Massachusetts Respiratory Hosp. v. Department of Public Welfare

• Decision Date: 17 February 1993
• Citation: 414 Mass. 330,607 N.E.2d 1018
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: , Medicare & Medicaid Guide P 41,472 MASSACHUSETTS RESPIRATORY HOSPITAL v. DEPARTMENT OF PUBLIC WELFARE & another. 1

Page 1018

607 N.E.2d 1018

414 Mass. 330, Medicare & Medicaid Guide P 41,472

MASSACHUSETTS RESPIRATORY HOSPITAL v. DEPARTMENT OF PUBLIC WELFARE & another. ¹

Supreme Judicial Court of Massachusetts Suffolk.

Argued Nov. 4, 1992.

Decided Feb. 17, 1993.

Kenneth A. Behar, Boston, for plaintiff.

Steve Berenson, Asst. Atty. Gen., for defendants.

Before WILKINS, NOLAN, LYNCH and GREANEY, JJ.

WILKINS, Justice.

The plaintiff hospital, formerly Norfolk County Hospital, is a participating provider of services in the Commonwealth's medical assistance program, commonly known as Medicaid. G.L. c. 118E (1990 ed.). The hospital and the defendant Department of Public Welfare (department) have entered into a provider agreement under which, subject to conditions, the department has agreed to pay the hospital, at rates approved by the Rate Setting Commission, for medically necessary services rendered to persons eligible for Medicaid benefits. In that agreement, the hospital has agreed "[to] comply with all federal and state laws, regulations, and rules applicable to the [hospital's] participation in [Medicaid], now existing or adopted during the term of this Provider Agreement."

The hospital seeks to recover for inpatient hospital services rendered on various dates between October 1, 1986, and May 31, 1988, to ten patients who, the hospital asserts, were eligible for Medicaid benefits. The hospital seasonably submitted claims for payment to the department at various times with respect to these patients, and, for various reasons, the department then rejected the claims between August 28, 1990, and November 23, 1990. The hospital asserts that the department's reasons for the denial of these claims are not valid and that the department should have paid the claimed amounts. ²

The hospital appealed the denials of its claims as to eight of these patients to a claims review board that the department had established by a regulation, the lawfulness of which the hospital challenges. See 106 Code Mass.Regs. § 450.323 (1989). The regulation states that "[a] provider must file an appeal for a denied claim within 30 days after being notified" of the denial. 106 Code Mass.Regs. § 450.323(A)(1). The department's notice of denial, sent as to each of the eight denied claims, stated, however, that the claims "must be appealed within 30 days from the date of this remittance advice if denial or underpayment was due to DPW error." ³ Each of the hospital's eight appeals was filed more than thirty days after both the date of its receipt of notice and the date of the remittance advice concerning each patient. The claims review board denied each appeal on the ground that the appeals were untimely.

The hospital filed this action within thirty days of the claims review board's denials of the hospital's appeals to it, seeking judicial review under G.L. c. 30A, § 14 (1990 ed.), as to all ten claims, and alleging breach of contract and unjust enrichment of the department. The hospital moved for the entry of summary judgment. A judge of the Superior Court concluded that the hospital's failure to file timely appeals to the claims review board was fatal to its case and entered judgment for the department dismissing the complaint. We granted the hospital's application for direct appellate review. We affirm the judgment.

The hospital makes the following contentions: (1) the department lacked statutory authority to adopt the regulation creating the claims review board; (2) in purporting to create the board, the department violated Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth, because only the General Court may establish "public officers"; (3) the notices of denial of the eight claims were void because they misstated the time within which the hospital had a right to appeal to the claims review board; (4) the Superior Court had jurisdiction to consider the hospital's claims even if the hospital did not take timely appeals to the claims review board; and (5) the department is liable in contract or on the theories of unjust enrichment and quantum meruit.

1. The department had authority to adopt the regulation creating the claims review board and requiring timely appeals from the department's initial denials of Medicaid claims. It is true that no statutory language explicitly authorized the adoption of such a regulation. ⁴

The department has extensive statutory authority, however, implicitly justifying the adoption of the challenged regulation. An agency has wide authority to interpret and implement a policy set out broadly in its governing statutes. See Worcester Sand & Gravel Co. v. Board of Fire Prevention Regulations, 400 Mass. 464, 466, 510 N.E.2d 267 (1987); Scofield v. Berman & Sons, 393 Mass. 95, 100, 469 N.E.2d 805 (1984), appeal dismissed, 469 U.S. 1201 (1985); Grocery Mfrs. of Am., Inc. v. Department of Pub. Health, 379 Mass. 70, 75, 393 N.E.2d 881 (1979); Levy v. Board of Registration & Discipline in Medicine, 378 Mass. 519, 524-525, 392 N.E.2d 1036 (1979); Consolidated Cigar Corp. v. Department of Pub. Health, 372 Mass. 844, 855, 364 N.E.2d 1202 (1977). See also Scannell v. State Ballot Law Comm'n, 324 Mass. 494, 501, 87 N.E.2d 16 (1949).

The statutes authorizing the department to adopt regulations are generous in their grant of rulemaking authority. The department must "formulate the policies, procedures and rules necessary for the full and efficient implementation of programs authorized by the laws of the commonwealth and federal laws in the area of public welfare financial assistance." G.L. c. 18, § 2(B)(a ) (1990 ed.). See G.L. c. 18, § 10 (1990 ed.). As to Medicaid, the department is authorized to "adopt, promulgate, amend and rescind rules and regulations suitable or necessary" to administer the Medicaid program. G.L. c. 118E, § 4 (1990 ed.). ⁵ The adoption of the regulation was consistent with the Federal law's requirement that the department adopt "procedures of prepayment and postpayment claims review, including review of appropriate data ... to ensure the proper and efficient payment of claims and management of the program." 42 U.S.C. § 1396a(a)(37)(B) (1988).

An implication of the department's authority to adopt the challenged regulation is, therefore, readily derived from the broad authority granted to the department by the statutes of the Commonwealth that we have cited. There is no conflicting statute that makes unwarranted an implication of authority to adopt the regulation. See, e.g., Telles v. Commissioner of Ins., 410 Mass. 560, 564-565, 574 N.E.2d 359 (1991). ⁶ We conclude that a regulation that provides a means of reviewing the denial of claims for reimbursement under Medicaid, following the timely submission of a request for such review, is a regulation "suitable" (see G.L. c. 118E, § 4) for the administration of the Medicaid program.

2. The creation of the claims review board did not violate Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth, by creating public officers. ⁷ The placing of certain claims-processing departmental personnel on a board to review appeals from the denial of claims does not create a public office in violation of the Constitution. These people performed much the same function both before and after formation of the claims review board. If these people were public officers before they were placed on the claims review board, they continued as such when they became board members. If they were not public officers in their earlier claims processing positions, they did not become public officers when they became board members. In any event, as we have just ruled, the Legislature authorized the department's creation of such a board. The department has not unlawfully usurped any legislative function.

3. The hospital has not shown that it was prejudiced by the defect in the notices concerning its right to appeal to the claims review board from the denial of its claims. The hospital was on notice that the regulation required an appeal within thirty days of its receipt of the denial of a claim. By contract the hospital agreed to comply with the board'sregulations. The department's denial notices stated time limits within which appeals must be filed that is earlier than that established by the regulation. The hospital makes no reasoned claim that it was misled or prejudiced by the misinformation. All its appeals were filed more than thirty days after it received the respective denial notices. Assuming, as the parties do, that the administrative process before the claims review board is subject to G.L. c. 30A, § 14 (1990 ed.), the hospital's argument concerning the defective notice of its appeal rights fails at least because it has not shown that its substantial rights have been prejudiced. See G.L. c. 30A, § 14(7); Vaspourakan, Ltd. v. Alcoholic Beverages Control Comm'n, 401 Mass. 347, 354, 516 N.E.2d 1153 (1987). ⁸

There is no basis for treating the inaccurate, but not prejudicially defective, notices of the hospital's appeal rights as void so that the hospital must be given new rejection notices and hence new opportunities to appeal. Cases, on which the hospital relies, concerning the consequences of a defect in the notice of an agency hearing which affects the basic fairness of the hearing process are inapposite.

The two claims whose denial the hospital did not appeal to the claims review board fare no better. The department rejected these two claims by notice dated November 23, 1990. By the time the hospital had to file appeals of these two rejections, it was not only on notice of its appellate rights but had actual knowledge of them. One of the eight claims that it did appeal was rejected by a letter dated November 26, 1990, in which the lack of timeliness of the appeal of the rejection of that claim was disclosed. Indeed, the complaint in this action was filed before the time within which the hospital could appeal these two claims to the claims...