Children's Hospital v. State

C hildren’s hospital , appellant, v. state of nebraska ,
department of health and human serviCes , division
of mediCaid and long -term Care , appellee .
768 N.W.2d 442
Filed July 24, 2009. 	No. S-08-1173.
1. Administrative Law: Judgments: Appeal and Error. A judgment or final order
rendered by a district court in a judicial review pursuant to the Administrative
Procedure Act may be reversed, vacated, or modified by an appellate court for
errors appearing on the record. When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the record, the inquiry
is whether the decision conforms to the law, is supported by competent evidence,
and is neither arbitrary, capricious, nor unreasonable.
2. Judgments: Appeal and Error. Whether a decision conforms to law is by defi-
nition a question of law, in connection with which an appellate court reaches a
conclusion independent of that reached by the lower court.
3. Administrative Law: Statutes: Appeal and Error. To the extent that the mean-
ing and interpretation of statutes and regulations are involved, questions of law
are presented, in connection with which an appellate court has an obligation
to reach an independent conclusion irrespective of the decision made by the
court below.
Appeal from the District Court for Lancaster County: steven
d. burns, Judge. Reversed and remanded with directions.
James L. Quinlan and Kristin A. Crone, of Fraser Stryker,
P.C., L.L.O., for appellant.
Jon Bruning, Attorney General, and Michael J. Rumbaugh
for appellee.
heaviCan, 	C.J., 	Wright, 	C onnolly, 	gerrard, 	stephan,
mCC ormaCk, and miller-lerman, JJ.
heaviCan, C.J.
INTRODUCTION
This case centers on a dispute between Children’s Hospital
(Children’s), located in Omaha, Nebraska, and the Nebraska
Department of Health and Human Services (DHHS) over
reimbursements to Children’s from the Nebraska Medical
Assistance 	Program, 	also 	known 	as 	NMAP 	(Medicaid).
The question presented by this appeal is whether the ser-
vices provided to two Children’s patients in the hospital’s
CHILDReN’S HOSPITAL v. STATe 	187
Cite as 278 Neb. 187
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:49 AM CST

hematologyoncology clinic located in the “Scott Pavilion” are
“hospital outpatient services,” properly billed on “Form CMS-
1450,” or are physician clinic-type services, which should be
billed on “Form CMS-1500.” This distinction matters because
Medicaid reimburses expenses for hospital services on a cost-
to-charge percentage, while expenses for practitioner services
are reimbursed via a fixed fee schedule. We conclude the dis-
trict court employed an incorrect legal test in concluding that
the services were physician clinic-type services. Accordingly,
we reverse the decision and remand the cause to the district
court with directions.
BACKGROUND
Scott Pavilion.
The Scott Pavilion is a four-story building located on the
campus of Children’s and is connected to the hospital via a
lobby and a skywalk. The Scott Pavilion is owned and operated
by Children’s, and all nonphysician personnel providing treat-
ment or support in this facility are employees of Children’s.
Children’s provides all supplies necessary for treatment and
evaluation of patients seen in the Scott Pavilion, and all patient
care services delivered there are delivered under license of
Children’s. In addition, the patient care services delivered in
the Scott Pavilion are subject to and governed by the Children’s
“Quality Assurance and Utilization Review Oversight.” All
outpatient services provided in the Scott Pavilion are surveyed
and reviewed in connection with the accreditation of Children’s
by the “Joint Commission on Accreditation of Healthcare
Organization,” a national organization.
Patients and Procedures.
D.P. and e.M. are two pediatric patients who received medi-
cally necessary hematology or oncology services in the hema-
tology oncology clinic at the Scott Pavilion. No doctor was
directly involved in the treatment of either D.P. or e.M. with
respect to the services relevant to this appeal.
After providing services to D.P. and e.M., Children’s billed
Medicaid for the services on Form CMS-1450, which provides
for the submission of claims for institutional services. With
188 	278 NeBRASKA RePORTS

respect to D.P., certain claims were denied, at least in part, with
the notation that “‘[p]ayment [was] adjusted due to a submis-
sion billing error(s).’” Other claims for laboratory work were
paid as outpatient hospital services.
With 	respect 	to 	e.M., 	who 	received 	chemotherapy,
DHHS denied certain claims, at least in part, again noting
that “‘[p]ayment [was] adjusted due to a submission bill-
ing error(s)’” and further noting that Children’s had used an
“‘[i]ncorrect claim form format for this service.’” Still other
claims were denied with DHHS noting that “‘[p]ayment is
denied when performed billed by this type of provider’” and
that “‘[t]his provider type provider specialty may not bill this
service.’” As with D.P., claims for laboratory work were paid
as outpatient hospital services.
Procedural History.
Following the denial of these claims and subsequent negotia-
tions and discussions between the parties, Children’s appealed
the denials to DHHS under the Administrative Procedure
Act. DHHS upheld the denials, and Children’s appealed to
the district court. The district court affirmed the decision of
DHHS, concluding that the Scott Pavilion was properly clas-
sified as a “healthcare practitioner facility,” which is excluded
from the definition of the term “hospital,” and that thus,
the services delivered were not “hospital outpatient services.”
Children’s appeals.
ASSIGNMeNT OF eRROR
Children’s assigns, restated and consolidated, that the district
court erred in concluding that the hematology oncology clinic
at the Scott Pavilion delivered physician clinic-type, and not
institutional outpatient, services and that accordingly, Children’s
should have submitted its claims on Form CMS-1500, the form
for practitioner services.
STANDARD OF ReVIeW
[1] A judgment or final order rendered by a district court in
a judicial review pursuant to the Administrative Procedure Act
may be reversed, vacated, or modified by an appellate court for
CHILDReN’S HOSPITAL v. STATe 	189
Cite as 278 Neb. 187

errors appearing on the record. When reviewing an order of a
district court under the Administrative Procedure Act for errors
appearing on the record, the inquiry is whether the decision
conforms to the law, is supported by competent evidence, and
is neither arbitrary, capricious, nor unreasonable.1
[2] Whether a decision conforms to law is by definition
a question of law, in connection with which an appellate
court reaches a conclusion independent of that reached by the
lower court.2
[3] To the extent that the meaning and interpretation of
statutes and regulations are involved, questions of law are
presented, in connection with which an appellate court has an
obligation to reach an independent conclusion irrespective of
the decision made by the court below.3
ANALYSIS
The issue presented by this appeal is whether services
delivered at the Scott Pavilion were outpatient or practitioner
services and, accordingly, what form should be used for bill-
ing those services. Children’s contends that these services
were “hospital outpatient services” and billed DHHS for
those services on Form CMS-1450, the form used by institu-
tions. However, DHHS argues that the hematology oncology
clinic at the Scott Pavilion was a physician clinic and that
Children’s should have billed DHHS on Form CMS-1500,
the form used by practitioners. The district court concluded
that the Scott Pavilion was a “healthcare practitioner facility”
and that services provided there should be billed on Form
CMS-1500.
Underlying this litigation is a dispute between Children’s
and DHHS about the use of discretion by DHHS in considering
these claims. Under 471 Neb. Admin. Code, ch. 10, § 10.09A
(2003), DHHS may “review and reduce or deny payment for
covered outpatient or emergency room drugs, supplies, or ser-
vices which are readily obtainable from another provider . . .
1 Nothnagel v. Neth, 276 Neb. 95, 752 N.W.2d 149 (2008).
2 Id.
3 Upper Big Blue NRD v. State, 276 Neb. 612, 756 N.W.2d 145 (2008).
190 	278 NeBRASKA RePORTS

to the amount payable at the least expensive appropriate place
of service.” In its brief, Children’s notes that “there may be
situations where a service provided in the outpatient setting
could have been provided in a physician’s office and for which
payment should be reduced, but [that] pediatric patients have
special concerns, which should be evaluated on a case-by-case
basis, as the regulation suggests,” and that DHHS was “attempt-
ing to arbitrarily implement a blanket approach to classifying
these services, an approach that ignores its own regulations and
avoids a case-by-case analysis.”4
We agree with Children’s. As noted, we conclude that the
district court employed an incorrect legal test in connection
with its determination that the Scott Pavilion was a “healthcare
practitioner facility” and that services there should be billed on
Form CMS-1500.
Our analysis begins with the question of whether, in the
cases of D.P. and e.M., Children’s provided “hospital outpa-
tient services.” “Hospital outpatient services” are defined by
Medicaid regulations as “[p]reventive, diagnostic, therapeutic,
rehabilitative, or palliative services that are provided to outpa-
tients under the direction of a physician or dentist in an insti-
tution that meets the standards for participation in 471 NAC
10-001.”5 These “standards for participation” are as follows:
To participate in [Medicaid], a hospital that provides
hospital inpatient and or outpatient emergency room ser-
vices must
1. Be maintained primarily for the care and treatment
of patients with disorders other than mental disease;
2. Be licensed as a hospital by [DHHS] Regulation and
Licensure or the officially designated authority for state
standard-setting in the state where the hospital is located;
3. Have licensed and certified hospital beds; and
4. Meet the requirements for participation in Medicare
and Medicaid.6
4 Brief for appellant at 9.
5 471 Neb. Admin. Code, ch. 10, § 001.03 (2008).
6 Id., § 001 (2003).
CHILDReN’S HOSPITAL v. STATe 	191
Cite as 278 Neb. 187

And an “outpatient” is defined as “[a] person who has not
been admitted as an inpatient but is registered on the hospital
records as an outpatient and receives services.”7
As an initial matter, we note that there is no dispute that
Children’s was providing “[p]reventive, diagnostic, therapeu-
tic, rehabilitative, or palliative services . . . under the direc-
tion of a physician” at the hematology oncology clinic at
the Scott Pavilion and that Children’s met all of the “stan-
dards for participation” set forth in the regulations. We note,
however, that there is a dispute over whether D.P. and e.M.
were outpatients.
The district court found there were “no records of any sort
offered to establish that either of these patients w[as] ever
registered by Children’s as an outpatient.” Our review of the
record, however, demonstrates that while there was no spe-
cific indication on the records generated at the Scott Pavilion
that D.P. and e.M. were outpatients, there was nevertheless
other evidence to support such a finding. In particular, the
records at issue included sections for “Discharge Planning”
and “Discharge Orders.” Further review of the record suggests
that the inclusion of such sections would be indicative of either
inpatient or outpatient care, but not necessarily clinic care.
Moreover, a Children’s official testified at the administrative
hearing that both D.P. and e.M. were registered as outpatients.
This testimony was uncontroverted. We therefore conclude
that the district court’s finding that there were no “records” to
establish that D.P. and e.M. were outpatients is not supported
by competent evidence and was erroneous.
Because Children’s met all “standards for participation”
and 	was 	providing 	“[p]reventive, 	diagnostic, 	therapeutic,
rehabilitative, or palliative services” that are provided to out-
patients under “the direction of a physician” at the hematol-
ogy oncology clinic at the Scott Pavilion, we conclude that
Children’s was providing “hospital outpatient services.” We
note that other than its finding that D.P. and e.M. were not
outpatients, which we have concluded was erroneous, the
district court found that the services provided at the Scott
7 Id., § 001.03.
192 	278 NeBRASKA RePORTS

Pavilion met all the elements of the definition of “hospital
outpatient services.”
The district court further erred in its interpretation of the
applicable regulations, specifically in the legal test it utilized.
Instead of focusing on the question of whether the services pro-
vided by Children’s met the definition of “hospital outpatient
services,” the district court focused on whether the services in
question were actually being provided in a “healthcare practi-
tioner facility.” The district court considered the appearance of
the facility and its medical records and concluded that it was a
“healthcare practitioner facility.”
We conclude that the district court erred as a matter of
law by framing the issue presented in such a manner. In this
instance, we are not concerned with the appearance of the
facility or the nature of its medical records. The issue pre-
sented in this case is what form Children’s should have uti-
lized when billing Medicaid and, by extension, the exercise of
discretion, or lack thereof, by DHHS in determining coverage
for the services at issue. Thus, our concern is not with where
the services were provided, but, instead, our concern lies with
the nature of the services actually provided. And we have
concluded that those services met the definition of “hospital
outpatient services.” Whether those services could have been
delivered by a practitioner and thus properly billed on the
practitioner form is a separate question.
Because the services in question met the definition of
“hospital 	outpatient 	services,” 	it 	was 	entirely 	appropriate
for Children’s to bill Medicaid for those services on Form
CMS-1450. We note again that DHHS retains discretion under
Medicaid regulations to “review and reduce or deny payment
for covered outpatient or emergency room drugs, supplies, or
services which are readily obtainable from another provider
. . . to the amount payable at the least expensive appropri-
ate place of service.”8 In this case, the claims were, at least
in part, denied because they were filed on an incorrect form
and not due to the exercise of any discretion on the part of
DHHS. We therefore remand this cause to the district court
8 471 Neb. Admin. Code, ch. 10, § 10.09A.
CHILDReN’S HOSPITAL v. STATe 	193
Cite as 278 Neb. 187

with directions to remand to DHHS for a reconsideration of
these claims.
CONCLUSION
We reverse the district court’s decision and remand this
cause to the district court with directions to remand to DHHS
for a reconsideration of the claims.
reversed and remanded With direCtions.
susan J. sChinnerer , appellee , v. nebraska diamond
sales C ompany, inC., appellant.
769 N.W.2d 350
Filed July 24, 2009. 	No. S-08-1251.
1. Summary Judgment. Summary judgment is proper when the pleadings and
evidence admitted at the hearing disclose no genuine issue regarding any material
fact or the ultimate inferences that may be drawn from those facts and that the
moving party is entitled to judgment as a matter of law.
2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an
appellate court views the evidence in the light most favorable to the party against
whom the judgment is granted and gives such party the benefit of all reasonable
inferences deducible from the evidence.
3. Courts: Appeal and Error. The district court and higher appellate courts gener-
ally review appeals from the county court for error appearing on the record.
4. Judgments: Appeal and Error. When reviewing a judgment for errors appear-
ing on the record, the inquiry is whether the decision conforms to the law,
is supported by competent evidence, and is neither arbitrary, capricious, nor
unreasonable.
5. ____: ____. In instances when an appellate court is required to review cases for
error appearing on the record, questions of law are nonetheless reviewed de novo
on the record.
6. Statutes. Statutory interpretation is a question of law.
7. Employer and Employee: Wages. The Nebraska Wage Payment and Collection
Act permits an employee to sue his or her employer if the employer fails to pay
the employee’s wages as they become due.
8. Damages: Proof. Damages need not be proved with mathematical certainty;
however, damages cannot be established by evidence which is speculative and
conjectural.
Appeal from the District Court for Lancaster County, paul
d. merritt, Jr ., Judge, on appeal thereto from the County
194 	278 NeBRASKA RePORTS