Court Opinion

ID: 4090192
Source: CourtListenerOpinion
Date Created: 2016-10-18 12:09:51.188726+00
Date Added: 2024-06-11T13:13:04.852743
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                 No. COA15-1197

                              Filed: 18 October 2016

Wake County, No. 14 CVS 635

ABRONS FAMILY PRACTICE AND URGENT CARE, PA; NASH OB-GYN
ASSOCIATES, PA; HIGHLAND OBSTETRICAL-GYNECOLOGICAL CLINIC, PA;
CHILDREN’S HEALTH OF CAROLINA, PA; CAPITAL NEPHROLOGY
ASSOCIATES, PA; HICKORY ALLERGY & ASTHMA CLINIC, PA; HALIFAX
MEDICAL SPECIALISTS, PA; and WESTSIDE OB-GYN CENTER, PA; Individually
and on Behalf of All Others Similarly Situated, Plaintiffs,

            v.

NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, and
COMPUTER SCIENCES CORPORATION, Defendants.

      Appeal by plaintiffs from order entered 12 June 2015 by Judge Gregory P.

McGuire in Wake County Superior Court. Heard in the Court of Appeals 9 June 2016.

      Williams Mullen, by Camden R. Webb, Elizabeth C. Stone, and Mark S.
      Thomas, for plaintiffs-appellants.

      Attorney General Roy Cooper, by Special Deputy Attorney General Olga
      Vysotskaya de Brito and Special Deputy Attorney General Amar Majmundar,
      for defendant-appellee North Carolina Department of Health and Human
      Services.

      Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Jennifer K. Van
      Zant, Charles F. Marshall, III, and Bryan Starrett, and Baker Botts L.L.P., by
      Bryan C. Boren, Jr., Van H. Beckwith, and Ryan L. Bangert, for defendant-
      appellee Computer Sciences Corporation.

      ZACHARY, Judge.
  ABRONS FAM. PRAC. & URGENT CARE, PA V. NC DEP’T OF HEALTH & HUM. SERVS.

                                   Opinion of the Court

      Abrons Family Practice and Urgent Care, PA; Nash OB-GYN Associates, PA;

Highland Obstetrical-Gynecological Clinic, PA; Children’s Health of Carolina, PA;

Capital Nephrology Associates, PA; Hickory Allergy & Asthma Clinic, PA; Halifax

Medical Specialists, PA; and Westside OB-GYN Center, PA (“plaintiffs”) appeal from

an order of the trial court granting a motion of the North Carolina Department of

Health and Human Services (“DHHS”) and Computer Sciences Corporation (“CSC”)

(collectively “defendants”) to dismiss plaintiffs’ complaint for lack of subject matter

jurisdiction. For the reasons stated below, we reverse the order of the trial court.

                       I. Factual and Procedural Background

      “Medicaid is a federal program that subsidizes the States’ provision of medical

services to . . . ‘individuals, whose income and resources are insufficient to meet the

costs of necessary medical services.’ [42 U.S.C.A.] §1396-1.” Armstrong v. Exceptional

Child Ctr., Inc., __ U.S. __, __, 191 L. Ed. 2d 471, 476 (2015). Plaintiffs are medical

practices in North Carolina that provide care to Medicaid-eligible patients and that

have Medicaid contracts with the State of North Carolina. DHHS is an administrative

agency of the State of North Carolina and is the single state agency designated to

administer and operate the North Carolina Medicaid plan. CSC is a Nevada

corporation, with its principal office in Falls Church, Virginia.

      In 2003, the federal Centers for Medicare and Medicaid Services (“CMS”)

required the State of North Carolina to replace its Medicaid Management

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Information System (“MMIS”). In December 2008, the State awarded the MMIS

contract to CSC. The contract required CSC to design and operate a new MMIS

system. The new system, NCTracks, was implemented on 1 July 2013, and was

intended to manage the enrollment of medical, dental, and other health care

providers (hereafter “providers”) and to process claims by providers for payment for

services provided to North Carolina Medicaid recipients.

      On 21 January 2014, plaintiffs filed a “First Amended Class Action Complaint”

on behalf of themselves and all others similarly situated against defendants.

Plaintiffs’ complaint also named SLI Global Solutions, Inc. (SLI) as a defendant;

however, SLI is not a party to this appeal. Plaintiffs alleged that the implementation

of NCTracks had been a “disaster, inflicting millions of dollars in damages upon

North Carolina’s Medicaid providers.” Plaintiffs asserted that CSC had breached its

duty to develop software that complied with Medicaid reimbursement rules, allowed

providers to enroll as Medicaid providers, and that processed and paid providers’

claims, and had also been negligent in its design and implementation of NCTracks.

Plaintiffs sought damages based on claims of negligence and unfair and deceptive

trade practices (“UDTP”) against CSC and SLI; and breach of contract and violations

of Art. I, § 19 of the North Carolina Constitution against DHHS. Plaintiffs also sought

a declaratory judgment that DHHS was in violation of the Medicaid reimbursement

rules. In their complaint, plaintiffs alleged that it would be futile or impossible for

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                                    Opinion of the Court

them to attempt to exhaust the available administrative remedies for a variety of

reasons, including the following:

             DHHS and CSC have also placed thousands of
             reimbursement claims in “limbo” by failing to issue
             decisions on reimbursement claims. The providers have
             been informed by DHHS and CSC that they must resubmit
             the claims, and providers’ claims have been resubmitted as
             many as a dozen times, with no reimbursement and no
             final determination that the amount is or is not payable.
             The providers therefore have no administrative remedies
             available to them for such claims because they have no
             agency decision from which to appeal.

      This matter was subsequently “designated a mandatory complex business case

by Order of the Chief Justice of the North Carolina Supreme Court[.]” On 4 April

2014, DHHS and CSC each filed a motion to dismiss pursuant to Rule 12(b)(1),

12(b)(2), and 12(b)(6) of the North Carolina Rules of Civil Procedure. Following a

hearing held on 15 April 2015, the trial court entered an “Amended Opinion and

Order on Motions to Dismiss” on 12 June 2015. The trial court ruled that plaintiffs’

“primary claim” was for unpaid Medicaid claims and that plaintiffs had failed to

exhaust the available administrative remedies prior to filing their complaint. The

court dismissed plaintiffs’ complaint pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(1)

(2015) for lack of subject matter jurisdiction, based upon plaintiffs’ failure to exhaust

the available administrative remedies prior to filing suit. The court dismissed as moot

defendants’ motions for dismissal pursuant to N.C. Gen. Stat. § 1A-1 Rule 12(b)(2)

and 12(b)(6). Plaintiffs noted an appeal to this Court.

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                                  Opinion of the Court

                                  II. Standard of Review

      Our Court “review[s] Rule 12(b)(1) motions to dismiss for lack of subject matter

jurisdiction de novo and may consider matters outside the pleadings.” Harris v.

Matthews, 361 N.C. 265, 271, 643 S.E.2d 566, 570 (2007) (citations omitted).

                                       III. Discussion

                                      A. Introduction

      The issue raised by this appeal is whether the trial court correctly determined

that plaintiffs failed to show that it would have been futile or impossible for them to

attempt to exhaust administrative remedies prior to filing suit. On appeal, plaintiffs

argue that DHHS has a legal obligation to render a final decision on each Medicaid

claim that it denies, to inform the provider of its final decision, and to notify the

provider of the provider’s right to seek a contested case hearing. Plaintiffs contend

that “[a]t no time do DHHS or CSC issue a final decision on any claims” and assert

that a provider cannot initiate the process of exhausting its administrative remedy

until DHHS issues a final decision from which the provider can appeal. We conclude

that plaintiffs’ arguments on this issue have merit and that the trial court erred in

its analysis of the issue of exhaustion of administrative remedies.

                 B. Exhaustion of Administrative Remedies: General Rule

      Judicial review of the final decision of a State agency is governed by the

Administrative Procedure Act (APA), N.C. Gen. Stat. § 150B-1 et seq., which applies

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to “both trial and appellate court review of administrative agency decisions.” N. C.

Dept. of Correction v. Myers, 120 N.C. App. 437, 440, 462 S.E.2d 824, 826 (1995). N.C.

Gen. Stat. § 150B-43 (2015) states in relevant part that “[a]ny party or person

aggrieved by the final decision in a contested case, and who has exhausted all

administrative remedies made available to the party or person aggrieved by statute

or agency rule, is entitled to judicial review of the decision under this Article[.]” “An

action is properly dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction

where the plaintiff has failed to exhaust administrative remedies.” Johnson v. Univ.

of N.C., 202 N.C. App. 355, 357, 688 S.E.2d 546, 548 (2010) (internal quotations

omitted). “[T]he exhaustion requirement may be excused if the administrative

remedy would be futile or inadequate.” Justice for Animals, Inc. v. Robeson Cty., 164

N.C. App. 366, 372, 595 S.E.2d 773, 777 (2004) (citing Huang v. N.C. State University,

107 N.C. App. 710, 715, 421 S.E.2d 812, 815 (1992)).

      N.C. Gen. Stat. § 150B-22 (2015) sets out the general policy for resolution of

disputes between a State agency and another party:

             It is the policy of this State that any dispute between an
             agency and another person that involves the person’s
             rights, duties, or privileges . . . should be settled through
             informal procedures. In trying to reach a settlement
             through informal procedures, the agency may not conduct
             a proceeding at which sworn testimony is taken and
             witnesses may be cross-examined. If the agency and the
             other person do not agree to a resolution of the dispute
             through informal procedures, either the agency or the
             person may commence an administrative proceeding to

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             determine the person’s rights, duties, or privileges, at
             which time the dispute becomes a “contested case.”

      The APA applies to appeals by a Medicaid provider. N.C. Gen. Stat. § 108C-12

(2015) states that:

             (a) General Rule. Notwithstanding any provision of State
             law or rules to the contrary, this section shall govern the
             process used by a Medicaid provider or applicant to appeal
             an adverse determination made by the Department.

             (b) Appeals. Except as provided by this section, a request
             for a hearing to appeal an adverse determination of the
             Department under this section is a contested case subject
             to the provisions of Article 3 of Chapter 150B of the General
             Statutes.

      Thus, pursuant to N.C. Gen. Stat. § 108C-12, a contested case hearing is the

administrative remedy that a provider must pursue before filing a civil suit. N.C.

Gen. Stat. § 108C-2(1) defines an “adverse determination” as “[a] final decision by the

Department to deny, terminate, suspend, reduce, or recoup a Medicaid payment[.]”

N.C. Gen. Stat. § 150B-23(a) (2015) provides that a “contested case shall be

commenced by . . . filing a petition with the Office of Administrative Hearings[.]” The

time within which a party may petition for a contested case hearing is limited by N.C.

Gen. Stat. § 150B-23(f), which provides in relevant part that:

             (f) Unless another statute or a federal statute or regulation
             sets a time limitation for the filing of a petition in contested
             cases against a specified agency, the general limitation for
             the filing of a petition in a contested case is 60 days. The
             time limitation, whether established by another statute,
             federal statute, or federal regulation, or this section, shall

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                                   Opinion of the Court

             commence when notice is given of the agency decision to all
             persons aggrieved who are known to the agency[.] . . . The
             notice shall be in writing, and shall set forth the agency
             action, and shall inform the persons of the right, the
             procedure, and the time limit to file a contested case
             petition. . . . .

      An appellant’s compliance with the time limit of N.C. Gen. Stat. § 150B-23(f)

is a jurisdictional requirement. “In order for the OAH to have jurisdiction over [a]

petitioner’s appeal . . . [a] petitioner is required to follow the statutory requirements

. . . for commencing a contested case.” Nailing v. UNC-CH, 117 N.C. App. 318, 324,

451 S.E.2d 351, 355 (1994). Thus, “timely filing of a petition is necessary to confer

subject matter jurisdiction on the agencies as well as the courts[.]” Gray v. N.C. Dep’t

of Env’t, Health & Nat. Res., 149 N.C. App. 374, 378, 560 S.E.2d 394, 397 (2002).

      In sum, the general rule, upon which the trial court and the parties are in

apparent agreement, is as follows:

             1. The APA applies to a provider who wants to challenge
             DHHS’ denial of a claim for Medicaid payment.

             2. Under the APA, a provider must exhaust administrative
             remedies, in this case by pursuing a contested case
             hearing, prior to filing a claim in superior court, unless the
             administrative remedy is inadequate or pursuing the
             remedy would be futile.

             3. In order to pursue a contested case hearing, a provider
             must file a petition for a contested case hearing within 60
             days of receiving notice, in writing, of DHHS’ adverse
             determination of the provider’s claim. An adverse
             determination is DHHS’ final decision to “deny . . . a
             Medicaid payment” to a provider.

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                                   Opinion of the Court

                             C. Administrative Appeal Process

      Plaintiffs assert that, in response to the submission by a provider of a claim for

a Medicaid payment, DHHS neither makes a final agency decision regarding the

claim nor provides the notice of such decision required under N.C. Gen. Stat. § 150B-

23(f). Plaintiffs argue that without a final agency decision from which to appeal, it is

impossible for them to pursue a hearing before the OAH. Evaluation of the merits of

plaintiffs’ argument requires a review of the document issued by DHHS.

      The parties agree that when a provider submits a claim for reimbursement,

DHHS responds by sending the provider a document known as a Remittance

Statement. The Remittance Statement notifies the provider of DHHS’ initial

disposition of the provider’s claim. Claims are either paid, denied, or placed in

“pending” status. In its appellee’s brief, CSC describes the contents and legal

significance of the Remittance Statement as follows:

             When faced with a denial of a reimbursement claim for
             Medicaid-covered services, a provider seeking relief may
             choose to do one of two things: (1) resubmit the claim,
             generally with new or updated information or (2) seek
             administrative review with the North Carolina Division of
             Medicaid Assistance (“DMA”). 10A NCAC 22J .0102(a). If
             the reconsideration review process proves unsuccessful, a
             provider may initiate a contested case proceeding before
             the Office of Administrative Hearings (“OAH”). . . . A
             provider’s option to pursue resubmission or administrative
             remedies is triggered by the provider’s receipt of a
             Remittance Statement. A Remittance Statement notifies a

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            provider whether reimbursement claims have been
            approved and paid, denied, or placed in pending status.

      The reconsideration review is an informal review process. Several provisions

of the North Carolina Administrative Code (NCAC) that are cited by the trial court

and by defendants address a provider’s right to seek a reconsideration review:

            1. 10A NCAC 22J .0101.

                   The purpose of these regulations is to specify the
                   rights of providers to appeal reimbursement rates,
                   payment      denials,    disallowances,  payment
                   adjustments and cost settlement disallowances and
                   adjustments. . . .

            2. 10A NCAC 22J .0102.

                   (a) A provider may request a reconsideration review
                   within 30 calendar days from receipt of final
                   notification of . . . payment denial[.] . . . Final
                   notification of . . . payment denial . . . means that all
                   administrative actions necessary to have a claim
                   paid correctly have been taken by the provider and
                   DMA or the fiscal agent has issued a final
                   adjudication. If no request is received within . . . [the
                   30] day period[], the state agency’s action shall
                   become final. . . .

                                          ...

            3. 10A NCAC 22J .0104.

                   If the provider disagrees with the reconsideration
                   review decision he may request a contested case
                   hearing[.]

      It is undisputed that if a provider does not seek a reconsideration review within

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30 days of receiving the Remittance Statement, the interim decision stated in the

Remittance Statement “shall become final.” In the alternative, a provider may

resubmit a denied claim to DHHS at any time within 18 months of receiving the

Remittance Statement.     The parties disagree sharply on the role played by the

Remittance Statement in the appeals process and on whether the trial court properly

concluded that the Remittance Statement met the definition of a final notice of an

adverse determination by DHHS that is required by N.C. Gen. Stat. § 150B-23(f).

                                 D. Remittance Statement

      After a careful review of the record, briefs, and applicable law, we reach the

following conclusions about the nature of the administrative remedy that plaintiffs

must pursue before filing a claim in superior court, and about the role played by the

Remittance Statement in the procedures with which a provider must comply in order

to seek an administrative remedy for the denial of a Medicaid claim.

1. The administrative remedy that plaintiffs are required to exhaust
prior to filing suit in superior court is a contested case hearing, there
being no legal requirement that plaintiffs must pursue a reconsideration
review before filing a petition for a contested case hearing.

      N.C. Gen. Stat. § 150B-22 states that it is the policy of the State that disputes

between an agency and a party should be resolved through informal means. However,

neither § 150B-22 nor any other statute or regulation requires that a provider pursue

the informal remedy of a reconsideration review. Moreover, 10A NCAC 22J .0102

expressly states that if a provider does not request a reconsideration review within

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30 days of receiving a Remittance Statement, “the state agency’s action shall become

final.” Thus, the pertinent NCAC regulation clearly anticipates that a provider may

choose not to pursue a reconsideration review.

2. DHHS is the only entity that has the authority to render a final
decision on a contested Medicaid claim. It is DHHS’ responsibility to
make the final decision and to furnish the provider with written
notification of the decision and of the provider’s appeal rights, as
required by N.C. Gen. Stat. § 150B-23(f).

      The issue addressed by the trial court in its order was whether plaintiffs had

demonstrated that it would have been futile or impossible for them to seek the

available administrative remedy of a contested case hearing. A provider cannot apply

for a contested case hearing, however, until after (1) DHHS reaches its final decision

on a given claim for Medicaid reimbursement, and (2) DHHS supplies the provider

with written notice of its final decision and of the provider’s appeal rights. The OAH

does not obtain subject matter jurisdiction over a dispute between DHHS and a

provider until the provider files a petition for a contested case hearing to review the

agency’s final decision. DHHS is the only entity involved in this matter that has the

authority to reach a final decision.

      The relevant statutes and NCAC regulations set out a clear schedule with

deadlines that have been strictly enforced. N.C. Gen. Stat. § 150B-23(f) requires that

when DHHS makes an adverse determination on a Medicaid claim, it must issue a

notification to the provider that “shall be in writing, and shall set forth the agency

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action, and shall inform the persons of the right, the procedure, and the time limit to

file a contested case petition.” The 60-day deadline within which a provider must

petition for a contested case hearing is triggered by the provider’s receipt of the

required notice of the final decision.

      As a result, it is clear that a provider initiates the process of seeking an

administrative remedy for a denied Medicaid claim by filing a petition seeking a

contested case hearing, and that the petition is the starting point for the provider’s

exhaustion of administrative remedies. There is no logical or legal basis to justify

grafting onto the statutory scheme a requirement imposing upon providers a new,

preliminary legal obligation to remind or “nudge” DHHS into complying with its duty

to render a final decision in a timely manner and to communicate its final decision to

providers.

3. The presence or absence of language stating that a document is the
“final notice” of DHHS’ “adverse determination” is not determinative of
whether the contents of the document meet the requirements of N.C.
Gen. Stat. § 150B-23(f).

      There is no statutory or regulatory requirement that the written notice that an

agency supplies to providers pursuant to N.C. Gen. Stat. § 150B-23(f) must bear the

heading “Final Notice” or similar language. The proper inquiry is not whether the

document declares itself to be the notice of a final agency decision, but whether its

content establishes that it is in fact such a notice.

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                                   Opinion of the Court

      For example, in Glorioso v. F.B.I., 901 F.Supp.2d 359, 362 (E.D.N.Y. 2012), the

plaintiff received a letter from a federal agency stating that “if you are dissatisfied

with our decision, suit may be filed against the United States in an appropriate

United States District Court, not later than six (6) months after the date of this

letter.” On appeal, the Court held that the letter “unequivocally informs plaintiff

that, if he is dissatisfied . . . he should file suit in federal court within six months”

and that “[e]ven though the letter does not include the words ‘final denial,’ the letter

constituted notice of a final denial of the plaintiff’s claim.” Similarly, in W. M.

Schlosser Co. v. Fairfax County, 17 Va. Cir. 246 (1989), the Circuit Court reviewed

the appeal of a contractor attempting to pursue litigation of a contract dispute with

Fairfax County, Virginia. The plaintiff conceded that he was required to appeal

within six months of the County’s final decision, but contended that the letter he had

received was not a “final decision.” Plaintiff’s argument was rejected:

             First, Plaintiff claims that the April 14, 1988, letter did not
             state on its face that it constituted the Director’s final
             decision. The Court does not believe that the statutory
             scheme of the Virginia Public Procurement Act requires a
             public body to emblazon the words “FINAL DECISION”
             across the face of a letter decision to put a party on notice
             that the appeal period has begun to run. The Court believes
             that the content and character of the letter in question
             could leave no doubt in Plaintiff’s mind that the letter
             embodied a final decision[.]

W. M. Schlosser Co., 17 Va. Cir. at 247. In the instant case, however, the fact that the

Remittance Statement does not expressly state that it is the notice of a “final agency

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decision” of DHHS’ “adverse determination” on a Medicaid claim does not resolve the

question of whether the content of the Remittance Statement establishes that it

constitutes notice of a final agency decision.

4. The Remittance Statement informs a provider of DHHS’ initial
determination on a provider’s Medicaid claim and gives a provider two
options by which to challenge this initial decision. Given that DHHS’
regulations expressly contemplate the possibility that DHHS may
change its initial decision, the Remittance Statement cannot, as a
matter of logic, itself constitute DHHS’ final decision.

      A provider may resubmit a denied claim within 18 months of receiving a

Remittance Statement informing the provider that a claim has been denied.

Defendants’ Billing Guide includes detailed instructions for making suggested

changes to a claim in order to correct errors in the original claim, and defendant CSC

asserts in its appellee’s brief that “the provider can often resolve the issue by

resubmitting the claim with updated, corrected, or more complete information.”

Alternatively, a provider may submit a written request for an informal

reconsideration review. In either case, DHHS may change its initial determination

in response to the provider’s argument or resubmission of the claim in dispute.

Accordingly, the Remittance Statement sets forth a preliminary determination which

is subject to subsequent revision. This being the case, the Remittance Statement

itself cannot be DHHS’ final decision on a Medicaid claim.

5. The provisions of 10A NCAC 22J .0102 are internally inconsistent
and the two avenues for seeking review of a claim denial upon receipt of
a Remittance Statement are legally and factually inconsistent.

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      10A NCAC 22J .0102(a) states in relevant part that:

             A provider may request a reconsideration review within 30
             calendar days from receipt of final notification of . . .
             payment denial[.] . . . Final notification of payment [denial]
             . . . means that all administrative actions necessary to have
             a claim paid correctly have been taken by the provider and
             DMA or the fiscal agent has issued a final adjudication. If
             no request is received within the . . . [30] day period[], the
             state agency’s action shall become final.

      This regulation stipulates that a provider may seek a reconsideration review

after receiving “final notification” of a DHHS action, but also that if the provider does

not request a reconsideration review, then the action outlined in the Remittance

Statement will at that time (30 days after the provider has received notice of the

“final” decision) become final. These provisions are internally inconsistent and cannot

both be accurate, because an agency decision cannot repeatedly become “final.” In

addition, the provider is given the option to resubmit a claim at any time within 18

months of receiving the Remittance Statement. These provisions are mutually

exclusive and legally inconsistent. There is no logical way that a provider could

resubmit a claim after 30 days, if the decision stated in the Remittance Statement

has become final after 30 days.

6. DHHS’ own procedures establish that DHHS makes its “adverse
determination” or issues its “final agency action” after the earlier of (1)
the expiration of 30 days after a provider’s receipt of the Remittance
Statement if the provider does not request a reconsideration review, at
which point DHHS’ initial determination becomes final, or (2) DHHS’
decision about the provider’s claim after a reconsideration review or

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resubmission of the claim. Upon making its final decision, DHHS must
supply the provider with written notice of its final decision, from which
a provider may seek administrative review within 60 days of receiving
the written notification specified in N.C. Gen. Stat. § 150B-23(f).

      For the reasons discussed above, we conclude that the Remittance Statement

cannot be construed to be DHHS’ final decision or adverse determination of a

Medicaid claim, if for no other reason than the fact that it is expressly subject to

revision. Because the Remittance Statement is sent before DHHS makes its final

agency decision, the Remittance Statement cannot constitute the notice of a final

decision that is required by N.C. Gen. Stat. § 150B-23(f).

7. Some of the alleged defects in the procedure by which a provider may
seek review of a denied Medicaid claim might be corrected with
relatively simple changes to the regulatory language and practice.

      Plaintiffs’ complaint alleges an array of deficiencies in the process by which a

provider may challenge the denial of a Medicaid claim. Some of the defects alleged

by plaintiffs, such as problems with software, may prove difficult to resolve. Other

assertions by plaintiffs, such as their allegation that Remittance Statement data is

confusing, do not appear to be dispositive of the issue of plaintiffs’ ability to pursue

an administrative remedy. The APA, however, provides a straightforward path for

review of final agency decisions. The following changes would clarify the procedures

for appealing a Medicaid claim denial and bring DHHS into compliance with the APA:

             1. The Remittance Statement, which informs providers of
             an interim determination that is expressly subject to

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             revision, should state that it is an interim or tentative
             decision.

             2. A provider who wishes to appeal the decision stated in
             the Remittance Statement should be required to either
             seek a reconsideration review within 30 days or to inform
             DHHS of an intention to resubmit the claim, at which point
             DHHS could suspend the automatic finalization of the
             Remittance Statement decision after 30 days.

             3. Upon the earlier of (1) the expiration of 30 days during
             which the provider neither seeks a reconsideration review
             nor informs DHHS of its intention to resubmit a claim, or
             (2) the conclusion of the reconsideration review and/or the
             resubmission process, DHHS should send the provider the
             written notice of its final agency decision and of the
             provider’s right to seek a contested case hearing, as
             required by N.C. Gen. Stat. § 150B-23(f).

                                  D. Trial Court’s Order

      In its order, the trial court reviewed the law governing review of a final agency

decision and made findings addressing plaintiffs’ failure to exhaust administrative

remedies and plaintiffs’ contention that it would have been futile or impossible for

them to do so. These findings, as relevant to the issues discussed herein, include the

following:

                                          ...

             32. Defendants contend that all of Plaintiffs’ claims in this
             action could have been addressed and remedied through
             the relevant administrative procedures. These procedures
             provide, first, for “reconsideration review” within DHHS,
             followed by a contested case hearing before an
             administrative law judge at the Office of Administrative

                                         - 18 -
ABRONS FAM. PRAC. & URGENT CARE, PA V. NC DEP’T OF HEALTH & HUM. SERVS.

                              Opinion of the Court

         Hearings. . . . Since Plaintiffs did not exhaust these
         administrative procedures, Defendants contend that their
         claims in this action must be dismissed.

         33. The applicable regulations state that a “provider may
         request a reconsideration review within 30 calendar days
         from receipt of final notification of payment, payment
         denial, disallowances, payment adjustment, notice of
         program reimbursement. . . .” That section further states
         that “final notification . . . means that all administrative
         actions necessary to have a claim paid correctly have been
         taken by the provider and [the NC Division of Medicaid
         Assistance (‘DMA’), a division of DHHS] or the fiscal agent
         has issued a final adjudication.” Id. This process provides
         an opportunity for reconsideration review of any payment
         decision and states that “[i]f a provider disagrees with the
         reconsideration review decision he may request a contested
         case hearing.” 10A NCAC 22J.0104.

                                          ...

         36. Here, Plaintiffs admit that they did not exhaust the
         administrative remedies available under the DHHS
         regulations. . . . Instead, Plaintiffs allege that the
         administrative process would have been futile and
         inadequate to provide the relief they seek.

         37. . . . Plaintiffs contend that DHHS, through its fiscal
         agent CSC, does not issue “final adjudications” or “final
         notices” that would trigger the reconsideration review and
         contested case processes and, consequently, Plaintiffs
         would be unable to obtain a “final agency decision” from
         which they might seek judicial review. . . .

         38. Once Medicaid reimbursement claims have been
         submitted, providers receive Remittance Statements that
         notify them of Medicaid claims that have been paid and
         those that have been denied, and the amount for which the
         provider is being reimbursed for the claims submitted. . . .
         The Remittance Statements do not contain any language

                                     - 19 -
ABRONS FAM. PRAC. & URGENT CARE, PA V. NC DEP’T OF HEALTH & HUM. SERVS.

                              Opinion of the Court

         indicating that they are “final notices” or “final
         adjudications” of the claims. The statements themselves do
         not reference an appeal procedure. . . .

                                      ...

         41. The Court has reviewed the Remittance Statements,
         regulations, and Billing Guide and concludes that they
         create a very confusing and difficult process for providers
         to determine why claims have been denied and how to
         appeal denials. The Remittance Statements are difficult to
         decipher. They do not contain any language indicating that
         the claims decisions contained in the statements are “final”
         adjudications or qualify as “final notifications,” within the
         regulatory language set forth above. [The] regulatory
         language does not specify what actions are included in the
         phrase “all administrative actions,” leaving at least some
         question as to whether telephone calls to the AVR and CSC
         Provider Services to seek assistance are “administrative
         actions” required before a claims decision becomes a “final
         adjudication.” Similarly, the provision in the Billing Guide
         regarding certain types of appeals being excluded from the
         reconsideration review process is also confusing.

         42. Nevertheless, at this stage Plaintiffs have only
         speculated that the process would be futile. Again, none of
         the Plaintiffs or the affiants appear to have attempted to
         initiate an appeal. While the regulations and Billing Guide
         are confusing, the regulations expressly explain an appeal
         process that can be initiated by making “a request for
         reconsideration review” within 30 days to DMA at the
         division’s address. Even if the Remittance Statements do
         not clearly state that they are a “final adjudication” of the
         claims, at some point common sense would suggest that a
         provider would at least attempt to follow the appeal
         procedure provided for in the regulations and the Billing
         Code, even if simply to get a determination as to whether
         the Remittance Statements constituted a final
         adjudication.

                                     - 20 -
  ABRONS FAM. PRAC. & URGENT CARE, PA V. NC DEP’T OF HEALTH & HUM. SERVS.

                                  Opinion of the Court

      In its order the trial court erred in several respects. For the reasons set out

above, the trial court erred by treating the Remittance Statement as the notice of a

final agency decision that is required by N.C. Gen. Stat. § 150B-23(f). The trial court

also erred in Findings Nos. 32 and 33 by including a reconsideration review as a

mandatory step in the process by which a provider seeks to exhaust administrative

remedies prior to filing suit. The Remittance Statement acknowledges that a provider

may choose to forego the reconsideration review and resubmit a claim, or may allow

the tentative determination stated in the Remittance Statement to become a final

decision. In addition, the trial court made several reversible errors in Finding No.

42. The finding states that plaintiffs “have only speculated” that it would be futile

for them to pursue an administrative remedy. To the contrary, plaintiffs assert that

“at no time” does DHHS ever issue a final decision on a denied Medicaid claim. The

trial court failed to address this issue or to determine the crucial question of fact

regarding DHHS’ compliance with N.C. Gen. Stat. § 150B-23(f). On remand, the trial

court should make a finding as to whether DHHS ever makes a final agency decision

on Medicaid claims and whether DHHS ever sends providers the notification that

starts the 60-day limitation period. The trial court also erred in Finding No. 42 by

suggesting that as part of exhausting administrative remedies, the plaintiffs are

obligated to contact DHHS in order to urge it to comply with its own responsibilities

and regulations. Finally, the court erred by ruling that plaintiffs were required to

                                         - 21 -
  ABRONS FAM. PRAC. & URGENT CARE, PA V. NC DEP’T OF HEALTH & HUM. SERVS.

                                  Opinion of the Court

seek administrative review, in this case a contested case hearing, not within 60 days

of receiving the notification required by N.C. Gen. Stat. § 150B-23(f) but, instead, at

an undefined time when “sooner or later” plaintiffs should be guided by “common

sense” to seek review.

      For the reasons discussed above, we conclude that the trial court erred by

failing to resolve the crucial issues of fact as to whether DHHS issues final agency

decisions in Medicaid claim matters and whether DHHS supplies providers with

written notice of its final agency decisions, by treating the Remittance Statement as

notice of a final agency decision, by including a reconsideration review as a

mandatory administrative review, by suggesting that a provider has the legal duty to

ensure that DHHS complies with its own obligations, and by substituting an

imprecise and subjective standard for the statutory and regulatory deadlines that

apply to review of a final agency decision. The trial court’s order is reversed and

remanded for entry of additional findings and conclusions that apply the legal

principles discussed herein. The trial court may take additional evidence if necessary.

Because we are reversing the trial court’s order, we do not reach plaintiffs’ other

arguments.

      REVERSED AND REMANDED.

      Judge STEPHENS concurs.

      Judge McCULLOUGH dissents by separate opinion.

                                         - 22 -
 No. COA15-1197– Abrons Fam. Prac. & Urgent Care, PA v. NC Dep’t of Health &
 Hum. Servs.

      McCULLOUGH, Judge, dissents.

      I believe that the trial court properly granted defendants’ motion to dismiss

based on lack of subject matter jurisdiction. I must, therefore, respectfully dissent.

      As the majority stated, “[a]n action is properly dismissed under Rule 12(b)(1)

for lack of subject matter jurisdiction where the plaintiff has failed to exhaust

administrative remedies.” Shell Island Homeowners Ass’n v. Tomlinson, 134 N.C.

App. 217, 220, 517 S.E.2d 406, 410 (1999). It is well-established that “where the

legislature has provided by statute an effective administrative remedy, that remedy

is exclusive and its relief must be exhausted before recourse may be had to the

courts.” Brooks v. Southern Nat’l Corp., 131 N.C. App. 80, 83, 505 S.E.2d 306, 308

(1998) (citation omitted).

      In the present case, it is undisputed that the NCMMIS Provider Claims and

Billing Assistance Guide (“Billing Guide”), available to all Medicaid-eligible care

providers, summarizes the appeal procedure set forth in 10A N.C.A.C. 22J.0102-0105.

The Billing Guide also states that appeals should be directed to the DMA Appeals

Unit, Clinic Policy and Programs, and provides a mailing address located in Raleigh,

North Carolina. The trial court found and agreed with plaintiffs that the Remittance

Statements, regulations, and Billing Guide “create a very confusing and difficult

process for providers to determine why claims have been denied and how to appeal

denials.”
    Abrons Fam. Prac. & Urgent Care, PA v. NC Dep’t of Health & Hum. Servs.
                                McCULLOUGH, J., dissents

       However, none of the plaintiffs has attempted to initiate an appeal and has

only speculated that the administrative process would be futile and inadequate. The

trial court discussed, and plaintiffs do not challenge the validity of its discussion, that

while the regulations and Billing Guide may be confusing, they

              expressly explain an appeal process that can be initiated
              by making “a request for reconsideration review” within 30
              days to DMA at the division’s address. Even if the
              Remittance Statements do not clearly state that they are a
              “final adjudications” of the claims, at some point common
              sense would suggest that a provider would at least attempt
              to follow the appeal procedure provided for in the
              regulations and the Billing Guide, even if simply to get a
              determination as to whether the Remittance Statements
              constituted a final adjudication.

In addition, the trial court found that the process for seeking review of Medicaid

claims decisions “did not change with the implementation of NCTracks, but, rather,

has apparently been in place for some time.” I agree with the trial court’s discussion,

and thus, would reject plaintiffs’ arguments that because DHHS failed to follow the

procedures set forth in the North Carolina Administrative Code for reconsideration

review, plaintiffs were excused from exhausting their administrative remedies. Our

Court has made it clear that “futility cannot be established by plaintiffs’ prediction

or anticipation that [DHHS] would again rule adversely to plaintiffs’ interests.”

Affordable Care, Inc. v. N.C. State Bd. of Dental Examiners., 153 N.C. App. 527, 534,

571 S.E.2d 52, 58 (2002).

                                            2
    Abrons Fam. Prac. & Urgent Care, PA v. NC Dep’t of Health & Hum. Servs.
                               McCULLOUGH, J., dissents

      Furthermore, I agree with the trial court that plaintiffs failed to satisfy their

burden of proving that the administrative remedies were inadequate to resolve their

claims. Our Court has previously held that “[w]here the remedy established by the

APA is inadequate, exhaustion is not required. The remedy is considered inadequate

unless it is calculated to give relief more or less commensurate with the claim.” Shell

Island, 134 N.C. App. at 222-23, 517 S.E.2d at 411 (citations and quotation marks

omitted).

      In accordance with the reasoning set forth in Jackson v. N.C. Dep’t of Human

Resources, 131 N.C. App. 179, 505 S.E.2d 899 (1998), I believe that a thorough review

of the record reveals that plaintiffs’ primary claim is for unpaid Medicaid

reimbursement claims. This is the exact type of claim that should be determined by

DHHS’ administrative procedures. As to plaintiffs’ claims for breach of contract and

a violation of the North Carolina Constitution instituted against DHHS, in which

plaintiffs seek damages for the payment of improperly denied Medicaid

reimbursement claims, I believe that DHHS’ administrative review and appeal

process could have given plaintiffs relief “more or less commensurate with [plaintiffs’]

claim” and that the trial court did not err by dismissing these claims. As to plaintiffs’

claim for a declaratory judgment that DHHS’ payment methodology, effective

1 July 2013, violated Medicaid reimbursement rules, plaintiffs were required to first

seek a declaratory ruling from DHHS before bringing a claim to the courts. N.C. Gen.

                                           3
    Abrons Fam. Prac. & Urgent Care, PA v. NC Dep’t of Health & Hum. Servs.
                                McCULLOUGH, J., dissents

Stat. § 150B-4 provides a method for a party in plaintiffs’ position seeking a

declaratory ruling with the agency:

             On request of a person aggrieved, an agency shall issue a
             declaratory ruling as to the validity of a rule or as to the
             applicability to a given state of facts of a statute
             administered by the agency or of a rule or order of the
             agency. Upon request, an agency shall also issue a
             declaratory ruling to resolve a conflict or inconsistency
             within the agency regarding an interpretation of the law or
             a rule adopted by the agency.

N.C. Gen. Stat. § 150B-4(a) (2015). Finally, as to plaintiffs’ claims of negligence and

UDTP against CSC, a review of plaintiffs’ amended complaint demonstrates that

plaintiffs seek reimbursement for Medicaid claims that were improperly denied

because of CSC’s alleged negligent design, implementation, and administration of

NCTracks and for related business damages resulting from the improperly denied

claims. The administrative remedies available to plaintiffs could have provided

plaintiffs relief more or less commensurate with plaintiffs’ claims. Accordingly, I

believe that plaintiffs are not relieved from the requirement that they exhaust

available administrative remedies before resorting to the courts.

      Based on the foregoing reasons, I would affirm the 12 June 2015 order of the

trial court, dismissing plaintiffs’ complaint for lack of subject matter jurisdiction.

                                            4