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Justices affirm ruling in dispute between health care facility and FSSA

March 21, 2012

The Indiana Supreme Court has affirmed the outcome of a case between Family and Social Services Administration and a decertified intermediate care facility, in which the net result was a wash for both sides.

In Randall L. Woodruff, Trustee, U.S. Bankruptcy Court, on Behalf of Legacy Healthcare, Inc.d/b/a New Horizon Develop. Center v. In. Family & Social Serv. Admin., Office of Medicaid Policy & Planning, No. 29S02-1110-PL-598, New Horizon Development Center was certified to receive Medicaid reimbursement from the state. However, an inspection found deplorable conditions and its certification was revoked. The facility operated without receiving federal or state funding for nine months, when the state then appointed a receiver. At issue in the case is whether Legacy Healthcare, which ran the center, is entitled to funding for the care of the patients, after it was decertified, until all the patients could be transferred to other facilities.

The trial court denied restitution for the unpaid months under a theory of quantum meruit, afforded relief under related breach of contract claims, but offset that judgment by the amount the state paid for its receiver. The parties received no net gain. The justices affirmed.

New Horizon couldn’t have reasonably foreseen payment from FSSA for its Medicaid-eligible patients after it was decertified, and the evidence clearly shows that it was aware that decertification would not result in immediate transfer of those patients to other facilities by the state. New Horizon then, can’t succeed as a matter of law in its claim for quantum meruit because it can’t show that it expected payment for any services it might have provided, wrote Chief Justice Randall T. Shepard.

Because FSSA did not have any contractual or equitable obligation to pay the health care costs of the Medicaid-eligible patients at New Horizon during the post-decertification period, there is no bar to the state’s counterclaim for a set-off pursuant to the receivership statutes, wrote Shepard.

The justices did reverse the trial court with respect to its findings on the issue of exhaustion, noting that the facility appealed its decertification through administrative channels and had sought relief in court.

 

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