Cmty. Mental Health P'ship of Se. Mich. v. Dep't of Health & Human Servs.

UNPUBLISHED

Court of Claims LC No. 20-000122-MB

Before: Markey, P.J., and Beckering and Boonstra, JJ.

Per Curiam

Plaintiffs Community Mental Health Partnership of Southeast Michigan, PIHP (CMH), and its constituent county mental health authorities, Lenawee County Community Mental Health Authority, Livingston County Community Mental Health Authority, Monroe County Community Mental Health Authority, and Washtenaw County Community Mental Health Authority, appeal by right the opinion and order of the Court of Claims ruling that plaintiffs failed to file a verified claim or notice of claim pursuant to MCL 600.6431(1) and granting summary disposition in favor of defendants pursuant to MCR 2.116(C)(7). We affirm.

I. BACKGROUND

CMH, a prepaid health plan, is one of 10 community-mental-health regional entities located in Michigan as created pursuant to MCL 330.1204b, and CMH was formed as a

combination of four community mental health authorities-the remaining plaintiffs-that were established under MCL 330.1204 and MCL 330.1205.^[1] CMH delivers mental healthcare services to approximately 8, 500 Medicaid beneficiaries in the four-county region. See MCL 400.109f. The defendant Department of Health and Human Services (DHHS) is required to "support the use of Medicaid funds for specialty services . . . for eligible Medicaid beneficiaries with a serious mental illness, developmental disability, serious emotional disturbance, or substance use disorder." MCL 400.109f(1). DHHS administers the Medicaid funds and provides them to CMH under an annual Medicaid Managed Care Contract. The funding comes in the form of capitated payments in amounts determined by DHHS as guided by law. The capitation rate reflects a set or fixed fee per Medicaid beneficiary regardless of actual treatment and is calculated on the basis of multiple variables and data.

In early August 2018, CMH requested that DHHS review the integrity of the data used to create the capitation rates for fiscal years 2017 through 2019. In late August 2018, Milliman, Inc., a firm retained by DHHS to provide actuarial and consulting services related to the development of certified capitation rates, responded to the request, examined and analyzed the data, and concluded that there should be no changes to the capitation rates. DHHS denied CMH's request to adjust the funding or capitation rates for fiscal years 2017 through 2019 and, on December 21, 2018, plaintiffs filed an appeal with the Michigan Administrative Hearing System. Plaintiffs asserted that they had incurred deficits from 2016 through 2018 and would incur a deficit in 2019 due to chronic underfunding by DHHS, that the capitated payments constituted a Medicaid entitlement, that the underfunding had deprived beneficiaries of Medicaid services to which they were entitled by state and federal law, and that the amount in dispute exceeded $35 million. Plaintiffs requested a formal hearing before an administrative law judge (ALJ).

In April 2019, the ALJ issued a proposed decision recommending dismissal of plaintiffs' appeal. The ALJ determined that plaintiffs had no right to challenge the capitation rates through the administrative appeals process. On June 6, 2019, DHHS issued a final order adopting the ALJ's proposed decision. Plaintiffs then filed a petition for appeal or review of that final order in the Washtenaw Circuit Court. At a hearing on September 26, 2019, the circuit court essentially concluded that plaintiffs were seeking relief that, jurisdictionally, could only be awarded in an original action in the Court of Claims and not in an appeal to the circuit court. On October 16, 2019, the circuit court entered a stipulated order affirming the final order of DHHS and dismissing plaintiffs' appeal.

Plaintiffs filed a complaint in the Court of Claims on June 26, 2020, against DHHS and the Director of DHHS. Plaintiffs asserted that capitated payments from DHHS to CMH are welfare entitlements belonging to Medicaid beneficiaries and that the failure of DHHS to cover the full cost of mental healthcare services and to reimburse CMH for the services provided to the beneficiaries constituted a reduction of welfare benefits absent a hearing, contrary to Goldberg v. Kelly, 397 U.S. 254; 90 S.Ct. 1011; 25 L.Ed.2d 287 (1970). Plaintiffs alleged a violation of the managed care contract, various federal regulations, multiple state statutes, and the decision of the

United States Supreme Court in Goldberg. In Count I, plaintiffs sought monetary damages in the amount of $41.9 million, "plus interest, costs, and attorney fees," for defendants' failure to cover the full cost of mental healthcare services and failure to reimburse CMH for services it provided at its own expense. In Count II of the complaint, plaintiffs requested a declaratory judgment mandating DHHS to provide sufficient funds for the required mental healthcare services and to reimburse plaintiffs for the services that had been provided at plaintiffs' own expense. In Count III, plaintiffs requested a writ of mandamus compelling the Director of DHHS to reimburse plaintiffs in the amount of $41.9 million.

In lieu of answering the complaint, defendants moved for summary disposition pursuant to MCR 2.116(C)(5), (7), and (8). Defendants first asserted that plaintiffs had failed to file a verified claim or notice of claim within one year of the accrual of their action, as required by § 6431 of the Court of Claims Act (COCA), MCL 600.6401 et seq. Defendants argued that plaintiffs' claims accrued no later than December 21, 2018, when plaintiffs filed the appeal with the Michigan Administrative Hearing System. And because the instant complaint was filed on June 26, 2020, more than one year later, plaintiffs' claims were barred by MCL 600.6431(1). Defendants' additional arguments in favor of summary disposition are not relevant to this appeal and were not reached by the Court of Claims.

On October 2, 2020, the Court of Claims issued an opinion and order granting defendants' motion for summary disposition pursuant to MCR 2.116(C)(7). Citing Rusha v. Dep't of Corrections, 307 Mich.App. 300; 859 N.W.2d 735 (2014), and McCahan v. Brennan, 492 Mich. 730; 822 N.W.2d 747 (2012), the Court of Claims explained that a plaintiff must strictly comply with the notice requirements of MCL 600.6431, that MCL 600.6431 applies to all claims filed in the Court of Claims, including constitutional claims, and that dismissal is mandatory when a plaintiff fails to comply with MCL 600.6431. The Court of Claims found that plaintiffs' action had accrued no later than June 6, 2019, when DHHS issued its final order in the administrative proceedings and that plaintiffs had not filed a notice of intent under MCL 600.6431(1) before filing their complaint on June 26, 2020. Thus, the complaint was untimely and had to be dismissed. Because the Court of Claims resolved the motion under MCR 2.116(C)(7), it did not address the arguments raised by defendants under MCR 2.116(C)(5) and (8).

II. ANALYSIS

A. STANDARD OF REVIEW

MCR 2.116(C)(7) provides for summary disposition of a claim when it is time-barred. This Court reviews de novo a trial court's decision on a motion for summary disposition, a determination that an action is time-barred, and questions of statutory construction. Caron v. Cranbrook Ed Community, 298 Mich.App. 629, 635; 828 N.W.2d 99 (2012).

In RDM Holdings, Ltd v. Continental Plastics Co, 281 Mich.App. 678, 687; 762 N.W.2d 529 (2008), this Court recited the principles pertaining to a motion for summary disposition brought pursuant to MCR 2.116(C)(7):

Under MCR 2.116(C)(7) . . ., this Court must consider not only the pleadings, but also any affidavits, depositions, admissions, or other documentary

evidence filed or submitted by the parties. The contents of the complaint must be accepted as true unless contradicted by the documentary evidence. This Court must consider the documentary evidence in a light most favorable to the nonmoving party. If there is no factual dispute, whether a plaintiff's claim is barred under a principle set forth in MCR 2.116(C)(7) is a question of law for the court to decide. If a factual dispute exists, however, summary disposition is not appropriate. [Citations omitted.]

B. THE COCA

Under MCL 600.6419(1), the COCA provides that the Court of Claims has exclusive jurisdiction over the following matters:

(a) To hear and determine any claim or demand, statutory or constitutional, liquidated or unliquidated, ex contractu or ex delicto, or any demand for monetary, equitable, or declaratory relief or any demand for an extraordinary writ against the state or any of its departments or officers notwithstanding another law that confers jurisdiction of the case in the circuit court.

MCL 600.6431(1), which is the statutory provision at the heart of this appeal, provides as follows:

Except as otherwise provided in this section, a claim may not be maintained against this state unless the claimant, within 1 year after the claim has accrued, files in the office of the clerk of the court of claims either a written claim or a written notice of intention to file a claim against this state or any of its departments, commissions, boards, institutions, arms, or agencies.

"The purpose of MCL 600.6431 is to establish those conditions precedent to pursuing a claim against the state." Fairley...