SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0593-17T4

N.P.,

Petitioner-Appellant,

v.

DIVISION OF MEDICAL 

ASSISTANCE AND HEALTH

SERVICES and UNITED

HEALTHCARE COMMUNITY

PLAN,

Respondents-Respondents.

_____________________________

Submitted December 6, 2018 – Decided May 24, 2019

Before Judges O'Connor and DeAlmeida.

On appeal from the New Jersey Department of Human 

Services, Division of Medical Assistance and Health 

Services.

Disability Rights New Jersey, attorneys for appellant 

(August L. Pozgay, on the briefs).

Gurbir S. Grewal, Attorney General, attorney for 

respondent Division of Medical Assistance and Health 

Services (Melissa H. Raksa, Assistant Attorney 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the 

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
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General, of counsel; Jacqueline R. D'Alessandro, 

Deputy Attorney General, on the brief).

Stradley Ronon Stevens & Young, LLP, attorneys for 

respondent United Healthcare Community Plan (Corey 

S. D. Norcross, on the brief).

PER CURIAM

Petitioner N.P. appeals from the September 27, 2017 final agency decision 

of the Division of Medical Assistance and Health Services (Division), which 

reversed the Administrative Law Judge's (ALJ) initial decision. The initial 

decision found respondent United Healthcare Community Plan (United), a 

managed care organization (MCO), failed to provide petitioner with notice of its 

adverse benefit determination, contrary to N.J.A.C. 10:49-10.4 and 42 C.F.R. 

438.404, and ordered United to provide the proper notice to petitioner. The ALJ 

contemplated that after proper notice was served upon petitioner, a fair hearing 

would be scheduled on the underlying substantive issue. For the reasons that 

follow, we vacate the Division's final decision and remand for further 

proceedings.

I

Petitioner is a severely impaired young woman, who resides at home with 

her father, her primary caregiver. She requires monitoring twenty-four hours a 

day. She cannot eat or speak, and is unable to sit, stand or change positions on 
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her own. She is fed and hydrated through a gastrostomy tube. She needs oral 

suctioning to prevent her from choking. She experiences frequent seizures, 

which occur even when she sleeps, for which she requires treatment.

In 2000, petitioner commenced receiving sixteen hours a day of private 

duty nursing (PDN) in her home. In 2016, she was receiving PDN from 3:00 

p.m. to 10:00 p.m. and from 11:00 p.m. to 8:00 a.m. Petitioner attends school 

during the week from 8:00 a.m. to 3:00 p.m. When she is not in school or there 

is no nurse in her home, she is cared for by her father. 

Petitioner's nursing care is paid by Medicaid. In particular, United pays 

the nursing agency for the cost of providing nurses to petitioner and United is 

compensated by Medicaid. As a MCO, United contracted with the State to 

provide or to oversee providing services to Medicaid beneficiaries in exchange 

for a fixed, prospective payment from the State for each beneficiary. See

generally Medicaid Program; Medicaid Managed Care: New Provisions, 67 Fed. 

Reg. 40,989 (June 14, 2002).

In early 2016, United notified petitioner's father it was reducing 

petitioner's PDN services from 112 to 77 hours per week, effective March 1, 

2016. United's reason was that, as her primary caretaker, the father was required 

to provide petitioner with at least eight hours of care every day. Petitioner 
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internally appealed United's determination, see N.J.A.C. 11:24-8.5, but it was 

upheld. Petitioner filed a second internal appeal, see N.J.A.C. 11:24-8.6(a), but 

United's determination was again upheld. Petitioner filed an external appeal 

pursuant to N.J.A.C. 11:24-8.7(a), and the Department of Banking and Insurance 

assigned the appeal to an independent utilization review organization (IURO) 

for its review and decision.

On May 5, 2016, the IURO issued a written decision recommending that 

United's decision to reduce petitioner's PDN from 112 to 77 hours per week be 

overturned, because petitioner's need for 16 hours of PDN per day was medically 

necessary in light of her medical condition. Specifically, the IURO's written 

opinion stated in pertinent part:

[Petitioner] meets medical necessity criteria for 

confinement in a skilled nursing facility, and placement 

of the nurse in the home is done to meet the skilled 

needs of [petitioner] only, not the convenience of the 

family caregiver. It also follows recommendations 

made by the American Academy of Pediatrics (AAP) in 

regard to the "medical home" for children with 

significant disabilities . . . and with the guidelines 

outlined by the Centers for Medicare & Medicaid 

Services (CMS) . . . . In addition, Noah et al discusses 

how children who are chronically ill require the support 

of trained family caregivers with the help of skilled 

nursing support, as is requested in this case . . . .

. . . .
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Giving this enrollee one hundred and twelve 

(112) hours per week of PDN care is appropriate for her 

level of care and the standards of care. The enrollee 

was previously approved for this level of nursing care, 

and her nursing needs have not decreased. . . . She 

requires around the clock medications, respiratory 

treatments, feedings and oral suctioning. The requested 

service allows the enrollee to attend school during the 

day and for the caregiver to sleep at night.

[(Emphasis added).]

Because of its relevance to one of the issues, we note that, when summarizing 

petitioner's history, the IURO remarked that "[petitioner] does not have a one 

(1) on one (1) nurse during school hours."

It is not disputed the IURO's decision is binding upon United. See

N.J.A.C. 11:24-8.7. In a letter dated May 6, 2016, United advised petitioner that 

the IURO had reversed United's decision to reduce the number of PDN hours to 

be provided for her care. The letter stated:

Please be advised that [United] recently received 

a copy of the letter from [the IURO] regarding the 

status of the external appeal on behalf of [petitioner] for 

coverage of continued private duty nursing services for 

112 hours/week from 3/1/16 forward. It is our 

understanding that you received a copy of this letter 

dated 5/5/16[,] which reversed [United's] denial of 

coverage for these services. 

Based on this review, the initial denial for 

continued private duty nursing services for 112 
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hours/week from 3/1/16 forward has been withdrawn, 

and the services are approved. 

Thereafter, on an unspecified date in June or July 2016,1 United faxed an 

"Authorization Letter" to the nursing agency that provided private nurses to 

petitioner. That letter advised the nursing agency that 35 of the 112 hours of 

PDN to which petitioner was entitled every week had to be utilized during school 

hours, "whether or not [petitioner] attends school." 

Petitioner did not receive written notice of United's decision to allocate 

the PDN hours between home and school. Petitioner's father learned of United's 

decision from a telephone call placed to him from one of the nurses at the nursing 

agency. On July 19, 2016, petitioner forwarded a letter to the Division, claiming 

United had not provided her with a notice of the aforementioned change in her 

benefits and that United was unwilling to provide her with notice. In her letter, 

petitioner stated she was requesting a Medicaid fair hearing to challenge 

United's determination that 35 of 112 hours of PDN she was to receive each 

 

1

 The parties state the Authorization Letter was sent on June 3, 2016, but the 

copy of the letter provided in the record does not show the date of the letter. 

There is a date of June 3, 2018 imprinted on the letter, but it is clear such date 

was generated by a facsimile server, not to mention it is unlikely the letter was 

drafted and sent to the nursing agency in 2018. 
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week had to be used while she was at school, as well as United's failure to 

provide notice to her of its determination.

The Division ultimately agreed to transmit the July 19, 2016 letter 

requesting a fair hearing to the Office of Administrative Law, where it was filed 

as a contested matter. After the fair hearing was scheduled, the matter was 

adjourned so the parties could brief the issue of whether United properly notified 

petitioner that it intended to allocate PDN services between petitioner's home 

and school. At the conclusion of oral argument on that issue, the ALJ 

determined petitioner had not been properly noticed and ordered United to do 

so.

The ALJ also stated he would schedule a fair hearing. Although he did 

not expressly state as such, in context it was clear the subject of that fair hearing 

was going to be whether United could allocate the hours of petitioner's PDN 

services between home and school. United then requested and the ALJ agreed 

to provide a written decision on the issue of notice. The ALJ thereafter noted 

his decision on notice was going to be an initial one and, thus, would have to be 

reviewed and a final decision rendered by the Director of the Division. The ALJ 

indicated he would schedule a fair hearing after the Division made its final 

decision.
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The salient points in the ALJ's written initial decision are as follows. 

Citing N.J.A.C. 10:60-5.1(b), the ALJ noted PDN services rendered to Medicaid 

beneficiaries receiving managed long-term support services are provided in the 

home. In addition, N.J.A.C. 10:49-10.4(a)(1) states a Medicaid agent must 

provide a Medicaid beneficiary timely advance notice of the agent's intention to 

terminate, reduce or suspend assistance for a beneficiary. There is no question 

United is a Medicaid agent and petitioner a Medicaid beneficiary. 

The regulation states that the notice an agent is to provide to a beneficiary 

must be in writing, state the action the agent intends to take, detail the reasons 

for the proposed action, provide the specific regulations that support or the 

change in federal or state law that requires the action, and the beneficiary's right 

to a fair hearing. N.J.A.C. 10:49-10.4(a)(2). The beneficiary must receive such 

notice at least ten days before the action is taken. N.J.A.C. 10:49-10.4(a)(1). 

The ALJ rejected United's argument that it did not make a new 

determination but, rather, had merely implemented the IURO's decision and, 

thus, was not obligated to provide petitioner with any notice of the subject 

action. The ALJ pointed out the IURO did not sanction the reduction of hours 

in the home. The matter was reviewed by the IURO because United reduced the 

number of PDN hours from 112 to 77 per week and petitioner challenged such 
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action. After reviewing the matter, the IURO found 112 hours of PDN per week 

medically necessary. The IURO did not state the hours should be allocated 

between home and school. 

United also argued the following comment in the IURO's written decision 

justified United's allocation of hours between home and school: "[t]he requested 

service allows the enrollee to attend school during the day and for the caregiver 

to sleep at night." The ALJ observed that such comment:

in no way set forth that a portion of the 112 hours were 

to be used while N.P. was at school; at best, this 

statement represented [IURO's] hope that sufficient

PDN hours at home would have allowed N.P. to 

continue to be able to attend school. 

Nowhere in [the IURO's] decision did they specify that 

35 hours per week were to be used at school and 77 

hours per week were to be used at home.

It was [United] who made the determination to 

reduce the number of weekly PDN hours to be provided 

at home from 112 to 77, and required that 35 weekly 

PDN hours were to be used at school. It was United 

Healthcare's medical director who "mandated that the 

PDN hours be used when the member attends school."

The ALJ concluded that, because it was United's determination to reduce PDN 

hours in the home, United was required to provide notice to petitioner in 

accordance with N.J.A.C. 10:49-10.4. 
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In addition, the ALJ observed federal regulation 42 C.F.R. 438.400(b) 

requires a MCO to provide notice that is comparable to that required in N.J.A.C. 

10:49-10.4. Although the ALJ cited 42 C.F.R. 438.400(b), it is clear he intended 

to cite 42 C.F.R. 438.404(b). However, a reading of 42 C.F.R. 438.400(b) 

defines the term adverse benefit determination, which includes:

(1) The denial or limited authorization of a 

requested service, including determinations based on 

the type or level of service, requirements for medical 

necessity, appropriateness, setting, or effectiveness of 

a covered benefit.

(2) The reduction, suspension, or termination of 

a previously authorized service. . . . 

42 C.F.R. 438.404(b) details the contents that the notice must provide to an 

enrollee of an adverse benefit determination.2 The ALJ concluded United did 

not provide the kind of notice required by 42 C.F.R. 438.404(b).

The ALJ rejected United's argument that, given a fair hearing was to be 

scheduled on the underlying substantive issue, the lack of any notice to 

petitioner was harmless. The ALJ observed the notice a MCO is to provide an 

enrollee must include certain information, which United did not provide to 

 

2

 We are aware 42 C.F.R. 438.400 and 42 C.F.R. 438.404 were amended 

effective July 5, 2016. However, with respect to the issues raised on appeal, the 

regulations remained essentially the same after the amendments went into effect.
11 A-0593-17T4

petitioner. The ALJ noted, "[t]here can be no due process when a petitioner 

would be deprived of a meaningful hearing because he or she lacks knowledge 

as to how and why an agency has taken a certain action." 

We note here N.J.A.C. 10:49-10.4(a)(2) requires that notice:

means a written notice that includes a statement of the 

action the Medicaid Agent or DMAHS intends to take, 

reasons for the proposed departmental action, the 

specific regulations that support, or the change in 

Federal or State law that requires the action, the 

claimant's right to request a fair hearing, or in cases of 

a departmental action based on a change in law, the 

circumstances under which a hearing shall be granted, 

and the circumstances under which assistance shall be 

continued if a fair hearing is requested.

In pertinent part, 42 CFR 438.404(b) requires that a notice include the 

following:

(b) Content of notice. The notice must explain the 

following:

(1) The adverse benefit determination the MCO

. . . has made or intends to make.

(2) The reasons for the adverse benefit 

determination, including the right of the enrollee 

to be provided upon request and free of charge, 

reasonable access to and copies of all documents, 

records, and other information relevant to the 

enrollee's adverse benefit determination. Such 

information includes medical necessity criteria, 

and any processes, strategies, or evidentiary 

standards used in setting coverage limits.
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(3) The enrollee's right to request an appeal of the 

MCO's . . . adverse benefit determination, 

including inform ation on exhausting the MCO's 

. . . one level of appeal described at § 438.402(b) 

and the right to request a State fair hearing 

consistent with § 438.402(c).

(4) The procedures for exercising the rights 

specified in this paragraph (b).

(5) The circumstances under which an appeal 

process can be expedited and how to request it.

The ALJ ordered United to provide the appropriate notice to petitioner, 

and his initial decision was filed with the Director of the Division for her 

consideration. 

In reversing the initial decision, the Director noted the IURO had observed 

that petitioner "does not have a one on one nurse during school hours." The 

Director also noted the IURO had commented that 112 hours of PDN services 

each week, "allows the enrollee to attend school during the day and for the 

caregiver to sleep at night." 

In the Director's view, when United decided that some of petitioner's PDN 

services had to be rendered at school, United was not taking any independent 

action. Rather, United was implementing the IURO's binding decision. 

Therefore, the Director reasoned, United was not required to provide petitioner 

with notice as mandated in N.J.A.C. 10:49-10.4 and 42 CFR 438.404, as it was 
13 A-0593-17T4

not a new, adverse benefits determination. Finally, according to the Director, 

although petitioner asked for a fair hearing to contest the implementation of 

PDN services while she was at school, she failed to address such issue when 

before the ALJ.

II

We recognize our role in reviewing agency decisions is limited. R.S. v. 

Div. of Med. Assistance & Health Servs., 434 N.J. Super. 250, 260-61 (App. 

Div. 2014). "An administrative agency's decision will be upheld 'unless there is 

a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks 

fair support in the record.'" Id. at 261 (quoting Russo v. Bd. of Trs., Police & 

Firemen's Ret. Sys., 206 N.J. 14, 25 (2011)). "Appellate courts, however, are 

not bound by an agency interpretation of a strictly legal issue when that 

interpretation is inaccurate or contrary to legislative objectives." G.S. v. Dep't 

of Human Servs., 157 N.J. 161, 170 (1999) (citation omitted). To determine 

whether agency action is arbitrary, capricious, or unreasonable, we examine:

(1) whether the agency action violates the enabling act's 

express or implied legislative policies; (2) whether 

there is substantial evidence in the record to support the 

findings upon which the agency based application of 

legislative policies; and (3) whether, in applying the 

legislative policies to the facts, the agency clearly erred

by reaching a conclusion that could not reasonably have 

been made upon a showing of the relevant factors.
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[H.K. v. Div. of Med. Assistance & Health Servs., 379 

N.J. Super. 321, 327 (App. Div. 2005) (quoting Public 

Serv. Elec. v. Dep't of Envtl. Prot., 101 N.J. 95, 103 

(1985)).]

"The federal Medicaid Act, Title XIX of the Social Security Act, 42 

U.S.C. §§ 1396 to 1396w-5, mandates a joint federal-state program to provide 

medical assistance to individuals 'whose income and resources are insufficient 

to meet the costs of necessary medical services.'" E.B. v. Div. of Med. 

Assistance & Health Servs., 431 N.J. Super. 183, 191 (App. Div. 2013) (quoting 

42 U.S.C. § 1396 -1). Although a State is not required to participate, "[o]nce a 

state joins the program, it must comply with the Medicaid statute and federal 

regulations." Ibid.

"The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 

30:4D -1 to -19.5, authorizes New Jersey's participation in the federal Medicaid 

program." Id. at 192. DMAHS is the agency within the State Department of 

Human Services that administers the Medicaid program. N.J.S.A. 30:4D-7. 

Accordingly, DMAHS is responsible for protecting the interests of the New 

Jersey Medicaid program and its beneficiaries. E.B., 431 N.J. Super. at 192

(citing N.J.A.C. 10:49-11.1(b)).

In our view, for the reasons set forth in the ALJ's initial decision, United 

was obligated to provide petitioner with notice of its decision to use some of 
15 A-0593-17T4

petitioner's weekly allotment of PDN services while she was in school, and such 

notice had to be in accordance with N.J.A.C. 10:49-10.4(b) and 42 C.F.R. 

438.404(b). United was not implementing the IURO's decision. The IURO did 

not state petitioner was not getting the kind of care she requires while at school 

or that the PDN hours allotted to her were to be divided between home and 

school. The statements the IURO made upon which respondents rely to support 

such argument are taken out of context. The IURO merely restored the number 

of PDN hours petitioner had been receiving in her home for years. Therefore, 

United was not advancing the IURO's decision when United divided PDN 

services between home and school. United's decision to allocate PDN services 

between home and school was a new and adverse benefits determination. 

Therefore, petitioner was entitled to proper notice before such determination 

was implemented.

Further, petitioner sought a fair hearing on the question of notice and 

whether United was authorized to allocate petitioner's PDN services between 

home and school. For the reasons previously stated, petitioner did not waive her 

right to a fair hearing on the latter issue. The record reveals the parties'

expectation was that once there was a final decision from the Division on the 

notice issue, a fair hearing on the substantive one was to be scheduled. 
16 A-0593-17T4

In addition, that there is to be a fair hearing on the substantive issue does 

not overcome United's failure to provide proper notice. Among other things, 

petitioner is entitled to know before the fair hearing United's reasons for its 

proposed action and the law upon which it relies in support of such proposed 

action. Petitioner is also entitled access to and copies of those records that are 

relevant to United's determination. See N.J.A.C. 10:49-10.4(b) and 42 C.F.R. 

438.404(b). 

To the extent we have not specifically addressed an argument raised by 

respondents, it is because they are without sufficient merit to warrant discussion 

in a written opinion. R. 2:11-3(e)(1)(E).

The final decision is reversed and we remand this matter to the ALJ to 

oversee that United provides the appropriate notice to petitioner, and to continue 

this contested matter and address petitioner's substantive challenges to United's 

adverse benefits determination. 

Reversed and remanded to the ALJ for further proceedings in accordance 

with this opinion. We do not retain jurisdiction.