Finnerty v. Thornton Hall, Inc., Record No. 2082-03-1.

• Decision Date: 09 March 2004
• Docket Number: Record No. 2082-03-1.
• Citation: 593 S.E.2d 568,42 Va. App. 628
• Parties: Patrick W. FINNERTY, Director, Virginia Department of Medical Assistance Services v. THORNTON HALL, INC.
• Court: Virginia Court of Appeals

593 S.E.2d 568

42 Va. App. 628

Patrick W. FINNERTY, Director, Virginia Department of Medical Assistance Services v. THORNTON HALL, INC.

Record No. 2082-03-1.

Court of Appeals of Virginia, Richmond.

March 9, 2004.

Paige S. Fitzgerald, Special Counsel (Jerry W. Kilgore, Attorney General; David E. Johnson, Deputy Attorney General; Siran S. Faulders, Senior Assistant Attorney General, on briefs), for appellant.

Laura G. Aaron (Jessica S. Jones; Healthcare Regulatory Advisors, Inc., on brief), for appellee.

Present: HUMPHREYS, CLEMENTS and KELSEY, JJ.

KELSEY, Judge.

In Smith v. Liberty Nursing Home, Inc., 31 Va.App. 281, 297, 522 S.E.2d 890, 897-98 (2000), we held that Code § 32.1-325.1:1(B) establishes a "mandatory limitation" period within which the Virginia Department of Medical Assistance Services (DMAS) must make an "initial determination" of Medicaid overpayment to a provider. The failure to meet this deadline bars any administrative claim seeking reimbursement of the overpayment. Id. The case now before us requires that we decide what constitutes an "initial determination."

The trial court found that an "initial determination" for purposes of Code §§ 32.1-325.1(A) and 32.1-325.1:1(B) refers to the agency's decision pursuant to an informal factfinding conference conducted under Code § 2.2-4019 (formerly Code § 9-6.14:11). On appeal, Patrick W. Finnerty, Director of DMAS, contends that the term actually refers to an earlier administrative notice (called a Notice of Program Reimbursement) issued before the informal factfinding conference. We agree with the trial court's interpretation, and thus, affirm its decision.

I.

DMAS administers the Medicaid program for the Commonwealth. Virginia law authorizes the Director of DMAS to "receive and expend federal funds" and to enter into contracts "necessary or incidental to the performance of the Department's duties." Code § 32.1-325. The Director also supervises an auditing system that reviews the annual cost submissions of participating providers "to determine the propriety, necessity and reasonableness of reimbursable costs." After an audit of a provider's annual cost submission, a DMAS "Reimbursement Analyst" issues a Notice of Program Reimbursement (NPR) outlining proposed allowed and disallowed costs for that particular accounting period. If the provider agrees with the analyst's proposal, the process ends. If the provider disagrees, DMAS conducts an "informal conference" under Code § 2.2-4019 so that the agency has an opportunity to "ascertain the fact basis" for any decision it makes. If the dispute continues, it then goes to a formal administrative hearing under Code § 2.2-4020 and later to the courts under Code §§ 2.2-4025 to 2.2-4030.

Thornton Hall, Inc., a participating provider, offers nursing care and services to the public through its nursing home, Thornton Hall. The nursing home submitted various cost reports for fiscal years ending (FYE) December 31, 1991 through 1994, fiscal periods ending June 30, 1995 and December 31, 1995 and FYEs December 31, 1996 through 1999. A cost analyst at the accounting firm Clifton Gunderson PLLC, on contract with DMAS, issued NPRs to Thornton Hall identifying overpayments for the applicable accounting periods. Each of the NPRs was issued within four years of the overpayments identified in the respective NPR.

DMAS conducted informal factfinding conferences (IFFCs) pursuant to Code § 2.2-4019 for all NPR periods except the FYE 1992 NPR.¹ The IFFCs, however, were not conducted until July 6, 2001, and September 25, 2001. Because DMAS conducted the IFFCs more than four years from the date of the 1991, 1993, 1994, 1995, and 1996 overpayments, Thornton Hall argued that Code § 32.1-325.1:1(B)'s four-year statute of limitation barred DMAS from recouping any alleged overpayments. The IFFC hearing officers rejected this argument, finding that the NPRs issued by the cost analyst within the limitations period constituted the agency's initial determination. Thornton Hall disagreed and requested formal hearings under Code § 2.2-4020.

The first formal hearing officer concluded that the IFFC, not the NPR, was the initial determination. As a consequence, he reasoned, DMAS could not recoup "overpayments more than four years from the date of the initial determination on July 6, 2001." Thornton Hall filed a letter requesting that DMAS adopt the formal hearing officer's recommendation. In a Final Agency Decision dated January 22, 2002, however, the Director rejected the recommendation as constituting "an error of law."

A second formal hearing officer likewise found that under Code § 32.1-325.1:1(B) "recoupment of overpayments made by DMAS to Thornton Hall, Inc. prior to July 6, 1997 are time barred as a matter of Virginia law." Once again, however, the Director rejected the hearing officer's recommendation in a Final Agency Decision dated August 15, 2002.

Thornton Hall appealed both Final Agency Decisions to Norfolk Circuit Court. Disagreeing with the Director's argument that an NPR is an "initial determination," the trial court held that the "clear language" of Code § 32.1-325.1:1(B) "indicates that there must be an IFFC before there can be an initial determination." Finding that the earliest IFFC did not occur until July 6, 2001, and that "there are no tolling provisions in the statute," the court ruled "that DMAS cannot collect for any repayments to Thornton Hall prior to July 6, 1997."

II.

A.

The Director first argues that the trial court erred by "failing to consider DMAS's expertise and specialized competence in interpreting its own statutes and regulations." According to the Director, "the interpretation of what constitutes an `initial determination'" under Code §§ 32.1-325.1 and 32.1-325.1:1(B) falls within DMAS's specialized competence and the trial court should have deferred to its interpretation. We disagree.

An agency does not possess specialized competence over the interpretation of a statute merely because it addresses topics within the agency's delegable authority. See generally 7-Eleven, Inc. v. Dep't of Envtl. Quality, 42 Va.App. 65, 73, 590 S.E.2d 84, 88 (2003) (en banc)

(observing that "no special agency expertise is necessary" for a resolution of issues of pure statutory construction).² As the Virginia Supreme Court recently reaffirmed, an "erroneous interpretation of a statute by those charged with its enforcement" cannot override the statute's "clear meaning." Volkswagen of Am., Inc. v. Smit, 266 Va. 444, 453, 587 S.E.2d 526, 531 (2003) (quoting Hampton Roads Sanitation Dist. Comm'n v. City of Chesapeake, 218 Va. 696, 702, 240 S.E.2d 819, 823 (1978)). "In sum, pure statutory interpretation is the prerogative of the judiciary." Sims Wholesale Co. v. Brown-Forman Corp., 251 Va. 398, 404, 468 S.E.2d 905, 908 (1996).³ This axiom stems from basic principles of separation of powers. "It is emphatically the province and duty of the judicial department to say what the law is." Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803). Virginia courts do not delegate that task to executive agencies.

The trial court, therefore, did not err in refusing to defer to the Director's definition of "initial determination" because it involves a pure question of statutory interpretation, a matter within the core competency of the judiciary.

B.

The Director next argues that, whether we defer to him or not, our de novo interpretation of the statute should lead us to the same conclusion he reached. For the following reasons, we reach the opposite conclusion.

Our analysis begins with two familiar principles of statutory construction. First, when the legislature uses the same word or phrase "in different parts of the same statute, the presumption is that it was used in the same sense throughout the statute, unless a contrary intention clearly appears." Bridgewater Mfg. Co. v. Funkhouser, 115 Va. 476, 480, 79 S.E. 1074, 1076 (1913); see also Bd. of Supervisors of Albemarle County v. Marshall, 215 Va. 756, 761-62, 214 S.E.2d 146, 150 (1975); Weaver v. Commonwealth, 25 Va.App. 95, 101, 486 S.E.2d 558, 561 (1997). Second, "we consider all relevant provisions of a statute and do not isolate particular words or phrases." Lee County v. Town of St. Charles, 264 Va. 344, 348, 568 S.E.2d 680, 682 (2002). "Statutes which have the same general or common purpose or are parts of the same general plan are also ordinarily considered as in pari materia." Lucy v. County of Albemarle, 258 Va. 118, 129, 516 S.E.2d 480, 485 (1999). We thus consider "the entire body of legislation and the statutory scheme to determine the `true intention of each part.'" McCray v. Commonwealth, 37 Va.App. 202, 204, 556 S.E.2d 50, 51 (2001) (citation omitted). And "when a controversy involves a number of related statutes," we construe them "together in order to give full meaning, force, and effect to each." Ainslie v. Inman, 265 Va. 347, 353, 577 S.E.2d 246, 249 (2003).

Guided by these two principles, we turn to Code § 32.1-325.1:1(B). That statute establishes the mandatory limitations period by declaring that

upon making an initial determination that an overpayment has been made to the provider pursuant to § 32.1-325.1, the Director shall notify the provider of the amount of the overpayment. Such initial determination shall be made within the earlier of (i) four years or (ii) fifteen months after the filing of the final cost report by the provider subsequent to sale of the facility or termination of the provider.

(Emphasis added); see Liberty Nursing Home, Inc., 31 Va.App. at 290, 522 S.E.2d at 894. Code § 32.1-325.1, in turn, requires the Director to "make an initial determination as to whether an overpayment has been made to a provider in accordance with the state plan for medical assistance, the provisions of Code § 2.2-4019 [formerly Code § 9-6.14:11] and applicable federal law."⁴ Code § 32.1-325.1(A) (emphasis added). And Code § 2.2-4019(A)...