State v. Carmel Healthcare Management, Inc.
| Decision Date | 31 January 1996 |
| Docket Number | No. 29A04-9308-CV-284,29A04-9308-CV-284 |
| Citation | 660 N.E.2d 1379 |
| Parties | STATE of Indiana, Family and Social Services Administration, Division of Family and Children of the Family and Social Services Administration Offices of Medicaid Policy and Planning; and Indiana State Board of Public Welfare, Petitioners-Appellants, v. CARMEL HEALTHCARE MANAGEMENT, INC., Respondent-Appellee. |
| Court | Indiana Appellate Court |
Pamela Carter, Attorney General, Beth H. Henkel, Deputy Attorney General, Indianapolis, for appellant.
Terrence L. Brookie, Lock Reynolds Boyd & Weisell, Indianapolis, for appellee.
Petitioners-Appellants State of Indiana, Family and Social Services Administration, Division of Family and Children of the Family and Social Services Administration Offices of Medicaid Policy and Planning, and Indiana State Board of Public Welfare (collectively referred to as "the Department") appeal the trial court's determination in favor of Respondent-Appellee Carmel Healthcare Management, Inc. (CHM).
We affirm in part and reverse in part.
The Department raises the following issues for our review:
1. Whether the trial court erred in finding that the Department waived any challenge to the issues presented at the administrative hearing.
2. Whether the trial court used the proper standard in reviewing the Department's finding that notice was sent to the correct address.
3. Whether the trial court erred in concluding that CHM was entitled to a hearing prior to imposition of the penalty.
4. Whether the trial court erred in concluding that CHM was entitled to recoup the penalty imposed by the Department.
In September of 1989, CHM became the new provider for the Carmel Care Center ("the Center"), a long-term care facility. Pursuant to 470 I.A.C. 5-4.2-5, the "provider" is to file an historical financial report with the Department within sixty days following the end of the first nine months of operation. CHM failed to submit the historical financial report within the period mandated by the regulation.
On July 10, 1990, the rate setting contractor, an agent of the Department, sent a certified letter to the Center, warning that CHM had to provide the historical report within ten days or the initial interim rate would be reduced by ten percent. CHM did not submit the report within the ten day period. On August 7, 1990, the Department sent notice to the Center that, pursuant to 470 I.A.C. 5-4.1-5(g), the Center's "per diem rates are reduced ten percent effective May 1, 1990, and shall continue until the first day of the month after receipt of this report by our Department." (R. 174).
CHM appealed the Department's imposition of the penalty. Following the administrative hearing, the Administrative Law Judge entered findings of fact and conclusions of law. Upon request of the parties, the findings were amended to read:
1. That the provider, Carmel Healthcare Management, Inc., failed to submit an historical report for the first nine months of operation as required by 470 I.A.C. 5-4.1-5(f).
2. That the department sent the provider a ten day notice letter on July 10, 1990, and that the provider received that letter at their address at 118 Medical Drive, Carmel, Indiana, 46032.
3. That this notice letter complied with the regulations and that the Administrative Law Judge finds that the provider did receive said notice and was notified according to the requirements of 470 I.A.C. 5-4.1-5.
4. However, the department did not satisfy all of the requirements prior to the imposition of a ten percent penalty.
5. That the Administrative Law Judge finds that the department imposed the ten percent penalty prematurely without properly notifying the provider and giving the provider a right to a hearing, prior to the imposition of said penalty.
6. That the Administrative Law Judge further finds that prior to the imposition of any ten percent penalty, a hearing is required in order to allow the provider an opportunity to recoup any penalty. Hathaway v. Mathews (7th Cir.1976), 546 F.2d 227.
7. That the ten percent penalty which has previously been withheld without opportunity for a hearing, should be immediately reimbursed to Carmel Healthcare Management, Inc., and the department, if it wishes to impose such penalty, must notify the provider in writing of its intention to do the same and give the provider thirty (30) days within which to appeal that decision and/or recoup any loss which the department intends to impose upon the provider.
8. That it is apparent that the department did not suffer any financial harm due to the late filing of the historical report except for the administrative inconvenience of the late filing of the provider; and that an equitable penalty for said late filing would be from one to five percent of the total penalty depending on the circumstances of the late filing; and in this case the Administrative Law Judge finds that an appropriate penalty would be two percent (2%) of the 10% penalty or approximately $2,000.00 and recommends that said penalty be imposed for this provider and the remainder of the 10% penalty be returned to the provider.
(R. 435-437; 441-442).
The Department appealed the Administrative Law Judge's determination to the Indiana Board of Public Welfare. The Board sustained the Department's imposition of the ten percent penalty. In so doing, it determined that the only issue was whether the notice letter was timely sent to CHM. (R. 470-472).
CHM filed a petition for judicial review. After the filing of briefs and oral argument, the trial court issued findings of fact and conclusions of law. The court determined that the Department erred in imposing the ten percent penalty without providing a hearing beforehand. In doing so, the court determined that: (1) CHM did not receive proper notice of the penalty; (2) the Department had not satisfied all of the requirements prior to imposing the penalty; and (3) the penalty could be recouped by CHM. (R. 131-132). Accordingly, the trial court ordered that the Department calculate the penalty withheld and reimburse the full amount to CHM.
The Department appealed to this court. In a memorandum decision, State of Indiana, et al. v. Carmel Health Care Management, Inc., 641 N.E.2d 1299 (Ind.App.1994), a panel of this court, by 2-1 vote, held that CHM failed to timely file the agency record. The panel further held that this failure deprived the trial court of jurisdiction over the case. Accordingly, the trial court's judgment was reversed and the cause was remanded to the trial court with directions to vacate its judgment and dismiss the petition for lack of jurisdiction. Memo. decision at 7. In an order dated April 17, 1995, our supreme court granted transfer, vacated the memorandum decision, and remanded to this court for a decision on the merits.
We now review the merits. 1
On September 6, 1990, approximately thirty days after the Department imposed the penalty, CHM filed an appeal letter with the Department raising the issue of whether the Department was in error in sending the notice letter to the Center instead of to CHM's office at a different location. On October 4, 1990, CHM sent a second appeal letter raising the additional issues of pre-hearing imposition and recoupment of the penalty.
After an administrative law judge was appointed, a pre-hearing conference was held. At the pre-hearing conference, the Department, CHM, and the administrative law judge agreed that the issues for administrative review were: (1) whether CHM was given proper notice; (2) whether CHM was improperly penalized without a hearing; and (3) whether CHM was entitled to recoupment. All three issues were subsequently considered at the administrative hearing. In a post-hearing brief, the Department for the first time argued that the issue of notice was the only issue properly before the administrative law judge. The administrative law judge rejected the Department's attempts to limit the issues, and ruled that CHM: (1) had received proper notice; (2) had been improperly deprived of a pre-imposition hearing; and (3) could recoup the penalty. On appeal from the administrative law judge's decision, the Board sustained the imposition of the penalty. CHM appealed and the trial court overruled the Board. In doing so, it specifically found that "[t]he Department waived any argument with regard to the issues presented for Judicial Review, as such an argument was not timely raised in the earlier administrative proceedings." (R. 130).
The regulation pertaining to provider appeals, 470 I.A.C. 1-4-3(c), requires that a provider, within thirty days after receipt of the initial notice upon which the appeal is premised, file a written appeal setting out each objection to the Department's actions and the legal reasons supporting the objection. The regulation further states that "failure to state objections and the legal reasons therefore, in a timely manner, shall be deemed a waiver of such objections."
In the present case, the initial notice was received on or around August 7, 1990. The September 6, 1990, protest letter was filed within the thirty day period mandated in the regulation; the October 4, 1990, protest letter clearly was not. Nevertheless, the Department agreed with CHM that the issues raised in the October 4 letter were appropriate for consideration by the administrative law judge.
The Department contends that the trial court erred in finding that it waived argument concerning the raising of the issues in the October 4 letter. The Department argues that CHM's failure to timely file objections divested the Department of jurisdiction to decide the issues. In making its argument, the Department analogizes ...
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