Hill v. Commonwealth, 2014-CA-001130-MR

• Decision Date: 18 December 2015
• Docket Number: NO. 2014-CA-001130-MR,2014-CA-001130-MR
• Parties: LISA HILL APPELLANT v. COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES; AND WELLCARE OF KENTUCKY, INC. APPELLEE
• Court: Court of Appeals of Kentucky

LISA HILL APPELLANT
v.
COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES;
AND WELLCARE OF KENTUCKY, INC. APPELLEE

NO. 2014-CA-001130-MR

Commonwealth of Kentucky Court of Appeals

DECEMBER 18, 2015

NOT TO BE PUBLISHED

APPEAL FROM BELL CIRCUIT COURT
HONORABLE ROBERT COSTANZO, JUDGE
ACTION NO. 13-CI-00329

OPINION
AFFIRMING

BEFORE: JONES, J. LAMBERT, AND MAZE, JUDGES.

MAZE, JUDGE: Lisa Hill (Hill) appeals from an order of the Bell Circuit Court that affirmed a final order by the Secretary of the Cabinet for Health and Family Services (the Secretary) rejecting her claim for Medicaid coverage of her inpatient psychiatric treatment. Hill argues that the circuit court and the Secretary erred by finding that the initial notice of denial complied with regulatory and due-process

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requirements, and that the denial of the inpatient treatment was supported by substantial evidence. Finding no clear error as to either issue, we affirm.

WellCare of Kentucky, Inc. (WellCare) is a managed-care organization (MCO) under contract with the Commonwealth of Kentucky to provide its product and administer managed-care services to Kentucky Medicaid recipients. Lisa Hill was an enrollee of Wellcare in March and April of 2012. On March 23, 2012, Hill was admitted to the Psychiatric Unit of Harlan Appalachian Regional Hospital (ARH) as an emergency involuntary admission.

On March 30, 2012, WellCare issued a Notice of Action (NOA) denying Hill's continued stay at ARH past that date. The letter identified the dates of service and the reasons for the denial. The letter also advised Hill of her right to appeal the decision within 30 days, as well as her right to continue receiving services pending any appeal. Hill was discharged from ARH on April 5, 2012.

After that discharge, Phyllis Wilson, an employee of ARH, filed a request for state fair hearing on Hill's behalf. Hill initially challenged the sufficiency of the March 30 NOA. However, the Secretary ultimately concluded that the NOA met all federal and state requirements. The Secretary directed the hearing officer to determine whether (1) the provider was appropriately authorized to request an administrative hearing on behalf of the enrollee for denial of services rather than a denial of payment; (2) the action taken was adverse to Hill, entitling her to an administrative hearing; and if necessary, (3) Hill could demonstrate that

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the denied services were medically necessary in accord with the provisions of 907 KAR¹ 3:130.

A hearing on these issues was conducted on December 14, 2012. Hill's treating physician, Dr. Syed Raza, did not testify at the hearing. However, Hill's medical records and Dr. Raza's notes were introduced. Wilson and Sheba Hensley, both nurses at ARH, testified concerning the course of Hill's treatment. Dr. Frank DeLand, a psychiatrist who works as a consultant and medical director for WellCare, was the only medical expert to testify at the hearing. Dr. DeLand did not personally see or treat Hill. He testified concerning the InterQual criteria, which set out standards to determine whether particular treatments are clinically appropriate for Medicaid coverage. Dr. DeLand also testified concerning his consultations with Dr. Raza during Hill's treatment, as well as his opinions based upon Dr. Raza's notes.

Based primarily upon Dr. DeLand's testimony, the hearing officer found that Hill was clinically appropriate for discharge on March 31, 2012, as she could have been treated on an outpatient basis as of that date. Consequently, the hearing officer found that Hill's acute inpatient treatment from March 31 through April 5, 2012, was not medically necessary or clinically appropriate. Based upon these findings, the hearing officer concluded that Hill failed to meet her burden of proof and that WellCare's denial of payment was proper.

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On June 3, 2012, the Secretary issued a final order adopting the recommended order in its entirety. Hill filed a petition for review with the circuit court pursuant to KRS² 13B.140. In an opinion and order issued on June 5, 2014, the circuit court found that WellCare's March 30, 2012 NOA letter was not defective. The circuit further considered whether the findings properly applied the InterQual criteria to determine whether Hill's inpatient treatment was "medically necessary" and "clinically appropriate." The circuit court also found that the medical records did not compel a finding that inpatient treatment was medically necessary and clinically appropriate after March 31, 2012. Rather, the circuit court concluded that the findings of fact were supported by substantial evidence and may not be disturbed. Consequently, the circuit court affirmed the Secretary's Final Order. This appeal followed.

KRS 13B.150(2) sets out the scope of judicial review of decisions of administrative agencies, as follows:

The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the final order or it may reverse the final order, in whole or in part, and remand the case for further proceedings if it finds the agency's final order is:
(a) In violation of constitutional or statutory provisions;
(b) In excess of the statutory authority of the agency;
(c) Without support of substantial evidence on the whole record;

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(d) Arbitrary, capricious, or characterized by abuse of discretion;
(e) Based on an ex parte communication which substantially prejudiced the rights of any party and likely affected the outcome of the hearing;
(f) Prejudiced by a failure of the person conducting a proceeding to be disqualified pursuant to KRS 13B.040(2); or
(g) Deficient as otherwise provided by law.

"Judicial review of an administrative agency's action is concerned with the question of arbitrariness." Commonwealth, Trans. Cab., Dept. of Vehicle Reg. v. Cornell, 796 S.W.2d 591, 594 (Ky. App. 1990), citing American Beauty Homes Corp. v. Louisville & Jefferson Cty. Planning & Zoning Comm'n, 379 S.W.2d 450, 456 (Ky. 1964). In determining whether an agency's action was arbitrary, the reviewing court should look at three primary factors.

The court should first determine whether the agency acted within the constraints of its statutory powers or whether it exceeded them. . . . Second, the court should examine the agency's procedures to see if a party to be affected by an administrative order was afforded his procedural due process. The individual must have been given an opportunity to be heard. Finally, the reviewing court must determine whether the agency's action is supported by substantial evidence. . . . If any of these three tests

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