Alaska Workers Compensation Decisions 2012. Workers' Compensation Board 12-0012. DAVID F. MCKINNON Employee and ARCTIC HEARTH ASSISTED LIVING INC. Health Care Provider Claimant v. FOUNTAINHEAD DEVELOPMENT INC. Employer and ALASKA INURANCE GUARANTY ASSN. Insurer Defendants Alaska Workers' Compensation Appeals Commission DAVID F. MCKINNON, Employee, and ARCTIC HEARTH ASSISTED LIVING, INC., Health Care Provider, Claimant v. FOUNTAINHEAD DEVELOPMENT, INC., Employer, and ALASKA INURANCE GUARANTY ASSN., Insurer, Defendants.AWCB Decision No. 12-0012Filed with AWCB Fairbanks, Alaskaon January 13, 2012AWCB Case No. 199613447INTERLOCUTORY DECISION AND ORDERArctic Hearth Assisted Living, Inc.'s (Provider) Workers' Compensation Claim (WCC) was heard in Fairbanks, Alaska, on September 1, 2011. Attorney John Pharr appeared on behalf of Provider. Attorney Richard Wagg appeared on behalf of Employer and its Insurer (Employer). David McKinnon (Employee) was joined as an interested party to Provider's WCC, but did not appear. Provider called two witnesses who appeared and testified by telephone: Sherry Mettler, of Northern Lighthouse Assisted Living Home, who had provided bookkeeping, licensing and regulatory services to Provider, and Monta Faye Lane, Provider's owner, who formerly operated two assisted living facilities as Arctic Hearth Assisted Living, Inc. Employer called Adjuster Misty Steed, who appeared and testified by telephone. The record closed after deliberation on November 29, 2011. ISSUES Provider contends it provided Employee with assisted living services, necessitated by Employee's June 24, 1996 work injury, from January of 1997 until April 28, 2006. Provider contends it is regulated by the State of Alaska Department of Health and Social Services (DHandSS). Provider contends the Department put into effect a cost-based reimbursement program on July 1, 2002, and Medicaid regulations prohibited it from charging non-Medicaid residents less than Medicaid residents. Provider contends since Employee was ineligible for Medicaid at the time, he was being billed the non-Medicaid, or "private pay" rate of $3,400.00 per month. Provider contends, beginning July 1, 2002, the Department's cost-based reimbursement program mandated an increase in Employee's private pay rate, so that it was not less than the Medicaid rate. Provider contends this resulted in it setting the private pay rate 1% over the Medicaid rate. Provider contends Employer failed to pay the difference between the former private pay rate of $3,400.00 per month and the new private pay rate of approximately $8,000.00 per month. Provider contends this ongoing shortfall accrued to an arrearage of $182,787.70 at the conclusion of Employee's residency at Provider's assisted living facility. Provider's WCC seeks an award of this arrearage, however did not seek an award of penalty, interest or attorney's fees and costs. Employer contends since Employee was not a Medicaid recipient, the Medicaid rates should not apply in this case, but rather Employee was a member of the general public. Employer acknowledges it must provide care for Employee, and contends it entered into an agreement to provide care at an original, set rate. Employer contends Provider later negotiated and agreed to a rate increase to $3,400.00 per month. Employer contends Provider later wanted to unilaterally double that rate. Employer's primary contention is it never agreed to the rate increase at issue in this matter. 1) What is an appropriate fee for Provider's services when the applicable Workers' Compensation Medical Fee Schedule does not set forth a usual, customary, and reasonable fee for assisted living services? 2) Is Provider entitled to an award of any arrearage on the usual, customary and reasonable fee? FINDINGS OF FACT A review of the entire record established the following relevant facts and conclusions by a preponderance of the evidence: 1) Monta Faye Lane came to Alaska in 1976, where she owned and operated numerous businesses over the next thirty years. (Lane). After caring for her mother, and following her mother's death in 1991, Ms. Lane decided she wanted to "take care of people." Ms. Lane opened her first assisted living home in 1991. In 1993, Ms. Lane became a certified nursing assistant and, in 1994, she opened her second assisted living home. Both of the assisted living homes were located in North Pole, Alaska, and each housed five residents. (Lane). 2) Ms. Lane operated the two facilities as Arctic Hearth Assisted Living, Inc. (Mettler; Lane Affidavit ¶ 1). 3) On July 24, 1996, Employee suffered a heart attack while working as a day laborer for Employer. (Report of Occupational Injury or Illness, July 24, 1996). 4) Because Employee was dead for twenty-two minutes following the heart attack, Employee suffers from a deep brain injury. (Lane). 5) Employee's injury has been more specifically described as "anoxic encephalophy and severe brain damage," and has left him with either the mentality of a two year-old, or a six year-old, depending on the report. (Detail Time Sheet Report, August 15, 2003). 6) Although Employee had numerous legal guardians over the years, B. Jarvi acted as Employee's guardian throughout most of the relevant times in this case. B. Jarvi was employed by numerous professional guardianship entities during the relevant times in this case. (Record; Lane). 7) At the request of the Office of Public Advocacy, Provider travelled to Anchorage to interview Employee. Following that interview, Provider agreed to accept Employee as a resident in one of its facilities. (Lane). 8) Employee was not Medicaid eligible. (Lane Dep. at 13). 9) In January of 1997, Employee became a resident in one of Provider's facilities. (Lane). 10) Employee's guardian at the time signed an Assisted Living Home Residential Services Contract in May 1997 for Provider to provide Employee with residential services at a rate of $2,000.00 per month. The agreement was for an indefinite term, included room and board, and was to continue from month to month, until terminated. (Assisted Living Home Residential Services Contract, May 27, 1997). 11) When he became a resident, Employee was a difficult patient to care for. Employee could not walk or talk and required feeding. Employee suffered from seizures, and was on numerous medications; Ms. Lane described some as "mind altering." Employee suffered from behavioral problems where he would become combative. He would also smear and eat his own feces. (Lane). 12) Employee required a high level of care. (Lane). 13) In 1998, because of the high level of care Employee required, Provider hired a CNA to attend to Employee, and negotiated a rate increase with Insurer to $3,400.00 per month. (Lane Dep. at 8-10). 14) Although Ms. Lane gave repeated testimony at both hearing and deposition that the new negotiated rate was $3,400.00, Provider's accounting statements indicate Insurer was actually paying $3,450.00 per month, which it continued to pay for the remainder of Employee's residency at Provider's facility. (Account Statement, undated (Provider's Exhibit 7); Account Statement, undated. (Provider's Exhibit 14); Account Statement, undated (Provider's Exhibit 25)). 15) Over time, Employee showed signs of some improvement while he was in Provider's care. He was taken off some of his medications, and he began to talk and walk. (Lane). 16) Ms. Lane testified Employee loved living at Arctic Hearth. She testified Employee liked living there because she allowed Employee to smoke, and Employee thought Ms. Lane was his wife. She testified Employee was like family to her. (Lane). 17) Ms. Lane is credible. (Experience, judgment, observations, unique or peculiar facts of the case, and inferences drawn from all of the above). 18) The Medicaid Choice Waiver (HCB Waiver) Program is a federal program administered by the states that pays for certain services related a recipient's care. The program pays for medically necessary services such as bathing, feeding, and managing medications, but excludes other services such as room and board, which are usually paid through other entitlements. (Mettler). 19) The program is administered by the Department of Health and Social Services (DHandSS) in the State of Alaska. (Id.). 20) There is an application process through the Division of Senior Services (DSS) to qualify assisted living facilities as Medicaid enrolled providers for the HCB Waiver Program. (Id.). 21) In 2002, the assisted living provider industry became subject to big regulatory changes in the Medicaid system brought about by, what Ms. Mettler characterized as an "explosion" of regulations, which caused a significant increase in the paperwork burden on providers in the industry. (Id.). 22) One of the big regulatory changes in 2002 was the implementation of "cost-based reimbursement" of HCB Waiver services. The cost-based reimbursement to a provider is determined by a pro forma projection that includes the actual expenses incurred by a provider in delivering HCB Waiver services. Cost-based reimbursement was implemented because of the federal government's desire to create an "even board," and is based on a policy philosophy that taxpayers should not be subsidizing services for private pay residents in assisted living. (Id.). 23) To determine the cost-based reimbursement to a HCB Waiver services provider, a provider is required to submit its pro forma costs to DSS. The State then decides which of those costs, and...

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