All opinions are subject to modification
and technical correction prior to official publication in the North Carolina
Reports and North Carolina Court of Appeals Reports. In the event of
discrepancies between the electronic version of an opinion and the print
version appearing in the North Carolina Reports and North Carolina Court of
Appeals Reports, the latest print version is to be considered authoritative.
NO. COA04-707
NORTH CAROLINA COURT OF APPEALS
Filed: 16 August 2005
CAROLINAS MEDICAL CENTER, DUKE
MEDICAL CENTER, FORSYTH MEMORIAL
HOSPITAL, HIGH POINT REGIONAL HOSPITAL,
MISSION-ST JOSEPH’S HEALTH
SYSTEM, INC., MOSES H. CONE
MEMORIAL HOSPITAL, THE NORTH
CAROLINA
BAPTIST HOSPITALS, INC.,
UNIVERSITY HOSPITAL, WAKE MEDICAL CENTER,
and WESLEY LONG COMMUNITY HOSPITAL,
Medical Providers,
Plaintiff-Appellants,
v. North
Carolina Industrial Commission
DRG
Cases
EMPLOYERS AND CARRIERS LISTED
IN EXHIBIT A,
Defendant-Appellees.
Appeal by defendants from opinion and award entered 16 February 2004 by a panel of the Full Commission of the North Carolina Industrial Commission. Heard in the Court of Appeals 12 January 2005.
Ott
Cone & Redpath, P.A., by Laurie S. Truesdell, Wendell H. Ott, and Melanie
M. Hamilton, for plaintiff-appellants.
Charles
R. Hassell, Jr., Root and Root, P.L.L.C., by Allan P. Root, Young Moore and
Henderson P.A., by Dawn D. Raynor, for defendant-cross appellants.
STEELMAN, Judge.
The North Carolina Industrial Commission entered an order on
18 December 2003 declaring that the provisions of N.C. Gen. Stat. §97-26(b) as
they existed from 1 July 1995 to 1 April 1996 were unconstitutional. We hold that the North Carolina Industrial
commission is without authority to declare statutes of the State
unconstitutional and vacate its order.
Factual Background
On 6 May 1994, the North Carolina Supreme Court filed its
decision in the Case of Charlotte-Mecklenburg Hosp. Auth. v. North Carolina
Indus. Comm’n, 336 N.C. 200, 443 S.E.2d 716 (1994), declaring that the
North Carolina Industrial Commission did not have authority under N.C. Gen.
Stat. §97-26 to require hospitals to accept payment for medical services on a per
diem basis. In response to the
questions surrounding its authority to set hospital rates leading up to the Charlotte-Mecklenburg
decision, the Industrial Commission sought additional authority from the North
Carolina General Assembly. The result
of these efforts was an amendment to N.C. Gen. Stat. §97-26. Act of April 19, 1993, ch. 679, sec. 2.3,
1993 N.C. Sess. Laws 398. As amended
N.C. Gen. Stat. §97-26(b), effective 1 October 1994, read as follows: “Hospital
Fees. -- Payment for medical
compensation rendered by a hospital participating in the State Plan shall be
equal to the payment the hospital receives for the same treatment and services
under the State Plan.”
At the time of this amendment to N.C. Gen. Stat. §97-26(b),
the State Plan utilized a complex diagnostic related grouping-based
reimbursement system (DRG) to compute amounts due to hospitals for treatment of
patients under N.C. Gen. Stat. §135-40.4.
Hospitals compute patient charges on a standard UB-92 form, which states
the amount that a patient is expected to pay for hospital services. However, under the DRG reimbursement system,
the actual charges set forth in the UB-92 form are modified, based upon how
efficiently a hospital provides services for patients. To the extent that a patient is hospitalized
for a shorter period of time, the DRG will reward that hospital with a greater
payment. Conversely, if the patient is
hospitalized for a greater period of time, that hospital is penalized. The result of the DRG system is that for
some patients the hospital is reimbursed more than the UB-92 amount, and in
some cases, the hospital is reimbursed less than the UB-92 amount.
As the DRG system was implemented, the Administrator of the
Industrial Commission began to receive complaints from the worker’s
compensation insurance carriers that the amount of payments approved by the
Industrial Commission was exceeding the amount shown on the UB-92 forms. At some point, the Administrator directed
the Industrial Commission to stop approving payments to hospitals in excess of
the amounts shown on the UB-92 form.
Prior to this decision, a number of payments to hospitals were approved
by the Industrial Commission for an amount in excess of the amount shown on
form UB-92.
Plaintiffs are hospitals that provided services to workers
whose injuries were covered under the North Carolina Worker’s Compensation Act
(Chapter 97 of the North Carolina General Statutes). Defendants are the employers of the injured workers, or their
worker’s compensation insurance carriers.
The parties have stipulated that all workers suffered injuries that were
compensable under Chapter 97, and received treatment from the hospitals for
those injuries. There was a further
stipulation that in each case, the Industrial Commission approved payment to
the hospital in an amount in excess of the amount shown on form UB-92. Finally, defendants stipulated that they would
not challenge that
the payment
amount approved by the Industrial commission is the amount the hospital would
have received under the DRG reimbursement system as implemented by the
administrators of the State Health Plan for the services described by the UB-92
claims form, if those had been covered by the State Health Plan.
Defendants refused to pay the amounts approved by the
Industrial Commission in excess of the amounts shown on form UB-92. Plaintiffs sought payment for the full
amount approved by the Industrial Commission.
A large number of cases, involving hospital treatment provided between 1
July 1995 and 1 April 1996, were consolidated for hearing before the Industrial
Commission.
In the conclusions of law of its opinion and award, the Industrial Commission ultimately concluded that the “changes to N.C. Gen. Stat. §97-26 enacted in 1994 did not reasonably or rationally relate to the purpose of the statute and were patently unfair to the employers and their carriers who were subject to the Worker’s Compensation Act, [and therefore] the statute violated the due process clause of the Constitution. U.S. CONST. amend. XIV; 16B Am Jur 2d, Constitutional Law §912.” The Commission based this ultimate conclusion on additional conclusions of law in which they determined that under the provisions of N.C. Gen. Stat. §97-26(b) they were required to authorize payments according to the State Health Plan, and that these mandated payments were fundamentally unfair in that they were “not directly related to the actual cost of the care provided.” They further concluded that the system as mandated by statute included no adequate remedy to address the individual situations where employers or their insurance carriers were required under the system to pay out “sums which were not otherwise due as payment for relevant hospital treatment and services[,]” and therefore N.C. Gen. Stat. §97-26(b), as it was then written, “deprived employers and their carriers of property without due process of law.”
The Commission ordered that “plaintiff hospitals are not
entitled to receive the additional amounts approved by the Industrial
Commission over and above the actual hospital charges.” Commissioner Pamela T. Young dissented,
asserting that the Industrial Commission had no authority to determine the
constitutionality of acts of the General Assembly.
From this opinion and award, plaintiffs appeal, asserting
that the Industrial Commission lacked authority to declare an act of the
General Assembly unconstitutional, and erred in doing so. Defendants purported to cross-appeal
asserting additional bases that would support the Commission’s decision in
favor of defendants.
Discussion of Legal Issues Presented
In plaintiffs’ first argument they contend that the Full
Commission erred in ruling that it had the authority to decide the
constitutionality of former N.C. Gen. Stat. §97-26(b). We agree.
The Industrial Commission is not a court of general
jurisdiction, it is an administrative agency of the State, created by
statute. Hogan v. Cone Mills Corp.,
315 N.C. 127, 137, 337 S.E.2d 477, 483 (1985).
It is a “well-settled rule that a statute’s constitutionality shall be
determined by the judiciary, not an administrative board.” Meads v. North
Carolina Dep’t of Agric., Food & Drug Protection Div., Pesticide Sec. (In
re Pesticide Bd. File Nos. IR94-128, IR94-151, IR94-155), 349 N.C. 656,
670, 509 S.E.2d 165, 174 (1998); see also State ex rel. Utilities Comm’n v.
Carolina Util. Customers Ass’n, 336 N.C. 657, 673-674, 446 S.E.2d 332,
341-342 (1994); Gulf Oil Corp. v. Clayton, 267 N.C. 15, 20, 147 S.E.2d
522, 526 (1966); Great Am. Ins. Co.
v. Gold, 254 N.C. 168, 173, 118 S.E.2d 792, 796 (1961). The Industrial Commission had no authority
to pass on the constitutionality of N.C. Gen. Stat. §97-26(b)(1994).
We note that there were at least two avenues available to
defendants to properly challenge the constitutionality of the statute in a
lower tribunal. They could have brought
an action under the Uniform Declaratory Judgment Act, N.C. Gen. Stat. §1-253 et
seq. (2004). Woodard v. Carteret County, 270 N.C. 55, 60, 153 S.E.2d
809, 813 (1967) (“A petition for a declaratory judgment is particularly
appropriate to determine the constitutionality of a statute when the parties
desire and the public need requires a speedy determination of important public
interests involved therein.”)(citation omitted). Alternatively, pursuant to N.C. Gen. Stat. §97-86 the Industrial
Commission of its own motion could have certified the question of the
constitutionality of the statute to this Court before making its final
decision.
The Industrial Commission acknowledged this option in its
decision in Carter v. Flowers Baking Co., 1996 N.C. Wrk. Comp. LEXIS
5284, in which it held that “the Commission does not have the authority to find
that enactments of the Legislature are unconstitutional[,]” and that:
If the
Commissioners feel strongly that a statute is unconstitutional and that it
would clearly offend their oath to apply it, or that applying it would cause
irreparable prejudice, or that the question would not otherwise be reviewed in
the courts, etc., the Commission “may certify questions of law to the Court of
Appeals for decision and determination” [pursuant to N.C. Gen. Stat. §97-86],
which would “operate as a supersedeas except as provided in G.S. 97-86.1.”
Id. at
11-12. The record in this matter
contains no such certification. Rather,
the Industrial Commission chose, contrary to its own prior decision and the
established case law of this state, to declare a statute passed by the General
Assembly to be unconstitutional.
The parties in their oral arguments before this Court
suggested that we proceed to decide the constitutional question, even though it
is not properly before us. It is not
the role of the appellate courts to render advisory opinions in matters that
are not properly before them. Wiggins v. Pyramid Life Ins. Co., 3 N.C.
App. 476, 478, 165 S.E.2d 54, 56 (1969).
There has been no petition for certiorari filed in this
case. N.C. R. App. P. Rule 21. There has been no motion filed by any party
requesting that we suspend the Rules of Appellate Procedure under Rule 2 and
treat the appeals of appellants and appellees as a certification by the
Industrial Commission under N.C. Gen. Stat. §97-86. The record in this matter is devoid of any indication that the
parties requested that the Industrial Commission certify the constitutional
question to this Court.
N.C. Gen. Stat. §97-96 allows this Court to consider
questions of law certified to it by the Industrial Commission. It does not presume to allow this Court to
certify matters to itself for review and consideration. The provisions of Rule 2 are discretionary,
and cannot be used to confer jurisdiction upon this Court in the absence of
jurisdiction. Bromhal v. Stott, 116 N.C. App. 250, 253, 447 S.E.2d 481,
483 (1994).
We decline to attempt to utilize Rule 2 to confer
jurisdiction upon this Court in the absence of a certification from the
Industrial Commission under N.C. Gen. Stat. §97-86.
The Industrial Commission was completely without authority
to declare a statute enacted by the General Assembly unconstitutional.
Defendants’ Cross-Assignments of Error
Defendants argue in cross-assignments of error (incorrectly
designated a cross-appeal) that there were alternative bases supporting the
Industrial Commission’s opinion and award.
We disagree.
First, defendants argue that N.C. Gen. Stat. §97-26(b)(1994)
was unconstitutional for uncertainty and vagueness and was an unlawful
delegation of legislative power to an administrative agency. Having held that the Commission was without
authority to determine the constitutionality of N.C. Gen. Stat.
§97-26(b)(1994), we must also hold that this cross-assignment of error is
without merit.
Second, defendants argue that the “legislation creating the
State Teachers’ and Employees’ Health Plan expressly prohibits charges in
excess of what hospital patients not covered by the Plan would be required to
pay[,]” and that this, in turn, prohibits charges assessed under N.C. Gen.
Stat. §97-26(b)(1994) from exceeding those authorized for patients not covered
by the Plan.
N.C. Gen. Stat. §97-26(b)(1994) states: “Hospital Fees.
-- Payment for medical compensation
rendered by a hospital participating in the State Plan shall be equal to the
payment the hospital receives for the same treatment and services under the
State Plan.” Defendants rely on N.C.
Gen. Stat. §135-40.7 (1996), which outlines general limitations and exclusions
for the State Plan, and states:
The following
shall in no event be considered covered expenses nor will benefits described in
G.S. 135-40.5 through G.S. 135-40.11 be payable for:
(8) Charges for any services with respect to which there is no legal obligation to pay. For the purposes of this item, any charge which exceeds the charge that would have been made if a person were not covered under this Plan shall, to the extent of such excess, be treated as a charge for which there is no legal obligation to pay . . . .
Defendants argue that because they were required to pay
amounts for services greater than that which people not covered under the Plan
would have been required to pay, under N.C. Gen. Stat. §135-40.7(8) they were
only obligated for payments up to the UB-92 amounts. However, N.C. Gen. Stat. §135-40.4 (1996) (emphasis added) states
in relevant part:
Notwithstanding
the provisions of this Article, the Executive Administrator and Board of
Trustees of the Teachers’ and State Employees’ Comprehensive Major Medical Plan
may contract with providers of institutional and professional medical care and
services to established preferred provider networks. ... The Executive
Administrator and Board of Trustees shall implement a refined
diagnostic-related grouping or diagnostic-related grouping-based reimbursement
system for hospitals as soon as practicable, but no later than January 1, 1995.
(b) As used in
this section the term “preferred provider contracts or networks” includes, but
is not limited to, a refined diagnostic-related grouping or diagnostic-related
grouping-based system of reimbursement for hospitals.
This statute required the Plan to set up a DRG based system
for preferred providers. Defendants’
interpretation of N.C. Gen. Stat. §135-40.7(8) would render N.C. Gen. Stat.
§135-40.4 inoperable. As Garry Bowman,
who was qualified as an expert in hospital charges and billing procedures,
testified, UB-92 charges for services in the hospital billing context do not
necessarily directly correspond with the amounts the hospitals are reimbursed
for those services. For this reason,
“charge” is not synonymous with “payment” in Chapter 135. Defendants were “charged” the same amounts
that would have been charged to individuals not covered by the Plan (and not
covered by N.C. Gen. Stat. §97-26(b)(1994)), however they were then required to
reimburse plaintiffs pursuant to the negotiated rates under the Plan’s DRG
system. Though this result may be
unfair, it is authorized by Chapters 97 and 135. N.C. Gen. Stat. §135-40.7(8) provides defendants no relief.
Third, defendants argue this Court should hold that the
decision of Thomas Bolch, then Administrator of the North Carolina Industrial
Commission, “to withhold approval of DRG bills submitted to defendant payors
was necessary to preserve the integrity and proper functioning of the workers’
compensation system.”
This argument is nothing more than a restatement of
defendants’ argument that N.C. Gen. Stat. §97-26 was unconstitutional, because
it violated due process. As previously
discussed, this argument is not properly before this Court. In addition, to adopt this argument would
require us to sanction Administrator Bolch’s decision to deliberately violate
an act of the General Assembly. This we
refuse to do. Finally, this argument is
premised upon the fallacious assumption that the bills in question were not
approved by the Industrial Commission following Administrator Bolch’s decision
to withhold approval of bills in excess of the UB-92 amount. However, in each of the cases before the
Commission, the parties stipulated that the Commission approved payment to the
plaintiffs in the amount that they would have received under the DRG
reimbursement system.
Defendants’ cross-assignments of error are without merit. The opinion and award of the Industrial
Commission is vacated.
VACATED.
Judge BRYANT concurs.
Judge WYNN concurring with separate opinion.
NO. COA04-707
NORTH CAROLINA COURT OF APPEALS
Filed: 16 August 2005
CAROLINAS MEDICAL CENTER, DUKE
MEDICAL CENTER, FORSYTH MEMORIAL
HOSPITAL, HIGH POINT REGIONAL HOSPITAL,
MISSION-ST JOSEPH’S HEALTH
SYSTEM, INC., MOSES H. CONE
MEMORIAL HOSPITAL, THE NORTH
CAROLINA
BAPTIST HOSPITALS, INC.,
UNIVERSITY HOSPITAL, WAKE MEDICAL CENTER,
and WESLEY LONG COMMUNITY HOSPITAL,
Medical Providers,
Plaintiff-Appellants,
v. North
Carolina Industrial Commission
DRG
Cases
EMPLOYERS AND CARRIERS LISTED
IN EXHIBIT A,
Defendant-Appellees.
WYNN, Judge concurring with separate opinion.
While I agree with the majority that the Industrial
Commission had no authority to pass on the constitutionality of N.C. Gen. Stat.
§97-26(b) (1994), I would treat the full Commission’s Opinion and Award as a
certification to this Court and address the issues on appeal.
N.C. Gen. Stat. §97-86 (2004) provides that “[t]he
Industrial Commission of its own motion may certify questions of law to the
Court of Appeals for decision and determination by said Court.” I would treat the Opinion and Award as a
certification on the constitutionality of N.C. Gen. Stat. §97-26(b) (19944) to
this Court. A determination of the
constitutionality of section 97-26(b) in the instant appeal is in the interest
of judicial economy. Upon remand of
this case to the Industrial Commission, the Commission will most likely
immediately certify the constitutionality of this statute to this Court for
determination. N.C. Dep’t of Env’t
& Natural Res. v. Carroll, 358 N.C. 649, 665, 599 S.E.2d 888, 898
(2004) (in the interests of judicial economy and fairness to the parties the
Supreme Court addressed the substantive issues on appeal). Furthermore, Rule 2 of the North Carolina
Rules of Appellate Procedure allows us to reach the issues on appeal in the
interest of judicial economy. N.C. R.
App. P. 2 (“[T]o expedite decision in the public interest, either court of the
appellate division may, . . . suspend or vary the requirements or provisions of
any of these rules in a case pending before it upon application of a party or upon
its own initiative[.]” (emphasis added)).
I would decide the issues on appeal, or at the very least,
remand this case to the Industrial Commission for a determination of whether
the constitutional issue should be certified to this Court.