Court Opinion

ID: 9911038
Source: CourtListenerOpinion
Date Created: 2023-12-19 13:05:06.355879+00
Date Added: 2024-06-11T12:55:38.194447
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                 No. COA23-122

                             Filed 19 December 2023

Mecklenburg County, No. 21 CVS 19462

ELITE HOME HEALTH CARE, INC., and ELITE TOO HOME HEALTH CARE,
INC., Petitioners,

            v.

N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF
MEDICAL ASSISTANCE, DIVISION OF HEALTH BENEFITS, Respondents.

      Appeal by petitioners from order entered 12 September 2022 by Judge Hugh

B. Lewis in Mecklenburg County Superior Court. Heard in the Court of Appeals 3

October 2023.

      Ralph Bryant Law Firm, by Ralph T. Bryant, Jr., for petitioners-appellants.

      Attorney General Joshua H. Stein, by Assistant Attorney General Adrian W.
      Dellinger, for the State.

      ZACHARY, Judge.

      This appeal concerns the definition of a “clean claim” for the purposes of

prepayment claims review of Medicaid providers in North Carolina, pursuant to N.C.

Gen. Stat. § 108C-7 (2021). After conducting prepayment claims review, Respondent

North Carolina Department of Health and Human Services (“DHHS”) terminated

Petitioners Elite Home Health Care, Inc., and Elite Too Home Health Care, Inc.,
       ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                            Opinion of the Court

(collectively, “Elite”)1 from participation in North Carolina’s Medicaid program, due

to Elite’s “failure to successfully meet the accuracy requirements of prepayment

review pursuant to [N.C. Gen. Stat.] § 108C-7.” Elite appeals from the superior court’s

order affirming the final decision of the administrative law judge, which upheld the

termination. After careful review, we affirm.

                                       I.      Background

       The dispositive issue in this appeal is the definition of a “clean claim” as used

in N.C. Gen. Stat. § 108C-7. The relevant legal and procedural facts are undisputed.

A. Medicaid and Prepayment Claims Review

       “The Medicaid program was established by Congress in 1965 to provide federal

assistance to states which chose to pay for some of the medical costs for the needy.”

Correll v. Division of Soc. Servs., 332 N.C. 141, 143, 418 S.E.2d 232, 234 (1992).

“Whether a state participates in the program is entirely optional. However, once an

election is made to participate, the state must comply with the requirements of

federal law.” Id. (cleaned up). In essence, “Medicaid offers the States a bargain:

Congress provides federal funds in exchange for the States’ agreement to spend them

       1 We use “Elite” as a collective term, consistent with the record on appeal and the proceedings

below. As the superior court explained: “Petitioners Elite Home Health Care, Inc.[,] and Elite Too
Home Health Care, Inc[.,] are two separate entities. [However,] Tara Ellerbe is the CEO and sole
shareholder of each. Each was enrolled as a [Medicaid] provider . . . . Each was subject to the same
prepayment review at issue in this case and both were referred to in the hearing as if a single entity.”
       Similarly, we use “DHHS” as a collective term to include Respondents Division of Medical
Assistance and Division of Health Benefits, both of which are divisions within the Department of
Health and Human Services.

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                                  Opinion of the Court

in accordance with congressionally imposed conditions.” Armstrong v. Exceptional

Child Ctr., Inc., 575 U.S. 320, 323, 191 L. Ed. 2d 471, 476 (2015).

      Among the conditions imposed by Congress for a State’s receipt of Medicaid

funds is the requirement that “[a] State plan for medical assistance must . . . provide

for procedures of prepayment and postpayment claims review[.]” 42 U.S.C.

§ 1396a(a)(37). Accordingly, N.C. Gen. Stat. § 108C-7 authorizes DHHS to conduct

prepayment claims review “to ensure that claims presented by a provider for payment

by [DHHS] meet the requirements of federal and State laws and regulations and

medical necessity criteria[.]” N.C. Gen. Stat. § 108C-7(a).

      Medicaid claims are generally paid upon receipt, and providers are subject to

periodic audits thereafter. See Charlotte-Mecklenburg Hosp. Auth. v. N.C. Dep’t of

Health & Hum. Servs., 201 N.C. App. 70, 74, 685 S.E.2d 562, 566 (2009), disc. review

denied, 363 N.C. 854, 694 S.E.2d 201 (2010). Under certain circumstances, however,

a Medicaid provider may receive notice that it has been placed on prepayment claims

review. N.C. Gen. Stat. § 108C-7(b). The “[g]rounds for being placed on prepayment

claims review” include:

             [R]eceipt by [DHHS] of credible allegations of fraud,
             identification of aberrant billing practices as a result of
             investigations, data analysis performed by [DHHS], the
             failure of the provider to timely respond to a request for
             documentation made by [DHHS] or one of its authorized
             representatives, or other grounds as defined by [DHHS] in
             rule.

Id. § 108C-7(a).

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      Before placing a provider on prepayment claims review, DHHS must “notify

the provider in writing of the decision and the process for submitting claims for

prepayment claims review.” Id. § 108C-7(b). Such notice must contain:

                (1) An explanation of [DHHS]’s decision to place the
                    provider on prepayment claims review.

                (2) A description of the review process and claims
                    processing times.

                (3) A description of the claims subject to prepayment
                    claims review.

                (4) A specific list of all supporting documentation that
                    the provider will need to submit to the prepayment
                    review vendor for all claims that are subject to the
                    prepayment claims review.

                (5) The process for submitting claims and supporting
                    documentation.

                (6) The standard of evaluation used by [DHHS] to
                    determine when a provider’s claims will no longer be
                    subject to prepayment claims review.

Id.

      Once a provider is placed on prepayment claims review, that provider must

achieve an acceptable level of “clean claims submitted” to be released from review or

else risk sanction, which potentially includes termination from the Medicaid

program:

                (d) [DHHS] shall process all clean claims submitted for
                    prepayment review within 20 calendar days of
                    receipt of the supporting documentation for each
                    claim by the prepayment review vendor. To be
                    considered by [DHHS], the documentation

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                                     Opinion of the Court

                       submitted must be complete, legible, and clearly
                       identify the provider to which the documentation
                       applies. If the provider failed to provide any of the
                       specifically requested supporting documentation
                       necessary to process a claim pursuant to this section,
                       [DHHS] shall send to the provider written
                       notification    of   the    lacking    or   deficient
                       documentation within 15 calendar days of the due
                       date of requested supporting documentation.
                       [DHHS] shall have an additional 20 days to process
                       a claim upon receipt of the documentation.

                (e) The provider shall remain subject to the prepayment
                    claims review process until the provider achieves
                    three consecutive months with a minimum seventy
                    percent (70%) clean claims rate, provided that the
                    number of claims submitted per month is no less
                    than fifty percent (50%) of the provider’s average
                    monthly submission of Medicaid claims for the
                    three-month period prior to the provider’s placement
                    on prepayment review. If a provider does not submit
                    any claims following placement on prepayment
                    review in any given month, then the claims accuracy
                    rating shall be zero percent (0%) for each month in
                    which no claims were submitted. If the provider does
                    not meet the seventy percent (70%) clean claims rate
                    minimum requirement for three consecutive months
                    within six months of being placed on prepayment
                    claims review, [DHHS] may implement sanctions,
                    including termination of the applicable Medicaid
                    Administrative     Participation   Agreement,     or
                    continuation of prepayment review. [DHHS] shall
                    give adequate advance notice of any modification,
                    suspension, or termination of the Medicaid
                    Administrative Participation Agreement.

Id. § 108C-7(d)–(e).

B. Procedural History

      Elite was party to a Medicaid Participation Agreement, pursuant to which it

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                                  Opinion of the Court

was required to abide by the policies developed by DHHS in Elite’s provision of

services. The Carolina Centers for Medical Excellence (“CCME”) is a private

corporation with which DHHS contracted to conduct prepayment claims reviews of

particular Medicaid providers in North Carolina.

      On 3 July 2019, at the direction of DHHS, CCME issued initial notices of

prepayment claims review to Elite via certified mail. After a failed delivery attempt

and after receiving no response to the notices left for Elite, CCME sent the notices to

Elite by secured email on 22 July 2019. Between July 2019 and May 2020, CCME

and Elite “made or attempted contact 263 times to discuss the prepayment review

process, including, but not limited to, documentation requests, claims submissions,

submission timelines, and denials.” Elite submitted “roughly 60,000” claims while on

prepayment claims review.

      On 6 March 2020, DHHS sent to Elite, via certified mail, tentative notices of

its decision to terminate Elite from participation in the North Carolina Medicaid

program. The tentative notices stated that the decision was “a result of [Elite] not

meeting minimum accuracy rate requirements of prepayment review[.]” On 20 April

2020, Elite filed a petition for a contested case hearing with the Office of

Administrative Hearings.

      The matter came on for hearing before the administrative law judge on 26 and

27 April 2021. On 3 November 2021, the administrative law judge entered a final

decision upholding DHHS’s decision.

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                                      Opinion of the Court

       In his final decision, the administrative law judge made the following pertinent

findings of fact:

                    12. The Notices informed [Elite] that CCME would
                        conduct prepayment review of claims submitted by
                        [Elite]. The Notices described the prepayment
                        review process and specifically explained that the
                        provider must attain a claims submission accuracy
                        rate of at least 70% for three consecutive calendar
                        months. Further, the Notices informed [Elite] that if
                        this rate was not achieved within six months of
                        being placed on prepayment review, . . . [DHHS]
                        could implement sanctions, including termination of
                        the provider from providing services.

                    13. The Notices specifically stated: “However, the
                        prepayment review contractor will review the
                        documentation for services billed, including prior
                        authorized services, to determine if the
                        documentation is compliant with policy. An example
                        is obtaining staff credentials to verify that a service
                        has been rendered by an appropriately credentialed
                        person, as required by Medicaid policy.”

                    14. The Notices from CCME also set out a list of
                        documents CCME would need to review and
                        included a sample Audit Tool. An Audit Tool lists
                        what documentation the reviewer needs to review
                        for each claim.

                          ....

                    16. A claim submitted for a given date of service must
                        be completely compliant with Clinical Coverage
                        Policy as of that date of service.

                    17. This methodology has been approved by [DHHS] and
                        is applied by CCME for all [personal care services]
                        providers in the NC Medicaid Program that are on
                        prepayment review.

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ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                           Opinion of the Court

         18. CCME is in nearly daily contact with providers who
             are subject to prepayment review and have
             questions about the process, about records requests,
             about specific denials, and other issues and concerns
             about the prepayment review process.

         19. The number of claims submitted while [Elite was] on
             prepayment review was roughly 60,000.

         20. Between July 2019 and May 2020, [Elite] and CCME
             made or attempted contact 263 times to discuss the
             prepayment review process, including, but not
             limited to, documentation requests, claims
             submissions, submission timelines, and denials.

         21. [Elite was] fully informed and aware of the
             requirements for accuracy.

         22. In calculating the monthly accuracy report, CCME
             reviews each claim detail line item.

         23. Petitioner Elite Home Health Care, Inc. failed to
             send all required documentation 78 [percent] of the
             time while on prepayment review. Petitioner Elite
             Too Home Health Care, Inc. failed to send all
             required documentation 74 [percent] of the time
             while on prepayment review.

         24. [Elite] failed to meet the minimum accuracy
             requirements.

         25. [Elite] ha[s] not proven that all required
             documentation was provided at the time claims were
             submitted and was available for review by the
             prepayment review vendor, nor that claims should
             not have been denied at the time of the vendor’s
             initial review.

         26. The term “clean claim” is not defined in [N.C. Gen.
             Stat. §] 108C.

         27. The term “clean claim” is defined in 42 C.F.R.

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      ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                   Opinion of the Court

                    § 447.45 as “one that can be processed without
                    obtaining additional information from the provider
                    of the service or from a third party.”

                 28. The term “clean claim” is not defined by the North
                     Carolina Administrative Code as it relates to
                     Medicaid claims.

      On 2 December 2021, Elite filed a petition for judicial review in the

Mecklenburg County Superior Court. In its petition, Elite specifically challenged the

administrative law judge’s findings of fact 16, 21, 23–25, and 28. Elite also challenged

the conclusions of law in which the administrative law judge applied the federal

definition of “clean claim” from 42 C.F.R. § 447.45 rather than the definition of “clean

claim” from 10A N.C. Admin. Code 27A.0302 (2022), which Elite argued applied

instead.

      On 23 August 2022, the matter came on for hearing in Mecklenburg County

Superior Court. By order entered on 12 September 2022, the superior court affirmed

the final decision of the administrative law judge. Elite timely filed notice of appeal.

                                 II.   Discussion

      On appeal, Elite argues that the superior court erred by affirming the final

decision of the administrative law judge, and makes the same argument that it made

below: that “DHHS was not authorized by statute to terminate [Elite’s] participation

in the Medicaid program” because it “failed to apply the correct definition of clean

claim to determine the provider prepayment review accuracy rate[.]” We disagree.

A. Standard of Review

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      ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                  Opinion of the Court

      N.C. Gen. Stat. § 150B-51 sets forth the standard of review of decisions of an

administrative agency, such as DHHS, and “governs both trial and appellate court

review of administrative agency decisions.” Williford v. N.C. Dep’t of Health & Hum.

Servs., 250 N.C. App. 491, 493, 792 S.E.2d 843, 846 (2016) (citation omitted). Section

150B-51 provides, in pertinent part, that:

                (b) The court reviewing a final decision may affirm the
                    decision or remand the case for further proceedings.
                    It may also reverse or modify the decision if the
                    substantial rights of the petitioners may have been
                    prejudiced because the findings, inferences,
                    conclusions, or decisions are:

                       (1) In violation of constitutional provisions;

                       (2) In excess of the statutory authority or
                           jurisdiction of the agency or administrative
                           law judge;

                       (3) Made upon unlawful procedure;

                       (4) Affected by other error of law;

                       (5) Unsupported      by   substantial evidence
                           admissible under [N.C. Gen. Stat. §] 150B-
                           29(a), 150B-30, or 150B-31 in view of the
                           entire record as submitted; or

                       (6) Arbitrary,    capricious,     or   an   abuse   of
                           discretion.

                (c) In reviewing a final decision in a contested case, the
                    court shall determine whether the petitioner is
                    entitled to the relief sought in the petition based
                    upon its review of the final decision and the official
                    record. With regard to asserted errors pursuant to
                    subdivisions (1) through (4) of subsection (b) of this
                    section, the court shall conduct its review of the final

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                                    Opinion of the Court

                     decision using the de novo standard of review. With
                     regard to asserted errors pursuant to subdivisions
                     (5) and (6) of subsection (b) of this section, the court
                     shall conduct its review of the final decision using
                     the whole record standard of review.

N.C. Gen. Stat. § 150B-51(b)–(c).

      Thus, pursuant to § 150B-51(b)–(c), our standard of review depends upon the

error asserted by the petitioner. Id. When the petitioner’s appeal raises an issue of

law, such as the scope of the agency’s statutory authority, “this Court considers the

matter anew and freely substitutes its own judgment for the agency’s.” Christian v.

Dep’t of Health & Hum. Servs., 258 N.C. App. 581, 584, 813 S.E.2d 470, 472 (cleaned

up), appeal dismissed, 371 N.C. 451, 817 S.E.2d 575 (2018). However, when the

petitioner’s appeal raises arguments pursuant to § 150B-51(b)(5)–(6), we review using

the whole record test. “Using the whole record standard of review, we examine the

entire record to determine whether the agency decision was based on substantial

evidence such that a reasonable mind may reach the same decision.” Id. at 584–85,

813 S.E.2d at 472.

      In the present case, Elite acknowledges that the dispositive facts are

undisputed and “the definition of a clean claim is determinative in this matter.” In

that this issue presents a pure question of law, we apply a de novo standard of review

to the legal issue raised in this appeal.

B. Analysis

      The question presented is the definition of the term “clean claim,” which is not

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                                   Opinion of the Court

defined in the text of N.C. Gen. Stat. § 108C-7. However, the Centers for Medicare &

Medicaid Services (“CMS”) promulgated a federal regulation defining the term “clean

claim” for the purposes of prepayment claims review pursuant to 42 U.S.C.

§ 1396a(a)(37). CMS defines a “clean claim” in the Code of Federal Regulations as

“one that can be processed without obtaining additional information from the

provider of the service or from a third party.” 42 C.F.R. § 447.45(b) (2022). DHHS

asserts that the definition in this federal regulation controls in this case.

      On the other hand, Elite contends that a “clean claim” is “an electronic invoice

for payment that contains all of the information that is required to be completed on

that invoice.” Elite derives this definition from the North Carolina Administrative

Code, one section of which (“the Rule”) defines a “clean claim” as “an itemized

statement with standardized elements, completed in its entirety in a format as set

forth in Rule .0303 of this Section.” 10A N.C. Admin. Code 27A.0302(b).

      Elite correctly notes that the Rule is “the only DHHS[-]promulgated rule in the

administrative code” that defines the term “clean claim.” Nonetheless, the Rule is

plainly inapplicable to the case before us. The Rule is found in a section of the

Administrative Code that is solely “applicable to local management entities (LMEs)

and public and private providers who seek to provide services that are payable from

funds administered by an LME.” 10A N.C. Admin. Code 27A.0301. LMEs are “area

mental health, developmental disabilities, and substance abuse authorit[ies]” that

operate under the Mental Health, Developmental Disabilities, and Substance Abuse

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      ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                   Opinion of the Court

Act of 1985. N.C. Gen. Stat. § 122C-3(1), (20b).

      Elite is not an LME, nor has it ever contended that it “provide[s] services that

are payable from funds administered by an LME.” 10A N.C. Admin. Code 27A.0301.

As Robyn Winters—a contract supervisor with CCME, the independent contractor

that processes documents submitted for prepayment claims review—testified before

the administrative law judge: “None of the claims that were submitted by Elite were

submitted to or through any of the [LMEs] in North Carolina.” Elite does not contest

this fact. Rather than arguing that this case involves claims that fall within the scope

of the Rule, Elite instead argues that the Rule reaches beyond its text to encompass

“all agencies that [DHHS] allows to administer Medicaid funds.” This argument is

meritless, and disregards the plain text limiting the scope of the Rule, which simply

does not apply in the context presented in the case at bar.

      It is evident that the CMS definition controls: for the purposes of prepayment

claims review, a clean claim is “one that can be processed without obtaining

additional information from the provider of the service or from a third party.” 42

C.F.R. § 447.45(b).

      Significantly, Elite candidly admits in its reply brief that, in the event that we

reject its definitional argument and agree with DHHS that the definition

promulgated by CMS in 42 C.F.R. § 447.45 applies, “DHHS would have made a

showing of less than perfect compliance in over 70% of the claims submitted.”

Consequently, there are no contested issues of fact to resolve; our answer to this

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      ELITE HOME HEALTH CARE, INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                  Opinion of the Court

determinative question of law controls. Elite’s argument is overruled.

                               III.   Conclusion

      For the foregoing reasons, the superior court’s order is affirmed.

      AFFIRMED.

      Chief Judge STROUD and Judge MURPHY concur.

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