Newcap, Inc. v. Dep't of Health Servs.
916 N.W.2d 173
Wis. Ct. App.2018Background
- Newcap, a Medicaid-certified family planning clinic, was audited by Wisconsin DHS for pharmacy services billed during 2010–2011; DHS performed a site visit in November 2013 and issued preliminary findings in August 2014.
- DHS's preliminary audit alleged (1) Newcap failed to retain purchase invoices documenting acquisition cost for dispensed drugs, (2) Newcap billed above acquisition cost (later abandoned), and (3) Newcap submitted claims with missing or incorrect National Drug Codes (NDCs). DHS sought recoupment.
- DHS issued a Notice of Intent to Recover $185,074.80, based on missing invoices and claims with missing/invalid NDCs. Newcap requested an administrative hearing and produced some invoices and chart evidence at that hearing.
- An ALJ upheld DHS’s recovery decision, reasoning DHS may recover where required records were not kept and that claims with missing/invalid NDCs were deniable and thus recoverable. DHS adopted the ALJ decision.
- The circuit court reversed, holding that under WIS. STAT. § 49.45(3)(f) DHS may recoup only where provision of services, appropriateness, or accuracy of claims cannot be verified, and evidence at hearing showed services were provided.
- The court of appeals affirmed the circuit court in part: it held DHS generally may recoup when a provider fails to maintain department-required records and must produce them at audit, but here DHS lacked authority to recoup because (a) Newcap was not required to retain the invoices at issue and (b) submission of claims with missing/invalid NDCs did not authorize recoupment.
Issues
| Issue | Plaintiff's Argument (Newcap) | Defendant's Argument (DHS) | Held |
|---|---|---|---|
| Whether § 49.45(3)(f) permits recoupment when the provider failed to maintain DHS-required records even if other records show services were provided | DHS cannot recoup if any provider record (even not the specific DHS-required ones) verifies that the service was provided and payment was appropriate | § 49.45(3)(f) allows DHS to recoup when verification cannot be made from the records DHS requires the provider to maintain | Court: § 49.45(3)(f) authorizes recoupment where DHS cannot verify claims using the specific records DHS required; recoupment may rest on failure to maintain those records |
| Whether records produced for the first time at the administrative hearing can cure failure to produce required records at audit and prevent recoupment | Post-audit submission of invoices and other records at the hearing should defeat recoupment because they verify services were provided | Provider must make required records available at the time of DHS audit; later production at hearing cannot defeat recoupment | Court: Records must be available at audit; producing them only at hearing is insufficient to avoid recoupment authority under § 49.45(3)(f) |
| Whether Newcap was required to retain purchase invoices for the prescription drugs at issue | No statute or DHS code required Newcap to retain invoices for those drugs | Administrative code provisions (DHS 105/106) and federal guidance require retention of evidence and invoices | Court: DHS code provisions do not reasonably require retention of purchase invoices for prescription drugs at issue (invoices required only for "medical supplies" as defined separately); Newcap was not required to retain these invoices, so DHS erred in seeking recoupment on that basis |
| Whether DHS may recoup payments because claims were submitted with missing or invalid NDCs | Missing/invalid NDCs are claim defects that do not, by themselves, authorize recoupment where services were provided and payments appropriate | DHS policy and administrative guidance required NDCs and would deny such claims; payments on such claims are erroneous and recoverable | Court: Submission of claims with missing/invalid NDCs does not equate to failure to maintain "records" under § 49.45(3)(f) nor otherwise establish a statutory basis for recoupment; DHS lacked authority to recoup on that basis |
Key Cases Cited
- Wilder v. Va. Hosp. Ass'n, 496 U.S. 498 (explaining Medicaid is a federal-state cooperative program)
- State ex rel. Kalal v. Circuit Court for Dane Cty., 271 Wis. 2d 633 (2004) (framework for statutory interpretation; start with plain language)
- Gabler v. Crime Victims Rights Bd., 376 Wis. 2d 147 (2017) (reviewing standard for appellate review of agency decisions)
- County of Dane v. LIRC, 315 Wis. 2d 293 (2009) (levels of deference to agency statutory interpretation)
- Turner v. Taylor, 268 Wis. 2d 628 (2003) (court need address only dispositive issues)
- 1st Stop Health Servs., Inc. v. Dep't of Med. Assistance Servs., 63 Va. App. 266 (2014) (provider documentation must be maintained at time of audit, not cured after audit)