Primary Children's Hosp. v. UD of H
Annotate this Casepublication in the Pacific Reporter.
IN THE UTAH COURT OF APPEALS
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Primary Children's Hospital
and Sean Daugaard,
Petitioners,
v.
Utah Department of Health,
Division of Health Care
Financing,
Respondent.
OPINION
(For Official Publication)
Case No. 981709-CA
F I L E D
December 2, 1999
1999 UT App 348
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Original Proceeding in this Court
Attorneys:
Merrill F. Nelson, Salt
Lake City, for Petitioners
Jan Graham and Jean P. Hendrickson,
Salt Lake City, for Respondent
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Before Judges Wilkins, Bench, and Davis.
DAVIS, Judge
¶1.
Primary Children's Hospital
(Primary) petitions this court for review of a final agency decision denying
Medicaid reimbursement for failure to obtain prior authorization for services.
We reverse.
FACTS
¶2.
In March of 1997, five-year-old
Sean Daugaard was admitted to Primary and later diagnosed with Acute Lymphoblastic
Leukemia. Chemotherapy was unsuccessful, and Sean's physician concluded
that a bone marrow transplant was necessary to save Sean's life. Because
the family did not have the means to pay for the transplant, Richard Fairborn,
Primary's resource counselor, helped the family obtain Medicaid coverage.
Medicaid coverage was established on June 9, 1997, retroactive to March
1, 1997. Accordingly, Medicaid paid for the diagnostic and treatment services
rendered from March until coverage was established.
¶3.
In preparation for the transplant,
Sean was admitted to Primary on July 8, 1997. Several days of pre-transplant
conditioning therapy would take place before the actual transplant. On
July 9, Mr. Fairborn reviewed the status of Sean's Medicaid eligibility
on the computer database of the Utah Division of Health Care Financing
(DHCF), the state agency responsible for administering the Medicaid program.
See Utah Code Ann. §§ 26-18-2.1, -3 (1998 & Supp.
1999). Mr. Fairborn did so because, to obtain Medicaid reimbursement for
Primary's cost of the transplant, Primary was required to submit a request
for prior authorization before the transplant took place. See Utah
Code Admin. P. R414-10A-6(1) (Supp. 1997) ("Prior authorization is required
for all transplantation services . . . ."). However, notwithstanding the
recent establishment of Medicaid eligibility, DHCF's database showed that
Sean was no longer eligible.
¶4.
After discovering Sean was
no longer eligible, Mr. Fairborn spoke to Debbie Lucero, the Medicaid eligibility
officer for DHCF, who maintained an office at Primary. Ms. Lucero confirmed
that DHCF showed that Sean did not have Medicaid coverage and told Mr.
Fairborn that Sean's Medicaid status was under review. Ms. Lucero directed
Mr. Fairborn to have Sean's family submit a new application for Medicaid
eligibility. The requested application was completed by Sean's mother and
personally delivered to Ms. Lucero by Mr. Fairborn that same day.
¶5.
Because Sean was apparently
not eligible for Medicaid coverage at that time, Primary did not submit
a request for prior authorization. Prior practice between DHCF and Primary
was that when Medicaid eligibility had not been established for an individual,
DHCF suspended the prior authorization requirement, allowing post transplant,
retroactive authorization. DHCF characterized this situation as an "unusual
circumstance" within the meaning of Rule 414-10A-4(5) of the Utah Administrative
Code.
¶6.
Ms. Lucero had routinely
notified Mr. Fairborn immediately and in person of Medicaid eligibility
determinations, and he waited for her response. However, unbeknownst to
Mr. Fairborn, on July 9, Ms. Lucero determined that Sean's Medicaid eligibility
was unchanged, resumed his coverage, and authorized the issuance of a Medicaid
card for July 1997.
¶7.
Although Primary believed
that Sean was not then covered by Medicaid, it proceeded with the bone
marrow transplant, expecting to make application for retroactive authorization
and receive reimbursement in accordance with prior practice. The transplant
was completed on July 17, 1997.
¶8.
On August 1, 1997, during
a routine review of pending cases, Mr. Fairborn discovered that Sean's
Medicaid eligibility had been reestablished. In fact, DHCF showed that
there had been no break in Sean's coverage, but that he had been eligible
for Medicaid during all of July. When asked about the glitch, Mr. Fairborn
was told that a system "rollover" had occurred, meaning that it was time
to update Sean's Medicaid eligibility and the system thereby indicated
his ineligible status.
¶9.
Sean remained hospitalized
until September 19, 1997. On that day, Primary prepared its request for
retroactive authorization and reimbursement for the transplant. DHCF received
this request form on October 29, 1997. In December 1997, DHCF issued a
Notice of Denial letter that denied Primary's Medicaid reimbursement request
based on the lack of substantiation of Medicaid criteria. Subsequently,
an Amended Notice of Denial was issued adding lack of prior authorization
as a basis. A formal hearing before an administrative law judge (ALJ) was
scheduled for August 1998. Before the hearing took place, DHCF issued yet
another Amended Notice of Denial that listed lack of prior authorization
as the sole basis for denying the reimbursement request.
¶10.
At the hearing, Primary
argued that: (1) based on prior practice with DHCF, Primary has never been
required to send in a request for prior authorization when DHCF's system
shows no eligibility; (2) the applicable agency rules provide for retroactive
authorization under "unusual, emergency circumstances," Utah Code Admin.
P. R414-10A-4(5) (Supp. 1997), and the fact situation here constitutes
unusual circumstances; and (3) because DHCF advised Primary that Sean's
Medicaid eligibility had lapsed, when in fact it had not, and it was this
misinformation upon which Primary relied when it did not file the request
for prior authorization, DHCF should be estopped from denying reimbursement.
DHCF maintained that had Primary been diligent in monitoring Sean's Medicaid
status, it would have been aware of his continuous Medicaid coverage, regardless
of the misinformation given regarding the lapse in eligibility. Thus, DHCF
argued, because Primary failed to get prior authorization before the transplant
as required by the agency rules, and retroactive authorization will be
allowed only in unusual, emergency circumstances, which DHCF argued were
not present under the facts here, Primary was not entitled to Medicaid
reimbursement.
¶11.
The ALJ entered a Recommended
Decision, ruling in favor of DHCF. The ALJ concluded that Primary unreasonably
failed to track Sean's Medicaid eligibility and therefore failed to file
the prior authorization request. Based on Primary's lack of diligence,
the ALJ concluded that Primary's actions did not amount to unusual circumstances
which would have entitled Primary to retroactive authorization, nor was
DHCF estopped from denying coverage based on the misinformation given Primary.
Thus, the ALJ affirmed DHCF's denial of Medicaid reimbursement.
¶12.
Primary filed a Request
for Reconsideration with the Director of DHCF. A Final Agency Order was
issued, wherein the ALJ's Recommended Decision was adopted in its entirety.
Primary has petitioned this court for review of the Final Agency Order.
ISSUE AND STANDARD OF REVIEW
¶13.
The sole issue for our review
is whether DHCF erred by denying Medicaid reimbursement to Primary for
Sean's bone marrow transplant because it failed to file a request for prior
authorization as required by the agency's rules.(1)
Because "the legislature has, by virtue of section 26-18-2.3(1) [of the
Utah Code], explicitly granted DHCF discretion to establish criteria concerning
Medicaid reimbursement[,] . . . [w]e review DHCF's decision denying Medicaid
reimbursement for medical care that [Primary] provided [Sean for the bone
marrow transplant] for reasonableness and rationality." South Davis
Community Hosp., Inc. v. Department of Health, 869 P.2d 979, 982 (Utah
Ct. App. 1994) (footnote omitted).
ANALYSIS
¶14.
DHCF is required by statute
to "establish . . . a program to safeguard against unnecessary or inappropriate
use of Medicaid services." Utah Code Ann. § 26-18-2.3(1) (1998). Accordingly,
DHCF has promulgated rules relating to transplant services. See
Utah Code Admin. P. R414-10A-1 to -23 (Supp. 1997). "Transplantation services
are covered by the Utah Medicaid program only when" certain criteria under
the rules established by DHCF are met. Id. R414-10A-5(1). These
criteria include obtaining authorization before the transplant takes place.
See id. R414-10A-5(1), -6(1). Thus, if Primary does not receive
the requisite prior authorization under Rule 414-10A-6(1), then, under
Rule 414-10A-5(1), the cost of services it provides for a transplant may
not be covered by Medicaid.
¶15.
An exception to the prior
authorization requirement is provided in Rule 414-10A-4(5):
Post transplant
authorization for transplantation services provided under unusual, emergency
circumstances may be given only when:
(a) all Utah Medicaid
criteria listed in R414-10A-6 through 22 are met;[(2)]
and
(b) both the transplant center and the board-certified or board-eligible specialist evaluation required by R414-10A-6(3)(f), (p), (q), and (r) are submitted with the recommendation that the tissue or organ transplantation be authorized. Id. R414-10A-4(5).
¶16.
DHCF argues, and the ALJ
concluded, that the facts before us, including Primary's lack of diligence,
do not amount to unusual circumstances(3)
which would allow Primary retroactive authorization for Sean's bone marrow
transplant. At the administrative hearing, however, counsel for DHCF conceded
that when Medicaid eligibility was not established or when a provider was
unaware that a patient was going to be a Medicaid recipient, requirements
for prior authorization were suspended and providers proceeded under Rule
414-10A-4(5), which provides for post transplant authorization under unusual
or emergency circumstances.
¶17.
Further, the ALJ made findings
to the effect that Sean's Medicaid eligibility had apparently indeed lapsed
when Mr. Fairborn checked DHCF's computer on July 9, 1997.(4)
Thus, DHCF's argument before the ALJ and on appeal is that regardless of
the fact that DHCF showed a lapse in coverage, unusual circumstances do
not exist when Primary failed to discover the corrected status of Sean's
Medicaid coverage in time to seek prior authorization. Primary researched
Sean's Medicaid status on July 9, found that no coverage existed, and caused
a new Medicaid application to be filed the same day. Only eight days after
submitting the new Medicaid application to DHCF as requested, Sean's bone
marrow transplant was completed. Thus, the record does not reflect lack
of diligence by Primary in discovering the lapse of coverage, bringing
it to DHCF's attention, and promptly returning the information requested
by DHCF. Primary discovered on August 1, 1997 that Sean had been eligible
for Medicaid coverage for the month of July. Thus, only three weeks had
passed before Primary became aware of the mistake, which, undisputably,
was caused by DHCF. It is neither reasonable nor rational on these facts
to condition the existence of unusual circumstances on Primary's lack of
diligence.
¶18.
Because both the undisputed
facts and unchallenged findings of the ALJ support Primary's position,
DHCF also urges an exception to the exception it created by Rule 414-10A-4(5)
and by consistent prior practice, to wit: actual coverage precluding an
assertion of unusual circumstances. The only difference between this case
and other situations when DHCF admittedly entertained retroactive authorization
requests is that Sean in fact had Medicaid coverage when the services
were rendered. According to DHCF, this distinction is fatal. Thus, DHCF
asserts that if Primary is prepared to run the risk of a subsequent determination
of Medicaid ineligibility and the risk of failing to meet appropriate
Medicaid criteria, an application for retroactive authorization is appropriate.
But when, as here, eligibility had been established, albeit unbeknownst
to Primary, and Primary risked only its possible inability to meet other
criteria, application for retroactive authorization is inappropriate. Such
a position is equally unreasonable and irrational.
CONCLUSION
¶19.
We hold that DHCF acted
unreasonably and irrationally by denying Primary's application for retroactive
authorization for Sean's bone marrow transplant. The sole reason DHCF denied
Primary's Medicaid reimbursement request was because Primary failed to
file the requisite request for prior authorization. The agency rules provide
for retroactive authorization under "unusual . . . circumstances" which
have consistently included retroactive authorization when the patient had
not established Medicaid eligibility before the rendering of services.
To make a distinction based upon an erroneous determination by DHCF of
eligibility or ineligibility and a level of diligence in discovering the
agency's mistake is inconsistent with prior practice, unusual circumstances,
and is both unreasonable and irrational. We therefore reverse the final
agency order denying Primary's application for retroactive authorization
and Medicaid reimbursement for the transplant.(5)
______________________________
James Z. Davis, Judge
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¶20.
WE CONCUR:
______________________________
Michael J. Wilkins,
Presiding Judge
______________________________
Russell W. Bench, Judge
1. DHCF
suggests in its brief that because "there was no consideration at the administrative
hearing of the medical services provided, there were no admissions by [DHCF]
as to the appropriateness of the services rendered." However, in its last
Amended Notice of Denial, DHCF omitted lack of substantiation of Medicaid
criteria as a basis for denial, relying exclusively on lack of prior authorization.
At the hearing before the
ALJ, counsel for DHCF on more than one occasion stated that the only issue
before the ALJ was prior authorization. Indeed, when the ALJ queried counsel
on the issues to be addressed at the hearing, the ALJ asked if the issue
was "whether or not . . . Sean Daugaard . . . met the Utah Medicaid criteria
for a bone marrow transplant? Or is it the issue in the latest denial letter,
which is merely a prior authorization issue?" Counsel for DHCF responded:
"Your Honor, as I see it, it's merely a prior authorization issue today."
Accordingly, even though
there is a lower standard for raising issues at an informal agency hearing,
see Badger v. Brooklyn Canal Co., 966 P.2d 844, 847 (Utah
1998) (adopting "'level of consciousness' test, requiring a plaintiff to
bring an issue to the fact finder's attention so that there is at least
the possibility that it could be considered"), DHCF not only failed to
meet this lower standard, but appears to have abandoned any claim that
Primary failed to substantiate the other Medicaid criteria as required.
Cf. Career Serv. Review Bd. v. Utah Dep't of Corrections,
942 P.2d 933, 938 (Utah 1997) (stating res judicata applies to administrative
agency decisions); Salt Lake Citizens Congress v. Mountain States Tel.
& Tel. Co., 846 P.2d 1245, 1251 (Utah 1992) (same); Kirk v.
Division of Occupational & Prof'l Licensing, 815 P.2d 242, 243
(Utah Ct. App. 1991) (same);
see also Macris & Assocs., Inc.
v. Neways, Inc., 986 P.2d 748, 750 (Utah Ct. App. 1999) (stating claim
preclusion applies when "'both cases . . . involve the same parties or
their privies'; . . . 'the claim that is alleged to be barred must have
been presented in the first suit or must be one that could and should have
been raised in the first action'; and . . . 'the first suit must have resulted
in a final judgment on the merits'") (citation omitted).
2. Rule 414-10A-4(5) allows post transplantation authorization under "unusual, emergency circumstances." Utah Code Admin. P. R414-10A-4(5) (Supp. 1997). The language in subsection (a) provides that post transplant authorization may be given "only when . . . all Medicaid criteria listed in R414-10A-6 [are] met." Id. R414-10A-4(5). Those criteria include prior authorization pursuant to R414-10A-6(1). See id. Ordinarily, post transplant authorization would not be required if the provider had obtained prior authorization. We therefore harmonize the provisions, seeIn re K.M., 965 P.2d 576, 580 (Utah Ct. App. 1998) ("'In interpreting a statute, we read it to harmonize it with its subsections.'") (citation omitted), and, on the facts of this case, proceed as if prior authorization is not a precondition to retroactive authorization.
3. The language of the rule is "unusual, emergency circumstances." Utah Code Admin. P. R414-10A-4(5) (Supp. 1997). While this language is not a model of clarity, during the administrative hearing both parties and the ALJ treated the language as meaning unusual or emergency circumstances. We agree. Rules of grammar provide that when there is a comma between two coordinate adjectives preceding a noun, each of those adjectives "modifies the noun itself." Chicago Manual of Style § 5.51 (14th ed. 1993). Thereafter the ALJ, in her recommended conclusions of law, again treated "unusual circumstances" separately from "emergency circumstances."
4. While DHCF does not necessarily agree with this characterization, it does not properly challenge this finding on appeal.
5. Because of our disposition, we do not address Primary's argument regarding equitable estoppel.
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