Maple Manor Rehab Ctr., LLC v. Dep't of Treasury

• Decision Date: 23 July 2020
• Docket Number: No. 349168,349168
• Parties: MAPLE MANOR REHAB CENTER, LLC, and Maple Manor Rehab Center of Novi, Inc., Plaintiffs-Appellants, v. DEPARTMENT OF TREASURY, Defendant-Appellee and Department of Health and Human Services, Defendant.
• Court: Court of Appeal of Michigan — District of US

333 Mich.App. 154

958 N.W.2d 894

MAPLE MANOR REHAB CENTER, LLC, and Maple Manor Rehab Center of Novi, Inc., Plaintiffs-Appellants,

v.DEPARTMENT OF TREASURY, Defendant-AppelleeandDepartment of Health and Human Services, Defendant.

No. 349168

Court of Appeals of Michigan.

Submitted July 8, 2020, at Detroit.

Decided July 23, 2020, 9:00 a.m.

Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, and Genevieve T. Fischré, Assistant Attorney General, for the Department of Treasury.

Rolf Goffman Martin Lang LLP, Cleveland (by Christopher G. Kuhn ), for Maple Manor Rehab Center, LLC, and Maple Manor Rehab Center of Novi, Inc.

Before: Fort Hood, P.J., and Jansen and Tukel, JJ.

Per Curiam.

In this case involving the alleged overpayment of the Medicaid Long-Term Care Quality Assurance Assessment (QAA) tax, MCL 333.20161, under Michigan's Medicare program, plaintiffs Maple Manor Rehab Center, LLC (the Wayne facility) and Maple Manor Rehab Center of Novi, Inc. (the Novi facility) appeal as of right the Court of Claims' opinion and order granting summary disposition in favor of defendant Department of Treasury under MCR 2.116(C)(4) and (C)(8) on the basis that the Treasury lacks authority to hear and decide plaintiffs' refund petition for the alleged QAA overpayment. On appeal, this Court is asked to decide whether the procedures for processing a petition for refund under the Revenue Act, MCL 205.1 et seq. , are applicable to a request for a refund for overpayment of the QAA tax. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are postacute care facilities that partake in Michigan's Medicare program and therefore are subject to the QAA. The QAA is collected in order to secure matching federal funds: MCL 333.20161 and 42 CFR 433.68 provide that the QAA and matching federal funds are to "be used to finance Medicaid nursing home reimbursement payments." MCL 333.20161(11)(a). Collection of the QAA, along with matching federal funds, allows for greater Medicaid reimbursements to nursing homes through the Quality Assurance Supplement (QAS) Medicaid payment. MCL 333.20161(11)(a). The QAA is assessed on the basis of the total number of days of patient care that a nursing home or hospital long-term care unit gives to non-Medicare patients. MCL 333.20161(11)(b). The QAA excludes from assessment the days of care given to residents in assisted living beds and the days of care given to Medicare beneficiaries. See MCL 333.20161(11)(b). To determine the amount due, providers submit annual Medicare cost reports to the Michigan Department of Health and Human Services (DHHS), which then calculates the facilities' QAA liability.

For the years at issue, 2015, 2016, and 2017, plaintiffs timely remitted monthly QAA payments to the DHHS.

MCL 333.20161 vests authority in the DHHS to implement and administer the QAA. Specifically, the DHHS has the authority to implement policies and procedures and to impose penalties for nonpayment. MCL 333.20171 ; MCL 333.20172 ; MCL 333.20161(11)(f). Additionally, the DHHS must administer the QAA in accordance with federal law and regulations and is required to seek annual approval from the Centers for Medicare and Medicaid Services (CMS), a federal agency within the United States Department of Health and Human Services. MCL 333.20161(11)(c) ; MCL 333.20161(11)(e) ; 42 CFR 433.68(e).

As aptly explained by the Court of Claims:

The QAA rates charged to all providers under MCL 333.20161 are dependent upon information provided in each individual provider's cost reports. As averred by John Donaldson, a director of the Long-Term Care Reimbursement and Audit Division within [the] DHHS, "any changes to an individual provider's cost reports would impact the tax rates for all providers in the state of Michigan to ensure adequate funding for the QAS program...." [The] DHHS sends written notice to each provider of the provider's upcoming QAA tax. The rates are based on information contained in the prior year's cost reports. According to the notices issued by [the] DHHS in the instant case, an entity has "10 calendar days from the date of this notice to notify [the DHHS] in writing of a disagreement with the total number of non-Medicare days of care rendered indicated above. Failure to respond within this 10[-]day time period will result in any changes being made on a prospective basis only." [Emphasis omitted.]

In the Court of Claims, the DHHS submitted documentary evidence to explain that the time period to respond to the DHHS's assessment is limited to 10 days because the amount of federal money received is dependent on statewide QAA information. Any change to an individual provider's QAA amounts affects the rates for all providers in Michigan. Additionally, the DHHS is required to obtain an annual waiver from CMS to impose the QAA, and the DHHS must have final and accurate information at the time it seeks that waiver. Accordingly, in administering the QAA, the DHHS only gives prospective effect to late QAA challenges.

Turning to the instant matter, in October 2017, plaintiffs discovered a clerical error in their annual reporting of QAAs to the DHHS, which had resulted in an overpayment. Specifically, the Wayne facility had included the days of care for residents in assisted living and for Medicare patients in 2015, 2016, and 2017, resulting in an overpayment of $227,419. The Novi facility made the same mistake in 2016 and 2017, resulting in an overpayment of $237,438. In December 2017, plaintiffs' counsel sent a letter to the DHHS explaining the errors in the cost reports for the years at issue and asking the DHHS to correct the non-Medicare days that plaintiffs had erroneously reported.

In a January 2018 letter, the DHHS acknowledged the mistake and corrected it on a prospective basis, but did not refund any of the overpayments. The DHHS reasoned that the error was reported outside the audit period and, therefore, only a prospective adjustment could be made. Plaintiffs did not seek judicial review of the denial of the relief requested from the DHHS. Rather, in September 2018, plaintiffs petitioned Treasury, seeking a refund of their QAA overpayments per MCL 205.30 for fiscal years 2015, 2016, and 2017. In their petition, plaintiffs correctly noted that Treasury holds the QAA funds under MCL 333.20161(11)(g) and that the DHHS had not disputed plaintiffs' mistakes and resultant overpayments of QAAs. In a letter dated October 19, 2018, Treasury denied plaintiffs' request, explaining:

Please be advised that the Department of Treasury has no jurisdiction in this matter and will not process or take action to review Maple Manor's petition. The Quality Assurance Assessment which is the subject of Maple Manor's Petition is not administered under the Revenue Act, and MCL 205.30 does not apply.

Following Treasury's refusal to issue a refund, plaintiffs filed a complaint in the Court of Claims alleging that Treasury had violated MCL 205.30 by refusing to process plaintiffs' petition for a refund.¹ In lieu of answering the complaint, Treasury moved for summary disposition arguing that it did not have authority to issue plaintiffs a refund for overpayment of their QAAs for the relevant tax years. It explained that the Revenue Act only applies to the Treasury's decisions that result from its administration of laws that it has the authority to administer. Because Treasury does not administer the QAA, and because whether a party is entitled to relief from a wrongly assessed QAA is a decision of the DHHS, Treasury argued that it had not made a decision appealable under the Revenue Act.

Further, Treasury noted that it was merely a custodian of the QAA funds and that plaintiffs' claim was an improper collateral attack on the DHHS's prior decision. In response, plaintiffs argued that the QAA is a "tax" subject to the Revenue Act, and because the Revenue Act's procedures apply to all taxes, the Act's procedures applied here.

The Court of Claims granted Treasury's motion for summary disposition without oral argument. Court of Claims LCR 2.119(E)(3). In its written opinion and order, the Court of Claims first noted that the Revenue Act's procedures apply to all taxes unless otherwise provided. Unlike other tax statutes that specifically state that the Revenue Act is applicable, Treasury has no express authority to administer the QAA because it has no authority to administer the Public Health Code in which MCL 333.20161 is found. The Court of Claims then examined "whether the QAA, by virtue of being a ‘tax’ is subject to the refund procedures of the Revenue Act by way of MCL 205.20, or whether the role played by [the] DHHS in the administration and enforcement of the tax compel a different result." Relying on the plain language of MCL 333.20161, the Court of Claims concluded:

[T]he QAA is not subject to the Revenue Code's refund procedures because Treasury has plainly not been given authority over the administration and enforcement of the QAA tax. The unambiguous language of MCL 333.20161 places responsibility for all aspects of administering the tax squarely with [the] DHHS, not with Treasury. This is exemplified by MCL 333.20161(f), which declares that if a nursing home fails to pay the required QAA tax, [the] DHHS may, at its discretion, "refer for collection to the department of treasury past due amounts consistent with" MCL 205.13. Stated otherwise, Treasury's involvement in the QAA is limited – aside from the state treasury serving as repository [for] QAA funds – and it is invoked only upon [the] DHHS's referring a specific matter to Treasury. The limited role of Treasury under MCL 333.20161 stands in contrast to Treasury's involvement over other tax matters that are otherwise within its authority and over which it need not be invited to act by another agency. See, e.g., MCL 205.1.

As additional support, the Court of Claims noted that MCL 333.20161 requires the DHHS to comply with federal law, while no such requirement...