Court Opinion

ID: 6324503
Source: CourtListenerOpinion
Date Created: 2022-03-18 05:06:39.308139+00
Date Added: 2024-06-11T09:21:52.681210
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                           COURT OF APPEALS

FOOD VALUE PHARMACY CORPORATION,                                   UNPUBLISHED
doing business as CARE PHARMACY, and                               March 17, 2022
CHANDRESH AMIN, R.PH.,

               Plaintiffs-Appellants,

v                                                                  No. 354020
                                                                   Saginaw Circuit Court
DEPARTMENT OF HEALTH AND HUMAN                                     LC No. 19-039180-AA
SERVICES,

               Defendant-Appellee.

Before: CAVANAGH, P.J., and MARKEY and SERVITTO, JJ.

PER CURIAM.

       Plaintiffs, Food Value Pharmacy Corporation, doing business as Care Pharmacy, and
Chandresh Amin, R.Ph., the owner of the pharmacy,1 appeal by leave granted2 a circuit court order
upholding a decision by the Department of Health and Human Services (DHHS) to require
repayment by the pharmacy of $164,663.13 in Medicaid overpayments. We affirm.

                                        I. BASIC FACTS

       This case involves a fiscal audit of Care by DHHS’s Office of Inspector General (OIG).
The audit, encompassing transactions from January 2010 to August 2016, resulted in a finding by
DHHS that Care owed $164,663.13 for Medicaid fee-for-service overpayments. The audit method
DHHS employed is referred to as an invoice\inventory-reconciliation audit (IR audit). It involves
comparing wholesale quantities of drugs ordered to amounts billed; if fewer drugs were ordered
than were billed, the apparent excess in Medicaid billing (determined by way of an apportionment

1
  For ease of reference, and to match the terminology used by the parties in their briefs, we will
simply use the term “Care” when referring to plaintiffs.
2
 See Food Value Pharmacy Corp v Dep’t of Health & Human Servs, unpublished order of the
Court of Appeals, entered December 18, 2020 (Docket No. 354020).

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method described infra) is to be recovered by DHHS. Care contested the amount alleged to be
owed, but after an evidentiary hearing, an administrative law judge (ALJ) upheld the assessment
in a proposal for decision (PFD), and the director of DHHS adopted the PFD without elaboration.
The circuit court upheld DHHS’s decision in a lengthy and detailed opinion, rejecting Care’s
argument that the Trading Partner Agreement (TPA) into which it had entered with DHHS
mandated that DHHS use random-sampling audits (RS audits) as opposed to IR audits. The circuit
court also rejected Care’s argument that DHHS, in conducting the IR audit, improperly looked at
billing information pertaining to cash transactions and payments from private insurers.

                                 II. STANDARDS OF REVIEW

       The issues on appeal involve contractual and statutory interpretation. In general, this Court
reviews de novo, as matters of law, issues of contractual and statutory construction. Elba Twp v
Gratiot Co Drain Comm’r, 493 Mich 265, 278; 831 NW2d 204 (2013); Sands Appliance Servs,
Inc v Wilson, 463 Mich 231, 238; 615 NW2d 241 (2000).

         “A final agency decision is subject to court review but it must generally be upheld if it is
not contrary to law, is not arbitrary, capricious, or a clear abuse of discretion, and is supported by
competent, material and substantial evidence on the whole record.” Vanzandt v State Employees
Retirement Sys, 266 Mich App 579, 583; 701 NW2d 214 (2005). “Substantial evidence is that
which a reasonable mind would accept as adequate to support a decision, being more than a mere
scintilla, but less than a preponderance of the evidence.” Id. at 584 (quotation marks and citation
omitted). “If there is sufficient evidence, the circuit court may not substitute its judgment for that
of the agency, even if the court might have reached a different result.” Id.

        “This Court reviews a lower court’s review of an administrative decision to determine
whether the lower court applied correct legal principles and whether it misapprehended or
misapplied the substantial evidence test to the agency’s factual findings, which is essentially a
clearly erroneous standard of review.” Id. at 585. “A finding is clearly erroneous where, after
reviewing the record, this Court is left with the definite and firm conviction that a mistake has been
made.” Id. “Thus, the circuit court’s decision will only be overturned if this Court is left with a
definite and firm conviction that a mistake was made.” Id.

                                          III. ANALYSIS

       As an initial matter, we note that this Court has recently upheld, in general terms, the use
of IR audits by DHHS. In Dearborn Hts Pharmacy v Dep’t of Health & Human Servs, ___ Mich
App ___, ___; ___ NW2d ___ (2021) (Docket No. 354008); slip op at 2-3, the petitioner argued
that DHHS did not have the authority to conduct IR audits pertaining to the period before the
implementation of subsection 19.2 of the Pharmacy chapter of the Medicaid Provider Manual
(MPM). Subsection 19.2 states:
              In addition to all other documentation required under state law, federal law,
       and MDHHS policy, pharmacy providers must maintain invoices, manufacturer
       and/or wholesaler sales records, distributor delivery records to the provider,
       inventory transfer records, provider payment records, and all other records
       necessary to support the size and quantity of the goods paid for by Medicaid during
       the audit/review period. Failure to do so will result in the recoupment of pharmacy

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       funds related to unsupported Medicaid claims. In the event inventory for any such
       product cannot be substantiated through reliable documentation for the beginning
       of the audit/review period, MDHHS may assume that the beginning and ending
       inventory quantities are the same for that product. For the purposes of this policy,
       the “audit/review period” shall be a period defined by MDHHS. [Medicaid
       Provider Manual, Pharmacy, Subsection 19.2.]

This Court in Dearborn Hts Pharmacy set forth the following background information:
              On June 1, 2015, DHHS issued a “bulletin” informing Medicaid pharmacies
       of efforts to clarify the documentation requirements for pharmacy providers.
       Specifically, the bulletin notified the pharmacies they must maintain particular
       documents “to support the size and quantity of the goods paid for by Medicaid.”
       The bulletin stated the effective date was July 1, 2015—and, it was later
       incorporated into the Pharmacy chapter of the Michigan Medicaid Provider Manual
       (“MPM”) at Subsection 19.2, Invoice and Inventory Records. [Dearborn Hts
       Pharmacy, ___ Mich App at ___; slip op at 1-2.]

The Court then stated, “Though petitioner disputes the applicability of Subsection 19.2 of the
MPM to the [IR] audit at issue, there are a number of authorities that predate and authorize the
conduct of this audit.” Id. at ___; slip op at 3. The Court set forth a substantial number of laws
referring to DHHS’s investigative powers and to recordkeeping obligations of Medicaid providers
and indicated that these laws allowed for an IR audit to be conducted. Id. at ___; slip op at 3-7.
The Court said that “DHHS-OIG clearly has long had broad authority to investigate possible fraud
by the unambiguous terms of these provisions. Thus, the trial court failed to consider the plain
language of other authority granting DHHS the authority to conduct investigations by focusing its
conclusion of the effective date of Subsection 19.2.” Id. at ___; slip op at 8. The Court stated,
“[W]e reverse the holding of the trial court finding that OIG’s authority to conduct inventory
reconciliation audits is derived from and limited to Subsection 19.2.” Id. at ___; slip op at 8.

        Dearborn Hts Pharmacy makes clear that DHHS has the authority, in general, to conduct
IR audits. The primary and specific argument being made by Care in the present case, however,
is that DHHS was limited to using RS audits because of the mention of RS audits in ¶ 13 of the
TPA, which states:

              I agree to comply with all policies and procedures of the Medical Assistance
       Program when billing for services rendered. I also agree that disputed claims,
       including overpayments, may be adjudicated in administrative proceedings
       convened under [the Michigan Social Welfare Act], as amended, or in a court of
       competent jurisdiction. I further agree to reimburse the Medical Assistance
       Program for all overpayments, and I acknowledge that the Medicaid Audit System,
       which uses random sampling, is a reliable and acceptable method for determining
       such overpayments. [Emphasis added.]

       The argument Care makes is clearly untenable. Care itself argues that the TPA is a contract,
and contracts are to be interpreted according to their plain and ordinary meaning. See Klein v HP

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Pelzer Auto Sys, Inc, 306 Mich App 67, 75; 854 NW2d 521 (2014). Paragraph 13 indicates that
an RS audit is a reliable and acceptable method for determining overpayments, but it does not
indicate that such an audit is the only reliable and acceptable method. As aptly noted by the ALJ:
       The agreement however does not contain an exhaustive list of every conceivable
       type of audit and to interpret the language as requested by Petitioner . . . would
       prohibit the Department from conducting any straightforward audit that uses even
       simple math.

The TPA refers to one acceptable type of audit but does not provide an exhaustive list of acceptable
audits. Care’s argument that the doctrine of expressio unius est exclusio alterius—“the expression
of one thing suggests the exclusion of all others”—should be applied is not persuasive. See
Pittsfield Charter Twp v Washtenaw Co, 468 Mich 702, 712; 664 NW2d 193 (2003) (citation
omitted). In Luttrell v Dep’t of Corrections, 421 Mich 93, 107; 365 NW2d 74 (1984), the Court
stated:
       [L]ike all other such rules, [the doctrine] is a tool to ascertain . . . intent . . . . It does
       not automatically lead to results. As we have seen, reference to the legislative
       history, the rule of legislative acquiescence and the rule of avoiding absurdity and
       unreasonableness leads to exactly the opposite result from that which the offenders’
       rule would. Furthermore, there is nothing upon consideration of the plain language
       of the statute that would apparently point in the offenders’ direction. As a
       consequence, while we recognize the offenders’ standard rule of interpretation, we
       do not find it persuasive in the circumstances of this case.

The doctrine is similarly not persuasive in the present case. In fact, as stated in Barnhart v Peabody
Coal Co, 537 US 149, 168; 123 S Ct 748; 154 L Ed 2d 653 (2003), “The canon [of expressio unius
est exclusio alterius] depends on identifying a series of two or more terms or things that should be
understood to go hand in hand, which [is] abridged in circumstances supporting a sensible
inference that the term left out must have been meant to be excluded.” (Emphasis added; quotation
marks and citations omitted.) The mention of one type of audit in the TPA does not lead to an
inference that all others should be excluded.

       Care appears to be arguing, at points, that DHHS should have conducted an RS audit and
looked only to so-called “signature logs.” The portion of the MPM specifically applicable to
pharmacies states, in part:
               Pharmacy providers must document receipt or delivery of new or refilled
       medications to the intended Medicaid beneficiary. This documentation serves as
       verification of the beneficiary receiving the prescription billed. The absence of the
       appropriate verification indicates the beneficiary did not receive the prescription,
       and funds will be recouped from the pharmacy. Documentation described below
       must be retained for review by MDHHS or the MDHHS agent for seven years and
       is subject to audit. Any method of reproducing past signatures is not acceptable.
       [Medicaid Provider Manual, Pharmacy, Subsection 5.1.]

It continues:

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              Pharmacy providers must maintain a log containing the following
       information:

              Beneficiary’s name;

              The signature of the beneficiary or that of his representative; and

              The date of receipt of the prescription.

              The log must effectively differentiate between prescriptions received by a
       beneficiary for which counseling was accepted and provided, and those for which
       counseling was offered and was declined. [Medicaid Provider Manual, Pharmacy,
       Subsection 5.1.A.]

       It seems that signature logs could indeed be one potential manner in which to audit
Medicaid billings, because billings could be compared against signature logs, which serve,
according to the manual, as “verification of the beneficiary receiving the prescription billed.” But,
as noted, DHHS undertook an IR audit in this case and was authorized to do so. Such an audit
properly involves inventory and billings.3 Contrary to Care’s argument on appeal, DHHS did not
use “voodoo” to arrive at the repayment figure.

        Care is insistent that because it ordered a sufficient quantity of drugs to provide for all of
its Medicaid fee-for-service billings, it cannot be ordered to provide any overpayment monies. But
the salient fact is that the quantity of drugs ordered was not sufficient to provide for the total
billings (including billings related to cash and private insurance), and DHHS, therefore, calculated
that a certain portion of the discrepancy was attributable to Medicaid billings. DHHS’s auditing
witness elaborated on how this attributable portion was reached:
               So the percentage of Medicaid column represents the overall percentage that
       can be attributed to fee-for-service Medicaid. So in the case of Abilify 10 milligram
       tablet again, if you look, 4,340 tablets were dispensed under Medicaid fee for
       service for the time period in question. The dispensing report shows 6,888 tablets
       total were dispensed for the time period in question to all payers including cash
       which results in . . . 63.01 percent which can be attributed to fee-for-service
       Medicaid.

3
 The circuit court explained one reason why signature logs would not necessarily reveal improper
billings:

       [T]he Department, in its review of fraud and waste, is tasked with evaluating the
       quantity of drugs dispensed to Medicaid beneficiaries in context with their
       acquisition, thus ensuring that each pharmacy has properly obtained the dispensed
       drugs in sufficient quantities via legitimate purchase/exchange/transfer
       mechanisms (e.g., rather than dispensing drugs that were free samples or obtained
       through the black market).

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This “63.01” factor was then applied to the “missing” inventory to arrive at a quantity for
reimbursement, with the quantity multiplied by average Medicaid pricing for the drug in question.

        Obviously, then, as part of the IR audit, DHHS looked, in part, to billings related to cash
and billings related to private insurers. Care contends that DHHS had no authority to look at these
types of billings. It cites MCL 333.26368(III)(A)(5) and (6) in support of its argument. These
provisions state:
              A. The Office of Health Services Inspector General shall conduct and
       supervise activities to prevent, detect, and investigate fraud, waste, and abuse in
       Health Services Programs. Specifically, the Office shall do all of the following:

                                              * * *

              5. Require and compel the production of such books, papers, records, and
       documents as the Health Services Inspector General deems to be relevant or
       material to an investigation, examination, or review undertaken by the Office.

              6. Examine and copy or remove documents or records of any kind related
       to Health Services Programs or necessary for the Office to perform its duties and
       responsibilities that are prepared, maintained, or held by, or available to, any state
       agency or local unit of government entity or contractor to a state agency or local
       unit of government. Any such documents or records shall be afforded
       confidentiality protections as provided under state and federal law. The removal of
       records shall be limited to those circumstances in which a copy is insufficient for
       an appropriate legal or investigative purpose. [MCL 333.26368(III).]

MCL 333.26368(III)(A)(5) indicates that the OIG can require the production of records it deems
material to an investigation, and the total billings were, as noted, material to the IR audit. The
circuit court aptly explained:
               Although Appellants contend that the Department is not allowed to consider
       any evidence relating to Care’s sales to persons other than Medicaid beneficiaries,
       the MGM [sic] and governing law do not support this contention. Appellants rely
       on MCL 333.26368(III)(A)(3) and (6). MCL 333.26368(III)(A)(3) requires the
       OIG to “[a]ctively seek out fraudulent billing practices through the use of existing
       database resources managed by the Department of Community Health and available
       from federal sources.” MCL 333.26368(III)(A)(6) provides that the OIG may
       obtain certain documents or records of state agencies, local units of government, or
       contractors thereof. However, neither provision constrains the OIG to rely
       exclusively on its own data or the data of state agencies. Moreover, MCL
       333.26368(III)(A)(4) gives the OIG broad subpoena powers to obtain testimony
       “the Health Services Inspector General deems relevant or material to an
       investigation, examination, or review undertaken by the Office.” Similarly, MCL
       333.26368(III)(A)(5) empowers the OIG to “[r]equire and compel the production
       of such books, papers, records, and documents as the Health Services Inspector
       General deems to be relevant or material to an investigation, examination, or review
       undertaken by the Office.”

                                                -6-
                                                * * *

                . . . Appellants are correct in that the data indicates that Care purchased
        more than enough drugs through properly documented purchases to fill all its
        Medicaid beneficiary prescriptions during the audit period. . . . However, there is
        no data in the record to establish that the drugs used to fill the Medicaid beneficiary
        prescriptions were obtained through those properly invoiced/documented
        purchases. In contrast, the data provided by Care suggests [sic] that its
        documented drug purchases comprise only a fraction of the total drugs
        dispensed. . . .

                Care therefore failed to supply records necessary to show that the drugs it
        dispensed to its Medicaid beneficiary customers were covered by documented
        purchasers or transfers. If Care only sold to Medicaid beneficiaries, its invoices,
        showing a purchase amount greater than those paid by Medicaid, would provide
        straightforward evidence of enough purchases to support the quantities dispensed.
        Alternatively, if Care used a tracking methodology that could tie a subset of its
        invoiced purchases to the Medicaid claims it paid, such documentation could
        support the quantity dispensed. [Second emphasis added.]

The trial court’s reasoning was sound. As stated in Prechel v Dep’t of Social Servs, 186 Mich App
547, 548-549; 465 NW2d 337 (1990), the provider (here, Care) has the burden of proving
inaccurate calculations, and Care did not meet this burden or establish that DHHS violated any
laws.

        Care also makes an unclear argument about document-retention requirements. It states:
                Pharmacy Rules at that time only required five year retention. Obviously
        no one wants to retain records longer than they need to because of the expense, etc.
        And if the OIG is permitted to access cash and private insurance records and they
        are only maintained for five years, by going back seven years the records would be
        inaccurate.

Care does not explain to what “Pharmacy Rules” it is referring and does not explain to what period
“at that time” refers. “It is not sufficient for a party simply to announce a position or assert an
error and then leave it up to this Court to discover and rationalize the basis for his claims, or unravel
and elaborate for him his arguments, and then search for authority either to sustain or reject his
position.” Wilson v Taylor, 457 Mich 232, 243; 577 NW2d 100 (1998) (quotation marks and
citation omitted). In addition, Care does not assert that the billing records relied upon by DHHS
were inaccurate on the basis of Care’s having discarded records in accordance with some
unspecified five-year documentation-retention requirement.

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       Under all the circumstances, Care has not established that the circuit court’s upholding of
the agency’s decision should be reversed.

       Affirmed.

                                                            /s/ Mark J. Cavanagh
                                                            /s/ Jane E. Markey
                                                            /s/ Deborah A. Servitto

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