State ex rel. Peregrine Health Servs. of Columbus, L.L.C. v. Sears, Dir., Ohio Dept. of Medicaid , 2020 Ohio 3426 ( 2020 )

[Cite as State ex rel. Peregrine Health Servs. of Columbus, L.L.C. v. Sears, Dir., Ohio Dept. of Medicaid, 2020-
Ohio-3426.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
State ex rel. Peregrine Health Services :
of Columbus, LLC dba Summit's Trace
Healthcare Center et al., :
Appellants/ :
Cross-Appellees,
: No. 18AP-16
v. (C.P.C. No. 17CV-1284)
:
Barbara Sears, Director, (REGULAR CALENDAR)
Ohio Department of Medicaid, :
Appellee/ :
Cross-Appellant.
:
D E C I S I O N
Rendered on June 23, 2020
On brief: Carlile Patchen & Murphy LLP, Maria Mariano
Guthrie, and Jeffrey J. Patter, for appellants/cross-appellees.
Argued: Maria Mariano Guthrie.
On brief: Dave Yost, Attorney General, Rebecca L. Thomas,
and Justin T. Radic, for appellee/cross-appellant. Argued:
Rebecca L. Thomas.
APPEAL from the Franklin County Court of Common Pleas
KLATT, J.
{¶ 1} Appellants/cross-appellees, Peregrine Health Services of Columbus, LLC dba
Summit's Trace Healthcare Center and Peregrine Health Services of Cincinnati, LLC dba
Oak Pavilion Nursing Center (hereinafter collectively referred to as "Peregrine"), appeal
from a December 11, 2017 judgment of the Franklin County Court of Common Pleas
denying their petition for a writ of mandamus ordering appellee/cross-appellant, Barbara
No. 18AP-16 2
Sears, Director of the Ohio Department of Medicaid (hereinafter referred to as "ODM") to
distribute critical access incentive payments to them for state fiscal year 2017. Following a
bench trial, the trial court entered judgment denying the writ of mandamus, finding
Peregrine was not entitled to the writ. For the following reasons, we affirm the trial court's
decision denying the requested writ.
{¶ 2} ODM filed a conditional cross-appeal from a November 1, 2017 decision of
the Franklin County Court of Common Pleas denying ODM's March 7, 2017 motion to
dismiss Peregrine's complaint for failure to state a claim upon which relief may be granted
pursuant to Civ.R. 12(B)(6). For the following reasons, we decline to address ODM's cross-
appeal, finding it moot.
I. FACTS AND PROCEDURAL BACKGROUND
A. Overview
{¶ 3} This mandamus action arose out of Peregrine's claim that ODM had denied
them critical access incentive payments for which they were eligible under R.C. 5165.15 and
5165.23 for state fiscal year 2017. Peregrine claims the denial was based on ODM's
incorrect and unreasonable interpretation of the term "occupancy rate" as described in R.C.
5165.23(A)(2) to determine whether a nursing facility qualifies for such payments.
{¶ 4} ODM is responsible for determining and issuing critical access incentive
payments to qualified nursing facilities according to R.C. 5165.15 and 5165.23. Pursuant to
R.C. 5165.15, ODM determines how much a Medicaid-funded nursing facility receives and
then distributes the funds as a "total per Medicaid day payment rate." This "total per
Medicaid day payment rate" is computed by determining the sum of six components, one
of which is a critical access incentive payment for qualifying nursing facilities. R.C.
5165.15(A)(5). If a nursing facility qualifies for a critical access incentive payment, then
ODM totals the facility's other components under R.C. 5165.15(A)(1) through (4) and (6)
and increases the total by five percent. R.C. 5165.23(B). The five percent increase
constitutes the critical access incentive payment. R.C. 5165.23(A) provides criteria a facility
must meet to receive a critical access incentive payment, one of which is to have an
occupancy rate of at least eighty-five percent as of the last day of the calendar year
immediately preceding the fiscal year.
No. 18AP-16 3
{¶ 5} ODM's decision regarding whether a nursing facility qualifies for a critical
access incentive payment is subject to reconsideration when sought by the facility "on the
basis of a possible error in the calculation of the rate." Ohio Adm.Code 5160-3-24. ODM
then issues a written reconsideration decision. ODM's reconsideration decision is not
subject to any administrative remedy under R.C. Chapter 119 or any other provision of the
Revised Code; therefore, a mandamus action is Peregrine's only legal remedy. Mandamus
is an appropriate remedy where no statutory right of appeal is available to correct an abuse
of discretion by an administrative body. State ex rel. Cydrus v. Ohio Public Emps.
Retirement Sys., 127 Ohio St.3d 257, 2010-Ohio-5770, ¶ 12.
B. Facts
{¶ 6} The facts of the underlying matter are undisputed. Peregrine Health Services
of Columbus, LLC operates Summit's Trace Healthcare Center, while Peregrine Health
Services of Cincinnati, LLC operates Oak Pavilion Nursing Center. (Feb. 3, 2017 Petition at
¶ 1-2.) ODM denied critical access incentive payments to Peregrine and Peregrine
requested reconsideration. ODM denied such reconsideration. Subsequently, on
February 3, 2017, Peregrine filed a verified petition for a writ of mandamus seeking a writ
to compel ODM to distribute critical access incentive payments to them under R.C.
5165.15(A)(5) and 5165.23 for state fiscal year 2017.
{¶ 7} The parties agree that the sole issue is the meaning of the term "occupancy
rate" as used in R.C. 5165.23(A)(2) to calculate the critical access incentive payment.
{¶ 8} "Occupancy rate" is a percentage of occupied days divided by available days.
(Petition at ¶ 28.) However, Peregrine argues that the calculation of an "occupancy rate"
for purposes of R.C. 5165.23(A)(2) should be calculated by using the number of beds
actually in use at the nursing facility that have been certified for Medicaid care and
reimbursement (hereinafter referred to as "certified beds") as the denominator in the
equation. ODM argues the determination is the maximum number of beds that the facility
was authorized by the Ohio Department of Health to make available or the maximum
number of beds that the facility has licenses for and, therefore, could be made available for
occupancy in the denominator of the equation (hereinafter referred to as "licensed beds").
(Nov. 16, 2017 Moore Aff. at ¶ 7.) Peregrine claims that ODM "wrongfully and arbitrarily"
denied them the critical access incentive payments based on ODM's incorrect
No. 18AP-16 4
interpretation of the term "occupancy rate" by using licensed beds rather than certified beds
in the calculation. (Petition at ¶ 32, 34.)
{¶ 9} It is not uncommon for nursing facilities to have a different number of
licenses for beds than the number of actual Medicaid-certified beds. For example,
Summit's Trace had licenses for 201 beds but only had 177 to 180 beds that existed in the
facility and could be occupied by a patient. (Heaphy Feb. 1, 2017 Aff. at ¶ 12, 20.) Oak
Pavilion had licenses for 150 beds but only 130 beds existed and were available to be
occupied by patients. Id. at ¶ 32.
{¶ 10} On March 7, 2017, ODM filed a motion to dismiss the complaint for failure to
state a claim upon which relief may be granted pursuant to Civ.R. 12(B)(6). ODM argued
its interpretation of occupancy rate was not unreasonable, irrational, or inconsistent with
the statutory purpose and, consequently, Peregrine had failed to state a claim for which
relief could be granted.
{¶ 11} On April 4, 2017, Peregrine filed a memorandum in opposition to ODM's
motion to dismiss, attaching an affidavit and supporting documents. On April 17, 2017,
ODM filed a reply in support of its motion to dismiss. On May 3, 2017, Peregrine requested
leave to file a sur-reply, which was opposed by ODM by memorandum filed the same day.
{¶ 12} By journal entry dated November 1, 2017, the trial court denied ODM's
motion to dismiss, denied Peregrine's motion for leave to file sur-reply, and set the matter
for supplemental briefing and hearing.
{¶ 13} On November 22, 2017, the trial court conducted a bench trial and, in
addition to live testimony, it admitted documentary evidence including the verified petition
for a writ of mandamus and the affidavits that had previously been filed. The trial court
qualified as experts all three witnesses that testified during the trial.
{¶ 14} On December 11, 2017, the trial court issued its decision denying the
requested writ. The trial court noted that the term "occupancy rate" is not defined in R.C.
Chapter 5165 and that "[t]he statute does not specifically address whether to use 'licensed'
or 'certified' beds to calculate critical access payments under 5165.23(A)(2)." (Dec. 11, 2017
Decision at 5.) The trial court found R.C. 5165.23(A)(2) ambiguous. The trial court stated:
A nursing facility occupancy rate could be calculated using all
of its licensed beds, or using only Medicaid certified beds.
There are pro's [sic] and con's [sic] to each approach. If a
No. 18AP-16 5
facility is remodeling – in order to better serve residents – and
takes licensed beds temporarily out of service the occupancy
rate will go down if licensed beds are the basis for the
computation, perhaps eliminating the critical access incentive
payment for a year or more. But, the record suggests a facility
that does not meet the 85% occupancy rate may simply be
"sitting-on" excess licensed beds, or may even have quality of
care issues that keep its population relatively low. Figuring out
what approach is best for the public in conducting critical
access incentive payment calculations is, therefore, a matter of
judgment. The General Assembly did not settle that issue with
this statutory language. The Department charged with
implementation of the language is left to apply the statutory
concept in a sensible manner.
(Decision at 6.)
{¶ 15} The trial court found that it was appropriate to defer to ODM's interpretation
of "occupancy rate" for purposes of determining whether a nursing facility qualified for a
critical access incentive payment. The trial court found the evidence showed ODM "was
acting in a reasonable and good faith manner in implementing the modest legislative
guidance on computing an 'occupancy rate' pursuant to R.C. 5165.23(A)(2)." (Decision at
7.) Relying on the holding of In re Champaign Wind, L.L.C., 146 Ohio St.3d 489, 2016-
Ohio-1513, ¶ 36 ("when a statute does not prescribe a particular formula or methodology,
the appropriate administrative agency has broad discretion in deciding how to implement
its duties"), the trial court concluded that ODM "must be allowed" broad discretion in
deciding how to implement R.C. 5165.23(A)(2). (Decision at 7.) The trial court concluded
that Peregrine had not demonstrated entitlement to a writ of mandamus.
{¶ 16} On January 5, 2018, Peregrine timely appealed from the December 11, 2017
judgment. On January 12, 2018, ODM conditionally cross-appealed from the trial court's
entry journalized on November 1, 2017 that denied ODM's motion to dismiss the
mandamus action.
II. ASSIGNMENTS OF ERROR
{¶ 17} Peregrine presents three assignments of error for review:
[1.] The trial court erred in dismissing [Peregrine's] Writ of
Mandamus when the trial court gave improper deference to the
Ohio Department of Medicaid's interpretation of R.C. 5165.23.
No. 18AP-16 6
[2.] The trial court erred when it found that the Ohio
Department of Medicaid's interpretation of R.C. 5165.23 was
reasonable.
[3.] The trial court abused its discretion when it failed to find
that the Ohio Department of Medicaid's denial of the critical
access incentive payments was unreasonable, arbitrary and/or
unconscionable.
III. CONDITIONAL CROSS-APPEAL
{¶ 18} ODM filed a conditional cross-appeal, requesting that the trial court's
decision denying ODM's Civ.R. 12(B)(6) motion to dismiss be reversed in the event this
court grants the relief sought by Peregrine:
The lower court incorrectly denied the Department's motion to
dismiss based on failure to state a claim upon which relief could
be granted. (See Comm. Pl. 11/1/2017 Journal Entry at 3.)
IV. LAW AND DISCUSSION – APPEAL
A. Mandamus
{¶ 19} To be entitled to relief in mandamus, a relator must demonstrate that
(1) relator has a clear legal right to the relief prayed for, (2) respondent is under a clear legal
duty to perform the act prayed for, and (3) relator has no plain and adequate remedy in the
ordinary course of law. State ex rel. Berger v. McMonagle, 6 Ohio St.3d 28, 29 (1983);
PBP, Inc. v. Ohio Dept. of Job & Family Servs., 10th Dist. No. 13AP-36, 2013-Ohio-4344.
"Mandamus is an extraordinary remedy which is to be exercised with caution and issued
only when the right is clear." Id. at ¶ 13, citing State ex rel. Rittner v. Bumb, 6th Dist. No.
F-07-017, 2007-Ohio-5319, ¶ 6. Therefore, in order for this court to issue a writ of
mandamus in this matter, Peregrine must establish a clear legal right to critical access
incentive payments for state fiscal year 2017, a clear legal duty on the part of ODM to issue
such payments to them, and the lack of an adequate remedy in the ordinary course of law.
{¶ 20} There is no dispute that ODM had a clear legal duty to determine and pay
critical access incentive payments to qualified nursing facilities for state fiscal year 2017.
Nor is there any dispute that, because Ohio Adm.Code 5160-3-24 bars any administrative
remedy of ODM's reconsideration decision, this mandamus action is Peregrine's only
remedy. Consequently, the remedy of a writ of mandamus is appropriate in this matter if
No. 18AP-16 7
Peregrine can demonstrate that ODM improperly and unreasonably calculated the critical
access incentive payments at issue here.
B. Standard of Review
{¶ 21} The parties disagree on the standard of review that applies in determining
whether the trial court erred in entering judgment in favor of ODM. ODM cites this court's
holding in State ex rel. BDFM Co. v. Ohio Dept. of Transp., 10th Dist. No. 11AP-1094, 2013-
Ohio-107, which supports the proposition that a trial court's decision in a mandamus action
is generally reviewed for abuse of discretion. ODM also asserts that this court should defer
to ODM's reasonable construction of its statutes and rules, regardless of the standard of
review applied.
{¶ 22} Peregrine challenges ODM's argument that our standard of review is an
abuse of discretion review and instead argues that a de novo review should be employed.
Peregrine acknowledges that, generally, the standard of review is an abuse of discretion.
ODM has conceded, however, that "[t]he question presented here is purely legal; there are
no disputed material facts." See ODM Combined Brief at 1. Peregrine relies on this court's
holding in State ex rel. V&A Risk Servs. v. State Bur. of Workers' Comp., 10th Dist. No.
11AP-742, 2012-Ohio-3583, ¶ 19 (where a "stipulated record presents a question of law,
appellate courts review a writ of mandamus issued by a trial court de novo"), to support
their position that de novo is the appropriate standard of review here.
{¶ 23} Having independently reviewed the record and the law regarding the
standard of review in a case such as this, we find de novo review appropriate. The parties
and trial court agree there are no material disputed facts, and the only issue for review is
whether ODM's interpretation of R.C. 5165.23(A)(2) was proper and reasonable, which is
purely a question of law. "Statutory interpretation is a question of law subject to de novo
review." Silver Lining Group EIC Morrow Co. v. Ohio Dept. of Edn. Autism Scholarship
Program, 10th Dist. No. 16AP-398, 2017-Ohio-7834, ¶ 33.
C. Assignments of Error
{¶ 24} Because they are interrelated, we address Peregrine's assignments of error
together. Peregrine asserts the trial court erred by affording improper deference to ODM's
interpretation of R.C. 5165.23, which resulted in its finding that ODM's interpretation of
R.C. 5165.23 was reasonable. Peregrine asserts that ODM's interpretation of R.C. 5165.23
No. 18AP-16 8
is unreasonable and resulted in an improper denial of critical access incentive payments to
Peregrine for fiscal year 2017.
{¶ 25} As recognized, there are no disputed facts. Both Peregrine and ODM agree
Peregrine satisfied three of the four criteria of R.C 5165.23 in order to receive incentive
payments. The parties do not dispute the data submitted by Peregrine that established the
number of licensed beds and the number of certified beds. Therefore, the sole issue
presented to the trial court was whether the calculation of the occupancy rate is determined
by using the number of licensed beds, as argued by ODM, or by using the number of
certified beds, as argued by Peregrine.
{¶ 26} The parties agree that, in 2012,1 the Ohio General Assembly enacted critical
access incentive payments that could be awarded to nursing facilities located in highly
distressed urban and rural communities to encourage the nursing facilities to remain in
those communities, thereby keeping "vital and needed senior health services in place" in
those communities. (Petition at ¶ 11-12; ODM Mar. 7, 2017 Mot. to Dismiss at 2.) The
parties likewise agree the critical access incentive payments "were put in place to address
the potential for a lack of access to healthcare by both rural and inner-city residents, a high
proportion of whom are poor and chronically ill and—thus—more likely to be Medicaid
recipients," and the critical access incentive payments make it economically feasible for the
nursing facilities to remain in their communities, where they also help by providing
significant local employment. (Mar. 7, 2017 ODM Mot. to Dismiss at 2, citing Petition at
¶ 11-12.)
{¶ 27} R.C. 5165.15 establishes the total per Medicaid day payment rate, including
the critical access incentive payment, that ODM shall pay a nursing facility during a state
fiscal year. Calculation of the Medicaid day payment rate for fiscal year 2017 required ODM
to determine the sum of all the following in accordance with R.C. 5165.15(A):
(1) The per medicaid day payment rate for ancillary and
support costs determined for the nursing facility under
section 5165.16 of the Revised Code;
1The statute, previously codified as R.C. 5111.246 but now codified as R.C. 5165.23, became effective on
September 10, 2012.
No. 18AP-16 9
(2) The per medicaid day payment rate for capital costs
determined for the nursing facility under section 5165.17 of the
Revised Code;
(3) The per medicaid day payment rate for direct care costs
determined for the nursing facility under section 5165.19 of the
Revised Code;
(4) The per medicaid day payment rate for direct care costs
determined for the nursing facility under section 5165.19 of the
Revised Code;
(5) If the nursing facility qualifies as a critical access nursing
facility, the nursing facility's critical access incentive payment
paid under section 5165.23 of the Revised Code.
{¶ 28} In order for a nursing facility to qualify for the critical access incentive
payment provided for in R.C. 5165.15(A)(5), ODM must determine that the nursing facility
satisfies the requirements of R.C. 5165.23(A), which provided for state fiscal year 2017, as
follows:
(A) Each state fiscal year, the department of medicaid shall
determine the critical access incentive payment for each
nursing facility that qualifies as a critical access nursing facility.
To qualify as a critical access nursing facility for a state fiscal
year, a nursing facility must meet all of the following
requirements:
(1) The nursing facility must be located in an area that, on
December 31, 2011, was designated an empowerment zone
under the "Internal Revenue Code of 1986," section 1391, 26
U.S.C. 1391.
(2) The nursing facility must have an occupancy rate of at
least eighty-five per cent as of the last day of the calendar year
immediately preceding the state fiscal year.
(3) The nursing facility must have a medicaid utilization rate of
at least sixty-five per cent as of the last day of the calendar year
immediately preceding the state fiscal year.
(4) The nursing facility must have been awarded at least five
points for meeting accountability measures under section
5165.25 of the Revised Code for the fiscal year and at least one
of the five points must have been awarded for meeting the
accountability measures identified in divisions (C)(9), (10),
(11), (12), and (14) of section 5165.25 of the Revised Code.
No. 18AP-16 10
(Emphasis added.) H.B. No. 483, as enacted by the 130th General Assembly, effective
Sept. 15, 2014.
{¶ 29} "The primary goal of statutory construction is to ascertain and give effect to
the legislature's intent in enacting the statute. The court must first look to the plain
language of the statute itself to determine the legislative intent." (Citations omitted.) State
v. Bundy, 4th Dist. No. 11CA818, 2012-Ohio-3934, ¶ 46. We must consider the statutory
language in context, construing words and phrases according to the rules of grammar and
common usage. Bartchy v. State Bd. of Edn., 120 Ohio St.3d 205, 2008-Ohio-4826, ¶ 16,
citing State ex rel. Stoll v. Logan Cty. Bd. of Elections, 117 Ohio St.3d 76, 2008-Ohio-333,
¶ 34.
{¶ 30} A court may only interpret a statute when " 'the words of a statute are
ambiguous, uncertain in meaning, or conflicting.' " In re Brooks, 136 Ohio App.3d 824,
829 (10th Dist.2000), quoting State ex rel. Burrows v. Indus. Comm., 78 Ohio St.3d 78, 81
(1997). Ambiguity exists when the language of a statute is susceptible to more than one
interpretation. Silver Lining Group, 2017-Ohio-7834, at ¶ 35, citing Columbus v. Mitchell,
10th Dist. No. 16AP-322, 2016-Ohio-7873, ¶ 6. R.C. 1.49 provides that when a statute is
ambiguous, a court may consider "other matters," such as the object sought to be attained,
the legislative history, the consequence of a particular construction, and the administrative
construction of the statute.
{¶ 31} ODM asserts that R.C. 5165.23(A)(2) is ambiguous because it does not define
"occupancy rate," while that term is defined in other sections in R.C. Chapter 5165,
including R.C. 5165.16 and 5165.17. ODM argues that its interpretation is uniform within
the chapter. We find that R.C. 5165.23(A)(2) is ambiguous because it does not specify how
that rate is to be determined, and it is susceptible to more than one reasonable
interpretation by using either licensed beds or certified beds. Here, the trial court expressly
noted the lack of legislative guidance on the formula or methodology to be applied in
calculating occupancy rate for purposes of determining critical access incentive payments.
{¶ 32} " 'If a statute provides an administrative agency authority to perform a
specified act but does not provide the details by which the act should be performed, the
agency is to perform the act in a reasonable manner based upon a reasonable construction
of the statutory scheme.' " Silver Lining Group at ¶ 49, quoting Cosby v. Franklin Cty.
No. 18AP-16 11
Dept. of Job & Family Servs., 10th Dist. No. 07AP-41, 2007-Ohio-6641, ¶ 38. If the agency
interprets the statute in a way that " 'fills a gap or defines a term in a reasonable way in light
of the Legislature's design [, such construction] controls, even if it is not the answer the
court would have reached in the first instance.' " Id. at ¶ 49, citing Cosby at ¶ 38, quoting
Regions Hosp. v. Shalala, 522 U.S. 448, 450 (1998).
{¶ 33} "[A] 'legislative gap' is not 'equivalent to a lack of authority for the agency to
act.' " Silver Lining Group at ¶ 50, quoting Northwestern Ohio Bldg. & Constr. Trades
Council v. Conrad, 92 Ohio St.3d 282, 289 (2001). Moreover, " 'the power of an
administrative agency to administer a * * * program necessarily requires the formulation of
policy and the making of rules to fill any gap left, implicitly or explicitly,' by the legislature."
(Emphasis omitted.) Northwestern Ohio Bldg. & Constr. Trades Council at 289, quoting
Morton v. Ruiz, 415 U.S. 199, 231 (1974).
{¶ 34} R.C. 5165.23 does not specify whether ODM should use licensed beds or
certified beds when calculating occupancy rate. ODM reasonably filled the gap and
determined it should use licensed beds to determine the occupancy rate. The General
Assembly delegated the determination of which nursing facilities were eligible for the
critical access incentive payments and required ODM to create the standards for that
determination.
{¶ 35} ODM argues that using licensed beds prevents facilities from manipulating
the numbers in order to meet the occupancy requirement. By using certified beds, it could
provide an incentive to facilities to choose to remove Medicaid-certified beds out of service,
thereby decreasing the number of beds used in the denominator of the occupancy-rate
fraction in order to artificially inflate the occupancy rate above 85 percent. It could
encourage facilities in empowerment zones to lower the number of available beds and
thereby result in a decrease, rather than an increase, in the local access to nursing facilities
in those empowerment zones. (Appellee Combined Brief at 4-5; Tr. 88-95.)
{¶ 36} Peregrine argues that using licensed beds to determine occupancy rate is
contrary to ODM's prior administrative practices. Under R.C. 5165.34, if a facility has a
patient who is temporarily absent due to a hospital stay or other reasons, Medicaid can pay
that facility 50 percent of the Medicaid day rate if the facility has an occupancy rate
exceeding 95 percent. Occupancy rate is not defined in that section. In determining
No. 18AP-16 12
occupancy rate for temporary absences under R.C. 5165.34, ODM initially used certified
beds for a few years (approximately 2011 to 2016). However, both ODM employees who
testified stated that using certified beds was an error, and ODM corrected the error and
began using licensed beds under R.C. 5165.34. (Moore Tr. at 59; Dickerson Tr. at 88-89.)
However, since 2012 when R.C. 5165.23 became effective, ODM has consistently
interpreted occupancy rate using licensed beds for the critical access incentive payments.
(Dickerson Tr. at 88.) Moreover, Peregrine conceded at trial that ODM had always used
licensed beds to determine occupancy rate under R.C. 5165.23. (Tr. at 13-15.)
{¶ 37} Further, ODM argues occupancy rate is now interpreted consistently
throughout R.C. Chapter 5165 because ODM also uses licensed beds in the formula for
occupancy rate in both R.C. 5165.16 and 5165.17. The term "occupancy rate" is defined in
R.C. 5165.16 and 5165.17, and R.C. 5165.16 provides, as follows:
(D)(2) For the purpose of determining a nursing facility's
occupancy rate under division (D)(1)(a) of this section, the
department shall include any beds that the nursing facility
removes from its medicaid-certified capacity unless the
nursing facility also removes the beds from its licensed bed
capacity.2
{¶ 38} One of ODM's experts, Roger Allan Dickerson, Deputy Director of the Rate
Setting and Cost-Setting Section of ODM, testified that if the General Assembly intended
ODM to use certified beds to calculate the occupancy rate for the critical access incentive
payments, the General Assembly would have used such language in R.C. 5165.23. (Tr. at
87-88.) Dickerson testified Medicaid-certified beds is a subset of licensed beds (all
Medicaid-certified beds must first be licensed beds), and if the General Assembly had
wanted "occupancy rate" to mean Medicaid-certified beds, they would have used
"Medicaid-certified" as the subset. (Tr. at 87-88.)
{¶ 39} Further, ODM argues that applying the same definition to R.C. 5165.23 as in
R.C. 5165.16 and 5165.17 furthers the purposes that the General Assembly intended which
was to ensure access to nursing facility healthcare for residents of underserved rural and
inner-city areas. ODM contends that providing incentive payments only to nursing
2R.C. 5165.17 uses similar language as R.C. 5165.16, as follows: "(D)(3) For the purpose of determining a
nursing facility's occupancy rate under division (D)(2)(a) of this section, the department shall include any
beds that the nursing facility removes from its Medicaid-certified capacity after June 30, 2005, unless the
nursing facility also removes the beds from its licensed bed capacity."
No. 18AP-16 13
facilities with high occupancy rates provides that the facilities that are used will be retained,
and access to such facilities will be assured. (ODM Combined Brief at 4.)
{¶ 40} Peregrine argues that R.C. 5165.16 and 5165.17 are rate-setting statutory
provisions and thus not closely related statutes to R.C. 5165.23, an add-on incentive
provision; therefore, we should not consider these statutes in pari materia. "It is a basic
rule of statutory construction that where sections of a statute are in pari materia, they shall
be construed together so as to give full force and effect to the legislative intent." State v.
Parks, 13 Ohio App.3d 85, 86 (10th Dist.1983). All statutes relating to the same subject
matter must be read in pari materia, and construed together, so as to give the proper force
and effect to each and all such statutes." State v. Cook, 128 Ohio St.3d 120, 2010-Ohio-
6305, ¶ 45. R.C. Chapter 5165 is titled Nursing Facility Services, and all three of these
sections are found in this same chapter of the Revised Code and involve components of
Medicaid rates paid to nursing facilities. They involve the same general subject matter and
address similar subjects. The sections are not so unrelated as to make in pari materia
review inappropriate.
{¶ 41} Generally, where there is ambiguity, " '[a] reviewing court, in interpreting a
statute, "must give due deference to an administrative interpretation formulated by an
agency which has accumulated substantial expertise, and to which the legislature has
delegated the responsibility of implementing the legislative command." ' " Northside
Amateur Boxing School Bingo Club v. Hamilton Cty. Gen. Health Dist., 184 Ohio App.3d
596, 2009-Ohio-5122, ¶ 17 (10th Dist.), quoting In re 138 Mazal Health Care, Ltd., 117 Ohio
App.3d 679, 685 (10th Dist.1997), quoting State ex rel. McLean v. Indus. Comm., 25 Ohio
St.3d 90 (1986). Furthermore, "in order to sustain an agency's application of a statutory
term, a reviewing court ' "need not find that its construction is the only reasonable one." ' "
Id., quoting 138 Mazal Health Care at 685, quoting Udall v. Tallman, 380 U.S. 1, 16 (1965),
superseded by statute on other grounds, quoting Unemp. Comp. Comm. of Territory of
Alaska v. Aragon, 329 U.S. 143 (1946). In the administrative law context, unless an
administrative agency's interpretation of a statute that it has a duty to enforce is
unreasonable, it will not be reversed. Warren v. Morrison, 10th Dist. No. 16AP-372, 2017-
Ohio-660, ¶ 10, citing State ex rel. Clark v. Great Lakes Constr. Co., 99 Ohio St.3d 320,
2003-Ohio-3802, ¶ 10, citing Northwestern Ohio Bldg. & Constr. Trades Council, 92 Ohio
No. 18AP-16 14
St.3d at 287. Thus, if the administrative agency's interpretation is reasonable and
consistent with the underlying legislative intent, this court must defer to the agency's
interpretation and uphold it. Id., citing Oyortey v. State Med. Bd. of Ohio, 10th Dist. No.
12AP-431, 2012-Ohio-6204, ¶ 17.
{¶ 42} Based on the foregoing reasons, we find that ODM's interpretation of
occupancy rate under R.C. 5165.23(A)(2) that resulted in denying critical access incentive
payments to Peregrine for state fiscal year 2017 was not unreasonable and not contrary to
law. We find, therefore, that the trial court did not err in deferring to ODM's interpretation
and denying Peregrine the writ of mandamus. Peregrine's three assignments of error are
overruled.
V. LAW AND DISCUSSION – ODM'S CONDITIONAL CROSS-APPEAL
{¶ 43} ODM argues that the trial court improperly denied its Civ.R. 12(B)(6) motion
to dismiss Peregrine's petition for a writ of mandamus for failure to state a claim upon
which relief could be granted. ODM posits that Peregrine is barred from stating a valid
claim for writs of mandamus compelling ODM to pay Peregrine critical access incentive
payments because Peregrine did not meet the statutory criteria for such payments, based
on ODM's interpretation of the term occupancy rate as it is used in R.C. 5165.23. (ODM's
Combined Brief in passim.) However, ODM raised this assignment of error only
conditionally upon our granting Peregrine's requested relief. Since we have not done so,
we decline to address ODM's conditional assignment of error as it is moot.
VI. CONCLUSION
{¶ 44} Based on the foregoing, we overrule Peregrine's three assignments of error
and affirm the judgment of the Franklin County Court of Common Pleas denying the
requested writ of mandamus. Additionally, we decline to address ODM's conditional
assignment of error on cross-appeal as it is moot.
Judgment affirmed.
LUPER SCHUSTER, J., concurs.
BRUNNER, J., dissents.
No. 18AP-16 15
BRUNNER, J., dissenting.
{¶ 45} I respectfully dissent from the decision of the majority. The matter before us
presents an appeal and a cross-appeal on a question of law in an action for a writ of
mandamus. Appellants/cross-appellees, Peregrine Health Services of Columbus, LLC dba
Summit's Trace Healthcare Center and Peregrine Health Services of Cincinnati, LLC dba
Oak Pavilion Nursing Center (hereinafter collectively referred to as "Peregrine" and "they"
or "them"), appeal from a December 11, 2017 judgment of the Franklin County Court of
Common Pleas denying their petition for a writ of mandamus ordering appellee/cross-
appellant, Barbara Sears, Director of the Ohio Department of Medicaid (hereinafter
referred to as "ODM") to distribute critical access incentive payments to them for state fiscal
year 2017. The trial court entered judgment following a bench trial, having found Peregrine
not entitled to the special writ because they had not proved that ODM's interpretation of
R.C. 5165.23(A)(2), the statutory provision at issue, was unreasonable, arbitrary, or
unconscionable. For the reasons that follow, I would reverse the trial court's decision
denying the requested writ.
{¶ 46} The majority in this case denies for mootness ODM's conditional cross-
appeal from a November 1, 2017 decision of the Franklin County Court of Common Pleas
denying ODM's March 7, 2017 motion to dismiss Peregrine's complaint for failure to state
a claim on which relief may be granted pursuant to Civ.R. 12(B)(6). ODM's cross-appeal is
conditioned on this Court granting relief to Peregrine. I concur with denying ODM's cross-
appeal but for reasons based on its merits and not for mootness. For the reasons that
follow, in addition to denying ODM's cross-appeal, I would also affirm the trial court's
decision denying ODM's motion to dismiss the underlying mandamus action.
I. FACTS AND PROCEDURAL BACKGROUND
A. Overview
{¶ 47} While some of the facts stated in this dissenting opinion may be duplicative
of those stated by the majority, I restate them for the purposes of cogency of presentation
of how I view the law as applying here and based on my analysis of the record.
{¶ 48} This mandamus action arose out of Peregrine's claim that ODM had denied
them critical access incentive payments for which they were eligible under R.C.
5165.15(A)(5) and 5165.23 for state fiscal year 2017. Peregrine claims the denial was based
on ODM's incorrect and unreasonable interpretation of the term "occupancy rate" as
No. 18AP-16 16
described in R.C. 5165.23(A)(2) to determine whether a nursing facility qualifies for such
payments.
{¶ 49} A review of the critical access incentive payment that is the crux of the
underlying matter is helpful at this juncture. Critical access incentive payments are
reserved for nursing facilities that satisfy the criteria of R.C. 5165.23(A). To receive a critical
access incentive payment, a nursing facility must be located in an "empowerment zone" as
discussed under the "Internal Revenue Code of 1986," 26 U.S.C. 1391-92. R.C.
5165.23(A)(1). The parties agree Peregrine satisfies this criterion. Second, a nursing facility
must have an occupancy rate of at least 85 percent as of the last day of the calendar year
immediately preceding the state fiscal year. R.C. 5165.23(A)(2). This second criterion is
the disputed issue here, because the denominator for determining that percentage may be
larger or smaller, depending on whether licensed beds (all beds possible) or certified beds
(beds physically existent at a facility designated for use by Medicaid patients) is used.
Third, a nursing facility must have a Medicaid utilization rate of at least 65 percent as of the
last day of the calendar year immediately preceding the state fiscal year. R.C.
5165.23(A)(3). There is no dispute between the parties that Peregrine satisfies the third
criterion.
{¶ 50} ODM determines how much a Medicaid-funded nursing facility receives then
based on a "total per medicaid day payment rate." R.C. 5165.23(A); R.C. 5165.15. This
"total per medicaid day payment rate" is computed by determining the sum of six variables,
one of which is a critical access incentive payment for qualifying nursing facilities. R.C.
5165.15(A). If a nursing facility qualifies for a critical access incentive payment, then ODM
totals the facility's other variables under R.C. 5165.15(A) and increases the total by five
percent. R.C. 5165.23(B). The five percent increase constitutes the critical access incentive
payment.
{¶ 51} ODM's decision about whether a nursing facility qualifies for a critical access
incentive payment is subject to reconsideration when sought by the facility "on the basis of
possible error of the calculation rate." Ohio Adm.Code 5160-3-24. ODM then issues a
written reconsideration decision. ODM's reconsideration decision is not subject to any
administrative remedy under R.C. Chapter 119 or any other provision of the Revised Code,
resulting in this mandamus action being Peregrine's only legal remedy. Mandamus is an
No. 18AP-16 17
appropriate remedy where no statutory right of appeal is available to correct an abuse of
discretion by an administrative body. State ex rel. Cydrus v. Ohio Public Emps. Retirement
Sys., 127 Ohio St.3d 257, 2010-Ohio-5770, ¶ 12.
B. Facts
{¶ 52} Peregrine Health Services of Columbus, LCC operates Summit's Trace
Healthcare Center, while Peregrine Health Services of Cincinnati, LLC operates Oak
Pavilion Nursing Center. (Feb. 3, 2017 Petition at ¶ 1-2.) ODM is responsible for
determining and issuing critical access incentive payments to qualified nursing facilities
according to R.C. 5165.15 and 5165.23. On February 3, 2017, Peregrine filed a verified
petition for a writ of mandamus seeking a writ to compel ODM to distribute critical access
incentive payments to them under R.C. 5165.15(A)(5) and 5165.23 for state fiscal year 2017.
{¶ 53} The facts of the underlying matter are undisputed. The parties agree that the
sole issue is the meaning of the term "occupancy rate" as used in R.C. 5165.23(A)(2) to
calculate the critical access incentive payment under that statute. Peregrine argues that the
calculation of an "occupancy rate" for purposes of R.C. 5165.23(A)(2) is determined by
using the number of beds actually in use at the nursing facility that have been certified for
Medicaid care and reimbursement (hereinafter referred to as "certified beds"). ODM
argues the determination is based on the often greater number of beds a nursing facility is
licensed to have (hereinafter referred to as "licensed beds"), but that is not necessarily in
use.
{¶ 54} Peregrine claims that ODM "wrongfully and arbitrarily" denied them the
critical access incentive payments based on ODM's incorrect interpretation of the term
"occupancy rate." (Petition at ¶ 32, 34.) Peregrine attached in support of their petition the
affidavit of Jeffrey Heaphy, a Nursing Home Administrator ("NHA") Partner at Plant &
Moran, PLLC, who specializes in Medicaid and Medicare and the health care industry and
who prepared certain Medicaid Cost Reports for Peregrine.
{¶ 55} On March 7, 2017, ODM filed a motion to dismiss the complaint for failure to
state a claim on which relief may be granted pursuant to Civ.R. 12(B)(6). ODM argued its
interpretation of occupancy rate was not unreasonable, irrational, or inconsistent with the
statutory purpose and, consequently, that Peregrine had failed to state a claim for which
relief could be granted.
No. 18AP-16 18
{¶ 56} On April 4, 2017, Peregrine filed a memorandum in opposition to ODM's
motion to dismiss with an attached new affidavit of the same Jeffrey Heaphy, along with
supporting documents. On April 17, 2017, ODM filed a reply in support of its motion to
dismiss. On May 3, 2017, Peregrine requested leave to file a sur-reply, which was opposed
by ODM by memorandum filed the same day.
{¶ 57} By journal entry dated November 1, 2017, the trial court denied ODM's
motion to dismiss, denied Peregrine's motion for leave to file sur-reply, and set the matter
for supplemental briefing and hearing.
{¶ 58} On November 22, 2017, the trial court conducted a bench trial at which it
admitted the following documentary evidence: the verified petition for a writ of mandamus;
the affidavits of Jeffrey Heaphy that had been filed on February 3 and April 4, 2017; the
affidavits of Peregrine's counsel authenticating certain exhibits; the affidavit of Terry
Moore, section chief for ODM's long-term care, rate-setting, and managed care rate-setting
section; biographical information on witnesses Heaphy, Moore, and Roger Allan
Dickerson, ODM's deputy director of ODM's rate-setting and cost-setting section; and
certain other exhibits offered by the parties. The trial court also admitted and considered
the testimony of Heaphy, Moore, and Dickerson. The transcript of the hearing and the
admitted exhibits are part of the record of this appeal.
{¶ 59} On December 11, 2017, the trial court issued its decision denying the
requested writ. The trial court found that all three witnesses who testified at the hearing
were qualified as expert witnesses. Heaphy qualified "as an expert on the nursing home
industry, and specifically, on third-party payer reimbursement arrangements." (Dec. 11,
2017 Decision at 3.) Moore qualified as an expert on Medicaid-related matters such as rate
setting, managed care rate setting, developing regulations for the Ohio Administrative
Code, and working "to 'translate' Medicaid statutes into explanations the [ODM's] IT
personnel can understand in writing programs for accounting and other record keeping."
Id. at 4. The trial court stated in its decision that Moore "offered very credible testimony,"
and that she "demonstrated a solid understanding of the subtle issues involved in
calculations such as those challenged in this case." Id. Dickerson qualified as an expert
based on his 15 years of Medicaid experience. The trial court stated in its decision that
Dickerson "essentially confirmed Ms. Moore's explanation of how the relevant statute is
No. 18AP-16 19
used, that [ODM] has never used anything except 'licensed' beds in calculating the
occupancy rate of a facility for critical access payments, and that [ODM] is proceeding in a
way it deems both logical and consistent with the legislature's language and intent." Id. at
5.
{¶ 60} The trial court noted that the term "occupancy rate" is not defined in R.C.
Chapter 5165, and that "[t]he statute does not specifically address whether to use 'licensed'
or 'certified' beds to calculate critical access payments under 5165.23(A)(2)." (Decision at
5.) The trial court found R.C. 5165.23(A)(2) to be ambiguous. The trial court stated:
A nursing facility occupancy rate could be calculated using all
of its licensed beds, or using only Medicaid certified beds.
There are pro's [sic] and con's [sic] to each approach. * * *
Figuring out what approach is best for the public in conducting
critical access incentive payment calculations is, therefore, a
matter of judgment. The General Assembly did not settle that
issue with this statutory language. The Department charged
with implementation of the language is left to apply the
statutory concept in a sensible manner.
(Decision at 6.)
{¶ 61} The trial court found that it was appropriate to defer to ODM's interpretation
of "occupancy rate" for purposes of determining whether a nursing facility qualified for a
critical access incentive payment. The trial court found the evidence showed ODM "was
acting in a reasonable and good faith manner in implementing the modest legislative
guidance on computing an 'occupancy rate' pursuant to R.C. 5165.23(A)(2)." (Decision at
7.) Relying on the holding of In re Champaign Wind, L.L.C., 146 Ohio St.3d 489, 2016-
Ohio-1513, ¶ 36 ("when a statute does not prescribe a particular formula or methodology,
the appropriate administrative agency has broad discretion in deciding how to implement
its duties"), the trial court concluded that ODM "must be allowed" broad discretion in
deciding how to implement R.C. 5165.23(A)(2). (Decision at 7.)
{¶ 62} The trial court was not persuaded by Peregrine's argument that ODM had
changed its interpretation, previously using another formula, and that this was material to
its determination of this matter.
Principles of waiver or estoppel do not apply against the state
or its agencies. Silver Lining [Group EIC Morrow Co. v. Ohio
Dept. of Edn. Autism Scholarship Program, 10th Dist. No.
16AP-398, 2017-Ohio-7834], ¶ 54. Thus, the fact the [ODM]
No. 18AP-16 20
changed its interpretation of another formula – which the court
accepts was done in good faith based upon the review that their
original formula was mistaken – does nothing to demonstrate
that the consistent interpretation applied to R.C. 5165.23 is
unlawful.
(Decision at 7.)
{¶ 63} The trial court then concluded that Peregrine had not demonstrated
entitlement to a writ of mandamus:
"It is a fundamental tenet of administrative law that an agency's
interpretation of a statute that it has a duty to enforce will not
be overturned unless the interpretation is unreasonable." State
ex rel. Clark v. Great Lakes Constr. Co., 99 Ohio St.3d 320,
2003-Ohio-3802, ¶ 10 and cases cited. To prove an abuse of
discretion, the agency interpretation must be "unreasonable,
arbitrary, or unconscionable." That plainly is not true here.
[Peregrine] have not demonstrated they are entitled to a Writ.
(Decision at 8.)
{¶ 64} On January 5, 2018, Peregrine timely appealed from the December 11, 2017
judgment. On January 12, 2018, ODM conditionally cross-appealed from the trial court's
entry journalized on November 1, 2017 that denied ODM's motion to dismiss the
mandamus action.
II. LAW AND DISCUSSION – APPEAL
{¶ 65} In addition to the parties' disagreement on the standard of review this Court
should apply in determining whether the trial court erred in entering judgment in favor of
ODM,3 ODM argues that our standard of review is abuse of discretion. It also asserts that
this Court should defer to ODM's reasonable construction of its statutes and rules,
regardless of the standard of review applied in this matter:
Whatever standard of review is being applied, "[a]n agency's
interpretation of a statute that governs its actions should be
given deference so long as the interpretation is not irrational,
unreasonable or inconsistent with the statutory purpose." See,
e.g., Morning View Care Center-Fulton v. Ohio Dept. of
3 ODM cites this Court's holding in State ex rel. BDFM Co. v. Ohio Dept. of Transp., 10th Dist. No. 11AP-1094,
2013-Ohio-107, which supports the proposition that a trial court's decision in a mandamus action is generally
reviewed for abuse of discretion.
No. 18AP-16 21
Human Servs., 148 Ohio App.3d 518, 2002-Ohio-2878, ¶ 43
(10th Dist.).
(ODM Combined Brief at 12.)
{¶ 66} Peregrine argues for de novo review but acknowledges that, generally, the
standard of review is abuse of discretion. ODM has conceded, however, and we agree that
"[t]he question presented here is purely legal; there are no disputed material facts." See
ODM Combined Brief at 1. Peregrine relies on this Court's holding in State ex rel. V&V Risk
Servs. v. State Bur. of Workers' Comp., 10th Dist. No. 11AP-742, 2012-Ohio-3583 (where a
"stipulated record presents a question of law, appellate courts review a writ of mandamus
issued by a trial court de novo"), to support their position that de novo is the appropriate
standard of review here. Peregrine also relies on Cincinnati Entertainment Assocs., Ltd. v.
Bd. of Commrs., 141 Ohio App.3d 803 (1st Dist.2001) for de novo review. In Cincinnati
Entertainment Assocs., Ltd., the First District Court of Appeals applied de novo review to
a trial court's grant of writ of mandamus. "While the court recognized that in certain cases
the abuse of discretion standard was used for appellate review of writ of mandamus, such
review is 'limited to their particular circumstances.' [Cincinnati Entertainment Assocs.,
Ltd.] at 810. However, when faced with a stipulated record and contract interpretation,
such [statutory] construction is a matter of law, which is reviewed de novo." (Emphasis
sic.) (Peregrine Brief at 20.)
{¶ 67} Additionally, Peregrine cites State v. McKelvey, 151 Ohio App.3d 673 (7th
Dist.2003) in support of de novo review. In McKelvey, the Seventh District Court of
Appeals applied the de novo standard in a mandamus review where the parties had
stipulated to the underlying facts, and the issue on appeal was the trial court's
interpretation of a statute. Id. at 675. The McKelvey court held that, "[a]s the construction
of a statute is a question of law, not fact, a trial court's interpretation of a statute is not
entitled to deference on appeal. Thus, we review the trial court's decision to grant the writ
of mandamus de novo." (Internal citations omitted.) Id. Finally, Peregrine cites State ex
rel. Manley v. Walsh, 142 Ohio St.3d 384, 2014-Ohio-4563, in which the Supreme Court of
Ohio reviewed a denial of a writ of mandamus on a de novo standard notwithstanding the
general rule that the standard of review in a mandamus case is abuse of discretion.
{¶ 68} Having similarly conducted an independent review of the record and the law
regarding the standard of review in a case such as this, I agree with the majority that de
No. 18AP-16 22
novo review is appropriate. There are no material disputed facts and the only issue for
review is whether ODM's interpretation of R.C. 5165.23(A)(2) was proper and reasonable,
which is purely a question of law. "Statutory interpretation is a question of law subject to
de novo review." Silver Lining Group EIC Morrow Co. v. Ohio Dept. of Edn. Autism
Scholarship Program, 10th Dist. No. 16AP-398, 2017-Ohio-7834, ¶ 33.
{¶ 69} I would address Peregrine's assignments of error together, as they are so
closely related that discussing them individually would result in unnecessary repetition and
redundancy.
{¶ 70} Peregrine asserts the trial court abused its discretion4 by affording improper
deference to ODM's interpretation of R.C. 5165.23—an error of law—that resulted in its
finding that ODM's interpretation of R.C. 5165.23 was reasonable, all of which underlay
ODM's denial of the critical access incentive payments as being unreasonable, arbitrary,
and/or unconscionable. Peregrine contends that this led the trial court to conclude that
Peregrine was not entitled to a writ of mandamus because it had failed to demonstrate that
ODM had a duty to perform the act requested—the payment of critical access incentive
payments to Peregrine.
{¶ 71} The statute at issue, R.C. 5165.23(A), provides: "Each fiscal year, the
department of medicaid shall determine the critical access incentive payment for each
nursing facility that qualifies as a critical access nursing facility." Under Ohio Adm.Code
5160-3-24, Peregrine may request reconsideration from ODM of a prospective nursing
facility rate on the basis of possible error in the calculation of the rate. Id. This section
further provides that "ODM's decision at the conclusion of the rate reconsideration process
4 The modern edition of Black's Law Dictionary, defines abuse of discretion so as to fully take into account
the fact that an error of law constitutes an abuse of discretion. It states that an abuse of discretion is "[a]n
adjudicator's failure to exercise sound, reasonable, and legal decision-making," or "[a]n appellate court's
standard for reviewing a decision that is asserted to be grossly unsound, unreasonable, illegal, or unsupported
by the evidence." (Emphasis added.) Black's Law Dictionary 12 (10th Ed.2014). Moreover, courts that have
directly considered the matter have invariably concluded that a court does not have discretion to violate the
law. See State v. Boles, 187 Ohio App.3d 345, 2010-Ohio-278, ¶ 15-26 (2d Dist.) (discussing the varying
formulations of what constitutes abuse of discretion and concluding "[n]o court -- not a trial court, not an
appellate court, nor even a supreme court -- has the authority, within its discretion, to commit an error of
law"); see also, e.g., State v. Robinson, 10th Dist. No. 17AP-707, 2018-Ohio-1166, ¶ 7; State v. Moncrief, 10th
Dist. No. 13AP-391, 2013-Ohio-4571, ¶ 7. As Justice O'Donnell of the modern Supreme Court of Ohio has
opined, " '[a] court abuses its discretion when its ruling is founded on an error of law or a misapplication of
law to the facts.' " Independence v. Office of the Cuyahoga Cty. Executive, 142 Ohio St.3d 125, 2014-Ohio-
4650, ¶ 49 (O'Donnell, J., dissenting), quoting Doe v. Natl. Bd. of Med. Examiners, 199 F.3d 146, 154 (3d
Cir.1999).
No. 18AP-16 23
shall not be subject to any administrative proceedings under Chapter 119. or any other
provision of the Revised Code." Ohio Adm.Code 5160-3-24(B).
{¶ 72} Both Peregrine and ODM agree that Peregrine satisfied two of the three
criteria of R.C 5165.23 in order to receive incentive payments. The parties agree that
Peregrine facilities were both located in an empowerment zone in satisfaction of R.C.
5165.23(A)(1). The parties also agree that Peregrine met the Medicaid utilization rate of at
least 65 percent as set forth in R.C. 5165.23(A)(3). The parties do not dispute the data
submitted by Peregrine that established the number of licensed beds and the number of
certified beds. Thus, the sole issue presented to the trial court was whether the calculation
of the occupancy rate is determined by using the number of licensed beds, as argued by
ODM, or by using the number of certified beds, as argued by Peregrine.
{¶ 73} The term "occupancy rate" is not defined in R.C. 5165.23. Peregrine argues
it satisfied the requirement of R.C. 5165.23(A)(2) in having an occupancy rate of at least 85
percent for fiscal year 2017, and thereby being eligible for critical access incentive payments
provided for in R.C. 5165.23. Peregrine disputes how ODM calculated the critical access
payments for fiscal year 2017, arguing that ODM incorrectly based its calculation on the
number of licensed beds, rather than the lesser number of certified beds in Peregrine's
facilities. Peregrine contends that ODM's calculation ignores the plain language of R.C.
5165.23 and, therefore, is arbitrary and contrary to the intent of the General Assembly in
enacting R.C. 5165.23.
{¶ 74} Resolving this disputed issue requires this Court to interpret the relevant
statutory provisions, which is a question of law. This Court must determine whether ODM's
denial of the critical access incentive payments to Peregrine, based on its interpretation of
the term "occupancy rate" as used in R.C. 5165.23(A)(2), was unreasonable, arbitrary,
and/or unconscionable. For the reasons that follow, I would find that it was.
{¶ 75} I restate paragraphs 26 through 28 of the majority decision for the purpose
of creating clarity in understanding why I diverge from the majority in its application of the
law to the claims of the parties.
No. 18AP-16 24
{¶ 76} The parties agree that, in 2012,5 the Ohio General Assembly enacted critical
access incentive payments that could be awarded to nursing facilities located in highly
distressed urban and rural communities to encourage the nursing facilities to remain in
those communities, thereby keeping "vital and needed senior health services in place"
there. (Petition at ¶ 11-12; ODM Mot. to Dismiss at 1.) The parties likewise agree the critical
access incentive payments "were put in place to address the potential for a lack of access to
healthcare by both rural and inner-city residents, a high proportion of whom are poor and
chronically ill and—thus—more likely to be Medicaid recipients." (ODM Mot. to Dismiss at
1, citing Petition at ¶ 11-12.) The parties further agree that the critical access incentive
payments make it economically feasible for the nursing facilities to remain in their
communities, where they also help by providing significant local employment. Id.{¶ 77} R.C. 5165.15 establishes the total per Medicaid day payment rate, including
the critical access incentive payment, that ODM shall pay a nursing facility during a state
fiscal year. Calculation of the Medicaid day payment rate for fiscal year 2017 required ODM
to determine the sum of all the following in accordance with R.C. 5165.15(A):
(1) The per medicaid day payment rate for ancillary and
support costs determined for the nursing facility under
section 5165.16 of the Revised Code;
(2) The per medicaid day payment rate for capital costs
determined for the nursing facility under section 5165.17 of the
Revised Code;
(3) The per medicaid day payment rate for direct care costs
determined for the nursing facility under section 5165.19 of the
Revised Code;
(4) The per medicaid day payment rate for direct care costs
determined for the nursing facility under section 5165.19 of the
Revised Code;
(5) If the nursing facility qualifies as a critical access nursing
facility, the nursing facility's critical access incentive payment
paid under section 5165.23 of the Revised Code.
5The statute, previously codified as R.C. 5111.246 but now codified as R.C. 5165.23, became effective on
September 10, 2012.
No. 18AP-16 25
{¶ 78} In order for a nursing facility to qualify for the critical access incentive
payment provided for in R.C. 5165.15(A)(5), ODM must determine that the nursing facility
satisfies the requirements of R.C. 5165.23(A), which provided for state fiscal year 2017 as
follows:
(A) Each state fiscal year, the department of medicaid shall
determine the critical access incentive payment for each
nursing facility that qualifies as a critical access nursing facility.
To qualify as a critical access nursing facility for a state fiscal
year, a nursing facility must meet all of the following
requirements:
(1) The nursing facility must be located in an area that, on
December 31, 2011, was designated an empowerment zone
under the "Internal Revenue Code of 1986," section 1391, 26
U.S.C. 1391.
(2) The nursing facility must have an occupancy rate of at
least eighty-five per cent as of the last day of the calendar year
immediately preceding the state fiscal year.
(3) The nursing facility must have a medicaid utilization rate of
at least sixty-five per cent as of the last day of the calendar year
immediately preceding the state fiscal year.
(4) The nursing facility must have been awarded at least five
points for meeting accountability measures under section
5165.25 of the Revised Code for the fiscal year and at least one
of the five points must have been awarded for meeting the
accountability measures identified in divisions (C)(9), (10),
(11), (12), and (14) of section 5165.25 of the Revised Code.
(Emphasis added.) H.B. No. 483 as enacted by the 130th General Assembly, effective
Sept. 15, 2014.
{¶ 79} ODM is to determine the critical access incentive payment for each nursing
facility that qualifies for the payment in accordance with R.C. 5165.23. ODM issues on an
annual basis its fiscal year rate setting reports to each nursing facility in the State. ODM
must pay each qualified nursing facility the critical access incentive payment. R.C. 5165.15.
A nursing facility that disagrees with the rate calculated by ODM may request
reconsideration "of a prospective [nursing facility] rate on the basis of a possible error in
calculation of the rate." Ohio Adm.Code 5160-3-24(A). Once a nursing facility requests
reconsideration, ODM must respond in writing to the facility. Ohio Adm.Code 5160-3-
No. 18AP-16 26
24(A)(3). ODM's decision at the conclusion of the rate reconsideration process is not
subject to any administrative proceedings under R.C. Chapter 119 or any other provision of
the Revised Code. Ohio Adm.Code 5160-3-24(B).
{¶ 80} The trial court's decision discusses the relevant statutes and rules but appears
to wholly concede authority in this matter to ODM. The trial court states in its decision:
The complexity of the Medicaid reimbursement system found
in R.C. Chapter 5165 is difficult to overstate. The record reflects
that nearly a thousand nursing home facilities operate across
Ohio. They operate in empowerment zones, and in other vastly
different settings urban, suburban, and rural. [ODM] must
endeavor to stretch available funding while seeking to
encourage quality care in all those varied settings. Writing and
administering rules and formulas to capture the necessary
date, track patient utilization, encourage new efforts like
"critical access," and pay for it all in a timely fashion (while not
falling victim to fraud) cannot easily be accomplished. For that
reason, [ODM] is afforded substantial deference in how it
fulfills its duties so long as it appears to be acting reasonably
and in good faith.
The evidence shows [ODM] was acting in a reasonable and
good faith manner in implementing the modest legislative
guidance on computing an "occupancy rate" pursuant to R.C.
5165.23(A)(2). Administrative agencies have the authority to
make rules to fill gaps left, implicitly or explicitly, by legislature.
Silver Lining [Group EIC Morrow Co. v. Ohio Dept. of Edn.
Autism Scholarship Program, 10th Dist. No. 16AP-398, 2017-
Ohio-7834], ¶ 50 and cases cited. "[W]hen a statute does not
prescribe a particular formula or methodology, the appropriate
administrative agency has broad discretion in deciding how to
implement its duties. [citation omitted]." In re Champaign
Wind, L.L.C., 146 Ohio St.3d 489, 2016-Ohio-1513, ¶ 36.
[ODM] must be allowed to do so here.
Principles of waiver or estoppel do not apply against the state
or its agencies. Silver Lining, supra ¶ 54. Thus, the fact the
[ODM] changed its interpretation of another formula – which
the court accepts was done in good faith based upon the view
that their original formula was mistaken – does nothing to
demonstrate that the consistent interpretation applied to R.C.
5165.23 is unlawful.
"It is a fundamental tenet of administrative law that an agency's
interpretation of a statute that it has a duty to enforce will not
be overturned unless the interpretation is unreasonable. State
No. 18AP-16 27
ex rel. Clark v. Great Lakes Constr. Co., 99 Ohio St.3d 320,
2003-Ohio-3802, ¶ 10 and cases cited. To prove an abuse of
discretion, the agency interpretation must be "unreasonable,
arbitrary, or unconscionable." That plainly is not true here.
[Peregrine] have not demonstrated they are entitled to a Writ.
(Decision at 7-8.)
{¶ 81} Although it is appropriate in some instances for a trial court to afford
deference to an agency's interpretation of the statutes and rules applicable to its function,
such deference is not unfettered—an agency's interpretation and application of its rules
cannot be arbitrary, capricious, or otherwise contrary to law; nor can the interpretation and
application constitute an abuse of discretion. Ohio Academy of Nursing Homes, Inc. v.
Barry, 56 Ohio St.3d 120, 129 (1990). See also Guethlein v. Ohio State Liquor Control
Comm., 10th Dist. No. 05AP-888, 2006-Ohio-1525, ¶ 24; HCMC, Inc. v. Ohio Dept. of Job
& Family Servs., 179 Ohio App.3d 707, 2008-Ohio-6223, ¶ 25 (10th Dist.); Athens Cty. Bd.
of Commrs. v. Schregardus, 83 Ohio App.3d 868 (1oth Dist.1992). "A proposed
interpretation that is inconsistent with or frustrates the legislative intent is not a reasonable
one and does not create an ambiguity." State v. Erskine, 4th Dist. No. 14CA17, 2015-Ohio-
710, ¶ 26.
{¶ 82} Based on a de novo review of the record, I would find ODM's latest
interpretation of R.C. 5165.23(A)(2) to be arbitrary in that it changed with little to no
explanation with no underlying change of language in the law. The trial court's deference
to the agency was not in keeping with the role of the judiciary to review the agency's decision
according to a legal standard of review and by applying the law of statutory construction in
reviewing this appeal—ascertaining and giving effect to the legislature's intent in enacting
the statute, including its plain meaning. State v. Bundy, 4th Dist. No. 11CA818, 2012-Ohio-
3934, ¶ 46, quoting State v. Lowe, 112 Ohio St.3d 507, 2007-Ohio-606, ¶ 9. ODM asserts
that R.C. 5165.23(A)(2) is ambiguous because it does not define "occupancy rate," while
that term is defined in other statutes in R.C. Chapter 5165. ODM then engages in an in pari
materia analysis with some of those other statutes, some of which were enacted years before
R.C. 5165.23.
{¶ 83} I disagree that R.C. 5165.23(A)(2) is ambiguous. It is well-settled law in Ohio
that a term is not ambiguous merely because it is not defined. Nationwide Mut. Fire Ins.
Co. v. Guman Bros. Farm, 73 Ohio St.3d 107, 108 (1995). Nor is "occupancy rate"
No. 18AP-16 28
ambiguous as used here. The parties agree that occupancy occurs when a patient occupies
a bed. The term "rate" is a "proportional or relative value; the proportion by which quantity
or value is adjusted." Black's Law Dictionary, 1452 (10th Ed.2014). Consequently,
occupancy rate is the percentage to which a nursing facility's beds are occupied during a
certain period of time. The occupancy rate is determined by the number of actual beds
located in the nursing facility available for Medicaid patients (that is, certified beds) and
the number of patients occupying those beds (that is, inpatient days). ODM's current
methodology operates to determine an occupancy rate using the number of licenses the
nursing facility holds, regardless of the actual number of certified beds in the nursing
facility, resulting in distorted results that ultimately frustrate the purpose for which the
legislature enacted the critical access incentive payment.
{¶ 84} I compare the facts of the case before us with those this Court considered in
Eaglewood Care Ctr. v. State Certificate of Need Review Bd., 10th Dist. No. 91AP-357, 1992
Ohio App. LEXIS 1265, 1992 WL 55435 (Mar. 17, 1992). In Eaglewood, a nursing home
sought review of the State Certificate of Need Review Board's ("CONRB") determination
denying the nursing home's application for a certificate of need to construct an addition to
an existing nursing home facility. The CONRB based its denial on a combination formula,
which included "rest home beds, beds not in service, and beds not capable or permitted by
licensure or certification status to serve the residents." Id. at *11. The Eaglewood Court
rejected CONRB's approach, stating:
Although not expressly stated by the hearing examiner, it
appears that the findings were predicated upon an assumption
that there are excess beds unless every bed in the county is
occupied. Under such an assumption, there will always be an
excess of beds in every county, since as a practical matter, it is
completely unrealistic to have 100 percent occupancy at any
time in all the nursing homes. This is why the only evidence as
to full occupancy indicates that full occupancy commences at
95 percent. To this extent, the hearing examiner's findings
adopted by CONRB are not supported by reliable, probative
and substantial evidence and are contrary to law.
The findings are predicated upon erroneous assumptions.
First, restricted beds, such as those at the Masonic Home,
should not be included. Inclusion of such beds in this case
greatly distorts the occupancy rate in Clark County, both
because of the substantial in-migration, and because of the
No. 18AP-16 29
great number of unoccupied beds. Secondly, there was an
assumption by the hearing examiner that all authorized beds
necessarily are included. The law does not contemplate that
some facilities can place numerous beds in a "bed bank" to be
used at some undetermined future time if needed. Rather, even
though "authorized" by its CON, beds which are not in
existence and will not be in existence within the reasonable,
foreseeable future, should not be counted in determining
whether to grant a CON application.
The purpose of the CON determination is to serve the public in
order to provide necessary facilities for the persons who need
the service of the facility seeking the CON, not to benefit
operators of other facilities who have no desire or intention of
providing such service within the foreseeable future. The fact
that the facility in question has a 99.11 percent occupancy rate
as found by the hearing examiner, indicates that there is some
need with respect to that facility. Whether 30 additional beds
are needed is not a question that we can properly determine,
such issue being for the CONRB. However, such determination
must be predicated upon evidence directly pertinent to the
need, and cannot be predicated solely upon the application of
the so-called bed-need formula, as we indicated above.
Id. at *18 - 20. The Eaglewood court recognized that the policy in place "is to meet the
needs of patients, not mathematical formulas." Id. at *24. This Court subsequently
recognized that, just because beds are authorized (that is, licensed beds), it does not mean
that they should be counted in determining whether to grant a certificate of need ("CON")
application. Summit Villa Care Ctr., Inc., v. Ohio Dept. of Health, 81 Ohio App.3d 761, 767
(10th Dist.1992).
{¶ 85} I find the case before us similar to those CON cases, albeit the formulas may
be different. The public policies for each exist to best serve Ohio's aging population,
providing Ohioans equal access to quality care. Here, ODM's calculation is based on the
presumption that occupancy for purposes of R.C. 5165.23(A)(2) includes all beds that
potentially "could have been made available for occupancy." (Emphasis sic.) (ODM
Combined Brief at 3.) The statute, however, does not indicate that the occupancy rate is
based on a number of potential beds (licensed beds). At trial, ODM acknowledged that "if
there are banked beds; i.e., beds that are out of service, they are automatically removed
from capacity because they're not available for use by residents." (Nov. 22, 2017 Tr. at 73.)
No. 18AP-16 30
{¶ 86} Courts have " 'no authority under any rule of statutory construction to add to,
enlarge, supply, expand, extend or improve the provisions of the statute to meet a situation
not provided for.' " Storer Communications, Inc. v. Limbach, 37 Ohio St.3d 193, 194
(1988), quoting State ex rel. Foster v. Evatt, 144 Ohio St. 65 (1944), paragraph eight of the
syllabus. By adopting ODM's interpretation of R.C. 5165.23(A)(2), the trial court erred in
expanding and enlarging the definition of occupancy rate, contrary to the legislature's
intent. See also State ex rel. Gen. Elec. Supply Co. v. Jordano Elec. Co., Inc., 53 Ohio St.3d
66, 71 (1990), where the Supreme Court declined "to read into the statute an intent that the
General Assembly could easily have made explicit had it chosen to do so."
{¶ 87} Similarly, if the legislature had intended R.C. 5165.23(A)(2) to encompass
potential occupancy rather actual occupancy, it could have and would have said so. Id. The
legislature enacted R.C. 5165.16 and 5165.17 more than a decade before enacting R.C.
5165.23. If the legislature had intended the term "occupancy rate" as used in R.C.
5165.23(A)(2) to have the same meaning as the earlier enacted statutes, it could have done
so by including the same language or by referencing the other statutes in the newer statute.
I am also persuaded that adopting ODM's interpretation of R.C. 5165.23(A)(2) would lead
to unreasonable results and have consequences that are contrary to the legislature's stated
purposes for the critical access incentive payment: to ensure that inner-city and rural
communities have access to quality health care by providing incentives that will allow
nursing facilities to continue operating in those communities. Just as in Eaglewood, the
needs of the inner-city and rural populations must be considered; the purpose of the critical
care incentive payment determination is to serve the public, and such determination cannot
be predicated solely on the application of ODM's arbitrary and unreasonable interpretation
of R.C. 5165.23(A)(2).
{¶ 88} Based on the foregoing reasons, I find that ODM's interpretation of
occupancy rate under R.C. 5165.23(A)(2) that resulted in denying critical access incentive
payments to Peregrine for state fiscal year 2017 was unreasonable and contrary to law. I
would find, therefore, that the trial court erred in deferring to ODM's interpretation and
denying Peregrine the writ of mandamus and would sustain Peregrine's three assignments
of error.
No. 18AP-16 31
III. LAW AND DISCUSSION - ODM'S CONDITIONAL CROSS-APPEAL
{¶ 89} Since the majority decided Peregrine's appeal differently, it mooted ODM's
cross-appeal. On substantive grounds, I would deny it. We review de novo a trial court's
disposition of a Civ.R. 12(B)(6) motion to dismiss for failure to state a claim on which relief
can be granted. Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, ¶ 5;
Adams v. Margarum, 10th Dist. No. 16AP-515, 2017-Ohio-2741; Rooney v. Ohio State
Hwy. Patrol, 10th Dist. No. 16AP-204, 2017-Ohio-1123; Stewart v. Fifth Third Bank of
Columbus, Inc., 10th Dist. No. 00AP-258, 2001 Ohio App. LEXIS 197, 2001 WL 58727(Jan. 25, 2001). "A motion to dismiss for failure to state a claim upon which relief can be
granted is procedural and tests the sufficiency of the complaint." State ex rel. Hanson v.
Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548 (1992); Powell v. Vorys, Sater,
Seymour and Pease, 131 Ohio App.3d 681, 684 (10th Dist.1998). In considering a Civ.R.
12(B)(6) motion to dismiss, a trial court may not rely on allegations or evidence outside the
complaint. State ex rel. Fuqua v. Alexander, 79 Ohio St.3d 206, 207 (1997). Rather, the
trial court must limit its consideration to the four corners of the complaint and may dismiss
the case only if it appears beyond a doubt that the plaintiff can prove no set of facts entitling
the plaintiff to recover. O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d
242 (1975), syllabus; Ritchie v. Ohio Adult Parole Auth., 10th Dist. No. 05AP-1019, 2006-
Ohio-1210, ¶ 16, citing Singleton v. Adjutant Gen. of Ohio, 10th Dist. No. 02AP-971, 2003-
Ohio-1838, ¶ 18. In such cases, a trial court must presume that all factual allegations in the
complaint are true and draw all reasonable inferences in favor of the nonmoving party.
Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192 (1998). This Court need not, however,
accept as true any unsupported or conclusory legal propositions advanced in the complaint.
Margarum at ¶ 12, citing Rooney at ¶ 14.
{¶ 90} ODM argues that the trial court improperly denied its Civ.R. 12(B)(6) motion
to dismiss Peregrine's petition for a writ of mandamus for failure to state a claim on which
relief could be granted. ODM posits that Peregrine is barred from stating a valid claim for
writs of mandamus compelling ODM to pay Peregrine critical access incentive payments
because Peregrine did not meet the statutory criteria for such payments, based on ODM's
interpretation of the term "occupancy rate" as it is used in R.C. 5165.23. (ODM's Combined
Brief in passim.)
No. 18AP-16 32
{¶ 91} The trial court stated in its ruling denying ODM's motion to dismiss that
attached to the verified original petition for a writ of mandamus were six exhibits, including
"the extensive affidavit of Jeffrey Heaphy," whom the trial court ruled is "an expert in the
nursing home industry." (Nov. 1, 2017 Journal Entry at 2-3.) The trial court found that the
original verification of the petition by the nursing home facilities' president and the Heaphy
affidavit appeared to add support to Peregrine's allegations. The trial court determined the
petition stated the basis on which Peregrine alleged a "clear right to the payments for both
of the denied claims and a clear legal duty upon ODM to make those payments, should this
court find Peregrine's arguments valid." Id. at 3. The trial court concluded, therefore, that
"[l]ooking solely at the verified petition and Heaphy affidavit, it would be inappropriate to
dismiss [Peregrine's] claims at this preliminary stage." Id.
{¶ 92} Having independently reviewed the record, I would find the trial court's
interpretation of the law and its application to ODM's Civ.R. 12(B)(6) motion to be sound.
Accordingly, I would find that the common pleas court did not err in denying ODM's Civ.R.
12(B)(6) motion to dismiss, and ODM's assignment of error on cross-appeal should be
overruled.
IV. CONCLUSION
{¶ 93} Based on the foregoing, I would sustain Peregrine's assignments of error on
appeal, reversing the judgment of the Franklin County Court of Common Pleas denying the
requested writ of mandamus and thereby grant the writ of mandamus ordering ODM to
distribute critical access incentive payments to Peregrine for state fiscal year 2017,
consistent with this dissent.
{¶ 94} Additionally, I would overrule ODM's assignment of error on cross-appeal,
thereby affirming the decision of the Franklin County Court of Common Pleas denying
ODM's March 7, 2017 motion to dismiss Peregrine's complaint for failure to state a claim
on which relief may be granted pursuant to Civ.R. 12(B)(6) and deny ODM's cross-appeal.
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