IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II

CHEHALIS CHILDREN’S CLINIC, P.S., No. 49569-4-II

Appellant,

v.

WASHINGTON STATE HEALTH CARE UNPUBLISHED OPINION

AUTHORITY,

Respondent.

WORSWICK, J. — The Washington Health Care Authority (Agency)1overpaid Chehalis 

Children’s Clinic (Clinic) for services rendered to Medicaid patients. Chehalis appeals an order 

affirming the Washington State Health Care Authority Board of Appeals (Board) decision that 

equitable estoppel does not preclude the Agency from recovering the overpayment. The Clinic

argues that some of the Board’s findings of fact are not supported by substantial evidence and 

that the Board improperly interpreted the law by concluding that the Clinic had not established

all the elements of equitable estoppel by clear, cogent, and convincing evidence. We affirm the 

Board’s order because substantial evidence supports the challenged findings and because the 

Clinic failed to establish equitable estoppel.

 

1

 The Health Care Authority (HCA) became the State’s designated state agency to administer 

the Medicaid program in 2011. RCW 71.04.050(2). Prior to 2011, the Department of Social and 

Health Services (DSHS) administered the Medicaid program. Because this case spans multiple 

years and involves references to both DSHS and the HCA, we use the term “Agency” when 

referring to either the HCA or DSHS.

Filed

Washington State

Court of Appeals

Division Two

May 8, 2018
No. 49569-4-II

2

FACTS

I. BACKGROUND

Congress provides federal funds to the States to provide medical services for needy

citizens through Medicaid. In re Guardianship of Lamb, 173 Wn.2d 173, 186, 265 P.3d 876 

(2011). Participation in Medicaid is voluntary but, once a state elects to participate, it must 

comply with Medicaid statutes and related regulations. Samantha A. v. Dep’t of Soc. Servs. & 

Health Servs., 171 Wn.2d 623, 630, 256 P.3d 1138 (2011). States design and administer their 

Medicaid programs within federal guidelines. Caritas Servs., Inc. v. Dep’t of Soc. & Health 

Servs., 123 Wn.2d 391, 396, 869 P.2d 28 (1994). A description of a state’s implementation of 

federal guidelines must be submitted in a document known as a “State Medicaid [P]lan” to the 

federal Centers for Medicaid Services (CMS) for approval. 42 U.S.C. § 1396a(33); 42 C.F.R. § 

403.304(b)(1). The Agency administers the Medicaid program in Washington. RCW 74.04.050; 

RCW 74.09.500.

Each state’s plan establishes, among other things, a method for reimbursing health care 

providers, such as rural health clinics (RHCs). See 42 U.S.C. § 1396a(bb)(5)-(6). RHCs are

clinics located in rural areas that engage in primarily outpatient or ambulatory care typically 

provided in a physician’s office or an outpatient clinic. All state plans must include a scheme for 

reimbursing RHCs for each encounter the clinics have with Medicaid recipients.2 See 42 U.S.C. 

§ 1396a(bb)(5)-(6). An encounter is a face-to-face visit between an RHC provider and a 

recipient. Former WAC 388-549-1100 (2008).

 

2

 Under federal law, RHCs also receive payment for services provided to Medicare recipients. 

However, this case only involves services provided by an RHC to Medicaid recipients. 
No. 49569-4-II

3

The RHC’s reimbursement structure under Medicaid is different than that of the standard 

medical office. See 42 U.S.C. § 1396a(bb)(6). Under the Medicaid program, reimbursement 

payments owed by the Agency to RHCs are assessed through what is known as the Prospective 

Payment System (PPS). Under this system, the Agency pays 100 percent of the average cost per 

each encounter of a Medicaid recipient. Additionally, RHCs can elect to be reimbursed through 

what is known as the alternative payment methodology (APM).3 This reimbursement method 

utilizes different, more recent data than the PPS, however, under the APM the Agency must still 

provide a payment to the RHCs which results in a payment at least equal to what the RHC would 

receive if using the PPS. 42 U.S.C. § 1396a(bb)(6)(B). In other words, under the APM, the 

Agency must still ensure that the RHCs receive at least 100 percent of the cost of each encounter.

In Washington, RHCs may also contract with managed care organizations (MCOs) to 

provide services to Medicaid recipients. WAC 182-549-1100. Medicaid recipients enroll with 

an MCO to receive services from certain providers. After providing services to MCO enrollees, 

an RHC will submit a claim for payment for services directly to the MCOs. The MCOs then 

determine whether the services provided by the RHCs were appropriate and, if so, the MCO pays

the RHC a contracted amount.

Sometimes this contracted amount results in the RHC’s receiving less than the amount 

they would receive had they been paid directly from the Agency under the PPS or APM. When 

the MCO payment for an encounter is less than the encounter rate the RHC would receive under 

the PPS or APM, the Agency must make supplemental payments to the RHCs so that the total

payment received by them is equal to the total amount they are entitled to receive under the PPS

 

3 For all times relevant in this case, the Clinic chose the APM.
No. 49569-4-II

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or APM. 118; 42 USC 1396a(bb)(5)(A)-(B). These supplemental payments are known as 

enhancement payments. WAC 182-549-1100.

The Agency calculates enhancement payments based on documentation sent to it by the 

MCOs. The MCOs submit a roster of enrollees seen by an RHC to the Agency and the Agency 

pays the RHCs an enhancement payment for each enrollee on the list. Enhancement payments 

are interim in nature and are made throughout the year until a reconciliation of the payments can 

be completed.4 All RHCs are to be notified on an annual basis that a reconciliation will be 

conducted to compare what the RHCs actually received to what they should have received.

In summary, the RHCs are entitled to two payments for each encounter, one payment 

from the MCO and one enhancement payment from the Agency to supplement the MCO 

payment if the MCO payment does not cover the entire cost of the encounter. These two 

payments allow the RHCs to receive a total amount that equals the amount the RHC would 

receive had the Agency paid the RHC directly under the PPS or APM.

II. WASHINGTON’S ENHANCEMENT PAYMENT PROCESS

After a federal audit in 2006, CMS found the Agency noncompliant with federal 

regulations regarding its enhancement payment method. Through the audit, CMS concluded that 

the Agency’s current enhancement payment methodology did not meet federal Medicaid 

requirements because the Agency could not prove that RHCs received a total amount “exactly 

 

4

 In finding of fact 8, the Board states that “RHCs receive enhancement payments from the 

Agency at the time the reconciliation occurs.” AR at 2-3. However this is an incorrect 

statement. The Board properly notes in finding of fact 19 that “[t]he monthly enhancement 

payment is the interim payment methodology used during the calendar year until reconciliation 

can be completed. Once reconciliation is completed, then a comparison is done between the 

payments with the enhancement payments, and what the payments would have been under the 

encounter rate.” AR at 7.
No. 49569-4-II

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equal” to what the RHCs should receive. Admin. Record (AR) at 120. CMS then required the 

Agency to develop a new methodology for making enhancement payments.

In 2008, the Agency informed the RHCs about the Agency’s noncompliance and the plan 

to develop an updated enhancement payment process. In a letter to the RHCs, the Agency stated:

. . . According to CMS, the PPS methodology currently used by the [Agency]

requires that overall reimbursement for eligible managed care visits must be equal

to the encounter rate paid for eligible fee-for-service visits. The overall 

reimbursement is comprised of payments from the managed care organizations 

(MCO) and the enhancement payments from the [Agency]. If the MCO payment 

for a particular visit is less than the encounter rate, the [Agency] is responsible for 

making an enhancement payment in order to bring the total reimbursement up to 

the level of your encounter rate. 

The CMS review of the enhancements found insufficient evidence that the 

[Agency]’s methodology for making the payments meets federal requirements. 

Specifically, the [Agency] was unable to demonstrate that the payments were 

exactly equal to the difference between the MCO payments and your encounter 

rate.

AR at 120. The Agency also stated that it was developing a process for addressing 

overpayments and underpayments when they exist. As a result, the Agency drafted a state plan 

amendment that included a new enhancement payment and reconciliation process. The newly

amended plan stated in part:

To ensure that the appropriate amounts are being paid to each clinic, the State will 

perform an annual reconciliation and verify that the enhancement payments made 

in the previous year were in compliance with Section 1902(bb)(5)(A)[ of the SSA]. 

The annual reconciliation will be done as follows:

APM: (managed care encounters x APM encounter rate) less (fee-forservice equivalent) = State’s payment amount[.]
No. 49569-4-II

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AR 125. CMS approved the Agency’s amended state plan and it became effective in 2008.5

In 2009, the Agency sent a letter to the RHCs notifying them of the new enhancement 

process and of the Agency’s expectation to complete a reconciliation of the 2009 enhancement 

payments in September 2010. The Agency also informed the RHCs that if the reconciliation

showed that the Agency had overpaid the RHCs in enhancement payments, the RHCs would be 

responsible for repaying the overpaid amount. 

Shortly after the agency implemented the reconciliation process in 2009, a group of 

health clinics sued the Agency over the propriety of the reconciliation process. As a result, the

Agency stayed the reconciliation process until the parties resolved the suit in October 2013.

III. CHEHALIS CHILDREN’S CLINIC AND 2009 ENHANCEMENT PAYMENTS

The Clinic is an RHC that provides health care services to low-income children in a rural 

area. In 2005, the Clinic signed a core provider agreement with the Agency. After it signed the 

agreement, the Clinic was subject to state and federal laws as well as Agency rules, regulations, 

memoranda, billing instructions, and other agency documents. The Clinic chose the APM 

payment methodology and contracted with the Agency to provide Medicaid funded services to

Medicaid recipients. Under the APM, the Agency paid an encounter rate for each Medicaid 

recipient encounter directly to the Clinic. In addition to providing services to Medicaid 

recipients, the Clinic also contracted with an MCO to provide services to MCO enrollees. Thus, 

the Clinic was entitled to payments from the MCO, and also entitled to enhancement payments

 

5

 Washington’s Medicaid (Title XIX) State Plan is available at: https://www.hca.wa.gov/abouthca/apple-health-medicaid/medicaid-title-xix-state-plan. The 2008 State Plan Amendment is 

available at: https://www.hca.wa.gov/assets/program/08-010_FQHC_RHC_Approval_Pkt_(6-

26-09).pdf
No. 49569-4-II

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from the Agency when the MCO failed to provide the Clinic full payment for enrollee 

encounters.

In 2009, the MCO submitted a roster to the Agency and, based on this roster, the Agency 

paid the Clinic estimated enhancement payments for each enrollee listed. When the Clinic

received the payments, its billing specialist recorded them as “revenue” or as an “income item.”

AR at 8.

After a reconciliation of the 2009 enhancement payments, the Agency determined that it 

had overpaid the Clinic in the amount of $216,336. Because the Clinic chose to participate in the 

APM, which utilized different data, and because it took the Agency some time to implement the 

APM changes after the Clinic chose that methodology, the rate the Agency paid the Clinic for

each client visit in the first six months of 2009 was different than the rate that the Agency paid 

the Clinic for the last six months of 2009. As a result, the Agency adjusted the Clinic’s debt by 

the difference between the two rates. Additionally, the state legislature inserted a provision in 

the operating budget for 2014 that forgave 65 percent of the 2009 overpayments made to RHCs. 

These combined actions reduced the Clinic’s overpayment responsibility to $74,634.

In 2014, the Agency notified the Clinic of the final amount the Agency sought to recover. 

The Clinic did not reimburse the Agency but instead requested an administrative hearing to 

address the overpayment.

IV. ADMINISTRATIVE HEARING

An administrative law judge (ALJ) with the Office of Administrative Hearings held a 

hearing on the matter. The Clinic disputed the Agency’s calculation and further argued that even 
No. 49569-4-II

8

if the Agency had overpaid the Clinic, the Agency was precluded from collecting the 

overpayment under equitable estoppel as described in WAC 182-526-0495.

6

Several witnesses testified at the hearing. They included Sandra Cashman, a cost 

reimbursement analyst for the Agency; Lynn McCarty, a billing specialist for the Clinic; and 

Jenise Mugler, the Clinic’s general administrator. 

Cashman described the Agency’s authority to recoup overpayments. She also testified 

that the Agency performed an annual reconciliation of the enhancement payments and explained 

that the Agency paid enhancement payments “in addition” to the amounts paid by the MCOs for 

each encounter. 1 Report of Proceedings (RP) at 24. Cashman also described the enhancement 

payment process. She explained that the MCO submitted, to the Agency, a roster of the 

enrollees to whom the Clinic provided services. The Agency then paid the estimated 

 

6

 WAC 182-526-0495 provides:

Equitable estoppel is a legal doctrine that may be used only as an affirmative defense 

to prevent the Agency from collecting an overpayment. WAC 182-526-0495. There are

five elements of equitable estoppel and a party asserting the doctrine of equitable 

estoppel must prove all of the following five elements by clear and convincing evidence:

(a) [The Agency] made a statement or took an action or failed to take an action, 

which is inconsistent with a later claim or position by [the Agency].

(b) The party reasonably relied on [the Agency]’s original statement, action or 

failure to act.

(c) The party will be injured to its detriment if [the Agency] is allowed to 

contradict the original statement, action or failure to act.

(d) Equitable estoppel is needed to prevent a manifest injustice. Factors to be 

considered in determining whether a manifest injustice would occur include, but are 

not limited to, whether:

(i) The party cannot afford to repay the money to [the Agency];

(ii) The party gave [the Agency] timely and accurate information when required;

(iii) The party did not know that [the Agency] made a mistake;

(iv) The party is free from fault; and

(v) The overpayment was caused solely by an [Agency] mistake.

(e) The exercise of government functions is not impaired.
No. 49569-4-II

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enhancement payments to the Clinic for the same services provided to the enrollees on the roster. 

Cashman further testified that when an RHC is overpaid, the Agency recoups the amount that 

was overpaid, and if an RHC is underpaid, the Agency pays the RHC the difference.

McCarty testified that the Clinic received enhancement payments from the Agency in 

2009. McCarty explained that she did not invoice the Agency for the enhancement payments 

and that upon receipt of enhancement payments, she did not take any action to reconcile the 

payments with the MCO payments. She also testified that she never recorded or classified any of 

the enhancement payments as “advanced” payments or as money that would have to be repaid to 

the Agency. AR at 8. McCarty further testified that she assumed that the enhancement

payments were reconciled by the Agency.

Mugler has worked at the Clinic for 22 years in various capacities. Mugler believed that 

enhancement payments were an additional source of “income” paid to the Clinic by the Agency 

in addition to the encounter payments. 1 Verbatim Report of Proceedings (VRP) at 61. Mugler

further stated that if the Clinic had to repay the overpayment, the survivability of the clinic 

would be in question, and that the Clinic did not have $74,634 “sitting in a bank account.” AR at 

9. Mugler testified that it would be difficult for the Clinic to keep its doors open even if the 

Agency were to provide the Clinic with a repayment plan.

After the hearing, the ALJ entered an order and concluded that the Clinic established all 

five elements of equitable estoppel by clear, cogent, and convincing evidence and therefore the 

Agency could not recoup the $74,634 overpayment. The Agency appealed the ALJ’s decision to 

the Health Care Authority Board of Appeals. 
No. 49569-4-II

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V. HEALTH CARE AUTHORITY BOARD ADJUDICATION

The Board reversed the ALJ’s decision and entered a final order that included specific 

findings of fact and conclusions of law. The Board found that the reconciliation process ensured

that the RHCs were paid the appropriate amounts. The Board further found that the 

enhancement payments were interim payments made throughout the year until a reconciliation of 

the payments could be completed.

The Board also found that the Agency notified the Clinic in 2008 via letter about the 

earlier federal audit and the Agency’s noncompliance with the enhancement process. The Board 

found that the Agency informed the RHCs that it was working to create a new enhancement 

payment methodology and reconciliation process because the previous process could not 

guarantee that the total amount received by the RHCs was “exactly equal” to the amount that the 

Clinic ought to receive for each encounter. AR at 5. The Board also found that the 2008 letter 

referred to the Agency’s expectation to reconcile future payments and develop a process to 

resolve underpayments and overpayments.

The Board found that if the Agency determined through reconciliation that an RHC was 

overpaid, the Agency would recoup the overpaid amount and if an RHC was underpaid, the 

agency would pay the difference owed to the RHC. The Board additionally found that the 

Agency sent out many communications to the RHCs regarding the 2009 reconciliation.

The Board also entered a number of conclusions of law. The Board concluded that the 

Clinic did not prove by clear, cogent, and convincing evidence that equitable estoppel applied to 

preclude the Agency from recouping any overpayment. Specifically, the Board determined that 
No. 49569-4-II

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the Clinic failed to establish three of the five equitable estoppel elements—reasonable reliance, 

manifest injustice, and impairment of governmental functions. 

Regarding reasonable reliance, the Board found that the Clinic knew that it must comply 

with federal law and that the Agency informed the Clinic of the 2006 audit results and the 

requirement that the enhancement payments needed to be “exactly equal” to the difference 

between the encounter rate and the rate paid by the MCOs. AR at 18. The Board also found that 

the Agency informed the Clinic that it was developing a process for dealing with underpayments 

and overpayments. Based on these facts, the Board concluded that it was not reasonable for the 

Clinic to believe that it would not be subject to an enhancement payment reconciliation and that 

it was not reasonable for the Clinic to believe that enhancement payments were simply additional 

income given to it by the Agency.

The Board further concluded that preventing the Agency from recouping the 

overpayment from the Clinic would impair government functions. The Board reasoned that 

government functions would be impaired if the Agency was precluded from recovering the 

overpayment from the Clinic because the Agency would be prevented from complying with 

federal Medicaid law and other related federal instructions.

VI. APPEAL TO THE SUPERIOR COURT

The Clinic appealed the Board’s decision to the superior court. The superior court 

affirmed the Board’s order and agreed that the Clinic did not establish all elements of equitable 

estoppel to preclude the Agency from recouping the overpayment. The Clinic now appeals.
No. 49569-4-II

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ANALYSIS

The arguments in this case are unique because the Clinic asks us to resolve only the issue 

of equitable estoppel. The Clinic affirmatively states that it does not want us to determine the 

propriety of the Agency’s ability to seek recoupment for enhancement overpayments. Whether 

the Agency can seek recoupment is a threshold issue in this matter. Nonetheless, we accept the 

issue as presented by the Clinic, assume without deciding that the Agency can seek recoupment, 

and resolve the issue of equitable estoppel.7 

The Clinic argues that the Board incorrectly concluded that the Clinic failed to establish

all elements of equitable estoppel by clear, cogent, and convincing evidence. The Clinic also 

asserts that a number of the Board’s findings of fact are not supported by substantial evidence or

are improperly interpreted. The Clinic additionally claims it does not admit unchallenged 

findings or conclusions of law as verities on appeal. We affirm the Board’s order and hold that 

CCC did not meet its burden to show equitable estoppel.

I. THE BOARD’S FINDINGS OF FACT

The Clinic challenges five of the Board’s findings of fact, claiming that they are not 

supported by substantial evidence or that they are improper. The Clinic challenges the Board’s 

 

7 The Clinic asserts that the “only issue on appeal is whether equitable estoppel precludes 

collection of the claimed overpayment.” Reply Br. at 1-2. However, the Clinic has assigned 

error to the Board’s conclusion that under federal law, the Agency has the legal authority to 

recoup the enhancement payment. The Clinic has also assigned error to the Board’s conclusion 

that expert testimony is not helpful when the case turns an issue of law. The Clinic makes no 

legal argument in support of these assignments of error, thus we do not address them, but instead 

consider the conclusions correct for purposes of this appeal. 12. RAP 10.3(a)(6), Satomi Owners 

Ass’n v. Satomi, LLC, 167 Wn.2d 781, 808, 225 P.3d 213 (2009).
No. 49569-4-II

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findings of fact 8, 11, 12, 20, and 30. We hold that these findings are supported by substantial 

evidence.

A. Standard of Review 

Under the Washington Administrative Procedure Act, chapter 34.05 RCW, we directly 

review the Board’s decision based on the record before the agency to see whether substantial 

evidence supports the Board’s decision. Pilchuck Contractors, Inc. v. Dep’t of Labor & Indus.,

170 Wn. App. 514, 517, 286 P.3d 383 (2012). We view the evidence in the light most favorable 

to the party that prevailed before the highest forum that exercised fact-finding authority, here the 

Agency. Miotke v. Spokane County, 181 Wn. App. 369, 376, 325 P.3d 434, review denied, 181 

Wn.2d 1010 (2014). “Substantial evidence” is evidence in sufficient quantum to persuade a fairminded person of the truth of the declared premises. Pilchuck Contractors, 170 Wn. App. at 

517. We do not reweigh the evidence. Harrison Mem’l Hosp. v. Gagnon, 110 Wn.App. 475, 

485, 40 P.3d 1221 (2002). Unchallenged findings of fact are verities on appeal. Mid Mountain 

Contractors, Inc. v. Dep’t of Labor & Indus., 136 Wn. App. 1, 4, 146 P.3d 1212 (2006).

B. Unchallenged Findings

As a preliminary matter, we address the Clinic’s claim that it does not admit 

unchallenged findings of fact as verities on appeal. The Clinic asserts that because many of the 

Board’s findings of fact and conclusions of law are not related to the issue of equitable estoppel, 

it does not assign error to all the Board’s findings and conclusions. The Clinic further claims

that though it does not cite or assign error to other findings of fact, it does not admit any 

unchallenged findings as verities on appeal.
No. 49569-4-II

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Under the Rules of Appellate Procedure, an appellant must separately assign error to each 

finding that he challenges on appeal, must identify each challenged finding by number, and must 

separately assign error to any challenged administrative findings. RAP 10.8(g)-(h). Where an 

appellant fails to assign error to administrative findings, we treat those findings as verities unless 

the appellant’s briefing makes it clear which findings he is challenging and on what grounds he 

challenges them. Bircumshaw v. State, 194 Wn. App. 176, 198, 380 P.3d 524 (2016).

The Clinic cites to no authority to support its contention that a party can prevent 

unchallenged findings of fact from becoming verities on appeal simply by stating that they do 

not “admit” as verities findings of fact unrelated to the issue on appeal. Accordingly, for 

purposes of this appeal, we accept as verities all unchallenged findings of fact. 

C. The Board’s Challenged Findings Are Supported by Substantial Evidence

The Clinic challenges the Board’s findings of fact 8, 11, 12, 20, and 30, claiming that 

they are not supported by substantial evidence or are otherwise improper. We hold that each 

finding is supported by substantial evidence.

The Clinic first assigns error to the trial court’s finding of fact 8, which states: 

An enhancement payment is a monthly amount paid to RHCs for each client 

enrolled with a managed care organization (MCO). The MCO contracts with RHCs 

to provide services under the Healthy Options plan. RHCs receive enhancement 

payments from the Agency at the time the reconciliation occurs. Enhancement 

payments are made in addition to the negotiated payment the RHC receives from 

the MCO for the same services. In 2009, enhancement payments were made based 

on rosters that were submitted by the MCO. The roster is a list of clients by name 

and the key identifier that is assigned by the MCO to each clinic. The rosters were 

then uploaded into the [] payment system and the RHC[’]s enhancement payment 

was applied to each client that was associated with the clinic. 

Clerk’s Papers (CP) at 12-13 (citations omitted).
No. 49569-4-II

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The Clinic argues that the Board’s description of an enhancement payment, method of 

calculation, and method of payment is incorrect because the description does not “comport” with 

WAC 182-549-1100 and WAC 182-549-1400. Br. of Appellant at 9. The Clinic argues that an 

enhancement payment is not just defined as a monthly amount paid to RHCs for each client 

enrolled with an MCO, but is further defined as a payment received by a provider from the 

Agency in addition to the negotiated payments the providers receive from MCOs for services to 

enrollees. The Clinic asserts that the fact that enhancements are made in addition to other 

payments made to RHCs is the “most critical part” of the definition, and the failure of the Board 

to consider that is an “obvious and fatal” error. Br. of Appellant at 9. 

The Clinic’s argument is a legal objection to a finding of fact. We review findings of fact

to determine whether the findings are supported by substantial evidence. Pilchuck, 170 Wn. 

App. at 517. Other than the inconsequential error we mention in footnote 5, finding of fact 8 is 

supported by substantial evidence.

Here, Cashman testified that enhancement payments are payments made by the Agency 

“in addition to the amounts paid by the managed care organizations.” 1 VRP at 24. 

Additionally, unchallenged finding of fact 15 states that “the contracted amount that the MCO 

pays, in addition to the enhancement payment paid by the agency, makes the RHC whole.” AR 

at 4.

Further, the record supports the finding that enhancement payments are related to 

services. Cashman testified that the enhancement payment process operates by the MCO 

submitting to the Agency a list of enrollees to whom the Clinic provided services. At the time

the MCOs submit the list to the Agency, the MCOs have already paid the Clinic for the services.
No. 49569-4-II

16

The estimated enhancement payments are then paid by the Agency to the Clinic based on the list 

of enrollees who received services from the Clinic, the same services for which the Clinic

already received the MCO payment for. Therefore, based on this evidence, the Board’s finding 

is supported by substantial evidence. 

The Clinic also assigns error to the trial court’s finding of fact 11, which states: 

Reconciliation is the process whereby the Department ensures that the appropriate 

amount was paid to the RHC. The Department performs an annual reconciliation 

of the enhancement payment. Because the Appellant used the APM, the 

reconciliation would be based on the following formula: (Managed care 

encounters) x (APM encounter rate) less (fee-for-service equivalent) = State’s 

payment amount. 

CP at 13.

The Clinic argues that this finding is erroneous because the Agency did not conduct a 

reconciliation of the 2009 enhancement payments until 2013 and that to make a finding that the 

Agency performs an “annual” reconciliation is therefore erroneous. Br. of Appellant at 10. 

Here, Cashman testified that the Agency performs an annual reconciliation of the 

enhancement payments made to the RHCs. Thus, finding of fact 11 is supported by substantial 

evidence. 

The Clinic also assigns error to the Board’s finding of fact 12, which states: 

After reconciliation, if the Agency determines that the RHC was overpaid, the 

[Agency] will recoup the overpayment amount; if the RHC was underpaid, the 

Agency will pay the difference owed. Enhancement payments exist in an effort to 

estimate, during the year, the full payment allowed to the RHC. The Agency 

estimates the additional dollar amount it would take for the RHC to be paid their 

entire encounter rate, which is equal to the [Fee-For-Service] rate. 

CP at 13-14.
No. 49569-4-II

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The Clinic argues that the Board’s finding that the Agency “will recoup” any overpaid 

enhancement payment is not supported by the record. Br. of Appellant at 10. The Clinic argues 

that the more proper “manifestation of the intent” of the enhancement payment process is that 

enhancement payments are to ensure that the total amount received by the RHC “at least equals

to that of the encounter rate. Br. of Appellant at 11. The Clinic contends that the enhancement 

payment process exists to ensure that RHCs are paid at least the minimum amount owed, and 

does not exist to take away any payment made in addition to that minimum amount.8 

The testimony of Sandra Cashman supports the Board’s finding. Cashman testified that 

if an RHC has been overpaid, the Agency will recoup the amount that it overpaid and that if the 

RHC was underpaid, the Agency would pay the RHC the difference. Finding of fact 12 is 

supported by substantial evidence. 

The Clinic also assigns error to the Board’s finding of fact 20, which states: 

To ensure that the appropriate supplemental payments (called enhancements) are 

made to each RHC, the Agency performs an annual reconciliation of the 

enhancement payments. The Agency will compare the amount actually paid to the 

amount determined by the following formula: (Managed Care encounters [based on 

Rosters]) x (encounter rate) less (FFS equivalent of MCO services). If the clinic 

has been overpaid, the Agency will recoup the appropriate amount. If the clinic has 

been underpaid, the Agency will pay the difference. 

CP at 16 (citation omitted).

 

8

 The Clinic again appears to argue that the Board’s finding is an improper conclusion of law. 

Specifically, that the intent behind enhancement payments does not stand for the notion that the 

Agency can take away overpaid enhancement payments. It appears that the Clinic argues that 

the Board improperly interpreted the law regarding enhancement payments to preserve these 

claims for a different tribunal. Because the only issue on review here is whether the Board’s 

findings are supported by substantial evidence and whether those findings support the Board’s 

conclusion that equitable estoppel applies, this court should not address the Clinic’s arguments 

because they appear to be solely for purposes of preserving its objections.
No. 49569-4-II

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The Clinic again argues that the Board’s finding that the Agency performs an annual 

reconciliation of the enhancement payments is incorrect. As discussed above, Cashman testified 

that the Agency conducts an annual reconciliation. Therefore, the Board’s finding is supported 

by substantial evidence.

The Clinic also assigns error to the Board’s finding of fact 30, which states:

Jenise Mugler is employed at [the Clinic] in various positions, as the General 

Administrator, Secretary, Treasurer and Director. She has been employed at [the 

Clinic] for twenty-two years. In September 2005, [the Clinic] became part of the 

state’s RHC program. Within the RHC program, [the Clinic] sees both private and 

public pay clients. [The Clinic] is an RHC that sees mainly lower income children 

who are located in a rural area and underserviced by providers and other medical 

personnel. [The Clinic] is located in Lewis County, which is a heavily publicsubsidized county. [The Clinic]’s designation as an RHC provides that the clinic 

will supply needed medical services to low income children and families. She is 

familiar with the billing process for MCOs. Her understanding is that the MCO 

pays the clinic directly for a claim that is made for an encounter that was made. In 

2009, when the Agency paid enhancements, [the Clinic] was sent a check by the 

state based upon what the Agency calculated was owed to [the Clinic] for the 

number of lives assigned to the clinic for that month. Her understanding is that an 

enhancement payment is in addition to an encounter payment. She has believed 

this to be the case since 2005, when it was explained to [the Clinic] that 

enhancements would be an additional source of income to encounters. Based on 

Exhibit 2 and Finding of Fact 18, this belief was not reasonable. 

CP at 19 (citations omitted).

The Clinic argues that the Board improperly determined that Mugler’s belief that 

enhancement payments were additional income for the Clinic was unreasonable. The Clinic

argues that this finding is neither a finding nor an appropriate determination and is also not

supported by substantial evidence. We hold that this finding of fact is supported by substantial 

evidence.

Evidence supports the finding that Mugler’s belief was unreasonable. The Board found 

that the Clinic had notice as early as 2008 that the enhancement payments were to be reviewed 
No. 49569-4-II

19

under a reconciliation process and that the Agency was developing a plan to recoup any 

overpayment. Additionally, the Board found that an enhancement payment is paid to supplement 

the payment that RHCs receive from MCOs in order to make the RHCs whole. A reasonable 

person, with knowledge about the potential for recoupment of overpayments and knowledge 

about the overarching enhancement payment scheme would not consider enhancement payments 

to simply be additional income. The Board’s finding is therefore supported by substantial 

evidence. 

II. THE BOARD’S CONCLUSIONS OF LAW ON EQUITABLE ESTOPPEL

The Clinic argues that the Board incorrectly concluded that the Clinic failed to establish

all elements of equitable estoppel by clear, cogent, and convincing evidence. 9 We disagree. 

A. Legal Principles

When reviewing an administrative agency decision, we review de novo an agency’s 

conclusions of law and its application of the law to the facts. Raven v. Dep’t of Soc. & Health 

Servs., 177 Wn.2d 804, 817, 306 P.3d 920 (2013). We review the record to see whether 

substantial evidence supports the findings of fact and whether the superior court’s conclusions of 

law flow from these findings. Nelson v. Washington State Dep’t of Labor & Indus., 175 Wn. 

App. 718, 723, 308 P.3d 686 (2013).

 

9

 The Clinic challenges the Board’s conclusions of law 19, 20, 21, 23, 24, 25, 26, 27, and 28. 

Because the Clinic only asks us to address the issue of equitable estoppel, we need not address 

the Clinic’s challenges to conclusions of law 13, 14, and 15. These conclusions are unrelated to 

whether the Clinic established all elements of equitable estoppel by clear, cogent, and convincing 

evidence.
No. 49569-4-II

20

Equitable estoppel is a legal doctrine that may be used only as an affirmative defense. 

WAC 182-526-0495.

10

 There are five elements of equitable estoppel. These elements are:

(a) [The Agency] made a statement or took an action or failed to take an 

action, which is inconsistent with a later claim or position by [the Agency].

(b) The party reasonably relied on [the Agency]’s original statement, action 

or failure to act.

(c) The party will be injured to its detriment if [the Agency] is allowed to 

contradict the original statement, action or failure to act.

(d) Equitable estoppel is needed to prevent a manifest injustice. Factors to be 

considered in determining whether a manifest injustice would occur include, but 

are not limited to, whether:

(i) The party cannot afford to repay the money to [the Agency];

(ii) The party gave [the Agency] timely and accurate information when 

required;

(iii) The party did not know that [the Agency] made a mistake;

(iv) The party is free from fault; and

(v) The overpayment was caused solely by an [Agency] mistake.

(e) The exercise of government functions is not impaired.

WAC 182-526-0495.

The party asserting equitable estoppel against the Agency must prove each element of 

estoppel by clear, cogent, and convincing evidence. WAC 182-526-0495. Under this burden of 

proof, the trier of fact must be convinced the fact at issue is “highly probable.” Bale v. Allison, 

173 Wn. App. 435, 453, 294 P.3d 789 (2013) (quoting In re Welfare of Sego, 82 Wn.2d 736,

739, 513 P.2d 831 (1973)). 

 

10

 The Clinic cites to the equitable estoppel elements cited in WAC 388-02-0495, the rule 

addressing equitable estoppel in DSHS actions. We rely on WAC 182-526-0495, because that 

rule specifically addresses equitable estoppel under HCA proceedings. 
No. 49569-4-II

21

B. Equitable Estoppel Not Proven

The Clinic argues that the Board incorrectly concluded that the Clinic failed to prove all 

necessary elements of equitable estoppel as required under WAC 182-526-0495.11 We disagree

and hold that the Board’s findings of fact support its conclusion that the Clinic has not proven by 

clear, cogent, and convincing evidence that equitable estoppel applies.

1. Reasonable Reliance

The Clinic argues that the Board incorrectly interpreted the element of reasonable

reliance.12 The Clinic asserts that it was reasonable for the Clinic to rely on the Agency’s 

conduct of sending monthly enhancement payments which the Clinic construed as incentive to 

continue to operate as a RHC. The Clinic also argues that it had “nothing to do” with any part of 

the enhancement payment process and that it simply received a check each month with “no 

explanation.” Br. of Appellant at 13. We hold that the Board’s findings support its conclusion 

that the Clinic failed to prove that it reasonably relied on the Agency’s overpayment.

The Board’s finding make clear that the Clinic had full notice of federal Medicaid 

statutes and instructions from the federal government about the reconciliation and enhancement 

 

11

 The Board concluded that the Clinic met its burden in proving both the first and third element 

of equitable estoppel. Neither party addresses the first and third elements in their briefing nor do 

the parties challenge the Board’s conclusions regarding those elements on appeal. Therefore

only elements of equitable at issue here are the second, fourth, and fifth elements. 

12

 The Clinic argues that the Board incorrectly interpreted the law with respect to equitable 

estoppel. When reviewing an administrative agency decision, this court reviews issues of law de 

novo. Ames v. Washington State Health Dep’t Med. Quality Health Assurance Comm’n, 166 

Wn.2d 255, 260, 208 P.3d 549 (2009). However, the Board’s conclusion that the Clinic has not 

met its burden to show that equitable estoppel applies is a conclusion of law based on the facts of 

this case and this conclusion is reviewed to determine if the findings of fact support the Board’s 

conclusion. Nelson, 175 Wn. App. at 723.
No. 49569-4-II

22

payment process. The Clinic signed a core provider agreement with the Agency in 2005, thus 

subjecting the Clinic to state and federal laws as well as Agency rules, regulations, memoranda, 

billing instructions, and other agency documents. It is well established that parties are presumed 

to know the laws they are subject to. Barson v. Dep’t of Soc. & Health Servs., 58 Wn. App. 616, 

618 n. 1, 794 P.2d 538 (1990). It follows then that in 2009, at the time of the reconciliation in 

2009, the Clinic had reasonable notice of, 42 U.S.C. § 1396a (bb)(6)(B), the federal statute 

requiring that the Agency’s enhancement payments made to RHCs must make the total payment 

received by the RHCs at least equal to the payment RHCs would be paid under the PPS or APM. 

See 42 U.S.C. § 1396a (bb)(6)(B).

Additionally, under federal regulations and as a result of the 2006 audit, the Agency 

created a State Plan Amendment establishing that the Agency procedures were in conformity

with federal regulations. See 42 C.F.R. § 430.10. Specifically, the Agency developed a 

methodology for making enhancement payments to RHCs that was consistent with federal 

statutes and regulations. The federal government approved the State Plan Amendment and the 

enhancement payment methodology, and the amendment became effective in July 2008. The 

federal regulations, the audit results, and the State Plan Amendment were all in place in 2008 and 

the Clinic, through its core provider agreement, was on notice of them and subject to comply

with them.

Moreover, the Clinic received a letter in 2008 from the Agency informing the Clinic of

the results of the audit and the Agency’s noncompliance with the enhancement process. The 

letter informed the Clinic that the Agency was working to create enhancement rates that were 

complaint with the audit results and federal law. The 2008 letter also referred to the Agency’s 
No. 49569-4-II

23

expectation of reconciling payments and developing a process for when underpayments and 

overpayments existed. The Agency again notified the Clinic in June 2009 about the upcoming

reconciliation and informed the Clinic that if the reconciliation results showed that the Agency

had made an overpayment, the Clinic would be responsible for the overpayment.

Based on these facts, it was not reasonable for the Clinic to believe that it would never be 

required to repay overpaid enhancement payments or that the enhancement payments were 

simply “additional” income. It also was not reasonable for the Clinic to rely on the Agency’s 

overpayment as the Clinic was on notice of the contingent nature of the enhancement payments. 

Accordingly, the Board’s conclusion that the Clinic failed to meet its burden to show that it 

reasonably relied on the Agency’s action of overpayment of enhancement payments or that any 

overpayment would not be recovered by the Agency, is supported by the findings of fact.

Because the Clinic has failed to meet its burden to show that it reasonably relied on the 

Agency’s overpayment it has failed to establish this element of equitable estoppel.

2. Impairment of Government Functions

The Clinic contends that the Board incorrectly interpreted the law by concluding that the

exercise of government functions would be impaired if the Agency was precluded from 

recouping the overpayment.

13 Specifically, the Clinic argues that preventing the Agency from

 

13 The Clinic argues that the Board incorrectly interpreted the law with respect to impairment of 

government functions. However, the Board’s conclusion that the Clinic has not met its burden to 

show that exercise of government functions would be impaired if the Agency was precluded 

from recouping the overpayment, is a conclusion of law based on the facts of this case. This 

conclusion is reviewed to determine if the findings of fact support the Board’s conclusion, 

Nelson, 175 Wn. App. at 723, and whether the conclusion is legally erroneous. Skamania Cty. v. 

Columbia River Gorge Comm’n, 144 Wn. 2d 30, 42, 26 P.3d 241 (2001).
No. 49569-4-II

24

collecting the overpayment would not stop the Agency from reconciling enhancement payments, 

but would only prevent it from collecting “improper overpayments.” Br. of Appellant at 14. The

Clinic argues that there is no federal law requiring the Agency to recoup overpaid enhancement 

payments and therefore no government impairment is caused by preventing the recoupment. We

disagree and hold that the Board’s findings of fact support its conclusion that the exercise of 

government functions would be impaired if equitable estoppel prevented recoupment of the 

overpayments.

CMS authorized the Agency’s enhancement payment and reconciliation process in 2009 

after the Agency amended its process. CMS approved the amended plan which required the 

Agency to pay estimated enhancement payments to RHCs throughout the year followed by a 

reconciliation of those payments to determine if enhancement payments brought the RHCs total 

to an amount exactly equal to what the RHC were entitled to receive. Thus, it is clear that any 

restriction on the Agency’s ability to collect enhancement overpayments would impair the 

Agency from obeying its federal Medicaid mandate, which is to ensure that the Agency operates 

a payment system that supports “efficiency, economy, and quality of care” by ensuring that 

clinics are paid the appropriate amount. See AR at 119.

The Clinic has not clearly shown that government functions would not be impaired if the 

Agency was precluded from recouping the $74,634 of the remaining overpayment debt. 

Therefore, the Clinic has not established this element of equitable estoppel.

Because the Clinic has failed to meet its burden to show that it reasonably relied on the 

Agency’s overpayment and that government functions would not be impaired, the Clinic has 

failed show by clear, cogent, and convincing evidence that it has established all five elements of 
No. 49569-4-II

25

equitable estoppel. Therefore, we do not address the other elements. WAC 182-526-0495 (The 

party asserting equitable estoppel must prove all elements by clear and convincing evidence.). 

Accordingly, the Board’s conclusion that equitable estoppel does not preclude the Agency from 

recovering the overpayment is not improper and is supported by the findings.

III. ATTORNEY FEES

In its conclusion, the Clinic appears to request appellate costs and reasonable attorney

fees. RAP 18.1 permits us to grant attorney fees to a party entitled to them under applicable law.

But RAP 18.1(b) requires an appellant to include a section of its opening brief to the request for 

the fees or expenses. Here, the Clinic failed to include a separate section for attorney fees as 

required. Moreover, the Clinic does not cite any specific statute or case entitling it to attorney 

fees and costs on appeal. Thus, the Clinic is not entitled to attorney fees and cost.

We affirm the Board’s decision.

A majority of the panel having determined that this opinion will not be printed in the 

Washington Appellate Reports, but will be filed for public record in accordance with RCW 

2.06.040, it is so ordered.

Worswick, P.J.

We concur:

Bjorgen, J.

Melnick, J.