Hartog v. Iowa Dep't. of Human Servs.

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MARK J. DEN HARTOG, Plaintiff-Appellant, v. IOWA DEPARTMENT OF HUMAN SERVICES, Defendant-Appellee.

No. 22-0273

Court of Appeals of Iowa

April 26, 2023

Appeal from the Iowa District Court for Polk County, Celene Gogerty Judge.

A chiropractor appeals from an Iowa Code chapter 17A (2019) proceeding.

Michael M. Sellers and Trent W. Nelson of Sellers Galenbeck &Nelson, Clive, for appellant.

Brenna Bird, Attorney General, and Lisa Reel Schmidt, Assistant Attorney General, for appellee.

Heard by Bower, C.J., and Ahlers and Buller, JJ.

AHLERS, JUDGE.

Mark Den Hartog is a chiropractor who enrolled in the Iowa Medicaid program and provided chiropractic services to Medicaid patients.^[1] In 2005 and 2006, an audit revealed Den Hartog's documentation of services was insufficient in a number of respects to support payment from Medicaid. Den Hartog was required to repay several thousand dollars of money received from Medicaid as a result. Fast forwarding to 2014 and 2015, a federal contractor performed a Payment Error Rate Measurement (PERM) audit of Iowa Medicaid. As part of the PERM audit, the contractor randomly requested documents from Den Hartog. Den Hartog did not provide the necessary documentation. This eventually led to an audit and administrative proceedings that resulted in the Iowa Department of Human Services,^[2] which oversees Iowa's Medicaid program, terminating Den Hartog's participation in the program. The proceeding also resulted in an order requiring Den Hartog to repay Iowa Medicaid for money he received for Medicaid services for which Den Hartog was unable to provide the required documentation.

Den Hartog petitioned for judicial review under Iowa Code chapter 17A (2019).^[3] The district court found the relevant administrative rules are not unconstitutionally vague; Den Hartog received sufficient notice of the issues addressed in the administrative proceedings; the administrative proceedings did not violate Iowa Code section 249A.56; and substantial evidence supported that Iowa Medicaid overpaid Den Hartog and was entitled to repayment.

Den Hartog appeals. He claims he did not receive adequate notice "to terminate him for a violation of Iowa Administrative Code rule 441-79.3(3)"; "the department exceeded its authority when it prosecuted [him] for fraud" "the department . . . applied the wrong documentation requirement in determining recoupment and termination of [his] participation in Medicaid"; and, if the department properly interpreted the documentation requirements, then they are unconstitutionally vague. Finally, Den Hartog seeks legal fees under section 625.29. We will address each claim separately, although not necessarily in order.

I. Scope and Standard of Review

When reviewing a judicial review action, "our job is to determine whether in applying the applicable standards of review under section 17A.19(10), we reach the same conclusions as the district court." Colwell, 923 N.W.2d at 231. "The petitioner challenging agency action has the burden of demonstrating the prejudice and invalidity of the challenged agency action." Id.

The applicable standard of review depends upon the error asserted by the petitioner. When the legislature has clearly vested interpretive authority with an agency, we defer to the agency's interpretation of the statutory language and reverse only when the agency's interpretation is "irrational, illogical, or wholly unjustifiable." However, when the legislature has not clearly vested interpretive authority with an agency, our standard of review is for errors of law. "To determine whether an agency has been given authority to interpret statutory language, 'we carefully consider "the specific language the agency has interpreted as well as the specific duties and authority given to the agency"'" regarding the particular statutes.

Id. at 231-32 (internal citations omitted). With respect to Den Hartog's constitutional challenges to various administrative rules, our review is de novo. See Endress v. Iowa Dep't of Human Servs., 944 N.W.2d 71, 76 (Iowa 2020). Regarding the request for attorney fees, we review for legal error. See id.

II. Notice

We first address Den Hartog's contention that the department could not terminate his participation in Medicaid due to a violation of Iowa Administrative Code rule 441-79.3 because the rule was not specifically referenced in the notice of termination. The written notice of termination explained that the department was authorized to terminate Den Hartog's participation in Medicaid under Iowa Administrative Code rule 441-79.2(2), which permits the imposition of sanctions for the following relevant conduct:

a. Presenting or causing to be presented for payment any false, intentionally misleading, or fraudulent claim for services or merchandise.

b. Submitting or causing to be submitted false, intentionally misleading, or fraudulent information for the purpose of obtaining greater compensation than that which the person is legally entitled, including charges in excess of usual and customary charges. ....

i. Violating any provision of Iowa Code chapter 249A, or any rule promulgated pursuant thereto, or violating any federal or state false claims Act, including but limited to Iowa Code chapter 685. ....

l. Breaching any settlement or similar agreement with the department, or failing to abide by the terms of the agreement with any other entity relating to, or arising out of, the state medical assistance program.

The director ultimately found Den Hartog's termination was authorized under rule 441-79.2(2)(i) and (l). The director determined Den Hartog violated paragraph (i) by "failing to comply with the recordkeeping requirements within rule 441-79.3." With respect to paragraph (l), the director determined Den Hartog violated a 2010 provider agreement because the agreement required Den Hartog to "maintain books, records and documents which sufficiently and properly document and calculate all charges billed to the [d]epartment."

Den Hartog complains that he did not understand the department based its decision to terminate his participation in Medicaid due to his failure to comply with documentation requirements and instead read the notice as terminating his participation due to fraud. But that is not the department's fault. "The notice from [the department] need only 'be reasonably calculated to apprise interested parties of the pendency of the action.'" Endress, 944 N.W.2d at 78 (citation omitted). The notice did that here. The notice Den Hartog received informed him that his participation in Medicaid was being terminated and listed the rules the department believed authorized his termination. See id. One of the rules listed was rule 441-79.2(2)(i), which gave the department the authority to sanction him based on a violation of any agency rule promulgated pursuant to Iowa Code chapter 249A, the Medical Assistance Act. The agency rules promulgated pursuant to Iowa Code chapter 249A include rule 441-79.3(3), which details the documentation requirements.

If the notice had merely cited rule 441-79.2(2)(i) without any additional detail, Den Hartog's claim that he didn't know the department's decision was based on rules related to inadequate documentation may be more persuasive. But the notice included much more. The notice laid out in great detail exactly what the department found that Den Hartog did that triggered the department's action, and that detail consisted almost exclusively of transgressions related to documentation. The notice included the following details. An investigator made an unannounced visit to Den Hartog's office following his inability to provide the requested documentation for the PERM audit. The unannounced on-site review occurred because Den Hartog "did not have proper documentation to support charges paid for by [Iowa Medicaid]." A review of the documentation Den Hartog provided at the on-site visit led the investigator to believe Den Hartog was creating documentation while the investigator was present, so the investigator asked Den Hartog to print the records while the investigator watched. Based on Den Hartog's actions following that request, the investigator confirmed that Den Hartog was creating documentation during the visit, and, when confronted about "this serious offense," Den Hartog confirmed that he was creating documents.

The above-described details included in the written notice were sufficient to put Den Hartog on notice that he was being sanctioned for violating rules related to documentation, which would include rule 441-79.3(3). The fact that Den Hartog knew that sanction was based on documentation is confirmed by Den Hartog's attorney's opening statement made to the administrative law judge (ALJ) during the hearing Den Hartog received after appealing the department's sanction. At the beginning of that opening statement, Den Hartog's counsel told the ALJ:

We think that . . . one of the fundamental questions that you, as the adjudicator, will have to figure out is whether or not Dr. Den Hartog was in compliance or not with the documentation requirements and whether or not all of the accusations that have been made against him actually deal with a demonstration by the State of what they claim is the requirement for documentation.

These comments made at the beginning of Den Hartog's opening statement support the conclusion that Den Hartog was adequately put on notice of the documentation claim, as they show that Den Hartog was well aware that documentation was the key component of the department's decision to sanction him.

Den Hartog was properly notified that his compliance with documentation requirements was at issue and should have reasonably understood his noncompliance was the root of...