2005-522, BEL AIR ASSOCIATES v. NH DEPARTMENT OF HEALTH AND HUMAN SERVICES

to close one of its two buildings. In order to replace the capacity lost due to nursing home in Goffstown. In the mid-1990s, the State ordered the petitioner

petitioner is a New Hampshire partnership that operates a State-licensed The petitioner’s amended complaint alleges the following facts. The

its complaint after the dismissal. We affirm in part and reverse in part. Services (DHHS), and the second denying the petitioner leave to further amend the respondent, the New Hampshire Department of Health and Human Superior Court (McGuire, J.), the first granting the motion to dismiss filed by DUGGAN, J. The petitioner, Bel Air Associates, appeals two orders of the

and Ms. Lehmann orally), for the respondent. attorney general, and Laura Lombardi, assistant attorney general, on the brief, Kelly A. Ayotte, attorney general (Suzan M. Lehmann, senior assistant

brief and orally), for the petitioner. to press. Errors may be reported by E-mail at the following address: Devine, Millimet & Branch, P.A., of Manchester (Thomas Quarles on the

editorial errors in order that corrections may be made before the opinion goes No. 2005-522 Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Merrimack Readers are requested to notify the Reporter, Supreme Court of New ___________________________

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

Department [of Health and Human Services]. Chapter IV, and other applicable official issuances of the [Federal] the specific requirements of title XIX, the regulations in [4 p. 2 2 C.F.R.] and giving assurance that it will be administered in conformity with

costs, including certain capital costs. See N.H. Admin. Rules, He-W 593.0 p. 2 2 Medicaid-eligible persons. Reimbursement is based upon certain allowable DHHS establishes rates of reimbursement for providers of services to

4.19-D”) (eff. July 19, 1977). Social Security Act,” Off. Leg. Serv. Div. Admin. Proc. Doc. #983 (“Attachment Reasonable Cost-Related Basis for Long-Term Facilities Under Title XIX of the rulemaking in the past. the agency describing the nature and scope of its Medicaid program See “Methods and Standards for Reimbursement on a although it has submitted the relevant provisions of the State plan to RSA chapter 541-A, the New Hampshire Administrative Procedures Act (APA), currently put the State plan through the State rulemaking process outlined in contents of the State plan. See 4 p. 2 2 U.S.C. § 1396a(a) (2000). DHHS does not 42 C.F.R. § 430.10 (2005). Title XIX provides detailed requirements for the

Security Act. medical costs, began in 1965 with the enactment of Title XIX of the Social funding of medical care for individuals who cannot afford to pay their own

The State plan is a comprehensive written statement submitted by

§ 1396 ( p. 2 2000). receive approval for their “State plans for medical assistance.” See 42 U.S.C. In order to be eligible to participate in Medicaid, States must submit and

( p. 2 2006). Arkansas Dept. of Health and Human Serv. v. Ahlborn, 126 S. Ct. 1752, 1758

information, and administering the program. Hampshire. The Medicaid program, which provides joint federal and state making eligibility determinations, collecting and maintaining costs and complies with certain statutory requirements for patient care, and, in return, the State pays its portion of the pays between 50% and 83% of the costs the State incurs for do. The program is a cooperative one; the Federal Government States are not required to participate in Medicaid, but all of them

430.0 ( p. 2 2005).

See Pub. L. No. 89-97, § 1 p. 2 21(a), 79 Stat. 343 (1965); 42 C.F.R.

DHHS is responsible for administering the Medicaid program in New

construction of an addition. this closure, the petitioner sought and received approval from the State for the that tests the facts in the complaint against the applicable law.

State and Federal Constitutions. The third count alleges a violation of the APA

facts in the plaintiff’s favor. We then engage in a threshold inquiry true, and we construe all reasonable inferences drawn from those recovery. We assume all facts pleaded in the plaintiff’s writ are are reasonably susceptible of a construction that would permit

through the APA process. were both implemented through amendments to the State plan, and not put

violation of the Social Security Act. The second count alleges a violation of the

is to ascertain whether the allegations pleaded in the plaintiff’s writ In reviewing the trial court’s grant of a motion to dismiss, our task

reimbursement for the prospective six month rate period.” These reductions The petitioner appeals the dismissal of its second and third counts.

the doctrine of sovereign immunity barred a damage action under the APA. amended, the complaint contains three counts. The first count alleges a Federal Constitutions. The trial court dismissed the third count, ruling that February 2004. A second motion to amend was granted in December 2004. As constitute either a violation of equal protection or a taking under the State or filed its first motion to amend its complaint. That motion was granted in second count because the petitioner had failed to allege facts sufficient to Alliance v. Ferguson, p. 3 362 F.3d 50 (1st Cir. 2004). The trial court dismissed the recent First Circuit Court of Appeals case. See Long Term Care Pharmacy count, ruling that the claim under the Social Security Act was barred by a DHHS filed a motion to dismiss. The trial court dismissed the first

individual rate which it should pay to nursing homes for Medicaid board rate reduction which DHHS applies after DHHS determines the “DHHS created what it calls the ‘budget neutrality factor’ . . . an across-the-

reductions. In January 2004, before DHHS had been served, the petitioner The petitioner filed suit in late December 200 p. 3 3, challenging both

XIX State Plan.” rules adopted through the APA and in part in “Attachment 4.19-D of the Title

percentile of all nursing homes’ allowable capital costs expenses.” Second, setting methodology to impose a cap on capital cost recoveries at the 85 th reduce reimbursements to nursing homes. First, “DHHS changed its rate- The petitioner alleges that in 2001, DHHS utilized two techniques to

readopted as He-E 806. p. 3 31(a) (2006)).

See N.H. Admin. Rules, He-W 59 p. 3 3.04(a) (1997) (amended and

used by DHHS to determine the actual reimbursable rates is set out in part in (2004) (amended and readopted as He-E 806.05 (2006)). The methodology properly brought in accordance with RSA 541-A:24.

p. 4 count III of the petitioner’s amended complaint on the ground that it was not RSA 541-A:24. We therefore conclude that the trial court erred in dismissing factor not been applied.” These allegations are sufficient to state a claim under that “it would have received [more reimbursement] had the budget neutrality

to decide. rulemaking mandates of RSA 541-A, constitutes a violation of RSA 541-A” and because the proper interpretation of a statute is a question of law for this court exercise our discretion to address it given that it has been fully briefed and factor under the APA. Although the trial court did not reach this issue, we

whether DHHS has complied with the APA. a declaratory judgment action pursuant to RSA 541-A:24 (1997) to determine See Thayer v. Town of Tilton, 151 N.H. 483, 486 (2004). privileges of the plaintiff. neutrality factor without legislative authorization, and without adherence to the impairs, or threatens to interfere with or impair, the legal rights or The petitioner’s complaint also alleges that the “creation and use of this budget alleged that the rule, or its threatened application, interferes with or would be “entitled to be reimbursed for 100% of its allowable capital costs.” count III concerns the validity of the capital cost cap and budget neutrality The second issue raised by the petitioner in its appeal of the dismissal of “imposition of the 85

privilege.”

these arguments and instead ruled that the petitioner had not properly brought

for declaratory judgment in the Merrimack county superior court if it is rule-making process” and that without that change to the State plan, Bel Air

Town of Orford v. N.H. Air Resources Comm., 128 N.H. 539, 541

validity of a rule allege that the rule impairs or interferes with a right or RSA 541-A:24 “on its face requires only that a plaintiff challenging the

these provisions are exempt from the APA. The trial court did not address and may not be used to reduce the level of reimbursement. DHHS argues that that have never been properly adopted under the APA, are therefore invalid, The validity or applicability of a rule may be determined in an action

judgment action under RSA 541-A:24, which provides: We first examine whether the amended complaint constitutes a declaratory

State plan imposing the capital cost cap and budget neutrality factor are rules As to the third count, the petitioner first argues that the provisions in the

and citations omitted). Berry v. Watchtower Bible & Tract Soc., 1 p. 5 52 N.H. 407, 410 (2005) (quotations 5

in other agencies. notice requirements. patients consistent with state and federal law and all appropriate the authority to implement these changes to the State plan. nursing facility services based primarily on the acuity level of providers of medical services under the medical assistance program,” provides VI (2002), which authorizes DHHS to “establish rates of reimbursement to them from the requirements of the APA. The petitioner argues that RSA 161:4,

E deals specifically with nursing facilities. of reimbursement to pharmaceutical providers). By contrast, RSA chapter 1 p. 5 51-

the agency, whether members of the general public or personnel

development and implementation of a reimbursement system for The department shall pursue as expeditiously as possible the

E:6, I, provides: changes to the State plan, and that RSA 1 p. 5 51-E:6, I (2005) implicitly exempts

rule under RSA p. 5 541-A:1, XV). (DHHS acted pursuant to RSA 161:4, VI when it adopted a rule relative to rates medical services provided under Medicaid. See Maxi Drug N., 153 N.H at ___ RSA 161:4, VI by its terms applies generally to reimbursement for procedure or practice requirement binding on persons outside such agency or (b) prescribe or interpret an agency policy, interpret, or make specific a statute enforced or administered by

DHHS argues that RSA chapter 1 p. 5 51-E authorizes it to implement these

binding upon all pharmacy providers receiving Medicaid reimbursement was a Servs., 1 p. 5 53 N.H. ___, ___ (decided August 22, 2006) (temporary presumption RSA 541-A:1, XV. See Maxi Drug N. v. Comm’r, N.H. Dep’t of Health & Human We therefore conclude that these provisions of the State plan are rules under APA.” Asmussen v. Comm’r, N.H. Dep’t of Safety, 145 N.H. 578, 592-93 (2000). agency’s policy constitutes a ‘rule’ that must be promulgated pursuant to the general applicability adopted by an agency to (a) implement, “effect substantive changes binding on persons outside the agency, the to include partnerships such as the petitioner). Where an agency’s efforts A:1, XV (Supp. 2005), which provides: itself) outside the agency. See RSA 541-A:1, XIII (Supp. 2005) (“person” defined The petitioner asserts that these amendments are binding on persons (such as

“Rule” means each regulation, standard, or other statement of

APA, we first consider whether they are rules within the meaning of RSA p. 5 541- In determining whether these amendments to the State plan violate the inconsistent. p. 6 6

statute, “the long-standing practical and plausible interpretation applied by the

federal law.” solely to “the notice requirements of the State Plan Amendment process under the APA in RSA 151-E: p. 6 6, I. We decline to construe these two sections as argues that this phrase refers not to the notice requirements of the APA, but with state and federal law and all appropriate notice requirements.” DHHS

interpretation” of RSA chapter 151-E. We have noted that, when interpreting a Finally, DHHS argues that we should give deference to its “longstanding

exemption from the APA. other). We thus disagree with DHHS that RSA 151-E: p. 6 6, I, creates an reasonably possible, statutes should be construed as consistent with each

See Swiezynski v. Civiello, 12 p. 6 6 N.H. 142, 148 (1985) (where

with the APA, is trumped by an implicit exemption from the requirements of DHHS thus contends that RSA 151-E:12, which explicitly requires compliance infer an exemption from the last phrase in RSA 151-E: p. 6 6, I; to wit, “consistent that the legislature does not enact unnecessary and duplicative provisions). 570 (1995) (in interpreting the meaning of statutory provisions, we presume compliance with the APA in RSA 151-E:12. See State v. Willard, 139 N.H. 568, follow the APA rulemaking procedures, since the legislature already required administration of this chapter. would be “unnecessary and redundant” if the legislature intended DHHS to DHHS argues that the phrase “all appropriate notice requirements”

Despite the clear, unambiguous language of RSA 151-E:12, DHHS urges us to

services shall adopt rules, pursuant to RSA 541-A, relative to the The commissioner of the department of health and human

the APA when adopting rules for reimbursement for nursing home services. to the general enactment where the two conflict.” RSA 151-E:12 provides a clear statement that DHHS must comply with same subject in a more detailed way, the latter will be regarded as an exception homes. implement the changes to the State plan regarding reimbursement to nursing agree with DHHS that RSA 151-E: p. 6 6, I, is the source of authority for DHHS to (1988) (quotations omitted), appeal dismissed, 488 U.S. 1035 (1989). We thus a general fashion.” Petition of Public Serv. Co. of N.H., 130 N.H. 265, 283 with a subject in a specific way and the earlier enactment treats that subject in statutes, the later statute will control, especially when the later statute deals chapter 151-E was enacted in 1998. “When a conflict exists between two 432 (1984). We also note that RSA 161:4, VI was enacted in 1991, while RSA

deals with a subject in general terms, and another deals with a part of the “It is a well-recognized rule of statutory construction that where one statute introduce two new causes of action.”

included in prior motions to amend. Further, the amendments sought [to] include issues that were identified in earlier pleadings and could have been amend its pleadings and twice did so. The amendments it seeks to make now denied the motion, finding: “The petitioner was given ample opportunity to

Cambridge Mut. Fire Ins. Co. v. Crete, 150 N.H. 6 p. 7 73, 678 (2004). The the complaint before any adverse judgment has preclusive effect. See On appeal the petitioner argues that it should be given leave to amend suit in its courts without its consent.” basis of sovereign immunity. “In New Hampshire, the State is immune from this violation of the APA. The trial court dismissed the damage claim on the

for relief under RSA chapter 541-B (199 p. 7 7 & Supp. 2005). The trial court for breach of contract between the petitioner and the State and a second count petitioner sought leave to include two new counts: one count under RSA 491:8 amend filed after the trial court had dismissed its amended complaint. The The petitioner did, however, raise the contract claim in a motion to

breach of that contract. existence of such a contract or that the petitioner’s damages result from a count III concerns whether the petitioner may seek damages against DHHS for address this argument, as the amended complaint does not directly allege the “founded upon any express or implied contract with the state”). We need not with the State. See RSA 491:8 (199 p. 7 7) (superior court may hear claims therefore not valid or effective against the petitioner. Instead, the petitioner argues that its right to damages arises out of a contract impliedly consents to damage actions arising out of violations of the APA. The petitioner has not argued that any provision of the APA expressly or

Courts, 152 N.H. 632, 634 (2005). statutory language.” Lorenz v. N.H. Admin. Office of the irrelevant . . . if such interpretation is in clear conflict with the express over many years, however, the “administrative interpretation of a statute is system mandated by RSA chapter 151-E. Even if the practice had occurred 2001, only two years after DHHS implemented the acuity-based reimbursement The third issue raised by the petitioner in its appeal of the dismissal of

legislative intent.” See RSA 541-A:22. factor are rules that were not adopted in accordance with the APA. They are Accordingly, we hold that the capital cost cap and the budget neutrality

interpretation urged by DHHS is in clear conflict with RSA 151-E:12.

(1985) (quotations omitted). In this case, the challenged changes occurred in

legislature, is evidence that the administrative construction conforms to the agency responsible for its implementation, without any interference by the limitless. p. 8 dismissal pleadings. As we have observed, the doctrine of amendment is not

the New Hampshire Constitution; and (2) denied the petitioner equal protection

calls for substantially different evidence, may properly be denied.” substantive amendment that introduces an entirely new cause of action, or pre-dismissal pleadings; DHHS identified both statutes in one of its pre- the Equal Protection Clauses of the State and Federal Constitutions. “A newly discovered information. The petitioner identified RSA 491:8 in two of its under the Social Security Act, and from claims under the Takings Clauses and negligence claims that the petitioner now seeks to add were not based upon amended writ, which added the challenge under the APA. The contract and capital costs: (1) constituted a compensable taking under Part I, Article 12 of complaint. The petitioner argues that imposition of the 85 percentile cap on th Lastly, the petitioner appeals the denial of count II of its amended

ITT Hartford Group, 150 N.H. 753, 760 (2004).

each a far cry from a declaratory judgment action under the APA, from a claim Moreover, a contract claim and a claim under RSA chapter 541-B are postpone filing its motion to dismiss until the petitioner had filed its second sufficient. the trial court that the opportunities provided the petitioner in this case were pleadings” yet failed to seek amendment until after dismissal). We agree with amend affirmed where party was “given ample notice of the deficiency in his

Follender v. Scheidegg, 142 N.H. 192, 193 (1997) (denial of motion to

substantially different evidence.” opposite party, introduce an entirely new cause of action, or call for The record supports the findings of the trial court. DHHS agreed to

of discretion standard). State v. Lambert, 147 N.H. 295, 296 (2001) (explaining unsustainable exercise discretion. Cambridge Mut. Fire Ins. Co. v. Crete, 150 N.H. at 678; see also will not overturn that decision unless it is an unsustainable exercise of contract is a prerequisite to reimbursement under federal law. discretion of the trial court. Belcher v. Paine, 136 N.H. 137, 148 (1992). We may reasonably be inferred from its pleadings since a Medicaid provider permitted, the decision to grant or deny a motion to amend rests in the sound 989, 991 (1981) (citations omitted). While amendment of pleadings is liberally

allows liberal amendment of pleadings unless the changes surprise the that it is necessary for the prevention of injustice.” “Accordingly, this court the court shall deem just and reasonable, when it shall appear to the court amendment to pleadings, “in any stage of the proceedings, upon such terms as Under RSA 514:9 (1997), the trial court may permit a substantive

ends payments to nursing facility), also argues that the existence of a contract petitioner, citing 42 C.F.R. 488.456 (2005) (termination of provider agreement p. 9 9

further discussion.

BRODERICK, C.J.