SSI Medical Services, Inc. v. State Dept. of Human Services, Div. of Medical Assistance and Health Services

• Decision Date: 20 November 1996
• Citation: 146 N.J. 614,685 A.2d 1
• Court: New Jersey Supreme Court
• Parties: , Medicare & Medicaid Guide P 44,902 SSI MEDICAL SERVICES, INC., Appellant-Respondent, v. STATE of New Jersey, DEPARTMENT OF HUMAN SERVICES, DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES, Respondent-Appellant.

Page 614

146 N.J. 614

685 A.2d 1, Medicare & Medicaid Guide P 44,902

SSI MEDICAL SERVICES, INC., Appellant-Respondent, v. STATE of New Jersey, DEPARTMENT OF HUMAN SERVICES, DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES Respondent-Appellant.

Supreme Court of New Jersey.

Argued Sept. 9, 1996.

Decided Nov. 20, 1996.

John K. Worthington, Deputy Attorney General (Peter G. Verniero, Attorney General of New

Jersey, attorney; Joseph L. Yannotti, Assistant Attorney General, of counsel), for appellant.

William S. Greenberg, for respondent (McCarter & English, attorneys; Mary Ann Mullaney, on the brief).

The opinion of the Court was delivered by

HANDLER, J.

The State of New Jersey participates in the Medical Assistance Program established under the Social Security Act. Those who are eligible for benefits under the program receive medical and health care from qualified "providers" of services. Providers are reimbursed from the New Jersey Medicaid Program fund.

In this case a provider under the program furnished medical equipment to patients. The State approved certain reimbursement claims submitted by the provider. However, it rejected other claims on the grounds that the evidence did not demonstrate that they had been filed within the time period required for the submission of claims.

On appeal, the Appellate Division reversed the determination of the State. 284 N.J.Super. 184, 664 A.2d 505 (1995). Based on a dissent, the State filed an appeal as of right to this Court. The sole issue in this case relates to the standard of proof required to demonstrate whether reimbursement claims were timely filed and the sufficiency of the evidence under that standard.

I

The Medical Assistance Program was established by Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 to 1396u. The Medicaid program is a federal-state cooperative program that is jointly funded by the state and federal governments. See N.J.S.A. 30:4D-2. The program enables participating states to furnish assistance to individuals whose economic resources are insufficient to meet the costs of necessary medical care. The Department of Human Services, through the Division of Medical and Health Services ("DMAHS"), is the state agency that administers the Medicaid program in New Jersey. N.J.S.A. 30:4D-5. Those who are eligible for benefits under the program are given treatment, care, or medical equipment from a qualified "provider" of services. The provider is reimbursed, not by the patient-beneficiary but from the New Jersey Medicaid Program fund. The State may then seek reimbursement from the federal government.

Plaintiff SSI Medical Services, Inc. ("SSI") is a qualified provider. It provides therapeutic beds and other specialized equipment to patients to assist them in their treatment of recuperation from illness, generally at the request of a physician. In November 1992, SSI filed a notice of appeal with the Office of Administrative Law in response to the denial of payment on the disputed claims by the State's fiscal agent, Unisys, which, in November 1991, replaced Prudential Insurance Co. ("Prudential") as DMAHS's fiscal agent. A hearing was held before the Chief Administrative Law Judge ("CALJ"). SSI claimed that it mailed the reimbursement forms within the statutorily prescribed period. SSI submitted into evidence photocopies of the disputed claims contained in patient files as well as employee affidavits attesting to SSI's standard procedure for mailing Medicaid claims. The State submitted its computer printout of claims received between 1990 and 1991, demonstrating no record of timely receipt of SSI's claims.

The CALJ issued a written preliminary decision recommending payment on one-half of the claims. The CALJ found that the evidence supported a conclusion that the claims were completed and mailed in accordance with SSI's procedure and custom. The CALJ was persuaded by the fact that the missing claims were randomly dated, thereby indicating that the loss of claims was random or sporadic rather than a loss attributable to an entire batch of sequentially-dated claims.

The CALJ further ruled that SSI could rely only on the presumption of proper mailing and receipt for a reasonable period of time. Medicaid regulations require the submission of claims within twelve months of the provision of services and allow inquiries into unsettled claims no later than ninety days after the expiration of the twelve-month period. See N.J.A.C. 10:49-7.2(c), (g). The CALJ then divided the claims into two groups: those for which SSI had produced no evidence of resubmittal and those for which SSI had produced a copy of resubmitted billing mailed either within the twelve-month period for timely submission of claims or within the additional ninety-day inquiry period. For those claims in the former group, the CALJ concluded that SSI had exceeded the bounds of reasonableness in relying on the presumption of receipt and recommended rejection of the claims. For the latter group of claims, the CALJ recommended that those be treated as timely submitted.

The decision was reviewed by the Acting Director of DMAHS, who affirmed the decision disallowing payment on the first group of claims (those of which there was no evidence of resubmittal) and reversed the decision allowing payment on the apparently resubmitted claims. The Acting Director's stated reasons for rejecting the claims are as follows:

The first reason is that the policy of the New Jersey Medicaid program has been that a provider of service must present "documentary evidence of filing" of the claims with the fiscal agent, Jewish Hospital and Rehabilitation Center v. DMAHS, 92 N.J.A.R.2d (DMA) 53, 58 (1992). As indicated in the holding of the above-cited case, this Division has historically required a higher standard of proof of timely filing of a claim than the general business practice with regard to processing and mailing set forth in the line of cases on which the Chief ALJ relied in reaching her decision.

The reason for requiring a higher standard of proof concerning the timely filing of a Medicaid claim is two-fold. The first reason, which is not at issue in this case, is to protect the integrity of the Medicaid program which pays providers of service millions of dollars in both State and Federal funds. The second reason, which is in issue in this case, is to avoid a disallowance of the federal share of the Medicaid payments because a claim was not filed within twelve months from the date of service (42 CFR 447.45(d)) and to comply with the State legislative mandate set forth in N.J.S.A. 30:4D-7, that the Commissioner maximize federal funding.

The Acting Director concluded that SSI failed to meet this "heightened standard of proof." SSI appealed.

The Appellate Division found that the standard of proof required by the Acting Director to demonstrate proof of mailing is higher than the traditional preponderance of the evidence standard generally applied in agency matters, and it disapproved use of that higher standard. 284 N.J.Super. at 188, 664 A.2d 505. The court held that proof of mailing could be established by evidence of habit or routine practice and that the evidence presented by SSI employees responsible for processing the disputed claims fully supported the CALJ's conclusion that the resubmitted claims were properly and duly mailed. Id. at 191, 664 A.2d 505. The dissent concluded that the Acting Director had not required a higher standard of proof than that ordinarily required of any litigant in a claim against a private entity. Id. at 199, 200-01, 664 A.2d 505 (Michels, J., dissenting). Considering the applicable standard of proof for demonstrating proper mailing, the dissent determined that under common law evidence of office custom must be accompanied by evidence that the custom was followed in the particular case. Id. at 198-99, 664 A.2d 505. It further noted that were the law otherwise, it would still defer to the standard applied by the Acting Director as the agency director charged with interpreting and administering the law governing the agency. Id. at 200, 664 A.2d 505.

II

The Acting Director of DMAHS ruled that the resubmitted claims should be disallowed because SSI did not present "documentary evidence" that the claims had been filed. The Acting Director stated that the DMAHS has historically required a higher standard of proof of timely filing of a claim than "general business practice" evidence. It is this final agency decision that forms the basis for our review.

Courts have a limited role in reviewing the decision of an administrative agency. George Harms Constr. v. Turnpike Auth., 137 N.J. 8, 27, 644 A.2d 76 (1994); Public Serv. Elec. v. New Jersey Dep't of Envtl. Protection, 101 N.J. 95, 103, 501 A.2d 125 (1985). Ordinarily, reversal is appropriate only if the decision of the agency is arbitrary, capricious or unreasonable, or not supported by substantial credible evidence in the record as a whole. Impey v. Board of Educ., 142 N.J. 388, 397, 662 A.2d 960 (1995); Dennery v. Board of Educ., 131 N.J. 626, 641, 622 A.2d 858 (1993); Henry v. Rahway State Prison, 81 N.J. 571, 579-80, 410 A.2d 686 (1980).

However, an agency has no expertise to decide purely legal issues. Greenwood v. State Police Training Ctr., 127 N.J. 500, 513, 606 A.2d 336 (1992); Mayflower Sec. v. Bureau of Sec., 64 N.J. 85, 93, 312 A.2d 497 (1973). In such situations, de novo review is appropriate. Baylor v. Department of Human Serv., 235 N.J.Super. 22, 26-27, 561 A.2d 618 (App.Div.1989), aff'd, 127 N.J. 286, 604 A.2d 110 (1990); Grancagnola v. Planning Bd., 221 N.J.Super. 71, 75-76, 533 A.2d 982 (App.Div.1987) (citing Mayflower Sec., supra, 64 N.J. at 93, 312 A.2d 497). This case presents a legal question regarding the standard of proof required in order to demonstrate proof of mailing as an evidentiary element in establishing the timely submission of claims. We believe that the Appellate Division...