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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Hidden Heights Assisted Living, Inc. v. State, Dept. of Health & Social Services, Division of Health Care Services (12/31/2009) sp-6445
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| HIDDEN HEIGHTS ASSISTED | ) |
| LIVING, INC., | ) |
| ) Supreme Court No. S- 13029 | |
| Appellant, | ) |
| ) Superior Court No. 3AN-05- 11125 CI | |
| v. | ) |
| ) O P I N I O N | |
| STATE OF ALASKA, | ) |
| DEPARTMENT OF HEALTH AND | ) No. 6445 December 31, 2009 |
| SOCIAL SERVICES, DIVISION | ) |
| OF HEALTH CARE SERVICES, | ) |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Mark Rindner, Judge.
Appearances: John C. Pharr, Law Offices of
John C. Pharr, Anchorage, for Appellant.
Jonathan P. Clement, Assistant Attorney
General, Anchorage, and Talis J. Colberg,
Attorney General, Juneau, for Appellee.
Before: Fabe, Chief Justice, Eastaugh,
Carpeneti, Winfree, and Christen, Justices.
CHRISTEN, Justice.
I. INTRODUCTION
I. Medicaid provider Ernest Reeves, doing business as
Hidden Heights Assisted Living, Inc. (Hidden Heights or the
facility), appeals the finding that the facility received
$47,686.79 in Medicaid overpayments. We conclude that Hidden
Heights cannot invoke the doctrine of equitable estoppel to
prevent the Department of Health and Social Services (DHSS) from
enforcing the applicable record-keeping and audit regulations.
But because DHSS agreed to give Hidden Heights an evidentiary
hearing, we conclude it was an abuse of discretion to exclude
documentary evidence Hidden Heights offered to prove that it
provided compensable services. We remand for consideration of
this evidence.
II. FACTS AND PROCEEDINGS
A. Facts
Reeves owns and operates Hidden Heights, a residential
facility for elderly male adults. Reeves and a few employees
provide care to five residents. The facility is certified as a
home and community-based waiver provider; it has been enrolled as
a Medicaid provider since 1999.1
Hidden Heights appeals the results of a ruling issued
after DHSS conducted record and field audits of documentation
supporting Hidden Heightss bills for services. Because an
overview of federal and state Medicaid law is necessary to
address Hidden Heightss appeal, we first discuss applicable
federal and state law.
1. Medicaid audits and record-keeping requirements
The Medicaid program is a cooperative federal-state
partnership under which participating states provide federally-
funded medical services to needy individuals.2 A states
participation in the Medicaid program is voluntary, but once a
state decides to participate, it must comply with federal
statutory and regulatory requirements.3 Alaska participates in
the Medicaid program, and DHSS promulgated regulations in 7
Alaska Administrative Code (AAC) 43 to implement and administer
it.4
a. Applicable federal law
The federal Medicaid Act requires that states establish
record-keeping requirements for providers.5 It also requires
that states audit provider records to monitor the use of Medicaid
funds.6 States must establish Medicaid provider agreements under
which a provider agrees to (1) [k]eep any records necessary to
disclose the extent of services the provider furnishes to
recipients, and (2) provide this information, as well as any
information regarding payments claimed by the provider for
furnishing services under the plan, to a Medicaid agency upon
request.7 Additionally, under 42 U.S.C. 1396a(a)(42), [a]
State plan for medical assistance must . . . provide that the
records of any entity participating in the plan and providing
services reimbursable on a cost-related basis will be audited as
the Secretary determines to be necessary to insure that proper
payments are made under the plan.8
One purpose of record audits is to identify improper
payments,9 such as overpayments.10 Under 42 C.F.R. 433.304,
[o]verpayment means the amount paid . . . to a provider which is
in excess of the amount that is allowable for services furnished
under section 1902 of the Act and which is required to be
refunded under section 1903 of the Act. When a state identifies
an overpayment, it must seek recoupment.11 And the states share
of federal Medicaid funds is reduced . . . to the extent of any
overpayment.12
b. Applicable Alaska law
Under Alaskas Medicaid program, providers like Hidden
Heights may seek payment for medical services rendered to
Medicaid recipients,13 but not for room and board.14 Providers in
Alaska are not required to submit supporting documentation at the
time payment is requested, but they are required to maintain
records of the services they provide15 and to submit to record
audits.16 7 AAC 43.065 requires that providers comply with
applicable state and federal Medicaid law and cooperate in
reports, surveys, reviews, or audits conducted by the department.17
7 AAC 43.065 also states:
The provider shall retain records necessary
to disclose fully to the division the extent
of services provided to recipients.
Information regarding any payment must be
made available, upon request, to division and
federal personnel.[18]
Since 1997, 7 AAC 43.030 has required that Medicaid
providers maintain records to support requests for payment.19 It
states:
A provider shall maintain accurate financial,
clinical, and other records necessary to
support the care and services for which
payment is requested. The provider is
responsible to assure that the providers
designated billing service, or other entity
responsible for the maintenance of financial,
clinical, and other records, meets the
requirements of this section.[20]
The regulation also defines what provider records must contain:
they must identify patient information including (1) recipient
receiving treatment; (2) specific services provided; (3) extent
of each service provided; (4) date on which each service is
provided; and (5) individual who provided each service.21
Alaskas Medicaid regulations have provided for post-
payment audits of provider records since 1997.22 Former 7 AAC
43.067, which was in effect when Hidden Heights submitted the
billing records at issue, stated, in relevant part, that DHSS may
conduct a desk review, field audit, or audit of a provider to
determine the providers compliance with the requirements of 7 AAC
43.030 and with other requirements of this chapter.23 7 AAC
43.032(d) authorized DHSS to identify overpayments on the basis
of a providers failure to provide documentation in an audit and
to seek recoupment for such overpayments.24
The Alaska Legislature made post-payment audits
mandatory in 2003, when it passed AS 47.05.200.25 Under
subsection (a) of that statute, DHSS must annually contract for
independent audits of a statewide sample of all medical
assistance providers in order to identify overpayments and
violations of criminal statutes.26 Under the 2003 law, compliance
with audits is a condition of receiving payment for medical
services. Alaska Statute 47.05.200(d) states, in pertinent part:
As a condition of obtaining payment under AS
47.07 and AS 47.08 . . . a provider shall
allow (1) the department reasonable access to
the records of medical assistance recipients
and providers; and (2) audit and inspection
of the records by state and federal agencies.
7 AAC 43.081(a) defines an overpayment as, among other
things, a reimbursement in excess of the amount due because of
the billing practices of the provider.27 Alaska Statute
47.05.200(b) addresses recoupment of overpayments. It requires
that DHSS use administrative procedures to recoup overpayments
identified in the audits.28 Alaskas Medicaid regulations require
that providers must refund to the division any reimbursed claim
that the division finds, after a post-payment review, does not
meet the requirements of this chapter.29
Alaskas regulations provide for appeals from record
audits. The regulation in effect when DHSS audited Hidden
Heights, 7 AAC 43.085(i), stated:
The appeal must be submitted to the
commissioner within 30 days after the
provider receives the results and must
include
(1) a clear description of the issue or
decision being appealed;
(2) the reason for the appeal; and
(3) all information and materials that the
provider requests the commissioner to
consider in resolving the appeal.[30]
2. The Hidden Heights audit
In 2004 DHSS hired Myers and Stauffer, a certified
public accounting firm (the auditor), to conduct independent
audits of Medicaid providers under AS 47.05.200(a) and former 7
AAC 43.067. The auditor conducted a desk review audit of fifty-
three of the seventy-four Medicaid claims that Hidden Heights
submitted for payment between April 1, 2002 and March 31, 2003.31
Because the auditor deemed the first set of documents Hidden
Heights submitted insufficient, it made additional document
requests, with which Hidden Heights complied.
On June 24, 2004, the auditor notified Hidden Heights
that it would be the subject of an on-site field audit and
requested more documents. Tracy Allan Hansen, who conducted the
audits and testified as an expert on Medicaid audits in the
evidentiary hearing, testified that Hidden Heights was selected
for an on-site field audit because the desk review had
left . . . a number of concerns relating to the . . . quality
and . . . breadth of documentation . . . . He testified that
Hidden Heights had not submitted documentation for every day that
was being covered in the claims in the sample.
Hansen and a registered nurse conducted the on-site
audit at Hidden Heightss office, which is located in Reevess
home, some miles away from the facility. Hansen testified that
Hidden Heights provided its documents in a highly disorganized
manner that did not include, for example, filing by patient
name, . . . filing in . . . chronological order and in . . . many
cases documents were vague as to what specific date they might
apply to.32 Hansen testified that he was informed that Hidden
Heights had presented him with all of the documents available for
the audited time period.
The auditor sent Hidden Heights a notice of preliminary
findings, explaining the audit revealed no documentation to
support twenty-seven of the fifty-three claims reviewed and
giving the facility twenty-one days to send additional documents.
Hidden Heights provided no additional documentation. Based on
the preliminary findings of twenty-seven overpayments, the
auditors initial report found the total extrapolated overpayments
for the period between April 1, 2002 and March 31, 2003 amounted
to $104,900.83.
The auditor also found that documents for recording
whether compensable services had been performed were often
completed by the caregiver initialing once and drawing a line
through all of the boxes on the form, rather than initialing each
daily [service] individually, but the auditor made no overpayment
findings on this basis. The report expressed disapproval of the
facilitys failure to update financial information (such as
patient accounts receivables). But Hansen testified that
overpayment findings were not based on the adequacy of financial
records. Overpayments were found only where Hidden Heights
submitted no documentation for the day or where the only
documentation it submitted failed to show who provided the
services in question.
DHSS gave Hidden Heights the opportunity to appeal the
audit results under former 7 AAC 43.085(i), which Hidden Heights
did in March 2005, submitting additional documentation. The new
documentation consisted of documents showing compensable daily
services (service records). The service records list nutrition,
dressing, bathing, hygiene, toileting, skin care, grooming,
administration of medication, laundry, and chores in a vertical
column on the left. A horizontal column across the top of the
page lists the days of the month. A staff members initials or a
defined symbol appeared under each date, with a handwritten,
vertical line seeming to indicate that all compensable services
were performed for that day.33 Some of the service records had
undefined stars drawn next to various activities rather than the
specific initials of the care provider.34 Hidden Heights also
provided medication supervision records showing each patients
medications and the dates on which a staff member administered
medication.
The auditor accepted the supplemental records that
documented the services provided by a line drawn down the column
of activities. But the auditor did not reduce overpayment
findings based on newly produced records that: (1) failed to
identify who provided the services, or (2) only identified that
medication was administered without indicating that any other
reimbursable services were provided.35 In April 2005 the auditor
revised the overpayment findings to total $45,093.57 for the
sample time period, extrapolated to $62,960.83 for the entire
audited time period. The facility appealed this finding in June
2005 and submitted still more documents. Hidden Heightss second
appeal resulted in a reduced overpayment finding of $39,111.02
for the sample time period, extrapolated to $54,607.84 for the
entire audited time period.
After Hidden Heightss second appeal, the commissioner
of DHSS sent Hidden Heights a compromise settlement offer. The
commissioner offered to accept a reduced payment in satisfaction
of the auditors overpayment finding. Alternatively, if Hidden
Heights rejected the compromise monetary settlement, the
commissioner gave Hidden Heights the option of requesting an
evidentiary hearing or pursuing an appeal in the superior court.
Hidden Heights requested an evidentiary hearing and
simultaneously filed a notice of administrative appeal in the
superior court. The superior court stayed the appeal pending the
outcome of the evidentiary hearing.
B. Proceedings
1. Pre-hearing events, the evidentiary hearing, and the agency
decision
In pre-hearing memoranda, Hidden Heights argued that
DHSS should be equitably estopped from enforcing 7 AAC 43.030
because DHSS did not require providers to keep records of
specific reimbursable services before 2004.36 Hidden Heights also
argued that it could prove that residents were physically present
at the facility on the dates of the overpayments and impliedly
argued that proof of the residents physical presence should be
accepted as proof that the residents received reimbursable
services on those dates. Hidden Heights offered Exhibit D, a set
of daily activity logs, to support this argument.
In a pre-hearing ruling, the hearing examiner described
the documents she would consider at the evidentiary hearing:
I will only consider documents Hidden
Heights presented to the Departments auditing
team prior to my assignment to this case.
Therefore, the Department will have had an
opportunity to receive, disseminate, and
consider the evidence long before the hearing
date. This restriction will ensure I remain
part of the appellate process and not become
an independent auditor.
The parties did not agree about which documents were
made available to the auditor. The hearing officer decided that
she would rule on the admissibility of Exhibit D at the hearing,
where she could assess the credibility of the witnesses.
The evidentiary hearing was held from March 28 to March
30, 2006. Hansen testified that Hidden Heightss documents were
inconsistent but that he did not make overpayment findings if
some identifiable mark, such as initials or a defined symbol,
indicated a staff person provided all or most of the necessary,
reimbursable services. He testified that he applied a standard
of leniency in the extreme to Hidden Heightss documents, finding
overpayments only where there was absolutely no documentation or
documentation for only one service, such as the administration of
medication.
Reeves testified that DHSS had not enforced any record-
keeping requirements on Hidden Heights before 2004. But he also
admitted that he had agreed Hidden Heights would comply with 7
AAC 43.030s record-keeping requirements when he applied for
certification as a Medicaid provider, and that by enrolling as a
Medicaid provider he agreed to keep records necessary to fully
disclose the extent of the services provided to recipients under
the Medicaid program.
Reeves testified that his facility performed
reimbursable services on the dates for which there was no
documentation. He testified Hidden Heights did not bill for any
days on which it had not provided reimbursable services. Hidden
Heights sought to admit Exhibit D, daily activity logs, to show
that residents were present at the facility on the days for which
Hidden Heights billed. After hearing testimony that the auditor
had never seen Exhibit D, the hearing examiner refused to admit
the logs because she believed the purpose of the hearing was
appellate review of the audits and audit appeals and she believed
she could only consider documentary evidence given to the
auditor. But the hearing examiner allowed Reeves to testify on
the content of each daily activity log and to read each log into
the record.
The facility also offered Exhibit E, a service record
with a row of green stars. The green stars are defined on the
document as equating to the initials of a particular care
provider. Exhibit E also has a row of black stars. The black
stars are undefined. Reeves testified that he knew which
employee used stars instead of initials to demonstrate services
performed. He explained a particular employee used a green felt
tip marker to draw some of the stars and to write a key defining
them. He testified that the green ink did not show up on the
photocopied document Hidden Heights gave the auditor. Other
stars appear to have been written in ball-point pen. The stars
written in ball-point pen are visible on the photocopied records,
but they do not have a corresponding key identifying the maker of
the stars. The hearing examiner permitted Reevess testimony and
admitted the original document with the green stars into evidence
as Exhibit E. Reeves did not offer the testimony of the employee
who used stars instead of initials.
The only witness that Reeves presented or attempted to
present was Sherry Mettler, his accountant. Mettler testified
that assisted living facilities were confused as to what
documentation DHSS wanted them to maintain. She also testified
she was at Reevess office during the on-site audit and that
neither she nor Reeves understood what kind of documentation the
auditors wanted.
The hearing examiner issued a revised proposed decision
in August 2006, which the commissioner of DHSS adopted. The
examiner concluded that Hidden Heights could not establish three
of the four elements of equitable estoppel. Interpreting the
hearing as an appeal of the audit, she implicitly accepted DHSSs
decision to find overpayments where the documentation that Hidden
Heights gave to the auditor inadequately documented the services
provided. In response to Hidden Heightss challenge to the use of
7 AAC 43.030(b) as the standard for determining the adequacy of
documentation, the hearing examiner found the regulations
requirements clear and ruled that Hidden Heights failed to
document the services it billed the Department for. The examiner
emphasized [t]here were very few dates the auditors did not
accept as valid, specifically, only those in which the [service
records] did not indicate services were provided, or those for
which the only documents submitted were medication logs showing
only one reimbursable service was provided.
The hearing examiner explained that admitting Exhibit D
would not have changed her decision because Exhibit D only
documented whether a resident was present at the facility on a
given day, not whether the patient received reimbursable services
on that day. The hearing examiner stated: Hidden Heights wishes
this hearing examiner to assume that if a patient is at the
facility, he is receiving services. Payment of claims cannot be
made on assumptions. She further wrote: It would be
unconscionable for the Department to pay for services under the
assumption that if a person is present in a facility, then that
facility must be providing all the services required.
The hearing examiner also addressed the service record
documented with green stars, Exhibit E. Although she initially
admitted Exhibit E into evidence, the hearing examiner reversed
herself in her final decision, reasoning since the auditors did
not have an opportunity to review this during the audit process,
the evidence was not admitted. She then found that because the
photocopy of the document that the auditor reviewed did not have
a key defining the green stars, and because without an
explanation for the green or black stars, the document neither
showed that reimbursable services were provided nor identified
who provided them, the document was insufficient to refute DHSSs
overpayment findings.
Finally, the examiner concluded DHSS is correct in
recouping the amount Hidden Heights received for services not
supported by documentation and for non-reimbursable services,
such as room and board.
2. The superior court appeal and decision
Hidden Heights appealed the agencys decision to the
superior court. Hidden Heights challenged the denial of its
equitable estoppel argument and raised the same arguments it made
in the evidentiary hearing. It also argued that Exhibit D should
have been admitted and that the hearing examiner erred with
respect to the document with green stars, Exhibit E.
Additionally, Hidden Heights argued that post-payment audits
violate due process.
The superior court rejected Hidden Heightss equitable
estoppel claim, concluded the hearing examiner should have
admitted Exhibit D but agreed that admitting this exhibit would
not have changed the outcome, and found that substantial
evidence supported DHSSs overpayment findings.37
Hidden Heights appeals.
III. STANDARD OF REVIEW
I. In an administrative appeal where the superior court acts as
an intermediate appellate court, we directly review the agency
action in question.38 In reviewing agency decisions, we review
factual issues under the substantial evidence standard.39
Substantial evidence is such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion40 based on
the record as a whole.41 We apply the deferential reasonable
basis test to legal issues involving agency expertise or
fundamental policy formation,42 including questions of [w]hether
the agency correctly interpreted its own regulations.43 Under
this standard, we defer to the agency unless the interpretation
is plainly erroneous and inconsistent with the regulation. 44 We
use the substitution of judgment standard when reviewing legal
determinations not involving agency expertise.45
IV. DISCUSSION
A. DHSS Is Not Equitably Estopped from Enforcing Medicaid
Record-keeping Requirements.
Hidden Heights argues that the hearing examiner should
have equitably estopped DHSS from enforcing 7 AAC 43.030(b)s
record-keeping requirements. It reasons DHSS never notified
Medicaid providers it would require compliance with the
regulation and did not enforce the regulation until the
legislature passed AS 47.05.200 in 2003. Whether equitable
estoppel applies is a legal question not involving agency
expertise, so we review it with our independent judgment.46
A party invoking equitable estoppel against the
government must show four elements: (1) the division asserted a
position by conduct or words; (2) [the party] acted in reasonable
reliance on the divisions assertion; (3) [the party] suffered
resulting prejudice; and (4) estopping the division from acting
against [the partys interests] serves the interest of justice so
as to limit public injury.47 If we determine that the party
cannot meet the first element, our analysis ends.48
The hearing examiner rejected Hidden Heightss argument
that DHSS asserted a position that it would not enforce 7 AAC
43.030(b) or require strict compliance with it. She found that 7
AAC 43.030 has long required providers to maintain records and
explicitly states what the providers records must include. The
hearing examiner seems to have concluded that Hidden Heights was
on notice of these requirements from the time Reeves signed the
Medicaid enrollment form in 1999 stating he would abide by this
regulation. We agree.
7 AAC 43.030s record-keeping requirements have been in
effect since 1997.49 The regulation contains a straight-forward
list of the specific information the records must include.50
Reeves knew he had to keep such documentation; he testified that
in obtaining his provider license he agreed to keep medical
records necessary to disclose the extent of the services
provided. Since 1997, regulations have authorized DHSS to audit
providers like Hidden Heights for compliance with 7 AAC 43.030s
record-keeping requirements and to seek recoupment of
overpayments based on the results of such audits.51 The
enrollment form Reeves signed included agreements to comply with
review and audit regulations and regulations relating to
recoupment/recovery of overpayment.
Reeves knew or should have known about the record-
keeping requirements of 7 AAC 43.030(b), that Hidden Heights was
subject to auditing by DHSS, and that DHSS had authority to
recoup overpayments the audits revealed. The states failure to
inform Hidden Heights separately that the record-keeping
regulations might one day be enforced does not constitute the
assertion of a position that the regulations would never be
enforced.52 Because Hidden Heights failed to show that DHSS
asserted a position contrary to enforcement of 7 AAC 43.030(b) or
recoupment proceedings, its equitable estoppel argument fails.
B. 7 AAC 43.030(b)s Record-keeping Requirements Are Clear and
DHSSs Interpretation of the Regulation Had a Reasonable Basis.
Hidden Heights argues that 7AAC 43.030(b) is ambiguous.
We disagree. 7 AAC 43.030(b) requires that provider records
identify: (1) recipient receiving treatment; (2) specific
services provided; (3) extent of each service provided; (4) date
on which each service is provided; and (5) individual who
provided the service.53 This clear regulation provided a
reasonable basis for DHSS to interpret 7 AAC 43.030(b) as
requiring that Hidden Heightss documents record the services
provided and who provided them.
C. Because DHSS Offered Hidden Heights an Evidentiary Hearing,
It Was an Abuse of Discretion To Consider Only the Documentary
Evidence Given to the Auditor.
Hidden Heights challenges two evidentiary decisions
made by the hearing examiner: one regarding Exhibit D, the daily
logs in which Hidden Heightss staff noted the residents activity
levels, and another regarding the service record on which an
employee used green stars instead of initials to document that
reimbursable services had been provided, Exhibit E. The hearing
examiner refused to admit Exhibit D into evidence because she
believed her role was limited to appellate review and because
Hidden Heights had not presented the daily logs to the auditor.
The examiner did admit Exhibit E into evidence, but she later
reversed this ruling, deciding that Exhibit E was not admissible
for the same reason as Exhibit D.
Hidden Heights argues that the hearing examiner abused
her discretion by excluding both Exhibits D and E. It also
argues that the hearing examiner erred by concluding that
consideration of Exhibit D would not have changed the result. We
review the hearing examiners decision to exclude evidence for
abuse of discretion.54
Former 7 AAC 43.085(i) allowed Hidden Heights to appeal
the auditors findings, but neither that regulation nor any other
applicable Medicaid regulation entitled Hidden Heights to an
evidentiary hearing at the administrative level.55 Hidden Heights
received an evidentiary hearing because the commissioner of DHSS
offered it as part of a compromise. DHSS had never held such an
evidentiary hearing for a Medicaid provider before. This
explains why the hearing examiner understood her purpose at the
hearing was to provide appellate review of the audit and the two
audit appeals that Hidden Heights had already received. It also
explains why the hearing examiner thought she could not admit
documentary evidence Hidden Heights had not given the auditor
during the audit or audit appeals. The hearing examiners
confusion is understandable because there are no statutes or
regulations providing an evidentiary hearing for Medicaid billers
challenging audit results. But because the commissioner of DHSS
agreed to give Hidden Heights an evidentiary hearing, it was an
abuse of discretion to limit the documentary evidence Hidden
Heights could present to the documents it gave the auditor in the
audit or audit appeals process.
The only evidence Hidden Heights offered that was not
admitted was Exhibit D, patient activity logs, and Exhibit E, a
single service record. But the hearing officer allowed Reeves to
read Exhibit D into the record, she heard testimony interpreting
Exhibit E, and she heard Mettlers testimony.56
Based on Reevess testimony, the hearing examiner found
that Exhibit D failed to show reimbursable services were
provided; the logs only show that a resident was present at the
facility on a given day and the residents activity level. For
example, one activity log shows that a resident rested all day;
another shows that a resident smoked a lot of cigarettes on a
particular day. Medicaid does not reimburse for room and board57
and as the hearing examiner concluded, a log showing only that a
resident was present does not support a finding that reimbursable
services were provided. Because the hearing examiner permitted
Reeves to read the contents of Exhibit D into the record, and
because substantial evidence supports her finding that Exhibit D
did not document the provision of compensable services, we
conclude the failure to admit Exhibit D was harmless error.
We reach a different result with respect to Exhibit E,
the document with green stars instead of an employees initials.58
Reeves testified that an employee used a green felt tip marker to
draw stars instead of her initials and to write a key defining
the stars. According to Reeves, the green ink did not show up on
the photocopy Reeves made for the auditor, and Reeves did not
show the auditor the original document. The hearing examiner
initially admitted Exhibit E but reversed herself in her final
decision. It is unclear whether she considered Reevess testimony
explaining Exhibit E.
We conclude the exclusion of Exhibit E requires remand
because we cannot say that the hearing examiners decision would
have been the same if she had considered Exhibit E or Reevess
testimony interpreting it. On remand, the hearing examiner must
consider Exhibit E and the credibility of Reevess testimony
interpreting the meaning of the green stars and key.59
In reaching this conclusion, we do not imply that the
statutory and regulatory scheme at issue entitles Medicaid
providers in Hidden Heightss position to evidentiary hearings.
That question is not before us. Here, DHSS agreed to give an
evidentiary hearing to Hidden Heights, so it was required to
consider Hidden Heightss evidence. If on remand any overpayment
findings are refuted, the total amount of overpayments must be
reduced accordingly.60
V. CONCLUSION
We AFFIRM the hearing examiners conclusion that DHSS
was not equitably estopped from enforcing Medicaid record-keeping
regulations and from auditing Hidden Heights. We AFFIRM the
hearing examiners conclusion that 7 AAC 43.030(b)s record-keeping
requirements are not ambiguous. The failure to admit Exhibit D
was harmless error, but we REVERSE the hearing officers decision
with respect to the admissibility of Exhibit E and consideration
of Reevess testimony regarding that exhibit. We REMAND for
proceedings consistent with this opinion.
_______________________________
1 The home and community-based waiver program offers a
choice between home and community-based waiver services and
institutional care in a nursing facility . . . to aged, blind,
physically or developmentally disabled, or mentally retarded
individuals who meet [certain] eligibility criteria. 7 Alaska
Administrative Code (AAC) 43.1000 (2008).
2 Garner v. State, Dept of Health & Soc. Servs., Div. of
Med. Assistance, 63 P.3d 264, 268 (Alaska 2003). Title XIX of
the Social Security Act established the Medicaid program. Id.;
42 U.S.C. 1396 (2006).
3 Garner, 63 P.3d at 268; see also AS 47.05.010 (listing
DHSSs duties).
4 See Garner, 63 P.3d at 268 (citing AS 47.07.040); 7 AAC
43.005-.1990 (2008).
5 See 42 U.S.C. 1396a(a)(27).
6 See id. 1396a(a)(42) (requiring states to conduct
audits to insure that proper payments are made under the plan).
7 42 C.F.R. 431.107(b) (2008); see also 42 U.S.C.
1396a(a)(27) (providing the same).
8 42 U.S.C. 1396a(a)(42); see also 42 C.F.R. 447.202
(The Medicaid agency must assure appropriate audit of records if
payment is based on costs of services or on a fee plus cost of
materials.).
9 See 42 U.S.C. 1396a(a)(42).
10 See 42 C.F.R. 433.304 (defining overpayment).
11 42 C.F.R. 433.316(b) (Unless [the state] chooses to
initiate a formal recoupment action against a provider without
first giving written notification of its intent, [the state] must
notify the provider in writing of any overpayment it
discovers . . . and must take reasonable actions to attempt to
recover the overpayment.); cf. id. 433.312 (requiring state
governments to refund, to the federal government, the Federal
share of any overpayments within sixty days of their discovery).
Agencies must report identified overpayments to the federal
government quarterly. See id. 433.320(a).
Federal law also requires each state to establish a
Medicaid fraud and abuse control unit for the collection, or
referral for collection to a single State agency, of overpayments
that are made under the State plan . . . to health care
facilities and that are discovered by [the Medicaid fraud and
abuse control unit] in carrying out its activities. 42 U.S.C.
1396a(a)(61), 1396b(q)(5).
12 Id. 1396b(d)(2)(A).
13 7 AAC 43.005(a) & (b)(35) (2008); see also 7 AAC
43.035(a)(18) (listing home and community-based service providers
as types of providers eligible to enroll with the department and
bill directly for services rendered).
14 7 AAC 43.1044(c)(2)(A).
15 See 7 AAC 43.065(c) (2001); 7 AAC 43.030 (2008). We
cite the version of 7 AAC 43.065 in effect when DHSS began
auditing Hidden Heights in 2004, not the current version, which
was amended in 2007. (Applying the 2007 version would not change
the result, as subsection (c) was not affected by the amendment.
Compare 7 AAC 43.065 (2001), with 7 AAC 43.065 (2007).)
16 AS 47.05.200(d); see also former 7 AAC 43.067 (1998)
(providing for audits at DHSSs discretion) (repealed in 2006 and
replaced by regulations implementing AS 47.05.200s new mandatory
audits); 7 AAC 43.065(b)(3) (requiring providers to cooperate
with audits); cf. 7 AAC 43.032(a) (requiring providers to produce
records to state officials on request, implicitly for auditing
purposes).
17 7 AAC 43.065(b)(2)-(3).
The entirety of 7 AAC 43.065(b) (2001) follows:
Providing medical or medically-related
services to recipients or billing the
division for those services constitutes
agreement by the provider
(1) to follow procedures that are
consistent with guidance in the
applicable Alaska Medicaid Provider
Billing Manual as of July 14, 2000;
(2) to comply with applicable state
and federal Medicaid law; and
(3) to cooperate in reports,
surveys, reviews, or audits
conducted by the department.
18 7 AAC 43.065(c).
19 See 7 AAC 43.030(a) (2008) (am. 1997, eff. 1997).
20 Id.
21 7 AAC 43.030(b)(1)-(5).
22 See former 7 AAC 43.067 (eff. 1997) (repealed 2006)
(providing for discretionary audits); 7 AAC 43.1440 (eff. 2006)
(providing for mandatory audits).
23 Former 7 AAC 43.067(a) (1998). 7 AAC 43.067 was
amended in June 2004 and repealed in December 2006. See former 7
AAC 43.067 (am. 2004) (repealed 2006). The regulation was
replaced by 7 AAC 43.1440, which made annual audits mandatory.
See 7 AAC 43.1440 (eff. 2006). Because DHSS began auditing
Hidden Heights in March 2004, before the June 2004 amendments or
the December 2006 repeal, the 1998 version of 7 AAC 43.067
applies.
Under former 7 AAC 43.067, a desk review was an audit
of a providers records without a visit to the providers place of
business or site at which the provider maintains business
records, and a field audit was an audit of a providers records at
the providers place of business or site at which the provider
maintains business records. Former 7 AAC 43.067(e)(2)-(3).
24 7 AAC 43.032(d) (eff. 1997).
25 See ch. 66, 3, SLA 2003.
26 AS 47.05.200(a). DHSS may use standard statistical
sampling methods to select claims for review or audit and to
calculate overpayments to providers. Former 7 AAC 43.068 (1998);
see also 7 AAC 43.1470 (2008) (eff. 2006) (providing the same).
27 7 AAC 43.081(a)(13) (1998). We cite the 1998 version
of 7 AAC 43.081 because the regulation was amended in 2006, after
DHSS audited Hidden Heights. Applying the current version would
not change the result, as the 2006 amendment did not change the
definition of overpayment. Compare 7 AAC 43.081 (1998), with 7
AAC 43.081 (2008).
28 AS 47.05.200(b); see also 7 AAC 43.065(h) (2001)
(Providing medical or medically-related services to recipients or
billing the division for those services constitutes an agreement
by the provider that the division may take action under 7 AAC
43.081 to recover an overpayment.).
29 7 AAC 43.065(g).
30 Former 7 AAC 43.085(i)(1)-(3) (2004).
31 The total Medicaid payments Hidden Heights received for
the seventy-four claims it submitted in this time period amounted
to $284,344.41. The fifty-three claims reviewed in the audit
amounted to a total of $202,754.64.
32 He further testified: The best way that I could
characterize the way the documentation was presented to us is
that it was piled in stacks on . . . a table and that these
stacks were highly disorganized. Reeves and his accountant,
Sherry Mettler, testified the documents were disorganized and in
stacks and boxes in part because Reeves was in the process of
moving Hidden Heightss office from Reevess mothers house to his
house.
33 We use defined symbol to refer to a symbol that is
explained in a key on the document. For example, some of the
defined symbols are identified in a key as [symbol] = [initials
of a particular provider].
34 We use undefined star to mean a star in a document with
no key to explain the stars meaning.
35 Mary Francis Arseneau, testifying as an Alaska Medicaid
expert, explained that Medicaid pays assisted-living providers an
all-inclusive per-diem rate but does not pay for individual
services. She testified that this is why a record showing that
only one service was provided on a given day, such as the
administration of medication, may result in an overpayment
finding for that day.
36 To invoke equitable estoppel against the government a
party must show: (1) the division asserted a position by conduct
or words; (2) [the party] acted in reasonable reliance on the
divisions assertion; (3) [the party] suffered resulting
prejudice; and (4) estopping the division from acting against
[the partys interest] serves the interest of justice so as to
limit public injury. State, Dept of Commerce & Econ. Dev., Div.
of Ins. v. Schnell, 8 P.3d 351, 356 (Alaska 2000).
37 The court also rejected Hidden Heightss due process
challenge as inadequately briefed.
38 Garner v. State, Dept of Health & Soc. Servs., Div. of
Med. Assistance, 63 P.3d 264, 267 (Alaska 2003) (citing Matanuska
Elec. Assn v. Chugach Elec. Assn, 53 P.3d 578, 583 (Alaska 2002))
(internal quotation marks omitted).
39 Bauder v. Alaska Airlines, Inc., 52 P.3d 166, 174
(Alaska 2002) (quoting Peninsula Corr. Health Care v. Dept of
Corr., 924 P.2d 425, 426 (Alaska 1996)).
40 Id. (quoting Thompson v. United Parcel Serv., 975 P.2d
684, 688 (Alaska 1999)) (internal quotation marks omitted).
41 Municipality of Anchorage, Police & Fire Ret. Bd. v.
Coffey, 893 P.2d 722, 726 (Alaska 1995).
42 Bauder, 52 P.3d at 174 (quoting Thompson, 975 P.2d at
688) (internal quotation marks omitted).
43 Garner, 63 P.3d at 267 (citing Cleaver v. State,
Commercial Fisheries Entry Commn, 48 P.3d 464, 467 (Alaska
2002)); see also May v. State, Commercial Fisheries Entry Commn,
175 P.3d 1211, 1215-16 (Alaska 2007).
44 May, 175 P.3d at 1216 (quoting Simpson v. State,
Commercial Fisheries Entry Commn, 101 P.3d 605, 609 (Alaska
2004)) (internal quotation marks omitted). We have explained the
reasonable basis standard another way, stating that under that
standard we defer[] to the agency decision as long as it is
reasonable and supported by the evidence. Bauder, 52 P.3d at 174
(citing Thompson, 975 P.2d at 688).
45 Bauder, 52 P.3d at 174 (quoting Thompson, 975 P.2d at
688) (internal quotation marks omitted).
46 See State, Dept of Commerce & Econ. Dev., Div. of Ins.
v. Schnell, 8 P.3d 351, 355 (Alaska 2000).
47 Id. at 356 (citing Wassink v. Hawkins, 763 P.2d 971,
975 (Alaska 1988)).
48 See id. at 358 (Because the first element necessary for
equitable estoppel is absent, we need not consider the other
three elements.).
49 See 7 AAC 43.030 (am. 1997).
50 See 7 AAC 43.030(b).
51 See former 7 AAC 43.067 (eff. 1997) (repealed 2006)
(authorizing DHSS to audit providers for compliance with 7 AAC
43.030); 7 AAC 43.032(d) (2008) (eff. 1997) (authorizing DHSS to
find overpayments based on a providers failure to provide
adequate records during an audit and to seek recoupment of such
overpayments). 7 AAC 43.032(d) has never been amended and
remains valid today.
52 Cf. State, Dept of Commerce & Econ. Dev., 8 P.3d at 356-
57.
53 7 AAC 43.030(b).
54 Cf. Lopez v. Admr, Pub. Employees Ret. Sys., 20 P.3d
568, 571 (Alaska 2001) (reviewing exclusion of evidence by
administrative boards for abuse of discretion).
55 Former 7 AAC 43.085(i) (2004); see also 7 AAC 43.005 et
seq. (2008).
56 DHSS argues that in a Medicaid provider audit,
documentation is the only evidence [a provider can offer] of
medical assistance actually provided. We need not reach that
issue. Because DHSS agreed to provide Hidden Heights an
evidentiary hearing, the evidence Hidden Heights offered,
Exhibits D and E and the testimony of two witnesses, should have
been admitted and considered by the hearing officer.
57 See 7 AAC 43.1044(c)(2)(A).
58 Exhibit E is the single service record with green
stars. The record contains similar but photocopied service
records for the same month with black stars apparently written in
ball-point pen. These black stars do not have a key explaining
who made them. It is unclear from the testimony and record
whether Reeves offered Exhibit E to serve as a key for all the
undefined stars for that month or whether Exhibit E was only
intended to serve as documentation for one day.
59 If Hidden Heights offered Exhibit E as a key to
interpret the stars written in ball-point pen on other service
records disallowed by the auditor, those service records should
also be considered on remand.
60 Hidden Heights also argued that DHSS is not required to
seek recoupment of overpayments and that DHSS could seek
sanctions instead. We disagree. If DHSSs overpayment findings
are adequately supported, the applicable statutes and regulations
require DHSS to seek recoupment. See AS 47.05.200(b) (Within 90
days after receiving each audit report from an audit conducted
under this section, the department shall begin administrative
procedures to recoup overpayments identified in the audits.); 42
C.F.R. 433.316(b).
Finally, to the extent Hidden Heights raises a due
process challenge on appeal, we consider it waived for inadequate
briefing and failure to raise the issue in the statement of
points on appeal. See A.H. v. W.P., 896 P.2d 240, 243 (Alaska
1995) ([W]here a point is given only cursory statement in the
argument portion of a brief, the point will not be considered on
appeal. (quoting Adamson v. Univ. of Alaska, 819 P.2d 886, 889
n.3 (Alaska 1991))); Wren v. State, 577 P.2d 235, 237 n.2 (Alaska
1978) (stating we will not address issues not listed in the
statement of points on appeal or not adequately briefed).
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