Riverside Hosp. v. Dc Dept. of Health, No. 03-AA-826.

• Decision Date: 27 March 2008
• Docket Number: No. 03-AA-826.
• Citation: 944 A.2d 1098
• Parties: RIVERSIDE HOSPITAL, Petitioner v. DISTRICT OF COLUMBIA DEPARTMENT OF HEALTH, Respondent.
• Court: D.C. Court of Appeals

944 A.2d 1098

RIVERSIDE HOSPITAL, Petitioner v. DISTRICT OF COLUMBIA DEPARTMENT OF HEALTH, Respondent.

No. 03-AA-826.

District of Columbia Court of Appeals.

Argued September 15, 2005.

Decided March 27, 2008.

Joel M. Hamme, Washington, DC, with whom Maria P. Spindel, was on the brief, for petitioner.

Edward E. Schwab, Deputy Attorney General for the District of Columbia at the time the brief was filed, with whom Robert J. Spagnoletti, Attorney General at the time the brief was filed, was on the brief, for respondent.

Before WASHINGTON, Chief Judge, KRAMER, Associate Judge, and TERRY, Senior Judge.^*

TERRY, Senior Judge:

Riverside Hospital ("Riverside") challenges a decision by the District of Columbia Department of Health ("the Department") which had the effect of retroactively denying Medicaid coverage to 53 of Riverside's former patients. After the Department's Office of Fair Hearings ("OFH") had ruled in Riverside's favor, the Director of the Department, in an administrative appeal, ruled that the OFH had no jurisdiction to consider Riverside's claims. Before this court Riverside contends (1) that the OFH, not the District of Columbia Board of Appeals and Review ("BAR"), as the Department contends, has jurisdiction to review Medicaid coverage disputes; (2) that Riverside has the authority to argue on behalf of those Medicaid recipients who received care that was considered not to be "medically necessary"; and (3) that the Department's failure to define the term "medically necessary" in accordance with the District of Columbia Administrative Procedure Act ("DCAPA") renders the disputed Medicaid coverage determinations invalid.¹ Accordingly Riverside asks this court to hold that the coverage determinations at issue are invalid and that the Department should be precluded from taking any further action based on those decisions.

At oral argument, this court sua sponte raised the issue of Riverside's standing to assert these claims, either in its own right or, alternatively, on behalf of a group of its former patients participating in the District of Columbia's Medicaid program. We later entered an order directing both parties to submit supplemental briefs discussing (1) whether Riverside has standing to maintain this proceeding, either on its own behalf or on behalf of the patients whom it purports to represent, and if so, what is the source of that standing; and (2) whether Riverside's petition for review presents a justiciable case or controversy, assuming that Riverside has standing.

We hold that Riverside does not have standing to assert the rights of the affected Medicaid recipients, even though they were formerly its patients. We further hold that, although Riverside presumably does have standing to assert its own rights, it has failed to exhaust the administrative remedies available to it before the Board of Appeals and Review. Consequently, we must affirm the Department's dismissal of Riverside's petition before the Office of Fair Hearings without considering the merits of its claims.

I

Riverside offers inpatient psychiatric and substance abuse treatment services primarily to District of Columbia children and adolescents, many of whom are referred to Riverside by the District's Child and Family Services Agency, the Youth Services Administration, and the public schools. Some of these patients receive Medicaid benefits. Riverside has been certified to treat Medicaid patients, participating in the District's Medicaid program which reimburses hospitals on a per diem basis for psychiatric care. See 49 D.C. Register 8716, 8719 (2002) (to be codified at 29 DCMR § 4809.1).

Section 1902 (a)(37) of the Social Security Act, 42 U.S.C. § 1396a (a)(37) (2000), authorizes a state-designated² Medical Assistance Administration to review information regarding Medicaid recipients and providers, as well as service and payment data, to ensure that appropriate payments are made.³ See also 29 DCMR §§ 1301 et seq. (1987). By contract, the District appointed Delmarva Foundation for Medical Care, Inc. ("Delmarva"), to operate as its designated Peer Review Organization ("PRO") to review the medical care provided to District of Columbia Medicaid recipients.⁴ See also 42 C.F.R. §§ 456.1-456.6 (2000).

Acting under this authority, Delmarva reviewed a total of 1202 patient records from the years 1997-2001 to determine whether appropriate payments had been made. After completing that review, Delmarva retroactively denied care to 148 Medicaid recipients, concluding that the care provided in those instances was not "medically necessary." Delmarva sent letters to those affected recipients informing them of its overpayment determination. These letters further informed the affected recipients of their right to request that Delmarva reconsider its decision, as well as the right to make a subsequent request for reconsideration before the Department.⁵ They were also told that they had a right to be represented in such proceedings by an attorney or by any person of their choosing.⁶ Riverside then contacted the affected recipients and offered to act as their representative. Several of them executed an "Assignment of Insurance Benefits," whereby they purportedly assigned any interest in medical reimbursement to Riverside.

Riverside, acting on behalf of the affected recipients, submitted to the Department the necessary requests for reconsideration of 53 cases. The Department then consolidated several of the cases and began corresponding directly with counsel for Riverside.

Riverside's petitions in due course came before an administrative law judge ("ALJ") of the OFH. After some preliminary proceedings, Riverside filed with the ALJ a "motion for summary judgment," arguing (1) that "any limits of Medicaid eligibility or coverage [were] subject to the rule-making requirements" of the DCAPA, (2) that Delmarva's "secret" utilization review standards were inconsistent with federal regulations, and (3) that the coverage denials were facially invalid. The Department responded by filing a motion to dismiss Riverside's petitions, asserting that the affected beneficiaries suffered no cognizable injury and that the OFH therefore had no authority to fashion a remedy for them.

In her proposed decision, the ALJ recommended that Riverside's motion be granted and that the Department be prohibited from seeking or claiming any Medicaid reimbursement, citing In re MedLink Hospital at Capitol Hill (D.C. Office of Fair Hearings, October 13, 1999).⁷ The Director of the Department declined to adopt the ALJ's recommendation. The Director ruled instead that the OFH lacked jurisdiction because the recipients were no longer receiving medical care. Since the Department could not seek reimbursement for services already rendered, there was no "controversy" on which to rule, and thus the OFH had no jurisdiction. As the Director explained, the Department could not recover from the recipients of medical services (i.e., the patients) any overpayments made to the providers of such services (such as, in this case, Riverside):

There is no authority in [statutes or regulations] that authorizes the Department of Health to recover overpayments of Medicaid funds to providers from the patients on whose behalf services were rendered. As a result, there is no controversy or matter upon which the Office of Fair Hearings can rule.

Because the OFH had only the recipients' appeals before it, the Director said, there was no remedy that it could fashion, regardless of whether it found the payments to be proper or improper. "If the [OFH] lacks the authority to order a remedy on Respondent's or Petitioner's behalf, then there is no cognizable controversy."

After the Director issued a final decision, the Department notified Riverside that it would seek reimbursement for Medicaid claims totaling $4,507,800 for 6884 days of care and treatment which Delmarva had held to be medically unnecessary. Dissatisfied with the Director's decision, Riverside filed the instant petition for review in this court, styling itself as the petitioner.

About three months later, the Department of Health, through its Office of Program Integrity, informed Riverside by letter of its intention to recoup any past overpayments to Riverside by offsetting them against future Medicaid payments. Riverside immediately objected to the recoupment, asserting in a letter from its counsel that "medical necessity" had not been defined according to the DCAPA's rulemaking requirements, and that the proposed recoupment would cause irreparable harm both to Riverside and to its patients. In a further exchange of correspondence, Riverside advised the Department that it had already begun to experience extreme financial difficulties and asked that the recoupment be stayed pending the outcome of this litigation. The Department rejected this request, stating in a letter dated February 5, 2004, that "the facts justif[ied] the suspension" of Medicaid payments to Riverside and that Riverside's Medicaid reimbursements would therefore be reduced by $187,825 per month for twenty-four months, beginning February 20, 2004.⁸ On February 9, however, Riverside filed a motion for stay in this court, which we granted, thereby barring the Department from recouping any money from Riverside during the pendency of this proceeding.

II

A. General Principles

Questions of standing may be raised sua sponte by this or any court. See United States v. Storer Broadcasting Co., 351 U.S. 192, 197, 76 S.Ct. 763, 100 L.Ed. 1081 (1956); Lee v. District of Columbia Board of Appeals & Review, 423 A.2d 210, 215 (D.C.1980). Although Congress did not establish this court under Article III of the Constitution, we generally adhere to the case and controversy requirement of Article III as well as prudential principles of standing. Speyer v. Barry, 588 A.2d 1147, 1160 (D.C.1991) (citing cases); see also D.C.Code § ll-705(b) (2001) (stating that divisions of this...