e e n out-of-state and border area providers while having n o special reimbursement rule for out-of-state providers. Accordingly, the 1995 insertion of a 77% reimbursement c la u s e for the benefit of "out-of-state" providers, at a time w h e n the distinction between "border area" and "out-of-state" p r o v i d e r s was already well established, further supports the v ie w that the intent of this new clause was narrowly focused on " o u t-o f -s ta te " providers only, as distinct from border area p r o v i d e r s . See MAD-RULE 303 (dated November 1, 1993, file d with the New Mexico State Records Center on March 10, 1994).
h e r e , and nursing, outpatient rehabilitation and juvenile psychosocial rehabilitation services are re s tric te d to in-state providers only. See 8 N.M. ADMIN. CODE § 4.MAD.704.4. It is worth noting th a t New Mexico relaxed the juvenile psychosocial rehabilitation services rule, creating a greater c h o ic e in providers by allowing payment for such services when rendered by border area p r o v id e r s , and not just in-state providers, at a point when fiscal and policy-making circumstances s e e m e d to permit it. See Dep't Memo. G i v e n the short list of services for which "out-of-state" providers would be paid, and the p r e s u m e d infrequency with which such providers would be
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