Court Opinion

ID: 4125815
Source: CourtListenerOpinion
Date Created: 2017-02-14 16:02:18.70397+00
Date Added: 2024-06-11T14:37:23.226213
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

                    CABRAL HOUSE, L.L.C.; DAVID
                  MANISCALCO; KATHY MANISCALCO,
                         Plaintiffs/Appellants,

                                         v.

                ARIZONA DEPARTMENT OF ECONOMIC
                       SECURITY DIVISION OF
                   DEVELOPMENTAL DISABILITIES;
                    ARIZONA HEALTH CARE COST
                      CONTAINMENT SYSTEM,
                         Defendants/Appellees.

                              No. 1 CA-CV 15-0721
                                FILED 2-14-2017

            Appeal from the Superior Court in Maricopa County
                       No. LC2015-000115-001 DT
             The Honorable Myra A. Harris, Judge Pro Tempore

                                    AFFIRMED

                                    COUNSEL

John R. Coll, P.L.L.C., Phoenix
By John R. Coll
Counsel for Plaintiffs/Appellants

Arizona Attorney General’s Office, Phoenix
By JoAnn Falgout
Counsel for Defendant/Appellee Arizona Department of Economic Security
Division of Developmental Disabilities
Johnston Law Offices, P.L.C., Phoenix
By Logan T. Johnston, III
Counsel for Defendant/Appellee Arizona Health Care Cost Containment System

                     MEMORANDUM DECISION

Judge James P. Beene delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Margaret H. Downie joined.

B E E N E, Judge:

¶1            Cabral House L.L.C. (“Cabral House”) and its principals,
David and Kathy Maniscalco, appeal the superior court’s ruling affirming
the Arizona Health Care Cost Containment System Director’s decision
denying Cabral House’s billing claim. For the reasons set forth below, we
affirm the superior court’s ruling.

             FACTS AND PROCEDURAL BACKGROUND

¶2            David and Kathy Maniscalco are the parents and guardians
of Frank Rebelo, a disabled adult. The Maniscalcos formed Cabral House
to provide various services to Rebelo through a contract with the Arizona
Department of Economic Security Division of Developmental Services
(“DDD”). Since at least December 2004, Cabral House has been a Qualified
Vendor licensed by DDD to provide habilitation and residential services.
The relationship between Cabral House and DDD is governed by a contract,
the Qualified Vendor Agreement (the “QVA”). The QVA allows a
Qualified Vendor to be paid for services authorized by DDD under the
contract and applicable law. The authorization of services is provided in
the form of an Individual Support Plan (“ISP”), a written statement of
services to be provided by Qualified Vendors to an individual with
developmental disabilities. The QVA expressly states that “[u]nder no
circumstances shall [DDD] make payment to the Qualified Vendor that
exceeds the authorization.”

¶3            Since its formation, Cabral House has provided services to
Rebelo pursuant to ISPs issued by DDD. An ISP was issued on May 15,
2012 affording Rebelo 18 hours of habilitation per day. On August 13, 2012,
DDD issued an ISP reducing Rebelo’s habilitation services from 18 hours a
day to three. The reduction in habilitation was replaced with attendant
services, a less intensive treatment option. Ms. Maniscalco was present

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                          CABRAL v. DDD, et al.
                           Decision of the Court

during the meeting at which DDD decided to decrease habilitation hours,
voiced her objection to the reduction, and did not sign the ISP as Rebelo’s
guardian. The August ISP was eventually signed in Ms. Maniscalco’s name
by an unascertained individual. An investigation performed by DES Office
of Special Investigations found that the DDD employee assigned to
Rebelo’s case forged guardian’s signatures on at least one other ISP, but
could not confirm that the employee signed Ms. Maniscalco’s name to
Rebelo’s ISP.

¶4             Two weeks after the August ISP was issued, Rebelo, through
the Maniscalcos, requested his habilitation be returned to 18 hours per day.
DDD denied this request by a Notice of Action (“NOA”) on October 18,
2012. Rebelo appealed this decision, and a Notice of Appeal Resolution
upheld the NOA on January 2, 2013. Rebelo declined to challenge the
Notice of Appeal Resolution. DDD issued another ISP on January 22, 2013,
again setting habilitation at three hours per day. Rebelo again challenged
the habilitation hours; DDD denied his challenge in a February 26, 2013
NOA. Rebelo did not appeal this second NOA.

¶5           On May 8, 2013, DDD issued an ISP which, for a third time,
provided Rebelo three habilitation hours per day. Rebelo objected to the
assessment, and again requested 18 hours of habilitation, a request which
DDD denied in a May 29, 2013 NOA. A series of appeals followed, and
between May 29, 2013 and December 16, 2013, the NOA was upheld in three
separate appeals, including a Notice of Appeals Resolution, a decision by
an administrative law judge (“ALJ”) and a Director’s decision upholding
the ALJ’s decision. These administrative proceedings addressed Rebelo’s
substantive medical needs, and each upheld the finding that only three
hours of habilitation was medically necessary. Rebelo did not pursue an
appeal in the superior court from the December 16, 2013 decision by the
Director.

¶6            Despite the succession of ISPs authorizing only three hours of
habilitation per day, Cabral House continued to provide Rebelo with 18
hours of habilitation per day. Cabral House invoiced DDD for the services,
but DDD refused to pay for more than three hours of habilitation a day. On
June 26, 2014, Cabral House filed a claim for habilitation it provided
between August 2012 and May 2014 in excess of Rebelo’s ISPs. DDD denied
the claim in an August 14, 2014 Notice of Decision, and Cabral House
appealed to an ALJ, who upheld DDD’s decision. Cabral House appealed
the ALJ’s decision to the Director of the Arizona Health Care Cost
Containment System, who accepted the ALJ’s decision in its entirety.

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                            CABRAL v. DDD, et al.
                             Decision of the Court

¶7           Cabral House then sought review of the Director’s decision in
superior court. The superior court upheld the decision, finding that there
was:

       evidence in the record that supported the finding that (1)
       Cabral House lacked standing to prosecute a claim for
       services on behalf of Mr. Rebelo; (2) Cabral House was not
       entitled to third party beneficiary status for any alleged
       contract; (3) the requested habilitation services were not both
       medically necessary and cost effective; (4) Ms. Maniscalco’s
       agreement to the change in ISP plans was not required; and
       (5) any claim was untimely.

¶8           Cabral House timely appealed, and we have jurisdiction
pursuant to Article 6, Section 9, of the Arizona Constitution and Arizona
Revised Statutes (“A.R.S.”) sections 12-2101(A)(1), 12-120.21(A)(1), and 12-
913 (2017).1

                                DISCUSSION

¶9            Appellants argue at length that due to purported violations of
Rebelo’s rights by DDD, Cabral House had a contractual and legal
obligation to continue providing him 18 hours a day of habilitation. In
response, Appellees argue Appellants lack standing, and there is sufficient
evidence to uphold the Director’s decision denying Appellants’ claim for
past billing.

       A.     Standard of Review

¶10           The superior court “shall affirm the agency action unless after
reviewing the administrative record and supplementing evidence
presented at the evidentiary hearing the court concludes that the action is
not supported by substantial evidence, is contrary to law, is arbitrary and
capricious or is an abuse of discretion.” A.R.S. § 12–910(E) (2017).

¶11             This Court reviews “the superior court’s ruling to determine
whether the record contains evidence to support the judgment, and in
doing so, we reach the underlying issue of whether the administrative
action was illegal, arbitrary, capricious or involved an abuse of discretion.”
Siler v. Ariz. Dep’t of Real Estate, 193 Ariz. 374, 378, ¶ 14, 972 P.2d 1010, 1014
(App. 1998) (internal quotation marks and citations omitted); see Ritland v.

1     Absent material revision after the relevant date, we cite a statute’s
current version.

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                            CABRAL v. DDD, et al.
                             Decision of the Court

Ariz. State Bd. of Med. Exam’rs, 213 Ariz. 187, 189, ¶ 7, 140 P.3d 970, 972 (App.
2006) (“We review the agency’s application of law de novo.”). An abuse of
discretion occurs when an agency “misapplies the law or fails to consider
the relevant facts.” Rios Moreno v. Ariz. Dep’t of Econ. Sec., 178 Ariz. 365, 367,
873 P.2d 703, 705 (App. 1994).

       B.     Cabral House Does Not Have a Contract with DDD to
              Provide Services to Frank Rebelo

¶12            Appellants claim the QVA incorporates the ISP and,
therefore, Cabral House has a contract to provide medical services to
Rebelo.2 Interpretation of a contract is a question of law or a mixed question
of law and fact, either of which we review de novo. United Cal. Bank v.
Prudential Ins. Co. of Am., 140 Ariz. 238, 257, 681 P.2d 390, 409 (App. 1983).

¶13           Appellants’ assertion that the QVA obligates Cabral House to
provide services at a specific level to Rebelo is not supported by the QVA
or relevant law. There is no clause in the QVA that creates contract rights
between Cabral House and any specific individual enrolled in DDD’s
programs. On the contrary, numerous clauses within the contract make
clear that Cabral House has no obligation to any specific individual to
provide services above those authorized by the individual’s ISP. Such
clauses include those that state “[DDD] makes no guarantee . . . to refer
members as may be identified or specified herein” and that “[u]nder no
circumstances shall [DDD] make payment to the Qualified Vendor that
exceeds the authorization.” While Qualified Vendors are required by the
QVA to maintain a system for reviewing and adjudicating grievances by
members, that requirement alone does not grant Qualified Vendors the
right to treat an individual beyond the limits authorized by an ISP. It
certainly does not allow, as Appellants argue, an ad hoc system to provide
and bill unauthorized services which the provider believes the member
requires.

2       Appellees argue that this issue is precluded by Appellants’ failure to
raise it during prior proceedings. We do not consider issues brought for
the first time on appeal. See Pro Finish USA, Ltd. v. Johnson, 204 Ariz. 257,
267, ¶ 41, 63 P.3d 288, 298 (App. 2003). Appellants have previously argued,
however, that the QVA obligates Cabral House to treat Rebelo in
accordance with ISPs issued prior to DDD’s purported fraud.

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                           CABRAL v. DDD, et al.
                            Decision of the Court

       C.     Appellants Lack Standing to Argue Frank Rebelo’s
              Treatment was Authorized

¶14           Appellants’ remaining substantive arguments address
alleged violations of Rebelo’s rights. Appellants argue that the May 15,
2012 ISP remains the only “authorized” service plan due to violations of
Rebelo’s due process rights and fraud by DDD. It follows, they claim, that
Cabral House was legally bound to provide services in accordance with the
May 2012 ISP. Appellees argue that Appellants lack standing to make
claims on Rebelo’s behalf. Whether Appellants have standing is a question
of law we review de novo. All. Marana v. Groseclose, 191 Ariz. 287, 289, 955
P.2d 43, 45 (App. 1997).

¶15            Arizona courts “are not constitutionally constrained to
decline jurisdiction based on lack of standing.” Sears v. Hull, 192 Ariz. 65,
71, ¶ 24, 961 P.2d 1013, 1019 (1998). Arizona, however, has placed limits on
a party’s standing to sue another. To have standing to sue, a plaintiff must
have suffered injury in fact, economic or otherwise, from the allegedly
illegal conduct, and the injury must be distinct and palpable so that the
plaintiff has a personal stake in the outcome. See Bennett v. Brownlow, 211
Ariz. 193, 196, ¶ 17, 119 P.3d 460, 463 (2005).

¶16            Only an enrollee in an Arizona Health Care Cost Containment
System program or its representative may challenge the “reduction,
suspension, or termination of a previously authorized service.” Ariz.
Admin. Code (“A.A.C.”) R9-34-202(2)(B); A.A.C. R9-34-208(A). While a
provider may be a representative if authorized by the member, the current
action is a claim dispute brought by Rebelo’s provider on its own behalf.
For the proposition that a provider may challenge the reduction of services
to individual DDD enrollees, Appellants cite Ariz. Ass’n of Providers for
Persons with Disabilities v. Ariz., 223 Ariz. 6, 219 P.3d 216 (App. 2009). This
reliance is misplaced. Ariz. Ass’n of Providers holds only that providers have
standing if the state reduces the rate at which they are compensated for
services rendered, not that reductions in a beneficiary’s authorized
treatment create a cause of action for that individual’s treating provider.

¶17           Without a contract or other obligation to perform services for
Rebelo, the Appellants have not suffered a distinct and palpable injury. It
is uncontested that Cabral House provided thousands of hours of
uncompensated service to Rebelo between August 1, 2012 and May 13,
2014. It is also uncontested that every ISP in effect during that time set
Rebelo’s authorized service at three hours of habilitation per day. The
Appellants were aware of each ISP issued by DDD, and despite numerous

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                         CABRAL v. DDD, et al.
                          Decision of the Court

actions by the Maniscalcos acting as Rebelo’s guardians, the ISPs were
never modified in any proceeding.

¶18          Appellants lack any legal interest in Rebelo’s ongoing
treatment authorization and have no standing to bring claims on his behalf.
As such, we decline to address the numerous substantive issues raised in
this appeal.

                             CONCLUSION

¶19          For the foregoing reasons we affirm.

                          AMY M. WOOD • Clerk of the Court
                           FILED: AA

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