Court Opinion

ID: 9390701
Source: CourtListenerOpinion
Date Created: 2023-04-28 14:04:56.40019+00
Date Added: 2024-06-11T17:18:36.289090
License: Public Domain

RENDERED: APRIL 21, 2023; 10:00 A.M.
                        NOT TO BE PUBLISHED

                 Commonwealth of Kentucky
                           Court of Appeals

                              NO. 2022-CA-0046-MR

PROFESSIONAL HOME HEALTH CARE                                        APPELLANT

                APPEAL FROM FRANKLIN CIRCUIT COURT
v.              HONORABLE THOMAS D. WINGATE, JUDGE
                        ACTION NO. 20-CI-00294

COMMONWEALTH OF KENTUCKY
CABINET FOR HEALTH AND FAMILY
SERVICES AND KENTUCKY
DEPARTMENT FOR MEDICAID
SERVICES                                                              APPELLEES

                                    OPINION
                                   AFFIRMING

                                   ** ** ** ** **

BEFORE: CETRULO, JONES, AND MCNEILL, JUDGES.

JONES, JUDGE: Professional Home Health Care (PHHC) appeals the Franklin

Circuit Court’s order affirming the final order of the Secretary of the Cabinet for

Health and Family Services (the Cabinet). The circuit court agreed with the
Cabinet that PHHC had been overcompensated for certain Medicaid services and,

as a result, recoupment in the amount of $1,062,171 was appropriate. After a

thorough review of the record and the law, we affirm.

                                           I. BACKGROUND

                The Cabinet is the state agency authorized to administer Kentucky’s

Medicaid program under KRS1 205.520. PHHC “is a home health care agency that

provides in-home care services to Medicaid patients in rural counties in eastern

Kentucky through the Cabinet’s Home and Community Based Waiver (HCBW or

HCB Waiver) Program.” (Appellant’s Brief at 1.) The HCBW program is

designed to assist elderly or disabled individuals in such a way that they may live

as independently as possible in their communities rather than reside in a nursing

facility.

                In 2009, the Cabinet amended the relevant regulation, 907 KAR2

1:170, to provide enhanced payments to providers for defined revenue code

services. Specifically, the amended version of 907 KAR 1:170, which went into

effect July 1, 2009, stated the Cabinet would pay “for a revenue code service

provided by a safety net provider a rate equal to the median rate of all local health

1
    Kentucky Revised Statutes.
2
    Kentucky Administrative Regulations.

                                               -2-
departments for the revenue code service.” 907 KAR 1:170 § 4(1).3 The same

regulation also defined “revenue code services” as “[a]n assessment, reassessment,

homemaking, personal care, respite, or attendant care service; or . . . a minor home

adaptation.” 907 KAR 1:170 § 1(19). Notably absent from the definition of

“revenue code services” was the provision of case management services,4 which

were noted as payable at a fixed upper rate limit specified in Section 2 of the

regulation.

               Despite the language in the regulation, the Cabinet paid PHHC the

enhanced rate for case management services for several years afterward. However,

on May 2, 2016, the Cabinet informed PHHC that these payments were in error

because case management services were not eligible for the enhanced payments

assigned to revenue code services in 907 KAR 1:170 § 1(19). The Cabinet then

sought recoupment of the excess payments, as authorized by 907 KAR 1:671, for

three fiscal years: 2011 ($264,116), 2012 ($385,677), and 2013 ($412,378), for a

total of $1,062,171. PHHC appealed the recoupment determination to a hearing

officer, arguing that the recoupment was arbitrary after several years of payments,

3
  907 KAR 1:170 was amended in 2016. The current version omits enhanced benefit payments
as previously provided in Section 4, and it no longer defines revenue code services in Section 1.
4
  According to the hearing officer’s recommended order, “Case management requires that a
qualified individual be responsible for locating, coordinating and monitoring a group of services
to be provided to a recipient. This involves reviewing the patient’s assessments, locating various
providers that are able to meet a patient’s needs, and checking in at least monthly with the
patient.” (Record (R.) at 10.)

                                               -3-
and that the omission of “case management” from the regulation was a drafting

error. PHHC also argued that individuals employed by the Cabinet represented

that case management services were reimbursable at the enhanced rate, and the

Cabinet should now be equitably estopped from recouping the excess payments.

Finally, PHHC argued that the equitable doctrine of laches should apply to prevent

the Cabinet from recoupment.

              Following an administrative hearing held on June 19, 2018, the

hearing officer issued a recommended order upholding the Cabinet’s recoupment.

The hearing officer pointed out that administrative regulations in Kentucky enjoy a

rebuttable presumption of correctness, and that there was “no question” that the

regulation in this case was properly promulgated under KRS 13A. (Hearing

Officer’s Order at 12.) The hearing officer also pointed out that no public

comments were filed regarding the regulation, PHHC was fully aware of the

language in the regulation, and PHHC had ample opportunity to comment if it

thought “case management services” were inadvertently omitted from the

regulation.

              Regarding PHHC’s specific legal arguments, the hearing officer

submitted that the rules of construction for interpreting administrative regulations

are identical to those for interpreting statutes, and “a statute may not be interpreted

at variance with its stated language.” (Hearing Officer’s Order at 13 (citing

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Revenue Cabinet, Commonwealth v. Gaba, 885 S.W.2d 706, 708 (Ky. 1994))).

The hearing officer also found equitable estoppel was not warranted here because

it could be applied to government agencies only under a finding of “unique

circumstances” involving “exceptional and extraordinary equities.” (Hearing

Officer’s Order at 15 (citing Sebastian-Voor Properties, LLC v. Lexington-Fayette

Urban County Gov’t, 265 S.W.3d 190, 194 (Ky. 2008))). Finally, the hearing

officer declined to apply laches as relief, finding that PHHC did not offer any legal

support for the premise that laches was applicable against a government agency in

Kentucky, nor was there any apparent violation of a statute of limitations. The

Secretary of the Cabinet subsequently issued a final order adopting the

recommended order, and PHHC appealed the decision to the Franklin Circuit

Court. In a thorough ten-page opinion, the circuit court affirmed the Secretary’s

final order. This appeal followed.

                                      II. ANALYSIS

             We begin by noting our role as the reviewing court of an

administrative agency decision is relatively limited. “Judicial review of an agency

decision is limited to the determination of whether the decision was arbitrary, i.e.,

whether the action was taken in excess of granted powers, whether affected parties

were afforded procedural due process, and whether decisions were supported by

substantial evidence.” Sebastian-Voor, 265 S.W.3d at 195 (citation omitted).

                                         -5-
Pursuant to KRS 13B.150(2), a court sitting in review “shall not substitute its

judgment for that of the agency as to the weight of the evidence on questions of

fact.” However, “[w]hen a question of law arises out of an administrative hearing,

appellate review is conducted de novo.” Cabinet for Health and Family Services v.

Appalachian Hospice Care, Inc., 642 S.W.3d 693, 695 (Ky. 2022) (citing Aubrey

v. Off. of the Att’y Gen., 994 S.W.2d 516, 519 (Ky. App. 1998)).

             PHHC presents four arguments on appeal. First, PHHC asserts that

the omission of the words “case management” from the definition of “revenue

code services” in 907 KAR 1:170 was the result of a drafting error. Second,

PHHC contends it is entitled to equitable estoppel against the Cabinet. Third,

PHHC claims it is entitled to a ruling in its favor based on the equitable doctrine of

laches. Fourth, and finally, PHHC argues the Cabinet had no right to look back

five years because the audit that found the error in case management payments was

an audit in name only. We will consider each argument in turn.

             First, PHHC contends that “case management” was left out of the

definition of revenue code services in 907 KAR 1:170 solely as the result of a

drafting error. Despite asserting that it had “overwhelming and uncontroverted

evidence” that the omission was a drafting error, the essence of PHHC’s briefed

argument is to shift the burden of proof, asserting that the Cabinet failed to offer

sufficient evidence that the omission was intentional. PHHC’s argument entirely

                                          -6-
discounts the importance of the language in the regulation. At one point, PHHC

goes so far as to argue, “[t]he Cabinet’s entire ‘proof,’ though, is that the definition

of ‘revenue code service’ in the regulation does not include the words case

management. However, taken in context, that is not substantial evidence of

anything other than that the words are missing.” (Appellant’s Brief at 13.)

             The hearing officer and the circuit court both analyzed this argument

based on the plain language of the regulation, as do we. We cannot agree with

PHHC that the language of a validly promulgated regulation should be disregarded

in favor of a contrary presumption. When interpreting a regulation,

             “the same rules apply that would be applicable to
             statutory construction and interpretation.” Revenue
             Cabinet, Com. v. Gaba, 885 S.W.2d 706, 708 (Ky. App.
             1994). The most commonly stated rule in statutory
             interpretation is that the plain meaning of the statute
             controls. Lamb v. Holmes, 162 S.W.3d 902 (Ky. 2005).
             We adhere to the plain-meaning rule “unless to do so
             would constitute an absurd result.” Executive Branch
             Ethics Commission v. Stephens, 92 S.W.3d 69, 73 (Ky.
             2002).

Commonwealth v. Estate of Cooper, 585 S.W.3d 253, 257 (Ky. App. 2019).

Furthermore, “[u]nder the plain meaning rule, when the language of a statute [or

regulation] is clear and unambiguous, we need not look beyond it for further

indications of legislative intent.” Lee v. Kentucky Department of Corrections, 610

S.W.3d 254, 262 (Ky. 2020) (citing Richardson v. Louisville/Jefferson Cnty. Metro

Gov’t, 260 S.W.3d 777, 779 (Ky. 2008)).

                                          -7-
             Most significantly, “when the statute [or regulation] is unambiguous,

courts are not free to insert words or add a provision even if it may be just or

desirable to do so.” Id. (citations omitted). The circuit court noted that there is

evidence in the record that the Cabinet considered including case management

services during the drafting process. (R. at 129.) However, the circuit court also

correctly stated that we must defer to the plain language of the regulation.

Although it is unclear what reason the drafters may have had to ultimately omit

case management from the definition of revenue code services eligible for

enhanced payments, there is no ambiguity in the omission. Again, the rules of

statutory construction apply to regulations. “It is our responsibility to ascertain the

intention . . . from the words used in enacting the [regulation] rather than surmising

what may have been intended but was not expressed.” Metzinger v. Kentucky

Retirement Systems, 299 S.W.3d 541, 546 (Ky. 2009) (quoting Flying J Travel

Plaza v. Commonwealth, 928 S.W.2d 344, 347 (Ky. 1996)). For these reasons, the

circuit court correctly determined that the language of the regulation did not

authorize enhanced payments for case management services, and the Cabinet did

not err in recouping such payments.

             In its second argument on appeal, PHHC argues the circuit court erred

when it denied its claim of equitable estoppel against the Cabinet. Under ordinary

                                          -8-
circumstances, equitable estoppel may be applied to a party using the following

elements:

            (1) conduct which amounts to a false representation or
            concealment of material facts, or, at least, which is
            calculated to convey the impression that the facts are
            otherwise than, and inconsistent with, those which the
            party subsequently attempts to assert; (2) the intention, or
            at least the expectation, that such conduct shall be acted
            upon by, or influence, the other party or other persons;
            and (3) knowledge, actual or constructive, of the real
            facts. And, broadly speaking, as related to the party
            claiming the estoppel, the essential elements are (1) lack
            of knowledge and of the means of knowledge of the truth
            as to the facts in question; (2) reliance, in good faith,
            upon the conduct or statements of the party to be
            estopped; and (3) action or inaction based thereon of such
            a character as to change the position or status of the party
            claiming the estoppel, to his injury, detriment, or
            prejudice.

Sebastian-Voor, 265 S.W.3d at 194-95 (citations omitted). However, equitable

estoppel only applies to governmental agencies under “exceptional circumstances.”

J. Branham Erecting & Steel Service Co., Inc. v. Kentucky Unemployment Ins.

Comm’n, 880 S.W.2d 896, 897 (Ky. App. 1994).

            PHHC claims it is entitled to equitable estoppel because it received

emailed assurances from staff at the Cabinet that case management would be

included as a revenue code service. However, the circuit court agreed with the

hearing officer that equitable estoppel was not applicable because there were no

“exceptional and extraordinary equities,” Sebastian-Voor, 265 S.W.3d at 194,

                                        -9-
which would be necessary to grant this remedy against a government agency. The

circuit court stressed how the plain language of the regulation did not allow “a

conflicting response from a Cabinet employee . . . to bind the Cabinet.” (R. at

131.) The circuit court also agreed with the hearing officer that the factual

circumstances did not warrant equitable estoppel, in that “PHHC should have

known that the only way to ensure reimbursement for ‘case management services’

was to move to have the service included in the regulation.” (R. at 131.) Yet

PHHC failed to avail itself of this process.

             “Estoppel is a question of fact to be determined by the circumstances

of each case.” Sebastian-Voor, 265 S.W.3d at 194. Additionally, pursuant to KRS

13B.150(2), we are not permitted to “substitute [our] judgment for that of the

agency as to the weight of the evidence on questions of fact.” The hearing officer

found the facts of this case, supported by substantial evidence, did not warrant

equitable estoppel; this conclusion was thereafter adopted by the Secretary of the

Cabinet and upheld at the circuit court. Given our deference to the agency on

factual questions, we decline PHHC’s invitation to disturb this ruling on appeal.

             For its third argument on appeal, PHHC contends the Cabinet should

have been barred from recoupment because of the equitable doctrine of laches. In

essence, PHHC asserts that the Cabinet knew the language of the regulation from

its inception in 2009, yet it “sat on its rights” until 2016 and used an audit as an

                                         -10-
excuse to avoid paying what it owed to PHHC. (Appellant’s Brief at 24.)

“‘Laches’ in its general definition is laxness; an unreasonable delay in asserting a

right. In its legal significance, it is not merely delay, but delay that results in injury

or works a disadvantage to the adverse party.” Plaza Condominium Ass’n, Inc. v.

Wellington Corp., 920 S.W.2d 51, 54 (Ky. 1996) (citations omitted). “[W]hat is

unreasonable delay is a question always dependent on the facts in the particular

case.” Id.

             The hearing officer determined that laches did not operate to bar the

Cabinet from recoupment, citing United States v. Summerlin, 310 U.S. 414, 60 S.

Ct. 1019, 84 L. Ed. 1283 (1940), for the general proposition that “laches does not

apply to government actions that assert or seek to enforce public rights or

interests.” (Hearing Officer’s Order at 17.) However, PHHC correctly points out

Summerlin actually says, “the United States is not bound by state statutes of

limitation or subject to the defense of laches in enforcing its rights.” Summerlin,

310 U.S. at 416, 60 S. Ct. at 1020 (emphasis added). The rule in Summerlin is

specific to the federal government, not the Commonwealth of Kentucky, and a

brief search indicates Summerlin has never been cited as precedent here. In

declining to award relief on the basis of laches, the hearing officer also stated,

“PHHC has not cited to Kentucky authority involving the use of laches against the

government at all, much less in an administrative proceeding, and the undersigned

                                          -11-
is unaware of any such authority.” (Hearing Officer’s Order at 17.) The circuit

court agreed with the hearing officer that laches should not apply, as PHHC failed

to cite applicable Kentucky authority for laches to apply to the state or a state

agency, and the circuit court was also unaware of any such authority.

             The precedents involving laches applied to the state government are

not recent, but they follow the principle announced in Summerlin. “Another

doctrine of law uniformly recognized in this state and generally is . . . the

government cannot be affected by the laches of its agents, or estopped from

asserting its rights against an official servant by the acts or omissions of auditors,

trustees, supervisors, or other guardians of public rights.” City of Winchester v.

Board of Education of City of Winchester, 182 Ky. 313, 206 S.W. 492, 492 (1918)

(citation omitted). The latest iteration of this principle that we have found is in a

precedent which is over eighty years old. “[A] municipality or government cannot

be affected by the laches of its agents or estopped from asserting its rights because

of the acts or omissions of its official servants.” City of Paducah v. Gillispie, 273

Ky. 101, 115 S.W.2d 574, 576 (1938). Gillispie is still authority, although its

principles have been read more recently to apply to equitable estoppel, rather than

laches:

             But there is an overriding public policy which makes a
             distinction between the action or nonaction of public
             officials when acting in a governmental capacity. That
             policy, in short, is that negligence or dereliction of public

                                          -12-
               officials will not work an estoppel against the state or its
               several agencies and subdivisions. The principle rests
               upon the broad ground that the public is entitled to
               greater consideration in weighing the equities than where
               rights of individuals only are concerned. City of
               Paducah v. Gillispie, 273 Ky. 101, 115 S.W.2d 574. The
               law is long established and deeply rooted in this and
               other states that, subject to special exceptions, the
               doctrine of equitable estoppel has no application to
               governments, municipal corporations and other agencies
               when their officials are acting in governmental
               capacities.

J. Branham Erecting & Steel Service Co., Inc., 880 S.W.2d at 897 (quoting

Maryland Casualty Company v. Magoffin County Board of Education, 358 S.W.2d

353, 358-59 (Ky. 1962)).

               Viewed through the lens of Gillispie, then, the Cabinet “cannot be

affected by the laches of its agents[.]” Gillispie, 115 S.W.2d at 576. Despite the

age of the precedent, we are bound by the holding in Gillispie until our Supreme

Court overturns or modifies it. Pursuant to SCR5 1.030(8)(a), “[a]s an intermediate

appellate court, this Court is bound by published decisions of the Kentucky

Supreme Court.” Kindred Healthcare, Inc. v. Henson, 481 S.W.3d 825, 829 (Ky.

App. 2014). “The Court of Appeals cannot overrule the established precedent set

by the Supreme Court or its predecessor Court.” Id. (citing Smith v. Vilvarajah, 57

S.W.3d 839, 841 (Ky. App. 2000)).

5
    Rules of the Kentucky Supreme Court.

                                           -13-
             However, upon a closer look at Gillispie and its progeny, it is possible

that Gillispie’s holding may have evolved in tandem with the doctrine of equitable

estoppel. It may be significant that our former highest court cited Gillispie within

the context of equitable estoppel and discussed how equitable estoppel does not

apply except under “special exceptions.” Maryland Casualty Company, 358

S.W.2d at 358-59. Nonetheless, even if we were to interpret Gillispie as allowing

laches to apply to a governmental agency under “special exceptions,” the hearing

officer and circuit court determined that no exceptional circumstances existed in

this case in their discussion of PHHC’s equitable estoppel argument. We discern

no error.

             For PHHC’s fourth and final argument on appeal, it argues that “[t]he

Cabinet has no right to look back five years because this was an ‘audit’ in name

only.” (Appellant’s Brief at 25.) PHHC’s argument appears to be that the Cabinet

undertook its audit with some sort of improper motive. The argument appears to

be a summary of previous accusations, and it amounts to two paragraphs without

any citations to the record or case law. “[W]ithout any argument or citation of

authorities, [an appellate] [c]ourt has little or no indication of why the assignment

represents an error. It is not our function as an appellate court to research and

construct a party’s legal arguments, and we decline to do so here.” Hadley v.

                                         -14-
Citizen Deposit Bank, 186 S.W.3d 754, 759 (Ky. App. 2005) (internal quotation

marks and citation omitted).

                                  III. CONCLUSION

            For the foregoing reasons, we affirm the order of the circuit court.

            ALL CONCUR.

BRIEFS FOR APPELLANT:                    BRIEF FOR APPELLEES:

John H. Gray                             Blake A. Vogt
Martha C. Gray                           Frankfort, Kentucky
Frankfort, Kentucky

                                       -15-