ATLANTICARE REGIONAL MEDICAL CENTER VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES(DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0364-15T2

ATLANTICARE REGIONAL MEDICAL
CENTER, BAYSHORE COMMUNITY
HOSPITAL, CAPITAL HEALTH
MEDICAL CENTER – HOPEWELL,
CAPITAL HEALTH REGIONAL
MEDICAL CENTER, CHILTON
HOSPITAL, COOPER UNIVERSITY
HOSPITAL, DEBORAH HEART AND
LUNG CENTER, EAST ORANGE
GENERAL HOSPITAL, ENGLEWOOD
HOSPITAL AND MEDICAL CENTER,
HACKENSACK UNIVERSITY MEDICAL
CENTER, JERSEY SHORE
UNIVERSITY MEDICAL CENTER,
JFK MEDICAL CENTER, LOURDES
MEDICAL CENTER - BURLINGTON,
MORRISTOWN MEMORIAL HOSPITAL,
NEWTON MEMORIAL HOSPITAL,
OCEAN MEDICAL CENTER, OUR
LADY OF LOURDES MEDICAL
CENTER, OVERLOOK MEDICAL
CENTER, PALISADES MEDICAL
CENTER, RARITAN BAY MEDICAL
CENTER, RIVERVIEW MEDICAL
CENTER, SOMERSET MEDICAL
CENTER, SOUTHERN OCEAN
MEDICAL CENTER, ST. FRANCIS
MEDICAL CENTER, and ST.
MARY'S HOSPITAL,

Petitioners-Appellants,
v.

DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES,

Respondent-Respondent.

Argued October 3, 2017 – Decided October 25, 2017

Before Judges Yannotti, Carroll and Mawla.

On appeal from the Division of Medical
Assistance and Health Services, Docket Nos.
HMA 5152-14 to 5157-14, 5161-14, 5163-14 to
5164-14, 5166-14 to 5172-14, 5174-14 to 5175-
14, 5177-14, 5180-14, 5182-14, 5184-14 to
5185-14, 5188-14, 5191-14, 5194-14, 5252-14 to
5264-14, 5266-14, and 5268-14 to 5275-14.

James A. Robertson argued the cause for
appellants (McElroy, Deutsch, Mulvaney &
Carpenter, LLP, attorneys; Mr. Robertson, of
counsel and on the briefs; Paul L. Croce and
Marissa Koblitz Kingman, on the briefs).

Jacqueline R. D'Alessandro, Deputy Attorney
General, argued the cause for respondent
(Christopher S. Porrino, Attorney General,
attorney; Melissa H. Raksa, Assistant Attorney
General, of counsel; Jennifer L. Cavin and
Jennifer Simons, Deputy Attorneys General, on
the brief).

PER CURIAM

Atlanticare Regional Medical Center and twenty-four other New

Jersey hospitals (the Hospitals) appeal from a final decision of

the Director of the Division of Medical Assistance and Health

Services (Division) dismissing their administrative appeals

2 A-0364-15T2
regarding their Medicaid inpatient reimbursement rates for 2013.

We affirm.1

I.

We briefly summarize the relevant facts and procedural

history. On December 14, 2012, the Division informed the Hospitals

of their Medicaid rates for 2013. Under the Division's regulations,

hospitals may challenge the rates on the basis of: a calculation

error in the computation of the rate, N.J.A.C. 10:52-14.17(b), or

any other reason, including the methodology employed in setting

the rate, N.J.A.C. 10:52-14.17(c).

The hospital must inform the Division of its intent to submit

the appeal within twenty days after it has received its rates.

N.J.A.C. 10:52-14.17(c)(1). The hospital also must identify the

rate appeal issue that is being raised, and submit supporting

documentation within eighty calendar days after receiving the

rates. N.J.A.C. 10:52-14.17(c)(2). The hospital's submission must

detail the basis for the challenge and calculate the "financial

impact of the rate appeal issue on the hospital's final rate and

1
We note that in October 2016, the court consolidated this appeal
with Our Lady of Lourdes Hospital-Burlington v. Division of Med.
Assist. & Health Services, No. A-2919-15. We have determined that
the issues raised on appeal should be addressed in separate
opinions. Therefore, we vacate the order of consolidation.

3 A-0364-15T2
its estimated impact on the hospital's Medicaid inpatient

reimbursement for the rate year." N.J.A.C. 10:52-14.17(c)(3).

In January 2013, twenty-three hospitals submitted notices of

intent to file rate appeals pursuant to N.J.A.C. 10:52-14.17(c).

Twenty-five hospitals submitted calculation error appeals pursuant

to N.J.A.C. 10:52-14.17(b), and thirteen of those hospitals

alleged the Division had understated the inflation factor that had

been applied to their rates from 1995 to 1998. The hospitals

claimed the error had a compounding effect on the rates for the

subsequent years, including 2013. These hospitals also challenged

the Division's use of a zero inflation rate in setting the 2013

rates.

In March 2013, the twenty-three hospitals submitted

additional information to the Division in support of their rate

appeals. Each of these hospitals asserted that the statutory

mandate in N.J.S.A. 26:2H-18.64, which requires that they provide

care to all patients regardless of their ability to pay (charity

care), and the State's charity care subsidy payments, have resulted

in an unconstitutional taking of their property without just

compensation.

The hospitals asserted they were not in a position to provide

the Division with detailed calculations showing the financial

impact of the rate appeal issue, or determine the estimated impact

4 A-0364-15T2
the issue would have upon the hospitals' Medicaid reimbursement

rates for 2013. The hospitals asked the Division for information

about the methodology it used to set the rates, so that they could

"make the appropriate assessment of the issue."

In October 2013, the Division issued letters stating that

N.J.A.C. 10:52-14.17(b) precluded the hospitals from challenging

their 2013 rates based on an alleged calculation error regarding

the 1995 and 1998 rates. The Division also rejected the contention

that it improperly applied a zero percentage inflation rate for

2013.

In addition, the Division rejected the rate appeals on the

ground that no hospital which raised the issue had "demonstrated

that it will incur a marginal loss in providing care to Medicaid

inpatients under its rates [for] 2013." The Division also advised

that the appeal process was not an appropriate vehicle for seeking

information about the Division's rate methodology, which is set

forth in the regulations.

Thereafter, the Hospitals filed administrative appeals from

the Division's October 2013 determinations, which the Division

referred to the Office of Administrative Law (OAL) for

consideration as contested cases. The Administrative Law Judge

(ALJ) consolidated the appeals. The hospitals pursuing rate

appeals advised the ALJ that they were raising a single issue, and

5 A-0364-15T2
all twenty-five of the hospitals advised the ALJ that they would

be pursuing challenges based on either one or two calculation

errors.

The ALJ thereafter identified three issues in dispute: (1)

whether there was an error in the calculation of rates for 1995

to 1998, which resulted in incorrect Medicaid reimbursement rates

for 2013; (2) whether the application of a zero percent inflation

factor for 2013 was consistent with state and federal law; and (3)

whether the charity care mandate, the State's allegedly inadequate

charity care subsidies, and the 2013 Medicaid reimbursement rates

resulted in an unconstitutional taking of the Hospitals' property

without just compensation.

The Hospitals later filed a motion for summary decision on

these issues, and the Division filed a cross-motion seeking the

same relief. The ALJ issued an initial decision dated March 30,

2015. In that decision, the ALJ stated that since the Hospitals

were essentially raising a constitutional challenge to the charity

care statute, their dispute was not with the Division, but rather

with the Department of Health and Senior Services (Department),

which administers the charity care program. The ALJ therefore

found the Division did not have jurisdiction to consider these

claims.

6 A-0364-15T2
 The ALJ also determined that the Division had properly applied

a zero inflation factor in setting the Hospital's 2013 rates. The

ALJ noted that in June 2012, the Governor signed the Annual

Appropriations Act for the 2012-2013 fiscal year (FY), which stated

in part that "effective January 1, 2013, the Medicaid inpatient

fee-for-service payment rates will not be adjusted to incorporate

the annual excluded hospital inflation factor, also referred to

as the economic factor recognized under" federal law. The ALJ

determined that the Division had implemented the amendment to the

State's plan in accordance with 42 U.S.C.A. § 1396a(a)(13) and 42

C.F.R. § 447.205, and properly applied the amendment in setting

the Hospitals' rates for 2013.

In addition, the ALJ determined that the Hospitals could not

assert a calculation error in the 2013 rates based on the alleged

error in setting the rates for 1995 to 1998. The ALJ found that

N.J.A.C. 10:52-14.17(b) precludes the Hospitals from raising this

issue with regard to the 2013 rates because the regulation limited

the Hospitals to challenges based on rate adjustments made since

the issuance of the 2012 rates, and the Hospitals had not preserved

the issue by raising it by pursuing a timely-filed appeal

challenging the rates for 2009.

The ALJ further found that the hospitals presenting rate

appeals failed to present sufficient evidence to show the financial

7 A-0364-15T2
impact of their appeals and the estimated impact the issue would

have upon the hospitals' Medicaid reimbursement rates in the rate

year. The ALJ rejected the Hospitals' application for leave to

supplement the record with additional evidence on these issues.

The ALJ noted, however, that the Division's regulatory

standard for rate appeals is "so vague as to be arbitrary" and the

standard "virtually guarantees that no party subject to its

parameters will be capable of compliance with its requirements."

The regulation provides that the Division will undertake a

financial review if the Division finds, based on the information

submitted, that the rate appeal has "merit." N.J.A.C. 10:52-

14.17(c)(4).

Citing In re Zurbrugg Memorial Hospital's 1995 Medicaid

Rates, 349 N.J. Super. 27, 36-38 (App. Div. 2002), the ALJ stated

that the rate appeals should be remanded to the Division for an

"interactive process" on the "merit" standard in N.J.A.C. 10:52-

14.17(c). In that process, the Division could explain its

definition of "merit" and the evidence required for a rate appeal.

The Director issued a final decision on August 11, 2015. The

Director adopted the ALJ's decision with regard to the alleged

calculation error in the rates for 1995 to 1998, the use of a zero

inflation factor for the 2013 rates, and the constitutional claims

based upon the charity care mandate.

8 A-0364-15T2
 The Director rejected, however, the ALJ's decision regarding

the need to undertake an "interactive process" regarding the

"merit" standard in N.J.A.C. 10:52—14.17(c). The Director noted

that before the ALJ, the Hospitals had not argued that the "merit"

standard was vague. The Director found that there was no confusion

as to the meaning of the term "merit" and no need for a remand.

This appeal followed.

On appeal, the Hospitals argue: (1) the Division erroneously

denied the calculation error appeals on procedural grounds; (2)

the 2013 rates should be adjusted based on the alleged error in

the calculation of rates for 1995 to 1998; (3) the Division failed

to comply with the requirements of the federal Medicaid statute

and regulations when it implemented the zero percent inflation

factor for 2013; (4) they were denied due process because the

Director did not permit them to engage in an "interactive process"

regarding the "merit" standard in N.J.A.C. 10:52-14.17(c); and (5)

the Division erred by rejecting their constitutional claims.

II.

We turn first to the Hospitals' contention that the Director

erred by concluding that N.J.A.C. 10:52-14.17(b) bars the

challenges to the calculation of their 2013 rates, based on the

continuing effect of alleged errors in their rates from 1995 to

1998.

9 A-0364-15T2
 We note that the scope of our review of an administrative

agency's decision is limited. Circus Liquors, Inc. v. Governing

Body of Middletown Twp., 199 N.J. 1, 9 (2009). In an appeal from

a final decision of an administrative agency, our inquiry is

limited to the following:

(1) whether the agency's action violates
express or implied legislative policies, that
is, did the agency follow the law; (2) whether
the record contains substantial evidence to
support the findings on which the agency based
its action; and (3) whether in applying the
legislative policies to the facts, the agency
clearly erred in reaching a conclusion that
could not reasonably have been made on a
showing of the relevant factors.

[In re Proposed Quest Acad. Charter Sch. of
Montclair Founders Grp., 216 N.J. 370, 385-86
(2013) (quoting Mazza v. Bd. of Trs., 143 N.J.
22, 25 (1995)).]

Although we are not bound by an agency's legal conclusions,

we generally defer to the agency's interpretation of its own

regulations and enabling statutes. Utley v. Bd. of Review, 194

N.J. 534, 551 (2008). We give considerable deference to the

agency's interpretation of its own rules "because the agency that

drafted and promulgated the rule should know [its] meaning

. . . ." N.J. Healthcare Coal. v. N.J. Dept. of Banking & Ins.,

440 N.J. Super. 129, 135 (App. Div.) (quoting In re Freshwater

Wetlands Gen. Permit No. 16, 379 N.J. Super. 331, 341-42 (App.

Div. 2005)), certif. denied, 222 N.J. 17 (2015).

10 A-0364-15T2
 The regulation governing the time within which "calculation

error" appeals must be taken provides:

Each hospital, within 15 working days of
receipt of its Medicaid inpatient rate
package, including its final rate and
applicable add-on amounts, shall notify the
Division of any calculation errors in its
final rate. For years after the initial year
that rates are set under this system, and for
which no recalibration or rebasing has
occurred, only calculation errors that relate
to adjustments that have been made to the
rates since the previously announced schedule
of rates shall be permitted. For subsequent
years, calculation error appeals will be
limited to the mathematical accuracy or data
used for recalibration, rebasing or both.
Calculation errors are defined as mathematical
errors in the calculations, or data not
matching the actual source documents used to
calculate the DRG weights and rates as
specified in this subchapter. Hospitals shall
not use the calculation error appeal process
to revise data used to calculate the DRG
weights and rates.

[N.J.A.C. 10:52-14.17(b).]

"Recalibration" is "the adjustment of all DRG [Diagnosis

Related Group] weights to reflect changes in relative resource use

associated with all existing DRG categories and/or the creation

or elimination of DRG categories." N.J.A.C. 10:52-14.2. "Rebasing"

is "setting the Statewide base rate using a more current year's

claim payment data." Ibid. "Statewide base rate" is "a rate per

case, which applies to all general acute care hospitals based on

11 A-0364-15T2
the total Medicaid inpatient fee-for-service payment amount

estimated for a given rate year." Ibid.

On appeal, the Hospitals argue that N.J.A.C. 10:52-14.17(b)

does not bar them from raising the alleged calculation error

related to the 1995 to 1998 rates in their challenges to the 2013

rates. The Hospitals argue that since they raised this calculation

error in their appeals for 1995 to 1998, and since those appeals

had not yet been resolved when they challenged the 2013 rates, the

issue was preserved for all subsequent rate years, including 2013.

We disagree.

It is undisputed that in 2009, the Division adopted new rules

that established an initial statewide base applicable to all

hospitals for the 2009 rate year. 41 N.J.R. 2921 (codified at

N.J.A.C. 10:52-14.6). The Division's regulation provides that if

any hospital wished to raise a calculation error pertaining to

proposed 2009 rates, it had to do so within fifteen days after

receipt of the rates. N.J.A.C. 10:52-14.17(b). It is undisputed

that the Hospitals did not pursue challenges to the 2009 rates

based on the alleged calculation error in the setting of the 1995

to 1998 rates.

As noted, N.J.A.C. 10:52-14.17(b) provides that for years

after the initial year of the new rate-making system, and for

years in which the rates have not been recalibrated or rebased,

12 A-0364-15T2
the Division will only consider calculation errors "that relate

to adjustments that have been made to the rates since the

previously announced schedule of rates . . . ." Because no

recalibration or rebasing occurred for the 2013 rate year, the

Hospitals could only challenge those rates based on adjustments

made since the issuance of the 2012 rate schedule, unless they had

preserved the issue by challenging the 2009 rates and subsequent

years on that basis.

The Hospitals argue that the Division's interpretation of

the rule is inconsistent with the explanation the Division provided

when it adopted the prior version of this regulation, which was

substantially the same. The Division had stated

Hospitals have an obligation to review their
rates annually and, if appeal of those rates
is appropriate, to appeal in a timely manner.
If a timely appeal of those rates has not been
filed, the rules do not permit a hospital to
challenge a prior year's rate calculation in
an appeal filed in a later year. It is a
hospital's responsibility to comply with
procedural appeal requirements. Separately,
with regard to rates which were appealed in a
timely manner and which have a decision
pending at the time of a second appeal, if a
hospital is successful in its appeal with
regard to specific issues, the amendment will
not be used as described with regard to those
issues. If a hospital receives an adverse
decision with regard to specific issues in a
particular appeal, those issues cannot be
raised again in subsequent appeals.

[37 N.J.R. 2508 (July 5, 2005).]

13 A-0364-15T2
 The statement does not support the Hospitals' argument. The

Division explained that under the rule, a hospital could not raise

a calculation error in a rate appeal if the error was made in a

prior rate year and the hospital had not filed a timely appeal.

As we noted previously, a hospital must file an appeal challenging

the rates in the manner prescribed by N.J.A.C. 10:52-14.17(b).

The regulation required a hospital to raise any calculation

error pertaining to the rates for 1995 to 1998 in a timely appeal

challenging the 2009 rates. Here, it is undisputed that none of

the Hospitals pursued a challenge to the 2009 rates based on those

earlier alleged calculation errors. Therefore, the regulation

precluded the Hospitals from raising that issue in a challenge to

the 2013 rates.

In support of their argument, the Hospitals also rely upon

our unpublished decision in In re Adoption of Amendments to

N.J.A.C. 10:52, No. A-6649-04 (App. Div. Apr. 26, 2007) (slip op.

at 18-20), certif. denied, 192 N.J. 296 (2007), which upheld the

time limitations in the earlier version of the regulation. In that

case, we addressed the concern that the regulation would preclude

a hospital from raising a calculation error from a previous rate

year or years that the Division has not corrected and continues

to have an impact upon the hospital's current rates. Id. at 18.

14 A-0364-15T2
 We found the concern was misplaced. Ibid. We stated that the

regulation was "merely [intended] to prevent the late recognition

of a long-standing calculation error that was not timely appealed

. . . ." We note that this was "a practice that could engender

difficult and financially unforeseeable retroactive rate

adjustments." Ibid.

We added that the regulation was "not designed to prevent the

continuation of ongoing timely rate calculation appeals or the

application of favorable results from those appeals to subsequent

rates, when likewise appealed in a timely fashion." Ibid. (emphasis

added). Therefore, the regulation would bar only those issues that

had not been raised in a timely fashion. Id. at 19.

Therefore, our opinion makes clear that in order to preserve

a challenge to rates for a particular year based on an alleged

calculation error relating to a prior rate year, the hospital must

raise the issue in a timely manner. The Hospitals failed to do so.

Even if we were to conclude that N.J.A.C. 10:52-14.17(b) does

not preclude the Hospitals from raising the alleged calculation

error from 1995 to 1998 in their appeals challenging the 2013

rates, the Hospitals would not be entitled to any rate relief on

that basis. The alleged error pertains to the Division's

15 A-0364-15T2
interpretation and application of N.J.A.C. 10:52-5.17(a), the

"economic factor" regulation.2

The regulation provides that after the 1993 rate year, a

hospital's inpatient Medicaid rate will be updated annually by an

economic factor that "will be the factor recognized under the

TEFRA target limitations." Ibid. The term "TEFRA target

limitations" in N.J.A.C. 10:52-5.17(a) refers to the Tax Equity

and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248,

§ 101, 96 Stat. 324, 331-36 (codified at 42 U.S.C.A. § 1395ww, but

later amended).

The Hospitals argue that the "economic factor" referenced in

the regulation is the "market basket percentage increase"

determined in accordance with the provisions of TEFRA that were

in effect in 1993, when the regulation was first adopted. In Our

Lady of Lourdes Hospital, supra, we reject that argument and

conclude that the Division properly interpreted the term "economic

factor" to mean "the applicable percentage increase" determined

in accordance with the provisions of TEFRA in effect at the time

the rates are set. (Slip op. at 13-21).

2
The regulation was later recodified at N.J.A.C. 10:52-5.13(a).
In this opinion, we refer to the regulation as N.J.A.C. 10:52-
5.17(a) because that was the regulation in effect when the dispute
concerning its interpretation and application first arose.

16 A-0364-15T2
 Thus, even if the Division erred by refusing to entertain the

challenges to the 2013 rates based on the alleged calculation

error in setting the reimbursement rates for 1995 to 1998, the

hospitals have not suffered any harm from that determination. As

indicated by our decision in Our Lady of Lourdes Hospital, the

Division did not err in computing the Hospitals' rates for 1995

to 1998. Therefore, the Hospitals were not entitled to any rate

relief based on this alleged calculation error.

III.

We next consider the Hospitals' contention that the Division

did not have authority to apply a zero percent "economic factor"

to the 2013 rates. The Hospitals contend that the Division

implemented this change in the State's Medicaid plan without

complying with the applicable federal Medicaid statutes and

regulations. Again, we disagree.

Medicaid is a federally established, state-run program,

Estate of F.K. v. Div. of Med. Assistance & Health Servs., 374

N.J. Super. 126, 134 (App. Div.), certif. denied, 184 N.J. 209

(2005), "designed to provide medical assistance," at public

expense, "to individuals 'whose income and resources are

insufficient to meet the cost of necessary medical services.'"

N.M. v. Div. of Med. Assistance & Health Servs., 405 N.J. Super.

353, 359 (App. Div.) (quoting 42 U.S.C.A. § 1396), certif. denied,

17 A-0364-15T2
199 N.J. 517 (2009). Participation in Medicaid is voluntary, but

the participating states must comply with the federal Medicaid

statute and any regulations promulgated by the federal agency to

implement the statute. Mistrick v. Div. of Med. Assistance & Health

Servs., 154 N.J. 158, 166 (1998).

States that participate in Medicaid must establish and adhere

to an approved state plan "specify[ing] comprehensively the

methods and standards" to be used in setting reimbursement rates.

42 C.F.R. § 447.252(b) (2017). Any changes in policy must be duly

authorized by amendment to the plan, subject to federal approval.

42 C.F.R. § 430.12 (2017).

To that end, the implementing state agency must provide public

notice of "any significant proposed change in its methods and

standards for setting payment rates for services." 42 C.F.R. §

447.205(a) (2017). The notice must:

(1) Describe the proposed change in methods
and standards;

(2) Give an estimate of any expected increase
or decrease in annual aggregate expenditures;

(3) Explain why the agency is changing its
methods and standards;

(4) Identify a local agency in each county
(such as the social services agency or health
department) where copies of the proposed
changes are available for public review;

(5) Give an address where written comments may

18 A-0364-15T2
 be sent and reviewed by the public; and

(6) If there are public hearings, give the
location, date and time for hearings or tell
how this information may be obtained.

[42 C.F.R. § 447.205(c) (2017).]

In addition, the notice must be published "before the proposed

effective date of the change" in a state register, certain widely

circulated newspapers, or online at the agency's website. 42 C.F.R.

§ 447.205(d) (2017).

As noted previously, in June 2012, the Governor signed the

Annual Appropriations Act for FY 2012-2013, which stated that

effective January 1, 2013, Medicaid inpatient payment rates will

not be "adjusted to incorporate the annual excluded hospital

inflation factor, also referred to as the economic factor

recognized under" TEFRA. L. 2012, c. 18.

On December 11 and 12, 2012, a notice regarding the proposed

change in the Medicaid reimbursement rates was published in several

newspapers in the State, including the Star-Ledger, the Bergen

Record, the Trenton Times, and the Press of Atlantic City. The

notice stated:

TAKE NOTICE that the New Jersey Department of
Human Services (DHS), Division of Medical
Assistance and Health Services (DMAHS) intends
to seek approval from the United States
Department of Health and Human Services (HHS),
Centers for Medicare and Medicaid Services
(CMS), for amendments to the New Jersey

19 A-0364-15T2
 Medicaid (Title XIX) State Plan, in order to
implement State Fiscal Year 2013 (SFY 2013)
budget provisions pursuant to the New Jersey
Fiscal Year 2013 Appropriations Act.

Medicaid Hospital Inpatient Services
exclusion of Annual Inflation Factor[.]

Notwithstanding the provisions of any law or
regulation to the contrary, of the amounts
appropriated to Payments for Medical
Assistance Recipients – Inpatient Hospitals,
effective January 1, 2013 the Medicaid
Inpatient Fee-For-Service payment rates will
not be adjusted to incorporate the annual
hospital inflation factor, also referred to
as the economic factor recognized under the
CMS TEFRA target limitations.

The above provision is expected to result in
an aggregate savings of $4.5 million (State
and Federal funds) for State Fiscal Year 2013.
DMAHS has determined that this action will not
impair client access.

The notice stated that it was meant to satisfy federal

statutory and regulatory requirements. The notice indicated that

a copy would be available for public review at medical assistance

customer centers, county welfare agencies, and online at the

Division's website. The notice also stated that comments and

questions may be submitted in writing within thirty days of the

notice.

On February 13, 2013, after the comment period had ended, the

State submitted its proposed amendment to the State's Medicaid

plan to CMS. CMS approved the proposed amendment on September 20,

20 A-0364-15T2
2013, and its approval was effective as of January 1, 2013, the

date specified by the Annual Appropriations Act for implementation

of the change.

On appeal, the Hospitals argue that they did not have an

opportunity to voice their concerns about the amendment before the

change was implemented or to adjust their budgets to address the

decreased revenues they would receive in 2013. They contend the

Division's alleged compliance with Medicaid's notice and comment

requirements was merely a pretext, and the Division never really

intended to consider the comments.

We are convinced these arguments are without sufficient merit

to warrant discussion. R. 2:11-3(e)(1)(E). We note, however, that

there is sufficient credible evidence in the record to support the

ALJ and the Director's finding that the Division complied with 42

C.F.R. § 447.205 when it eliminated the inflation factor for 2013.

Here, the Division published notice of the proposed change

to the State's Medicaid plan before the effective date of the

change, and the Division did not submit the plan amendment to CMS

until the comment period was complete. CMS approved the plan

amendment and allowed it to be implemented as of January 1, 2013.

Moreover, the Annual Appropriations Act for the 2012-2013 fiscal

year was enacted in June 2012. The Hospitals could reasonably have

anticipated that the State would be seeking CMS approval of a

21 A-0364-15T2
change in its Medicaid plan for 2013, and if CMS approved the

change, the 2013 Medicaid rates would not be adjusted for

inflation.

IV.

The Hospitals also argue that the facts clearly establish

that the charity care mandate and the limited reimbursement

received for the treatment of Medicaid and charity care patients

result in an unconstitutional taking of their property without

just compensation; the Director violated their right to due process

by denying them the opportunity to engage in an "interactive

process" regarding the merit standard for rate appeals in N.J.A.C.

10:52-14.17; the Division erred by finding that the constitutional

claims had been previously resolved by decisions of this court;

and the Director erred by finding that the Division did not have

jurisdiction to consider these claims.

At oral argument, counsel for the Hospitals advised the court

that since the filing of this appeal, the Hospitals have filed an

action in the Law Division in which they are raising their

constitutional claims regarding the State's charity care mandate

and the State's alleged inadequate charity care subsidies. Because

the Hospitals will be pursuing these claims in the trial court,

we need not address the Hospitals' additional arguments on appeal.

Therefore, we affirm the dismissal of the Hospital's

22 A-0364-15T2
constitutional claims with regard to the 2013 Medicaid

reimbursement rates, without prejudice to the assertion of these

claims in the Hospitals' pending Law Division action.

Affirmed.

23 A-0364-15T2