Lifecare Med. Transports, Inc. v. Va. Dep't of Med. Assistance Servs.

• Decision Date: 24 June 2014
• Docket Number: Record No. 1586–13–4.
• Citation: 759 S.E.2d 35,63 Va.App. 538
• Court: Virginia Court of Appeals
• Parties: LIFECARE MEDICAL TRANSPORTS, INC. v. VIRGINIA DEPARTMENT OF MEDICAL ASSISTANCE SERVICES.

63 Va.App. 538

759 S.E.2d 35

LIFECARE MEDICAL TRANSPORTS, INC.

v.VIRGINIA DEPARTMENT OF MEDICAL ASSISTANCE SERVICES.

Record No. 1586–13–4.

Court of Appeals of Virginia, Alexandria.

June 24, 2014.

Victoria A.B. Willis (DurretteCrump, PLC, on brief), for appellant.

Elizabeth McDonald Guggenheim, Assistant Attorney General (Kenneth T. Cuccinelli, II, Attorney General; Rita W. Beale, Deputy Attorney General; Kim F. Piner, Senior Assistant Attorney General, on brief), for appellee.

Present: FELTON, C.J., FRANK and HUFF, JJ.

HUFF, Judge.

LifeCare Medical Transports, Inc. (“LifeCare”) appeals a ruling of the Circuit Court of the County of Stafford (“circuit court”) affirming the October 23, 2009 decision by the Virginia Department of Medical Assistance Services (“DMAS”) denying LifeCare's request for relief and affirming the overpayment determination in the amount of $367,178. The circuit court affirmed on the grounds that there was substantial evidence to support DMAS's decision, that the record did not reveal an arbitrary or capricious decision in upholding collection of the overpayment amount, and that DMAS had followed the applicable laws and regulations governing the proceeding.

On appeal, LifeCare contends that the circuit court erred 1) in finding that DMAS acted in accordance with the law; 2) in finding that DMAS did not make a procedural error and the error was harmless; 3) in finding that DMAS had sufficient evidential support for its findings of fact; 4) in finding the record did not reveal an arbitrary or capricious decision; 5) in denying the motion to open the record; and 6) in granting the motion to dismiss and failing to address the issue of detrimental reliance. For the following reasons, this Court affirms the decision of the circuit court.

I. BACKGROUND

On appeal, “[w]e view the facts in this case ‘in the light most favorable to sustaining the [agency's] action and take due account of the presumption of official regularity, the experience and specialized competence of the [agency], and the purposes of the basic law under which the [agency] has acted.’ ” Nat'l College of Bus. & Tech., Inc. v. Davenport, 57 Va.App. 677, 680–81, 705 S.E.2d 519, 521 (2011) (quoting Sentara Norfolk Gen. Hosp. v. State Health Comm'r, 30 Va.App. 267, 279, 516 S.E.2d 690, 696 (1999)). So viewed, the evidence is as follows.

LifeCare is a medical transportation provider, specializing in basic and advanced life support transports. Additionally, LifeCare provides specialty care, which involves “taking patients ... with ... ventilators or neonatal transports, and ... also ... wheelchair transports taking patients back and forth to doctors' offices.”

DMAS is the state agency responsible for the administration of the medical assistance program known as Medicaid. Medicaid is a program funded by both the state and federal governments to provide medical assistance to the eligible and medically needy citizens of the Commonwealth of Virginia. Certain individuals may qualify as dually eligible meaning they receive benefits from both federal Medicare and state Medicaid. When a provider bills Medicare for services rendered to a dually eligible individual, “Medicare would pay based on its rules of eligibility and provider rates, and the claim would then be electronically forwarded to Medicaid [DMAS] as a ‘crossover’ claim.” ¹

LifeCare provides medical transportation services for Medicaid and Medicare/Medicaid eligible individuals in exchange for payment from DMAS under a provider participation agreement. After providing transportation services, LifeCare's “billing department will add in the charges based on the level of services [provided] and ... submit [its] claim for payment” to Medicare. App. at 249. If Medicare elects to pay the claim, it will perform an “automatic crossover” wherein Medicare “send[s] that claim over automatically to Medicaid.” App. at 250. After Medicaid receives the claim, it will “calculate the amount of payment that is to be made to [LifeCare]....” Id. LifeCare then deducts the Medicaid payment from the unpaid balance on patient bills.

The federal Balanced Budget Act of 1997 authorized the Commonwealth to choose to limit its payment of Medicare coinsurance, deductibles or copayments to the Medicaid amounts as set forth in its State Plan. To take advantage of the authorization to limit payments, DMAS was required to amend the State Plan. That amendment required approval by the federal agency ultimately known as the Centers for Medicare and Medicaid Services (“CMS”). Federal regulations established the requirements for obtaining the necessary CMS approval of a State Plan change. 42 C.F.R. § 447.253 (“In order to receive CMS approval of a State plan change in payment methods and standards, [DMAS] must make assurances satisfactory to CMS that the requirements set forth ... are being met.”). The requirements for CMS approval of a State Plan amendment were established by federal regulation. Id. Compliance with certain notice provisions was required for CMS approval. 42 C.F.R. § 447.205.

The General Assembly directed DMAS to take advantage of the cost saving measure allowed by the federal Balanced Budget Act of 1997. 1998 Va. Acts ch. 464 at 913–14. DMAS therefore proposed the necessary amendments to the State Plan. Notices were given which CMS found “satisfactory.”

In accordance with the General Assembly's directive, DMAS submitted an emergency regulation effective July 1, 1998, 12 VAC 30–80–170, limiting the payment of crossover claims to the Medicaid rate. On June 30, 1998, DMAS sent a memorandum to all affected Medicaid providers regarding the change in reimbursement for dual eligible claims. CMS approved the amendments to the State Plan. The State Plan for reimbursements was thereby amended to meet the requirements of the federal Balanced Budget Act and regulations.

In July 2003, DMAS implemented a new Medicaid Management Information System (“MMIS”), which is the computer processing system through which payments are made to providers for Medicaid claims. On October 28, 2003, a memorandum was sent to all providers participating in the Virginia Medical Assistance Program (Medicaid) informing them of the new processing system for claims.² In particular, the memorandum indicated “the amount paid by Medicaid, in combination with the Medicare payment, will not exceed the amount Medicaid would pay for the service if it were billed solely to Medicaid.” Eventually DMAS discovered a system error in its MMIS which had resulted in overpayment of ambulance providers' claims. The MMIS error failed to limit payment of the coinsurance and deductible amounts to the Medicaid rate when it crossed over to the Medicaid side for payment.

After the error in DMAS's MMIS was found, an independent accounting firm was engaged to verify the error in the MMIS and calculate the amounts that had been overpaid to each provider. After confirming the error, on March 1, 2008, DMAS sent a memorandum to all ground, air, and neonatal ambulance services, all managed care organizations and other providers participating in the Virginia Medical Assistance Program, advising them of the miscalculations and resultant overpayments. On September 15, 2008, DMAS requested that LifeCare repay the amount of $367,178, which represented the excess crossover claims that DMAS had erroneously overpaid to LifeCare for the period of April 15, 2005, through August 31, 2008.

On October 3, 2008, LifeCare appealed the overpayment determination and timely requested an informal fact finding conference (“IFFC”). An IFFC was held on December 12, 2008 and a decision issued on April 2, 2009, which affirmed DMAS's determination of overpayment. On May 1, 2009, LifeCare timely filed a notice of appeal challenging the IFFC decision. On June 20, 2009, an evidentiary hearing was held before Hearing Officer Carol S. Nance. On August 26, 2009, the hearing officer issued her recommendation affirming the findings of the IFFC. A final agency decision was issued on October 23, 2009, which accepted the hearing officer's recommendation.

On December 16, 2009, LifeCare filed a petition for appeal of the final agency decision in the circuit court. The circuit court heard arguments on January 28, 2011 and entered an order on August 5, 2013, upholding the final agency decision. The circuit court held that there was substantial evidence to support DMAS's decision, the record did not reveal an arbitrary or capricious decision in upholding collection of the overpayment amount, and DMAS had followed the applicable laws and regulations governing the proceeding. The circuit court also dismissed LifeCare's motion to open the record. This appeal followed.

II. ANALYSIS

LifeCare presents six assignments of error on appeal. Specifically, LifeCare contends that the circuit court erred 1) in finding that DMAS acted in accordance with the law; 2) in finding DMAS did not make a procedural error and the error was harmless; 3) in finding DMAS had sufficient evidential support for its findings of fact; 4) in finding the record did not reveal an arbitrary or capricious decision; 5) in denying the motion to open the record; and 6) in granting the motion to dismiss and failing to address the issue of detrimental reliance.

A. Standard of Review

The Virginia Administrative Process Act (“VAPA”) authorizes judicial review of agency decisions. Code § 2.2–4026. Specifically, “under the VAPA, the circuit court's role in an appeal from an agency decision is equivalent to an appellate court's role in an appeal from a trial court.” Sch. Bd. of Cnty. of York v. Nicely, 12 Va.App. 1051, 1062, 408 S.E.2d 545, 551 (1991). “On appeal of an administrative agency's decision, ‘the party complaining of an agency action has the burden of demonstrating an error of law subject to review.’ ” Volkswagen of Am., Inc. v. Quillian, 39 Va.App. 35, 49, 569 S.E.2d 744, 751 (2002) (quoting Hilliards v. Jackson, 28 Va.App. 475, 479,...