Counseling Center, Inc. v. N.M. Human Servs. Dep't
429 P.3d 326
| N.M. Ct. App. | 2018Background
- The Counseling Center, Inc. (TCC), a behavioral health provider under contract with OptumHealth (the managed care contractor), submitted H0031 claims (with and without modifiers) between 2009–2013; OptumHealth’s billing systems and fee schedules had errors and back-dating problems.
- OptumHealth flagged aberrant billing by several providers; HSD hired PCG to audit and later referred TCC and others to the Attorney General / MFCU for further review.
- PCG’s random-sample audit initially found 26 failed claims (later reduced to 9 after additional documentation); the Attorney General’s random audit of 30 claims found failures that were extrapolated to a large overpayment.
- HSD sought roughly $343,000 (later $379,135.26) in overpayments based on extrapolations from the PCG and Attorney General audits and on findings that certain H0031 (no modifier) and H0031 (HA) claims were mistakenly paid from Medicaid funds.
- An ALJ concluded the extrapolated overpayments were prima facie established and required TCC to rebut them (finding TCC had not performed a one‑hundred percent audit), and also found TCC was credited with Medicaid funds for some H0031 (no modifier) and HA claims.
- The district court reversed the ALJ on the extrapolation/burden issue (ordering application of the preponderance standard on remand) and held there was not substantial evidence that TCC was paid with Medicaid funds; HSD appealed and the Court of Appeals granted certiorari.
Issues
| Issue | Plaintiff's Argument (HSD) | Defendant's Argument (TCC) | Held |
|---|---|---|---|
| Whether the ALJ properly shifted burden to TCC to produce a 100% audit before evaluating whether sampled claims actually failed | ALJ correctly treated audit/extrapolation as prima facie and required provider to rebut; a 100% audit is required only to dispute sampling math or methodology | TCC argued it was not required to perform a 100% audit before the ALJ would consider whether individual sampled claims actually failed | Court: ALJ misapplied the regulations. Agency still bears preponderance burden to prove claims failed and extrapolation is valid; requiring a 100% audit before any evaluation was improper. District court affirmed on this point and remand ordered to apply preponderance standard. |
| Whether a provider must always perform a 100% audit to challenge a sampling/extrapolation | HSD: regulation requires a 100% audit when a provider challenges the validity of MAD’s sample; this is reasonable and within agency discretion | TCC: a 100% audit requirement is unreasonable and premature where the dispute concerns whether particular sampled claims failed | Court: The 100%‑audit rule is rational and not per se unreasonable when the validity of the sample is the issue, but failure to do so does not relieve HSD of its burden at hearing. |
| Whether ALJ’s finding that certain H0031 (no modifier) and H0031 (HA) claims were paid with Medicaid funds is supported by substantial evidence | HSD: MAD records (and Stevens’ testimony) show OptumHealth submitted encounter data indicating Medicaid paid those claims; federal law requires return of Medicaid overpayments | TCC: it billed those claims to non‑Medicaid payors; any erroneous Medicaid payments are OptumHealth’s problem — TCC should not be required to reimburse HSD | Court: Substantial evidence supports ALJ’s finding that OptumHealth erroneously credited TCC with Medicaid funds; federal law requires return of Medicaid overpayments, so reversal of district court on this point. |
| Remedy and remand scope | HSD seeks affirmation of ALJ’s recovery order | TCC seeks reversal or at least protection from paying for OptumHealth’s mistakes | Court: Affirmed district court insofar as ALJ improperly shifted burden; reversed district court with respect to Medicaid‑funds issue; remanded to ALJ to decide failed‑claim merits and any adjustment to extrapolation under preponderance standard. |
Key Cases Cited
- Illinois Physicians Union v. Miller, 675 F.2d 151 (7th Cir. 1982) (upheld state requirement that providers conduct a one‑hundred percent audit to rebut an extrapolated overpayment where state bore initial audit cost and evidence was within provider’s control)
- Chaves County Home Health Serv., Inc. v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991) (discusses alternatives to a full universe review for challenging extrapolation, including presenting a separate random sample)
- Atkins v. Rivera, 477 U.S. 154 (U.S. 1986) (states participating in Medicaid must comply with federal requirements)
- National Council on Comp. Ins. v. N.M. Corp. Comm'n, 107 N.M. 278 (N.M. 1988) (standards for substantial evidence review of administrative decisions)