State of West Virginia ex rel. Heartland of Beckley WV, LLC v. West Virginia Bureau for Medical Services

STATE OF WEST VIRGINIA

SUPREME COURT OF APPEALS

FILED

May 14, 2021

State of West Virginia, ex rel. released at 3:00 p.m.

EDYTHE NASH GAISER, CLERK

Heartland of Beckley WV, LLC, SUPREME COURT OF APPEALS

Heartland of Clarksburg WV, LLC, OF WEST VIRGINIA

Heartland of Rainelle WV, LLC,

Heartland of Martinsburg WV, LLC,

Heartland-Preston County of Kingwood, LLC,

Heath Care and Retirement Corporation of America, LLC, d/b/a Heartland of Charleston,

Petitioners

vs.) No. 20-0961

West Virginia Bureau for Medical Services,

Respondent

MEMORANDUM DECISION

The petitioner in this case is HCR, a company that in 2012 operated seven nursing facilities

in West Virginia under the name “Heartland.” The petitioner seeks a writ of prohibition to halt the

enforcement of a November 15, 2018, decision of the West Virginia Bureau for Medical Services

(“BMS”). The BMS decision remands the case to an administrative hearing officer for the

introduction of additional evidence. HCR did not object to the BMS decision, before or after it was

entered, and did not thereafter appeal BMS’s decision. Instead, HCR waited over two years, until

December 4, 2020, to file its petition for a writ challenging the BMS remand decision. The

petitioner, HCR, appears by counsel Gordon H. Copland. The respondent, BMS, appears by

counsel Kimberly Stitzinger.

The Court has considered the parties’ briefs, the appendix record, and the oral arguments

of the parties. Upon consideration of the applicable standard of review for a writ of prohibition,

the Court finds no substantial question of law for consideration and no error in the lower tribunal’s

decision. For these reasons, a memorandum decision denying the requested writ of prohibition is

appropriate under Rule 21 of the Rules of Appellate Procedure.

This case has its origins in HCR’s June 2012 request for reimbursement by BMS of certain

Medicaid-related expenses that HCR claims it incurred in the operation of its nursing facilities.

BMS is the state agency charged with administering West Virginia’s Medicaid program, and in so

doing it relied upon the “State Medicaid Plan,” a document that outlined the scope of “allowable”

expenses that may be reimbursable to nursing facilities. The document required nursing facilities

to submit a report of allowable expenses twice a year (in June and in December) to assist BMS in

calculating reimbursement rates under the Medicaid program. The 2012 State Medicaid Plan

included “liability insurance” expenses as an allowable cost but did not clearly define what was

properly included in, or excluded from, a nursing facility’s “liability insurance” expenses.

1

Between 2010 and 2012, BMS noticed that HCR’s documentation of expenses included a

dramatic increase in HCR’s liability insurance expenditures. In June of 2012, HCR reported that

its liability insurance costs exceeded $8,000 per bed at each of its seven facilities. However, the

next highest claim per bed, at a facility not owned by HCR, was $2,367 per bed. BMS, troubled

by these abnormal expenses, subjected HCR’s June 2012 report to a desk audit and learned that

HCR was including payments of various legal claims as a liability insurance expense. BMS

thereafter eliminated the legal claims from HCR’s expense reports in calculating reimbursement

1

costs.

HCR challenged the BMS decision. An evidentiary hearing was conducted before an

administrative hearing officer, and the hearing officer drafted a recommended decision that

supported BMS’s determination that HCR’s paid legal claims were not allowable expenses. BMS

then issued a final decision adopting the hearing officer’s recommendation. HCR appealed to the

circuit court which affirmed the BMS decision. HCR finally appealed to this Court.

In a memorandum decision, this Court reversed. Heartland of Beckley, LLC v. Bureau for

Medical Services, No. 15-0595, 2016 WL 6248620 (W.Va. Oct. 26, 2016). We examined the

various laws, rules and manuals governing the actions of BMS and concluded that, in considering

HCR’s report of expenses, BMS failed to consider language in the federal Medicare “Provider

Reimbursement Manual.” That manual provided that certain paid legal claims, like those submitted

by HCR, may be allowable. Specifically, the Court found that those legal claims “which are

reasonable, are allowable . . . up to a certain amount (essentially, up to ten percent of HCR’s net

worth). However, . . . [another federal regulation] prohibits a nursing facility’s costs from being

‘substantially out of line’ from comparable institutions.” Id. at *5 (emphasis added). Our

memorandum decision noted the following definition of “reasonable costs” in the “Provider

Reimbursement Manual” which, importantly, suggests a means of assessing “comparable

institutions”:

[P]roviders are reimbursed the actual costs of providing high quality care,

regardless of how widely they may vary from provider to provider, except where a

particular institution’s costs are found to be substantially out of line with other

institutions in the same area which are similar in size, scope of services, utilization,

and other relevant factors.

Id. (emphasis in original) (quoting CENTERS FOR MEDICARE AND MEDICAID SERVICES, PROVIDER

REIMBURSEMENT MANUAL § 2100, in part).

Accordingly, we reversed the circuit court and BMS decisions and remanded the case with

the requirement that the parties introduce evidence as to whether and what portion of HCR’s paid

1

BMS subsequently revised its definition of “liability insurance” expenses and, effective

in January 2013, clarified that the various legal costs included by HCR in its June 2012 report were

non-allowable costs. See Heartland of Beckley, LLC v. Bureau for Medical Services, No. 15-0595,

2016 WL 6248620 * 3 (W.Va. Oct. 26, 2016).

2

legal claims could be included in its June 2012 cost report. Id. at *6. The circuit court subsequently

remanded the case to BMS.

In May of 2018, an administrative hearing officer conducted a new evidentiary hearing on

behalf of BMS. At that hearing, a BMS accountant testified that she had reviewed this Court’s

Heartland memorandum decision. However, despite that decision, the BMS accountant opined

that most (but not all) of the liability costs submitted by HCR in its June 2012 report should be

disallowed because the costs were “substantially out of line” from comparable institutions. By

“comparable institutions,” the BMS accountant stated she was comparing nursing facilities in West

Virginia by the numbers of beds in each building. Specifically, she noted that a facility with ninety-

one beds or more was a “large” institution, and a facility with ninety or fewer beds was “small.”

Six of HCR’s seven facilities qualified as a “large” facility and one qualified as a “small” facility.

In reaching her conclusion that the HCR facility expenditures “were substantially out of line when

compared to these comparable facilities,” the BMS accountant compared the HCR large facilities

against the other large nursing facilities operating in West Virginia in 2012, and likewise compared

HCR’s small facility against other small nursing facilities operating in West Virginia in 2012.

HCR offered an accounting expert to refute BMS’s assessment. HCR’s expert also

criticized the BMS accountant’s approach and insisted that BMS should not be relying solely upon

2

the number of beds to assess whether one facility is “comparable” to another facility. Thereafter,

the BMS accountant was recalled to the witness stand. The hearing officer then asked the BMS

accountant about this Court’s Heartland decision and whether BMS had used the factors listed in

the Court’s opinion: “size, scope of services, utilization, and other relevant factors from the

Provider Reimbursement Manual.” The BMS accountant testified that when the Court directed

BMS to apply these standards, the Court had effectively imposed an entirely new process upon

which BMS had never relied. Apparently, BMS relied upon the number of beds in a facility to

measure comparability because it was the only information provided by nursing facilities and that

was available to BMS. As the BMS accountant stated, “I don’t have the other information. I don’t

have their net worth. I don’t have what their scope of business is. I treat all the nursing homes the

same except for the two distinct bed sizes.” Moreover, the BMS accountant said that, other than

the numbers of beds in a facility, BMS “did not have the resources or the wherewithal at the agency

to look into things like . . . scope of services, utilization, and other relevant factors[.]”

At the conclusion of the hearing, the administrative hearing officer drafted a detailed and

thorough recommended decision for entry by BMS. On November 7, 2018, copies of the

recommended decision were provided to counsel for BMS and counsel for HCR. The

administrative hearing officer acknowledged in the recommended decision that BMS did not apply

the regulations outlined in this Court’s 2016 Heartland opinion because the agency “had

inadequate resources to do so.” However, the administrative hearing officer explained the long-

established concepts of the “law of the case” and the “mandate” of an appellate court, concepts

whereby an appellate court’s opinion establishes the framework that controls the acts of a lower

tribunal on remand. The administrative hearing officer reasoned that “the law of the case and

2

We do not delve into the substance, quality or weight of the parties’ evidence. The

measure of those matters is solely for the BMS hearing officer on remand.

3

mandate” set forth in Heartland “have not been followed” because BMS failed to conduct an

assessment using the Medicare guidelines discussed in Heartland. Because of this, the

administrative hearing officer recommended to BMS that “the matter must be remanded so that

the Bureau can apply the methodology set forth by the Supreme Court in Heartland.”

HCR did not object to the administrative hearing officer’s recommended decision. There

is also nothing in the record showing that HCR offered any comments to BMS suggesting that it

alter the recommended decision. Accordingly, on November 15, 2018, the Commissioner of BMS

entered a “Decision” adopting, without modification, the hearing officer’s recommended decision.

Thereafter, there is nothing in the record showing any objection or challenge by HCR to the entry

of the BMS decision. Moreover, HCR never sought to appeal the November 2018 decision to the

circuit court.

Twenty-five months later, on December 4, 2020, petitioner HCR filed the instant petition

for a writ of prohibition to halt enforcement of the November 2018 BMS remand decision. HCR

asserted that the decision unfairly imposes on HCR the burden and expense of a new hearing, and

that the decision is unfair because BMS will have had the benefit of seeing HCR’s full case in

advance. We granted a rule to show cause and permitted the parties to orally argue their positions.

We now deny the requested writ.

“This Court is restrictive in the use of prohibition as a remedy.” State ex rel. W. Va. Fire

& Cas. Co. v. Karl, 199 W. Va. 678, 683, 487 S.E.2d 336, 341 (1997). “Prohibition lies only to

restrain inferior courts from proceeding in causes over which they have no jurisdiction, or, in

which, having jurisdiction, they are exceeding their legitimate powers and may not be used as a

substitute for writ of error, appeal or certiorari.” Syl. pt. 1, Crawford v. Taylor, 138 W.Va. 207, 75

S.E.2d 370 (1953); accord, Syl. pt. 2, State ex rel. Peacher v. Sencindiver, 160 W. Va. 314, 233

S.E.2d 425 (1977) (“A writ of prohibition will not issue to prevent a simple abuse of discretion by

a trial court. It will only issue where the trial court has no jurisdiction or having such jurisdiction

exceeds its legitimate powers. W. Va. Code 53-1-1.”). See also, Syl. pt. 1, in part, Hinkle v. Black,

164 W. Va. 112, 262 S.E.2d 744 (1979) (“In determining whether to grant a rule to show cause in

prohibition when a court is not acting in excess of its jurisdiction, this Court will look to the

adequacy of other available remedies such as appeal and to the over-all economy of effort and

money among litigants, lawyers and courts[.]”).

Petitioner HCR does not allege that the lower tribunal has acted without jurisdiction;

instead, it argues that BMS is exceeding its legitimate powers. In cases such as these, we consider

five factors to determine whether to issue a discretionary writ of prohibition. Those factors are:

(1) whether the party seeking the writ has no other adequate means, such as direct

appeal, to obtain the desired relief; (2) whether the petitioner will be damaged or

prejudiced in a way that is not correctable on appeal; (3) whether the lower

tribunal’s order is clearly erroneous as a matter of law; (4) whether the lower

tribunal’s order is an oft repeated error or manifests persistent disregard for either

procedural or substantive law; and (5) whether the lower tribunal’s order raises new

and important problems or issues of law of first impression. These factors are

general guidelines that serve as a useful starting point for determining whether a

discretionary writ of prohibition should issue. Although all five factors need not be

4

satisfied, it is clear that the third factor, the existence of clear error as a matter of

law, should be given substantial weight.

Syl. pt. 4, in part, State ex rel. Hoover v. Berger, 199 W. Va. 12, 483 S.E.2d 12 (1996) (emphasis

added).

We focus our analysis on the first factor of Hoover and find that petitioner HCR has failed

to establish an entitlement to a writ of prohibition. The first factor is whether the party seeking the

writ had any other adequate means to obtain the desired relief. BMS argues that HCR should have

filed a petition for review of the November 2018 BMS decision in the circuit court “within thirty

days after the date upon which” HCR received notice of the decision. W. Va. Code § 9-2-13(d)

(2018). Accordingly, BMS takes the position that HCR waited over two years to take any action

and is now attempting to seek a writ of prohibition to compensate for its failure to file a timely

appeal.

However, we see that HCR had another adequate means to obtain relief that preceded any

appeal to circuit court: it could and should have raised an objection or complaint to the

3

administrative hearing officer’s recommended decision with BMS. While a writ of prohibition is

designed to prevent “a palpable, substantial, or irremediable injustice, or to preserve the order and

regularity of judicial proceedings,” 72A C.J.S. Prohibition § 11 (2021), it is a long-standing

principle that objections to non-jurisdictional issues should first be made in the lower tribunal to

preserve the issue for subsequent review by way of a petition for a writ of prohibition. “Before a

writ of prohibition is granted, it generally must appear that the petitioner has applied to the inferior

court or judge for relief.” 72A C.J.S. Prohibition § 59 (2021). Hence, for a party to establish a right

to a writ of prohibition, the “party must alert a tribunal as to perceived defects at the time such

defects occur,” and if the tribunal is not so alerted, this Court will deny prohibition and will not

“consider an error which is not properly preserved in the record nor apparent on the face of the

record.” State ex rel. State Farm Mut. Auto. Ins. Co. v. Bedell, 228 W. Va. 252, 264, 719 S.E.2d

4

722, 734 (2011) (citations omitted). HCR failed to object to the hearing officer’s recommended

3

In examining the briefs, record and oral argument in this case, it appears that the parties

do not identify the specific procedures which govern BMS administrative hearings. We assume

without deciding, however, that the hearings are affected by a regulation established by BMS’s

parent agency, the Department of Health and Human Resources, which provides that at the

conclusion of an administrative hearing, a hearing officer must prepare a report or recommendation

that contains proposed findings of fact and conclusions of law. 69 C.S.R. § 9.2 (2015). The

regulation then provides: “The parties to the hearing shall then be permitted seven days in which

to file objections or comments upon the report and recommendation and three more days to

respond to each others’ objections or comments.” Id.

4

It is a well-established principle that “[t]his Court will not pass on a nonjurisdictional

question which has not been decided by the trial court in the first instance.” Syl. pt. 2, Sands v.

Security Trust Co., 143 W. Va. 522, 102 S.E.2d 733 (1958); accord Syl. pt. 2, Cameron v.

Cameron, 105 W. Va. 621, 143 S.E. 349 (1928) (“This court will not review questions which have

not been decided by the lower court.”). See also, Honaker v. Mahon, 210 W. Va. 53, 60, 552 S.E.2d

Continued . . .

5

decision before its entry by BMS, and HCR similarly failed to object or complain about the

decision to BMS after its entry. On this record, it would be inappropriate for this Court to inform

BMS that it has acted wrongly when it did not have an opportunity to address the matter in the first

instance.

Accordingly, because HCR did not object, comment, complain or otherwise raise its

nonjurisdictional issue with the BMS decision below, and instead raised it for the first time in its

petition to this Court over two years after entry of the decision, we deny the requested writ of

prohibition.

Writ denied.

ISSUED: May 14, 2021

CONCURRED IN BY:

Chief Justice Evan H. Jenkins

Justice Elizabeth D. Walker

Justice Tim Armstead

Justice John A. Hutchison

Justice William R. Wooton

788, 795 (2001) (“[T]he general rule [is] that a party’s failure to object waives any right to appeal

an issue.”); Tennant v. Marion Health Care Found., Inc., 194 W. Va. 97, 114, 459 S.E.2d 374, 391

(1995) (“To be clear, the party complaining on appeal of the admission of evidence bears sole

responsibility for adequately preserving the record for meaningful appellate review.”); Loar v.

Massey, 164 W. Va. 155, 159, 261 S.E.2d 83, 86 (1979) (“[O]bjections on non-jurisdictional

issues, must be made in the lower court to preserve such issues for appeal.”); Konchesky v. S. J.

Groves & Sons Co., 148 W. Va. 411, 414, 135 S.E.2d 299, 302 (1964) (“[I]t has always been

necessary for a party to object or except in some manner to the ruling of a trial court, in order to

give said court an opportunity to rule on such objection before this Court will consider such matter

on appeal.”).

6