OPINION ENTERED: January 16, 2009
CLAIM NO. 08-98984
KENTUCKY LEAGUE OF CITIES PETITIONER
VS. APPEAL FROM HON. RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE
UNIVERSITY OF KENTUCKY HOSPITAL
(JOE TURNER)
and HON. RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE RESPONDENTS
AND
CLAIM NO. 07-90462
KENTUCKY LEAGUE OF CITIES PETITIONER
VS.
UNIVERSITY OF KENTUCKY HOSPITAL
(DARIN SPENCE)
and HON. RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE RESPONDENTS
AND
CLAIM NO. 06-81301
KENTUCKY LEAGUE OF CITIES PETITIONER
VS.
UNIVERSITY OF KENTUCKY HOSPITAL
(ALAN FARMER)
and HON. RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE RESPONDENTS
AFFIRMING
* * * * * *
BEFORE: GARDNER, Chairman, COWDEN and STIVERS, Members.
GARDNER, Chairman. The Kentucky League of Cities (“League of Cities”) seeks review of decisions rendered August 20, 2008 by Hon. Richard M. Joiner, Administrative Law Judge (“ALJ”), in three consolidated medical fee disputes challenging the University of Kentucky Hospital’s (“the hospital”) entitlement to reimbursement using the cost-to-charge ratio under 803 KAR 25:091 Section 3 for surgeries involving implants undergone by Joe Turner (“Turner”) in Claim No. 08-98984, Darin Spence (“Spence”) in Claim No. 07-90462, and Alan Farmer (“Farmer”) in Claim No. 06-81301. The League of Cities also appeals from separate orders issued September 18, 2008, denying its petitions for reconsideration in all three claims.
Effective July 1, 2008, 803 KAR 25:091E was implemented by emergency declaration of the Commissioner of the Department of Workers’ Claims (“the Commissioner”) excepting surgical “implants” from previously established cost-to-charge ratio methods for reimbursement to hospitals for the costs of services or supplies furnished to injured employees. The regulatory amendment notwithstanding, the ALJ, in deciding the above medical fee disputes held the version of 803 KAR 25:091 Section 3 in effect at the time of the contested surgeries was controlling.
On appeal, the League of Cities raises three issues. First, it maintains that because 803 KAR 25:091 prior to July 1, 2008 was silent as to implants, reimbursement for such items was intended, as a matter of law, to be controlled by the express language of KRS 342.020(1), which provides that “in no event shall a medical fee exceed the limitations of an adopted medical fee schedule or other limitations contained in KRS 342.035, whichever is lower,” and KRS 342.035(1), which directs that “all fees, charges, and reimbursements under KRS 342.020 . . . be fair, current, and reasonable.” In making this argument, the League of Cities contends that implants are unique in nature due to their excessive pricing and, as such, do not qualify as the type of services or supplies furnished by a hospital designated to be presided over by the former version of 803 KAR 25:091. The League of Cities argues that to rule otherwise would condone disproportionate “markups” of such items, allowing hospitals to charge as much as 225 percent above normal invoice cost.
The League of Cities next argues the Commissioner, in promulgating an emergency regulation specifically implemented to overcome excessive billing by hospitals for implants, expressly recognized that “immediate clarification” was required concerning such charges and, therefore, intended 803 KAR 25:091E to be remedial in its application affecting “all current and pending claims.”
Finally, the League of Cities contends that contrary to the determination by the ALJ, the express language of 803 KAR 25:091E does not prohibit retroactive application of the emergency changes to the regulation “to effectuate the overall purpose of both the prior and amended version.” We affirm.
On July 6, 2007, Turner underwent a C3-4 anterior cervical discectomy and fusion with bone grafting and implantation of slim lock anterior instrumentation. Tonya Peters (“Peters”), the assistant director of finance for the hospital, testified the total charges incurred for Turner’s surgery were $18,098.02. Peters stated that under the Kentucky Workers’ Compensation Medical Fee Schedule promulgated by the Commissioner, the hospital was entitled to reimbursement for Turner’s treatment at the rate of 56.0142 percent of the total amount charged, equaling $10,137.46. She testified the League of Cities had paid $8,914.68, leaving a balance due of $1,222.02. Peters stated the underpayment related to a bone graft and three slim locks (screws and plates) implanted at the time of Turner’s operation. According to Peters, the League of Cities paid for those items “at cost plus 10 percent versus the fee schedule.”
On March 30, 2007, Spence underwent an arthroscopic repair of a type 2 superior labrum anterior posterior lesion of the left shoulder, utilizing the implantation of a surgical screw. Peters testified the total charges incurred for Spence’s surgery were $7,305.88. Peters stated that under the medical fee schedule, the hospital was entitled to reimbursement for Spence’s treatment at the rate of 60.6653 percent of the total amount charged, equaling $4,432.13. She testified the League of Cities had paid $4,111.61, leaving a balance due of $320.52. Peters stated the underpayment was in relation to a screw implanted at the time of the operation. According to Peters, the League of Cities paid for that item at cost plus ten percent, in contravention of the medical fee schedule.
On February 6, 2006, Farmer underwent a trans-foraminal lumbar interbody fusion at L5-S1 with the implantation of instrumentation. Peters testified the total charges incurred for Farmer’s surgery were $36,565.17. Peters stated that under the medical fee schedule, the hospital was entitled to reimbursement for Farmer’s treatment at the rate of 60.6653 percent of the total amount charged, equaling $22,182.37. She testified the League of Cities had paid $17,077.09, leaving an unpaid balance of $5,106.99. Peters stated the underpayment was solely in relation to a concord, rod, guide-wire and screws implanted at the time of the operation. According to Peters, the League of Cities paid for those items based strictly on the “manufacture’s invoice” in contravention of the fee schedule.
At the time of each of the subject surgeries, 803 KAR 25:091 did not differentiate between the cost of implants and other services or supplies furnished by a hospital to an injured employee. With reference to the calculation of a hospital’s base to adjusted cost-to-charge ratio and right to reimbursement under the medical fee schedule, Section 3 of 803 KAR 25:091 provided as follows:
(1) A hospital’s base cost-to-charge ratio shall be based on the latest HCFA-2552 which has been supplied to the Cabinet for Health Services, Department of Medicaid Services, pursuant to 907 KAR 1:376 and 907 KAR 1:013 on file as of October 31 of each calendar year. The base cost-to-charge ratio shall be determined by dividing the net expenses for allocation as reflected on Worksheet A, Column 7, Line 95, plus the costs of hospital-based physicians and nonphysician anesthetists reflected on lines 12, 13, and 35 of Worksheet A-8, by the total patient revenues as reflected on Worksheet G-2 of the HCFA-2552.
(2) The base cost-to-charge ratio shall be further modified to allow for a return to equity by the addition of twelve (12) percentile.
(3) A hospital’s adjusted cost-to-charge ratio shall not exceed eighty-five (85) percentile, including the twelve (12) percentile addition, except for a hospital that services seventy (70) percentile or more patients covered and reimbursed by Medicaid or Medicare as reflected in the records of the Cabinet for Health Services, Department of Medicaid Services. The adjusted cost-to-charge ratio for a hospital that services seventy (70) percentile or more patients covered and reimbursed by Medicaid or Medicare shall not exceed ninety-seven (97) percentile.
(4) The reimbursement to a hospital for services or supplies furnished to an employee which are compensable under KRS 342.020 shall be calculated by multiplying the hospital’s total allowable charges by its adjusted cost-to-charge ratio.
By emergency declaration effective July 1, 2008, the Commissioner promulgated 803 KAR 25:091E. As a consequence, Section 3 of that administrative regulation was amended as follows:
(1)(a) A hospital’s base cost-to-charge ratio shall be based on the latest HCFA-2552 which has been supplied to the Cabinet for Health Services, Department of Medicaid Services, pursuant to 907 KAR 1:376 and 907 KAR 1:013 on file as of October 31 of each calendar year;
(b) The base cost-to-charge ratio shall be determined by dividing the net expenses for allocation as reflected on Worksheet A, Column 7, Line 95, plus the costs of hospital-based physicians and nonphysician anesthetists reflected on lines 12, 13, and 35 of Worksheet A-8, by the total patient revenues as reflected on Worksheet G-2 of the HCFA-2552;
(c) The base cost-to-charge ratio shall be further modified to allow for a return to equity by the addition of twelve (12) percentile; and
(d)1. A hospital’s adjusted cost-to-charge ratio shall not exceed eighty-five (85) percentile, including the twelve (12) percentile addition, except for a hospital that services seventy (70) percentile or more patients covered and reimbursed by Medicaid or Medicare as reflected in the records of the Cabinet for Health and Family Services, Department of Medicaid Services.
2. The adjusted
cost-to-charge ratio for a hospital that services seventy (70)
percentile or more patients covered and reimbursed by Medicaid or
Medicare shall not exceed ninety-seven (97) percentile.
(2)(a)
The reimbursement to a hospital for services or supplies furnished to
an employee which are compensable under KRS 342.020 shall be
calculated by multiplying the hospital’s total allowable
charges by its adjusted cost-to-charge ratio;
(b) Except for durable medical equipment (DME) and implants which shall be reimbursed at invoice plus twenty (20) percent or manufactured suggested invoice plus twenty (20) percent, whichever is less. (Emphasis added.)
The revised emergency regulation specifically defined “implant” as “an object or material inserted or grafted into the body for prosthetic, therapeutic, diagnostic, or experimental purposes.” See 803 KAR 25:091E Section 1(4). As did its predecessor, however, Section 2 of 803 KAR 25:091E expressly provided:
This administrative regulation shall apply to all workers’ compensation patient hospital fees for each hospital for each compensable service or supply provided on or after the effective date of this administrative regulation.
In resolving the merits of the three medical fee disputes filed by the League of Cities, the ALJ determined Section 3 of 803 KAR 25:091 in effect prior to July 1, 2008, rather than 803 KAR 25:091E as amended, was controlling. In identical rulings in all three disputes, the ALJ concluded the language of both 803 KAR 25:091 and 803 KAR 25:091E was plain and unambiguous. The ALJ further determined that both regulations satisfied the statutory obligation of the Commissioner to establish a schedule of fees that was “fair, current, and reasonable for similar treatment of injured persons in the same community for like services, where treatment is paid for by general health insurers limiting such charges.” The ALJ noted that the cost-to-charge ratio under 803 KAR 25:091 was “not calculated on each individual item or service but on the whole array of services and charges provided by the individual hospital.” The ALJ further noted that in accordance with 803 KAR 25:091, the Commissioner’s responsibility to revise the fee schedule for hospital charges on an annual basis was fulfilled. Because the pre-July 1, 2008 version of 803 KAR 25:091 was in conformity with statutory mandates, the ALJ reasoned the language of the regulation was legally binding at the time each procedure was performed and, as such, he was not vested with the authority to declare that regulation invalid, but rather was obligated “to follow” its dictates.
In addition, the ALJ noted that 803 KAR 25:091E Section 2, by its express language, was intended “to apply to all workers compensation patient hospital fees for each hospital for each compensable service or supply provided on or after the effective date of the administrative regulation.” The ALJ concluded the articulated time constraints imposed by 803 KAR 25:091E Section 2 concerning application of the emergency amendments could not be suspended merely on the basis that “implants are high ticket items.”
In line with the above rationale, the ALJ ordered the League of Cities to reimburse the hospital the total amounts attested to by Peters using the appropriate cost-to-charge ratio for each of the three contested procedures in accordance with the 803 KAR 25:091 as that regulation existed prior to July 1, 2008.
We begin by noting that as a general rule, a regulation is valid unless it exceeds statutory authority or, in some way, is repugnant to the statutory scheme. See KRS 13A.140; Revenue Cabinet v. Joy Technologies, Inc., 838 S.W.2d 406, 409 (Ky.App. 1992). It is also well established that a duly promulgated regulation has the force and effect of a statute. Aubrey v. Office of the Attorney General, 994 S.W.2d 516 (Ky.App. 1998).
Contrary to the first argument put forth by the League of Cities, upon review of the pre-July 1, 2008 version of 803 KAR 25:091, we are convinced that nothing in that regulation exceeds statutory authority or is repugnant to the statutory scheme established under KRS 342.020 and KRS 342.035. Moreover, we disagree that implants were not intended to be included under 803 KAR 25:091 as “services or supplies furnished” by a hospital at the time that regulation was promulgated and became effective on February 10, 1997. The preamble to 803 KAR 25:091 pertaining to the necessity function and conformity of that regulation to the statutory scheme as signified by the Commissioner plainly states:
KRS 342.035 requires the Commissioner of the Department of Workers’ Claims to promulgate administrative regulations to adopt a medical fee schedule for fees, charges and reimbursements under KRS 342.020. KRS 342.020 requires the employer to pay for hospital treatment, including nursing, medical, and surgical supplies and appliances. This administrative regulation regulates hospital fees for services and supplies provided to workers’ compensation patients pursuant to KRS 342.020.
It is evident given the above language, much of which is taken verbatim from KRS 342.020(1), that 803 KAR 25:091 was intended to regulate all charges by hospitals incurred in the course of treatment of injured employees, including surgical supplies. In our opinion, it is beyond cavil that surgical implants fit that criterion. What is more, neither KRS 342.020 nor 803 KAR 25:091 distinguish the compensability of such services or supplies on the basis of pricing, provided reimbursement for such items are within the appropriate limitations imposed by the medical fee schedule in accordance with KRS 342.035. Whether the amount of reimbursement for individual supplies, including implants, furnished by hospitals qualify as “fair, current, and reasonable” as mandated by KRS 342.035 is a determination vested solely within the discretion of the Commissioner, subject to publication by the Legislative Research Commission in the “The Administrative Register” and public hearings, and review by the Administrative Regulation Review Subcommittee of the General Assembly, the Governor and, ultimately, by our courts of justice. See KRS 13A.030; KRS 13A.050; KRS 13A.080; KRS 13A.140; KRS 13A.270; KRS 13A.290; KRS 13A.330; KRS 13A.350; KRS 342.035(1); and KRS 342.260(1). Neither the ALJ nor this Board, as an administrative tribunal, has the authority to invalidate a regulation duly promulgated by the Commissioner. See KRS 13A.140. So long as a contested hospital expense is work-related and medically reasonable and necessary for the cure and relief of an employee’s injuries, and in conformity with the medical fee schedule adopted by the Commissioner, it must be found compensable to the extent the effective medical fee schedule allows, irrespective of the scheme for calculating reimbursement of charges promulgated by the Commissioner that is found to be controlling. See KRS 13A.120; KRS 13A.140; National Pizza Company v. Curry, 802 S.W. 2d 949 (Ky. App. 1991).
That having been said, we concur with the ALJ’s holding that 803 KAR 25:091 not 803 KAR 25:091E is the controlling authority with regard to the proper method for calculating the hospital’s reimbursement relative to the various implants at issue. We further agree that 803 KAR 25:091E was not intended by the promulgating authority to be retroactive, nor is that emergency regulation subject to remedial application.
Nothing contained within the language of KRS 342.020 and KRS 342.035, or for that matter KRS 342.260, specifically denotes amendments to regulations promulgated by the Commissioner relative to the medical fee schedule as either retroactive or remedial in effect. All three statutes have fundamentally remained unaltered by the legislature since 1996. As a general rule, no statute shall be construed to be retroactive, unless expressly so declared. See KRS 446.080(3). The courts have consistently upheld this principal, proclaiming there to be a strong presumption that statutes operate prospectively, and retroactive application of statutes will be approved only if it is absolutely certain the legislature intended such a result. Commonwealth of Kentucky Department of Agriculture v. Vinson, 30 S.W.3d 162, 168 (Ky. 2000).
Regulations, like statutes, are ordinarily presumed not to have retroactive effect. United Sign, Ltd. v. Com., 44 S.W.3d 794 (Ky.App. 2000). Nevertheless a promulgating authority, if it so elects, may through express language, designate the application of a regulation to be retroactive. For example, in New Directions Housing Authority v. Walker, 149 S.W.3d 354, 356 (Ky. 2004), a workers’ compensation claim, the court acknowledged that amendments to 803 KAR 25:010 implemented by way of an emergency regulation were expressly declared within the body of the regulation to take effect three months prior to their promulgation by the Commissioner. Accordingly, the Commissioner of the Office of Workers’ Claims knows how to make a regulation retroactive when and if he intends to do so.
By the same token, a regulation is not automatically retroactive or remedial in its effect simply because it is brought into operation by way of an emergency clause. Such a clause contained within a regulation merely means the regulatory provisions become effective prospectively for a period of 180 days immediately upon the filing of the regulation by the Commissioner with the Legislative Research Commission, rather than later when and if an “ordinary administrative regulation” addressing the same subject matter is adopted by the Department. See KRS 13A.010; KRS 13A.170; KRS 13A.190.
In this instance, as pointed out by the ALJ, 803 KAR 25:091E is expressly self-limiting with reference to its effective date. The fact that 803 KAR 25:091 contained similar self-limiting language is of no consequence. 803 KAR 25:091E was adopted on an emergency basis effective July 1, 2008. The emergency provision expressly provides under Section 2 that its substantive effect “shall” only “apply to all workers’ compensation patient hospital fees for each hospital for each compensable service or supply,” including implants, “provided on or after the effective date of this administrative regulation.” (Emphasis added.) In view of that language, the ALJ was correct in ruling 803 KAR 25:091E was not intended by the Commissioner to be applied retroactively, nor can it be concluded, based on that same language, that the emergency regulation has any remedial effect. It is undisputed that each of the surgical procedures at issue involving the use of surgical implants occurred in either 2006 or 2007, well before July 1, 2008. Even were we to agree with the policy arguments underscoring the critical need for remedial application of 803 KAR 25:091E put forth by the League of Cities, as a matter of law, our hands are tied. Regulations cannot be construed to mean what the Commissioner may have intended but did not adequately express within the confines of the provision. See Austin v. Owsley County Health Care Center, Inc., No. 86-CA-3023-MR, 1988 WL 331660 (Ky.App. 1988). Consequently, we find no error.
Accordingly, the decisions rendered August 20, 2008 by Hon. Richard M. Joiner, Administrative Law Judge, are hereby AFFIRMED.
ALL CONCUR.
COUNSEL FOR PETITIONER:
HON JEFFREY D DAMRON
PO BOX 351
PIKEVILLE KY 41502
COUNSEL FOR RESPONDENT
UNIVERSITY OF KENTUCKY HOSPITAL:
HON JOHN OAKLEY
167 W MAIN ST STE 404
LEXINGTON KY 40507
RESPONDENTS:
MR ALAN FARMER
2008 WEST CHESTER AVE
MIDDLESBORO KY 40965
MR DARIN SPENCE
ROUTE 1 BOX 295C
TOLLESBORO KY 41189
MR JOE TURNER
667 RIDGEVIEW WAY
HAZARD KY 41701
ADMINISTRATIVE LAW JUDGE:
HON RICHARD JOINER
145 EAST CENTER ST
MADISONVILLE KY 42431
