CHARLES W. PALIAN v. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Ken-19-221
MAINE SUPREME JUDICIAL COURT
November 10, 2020
2020 ME 131
CONNORS, J.
Argued: December 6, 2019. Panel: MEAD, GORMAN, JABAR, HUMPHREY, HORTON, and CONNORS, JJ., and CLIFFORD, A.R.J.*
[¶1] Charles W. Palian, DMD, appeals from a judgment of the Superior Court (Kennebec County, Stokes, J.) denying his petition for judicial review of final agency action,
[¶2] We reject the bulk of Dr. Palian’s arguments, but remand as to one aspect of the Department’s decision, which imposed the maximum allowable penalties for Dr. Palian’s failure to adequately document time spent with patients following his administration of anesthesia.
I. BACKGROUND
[¶3] The following undisputed facts are drawn from the presiding officer’s recommended decision, and the procedural facts are taken from the court’s record. See Manirakiza v. Dep’t of Health & Hum. Servs., 2018 ME 10, ¶ 2, 177 A.3d 1264.
[¶4] Until he retired in 2013, Dr. Palian was an oral surgeon and MaineCare provider1
Department issued a notice of violation (NOV), alleging that Dr. Palian had been overpaid by $189,770.08.3
[¶5] By statute,
Court in accordance with the Maine Administrative Procedure Act.
[¶6] Dr. Palian requested an informal review in which he responded to the Department’s allegations and argued that the Department failed to pay him for multiple claims that he submitted for reimbursement. Hooper reviewed and prepared responses to Dr. Palian’s request, consulted with Herbert Downs, director of the Department’s Division of Audit, and provided to Downs a draft letter of decision for his use in the informal review. Downs issued his final informal review decision in August 2016, adopting Hooper’s draft letter, which revised the overpayment calculation to $147,329.89 based on the arguments raised by Dr. Palian.
[¶7] Dr. Palian timely requested an administrative hearing, which was held on July 17, 2017, and January 9, 2018. Based on evidence presented at the hearing, and before a decision was issued by the presiding officer, the Department reduced its total claim to $116,852.05. Before the hearing, the Department had imposed penalties of 100% for lack of documentation of anesthesia
Department reduced these anesthesia penalties from 100% to 20% because it accepted Dr. Palian’s testimony that his standard practice was to remain with patients as the standard of care required.
[¶8] The presiding officer issued a recommended decision on June 5, 2018, upholding the Department’s recoupment claim for $116,852.05, as provided in a revised recoupment demand spreadsheet submitted after the hearing. In so recommending, the presiding officer concluded that Hooper’s assistance of Downs in conducting the informal review did not violate Dr. Palian’s procedural rights; the Department was not equitably estopped from maintaining its claims; and Dr. Palian failed to preserve his argument regarding penalties for improperly documented claims, except with respect to the 20% penalties for improper documentation of anesthesia recovery time because those penalties were not in effect at the time of the informal review.
[¶9] Dr. Palian filed responses and exceptions to the presiding officer’s recommended decision on June 19, 2018. Two weeks later, Commissioner Ricker Hamilton issued a one-sentence final decision adopting the presiding officer’s recommended decision in full.5 Dr. Palian timely appealed the
Commissioner’s decision to the Superior Court pursuant to
II. DISCUSSION
[¶10] “When the Superior Court acts in an intermediate appellate capacity pursuant to
A. Equitable Estoppel
[¶11] Dr. Palian argues that the Department should be estopped from seeking recoupment or imposing penalties because he followed MaineCare’s instructions for submitting claims and reasonably relied on MaineCare’s repeated approval and payment of his claims.
[¶12] “Equitable estoppel precludes a party from asserting rights which might perhaps have otherwise existed . . . .” Dep’t of Health & Hum. Servs. v. Pelletier, 2009 ME 11, ¶ 17, 964 A.2d 630 (quotation marks omitted). In
general, we view with caution any effort to invoke equitable estoppel against the government. Mrs. T. v. Comm’r of the Dep’t of Health & Hum. Servs., 2012 ME 13, ¶ 10, 36 A.3d 888. To prevail, a party asserting an equitable estoppel defense against a governmental entity must show that “(1) the statements or conduct of the government
[¶13] The MaineCare Benefits Manual and the MaineCare provider agreement both contain several provisions that put—or should have put—Dr. Palian on notice that his billing activity might one day be scrutinized more closely. The Manual states, “The Division of Audit or duly Authorized Entities appointed by the Department have the authority to monitor payments to any
MaineCare provider by an audit or post-payment review.”
[¶14] More specifically, the Manual requires that “records must be retained for a period of not less than five (5) years from the date of service or longer if necessary to meet other statutory requirements. If an audit is initiated within the required retention period, the records must be retained until the audit is completed and a settlement has been made.”
[¶15] Further, the provider agreement Dr. Palian signed expressly states that the Department “may collect any debts, including overpayments, through offset or recoupment.” The agreement requires that providers “retain all medical, financial, administrative and other records and documents required by the [Manual] . . . for at least five (5) years from the date of service.” It goes on to say that “[i]f any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 5-year period, the records must be retained until completion of the action . . . or until the end of the regular 5-year period, whichever is later.” (Emphasis added.)
[¶16] Pursuant to the provider agreement, Dr. Palian was “expressly responsible for understanding and applying applicable regulations and requirements for proper billing.”9 Thus, he knew or should
[¶17] Although Dr. Palian argues that the remittance advice forms provided to him by the Department indicated that his claims had been “allowed,” there is no record evidence that the Department ever represented to
Dr. Palian that the claims, once paid, would never be subject to further review or that payment of the claims marked the end of the matter. The Manual’s repeated references to “post-payment review” make clear that the mere payment of claims does not immunize payments from later review.10
[¶18] In sum, given the claw-back provisions contained in the Department’s regulations, the Commissioner did not err in accepting the
presiding officer’s conclusion that the Department was not equitably estopped from recouping the $116,852.05 in overpayments made to Dr. Palian.
B. Informal Review of the NOV
[¶19] Next, Dr. Palian argues that the Commissioner erred in accepting the presiding officer’s conclusion that the Department did not violate its own rules when Hooper, who prepared and issued the original NOV, drafted the informal review decision ultimately adopted by Downs. See
[¶20] Whether the Department violated its rules is a question of law that we review de novo, and Dr. Palian bears the burden of persuading us that an error occurred. See Doe, 2018 ME 164, ¶ 11, 198 A.3d 782. Our precedent instructs us to “give considerable deference to the agency’s interpretation of its own rules, regulations, and procedures, and [we] will not set aside the agency’s findings unless the rule or regulation plainly compels a contrary result.” Beauchene v. Dep’t of Health & Hum. Servs., 2009 ME 24, ¶ 11, 965 A.2d 866 (quotation marks omitted).
[¶22] Although it is undisputed that Hooper, who prepared and issued the NOV, was involved in the informal review process, the presiding officer found, based on competent evidence in the record, that “Mr. Downs applied Ms. Hooper’s consultative work as a part of the Final Informal Review he conducted—that he, as the Director of the office in which she worked, independently gauged the correctness of her review and conclusions, and adopted those that his judgment determined were correctly reached.” The relevant Manual provision,
C. Penalties
1. Imposition of Penalties for Improperly Documented Claims
[¶23] Dr. Palian challenges the Department’s methodology for imposing penalties for improperly documented claims. Our discussion here pertains to the penalties of 20% that were imposed in the NOV and were in effect at the time of the request for an informal review.13 Dr. Palian argues that the Department abused its discretion in imposing these “original” 20% penalties because it failed to consider the various factors laid out in the Manual that may be considered when determining penalties to be imposed, and he contests the presiding officer’s conclusion that he waived this argument by failing to raise this issue in his request for an informal review.
[¶24] Again, we review questions of law de novo, and Dr. Palian bears the burden of persuasion. See Doe, 2018 ME 164, ¶ 11, 198 A.3d 782. We defer to the agency’s interpretation of the relevant provisions of the MaineCare Benefits Manual. See Beauchene, 2009 ME 24, ¶ 11, 965 A.2d 866.
[¶25] The Manual provides that “[i]ssues that are not raised by the provider . . . through the written request for an informal review or the
submission of additional materials for consideration prior to the informal review are waived in subsequent appeal proceedings.”
2. Claims for Nonemergency Hospital Procedures
[¶26] Next, Dr. Palian argues that the Commissioner erred in accepting the presiding officer’s recommendation to uphold the “penalties” imposed for incorrectly using a certain billing code, D9410, listed in
[¶27] The Manual directs providers to the American Dental Association’s Current Dental Terminology (CDT) for guidance, which is published annually and includes a glossary and schedule of billing codes. Id. (“Every effort should be made to utilize the correct code. Billing should be done in accordance with the CDT guidelines and Chapter II and Chapter III, Section 25.“). Pursuant to the CDT, billing code D9410 allows for additional payment when dental services are performed in houses or extended care facilities, such as “nursing homes, long-term care facilities, hospice sites, [or] institutions.” To receive this additional payment, providers are instructed to bill for qualifying services under D9410 “in addition to reporting appropriate code numbers for actual services performed.”
[¶28] Dr. Palian contends that he was permitted to bill for the procedures he performed in a hospital operating room under billing code D9410 because hospitals fall within the category of “institutions.” The Department’s position is that hospitals are not “institutions” as that term is used in D9410. The Department maintains that providers may receive additional payment for dental services rendered in a hospital by using a different billing code, D9420, but only when the service provided is “emergency room trauma care.”17 Id. The CDT indicates that a provider may receive additional payment using billing code D9420 when treating a patient “in a hospital or ambulatory surgical center,”18 but section 25 expressly limits the use of billing code D9420 to “emergency room trauma care.” Thus, unless the services are provided in a house or extended care facility, or for emergency room trauma care in a hospital or ambulatory surgical center, a MaineCare provider may bill only for the
[¶29] The Department’s interpretation is a reasonable one, and the language of the billing codes at issue does not plainly compel a contrary result.
See
[¶30] Therefore, the Commissioner did not err in accepting the presiding officer’s conclusion that “[n]either code is applicable, based on plain language, to non-emergency, outpatient surgeries performed in hospital operating rooms” and “that the proper billing procedure for dental surgeries performed on a non-emergency, outpatient basis in hospital operating rooms is to employ only the code for the underlying dental surgery service performed.”
3. Overpayments Related to the Acquisition Cost of Drugs
[¶31] Next, Dr. Palian contends that the Commissioner erred in accepting the presiding officer’s conclusion that the Department was entitled to recoup the difference between what he billed per dose of certain drugs and the true acquisition cost of those drugs.
[¶32] Dr. Palian is correct that the Manual states, “Providers are requested to bill their usual and customary charge for all dental services.”
4. Imposition of 20% Penalties for Failure to Properly Document Time Spent with Patients Following Administration of Anesthesia
[¶33] We now turn to Dr. Palian’s claim that the Department erred by imposing 20% penalties for his failure to properly document time spent with patients following his administration of anesthesia. As a preliminary matter, Dr. Palian claims that it was error for the Commissioner to accept the presiding officer’s recommendation to uphold the 20% penalties assessed against him for improperly documenting
[¶34] MaineCare providers are required to “[m]aintain and retain contemporaneous financial, provider, and professional records sufficient to fully and accurately document the nature, scope and details of the health care and/or related services or products provided to each individual MaineCare member.”
must include, among other things, the “duration of services.”
[¶35] Dr. Palian also argues, however, that the Department did not properly exercise its discretion in setting the anesthesia-related penalties at the 20% cap. To support his argument, Dr. Palian points to Hooper’s testimony at the hearing that she had no discretion in determining whether a penalty below 20% was warranted and that it is “sort of the standard practice” of the Department to penalize at the cap.
[¶36] Pursuant to its rules and consistent with statute,
services, then the Department may impose a penalty “not to exceed” 20%.
1.20-3 Rules Governing the Imposition and Extent of Sanction
A. Imposition of Sanction
The decision to impose a sanction shall be the responsibility of the Commissioner of the Department of Health and Human Services, who may delegate sanction responsibilities to the Division of Audit, and the Director of MaineCare Services.
1. The following factors may be considered in determining the sanction(s) to be imposed:
a. Seriousness of the offense(s);
b. Extent of violation(s);
c. History of prior violation(s);
d. Prior imposition of sanction(s);
e. Prior provision of provider education;
f. Provider willingness to obey MaineCare rules;
g. Whether a lesser sanction will be sufficient to remedy the problem; and
h. Actions taken or recommended by peer review groups, other payers, or licensing boards.
[¶37] Dr. Palian first raised this argument as to the Department’s lack of exercise of discretion in applying the factors in its rule in his written closing argument at the administrative hearing. The Department countered that, as with the penalties originally set by the Department before the hearing, the argument was not preserved because Dr. Palian did not argue at the informal review stage that a penalty at the cap was not warranted. The presiding officer rejected the Department’s position because the penalties on these anesthesia-related claims had not been calculated at 20% when Dr. Palian submitted his informal review request.
[¶38] As the presiding officer’s recommended decision recognized, the Department’s reduction of the penalties from 100% to 20% was based on its acceptance of Dr. Palian’s hearing testimony “as proof that the time billed actually correlated to the services provided.” See
[¶39] As the presiding officer found and the Commissioner accepted, however, Dr. Palian’s “relevant patient records did not satisfy the documentation standard where they did not clearly indicate the amount of time
actually spent with the patients after anesthesia was administered” (emphasis added), as required by
[¶40] For this reason, and without further explanation or reference to the factors contained in the rule governing the imposition and extent of sanctions, the presiding officer concluded that “the Department . . . correctly maintained such violations at the 20[%] sanction rate.” The one-sentence adoption by the Commissioner of the presiding officer’s recommendation does not elaborate upon this point, and thus also does not articulate whether or how the Department exercised its discretion in penalizing Dr. Palian at the cap.
[¶41] When “dealing with a determination or judgment [that] an administrative agency alone is authorized to make, a court must judge the propriety of such action solely by the grounds invoked by the agency.” Me. Motor Rate Bureau, 357 A.2d 518, 527 (Me. 1976) (alteration omitted) (quoting SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)). An “important corollary” to this rule is that the basis for the agency’s action “must be set forth with such clarity as to be understandable.” Id. (quotation marks omitted). We cannot “guess at the theory underlying the agency’s action,” nor can we “chisel that which must be precise from what the agency has left vague and indecisive.” Id.; see Zegel v. Bd. of Soc. Worker Licensure, 2004 ME 31, ¶ 24, 843 A.2d 18
(holding that “we may not hypothesize” about an agency’s reasoning); Gashgai v. Bd. of Registration in Med., 390 A.2d 1080, 1085 (Me. 1978) (“Courts need to know what an agency has really determined in order to know even what to review. We must know what a decision means before the duty becomes ours to say whether it is right or wrong.” (citation omitted) (quotation marks omitted)).
[¶42] In sum, although the Commissioner did not err in accepting the presiding officer’s recommendation to uphold some penalty for lack of documentation, the Department’s decision is devoid of any explanation why it chose to impose the penalties at the cap. The Department failed to identify any factors it considered, let alone
[¶43] We addressed a similar issue in Zegel v. Bd. of Soc. Worker Licensure, 2004 ME 31, 843 A.2d 18. In that case, the appellant challenged a decision of the Board of Social Worker Licensure on the basis that the Board had failed to articulate why it chose the specific sanctions it imposed against her. Id. ¶ 20. The Board countered “that it was not required to explain why it chose” the sanctions “over any other sanctions because it appropriately exercised its discretion in imposing the sanctions.” Id. In our decision, we
noted that there was no dispute that the appellant had violated the pertinent rules and that the Board had the authority to impose the sanctions it chose. Id. ¶¶ 14, 22. But we nevertheless vacated the Board’s decision on the basis that the Board failed “to explain why it decided to impose the sanctions it chose.” Id. ¶ 24 (emphasis added). We stated:
Both statute and case law require the Board to set out findings that justify its decision; we may not hypothesize about the Board’s reasoning. Because we may only determine whether the Board acted within the bounds of its discretion if we understand the specific facts that justify the sanctions imposed, we must require the agency to articulate its reasons for imposing the sanctions.
Id. (citations omitted); see also Gashgai, 390 A.2d at 1085;
[¶44] The Department’s treatment of its rule listing factors it may consider further underscores the lack of an articulated rationale reflecting the exercise of discretion.
[¶45] It is a fundamental tenet of administrative law that agencies must follow their own rules and regulation. Rotinsulu v. Mukasey, 515 F.3d 68, 72 (1st Cir. 2008); see also Ariz. Grocery Co. v. Atchison, Topeka & Santa Fe Ry. Co., 284 U.S. 370, 388-89 (1932) (holding that an administrative agency was bound to recognize the validity of its prescribed rules). Dr. Palian contends that the eight factors listed in
exclusive list” of factors that the Department must consider in exercising its discretion in setting the penalty between zero and 20%. The Department responds that the rule does not make consideration of these factors mandatory, and it was “not required to apply the factors . . . toward reducing the sanction below 20[%].” While we defer to a reasonable interpretation of a rule by a state agency, Beauchene, 2009 ME 24, ¶ 11, 965 A.2d 866, it is unclear exactly how the Department is interpreting its rule—whether the eight listed factors are those that it may consider and no others or whether it may consider those factors along with others not listed in the rule. Instead, the Department appears to be positing that it need not consider any factor, whether listed in the rule or not. This interpretation would not only render the rule wholly irrelevant but suggests that the Department is arguing that it may set the penalty at the cap based on no factor at all, thereby abdicating its duty to apply discretion.
[¶46] While the relevant question for us is what the Department articulated in its written decision, and not on which factors we speculate the Department may have based its decision given the evidentiary record, as noted above, Hooper testified that no discretion was exercised at the NOV stage, and neither Downs nor the Commissioner testified at the hearing to suggest any
factors—either listed in its rule or otherwise—were considered at their stages of review.24
[¶48] It would be helpful for the Department, in explaining its rationale, to provide its interpretation as to the import of its existing rule. We note that by listing specific factors for review in setting a penalty, a rule promulgated pursuant to the Maine Administrative Procedure Act can set parameters for the exercise of agency discretion that advance the goal of predictable, nonarbitrary decision-making. Cf. Uliano v. Bd. of Env’t. Prot., 2009 ME 89, ¶ 28, 977 A.2d 400 (“[B]y providing significant protection against abuses of discretion by the Board in exercising its rule-making authority, the requirement that the Board promulgate rules subject to the Maine Administrative Procedure Act compensates substantially for the want of precise [legislative] guidelines.” (quotation marks omitted)).
[¶49] In all other respects, we affirm the judgment.
The entry is:
Judgment affirmed in part and vacated in part. Remanded to the Superior Court for remand to the Department of Health and Human Services for further proceedings consistent with this opinion.
Joshua D. Hadiaris, Esq. (orally), and David A. Goldman, Esq., Norman, Hanson & DeTroy, LLC, Portland, for appellant Charles Palian
Aaron M. Frey, Attorney General, and Thomas C. Bradley, Asst. Atty. Gen. (orally), Office of the Attorney General, Augusta, for appellee Department of Health and Human Services
Kennebec County Superior Court docket number AP-2018-49
FOR CLERK REFERENCE ONLY