Haverhill Manor, Inc. v. Commissioner of Public Welfare

Decision Date04 June 1975
Citation330 N.E.2d 180,368 Mass. 15
PartiesHAVERHILL MANOR, INC. v. COMMISSIONER OF PUBLIC WELFARE et al. 1
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Richard H. Gens, Boston, for plaintiff.

Danielle E. deBenedictis, Asst. Atty. Gen., for defendants.

Before TAURO, C.J., and REARDON, QUIRICO, HENNESSEY and WILKINS, JJ.

TAURO, Chief Justice.

In this suit for declaratory relief, Haverhill Manor, Inc. (Haverhill Manor) challenges the refusal of the Commissioner of Public Welfare (commissioner) to remit to Haverhill Manor certain sums owed Haverhill Manor for the provision of health services. Haverhill Manor asserts that the administrative procedures employed by the commissioner in reaching his determination abridged its rights under the due process clause of the Fourteenth Amendment to the United States Constitution and under the State Administrative Procedure Act (APA), G.L. c. 30A, and that the commissioner had no legal right to treat Haverhill Manor and three affiliated nursing home corporations as a single corporate entity in order to collect past overpayments to the affiliated homes from money owed to Haverhill Manor. The case comes before us on the reservation and report, without decision, of a single justice of this court.

Briefly, the facts appearing in the parties' statement of agreed facts, which amounts to a case stated, are these. Haverhill Manor, a Massachusetts corporation licensed to do business as a nursing home, furnishes a variety of health care services to eligible persons under programs administered by the Department of Public Welfare (department) and, as a consequence, is deemed a 'provider of health services' under G.L. c. 7, §§ 30K-- 30P. 2 Haverhill Manor receives payments for health services provided pursuant to G.L. cc. 118, 118A, 118C, 118D 3 and 118E, in accordance with rules and regulations adopted thereunder.

Haverhill Manor and three other individually incorporated nursing homes (affiliated homes) which also supply health services under the above statutes are wholly-owned subsidiaries of Century Convalescent Centers, Inc. (Century), a Massachusetts corporation. Century, in turn, is a wholly-owned subsidiary of Carex International, Inc. (Carex), a Delaware corporation with its principal place of business in Los Angeles, California. Carex, for a management fee, performs accounting, managerial and administrative services for Haverhill Manor and the affiliated homes. All such services are performed, and original financial records are kept, in California. The funds of each of the corporations (with the exception of petty cash accounts maintained separately in Massachusetts) are commingled by Carex with its own funds and the funds of its other subsidiaries. The Massachusetts corporations and Carex file consolidated tax returns for Massachusetts and Federal tax purposes. However, Haverhill Manor and the affiliated homes have individual identification numbers with the United States Internal Revenue Service and individual vendor numbers with the department.

The rates of payment for the health services provided by Haverhill Manor and the affiliated homes pursuant to the above mentioned programs are prescribed by the Rate Setting Commission (commission) pursuant to G.L. c. 7, § 30L. For each year, the commission determines an interim rate for each provider of health services based on data from a prior year's operations and on regulations which the commission promulgates. The department makes payments to each provider in accordance with these interim rates. The commission establishes final rates 4 for the year based on actual costs incurred in the provision of health services and verified by a full field audit. 5 The final rate determination may result in an adjustment of the amounts owed a provider for a given year or indicate that the department has overpaid the provider for the year. The efforts of the commissioner, acting for the department, 6 to recover overpayments made to Haverhill Manor and the affiliated homes by deducting the amounts of such overpayments from sums owed to Haverhill Manor for services performed in 1973 have given rise to the instant litigation.

Initially, the commission issues interim and final rates without affording the provider notice or opportunity to be heard. A provider who is 'aggrieved' by any interim or final rate may appeal and will receive a full hearing before a hearing officer or a member of the commission in accordance with G.L. c. 30A. 7 G.L. c. 7, § 30O. A provider who is aggrieved by a decision of the commission after such hearing may petition for review in the Superior Court for Suffolk County. See G.L. c. 7, § 30O. The commission established interim rates severally applicable to Haverhill Manor and the three affiliated homes for the years 1968 through 1971. Necessary appeals have been filed, hearings held, and decisions rendered as to these interim rates. 8 Final rates, computed after a full field audit, have been issued for Haverhill Manor and the affiliated homes for the same years. Appeals are pending with respect to the 1970 9 and 1971 final rates. On the basis of these final rates for the years 1968 through 1971, the commissioner has determined that Haverhill Manor and the three affiliated homes were overpaid substantial sums in the years prior to 1973. 10 As a consequence, he has refused to authorize payments to Haverhill Manor for health services rendered in 1973 until the overpayments have been recaptured. 11 The commissioner asserts that he can offset all amounts due to the Commonwealth from Haverhill Manor against amounts owed to Haverhill Manor for 1973. He asserts further that he can offset amounts owed by the three affiliated homes to the Commonwealth against amounts owed to Haverhill Manor for 1973. The commissioner's procedure would preclude any payments to Haverhill Manor until the alleged overpayments have been recovered by the Commonwealth.

In the instant proceeding, Haverhill Manor contests the commissioner's right to utilize his offset procedure. Haverhill Manor presents four specific objections: It alleges that (1) the decision to offset overpayments against current amounts due to Haverhill Manor constitutes a regulation, as that term is defined in the APA, G.L. c. 30A, § 1(5), and was improperly promulgated and implemented without a hearing; (2) the commission's failure to provide a post-audit evidentiary hearing concerning the final rate for 1971 12 before the commissioner commenced the offset procedure denied Haverhill Manor due process of law under the Fourteenth Amendment; (3) the commissioner's deduction of alleged overpayments to the affiliated nursing homes from amounts owed to Haverhill Manor for services rendered in 1973 violated Haverhill Manor's rights under the due process clause of the Fourteenth Amendment because no prior hearing had been convened to give Haverhill Manor an opportunity to defend the separateness of the corporate entities involved; and (4) the commissioner, generally, had no legal right to treat the affiliated homes and Haverhill Manor as a single entity for the purpose of collection of past overpayments.

1. Haverhill Manor contends that the decision to offset the alleged overpayments against sums owed to Haverhill Manor for services rendered in 1973 is a regulation within the meaning of the APA, G.L. c. 30A, § 1(5), and that, consequently, the 'regulation' is invalid because timely notice and a fair hearing did not precede its issuance and implementation. We disagree. The decision to offset is not a 'rule, regulation, standard or other requirement of general application and future effect' (emphasis supplied). G.L. c. 30A, § 1(5), inserted by St.1954, c. 681, § 1 (see amendments by St.1969, c. 808, § 2; St.1970, c. 712, § 2). Rather, it appears from the record that the offset is an administrative expedient undertaken to recover overpayments made in one specific case. We have before us no indication that the commissioner proposes to adopt this method generally in the future or that the procedure is proposed as a rule or standard of conduct. Accordingly, the decision to offset is not a 'regulation,' and the provisions of the APA relative to notice and hearings are inapposite. Cf. Department of Pub. Health v. Cumberland Cattle Co., --- Mass. ---, ---, a 282 N.E.2d 895 (1972).

2. Despite the absence of express statutory authorization, we believe that the commissioner may legally offset current obligations against past overpayments. Under G.L. c. 18, § 5E, any vendor who receives payment under any assistance program administered by the department must return overpayments or erroneous payments to the State Treasurer on demand. The offset procedure expeditiously recaptures funds owed to the Commonwealth without necessity for demand or court proceedings. '(M)ultiplicity of suits and circuity of action are avoided.' Wisconsin Cent. R.R. v. United States, 164 U.S. 190, 211, 17 S.Ct. 45, 52, 41 L.Ed. 399 (1896). Similar procedures have repeatedly been upheld by the Federal courts. See, e.g., Gratiot v. United States, 40 U.S. 336, 15 Pet. 336, 370, 10 L.Ed. 759 (1841); Wisconsin Cent. R.R. v. United States, supra; Grand Trunk Western Ry. v. United States, 252 U.S. 112, 121, 40 S.Ct. 309, 64 L.Ed. 484 (1920); Rains v. United States, 321 F.2d 764, 767, 160 Ct.Cl. 535 (1963); Wilson Clinic & Hosp. Inc. v. Blue Cross of S.C., 494 F.2d 50, 52 (4th Cir. 1974); Russi v. Weinberger, 373 F.Supp. 1349, 1352 (E.D.Va.1974). Cf. United States v. New York, N.H. & H.R.R., 355 U.S. 253, 261, 78 S.Ct. 212, 2 L.Ed.2d 247 (1957).

Further, the financial relationship between the department and Haverhill Manor appears analogous to a relationship between other parties doing business which would create a 'mutual and open account current' or a simple 'running (open) account.' In either case and, by extension, in this case, one party owes the other party only the...

To continue reading

Request your trial
49 cases
  • General Chemical Corp. v. Department of Environmental Quality Engineering
    • United States
    • Appeals Court of Massachusetts
    • April 1, 1985
    ...that secure certain benefits and that support claims of entitlement to those benefits.' " Haverhill Manor, Inc. v. Commissioner of Pub. Welfare, 368 Mass. 15, 23, 330 N.E.2d 180, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975), quoting from Regents of State Colleges v. Roth,......
  • Moore v. Exec. Office of the Trial Court
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • July 8, 2021
    ...Mathews v. Eldridge, 424 U.S. 319, 334, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). See Haverhill Manor, Inc. v. Commissioner of Pub. Welfare, 368 Mass. 15, 24, 330 N.E.2d 180, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975) ("Due process is a protean concept which imports different......
  • WJM, Inc. v. Massachusetts Dept. of Public Welfare, 87-1111
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • September 9, 1987
    ...its position, the DPW relies on language in a decision by the Supreme Judicial Court of Massachusetts ("SJC"), Haverhill Manor, Inc. v. Commissioner of Public Welfare, 368 Mass. 15, 330 N.E.2d 180, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975). In Haverhill Manor the SJC g......
  • Madera v. Secretary of Executive Office of Communities and Development
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • July 22, 1994
    ...that secure certain benefits and that support claims of entitlement to those benefits.' " Haverhill Manor, Inc. v. Commissioner of Pub. Welfare, 368 Mass. 15, 23, 330 N.E.2d 180, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975), quoting Regents of State Colleges v. Roth, 408 ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT