Shaffer v. Neb. Dep't of Health & Human Servs.

• Decision Date: 19 December 2014
• Docket Number: No. S-14-165,S-14-165
• Citation: 857 N.W.2d 313
• Parties: Delores Shaffer, as Guardian and next friend of Brian Shaffer, an incapacitated person, appellee, v. Nebraska Department of Health and Human Services and Vivianne M. Chaumont, director, Division of Medicaid and Long-Term Care, appellees, and Coventry Health Care of Nebraska, Inc., appellant.
• Court: Nebraska Supreme Court

857 N.W.2d 313

Delores Shaffer, as Guardian and next friend of Brian Shaffer, an incapacitated person, appellee

v.Nebraska Department of Health and Human Services and Vivianne M. Chaumont, director, Division of Medicaid and Long-Term Care, appellees, and Coventry Health Care of Nebraska, Inc., appellant.

No. S-14-165

Supreme Court of Nebraska.

Filed December 19, 2014

Thomas J. Kenny, Kathryn E. Jones, and Edward M. Fox II, of Kutak Rock, L.L.P., Omaha, for appellant.

Alan E. Peterson, Lincoln, and Thomas J. O'Neill for appellee Delores Shaffer.

On brief, Douglas J. Peterson, of Keating, O'Gara, Nedved & Peter, L.L.O., Lincoln, for appellee Delores Shaffer.

Heavican, C.J., Wright, Connolly, Stephan, McCormack, and Cassel, JJ.

Syllabus by the Court

1. Administrative Law: Final Orders: Appeal and Error. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record.

2. Administrative Law: Judgments: Appeal and Error. When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is not arbitrary, capricious, or unreasonable.

3. Judgments: Appeal and Error. Whether a decision conforms to law is by definition a question of law, in connection with which an appellate court reaches a conclusion independent of that reached by the lower court.

4. Administrative Law: Statutes: Appeal and Error. The meaning and interpretation of statutes and regulations are questions of law for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.

5. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional question does not involve a factual dispute, its determination is a matter of law, which requires an appellate court to reach a conclusion independent of the decisions made by the lower court.

6. Actions: Parties: Standing. To have standing, a litigant must have a legal or equitable right, title, or interest in the subject matter of the controversy.

7. Parties: Judgments: Appeal and Error. An appeal is generally available only to persons who were parties to the case below, although in a proper case a nonparty may be sufficiently interested in a judgment to permit him or her to take an appeal from it.

8. Parties: Jurisdiction: Waiver. The presence of necessary parties to a suit is a jurisdictional matter that cannot be waived by the parties; it is the duty of the plaintiff to join all persons who have or claim any interest that would be affected by the judgment.

9. Administrative Law: Words and Phrases. An administrative agency is a neutral factfinding body when it is neither an adversary nor an advocate of a party.

10. Administrative Law: Parties. When an administrative agency acts as the primary civil enforcement agency, it is more than a neutral factfinding body.

11. Administrative Law: Parties. An administrative agency that is charged with the responsibility of protecting the public interest, as distinguished from determining the rights of two or more individuals in a dispute before such agency, is more than a neutral factfinding body.

Opinion

Stephan, J.

This is an appeal from an order of the district court for Lancaster County which reversed a determination by the

Nebraska Department of Health and Human Services (the Department) that Brian Shaffer was ineligible for certain Medicaid benefits. The appellant, Coventry Health Care of Nebraska, Inc. (Coventry), participated in the administrative proceedings and advocated the determination eventually reached by the Department, but it was not named as a party in the appeal to the district court. Coventry contends that it was a necessary party to the district court appeal and that because it was not joined, the district court was without jurisdiction to reverse the Department's determination in its favor. We conclude that Coventry has standing to appeal and was a necessary party in the appeal to the district court.

I. BACKGROUND

Shaffer is a 33–year–old man with severe autism and chemical sensitivities. He has many environmental, food, and drug allergies. He resides with his mother, Delores Shaffer, who is a licensed practical nurse.

Coventry is a managed care organization (MCO) which contracts with the Department to provide Medicaid services.¹ Coventry receives a capitation payment, which is a fee “paid by Medicaid to an MCO on a monthly basis for each client enrolled with the physical health or behavioral health plan. The fee covers all services required to be provided by the MCO to the client, regardless of whether the client receives services or not.”² This type of care program is different from a fee-for-service program in that Coventry receives from the Department a set rate for each person enrolled in its program.³ Coventry then provides the requested services.⁴

Until October 2011, Delores was paid to provide 18 hours a day of private duty nursing (PDN) care to Shaffer. This payment came from a Medicaid provider other than Coventry. In October 2011, Shaffer's Medicaid coverage was then transferred to Coventry. In April 2012, Delores asked Coventry

to approve her to continue to provide PDN to Shaffer for 18 hours each day. Coventry denied this request after determining the nursing services were not medically necessary. Shaffer filed a first-level appeal with Coventry, which was denied. Shaffer then filed a second-level appeal with Coventry, which was also denied. Shaffer then requested a State fair hearing with the Department pursuant to 482 Neb. Admin. Code, ch. 7, § 003 (2010).

The fair hearing was held on January 22, 2013, before a hearing officer. Shaffer was represented by legal counsel. Teresa Engel, Coventry's supervisor of the appeals department, appeared for Coventry. At the commencement of the hearing, the hearing officer asked the “parties” to enter into a stipulation regarding the redaction of certain information from the exhibits which were to be offered. Engel and Shaffer's counsel agreed to the stipulation, which was made a part of the record. Engel also acknowledged that Coventry had received copies of all exhibits “from the State.”

The hearing officer noted it was customary to “have the Department or its representative or contractor in this case, Coventry, put on [its] testimonial evidence first.” Shaffer's counsel indicated he had no objection to this procedure, and both Engel and Shaffer's counsel declined the hearing officer's invitation to make opening statements. Engel was then sworn as Coventry's first witness. Engel presented narrative testimony explaining Coventry's reasons for denying the requested Medicaid benefits and describing the first-and second-level appeal determinations made by Coventry. She was cross-examined by Shaffer's counsel, after which she stated Coventry was resting its case but “may ... pose additional questions at the end.”

Shaffer's counsel then called both Delores and Shaffer's allergist. Both testified that in their opinion, continuation of the PDN care which Delores had been providing to Shaffer was medically necessary. The hearing officer permitted both Engel and Dr. Debra Esser, Coventry's vice president of medical affairs, to cross-examine both witnesses. On behalf of Coventry, Engel made a relevancy objection during Delores' direct examination, which the hearing officer overruled.

After Delores and Shaffer's allergist concluded their testimony, Esser was sworn and testified on behalf of Coventry, apparently as a rebuttal witness. Esser, a board-certified family practice physician, stated in response to questions posed by Engel that the PDN services for Shaffer were not medically necessary. She was cross-examined by Shaffer's counsel.

The hearing officer asked both Engel and Shaffer's counsel if they wished to offer any additional evidence, and when they responded in the negative, the hearing officer announced, “[b]oth parties have rested.” Shaffer's counsel made a closing statement, to which Engel responded.

On April 9, 2013, Vivianne M. Chaumont, who was then the director of the Division of Medicaid & Long–Term Care of the Department, entered an order based upon the record made at the State fair hearing. The order noted that Engel and Esser had appeared at the fair hearing on behalf of Coventry, that “[t]he parties” had entered into a stipulation regarding exhibits, and that “[a]ll parties were provided proper notice of the administrative hearing.” After discussing the evidence adduced at the fair hearing, the order concluded the PDN services at issue were not medically necessary.

Delores, as Shaffer's guardian and next friend, filed a petition in the district court for Lancaster County seeking judicial review of this order pursuant to the Administrative Procedure Act (APA).⁵ The petition named the Department and Chaumont in her official capacity as respondents, but did not name Coventry. The district court conducted a de novo review of the administrative record and reversed the order of the Department, finding the PDN services which Delores provided to Shaffer were medically necessary, because there was a significant probability that Shaffer could develop medical complications “virtually immediately” without such services.

The Department did not appeal, but Coventry did. We moved the appeal to our docket on our own motion pursuant to our

statutory authority to regulate the caseloads of the appellate courts of this state.⁶

II. ASSIGNMENTS OF ERROR

Coventry assigns, consolidated and restated, that the district court erred in (1) failing to find Coventry was a necessary party to the district court appeal; (2) failing to join Coventry as a necessary party, because the Department was statutorily precluded from being a party; and (3) finding the PDN services were medically...