250 N.C. App. 1
N.C. Ct. App.2016Background
- Plaintiffs are North Carolina medical provider practices with Medicaid contracts who sued DHHS and CSC after implementation of a new MMIS (NCTracks) allegedly caused widespread claim denials, delayed payments, and other errors.
- Plaintiffs alleged negligence and UDTP against CSC/SLI and breach of contract and constitutional violations against DHHS; they sought damages and declaratory relief; they alleged administrative remedies were futile because DHHS/CSC did not issue final decisions on many claims.
- DHHS (single state Medicaid agency) issues Remittance Statements after claim submission that record initial dispositions: paid, denied, or pending. Providers may resubmit claims (within 18 months) or request a 30-day reconsideration review per NCAC, and may pursue a contested case hearing under the APA once they have a final adverse determination.
- Defendants moved to dismiss under Rule 12(b)(1) for failure to exhaust administrative remedies; the trial court granted the motion, concluding plaintiffs had not shown futility and treated Remittance Statements as final notices. Plaintiffs appealed.
- The Court of Appeals reversed and remanded, holding the trial court erred in treating Remittance Statements as final agency decisions, in making reconsideration review a mandatory prerequisite to a contested case, and in failing to resolve whether DHHS actually issues the written final determinations that trigger the 60-day APA appeal period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether providers had to exhaust administrative remedies before suing | Exhaustion was futile/impossible because DHHS/CSC never issue written final adverse determinations from which to appeal | Plaintiffs failed to exhaust available administrative remedies (reconsideration then contested case); dismissal appropriate | Reversed: trial court erred — remand to determine whether DHHS issues final decisions and notices; exhaustion not excused unless futility shown |
| Whether Remittance Statements constitute the final agency decision triggering APA appeal deadlines | Remittance Statements do not constitute final decisions; they are preliminary and subject to resubmission/reconsideration | Remittance Statements notify providers of denials and thus trigger appeal options and timelines | Remittance Statements are preliminary; they do not satisfy §150B-23(f) notice requirement when they are subject to revision |
| Whether reconsideration review is a mandatory prerequisite to filing a contested case petition | Not mandatory; statute/regulations allow contested case once agency issues final adverse determination and written notice; informal review is optional | Regulations and Billing Guide create a process where reconsideration is part of appeals and should be followed | Reconsideration is not a mandatory step; contested case may be filed after receipt of agency final decision and required notice |
| Whether plaintiffs bore a duty to "nudge" DHHS to issue timely final determinations | No duty to prompt DHHS; providers should not be required to ensure agency complies with its statutory notice obligations | Plaintiffs should have attempted appeals or attempted to follow appeal procedures despite confusion | Court held plaintiffs are not required to prod DHHS; trial court erred by imposing such a duty; remand to resolve factual compliance issues |
Key Cases Cited
- Armstrong v. Exceptional Child Ctr., 135 S. Ct. 1378 (U.S. 2015) (describing Medicaid as a federal-state program funding state provision of medical services)
- Harris v. Matthews, 361 N.C. 265 (2007) (Rule 12(b)(1) review de novo; courts may consider matters outside the pleadings)
- Johnson v. Univ. of N.C., 202 N.C. App. 355 (2010) (failure to exhaust administrative remedies supports dismissal under Rule 12(b)(1))
- Nailing v. Univ. of N.C., 117 N.C. App. 318 (1994) (timely filing of petition is jurisdictional for OAH)
- Jackson v. N.C. Dep't of Human Resources, 131 N.C. App. 179 (1998) (administrative process appropriate forum for certain agency-related claims)
- Shell Island Homeowners Ass'n v. Tomlinson, 134 N.C. App. 217 (1999) (effective administrative remedy must be exhausted; exclusivity of statutory remedy)
- Affordable Care, Inc. v. N.C. State Bd. of Dental Examiners, 153 N.C. App. 527 (2002) (futility cannot be established by mere prediction of adverse outcome)
- Glorioso v. F.B.I., 901 F. Supp. 2d 359 (E.D.N.Y. 2012) (agency letter lacking "final denial" label can still be notice of final decision when content is clear)