Court Opinion

ID: 3170314
Source: CourtListenerOpinion
Date Created: 2016-01-19 14:24:38.292156+00
Date Added: 2024-06-11T12:47:13.645242
License: Public Domain

COURT OF APPEALS OF VIRGINIA

              Present: Judges McCullough, Chafin and Russell
UNPUBLISHED

              Argued at Richmond, Virginia

              BON SECOURS ST. MARY’S HOSPITAL
                                                                                            MEMORANDUM OPINION* BY
              v.            Record No. 0839-15-2                                             JUDGE TERESA M. CHAFIN
                                                                                                JANUARY 19, 2016
              CYNTHIA B. JONES, DIRECTOR, AND
               DEPARTMENT OF MEDICAL ASSISTANCE
               SERVICES

                                              FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                                                           Melvin R. Hughes, Jr., Judge

                                           Kathryn E. Kasper (Eileen R. Geller; Hancock, Daniel, Johnson &
                                           Nagle, P.C., on briefs), for appellant.

                                           Elizabeth M. Guggenheim, Assistant Attorney General (Mark R.
                                           Herring, Attorney General; Cynthia V. Bailey, Deputy Attorney
                                           General; Kim Piner, Senior Assistant Attorney General, on brief),
                                           for appellee.

                            The Director of the Department of Medical Assistance Services (“DMAS” or the

              “Department”) issued a final agency decision (“FAD”) requiring Bon Secours St. Mary’s

              (“St. Mary’s” or “Provider”) to reimburse the Department $424,718.50 based on a failure to

              maintain adequate documentation. St. Mary’s appealed the FAD to the Circuit Court for the City of

              Richmond, which affirmed the Department’s decision. St. Mary’s now appeals to this Court.

                                                                               Background

                            St. Mary’s is a participating provider in the Medicaid program. DMAS is the agency

              charged with administering the Medicaid program in Virginia. According to the Provider

              Participation Agreement between St. Mary’s and DMAS, St. Mary’s must “comply with all
                                                                          
                            *
                                Pursuant to Code § 17.1-413, this opinion is not designated for publication.
applicable state and federal laws, as well as administrative policies and procedures of [DMAS]

as from time to time amended.”

              DMAS issues a Hospital Manual (“Manual”) that contains applicable policies and

procedures. The Manual specifies that “[p]roviders will be required to refund payments made by

Medicaid if they are found to have . . . failed to maintain any record or adequate documentation

to support their claims.” Hosp. Manual, Chapter VI, p. 2 (June 12, 2006).1

              On December 29, 2011, DMAS informed St. Mary’s that an audit identified deficiencies

in the St. Mary’s documentation. Based upon the auditor’s findings, DMAS claimed it was

entitled to recover $424,718.50 in Medicaid payments it made to St. Mary’s. According to the

auditor’s findings, the retraction was due to the absence of certifications and/or recertifications

that complied with federal regulations and DMAS policies for eleven Medicaid recipients. The

auditor identified two types of documentation deficiencies, represented by Error Codes 102 and

103. Error Code 102 was assigned to recipients MHG, GMG, JD, LD, GW, BLH, SAN, KSC,

and MWC, because the recipients’ records lacked the initial certification that inpatient services

were needed. Error Code 103 was assigned to recipients MHG, GMG, OD, LD, CNR, JD, and

GW, because the recipients’ records lacked the necessary recertification within 60 days of the

initial certification.

              St. Mary’s appealed the overpayment determination and requested an informal fact

finding conference (“IFFC”) pursuant to Code § 2.2-4019 and 12 Va. Admin. Code. 30-20-540

(2015). An IFFC decision affirming the determination of overpayment was issued on July 10,

2012.

                                                            
              1
         The Manual was revised in 2009. The only relevant difference between the 2006 and
2009 Manual is that the 2009 Manual provides that the physician may complete certification
within twenty-four hours of admission rather than at the time of admission. That change is not at
issue on appeal.
                                              -2-
       Appellant appealed the IFFC decision pursuant to Code § 2.2-4020 and 12 Va. Admin.

Code 30-20-560 (2015). Following a de novo evidentiary hearing, Hearing Officer Roger L.

Chaffe issued his recommended decision (“RD”) on January 9, 2013. The RD recommended

that the Director uphold the overpayment determination in its entirety, reasoning that St. Mary’s

               violated clear federal regulatory requirements as implemented by
               the Medicaid state plan and the Hospital Manual. For that reason
               alone, retraction of payment is appropriate. Moreover, if contract
               law analysis is used, these violations constitute a material breach
               of the Provider’s agreement with DMAS, thereby disqualifying
               Provider from a contractual recovery as a matter of law.

Recommended Decision of Hearing Officer (Jan. 9, 2013), at 17-18. The Director’s FAD

accepted the hearing officer’s recommendations and upheld the overpayment determination.

St. Mary’s appealed the FAD to the Circuit Court for the City of Richmond, which upheld the

Director’s decision. This appeal followed.

                                             Analysis

       This Court reviews an agency’s determinations of law de novo, while taking “due account

of the presumption of official regularity, the experience and specialized competence of the

agency, and the purposes of the basic law under which the agency has acted.” Code § 2.2-4027.

See 1st Stop Health Servs. v. Dep’t of Med. Assistance Servs., 63 Va. App. 266, 276-77, 756
S.E.2d 183, 188-89 (2014).

       “Federal regulations require a physician to ‘certify for each applicant or beneficiary that

inpatient services in a hospital are or were needed.’” Culpeper Reg’l Hosp. v. Jones, 64
Va. App. 207, 211, 767 S.E.2d 236, 238 (2015) (quoting 42 C.F.R. § 456.60(a)(1)).

Recertifications “must be made at least every 60 days after certification.” 42 C.F.R.

§ 456.60(b)(2). The Manual provides that “Medicaid requires that payment for certain covered

services may be made to a provider of services only if there is a physician’s certification

                                                -3-
concerning the necessity of the services furnished and, in certain instances, only if there is a

physician’s recertification as to the continued need for the covered services.” Hosp. Manual,

Chapter VI, p. 2.

        “A physician must certify the need for inpatient care at the time of admission.” Id. at 3.

“The certification must be dated at the time it is signed.” Id. Furthermore, “[t]he certification

must be in writing and signed by an individual clearly identified as a physician (M.D.), doctor of

osteopathy (D.O.), or dentist (D.D.S.).” Id. “A physician, physician assistant or nurse

practitioner acting within the scope of practice as defined by state law and under the supervision

of a physician must recertify for each patient that inpatient services in a hospital are needed.

Recertification must be made at least every 60 days after certification.” Id. at 5.

        According to the Manual, it is at the discretion of each provider to determine the method

by which the required physician certification and recertification statements are to be obtained.

Id. at 2.

               There is no requirement that a specific procedure or specific forms
               be used, so long as the approach adopted by the provider permits
               verification that the requirement of physician certification and
               recertification . . . is met. Certification and recertification
               statements may be entered on or included in forms, notes, or other
               records a physician normally signs in caring for a patient, or a
               separate form may be used. Each certification and recertification
               statement is to be separately signed by a physician, except as
               otherwise specified . . . .

               The requirements for recertification . . . specify certain information
               that is to be included in the physician’s statement. It should be
               noted that this required information need not be repeated in a
               separate statement if, for example, it is contained in the physician’s
               progress notes. The physician’s statement may merely indicate
               where the required information is contained in the patient’s
               medical record.

Id. at 2-3.

                                                -4-
        The Manual also states that
               The certification may be either a separate form to be included with
               the patient’s records or a stamp stating “Certified for Necessary
               Hospital Admission” which must be made an identifiable part of
               the physician orders, history, and physical or other patient records.
               This certification must be signed and dated by the physician at the
               time of admission or, if an individual applies for assistance while
               in the hospital, before payment is to be made by DMAS.

Id. at 3.

                                      A. INITIAL CERTIFICATION

        St. Mary’s first contends that the circuit court erred in upholding the Director’s FAD

affirming the overpayment determination. St. Mary’s claims that “a simple comparison of the

minimal certification requirements against the forms maintained by St. Mary’s demonstrates that

there is not substantial support for the circuit court’s decision . . . and that a reasonable person

looking at the evidence in this case would necessarily come to an opposite conclusion.”

        In this case, St. Mary’s primarily relies on a form entitled “NICU ADMISSION

ORDERS” for its certifications. As testified to by one of its physicians, Bonita J. Makdad, M.D.,

this form was created by St. Mary’s in order to comply with legal requirements, including the

certification requirement. The NICU ADMISSION ORDERS forms contain a block at the top

(the “certification block”) with the phrase “Hospitalization certified for the following reasons:”

followed by a blank space. At the top of the certification block is the word “Date:” followed by

a blank space and the phrase “Estimated Length of Stay:” again followed by a blank space. At

the bottom of the certification block are the words “Physician Signature:” followed by a blank

space. In addition to the certification block, the form contains two lower blocks entitled

“ORDERS” and “MEDICATIONS & I.V. FLUID ORDERS.” Below these two blocks, there is

a blank line under which the words “Physician Signature” and “Date/Time” are preprinted.

                                                 -5-
       On its face, the form prompts the physician who is completing it to sign in two separate

and distinct places – first, in the certification block, and second, in the bottom right corner of the

form under the “ORDERS” and “MEDICATIONS & I.V. FLUID ORDERS” blocks. The

evidence clearly shows that St. Mary’s failed to properly complete the form for six of the nine

recipients included in the audit.

                   1. JD: the form is signed by a non-physician, then
                      countersigned by a physician, but does not appear to be
                      dated by the countersigning physician.
                   2. LD: the form is not signed or dated by a physician.
                   3. GW: the form is signed by a physician but not dated.
                   4. MWC: the certification block is signed by a physician but
                      not dated.

       For recipients SAN and KSC, St. Mary’s relies on a different form. For SAN, the form is

signed but the signature is not dated. The form contains certification language but the

certification is unclear. The form states: “Hospital admission is certified for the following

reason(s).” Following that statement are two statements, each preceded by a blank line. No

mark or other notation on the lines indicates which, if any, of those statements applies. For KSC,

the form is similarly deficient. The form is signed but the signature is not dated. The form also

contains certification language followed by two statements, each preceded by a blank line.

Again, there is no mark or other notation on the lines to indicate which, if any, of those

statements applies.

               Although the regulation and the Manual do not define the term
               “certification,” it has a plain meaning. “Certification is simply
               “the act of certifying,” Webster’s Third New International
               Dictionary 367 (1981), and to “certify” means “to attest . . .
               authoritatively or formally.” Id. Whatever form it takes, the
               certification is an additional step beyond simply admitting the
               patient. Merely admitting a patient does not constitute a formal act
               declaring that “inpatient services in a hospital are or were needed.”
               42 C.F.R. § 456.60(a)(1).

Culpeper Reg’l Hosp., 64 Va. App. at 212, 767 S.E.2d at 239.
                                                 -6-
       While there is no prescribed manner in which the initial certification must be executed, it

is the burden of St. Mary’s to ensure that initial certifications are made in accordance with

federal and Virginia Medicaid requirements. St. Mary’s created its own forms, and the forms

contain the necessary elements for compliance. However, it is clear from the record that

St. Mary’s failed to use the forms in the manner that they were designed for six of the nine

recipients at issue in this case. Thus, the circuit court did not err in affirming the FAD as to

initial certifications for JD, LD, GW, MWC, SAN, and KSC.

       However, we must reverse the circuit court’s decision to affirm the FAD as to initial

certification for MHG, GMG, and BLH. The forms used for initial certification for these

recipients are clearly dated and signed by a physician. Thus, they are compliant under the

federal regulations and state requirements.

       Code § 2.2-4029 states in relevant part that when a court has determined an agency has

committed an error of law, that court:

               may compel agency action unlawfully withheld . . . except that the
               court shall not itself undertake to supply agency action committed
               by the basic law to the agency. Where . . . a case decision is found
               by the court not to be in accordance with law under § 2.2-4027, the
               court shall suspend or set it aside and remand the matter to the
               agency for further proceedings, if any, as the court may permit or
               direct in accordance with law.

Here, the circuit court upheld the DMAS decision as to initial certification for MHG, GMG, and

BLH. This decision constituted error.

       As this Court stated in Virginia Imports v. Kirin Brewery of America, 41 Va. App. 806,

831, 589 S.E.2d 470, 482 (2003):

               If a court finds that an agency has failed to comply with statutory
               authority, “the court shall suspend or set the decision aside and
               remand the matter to the agency.” Virginia Bd. of Medicine v.
               Fetta, 244 Va. 276, 280, 421 S.E.2d 410, 412 (1992); Code
               § 2.2-4029. Hence, having found in this case that the ABC Board
                                                -7-
                had “failed to address and rule upon all the issues raised by Kirin
                with respect to its grounds for termination of the agreement,” the
                circuit court, rather than imposing its own judgment on the matter,
                should have suspended the ABC Board’s decision and remanded
                the matter back to the ABC Board with instructions to make the
                additional required factual determinations.

See also Fetta, 244 Va. at 280, 421 S.E.2d at 413 (“The court itself may not undertake the agency

action directly.”).

        Accordingly, we reverse the decision of the circuit court affirming the FAD as to initial

certification for MHG, GMG, and BLH. We remand to the circuit court with directions to set

aside the decision of the Director as to those specific initial certifications and to remand to

DMAS.

                                        B. RECERTIFICATION

        The federal regulation requires that “[a] physician, or physician assistant or nurse

practitioner acting . . . under the supervision of a physician, must recertify for each applicant or

beneficiary that inpatient services in a hospital are needed . . . [and] recertifications must be

made at least every 60 days after certification.” 42 C.F.R. § 456.60(b). The Manual provides

“[e]ach certification and recertification statement is to be separately signed by a physician.”

St. Mary’s relied primarily on progress notes that did not contain a recertification. Dr. Makdad

testified that the purpose of these documents is to determine the overall status of the patient and

that she was unable to locate language in the progress notes that constituted a recertification. See

App. at 507-08. To accept St. Mary’s interpretation would, as this Court stated in Culpeper¸

render the requirements superfluous. Culpeper Reg’l Hosp., 64 Va. App. at 212, 767 S.E.2d at

239.

        In Culpeper, the appellant submitted admission orders and claimed that they were

sufficient to meet the requirements of 42 C.F.R. § 456.60 even though there was no certification

                                                 -8-
contained within the documents, and the documents were clearly intended to admit the patient

for treatment only. See id. (“Instead, the admission form only admits the patient for treatment.”).

This Court rejected the appellant’s argument. This case presents the same scenario as Culpeper:

attempting to take documents that were clearly intended for one purpose, in this case to

determine the overall status of the patient, and asking the Court to infer that it intended the

document for other purposes, in this case recertification.

       While the Manual provides that progress notes may be used for recertification, the

recertification language must be included within the progress notes and the physician must

include a statement indicating where the required information is contained in the patient’s

medical record. In this case, the recertification language was not included in the progress notes

nor is there any indication that the physicians included a statement indicating where the required

information was contained in the medical records. Thus, the circuit court did not err in affirming

the FAD as to recertifications.

            C. COMPLIANCE WITH FEDERAL REGULATIONS AND STATE REQUIREMENTS

       St. Mary’s acknowledges that the Provider Agreement (the “Agreement”) between

DMAS and St. Mary’s is governed by the law of contracts. Id. at 213, 767 S.E.2d at 239.

However, St. Mary’s contends that the alleged deficiencies at issue in this appeal do not amount

to a material breach of the Agreement. St. Mary’s also argues that by including certification

language in its forms, St. Mary’s has substantially complied with the requirements of the Manual

necessitating a holding different from that reached in Culpeper.

       “The law of contracts supplies a number of default rules that govern contract

interpretation. . . . [One] default rule is that of ‘material breach’ and ‘substantial compliance.’”

Id.

                                                 -9-
               “Generally, a party who . . . breach[es] . . . a contract is not entitled
               to enforce the contract. An exception to this rule arises when the
               breach did not go to the ‘root of the contract’ but only to a minor
               part of the consideration.

               If the . . . breaching party committed a material breach, however,
               that party cannot enforce the contract. A material breach is a
               failure to do something that is so fundamental to the contract that
               the failure to perform that obligation defeats an essential purpose
               of the contract.”

Id. (quoting Horton v. Horton, 254 Va. 111, 115, 487 S.E.2d 200, 203-04 (1997)). “Substantial

compliance is the inverse of the proposition that a breach of the contract must be ‘material’ or

significant before it will excuse non-performance.” Id. at 214, 767 S.E.2d at 240.

               We addressed substantial compliance in the context of [P]rovider
               [A]greements in Psychiatric Solutions. In that case, we held that
               “contract principles applied to the interpretation of the provider
               agreement and that, under settled principles of contract law,
               appellant would be entitled to payment if its noncompliance did
               not amount to a material breach of the agreement.” Psychiatric
               Solutions of Va., Inc. [v. Finnerty], 54 Va. App. [173,] 176, 676
               S.E.2d [358,] 359-60 [(2009)]. We concluded that the provider did
               not substantially comply because, on those facts, its documentation
               deficiencies were material. Id. at 190-91, 676 S.E.2d at 367. We
               rejected the argument that the failures to document represented a
               “‘trifling’ technical deficiency in the documentation of those
               sessions.” See id. at 191-92, 676 S.E.2d at 367. Instead, as a
               factual matter, DMAS established that the documentation failure
               “significantly impacted” the ability to provide care and, therefore,
               was a material breach. See id. at 192, 676 S.E.2d at 367-68.

               We were called upon to revisit the issue of substantial compliance
               in 1st Stop Health Services, Inc. [v. Department of Medical
               Assistance Services]. We again concluded that the provider’s
               documentation failures were material. 63 Va. App. at 270, 756
               S.E.2d at 185. The provider’s documentation in that case was
               “‘abysmal’ to the point [that] the auditor [could not] determine that
               certain payments were justified.” Id. at 280, 756 S.E.2d at 190.
               We also pointed to the language of the Provider Agreement and the
               applicable DMAS Manual to hold that the retraction of payment
               was a plainly authorized remedy for the provider’s failure to
               maintain the required documentation. Id. at 281, 756 S.E.2d at
               191.

                                                - 10 -
Culpeper Reg’l Hosp., 64 Va. App. at 214, 767 S.E.2d at 240. We further noted in 1st Stop that

“any paid provider claim that cannot be verified at the time of review cannot be considered a

valid claim for services provided.” 1st Stop, 63 Va. App. at 278-79, 756 S.E.2d at 189-90

(emphasis in original) (quoting EDCD Manual, Chapter 6, p. 12-13). The documentation

requirements are obligations that are an indispensable part of the agreement between providers

and DMAS.

        In this case, as stated above, we find that the language of the agreement controls. The

Agreement requires the hospital to follow the provisions of the Manual. The Manual explicitly

requires providers “to refund payments made by Medicaid if they are found to have . . . failed to

maintain any record or adequate documentation to support their claims.” Hosp. Manual, Chapter

VI, p. 2. St. Mary’s was required to “certify for each applicant or beneficiary that inpatient

services in a hospital are or were needed,” and “recertify for each applicant or beneficiary that

inpatient services in a hospital are needed . . . at least every 60 days after certification.” 42

C.F.R. § 456.60(a)-(b). St. Mary’s failed to make these required certifications and recertification

in a manner that complied with the Manual. Therefore, DMAS could enforce the terms of the

Agreement and require repayment for patients that were admitted without the required

certification and retained without the required recertification. Accordingly, the circuit court did

not err in affirming the FAD requiring St. Mary’s to refund payments.

                                          D. DUE PROCESS

        St. Mary’s claims that by imposing a requirement that was not only not clearly stated in

the relevant Manual provisions or regulations, but that was altogether completely absent from the

regulations and Manual, the Director denied St. Mary’s rights to due process. More specifically,

St. Mary’s claims that “DMAS has unabashedly imposed requirements involving specific form,

specific procedure, and specific language that cannot be found anywhere in any statute,
                                                 - 11 -
regulation, Manual provision, or other written guidance document.” We find no merit in this

argument.

       Due process requires that a statute “be sufficiently precise and definite to give fair

warning to those who are subject to it what the statute prohibits and what is expected of them by

the state.” Volkswagen of America, Inc. v. Smit, 279 Va. 327, 337, 689 S.E.2d 679, 685 (2010).

The Virginia Supreme Court has extended this holding to ordinances and regulations as well,

noting that “[a] statute, ordinance, or regulation which delegates discretionary authority to an

administrative officer to determine its application does not satisfy due process if it lacks

standards which are sufficiently clear to guide the officer, and inform those subject to his

jurisdiction, of how that discretion is to be exercised.” Id. at 339, 689 S.E.2d at 686.

       In this case, the statutes, ordinances, and regulations were sufficiently clear. St. Mary’s

constructed its forms which, if completed properly, would contain the necessary elements for

compliance. Therefore, St. Mary’s cannot claim that it was “blindsided” by the requirements

contained in the regulations or Manual.

                                          E. CONCLUSION

       In summary, we find that the circuit court did not err in affirming the DMAS Director’s

FAD as to JD, LD, GW, MWC, SAN, and KSC as to initial certifications and as to all recipients

at issue as to recertifications. However, we find that the circuit court erred in affirming the

DMAS Director’s FAD as to MHG, GMG, and BLH. Accordingly, we find that the circuit court

did not err in affirming the Director’s decision requiring St. Mary’s to refund payments except

those applicable to the initial certifications for MHG, GMG, and BLH. Finally, we find no merit

in St. Mary’s due process argument.

                                                                                   Affimed in part;
                                                                     reversed and remanded in part.

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