C.A.N. Enterprises, Inc. v. South Carolina Health and Human Services Finance Com'n
| Decision Date | 16 May 1988 |
| Docket Number | No. 22911,22911 |
| Citation | 296 S.C. 373,373 S.E.2d 584 |
| Court | South Carolina Supreme Court |
| Parties | , Medicare & Medicaid Guide P 37,570 C.A.N. ENTERPRISES, INC., d/b/a Oakmont Nursing Centers, (North, East and West), Respondent, v. SOUTH CAROLINA HEALTH AND HUMAN SERVICES FINANCE COMMISSION, as Successor in Interest to the South Carolina Department of Social Services, Petitioner. . Heard |
Richard Mark Gergel and W. Allen Nickles, III, Gergel, Burnette & Nickles, Columbia, for petitioner.
David M. Rogers of Carter, Smith, Merriam, Rogers & Traxler, Greer, for respondent.
This case involves an interpretation of a contract entered into between the South Carolina Health and Human Services Finance Commission (State) 1 and Oakmont Nursing Centers (Oakmont). The question for review is whether or not Oakmont, a for profit nursing home, may retain alleged overpayments of Medicaid funds received by it from the State by reason of the State's failure to timely complete its audit wherein the overpayments were disallowed. We granted certiorari to review the decision of the Court of Appeals in C.A.N. Enterprises v. S.C. Health and Human Services Finance Comm'n, 292 S.C. 556, 357 S.E.2d 714 (1987).
Oakmont was a nursing home provider to the State pursuant to a series of contracts whereby it provided services to indigent Medicaid eligible patients. During the duration of the contract, Oakmont was reimbursed by the State on the basis of cost information supplied by Oakmont. At the conclusion of the contract, these reimbursements were subject to audit by the State and to reduction should any costs be found nonallowable under the terms of the contract and federal Medicaid reimbursement regulations which were incorporated therein. The contract contained procedures for post contract audit by the State of the Medicaid funds received by Oakmont during the contract period. Pursuant to this procedure, upon completion of the contract in 1979, the State audited the financial records of Oakmont. The auditing process took a considerable length of time, well over three years. Ultimately, the State issued its Final Audit Report in which it disallowed $24,080.00 of the payments previously made to Oakmont and demanded that this sum be repaid to the State. Oakmont contested the amount claimed due, and appealed the audit findings to the South Carolina Department of Social Services Fair Hearing Panel (Hearing Panel) pursuant to the provisions in the contract 2 and S.C. Regulation 114-35.1. Oakmont contested the disallowances on the merits but also contended that they "were untimely and thus, invalid."
The Hearing Panel concluded that since the contract contained no deadline for final audit reports, the State was entitled to recover the overpayment from Oakmont. Oakmont appealed the decision of the Hearing Panel to the Circuit Court. On appeal to the Circuit Court, Judge William B. Traxler found substantial evidence to support the administrative finding and affirmed the panel's decision. The South Carolina Court of Appeals reversed the decision of the Circuit Court and remanded with instructions to enter a judgment in favor of Oakmont. We affirm, as modified, the decision of the Court of Appeals.
As stated above, Oakmont and the State entered into a contract which provided for the payment and reimbursement of Medicaid benefits. It also expressly incorporated the provisions of the federal Medicaid and medicare regulations and the State plan for medical assistance. The clause (E-4), which is the center of this dispute, reads as follows:
The parties agreed on certain definitions for terms employed in the contract, and defined audit thusly:
"Audit: To examine for the purpose of authentication and to adjust, disallow or reject an account of the provider."
The parties now disagree as to the interpretation of the word "audit."
Interpreting the word "audit" requires a review of the audit process delineated in the contract. Under the State Plan, which is incorporated into the contract in question, there is a multi-step process to obtain and retain Medicaid benefits for nursing homes. First, during the duration of the contract, the nursing home submits a certified statement of costs and that such expenses were incurred as a result of patient care. The State then conducts a "desk review" of the submitted costs, and pays the provider a per diem rate under an established reimbursement formula. After the contract term is completed, the State reviews the amount paid to the nursing homes by inspecting their records and accounts, which is designated "field work," or an on-site review of the provider's records. Then, the auditors hold an "informal exit conference" with the nursing home provider. At the informal exit conference, the auditors disclose their findings and allow the provider to submit any additional information. The auditor's "field work" is then subjected to a supervisory review. After the supervisory review, the State issues a draft audit report. Thereafter, the provider has an opportunity to supplement the draft audit report. Lastly, the State issues a final audit report.
The parties do not dispute that the contract terminated in June of 1979, and that the final audit report was not issued until after the expiration of the three year deadline. The pivotal issue is whether the term "audit", and its attendant three year deadline, is satisfied by the completion of an on-site review or whether the term "audit" necessitates the filing of a final audit report.
The State argues that this Court should interpret the contract to define "audit" as a process which includes on-site reviews, but excludes the final audit report. Oakmont, on the other hand, contends...
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