Commonwealth v. Sexton

Decision Date27 September 2018
Docket Number2016-SC-000540-DG,2016-SC-000534-DG,2016-SC-000529-DG,2017-SC-000095-DG
Citation566 S.W.3d 185
Parties COMMONWEALTH of Kentucky, CABINET FOR HEALTH AND FAMILY SERVICES, DEPARTMENT FOR MEDICAID SERVICES, Appellant v. Lettie SEXTON, BY AND THROUGH Her Authorized Representative, APPALACHIAN REGIONAL HEALTHCARE, INC.; and Coventry Health and Life Insurance d/b/a Coventrycares, Inc., Appellees and Coventry Health and Life Insurance d/b/a Coventrycares, Inc., Appellant v. Lettie Sexton, by and through Her Authorized Representative, Appalachian Regional Healthcare, Inc., and Commonwealth of Kentucky, Cabinet for Health and Family Services, Appellees and Lettie Sexton, by and through Her Authorized Representative, Appalachian Regional Healthcare, Inc., Appellant v. Commonwealth of Kentucky, Cabinet for Health and Family Services and Coventry Health and Life Insurance d/b/a Coventrycares, Inc., Appellees and Coventry Health and Life Insurance, Appellant v. Lettie Sexton, by and through Her Authorized Representative, Appalachian Regional Healthcare, Inc., and Commonwealth of Kentucky, Cabinet for Health and Family Services, Appellees
CourtUnited States State Supreme Court — District of Kentucky

COUNSEL FOR COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES, DEPARTMENT FOR MEDICAID SERVICES APPELLANTS: Catherine Elaine York, Cabinet for Health and Family Services.

COUNSEL FOR LETTIE SEXTON, BY AND THROUGH HER AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.: Virginia Hamilton Snell, Carole Douglas Christian, Amanda Warford Edge, Louisville, Wyatt, Tarrant & Combs, LLP.

COUNSEL FOR COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.: Joyce Ann Merritt, Lexington, Samantha Nance, Embry Merritt Shaffar Womack, PLLC, Miguel Estrada, Lucas C. Townsend, Gibson, Dunn & Crutcher LLP.

OPINION OF THE COURT BY CHIEF JUSTICE MINTON

This case requires us to consider whether the courts of Kentucky can undertake a statutorily created judicial review of an administrative agency’s final order when the person appealing that final order does not have a concrete injury. Our resolution requires us to apply the doctrine of constitutional standing, and, in doing so, we hold as a matter of first impression that the existence of a plaintiff’s standing is a constitutional requirement to prosecute any action in the courts of this Commonwealth, adopting the United States Supreme Court’s test for standing as espoused in Lujan v. Defenders of Wildlife .1 Because this case reaches us via an interlocutory appeal from the circuit court’s review of an agency ruling, we further hold that all of Kentucky’s courts have the responsibility to ascertain, upon the court’s own motion if the issue is not raised by a party opponent, whether a plaintiff has constitutional standing, an issue not waivable, to pursue the case in court. Under that test, we conclude that Medicaid beneficiary Lettie Sexton, the putative petitioner in the present case, does not have the requisite constitutional standing to pursue her case in the courts of the Commonwealth. So, we reverse the decision of the Court of Appeals, vacate the ruling of the circuit court, and remand this case to the circuit court with instructions to dismiss the case.

I. BACKGROUND.

Lettie Sexton, a Medicaid beneficiary, was admitted to Appalachian Regional Healthcare ("ARH"), complaining of chest pain. ARH sent a request for preauthorization of medical services to Coventry Health and Life Insurance, d/b/a Coventry Cares, Inc. ("Coventry"), a managed-care organization that had contracted with the Kentucky Cabinet for Health and Human Services ("Cabinet") to provide reimbursement to hospitals for certain services provided to Medicaid beneficiaries. Coventry approved a 23-hour observation stay at ARH. Sexton, through ARH, her designated representative for any disputed claims, requested that the observation stay at ARH be extended 15 more hours for a cardiology consultation. Coventry denied reimbursement for this request. Sexton was eventually hospitalized at ARH for approximately 38 hours.

ARH then requested an internal review by Coventry of its denial of reimbursement for the 15 hours of additional hospitalization. After review, Coventry upheld its denial.

ARH, ostensibly acting for Sexton, then requested a Medicaid Fair Hearing to challenge Coventry’s denial. A hearing officer for the administrative-services branch of the Cabinet conducted that hearing and ruled that Sexton lacked standing to pursue an appeal of Coventry’s denial of reimbursement to ARH because Sexton herself had no stake in the outcome of the dispute between ARH and Coventry. The hearing officer’s ruling was based upon the fact that because Medicaid had paid ARH for the services rendered to Sexton, she would owe nothing at all to ARH for the extended hospital stay.2 In due course, the Cabinet Secretary adopted the hearing officer’s recommendation as the Cabinet’s final order.

ARH, acting as Sexton’s representative, then sought judicial review under Kentucky Revised Statute (KRS) 13B.140 of the Cabinet’s final order by timely filing a petition for review in the Harlan Circuit Court. The Cabinet filed a motion to dismiss the petition, alleging that: (1) Sexton lacked standing; (2) ARH was not Sexton’s authorized representative; (3) venue did not lie in Harlan County; and (4) that the petition was barred by the doctrine of sovereign immunity because it did not strictly comply with the requirements of KRS 13B.140. Coventry joined in the Cabinet’s motion on the same grounds.

Following a hearing, the circuit court denied the motion to dismiss. On the issue of standing, the circuit court found that the individual ARH employees who had been authorized by Sexton to represent her interests were sufficiently identified in the exhibits to the petition to provide standing and to comply substantially with the requirements of KRS 13B.140. As for venue and subject-matter jurisdiction, the circuit court ruled that the addresses for Sexton’s designated representatives were the address of the ARH hospital employees located in Harlan County, thus fixing venue there in accordance with KRS 13B.140. On the issue of sovereign immunity, the circuit court determined that this argument was based upon the proposition that a failure strictly to comply with KRS 13B.140 eliminated waiver of sovereign immunity. But since the circuit court found the petition to be otherwise sufficient, the limited waiver of immunity was not eliminated. So, the circuit court denied Coventry’s and the Cabinet’s motions to dismiss the petition.

Because the circuit court denied the Cabinet and Coventry’s sovereign-immunity argument, they each filed an interlocutory appeal in the Court of Appeals. ARH initially sought a dismissal of the appeal, claiming that the circuit court’s order was not final and appealable.

On ARH’s motion to dismiss the appeal, the Court of Appeals found that the circuit court’s rulings on sovereign immunity were immediately appealable, and therefore denied ARH’s motion to dismiss the appeal. The Court of Appeals also found that there was no requirement that KRS 13B.140 be strictly followed for the waiver of sovereign immunity to apply. But the Court of Appeals also found that in Medicaid reimbursement cases like this one, sovereign immunity has been waived by the overwhelming implication of statutory language, including KRS 45A.235.3 Additionally, the Court of Appeals found that the statutes governing the state Medicaid program, KRS 205.510 -645, indicate that sovereign immunity had been waived.

Finally, the Court of Appeals found that venue, as provided in the Kentucky Model Procurement Code, specifically KRS 45A.245, mandated that an aggrieved person, firm, or corporation who has a valid written contract must bring an enforcement action in Franklin Circuit Court. Because the petition was filed in Harlan Circuit Court, the Court of Appeals held that the circuit court’s ruling denying the motion to dismiss based on improper venue should be vacated and directed that the parties may make a motion to transfer the case to Franklin Circuit Court or file a new petition for review in Franklin Circuit Court.

Both parties then filed discretionary-review petitions, which we granted.

II. ANALYSIS.
A. Reviewability of the Issues.

From the outset of our analysis, it is important to note that this case is before us at this juncture as an interlocutory appeal because of the lower courts' rulings on the sovereign immunity issue. And we recently held in Baker v. Fields "that the scope of appellate review of an interlocutory appeal of the trial court’s determination of the application of qualified official immunity is limited to the specific issue of whether the immunity was properly denied and nothing more."4 Although the case before us today involves a circuit court’s ruling on an issue of sovereign-immunity, not qualified official immunity, the principle is the same—the scope of appellate review of an interlocutory appeal of the trial court’s determination of the application of sovereign immunity is limited to that issue and nothing more.

Such a rule grounds itself in this Court’s analysis of issues that can and cannot be decided via interlocutory appeal in Breathitt County Bd. of Educ. v. Prater.5 At the risk of simply restating our analysis in that case and in Baker v. Fields, we simply note that interlocutory appeals are a vehicle to be used rarely, only to decide a few, enumerated issues.

Admittedly, the question of whether the issue of standing can be reached on an interlocutory appeal has never been before this Court. But a nationwide review of relevant case law reveals a trend that parties, themselves, may not raise the issue of standing by interlocutory appeal.6 Most consistently, federal appellate courts hold "that a district court’s denial of a motion to dismiss on justiciability grounds is not immediately appealable under the collateral-order doctrine."7...

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