Omni Behavioral Health v. State ex rel. Peterson

308 Neb. 692

956 N.W.2d 300

OMNI BEHAVIORAL HEALTH, a Nebraska nonprofit corporation, appellant,

v.STATE of Nebraska EX REL. Doug PETERSON, Attorney General, and the Nebraska Department of Health and Human Services, appellees.

No. S-19-1218.

Supreme Court of Nebraska.

Filed March 19, 2021

Abbie J. Widger and Morgan C.H. Kristensen, of Johnson, Flodman, Guenzel & Widger, Lincoln, for appellant.

Douglas J. Peterson, Attorney General, and Ryan C. Gilbride, Lincoln, for appellees.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Papik, JJ.

Papik, J.

After the Nebraska Department of Health and Human Services (DHHS) issued a notice to OMNI Behavioral Health (OMNI) that DHHS had overpaid OMNI under a contract, OMNI requested an administrative hearing. DHHS held an administrative hearing and concluded that the overpayment determination was proper. OMNI then sought review in the district court, and the district court affirmed. OMNI now appeals the district court decision. Finding no merit to the errors assigned by OMNI, we affirm the order of the district court.

BACKGROUND

OMNI's Contract With DHHS.

In 2007, the U.S. Department of Justice began an investigation into the conditions of care and treatment of residents at the Beatrice State Developmental Center (BSDC), a residential institution operated by the State of Nebraska for individuals with developmental disabilities. After the completion of the investigation, Department of Justice officials informed State officials that they believed the conditions at BSDC violated the constitutional rights of BSDC residents. The State and the United States of America thereafter entered into a settlement agreement. In the settlement agreement, the State agreed to, among other things, transition residents of BSDC to integrated community settings, create transition plans for BSDC residents, monitor community-based placements to ensure consistency with transition plans, and expand the capacity of providers serving those with developmental disabilities.

The State later contracted with OMNI to assist it in complying with its obligations under the settlement agreement. The first contract took effect in July 2010. Several additional contracts followed. The contract at issue in this case was signed in April 2015 and was effective from July 2015 to June 2017.

Under the contract at issue here, OMNI agreed to operate a group home for individuals with developmental disabilities and to provide various other services related to serving individuals with developmental disabilities. In one section of the contract, OMNI agreed to provide "Mobile Intervention Treatment Services," whereby OMNI would meet with developmentally disabled individuals, their parents or guardians, and other professionals serving that person; evaluate the individual's disabilities, treatment, habilitation and staffing requirements; develop and implement a "habilitation/treatment program"; and conduct "adherence and fidelity checks" regarding the implementation of recommended changes to the individual's program. The parties refer to these services as "ITMS," an acronym for "Intensive Treatment Mobile Services." Another section of the contract provided that "[i]n addition to direct ITMS services, [OMNI] will collaborate with DHHS to provide expanded fidelity and adherence processes for potential follow-up training to individuals for whom DHHS has independently contracted with for ITMS related services ...."

DHHS agreed to pay OMNI for its "actual approved costs" in performing the contract. In submitting its costs, OMNI agreed to comply with monthly budgets attached to the contract as an exhibit. One of the budgets pertained to ITMS and included various categories of expenses. Relevant to this appeal, the budget allowed OMNI to bill up to $25,000 per month for "Contract Labor," up to $5,000 per month for "Staff Specific Training Implementation," and up to $24,666.67 for "Fidelity and Adherence." The budget also included a 22-percent charge on all expenses labeled "22% Admin Costs." The total amount budgeted for the 2-year contract term was $7,047,252.70.

OMNI agreed in the contract that all of its records relating to work performed or moneys received under the contract were subject to audit by DHHS and that it would maintain all such records for 5 years from the date of final payment. OMNI also agreed that it would be liable for audit exceptions and would return to DHHS "all payments made under this contract for which an exception has been taken or which has been disallowed because of such an exception, upon demand from DHHS."

Notice of Overpayment and Administrative Hearing.

In June 2018, DHHS issued a "Notice of Overpayment" to OMNI. In the notice, DHHS informed OMNI that it had determined OMNI was overpaid under the contract by $34,876.44. The notice informed OMNI that if it disagreed with DHHS’ findings, it could request a hearing. OMNI requested and received an administrative hearing before a DHHS hearing officer.

DHHS called one witness at the hearing, Joseph Dondlinger, the financial officer for DHHS’ Division of Developmental Disabilities. In that position, Dondlinger was responsible for financial oversight of the division's contracts with providers, including OMNI. Dondlinger issued the "Notice of Overpayment" to OMNI. He testified that the review of OMNI's performance under the contract was prompted by earlier audits completed by Nebraska's Auditor of Public Accounts (State Auditor). In several reports beginning in 2016, the State Auditor expressed concern about how OMNI was being paid under the contract. Among the concerns noted by the State Auditor was OMNI's inadequate documentation of costs incurred for the fidelity and adherence expense category of the budget. The State Auditor concluded that OMNI was likely double-billing DHHS by including the salaries of several employees as fidelity and adherence expenses when those same salaries were also part of the 22-percent administrative expense category.

Dondlinger testified that after the issuance of a State Auditor's report in 2017, DHHS decided to do a more extensive audit of OMNI's billing for May and June 2017. He testified that DHHS requested that OMNI provide documentation to demonstrate its actual costs as required by the contract for each of the line items corresponding to the contract's budget.

OMNI provided documentation to DHHS, but according to Dondlinger, DHHS determined that OMNI had not provided documentation demonstrating actual costs for several expenses for which it billed DHHS in May and June 2017.

Dondlinger identified three categories of expenses for which DHHS found inadequate documentation of actual costs. The first was a travel expense. OMNI did not and does not dispute that it lacked documentation for this expense.

The second category involved OMNI's charges for fidelity and adherence. OMNI billed DHHS the maximum allowed $24,666.67 for fidelity and adherence in both May and June 2017. DHHS determined that OMNI had not submitted any documentation demonstrating that it incurred actual costs for fidelity and adherence activities in those months.

Dondlinger testified that even though none of the over $49,000 in fidelity and adherence charges OMNI billed in May and June 2017 were supported by proof of actual costs, DHHS determined that it would demand that OMNI repay a lower amount, $29,779.26. Dondlinger explained how DHHS arrived at this figure. He testified that in reviewing OMNI's records, DHHS determined that OMNI had billed DHHS $29,779.26 under the categories "Contract Labor" and "Staff Specific Training Implementation." The documentation OMNI submitted to support these charges showed that OMNI had incurred charges to host training sessions related to the system of care it was promoting for individuals with developmental disabilities and to provide incentives for staff to attend these training sessions. Dondlinger testified that because these expenses appeared to have been incurred to promote fidelity and adherence to the system of care OMNI was implementing under the contract, DHHS determined that those expenses should have been categorized as fidelity and adherence expenses. If categorized as fidelity and adherence expenses, OMNI would have exceeded the monthly budget for that category of expense.

Finally, Dondlinger testified that DHHS determined that OMNI had not submitted adequate documentation for $5,083.32 billed to DHHS for the salary of John Apala, an OMNI information technology employee. OMNI billed DHHS one-quarter of Apala's total salary to DHHS for May and June 2017. Dondlinger explained that other salary expenses OMNI billed to DHHS were documented in OMNI's accounting system as expenses under the contract, but that Apala's salary was recorded as a general administrative expense, for which OMNI would have been compensated by the 22-percent administrative expense category. He added that OMNI billed DHHS for portions of other employee's salaries, but that for those "split salaries," a portion was categorized as an expense under the contract.

OMNI called two witnesses at the administrative hearing. The first, a therapist who performed behavioral consultations under the contract, testified that OMNI provided staff with incentives to perform fidelity and adherence checks under the contract. She testified that staff incentives were appropriately billed under the "Staff Specific Training Implementation" category of the contract's budget.

OMNI also called Dr. William Reay, OMNI's chief executive officer. Reay testified about OMNI's duties under its contracts with DHHS. He testified that one of OMNI's duties was to build a new system of care and to promote fidelity and adherence to it. He testified regarding OMNI's efforts to host various training programs related to that system. He described several of the trainings as fidelity and adherence processes, but later testified they were not fidelity and adherence activity under the contract....