Commonwealth v. EPI Corporation, No. 2005-CA-000274-MR (KY 4/14/2006)
| Decision Date | 14 April 2006 |
| Docket Number | No. 2005-CA-000274-MR.,2005-CA-000274-MR. |
| Parties | COMMONWEALTH of Kentucky, Cabinet for Health and Family Services; James W. Holsinger M.D., in his official Capacity as Secretary of the Cabinet, Appellant v. EPI CORPORATION, Appellee. |
| Court | United States State Supreme Court — District of Kentucky |
Alea Amber Arnett, Johann F. Herklotz Ann Truitt Hunsaker, Frankfort, Kentucky Briefs for Appellant.
Alea Amber Arnett, Frankfort, Kentucky, Oral Argument for Appellant.
Frank F. Chuppe, Stephen R. Price, Virginia H. Snell, Louisville, Kentucky, Brief for Appellee.
Frank Chuppe, Louisville, Kentucky, Oral Argument for Appellee.
Before: BARBER, MINTON, and TACKETT, JUDGES.
This matter is an appeal from the Anderson Circuit Court of its granting of partial summary judgment to Appellee, EPI Corporation (EPI), per order entered December 3, 2004. The Appellant, Cabinet for Health and Family Services (Cabinet), had previously been awarded a judgment by the Administrative Hearings Branch of the Cabinet from which EPI appealed to the Anderson Circuit Court.
The primary issue in this current appeal is recoupment by the Cabinet for alleged overpayments of Medicaid benefits to EPI's long-term care facilities. There is a long history of disagreement between the parties spanning nearly three decades. However, we direct our attention only to the cost years that are the subject of this appeal before us, i.e. 1988 through 1996.
Each year, facilities participating in the Medicaid program are required to submit cost reports to the Cabinet in a timely manner per the Cabinet's regulations. Using these cost reports, the Cabinet sets prospective reimbursement rates for a facility that may or may not be adjusted at the end of the next cost year depending upon whether the Cabinet determines the same is appropriate. Neither party disputes that EPI promptly filed its cost reports for each cost year at issue.
For cost years 1988 through 1995, if a facility disputed a proposed adjustment, it would first request a re-evaluation by the Director, Division of Reimbursement Operations (f/k/a/ Division of Reimbursement and Contracts). 907 KAR 1:036E, Section 5 (1988); 907 KAR 1:036E, Section 6 (1989); 907 KAR 1:036E, Section 6 (1990); 907 KAR 1:025, Section 6 (1991); 907 KAR 1:025, Section 6 (1992); 907 KAR 1:025E, Section 6 (1993); 907 KAR 1:025E, Section 6 (1994); and 907 KAR 1:025E, Section 6 (1995). The Director would review the proposed adjustment and notify the facility of what action would be taken by the Cabinet within twenty days of the request. Id. If the facility disagreed, it could then request a review by a standing review panel. Id. The panel consisted of three members: One from the Division of Reimbursement Operations (f/k/a/ Division of Reimbursement and Contracts), one from the Kentucky Association of Health Care Facilities, and one from the Department for Medicaid Services. Id. The panel would hold a hearing within twenty days of receiving the request and issue a binding decision within thirty days of said hearing. Id.
For cost year 1996, the Cabinet adopted a new appeal process. If a facility disputed a proposed adjustment, it would first request a program review meeting. 907 KAR 1:671, Section 10 (1996). If the Cabinet determined such a meeting was unnecessary, it would render a decision in lieu thereof. Id. However, if a program review meeting was held, the Cabinet had thirty days to schedule said meeting and another thirty days to render a decision following the meeting. Id. The program review meeting would be conducted by the Director or his designee rather than a three member panel described in the prior regulations. Id. If the facility disagreed with the decision, it could then request a full administrative hearing through the Office of the Commissioner.1 Id. We now review the procedural history in this matter.
On July 9, 2002, the Cabinet issued a decision letter regarding all outstanding appeals by EPI for cost years 1988 through 1996. EPI promptly appealed the decision letter and requested a full administrative hearing. The administrative hearing was held on January 27, January 28, January 29, January 31, and February 12, 2003. At the conclusion of the hearing, each party was directed to provide its recommended findings of fact, conclusions of law, and closing argument by late May 2003. Following submission thereof, the Hearing Officer's Findings of Fact, Conclusions of Law, and Recommended Order was issued February 9, 2004. The Hearing Officer concluded the proposed audit adjustments were not time-barred, because KRS 413.120(2), a fifteen year statute of limitation for actions based on written contracts, applied due to the provider agreements between the parties. EPI promptly filed its exceptions to the Hearing Officer's recommendations. However, the Cabinet issued a final order affirming the Hearing Officer's Findings of Facts, Conclusions of Law, and Recommended Order in its entirety. EPI then appealed to the Anderson Circuit Court.
A motion for partial summary judgment was filed by EPI on July 26, 2004, arguing that the Cabinet was barred by the statute of limitations from pursuing recoupment against them. The Cabinet also filed a motion for partial summary judgment arguing its actions were not barred by the statute of limitations and it acted accordingly. On December 3, 2004, the circuit court entered an order for partial summary judgment on behalf of EPI. The Cabinet filed a motion to alter, amend, or vacate the partial summary judgment order, but was ultimately denied by the trial court on January 7, 2005. The Cabinet now appeals to our court.
The Cabinet has two primary arguments. First, the proper venue for the first level of the appellate process should have been Franklin Circuit Court rather than the Anderson Circuit Court.2 Second, the Cabinet was not barred by a statute of limitation in recoupment of overpaid Medicaid benefits for any of the cost years at issue (i.e. 1988-1996). We review the Cabinet's first argument.
The Cabinet argues that Franklin Circuit Court was the proper venue for EPI's appeal, because EPI had two prior matters before the Franklin Circuit Court. One was protesting the Cabinet's recoupment efforts for years prior to those at issue here and the other action tried to enjoin the Cabinet's administrative procedures on the audits in the fiscal years in question. Neither of the two prior Franklin Circuit Court cases are appeals of the Cabinet's Findings of Fact, Conclusions of Law, and Final Order related to the audit adjustments for cost years 1988 through 1996.3 We are not persuaded by the Cabinet's argument.
Kentucky Revised Statute 13B.140(1) states, in pertinent part, "If venue for appeal is not stated in the enabling statutes, a party may appeal to Franklin Circuit Court or the Circuit Court of the county in which the appealing party resides or operates a place of business." The Cabinet admits that its enabling statutes do not contain a statement regarding venue for appeal and that one of EPI's nursing facilities is located in Anderson County. Also, absent compelling or unusual circumstances, which we do not believe are applicable in the instant case, a court is duty bound to hear cases within its vested jurisdiction. Roos v. Kentucky Education Association, 580 S.W.2d 508, 509 (Ky.App. 1979). Therefore, we believe the Anderson Circuit Court was a proper venue for the first level of appellate review.
The Cabinet's second argument is that the incorrect statute of limitation was applied by the Anderson Circuit Court. The Anderson Circuit Court found the appropriate statutes of limitations were KRS 413.120(2) and 42 CFR §405.1885.4 The former imposes a five-year statute of limitation on an action upon a liability created by statute, when no other time is fixed by the statute creating the liability. The latter imposes a three-year statute of limitation in which to reopen a determination of an intermediary or a decision by a hearing officer or panel of hearing officers, by the Board, or the Secretary.
The Court of Appeals is authorized to review issues of law involving an administrative agency on a de novo basis. Liquor Outlet, LLC v. Alcoholic Beverage Control Board, 141 S.W. 3d 378, 381 (Ky.App. 2004), (citing Aubrey v. Office of the Attorney General, 994 S.W.2d 516 (Ky.App. 1998)). Determining whether an action is time-barred due to an applicable statute of limitation is a question of law. Lipsteuer v. CSX Transportation, Inc., 37 S.W.3d 732, 737 (Ky. 2000). In particular, an interpretation of a statute is a question of law and a reviewing court is not bound by the agency's interpretation of that statute. Liquor Outlet, supra, (citing Halls Hardwood Floor Co. v. Stapleton, 16 S.W.3d 327 (Ky.App. 2000)). However, an administrative agency's interpretation of its own regulation is entitled to substantial deference. Cabinet for Health Services v. Family Home Health Care, Inc., 98 S.W.3d 524, 527 (Ky.App. 2003), (citing Camera Center, Inc. v. Revenue Cabinet, 34 S.W.3d 39 (Ky. 2000)). A reviewing court is not free to substitute its judgment as to the proper interpretation of the agency's regulations as long as that interpretation is compatible and consistent with the statute under which it was promulgated and is not otherwise defective as arbitrary or capricious. Id., (citing City of Louisville by Kuster v. Milligan, 798 S.W.2d 454, 458 (Ky. 1990)). Unfortunately, there are no state statutes dealing with recoupment of Medicaid funds. As such, we turn to the state regulations for guidance regarding recoupment of overpayments in the Medicaid system.
An agency must be bound by the regulations it promulgates. Hagan v. Farris, 807 S.W.2d 488, 490 (Ky. 1991), (citing Shearer v. Dailey, 226 S.W.2d 955 (Ky. 1950)). The regulations adopted by an agency have the force and effect of law. Id., (cit...
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