St. Alexius Med. Ctr. v. N.D. Dep't of Human Servs.

Decision Date01 February 2018
Docket NumberNo. 20170200,20170200
Citation906 N.W.2d 343
Parties ST. ALEXIUS MEDICAL CENTER, d/b/a Great Plains Rehabilitation, Appellant v. NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES, Appellee
CourtNorth Dakota Supreme Court

Jason T. Lundy (argued), Chicago, IL and Sean O. Smith (appeared), Bismarck, ND, for appellant.

Elizabeth A. Fischer (argued), and James E. Nicolai (appeared), Office of the Attorney General, Bismarck, ND, for appellee.

Jensen, Justice.

[¶ 1] St. Alexius Medical Center, doing business as Great Plains Rehabilitation ("Great Plains"), appeals from a district court judgment affirming a decision of the Department of Human Services ("the Department") determining that the Department was entitled to recoup overpayments made to Great Plains. Great Plains argues that the Department's decision should be reversed because the Department did not issue the decision within the statutory time limit, the Department did not provide a fair process for disputing the Department's position, and the Department's findings of fact are not supported by the evidence. We affirm the judgment.

I

[¶ 2] This case is one of three factually similar cases arising from administrative appeals initiated by providers of durable medical equipment and supplies (DME) to Medicaid recipients. See Sanford HealthCare Accessories, LLC v. N.D. Dep't of Human Servs. , 2018 ND 35, 906 N.W.2d 336 ; Altru Specialty Servs., Inc. v. N.D. Dep't of Human Servs. , 2017 ND 270, 903 N.W.2d 721. In all three cases, the Department issued administrative decisions determining that it was entitled to recoup overpayments made to the providers. In the Sanford and Altru cases, the district court determined the Department's decisions were "not in accordance with the law" under N.D.C.C. § 28–32–46(1) because the Department failed to issue the decisions within the seventy-five day deadline set forth in N.D.C.C. § 50–24.1–24(5). Great Plains did not challenge the timeliness of the Department's decision in the district court, and the district court affirmed the Department's decision after reviewing the Department's findings.

[¶ 3] The Patient Protection and Affordable Care Act, 42 U.S.C. § 18001 et seq. (2010), and related federal regulations require states to establish a Medicaid Recovery Audit Contractor Program ("RAC") to audit past payments to ensure the state's Medicaid billing procedures and policies were followed by providers who requested payment of Medicaid claims. The Department contracted with an audit contractor to conduct the audit and review provider submitted Medicaid claims.

[¶ 4] The documentation requirements and procedures for billing Medicaid claims are included in the Manual for Durable Medical Equipment, Orthotics, Prosthetics & Supplies ("DME Manual") published by the Department and available on the internet. See Manual for Durable Medical Equipment, Orthotics, Prosthetics & Supplies (March 2013), www.nd.gov/dhs/services/medicalserv/medicaid/docs/dme/dme-manual.pdf. The parties agree the relevant part of the DME Manual provides: "The diagnosis, medical necessity, and the projected length of need for a covered item must be included on the prescription, prior auth, or Certificate of Medical Necessity (CMN)." Great Plains asserted that the three items listed in the manual (diagnosis, medical necessity, and length of need) can be provided through a combination of the prescription, prior authorization, or certificate of medical necessity. The RAC auditor interpreted the language in the manual to require all three items to be found within a single record, i.e., either the prescription, prior authorization, or certificate of medical necessity.

[¶ 5] The RAC audit determined that Great Plains had received overpayment from the Department in at least forty claims. For each of those claims, the RAC audit noted multiple deficiencies in the documentation Great Plains had provided to support Medicaid billings for equipment provided to Medicaid recipients. Great Plains sought administrative review challenging the findings of the RAC audit.

[¶ 6] Great Plains filed its request for review of the RAC audit with the Department on August 6, 2015. Twenty days later, the Department sent Great Plains a letter outlining the documentation that Great Plains could submit to satisfy Medicaid's billing requirements for establishing the diagnosis, medical necessity, and projected length of need for DME. In the August 2015 letter to Great Plains, the Department noted its agreement with Great Plains that it would be acceptable for the diagnosis, medical necessity, and length of need to be found in a combination of the prescription, prior authorization, and certificate of medical necessity documents. The Department directed Great Plains to mark an "A" on one of the three acceptable documents showing the diagnosis, a "B" on one of the three documents showing the medical necessity, and a "C" on one of the three documents showing the projected length of need.

[¶ 7] In response to the Department's August 2015 letter, Great Plains resubmitted the claims, marking the documents to show which documents included the diagnosis, medical necessity, and projected length of need. In some instances, Great Plains altered original prescription documents by adding the phrase "one time dispense" next to a designation of "C."

[¶ 8] On March 29, 2016, the Department issued an administrative decision finding Great Plains had not complied with Medicaid billing requirements with respect to all forty claims, an overpayment had been made to Great Plains in the amount of $96,140.35, and the Department was entitled to a recoupment of the overpayment. The decision noted that the requirement to document the diagnosis, medical necessity and length of need must be fulfilled by including the information within a combination of the prescription, prior authorization or certificate of medical necessity and could not be satisfied if the information was somewhere else within the medical record. The administrative decision also specifically noted Great Plains could not satisfy the documentation requirements by modifying an original prescription to include the length of need.

[¶ 9] On April 29, 2016, Great Plains filed a Notice of Appeal and Specifications of Errors for Administrative Review, timely appealing the administrative decision to the district court. Great Plains advanced eight specifications of error, but did not challenge the timeliness of the Department's decision. Great Plains also failed to challenge the timeliness of the Department's decision in its subsequent pleadings in the district court.

[¶ 10] On December 19, 2016, the district court issued an order affirming the Department's administrative decision. The court rejected Great Plains' contentions that the Department did not afford it a fair hearing, that the Department violated the adjudicative procedure requirements of the Administrative Agencies Practice Act ("AAPA"), N.D.C.C. ch. 28–32, and that the Department's findings of fact were unsupported by the record. The district court did not address the timeliness of the Department's decision because Great Plains had not raised the issue. Great Plains filed a timely appeal of the district court's decision to this Court.

II

[¶ 11] An administrative agency's decision is reviewed under the standard set out in N.D.C.C. § 28–32–46. See Welch v. Workforce Safety & Ins. , 2017 ND 210, ¶ 11, 900 N.W.2d 822. Under N.D.C.C. § 28–32–46, an administrative agency's decision will be affirmed on appeal unless the order is not in accordance with the law, the order violates the appellant's constitutional rights, the provisions of N.D.C.C. ch. 28–32 have not been complied with in the agency proceedings, the agency's rules or procedure have not afforded the appellant a fair hearing, the findings of fact are not supported by a preponderance of the evidence, or the conclusions of law are not supported by the findings of fact. See Welch , at ¶ 11.

III

[¶ 12] For the first time, on appeal, Great Plains argues the Department lost subject matter jurisdiction over the action because it failed to issue a final decision within seventy-five days as required by N.D.C.C. § 50–24.1–24(5). Great Plains admits it did not raise this issue before the district court, but contends it can raise the Department's failure to issue a decision within the statutory time limit for the first time on appeal because it is a jurisdictional issue.

[¶ 13] Section 50–24.1–24(5), N.D.C.C., states, "The department shall make and issue its final decision within seventy-five days of receipt of the notice of request for review." Generally, the use of the word "shall" in a statute creates a mandatory duty and the use of the word "may" creates a directory duty; however, this Court has said the word "shall" will be construed as "may" where it is necessary to effect the legislative intent. Solen Pub. Sch. Dist. No. 3 v. Heisler , 381 N.W.2d 201, 203 (N.D. 1986). This Court explained:

If the prescribed duty is essential to the main objective of the statute, the statute is mandatory and the failure to comply with it will invalidate subsequent proceedings; however, if the duty is not essential to accomplishing the main objective of the statute but is designed to assure order and promptness in the proceeding, the statute is directory and the failure to comply with it will not invalidate subsequent proceedings.

Id . Statutes requiring performance of a duty by a public officer within a specified time are generally construed to be directory so that the interests of private parties and the public will not be injured because of the delay. Id . at 204. "[C]ourts employ a balancing test to determine whether prejudice to a party caused by the delay is outweighed by the interests of another party or the public in allowing the act to be performed after the statutory time period has elapsed." Id . This Court has said non-compliance with statutory time requirements intended to ensure order and...

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3 cases
  • State v. Sanchez
    • United States
    • North Dakota Supreme Court
    • November 6, 2018
    ...the complaining party establishes prejudice or detriment. See St. Alexius Med. Ctr. v. N.D. Dep’t of Human Servs. , 2018 ND 36, ¶ 13, 906 N.W.2d 343 ; Fireman’s Fund Mortg. Corp. v. Smith , 436 N.W.2d 246, 247-48 (N.D. 1989). Here, the 30-day deadline was not imposed by statute or rule, but......
  • State v. Sanchez
    • United States
    • North Dakota Supreme Court
    • November 6, 2018
    ...the complaining party establishes prejudice or detriment. SeeSt. Alexius Med. Ctr. v. N.D. Dep't of Human Servs., 2018 ND 36, ¶ 13, 906 N.W.2d 343; Fireman's Fund Mortg. Corp. v. Smith, 436 N.W.2d 246, 247-48 (N.D. 1989). Here, the 30-day deadline was not imposed by statute or rule, but by ......
  • Sanford Healthcare Accessories, LLC v. N.D. Dep't of Human Servs.
    • United States
    • North Dakota Supreme Court
    • February 1, 2018

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