1ST Stop Health Servs., Inc. v. Dep't of Med. Assistance Servs.

• Decision Date: 08 April 2014
• Docket Number: Record No. 1418–13–4.
• Citation: 63 Va.App. 266,756 S.E.2d 183
• Court: Virginia Court of Appeals
• Parties: 1ST STOP HEALTH SERVICES, INC., d/b/a 1st Stop Home Care v. DEPARTMENT OF MEDICAL ASSISTANCE SERVICES, Cynthia B. Jones, Director.

63 Va.App. 266

756 S.E.2d 183

1ST STOP HEALTH SERVICES, INC., d/b/a 1st Stop Home Care

v.DEPARTMENT OF MEDICAL ASSISTANCE SERVICES, Cynthia B. Jones, Director.

Record No. 1418–13–4.

Court of Appeals of Virginia, Alexandria.

April 8, 2014.

Martin A. Donlan, Jr. (J. Nelson Wilkinson; Williams Mullen, Richmond, on briefs) for appellant.

Jennifer L. Gobble, Assistant Attorney General (Kenneth T. Cuccinelli, II, Attorney General; Rita W. Beale, Deputy Attorney General, Kim F. Piner, Senior Assistant Attorney General, on brief), for appellee.

Present: Chief Judge FELTON, Judges PETTY and McCULLOUGH.

McCULLOUGH, Judge.

The Director of the Department of Medical Assistance Services issued a decision retracting $128,736.72 in payments made to 1st Stop Health Services, Inc. The decision was based on 1st Stop's failure to maintain adequate documentation. 1st Stop appealed to the Circuit Court of Fairfax County, which affirmed in part and reversed in part. 1st Stop now appeals to this Court, raising the following eight assignments of error.

1. The Final Agency Decision [“FAD”] is not supported by substantial evidence as it ignores the evidence of 1st Stop and testimony of 1st Stop's Administrator, which the Hearing Officer found to be undisputed.

2. The FAD erred under Va.Code Ann. § 32.1–325.1.B because it failed to adopt the Hearing Officer's Recommended Decision [“RD”] when such RD complied with applicable law and DMAS policy.

3. The FAD erred under Va.Code Ann. § 2.2–4020.C because it does not give due deference to the findings of fact made by the Hearing Officer.

4. The FAD erred in not applying contract standards of law to determine whether any deficiency in 1st Stop's documentation constituted a material breach of the Provider Agreement, and if they did, in not requiring DMAS to prove the amount of damages incurred by DMAS that arose from such breach.

5. The FAD is arbitrary and capricious and constitutes an abuse of the Director's discretion because it fails to apply applicable contract law in that all the services required to be provided to each recipient was provided and enabled recipients not to be placed in a nursing home during the audit period; any deficiency in the DMAS–90s, the Aide Records and other documentation was not substantive and/or was corrected; DMAS failed to show that any harm occurred to any recipient or that any damage was sustained by DMAS in any material or substantive amount; and a basis for forfeiture of all provider payments was not established because DMAS and its recipients received all of the services for which payments were made and avoidance of a nursing home admission was accomplished.

6. The FAD erred in not applying contract law in this case because 1st Stop only became subject to Medicaid laws, regulations and policies by contracting with DMAS through its Provider Agreement.

7. The FAD erred in not applying Virginia's breach of contract materiality standards in this case, in that the Director failed to find:

a. the extent to which the injured party will be deprived of the benefit which it reasonably expected;

b. the extent to which the injured party can be adequately compensated for the part of the benefit of which it was deprived;

c. the extent to which the party failing to perform or to offer to perform will suffer forfeiture;

d. the likelihood that the party failing to perform or to offer to perform will cure his failure, taking into account all of the circumstances, including any reasonable assurances; and

e. the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

8. The FAD is arbitrary and capricious and constitutes an abuse of discretion because the conduct at issue here does not involve any substandard quality of care and all services were provided as authorized by DMAS.

For its part, DMAS assigns error to the trial court's application of contract principles. We affirm the decision of the circuit court.

BACKGROUND

Under the Elderly or Disabled with Consumer Direction (EDCD) Waiver program, elderly or disabled individuals can receive services that enable them to remain in their homes or communities instead of residing in a nursing home. See12 Va. Admin. Code § 30–120–900. 1st Stop Health Services is an enrolled provider of services under the Medicaid program. 1st Stop provides both “personal care” and “respite care” services.

Personal care services involve assisting a patient at home with activities such as bathing, eating, toileting, reminding the patient to take medication, and housekeeping. 12 Va. Admin. Code § 30–120–950. Unlike “personal care” services, which focus on assisting the patient, “respite care” services are designed to provide temporary relief to an unpaid caregiver. 12 Va. Admin. Code § 30–120–960(C). The services provided as respite care, however, are the same. Id. The Department of Medical Assistance Services, or DMAS, issues a “Preauthorization Notice” to the provider authorizing the provider to bill for a predetermined number of hours for each patient.

A contract, known as a Provider Agreement, spells out 1st Stop's obligations. The contract itself is not lengthy, but it incorporates by reference applicable regulations and Provider manuals. The Provider Agreement requires 1st Stop to “provide services in accordance with the Provider Participation Standards published periodically by DMAS in the appropriate Provider Manual(s)....” The Provider Agreement also specifies that the provider “agrees to keep such records as DMAS determines necessary.” 1st Stop also must “comply with all applicable state and federal laws, as well as administrative policies and procedures of [DMAS] as from time to time amended.”

To ensure compliance with policy and regulations, DMAS conducts “utilization reviews” and financial reviews. According to the Elderly or Disabled with Consumer Directed Services Manual (“EDCD Manual”), the purpose of utilization reviews

is to determine whether services delivered were appropriate, whether services continue to be needed, and the amount and kind of services required. Utilization review is mandated to ensure that the health, safety, and welfare of the individuals are protected and to assess the quality, appropriateness, level, and cost-effectiveness of care.

EDCD Manual, Chapter 6, p. 4. DMAS also can conduct a “financial review and verification of services ... to ensure that the provider bills only for those services which have been provided in accordance with DMAS policy and which are covered under the EDCD Waiver.” EDCD Manual, Chapter 6, p. 12. The Manual goes on to specify that “[a]ny paid provider claim that cannot be verified at the time of review cannot be considered a valid claim for services provided.” Id. (emphasis added).

By law, “[t]he provider shall maintain all records for each individual receiving personal care services.” 12 Va. Admin. Code § 30–120–950(E). The provider must correctly prepare and maintain the DMAS–90 form, the required form for providers of personal care services. Id. Moreover, the EDCD Manual specifies that “[i]f an individual receives personal care and respite care services, one record may be maintained, but separate sections must be reserved for the documentation of the two services.” EDCD Manual Chapter 4, p. 33. The Manual also provides that “[a]n accurately signed and dated DMAS–90 is the only authorized documentation of services provided for which DMAS will reimburse. DMAS will not accept employee payroll time sheets in place of the DMAS–90.” EDCD Manual, Chapter 4, p. 36. Chapter 6 of the EDCD Manual again notes that with regard to personal care and respite care services, “[o]nly DMAS–90s will be used by DMAS to verify services delivered and billed to DMAS. No other documentation (e.g., time sheets) will be used for verification of services.” EDCD Manual, Chapter 6, p. 12.

The EDCD Manual repeatedly warns Providers that they “will be required to refund Medicaid” if they are found to have, among other things, “failed to maintain records to support their claims.” EDCD Manual, Chapter 2, p. 7. Chapter 6 of the EDCD Manual, dealing with audits or “Utilization Reviews,” again specifies that

[p]roviders will be required to refund payments made by Medicaid if they are found to have billed Medicaid contrary to law or regulation, failed to maintain any record or adequate documentation to support their claims, or billed for medically unnecessary services.EDCD Manual, Chapter 6, p. 1 (emphasis added). The same chapter provides that “EDCD Waiver services that fail to meet DMAS criteria are not reimbursable.” Id. at 14. Among other specifically listed non-reimbursable items, the Manual lists “[i]nsufficient documentation to support services billed.” Id. at 15. “If services billed to and paid by DMAS are not documented on the DMAS–90, DMAS will require the provider to refund Medicaid.” EDCD Manual, Chapter 6, p. 12–13. Likewise, the regulations warn providers that “noncompliance with DMAS policies and procedures may result in a retraction of Medicaid payment or termination of the provider agreement, or both.” 12 Va. Admin. Code § 30–120–930(A)(17).

An auditor hired by DMAS conducted a “utilization review” of the personal care services provided by 1st Stop. The audit did not cover respite care services. To support its billing, 1st Stop provided the auditor with CDs containing scanned DMAS–90 forms. The auditor found a number of deficiencies in the documentation submitted by 1st Stop. Two of those deficiencies are at issue in this appeal. First, the auditor concluded that some of the records provided did not contain the required DMAS–90 form for the dates billed, or the hours billed did not match the hours documented on the DMAS–90 form. Second, the auditor found in some instances that “the DMAS–90 Form is not clearly marked in order to determine the type of service provided ( i.e., personal care or respite...