Culpeper Regional Hospital v. Cynthia B. Jones, Director
64 Va. App. 207
| Va. Ct. App. | 2015Background
- Culpeper Regional Hospital (Hospital) participated in Virginia Medicaid under a Provider Participation Agreement requiring compliance with DMAS policies, including a Hospital Manual specifying physician "certification" of medical necessity for inpatient admissions.
- DMAS audited the Hospital and found admissions lacking the required physician certification of medical necessity, seeking to recoup Medicaid payments (~$46,760.10; Hospital later narrowed dispute to ~$36,000).
- The Hospital argued its Admission Order Forms—signed and dated by physicians and indicating inpatient status—satisfied the certification requirement; alternatively, it claimed substantial compliance with the contract excused any formal deficiency.
- An administrative hearing officer ruled for the Hospital; the DMAS Director reversed, finding the hearing officer erred as a matter of law and policy and authorized recoupment; the Circuit Court affirmed the Director.
- On appeal, the Court of Appeals reviewed the agency’s legal determinations de novo and addressed (1) whether the Admission Order Forms fulfilled the certification requirement and (2) whether substantial compliance could bar recoupment despite a missing certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether physician-signed Admission Order Forms satisfy the regulatory/Manual physician "certification" requirement | Admission form checkboxes indicating inpatient status, with physician signature and date, constitute the required certification | Certification is a distinct, formal attestation that inpatient services were or were not needed and is separate from an admission order | The admission form did not satisfy the certification requirement; certification must be an attestive act beyond mere admission to treatment |
| Whether Hospital's substantial compliance excuses lack of formal certification and precludes recoupment | Even if certification was deficient, the Hospital substantially complied and provided necessary services; failure was at most a minor/technical breach | The Provider Agreement and Manual make certification a binding condition; failure to comply permits DMAS to recoup payments regardless of alleged substantial compliance | Contract terms govern; the Manual authorizes refund when required documentation is missing, so substantial compliance does not bar recoupment here |
| Whether the Director erred by overturning the hearing officer's factual/legal conclusions | Hearing officer found records satisfactory and DMAS interpretation arbitrary and capricious; decision should stand | Director correctly applied law and DMAS policy, concluding the hearing officer committed an error of law | Director lawfully set aside the hearing officer’s decision; agency interpretation and contract control |
Key Cases Cited
- 1st Stop Health Servs., Inc. v. Dep’t of Med. Assistance Servs., 63 Va. App. 266 (affirming documentation requirement and recoupment where records were inadequate)
- Psychiatric Sols. of Va., Inc. v. Finnerty, 54 Va. App. 173 (contract principles apply to provider agreements; noncompliance may bar payment if material)
- Horton v. Horton, 254 Va. 111 (breach is material if it defeats an essential purpose of the contract)
- Ames v. Am. Nat’l Bank of Portsmouth, 163 Va. 1 (courts must enforce contract language as written)
- Cnty. of Albemarle v. Camirand, 285 Va. 420 (courts avoid interpretations that render statutory/regulatory provisions superfluous)