HALIKIERRA COMMUNITY SERVICES LLC v. NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH BENEFITS; MEDICAL REVIEW OF NORTH CAROLINA, INC. d/b/a THE CAROLINAS CENTER FOR MEDICAL EXCELLENCE; KAY COX, in her individual capacity; PATRICK PIGGOTT, in his individual capacity
No. 59A23
IN THE SUPREME COURT OF NORTH CAROLINA
Filed 22 March 2024
RIGGS, Justice.
Ralph T. Bryant Jr.; and Q Byrd Law, by Quintin D. Byrd, for plaintiff-appellant.
Joshua H. Stein, Attorney General, by Ryan Y. Park, Solicitor General, John H. Schaeffer, Assistant Attorney General, James W. Whalen, Solicitor General Fellow, and Mary Elizabeth D. Reed, Solicitor General Fellow, for defendant-appellee North Carolina Department of Health and Human Services, Division of Health Benefits.
No brief filed for defendant-appellees Medical Review of North Carolina, Inc. d/b/a The Carolinas Center for Medical Excellence, Kay Cox, and Patrick Piggott.
RIGGS, Justice.
This appeal requires us to determine whether summary judgment was properly entered against plaintiff Halikierra Community Services LLC (Halikierra) on its substantive due process and equal protection violation claims against defendant North Carolina Department of Health and Human Services (DHHS)1 after DHHS placed Halikierra on Medicaid reimbursement prepayment review. We hold that the trial court properly granted summary judgment for DHHS because Halikierra’s evidentiary forecast failed to disclose any genuine issues of material fact in support of its claims.
I. Factual and Procedural History
Beginning in 2009, Halikierra provided home personal care services to Medicaid beneficiaries through the North Carolina Medicaid Program. DHHS, which administers the Medicaid program, received reimbursement requests from Halikierra in connection with the provision of personal care services; once received, DHHS would ordinarily remit the Medicaid reimbursement to Halikierra.
DHHS received several Medicaid overbilling complaints relating to Halikierra’s services between 2015 and 2017, leading DHHS to conduct several post-payment audits. In carrying out these audits, DHHS inspected Halikierra’s supporting documentation, determined that Halikierra had erroneously received excess Medicaid reimbursement funds on at least three occasions, and recovered those excess sums from Halikierra. DHHS also compared Halikierra’s billing patterns to comparable personal care providers, which showed an outsized volume of billing compared to its peers. Independent of these investigations into Halikierra’s billing practices, DHHS received a complaint that Halikierra was operating out of unlicensed locations.
By August 2018, DHHS had referred Halikierra to the North Carolina Attorney General’s Office for investigation into potential fraud. DHHS suspended Halikierra’s Medicaid participation that same month on suspicion that it was billing for services not rendered, hiring and providing services through unauthorized personnel, and operating out of unlicensed facilities. DHHS’s own audit through an independent investigator, completed in September 2018, revealed $530,579 in suspicious reimbursement claims; DHHS ultimately denied $982,789.50 of the $1,129,733.27 in Medicaid reimbursement claims submitted by Halikierra during the prepayment review period. Halikierra’s participation in Medicaid was subsequently terminated on 2 October 2018.
Halikierra filed a petition with the Office of Administrative Hearings on 13 December 2018, challenging DHHS’s denial of its Medicaid reimbursement claims. The Office of Administrative Hearings subsequently upheld DHHS’s actions in its Final Decision.
Outside the administrative petition, Halikierra filed suit in the Superior Court, Wake County against DHHS alleging, inter alia, that DHHS’s decision to place Halikierra on prepayment review violated its substantive due process and equal protection rights under the North Carolina Constitution. The matter was subsequently designated a mandatory complex business case. On 27 September 2022, the trial court granted summary judgment for DHHS on all pending claims. Halikierra subsequently filed timely notice of appeal, asserting error as to the dismissal of its substantive due process and equal protection claims against DHHS.
II. Analysis
Halikierra’s argument on appeal is straightforward: DHHS acted arbitrarily and capriciously in placing Halikierra on prepayment review because DHHS had no established policies or procedures for doing so. Moreover, Halikierra contends, the evidence reveals inconsistent and contradictory bases behind DHHS’s prepayment review decision. We hold the trial court did not err in granting summary judgment to DHHS on these claims.
A. Standard of Review
Summary judgment is proper where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
B. Substantive Due Process
The Law of the Land Clause in
Neither party asserts that a fundamental right is implicated by DHHS’s action in this case. And Halikierra does not argue that the prepayment review program violates substantive due process; instead, it argues only that the selection of Halikierra was unconstitutionally arbitrary under the Law of the Land Clause. Because any or all of the reasons for which Halikierra was placed on prepayment review are rationally related to a legitimate governmental interest, we hold that Halikierra has failed to establish a constitutional substantive due process violation.
The forecast of evidence produced below shows that Halikierra was selected for prepayment review on several grounds. One DHHS investigator, Kay Cox, testified that the adverse post-payment audits, consumer complaints, and data analysis showing comparatively outsized billing volumes were submitted to Patrick Piggott, the final decisionmaker at DHHS, for consideration of prepayment review. Mr. Piggott’s testimony was largely consistent with Ms. Cox’s,2 as he identified both the prior investigation and DHHS’s data analytics analysis as the bases for his decision. These unfavorable inquiries into Halikierra’s billing practices provided a rational basis for placing Halikierra on prepayment review, which purpose is to combat Medicaid fraud and “ensure that claims presented by a provider for payment by [DHHS] meet the requirements of federal and State laws and regulations” through investigation of “credible allegations of fraud, identification of aberrant billing practices as a result of investigations, [and] data analysis performed by [DHHS].”
To be sure, an agency may act arbitrarily and capriciously for substantive due process purposes when it is granted unfettered discretion over a decision and fails to promulgate and adhere to policies governing that process. See In re Ellis, 277 N.C. 419, 425–26 (1970) (observing that government action violates the substantive due process clauses of the state and federal constitutions when decisionmakers, “in the absence of standards, . . . could [render their decision] for a good reason, for a bad reason, or for no reason” (cleaned up)). And agencies may insulate themselves from prospective substantive due process challenges by creating and faithfully implementing such policies. While Halikierra may make sound policy arguments for why more detailed policies and procedures are desirable or even necessary,
C. Equal Protection
Like substantive due process, equal protection claims under the North Carolina Constitution are subjected to either strict scrutiny or rational basis review, with the former standard applicable to restrictions of fundamental rights or members of a suspect class. Rhyne, 358 N.C. at 180. For example, government action treating persons differently or more harshly than a similarly situated person or entity on the basis of race mandates the exacting standards of strict scrutiny review. Miller v. Johnson, 515 U.S. 900, 904 (1995). Other claims unrelated to disparate treatment of suspect classes or restrictions of fundamental rights, however, are subject to less stringent rational basis review. Under this standard, a claimant must establish that “he received treatment different from others similarly situated,” Maines v. City of Greensboro, 300 N.C. 126, 132 (1980), and that such disparate treatment did not “bear some rational relationship to a conceivable legitimate governmental interest,” Texfi Indus., Inc. v. City of Fayetteville, 301 N.C. 1, 11 (1980).
Here, Halikierra does not directly allege that it was treated differently or more harshly on any basis that would trigger strict scrutiny review. Nor has it introduced any evidence that would support such allegations. Without allegations or evidence disclosing that strict scrutiny applies, we proceed under rational basis review.
The parties’ evidentiary proffers do not demonstrate disparate treatment of Halikierra from those similarly situated; none of the evidence produced below demonstrates that other personal care providers with outsized billing volumes, prior adverse post-payment audits, and a record of consumer complaints were not placed on prepayment review like Halikierra was. Nor has Halikierra identified evidence showing that DHHS utilized a different decision-making process than that used to place other Medicaid providers on prepayment review. The burden fell to Halikierra to produce such evidence once DHHS made its initial showing that there were no genuine issues of material fact on this claim. See Liberty Mut. Ins. Co., 356 N.C. at 579. Halikierra has not done so here, and on the record before us, we affirm the trial court’s order granting summary judgment on this claim.
III. Conclusion
For the foregoing reasons, we affirm the trial court’s order granting summary judgment in favor of DHHS and dismissing Halikierra’s claims.
AFFIRMED.