Kathleen Papa and Professional Homecare Providers, Inc. v. Wisconsin Department of Health Services
Nos. 2016AP2082 & 2017AP634
Supreme Court of Wisconsin
July 9, 2020
2020 WI 66
SUPREME COURT OF WISCONSIN
CASE NO.: 2016AP2082 & 2017AP634
COMPLETE TITLE: Kathleen Papa and Professional Homecare Providers, Inc., Plaintiffs-Respondents-Petitioners, v. Wisconsin Department of Health Services, Defendant-Appellant.
REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 388 Wis. 2d 474, 934 N.W.2d 568 (2019 – unpublished)
OPINION FILED: July 9, 2020
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: March 18, 2020
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Waukesha
JUDGE: Kathryn W. Foster
JUSTICES: ZIEGLER, J., delivered the majority opinion of the Court, in which ROGGENSACK, C.J., and ANN WALSH BRADLEY and DALLET, JJ., joined, and in which REBECCA GRASSL BRADLEY and KELLY, JJ., joined except for ¶¶46-48; KELLY, J., filed an opinion concurring in part and dissenting in part, in which REBECCA GRASSL BRADLEY, J., joined.
NOT PARTICIPATING: HAGEDORN, J. did not participate.
ATTORNEYS:
For the plaintiffs-respondents-petitioners, there were briefs filed by Diane M. Welsh, Aaron G. Dumas, and Pines Bach LLP, Madison. There was an oral argument by Diane M. Welsh.
For the defendant-appellant, there was a brief filed by Steven C. Kilpatrick, assistant attorney general; with whom on the brief was Joshua L. Kaul, attorney general. There was an oral argument by Steven C. Kilpatrick.
An amicus curiae brief was filed on behalf of Wisconsin Hospital Association, Inc., Wisconsin Medical Society, Inc, Wisconsin Dental Association, Inc, Pharmacy Society of Wisconsin, Inc., Wisconsin Health Care Association, Inc., Wisconsin Personal Services Association, Inc., and Leading Age Wisconsin, Inc. by Sarah E. Coyne, Matthew Splitek, James Goldschmidt, and Quarles & Brady LLP, Madison.
2020 WI 66
NOTICE
This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports.
Nos. 2016AP2082 & 2017AP634 (L.C. No. 2015CV2403)
STATE OF WISCONSIN : IN SUPREME COURT
Kathleen Papa and Professional Homecare Providers, Inc., Plaintiffs-Respondents-Petitioners, v. Wisconsin Department of Health Services, Defendant-Appellant.
FILED JUL 9, 2020
Sheila T. Reiff Clerk of Supreme Court
ZIEGLER, J., delivered the majority opinion of the Court, in which ROGGENSACK, C.J., and ANN WALSH BRADLEY and DALLET, JJ., joined, and in which REBECCA GRASSL BRADLEY and KELLY, JJ., joined except for ¶¶46-48; KELLY, J., filed an opinion concurring in part and dissenting in part, in which REBECCA GRASSL BRADLEY, J., joined.
HAGEDORN, J., did not participate.
REVIEW of a decision of the Court of Appeals. Reversed in part, affirmed in part, and remanded.
Nos. 2016AP2082 & 2017AP634 2
reversing the Waukesha County circuit
¶2 This case requires this court to determine the scope of DHS‘s authority to recoup payments made to Medicaid service providers. PHP challenges DHS‘s recoupment policy, as it has been enforced against PHP nurses to recover payments made for services they provided to Medicaid patients. PHP argues that, after DHS has already paid nurses for covered and provided Medicaid services, its practice is to then audit nurses’ records and seek to recover the payments if DHS finds any documentation shortcomings. According to PHP, DHS does not contest whether the nurse actually provided a Medicaid patient with the covered service for which the nurse was paid. Nor does it claim that the payment was inappropriate or inaccurate. Rather, it recoups payments nurses earned and received for their work because, after the fact, it claims the nurse‘s supporting records are not perfect. The issue in this case is whether DHS has the authority to enforce this recoupment policy. The short answer is no, it does not.
Nos. 2016AP2082 & 2017AP634 3
¶3 We conclude that PHP‘s challenge to DHS‘s recoupment policy is ripe for judicial determination. We conclude that, under
I. FACTUAL BACKGROUND
¶4 The Medicaid Program provides free or low-cost health care for low-income people, families, and children, pregnant women, the elderly, and people with disabilities. “‘Medicaid is a cooperative federal-state program through which the Federal Government provides financial assistance to States so that they may furnish medical care to needy individuals.‘” Newcap, Inc. v. DHS, 2018 WI App 40, ¶4, 383 Wis. 2d 515, 916 N.W.2d 173 (quoting Wilder v. Virginia Hosp. Ass‘n, 496 U.S. 498, 502 (1990)). “[S]tates voluntarily opt into the federal scheme and thereby bind themselves to abide by the rules and regulations imposed by the
Nos. 2016AP2082 & 2017AP634 4
federal government in return for federal funding.” Gister v. Am. Family Mut. Ins. Co., 2012 WI 86, ¶14, 342 Wis. 2d 496, 818 N.W.2d 880. The States administer Medicaid pursuant to federal requirements set forth in Title XIX of the Social Security Act.
¶5 DHS has Medicaid-related responsibilities, including those “relating to fiscal matters, the eligibility for benefits . . . and general supervision of the medical assistance program.”
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¶6 Under Wisconsin law, DHS may conduct audits “to verify the actual provision of services or items available under the medical assistance program and the appropriateness and accuracy of claims for reimbursement submitted by providers participating in the program.”
¶7 PHP is a non-profit professional organization for independent nurses. Kathleen Papa and other PHP nurses are certified Medicaid service providers who work in independent practice and provide in-home care. When PHP nurses provide care for Medicaid patients, the nurses are reimbursed by Wisconsin‘s medical assistance program.
¶8 On December 14, 2015, PHP filed a complaint for declaratory and injunctive relief, challenging DHS‘s recoupment policy. PHP alleged that DHS sought:
recoupment of monies paid to independent nurses for Medicaid-covered services the nurses actually provided, merely because post-payments audits have found that the services or documentation fail to meet any single one of numerous, evolving requirements set forth in federal and state law, updates issued by DHS, the online Medicaid Handbook, as well as other standards deemed relevant by individual auditors in DHS‘s [OIG].
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Essentially, PHP alleged that it is DHS‘s practice to seek recoupment of payments already paid to nurses for covered services they actually provided, absent any assertion that the reimbursement claims for those services were either inappropriate or inaccurate, simply because a post-payment audit found that the nurse‘s records were not perfect. As a shorthand, we will refer to this alleged recoupment policy as DHS‘s “Perfection Policy.”
¶9 PHP alleged that DHS‘s Perfection Policy was: (1) an unpromulgated rule under
PHP alleged that DHS‘s “statement of general policy” on recoupment exceeds its statutory authority.
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¶10 On March 18, 2016, PHP moved for summary judgment. In support of its motion, PHP submitted affidavits from several nurses describing the Perfection Policy. Kathleen Papa and Shanda M. Hubertus, the past and current presidents of PHP, each stated:
During audits of PHP members, I have observed that OIG has sought to recover Medicaid funds based on a finding of alleged minor noncompliance with a Medicaid Provider Update, a Handbook provision, an Administrative Code provision, or other standard or policy.
Nurses H.U., M.S., J.G., and G.R. stated that they each had been the subject of an OIG audit. OIG sought to recoup approximately $58,000, $15,000, $48,000, and $36,000 from each of them, respectively. The nurses alleged that the recoupments were “for care that OIG did not dispute was provided to a Medicaid patient, following OIG‘s prior authorization for the services.” OIG did not contest that the nurses actually provided authorized services for which they were paid. Rather, OIG‘s recoupment efforts were based on “noncorrelation between the medication record, the record of treatment and the nurse‘s clinical notes.” Nurse D.Z.-G. stated that OIG had sought to recoup about $58,000 from her because she “did not submit claims for reimbursement to the minor patients’ parents’ employer-based health plans despite the fact that it had previously been established that the employer-based health plans would not cover the private duty nursing services.”6
¶11 Finally, counsel for PHP submitted an affidavit. He attached to it a DHS brief filed in another case, in which OIG
Nos. 2016AP2082 & 2017AP634 8
sought to recoup money paid to a PHP nurse “merely because she did not counter-sign the Prior Authorization/Care Plan Attachment.” In that case, DHS concluded its brief by asserting:
A Medicaid provider may only be reimbursed for covered services if she meets all of the program requirements in the law, administrative rules, and applicable Medicaid Handbook provisions. . . . [Nurse N.M.] failed to countersign [the patient‘s] Care Plan before she provided the ordered nursing services.
The Administrative Law Judge should find that the State of Wisconsin Department of Health Services is authorized to recoup $7,358.51 from [Nurse N.M.] for payment she received from the Medicaid program for non-covered services . . . .
II. PROCEDURAL POSTURE
¶12 The circuit court granted PHP‘s motion for summary judgment. On September 27, 2016, the circuit court determined the case was ripe for judicial determination and granted declaratory relief. It declared:
[DHS‘s] authority under
The circuit court further declared that DHS‘s recoupment policy “imposes a ‘Perfection Rule’ which exceeds [DHS‘s] authority,” and
Nos. 2016AP2082 & 2017AP634 9
that this policy, including Topic #66, is “a rule not properly promulgated under
¶13 On October 20, 2016, DHS filed a notice of appeal. Then, on January 12, 2017, PHP filed a motion for supplemental relief or for contempt of court. PHP asserted that DHS was violating the circuit court‘s declaratory judgment and injunction. The circuit court granted PHP‘s motion for supplemental relief. Pursuant to
1. [DHS] shall not issue a notice of intent to recover Medicaid payments to, or otherwise recoup funds from, a Medicaid provider if the provider‘s records verify that the services were provided and the provider was paid an appropriate amount for such services, notwithstanding that an audit identified other errors or noncompliance with [DHS] policies or rules;
2. [DHS] shall not further any agency action, including an administrative proceeding, currently underway in which [DHS] seeks to recoup Medicaid payments from a Medicaid provider, if the provider‘s records verify that the services were provided and the provider was paid an appropriate amount for such services, notwithstanding that an audit identified other errors or noncompliance with [DHS] policies or rules; and
Nos. 2016AP2082 & 2017AP634 10
3. [DHS] shall pay the Plaintiffs’ costs and attorneys’ fees incurred for prosecuting this Motion.
In a separate order, the circuit court ordered DHS to pay PHP‘s “costs and attorneys’ fees in the amount of $25,284.50.”
¶14 DHS filed an amended notice of appeal and a motion to consolidate its appeals of the circuit court‘s original and supplemental orders. The court of appeals granted the motion to consolidate.9 Then, on July 31, 2019, the court of appeals reversed the circuit court orders in a split decision. Papa, unpublished slip op., ¶19.
Nos. 2016AP2082 & 2017AP634 11
property without the legal right to do so. See
¶16 We granted PHP‘s petition for review.
III. STANDARD OF REVIEW
¶17 We review the court of appeals’ decision reversing the circuit court‘s order granting PHP‘s motion for summary judgment. “‘We review summary judgment rulings independently, applying the well-established standards set forth in
¶18 DHS argues that this case is not justiciable because it is not ripe. Ripeness is a question of law which we review de novo. Olson v. Town of Cottage Grove, 2008 WI 51, ¶38, 309 Wis. 2d 365, 749 N.W.2d 211.
¶19 This case requires us to determine the scope of DHS‘s authority to recoup payments made to Medicaid service providers. “The question of the scope of an agency‘s authority requires the interpretation of relevant statutes [and regulations], which presents a question of law, which we review de novo.” Lake Beulah Mgmt. Dist. v. DNR, 2011 WI 54, ¶23, 335 Wis. 2d 47, 799 N.W.2d 73 (citing Anderson v. DNR, 2011 WI 19, ¶25, 332 Wis. 2d 41, 796 N.W.2d 1). We do not defer to agency interpretations.
Nos. 2016AP2082 & 2017AP634 12
(“Upon review of an agency action or decision, the court shall accord no deference to the agency‘s interpretation of law.“); see also Tetra Tech EC, Inc. v. DOR, 2018 WI 75, ¶108, 382 Wis. 2d 496, 914 N.W.2d 21. Statutory and regulatory interpretation begin and end with the language of the relevant statutes and regulations if their meaning is plain. State ex rel. Kalal v. Circuit Court for Dane Cty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681 N.W.2d 110.
¶20 We also review the court of appeals’ reversal of the circuit court‘s supplemental order and order for costs and attorney fees. Whether a circuit court may order a state agency to pay costs and attorney fees is a question of law we review de novo. DOT v. Wisconsin Personnel Comm‘n, 176 Wis. 2d 731, 735, 500 N.W.2d 664 (1993).
IV. ANALYSIS
A. The Issues Presented
¶21 PHP argues that the Perfection Policy is unlawful under
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¶22 DHS has several counter-arguments. It argues that this case is a review of Topic #66 specifically, and not a broader Perfection Policy. Regarding Topic #66, DHS argues that it is not a rule. It also argues that, even if Topic #66 is a guidance document, PHP‘s guidance document claim is not properly before this court. Regarding the Perfection Policy, DHS denies its existence. It also argues that PHP‘s claim is not ripe and that the alleged Perfection Policy is not a rule or guidance document. Next, DHS argues that neither Topic #66 nor the Perfection Policy exceeds DHS‘s recoupment authority. Finally, DHS argues that the circuit court‘s supplemental order was improper because it expanded the scope of the original order while DHS‘s appeal was pending. And it argues that sovereign immunity bars the circuit court‘s order for costs and attorney fees.
¶23 Accordingly, the parties present this court with a variety of issues. But we narrow them to three.10 To do so, we clarify (1) the scope of the challenge (Topic #66 or the Perfection Policy), and (2) the proper inquiry (rule, guidance document, or excess of recoupment authority).
¶24 First, we must determine whether PHP‘s complaint challenged Topic #66 only or, more broadly, the Perfection Policy. Both the court of appeals and DHS view this case as a challenge to
Nos. 2016AP2082 & 2017AP634 14
Topic #66 exclusively. Papa, unpublished slip op., ¶¶17, 19. But the complaint and the circuit court‘s original order both make clear that this case presents a review of DHS‘s Perfection Policy, not just Topic #66.
¶25 PHP‘s complaint alleged that DHS “has a ‘statement of general policy’ that [it] may recoup payment from Medicaid providers for covered services that have been provided, and for which Medicaid has reimbursed, if a post-payment audit finds that the services fail to meet all applicable program requirements.” Topic #66 was attached to the complaint. But the complaint itself consistently refers not to Topic #66, but to a “statement of general policy.” PHP‘s Claim Two alleges it is DHS‘s policy “that any compliance imperfection causes the services to be ‘non-covered’ and therefore an ‘overpayment.‘” PHP alleges that this policy “has no basis in regulation or statute” and “is in excess of DHS‘s authority.” Accordingly, the complaint alleges that DHS‘s recoupment policy requires perfection and exceeds DHS‘s actual recoupment authority. The complaint is not limited to Topic #66.
¶26 Furthermore, the circuit court determined that Topic #66 is just an example of DHS‘s recoupment policy. It concluded that DHS‘s “recoupment policy” requires perfection. And it described the “recoupment policy” as “including the standard as set forth in the Medicaid Provider Handbook at Topic #66.” (Emphasis added.) Thus, this case is not limited to a
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¶27 Second, we clarify what the proper inquiry is—whether the Perfection Policy is an unpromulgated rule, is a guidance document, or exceeds DHS‘s recoupment authority. The proper inquiry is whether the Perfection Policy exceeds DHS‘s recoupment authority. We need not decide whether the Perfection Policy is a rule or a guidance document.11 It makes no difference in this case. Regardless, Claim Two of the complaint clearly alleged that the Perfection Policy is in excess of DHS‘s recoupment authority. DHS may not adopt a Perfection Policy if that policy is in excess of its recoupment authority. See
¶28 Thus narrowed, the issues we review in this case are: whether PHP‘s Perfection Policy claim is ripe; whether the Perfection Policy is in excess of DHS‘s recoupment authority; and whether the supplemental order and order for costs and attorney fees were proper.
B. Ripeness
¶29 DHS argues that PHP‘s challenge to the Perfection Policy is not justiciable because it is not ripe. “A court must be
Nos. 2016AP2082 & 2017AP634 16
presented with a justiciable controversy before it may exercise its jurisdiction over a claim for declaratory judgment.” Olson, 309 Wis. 2d 365, ¶28. A controversy is justiciable when: (1) a “right is asserted against [a defendant] who has an interest in contesting it“; (2) the controversy is “between persons whose interests are adverse“; (3) the plaintiff has a “legally protectable interest” in the controversy; and (4) the controversy is “ripe for judicial determination.” Id., ¶29 (citing Loy v. Bunderson, 107 Wis. 2d 400, 410, 320 N.W.2d 175 (1982)). “‘If all four factors are satisfied, the controversy is “justiciable,” and it is proper for a court to entertain an action for declaratory judgment.‘” Id. (quoting Miller Brands-Milwaukee, Inc. v. Case, 162 Wis. 2d 684, 694, 470 N.W.2d 290 (1991)).
¶30 Ripeness is the only factor at issue here. The purpose of ripeness is “‘to avoid courts entangling themselves in abstract disagreements.‘” Olson, 309 Wis. 2d 365, ¶43 (quoting Miller Brands-Milwaukee, 162 Wis. 2d at 694). Courts resolve concrete cases, not abstract or hypothetical cases. That being said, “the ripeness required in declaratory judgment actions is different from the ripeness required in other actions” because declaratory judgments are prospective remedies. Id. A plaintiff need not prove an injury has already occurred. Id. Rather, the facts must be “sufficiently developed to allow a conclusive adjudication.” Id. (citing Milwaukee Dist. Council 48 v. Milwaukee Cty., 2001 WI 65, ¶41, 244 Wis. 2d 333, 627 N.W.2d 866). “The facts on which the court is asked to make a judgment should not be contingent or uncertain, but not all adjudicatory facts must be resolved as a
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prerequisite to a declaratory judgment.” Id. (citing Miller Brands-Milwaukee, 162 Wis. 2d at 694-95).
C. Recoupment Authority
¶32 The crux of this case is the scope of DHS‘s recoupment authority. “No agency may implement or enforce any standard, requirement, or threshold, . . . unless that standard, requirement, or threshold is explicitly required or explicitly permitted by statute or by a [promulgated] rule . . . .”
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do so by statute or a previously
¶33
[a]fter reasonable notice and opportunity
Accordingly, DHS has the authority, indeed the obligation, to recoup improper or erroneous Medicaid payments and overpayments. That grant of authority raises two questions: What makes a payment improper, erroneous, or an overpayment?; and, how does DHS so determine? We find the answers a little further down in the same statute.
Papa v. Department of Human Services
Nos. 2016AP2082 & 2017AP634.dk
Supreme Court of Wisconsin
¶51 DANIEL KELLY, J. (concurring in part, dissenting in part). I join the majority except with respect to its denial of costs. The Department of Human Services (“DHS“) says it enjoys immunity from the imposition of costs pursuant to Article IV, Section 27 of the Wisconsin Constitution, which says
I. ORIGIN OF “EXPRESS AUTHORIZATION”
¶52 A brief review of our cases addressing what it means for a statute to “expressly authorize” the award of costs against the state reveals this is more a matter of basic statutory construction than some type of heightened scrutiny called forth by the concept of sovereign immunity. In one of our earliest cases involving costs against the state, Noyes v. State, 46 Wis. 250, 1 N.W. 1 (1879), we resolved the issue without once mentioning sovereign immunity or our constitution. Our attention was captured, instead, by the interplay between common law and statutory law:
At the common law, costs were unknown. Costs are altogether the creature of statute. Speaking of the statute of Glocester, 6 Edw. 1, Sir Edward Coke says: “Before this statute, at the common law, no man recovered any costs of sute, either in plea real, personal or mixt; by this it may be collected, that justice was good cheap of ancient times, for in King Alfred‘s time there were no writs of grace, but all writs remedialls granted freely.” 2 Inst. 288. And no known statute gave costs against the crown.
Noyes, 46 Wis. at 251-52. So we concluded that, “[i]n this state, therefore, costs are regulated exclusively by statute.” Id. at 252. We were so far from considering this a matter of sovereign immunity that we actually suggested that costs may be awarded against the state when it permits itself to be sued: “As a rule, costs are given to the prevailing party in civil actions. And the statutes giving them, might include the state, when it sues or permits itself to be sued in civil actions.” Id.
¶53 We introduced sovereign immunity to the question of costs in Sandberg v. State, 113 Wis. 578, 589, 89 N.W. 504 (1902), in which we said that “[n]o court is authorized to render judgment
for costs against the sovereign state, in absence of statute giving express authority.” We based the part of the sentence addressing immunity, interestingly enough, not on our constitution but on what the United States Supreme Court said about the United
¶54 We said pretty much the same thing in Frederick v. State, 198 Wis. 399, 400, 224 N.W. 110 (1929), where we ruled that costs against the state are not allowed absent consent “manifested by an act of its Legislature . . . .” But the measure of how express that manifestation must be seems to have been looser than what the majority requires today. In Mr. Frederick‘s suit to recover unpaid salary under
Nonetheless, we said “[t]his is sufficient to warrant the imposition of costs.” Frederick, 224 N.W. at 110.
¶55 DHS calls our attention to DOT v. Wisconsin Pers. Comm‘n, 176 Wis. 2d 731, 500 N.W.2d 664 (1993), and says we should deny costs here for the same reason we did there. But that case actually explains why costs should be awarded to Ms. Papa. The Wisconsin Pers. Comm‘n court considered whether attorney‘s fees could be awarded against the state for a discovery violation under the auspices of
II. THE SYMMETRY OF DECLARATORY JUDGMENTS AND CONTESTED CASES
¶56 In a declaratory judgment action, such as the one here, the natural alignment of parties is the reverse of what they would be had the action commenced as a contested case. See, e.g., Lister v. Bd. of Regents of Univ. Wis. Sys., 72 Wis. 2d 282, 307, 240 N.W.2d 610 (1976)
(explaining that a declaratory judgment action allows a party to bring an action to settle “controversies of a justiciable nature” before “a wrong has been threatened or committed” against that party so as to provide “a remedy which is primarily anticipatory or preventative in nature.“). Our statutes unquestionably allow costs in the latter, and
¶57 Ms. Papa was the plaintiff here only because she took the initiative to commence the proceedings. If she had waited for DHS to commence a contested case for the payments at issue, she would have been the defendant. In that setting, it is beyond question that costs against the state are potentially available if the administrative agency‘s position fails:
In any contested case in which an individual, a small nonprofit corporation or a small business is the prevailing party and submits a motion for costs under this section, the hearing examiner shall award the prevailing party the costs incurred in connection with the contested case, unless the hearing examiner finds that the state agency which is the losing party was substantially justified in taking its position or that special circumstances exist that would make the award unjust.
¶58 In the same subchapter that provides for those costs, the legislature authorized those like Ms. Papa to bring a declaratory judgment action challenging an agency‘s rule instead of waiting for an agency to commence a contested case: “Except as provided in sub. (2) [the terms of which are not material here], the exclusive means of judicial review of the validity of a rule or guidance document shall be an action for declaratory judgment as to the validity of the rule or guidance document brought in the circuit court . . . .”
¶59 The legislature expressly chose to subject the state to a proceeding in which costs could be awarded. The question is whether, in doing so, it manifested consent to the imposition of costs “as may seem equitable and just.” I think it did. There is a basic symmetry between contested cases and declaratory judgment actions, in which the only differences are the venue and the parties’ relative positions. The subject matter is the same, and the overall purpose is the same. There is no doubt about the availability of costs in a contested case, and
is sufficient to satisfy the judicially-created “express authorization” standard. For these reasons, I respectfully dissent from ¶¶46-48 of the court‘s opinion concluding that DHS has sovereign immunity as to the costs awarded in favor of the petitioners.
¶60 I am authorized to state that Justice REBECCA GRASSL BRADLEY joins this concurrence/dissent.