Opinion ID: 1275626
Heading Depth: 2
Heading Rank: 2

Heading: the committee decision: based on substantial evidence?

Text: The parties agree that this judicial review is governed by Section 1-23-380 of the Administrative Procedures Act, and that the substantial evidence rule controls. DSS bases its overpayment claim upon a finding by its auditors that Babcock used an inappropriate method of allocating costs assignable to Medicaid, although the method was the same used at the time of the 1976 audit and upon which Babcock's reimbursement claims were approved at that time. The method employed by Babcock is known as the patient weighted day (weighted) method. DSS auditors in the 1980 audit found that a method known as accumulated cost should have been used by Babcock. The evidence upon which DSS relied solely was that presented in the testimony of its own auditor, Thomas D. Hansom, who supervised and participated directly in the 1980 audit. Hansom admitted that under terms of the guideline furnished to providers, Provider Reimbursement Manual (HIM-15), the selection of a method of cost accounting was entirely up to the facility, within the methods outlined in HIM-15. Nothing in HIM-15 designates a particular method, the requirement in section 2306 being only that a method described in sections 2306.1-2310 be used to determine the actual cost of services rendered during the provider's initial Medicare reporting period. Section 2306 provides, further, that the provider may not thereafter change the method without approval of the intermediary. Babcock never sought a change. Hansom testified repeatedly to his opinion that the accumulated cost method of allocating costs was superior to the weighted method employed by Babcock. However, his opinions represented conclusions not supported by substantial evidence. On cross examination, he described the accumulated cost method, upon which the 1980 audit was conducted, as simpler. However, he conceded it did not take into consideration the duties of Babcock employees, an inquiry into which was critical in determining their allocation of time in the administering of programs: Lewis: And it doesn't take into account what one secretary does, does it? Hansom: No, sir. Lewis: It doesn't take into account what one bookkeeper does? Hansom: No, sir. Lewis: It doesn't take into account what the administrator does? Hansom: That's true. Lewis: It doesn't take into account anything that the people doing the work actually do, does it? Hansom: No. Lewis: And it doesn't take into account what portion of the building is necessary. It doesn't take into account what portion of the transportation are necessary. It doesn't take into account one real life fact, does it? Hansom: One real life fact is, that the use of accumulated cost is a given acceptable method under Medicare. Lewis: I didn't ask you that. I said it doesn't take into one real life fact what happens in the administrative overhead facility, does it? Hansom: It may or may not. Lewis: It doesn't, does it? Isn't that unfair? It's just based on a dollar. Hansom: It is based on a dollar, yes, sir. Hansom identified a Medicare form 2552 which he testified uses a method of cost finding, part of which involves the allocation of administrative and general costs on the basis of accumulated costs.  [Emphasis supplied.] Admittedly, a provider using form 2552 could not object to an audit based upon the accumulated cost method. However, form 2552 was not required or recommended at the time of the audit, as Hansom indicated in answer to questions by a member of the Committee, Mollie C. Corrie: Corrie: Okay, one other question. This 2552 report, cost finding cost ... Hansom: Yes Ma'am. Corrie: Was this effort required or was Babcock Center at any time instructed or was it recomeended that they use this form? Hansom: It was recommended for future cost report periods. As far as I know it was not recommended that they use this form during the period under audit. I think Mr. Lewis has asked me that question earlier and I gave the same answer. [Emphasis supplied.] The question of attorney Lewis, to which Hansom refers, occurred during his cross examination, in the course of which he testified, incredibly , that Babcock should have used form 2552, notwithstanding the form was not required and notwithstanding further, that other forms which Babcock used were furnished to Babcock by DSS: Lewis: And so now I understand that you are talking about some form. Are you upset because Babcock didn't choose to use that form. There is no requirement for them to use that form, is there?       Hansom: At the time of the audit the 2552 was not mandated for use by ICF/MR. Lewis: Thank you. And in fact aren't you aware that the forms that were given to use by Babcock, were they furnished by DSS? Do you know? Do you know where they got them? Hansom: I believe they were. Lewis: So all of a sudden we have ... they are using the forms by DSS and you are sitting here saying they should have used 2552? Hansom: Yes. Lewis: Thank you. [Emphasis supplied.] Despite the efforts of DSS to represent accumulated cost as more accurate than weighted in allocation of costs, Hansom admitted that, if he based his audit upon trial testimony concerning the everyday activities of Babcock personnel, the 75% reimbursement figure resulting from the weighted method would be more certainly the one I would use. Babcock presented evidence from its officials and employees of the time spent upon activities related to Medicare solely and that spent upon activities related to other programs. These employees were interviewed by Babcock's witness, William D. Brigman, a certified public accountant and Medicaid consultant with the firm of Ernst and Whinney. Brigman's explanation of the two cost accounting methods was clear and cogent. He testified that based on his study the weighted method was more accurate for the Babcock audit. In defining substantial evidence, this Court has held: `Substantial evidence' is not a mere scintilla of evidence nor the evidence viewed blindly from one side of the case which, considering the record as a whole, would allow reasonable minds to reach the conclusion that the administrative agency reached or must have reached to justify its action. [Citation omitted.] Law v. Richland Cty. School Dist. No. 1 , 270 S.C. 492, 495, 243 S.E. (2d) 192 (1978). When the entire record is reviewed and considered, we hold that the finding of the Committee was not based upon substantial evidence and was, therefore, clearly erroneous. We reverse.