Sanford Healthcare Accessories, LLC v. N.D. Dep't of Human Servs.

906 N.W.2d 336

SANFORD HEALTHCARE ACCESSORIES, LLC, Appellee

v.NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES and Christopher D. Jones, in his capacity as Executive Director of North Dakota Department of Human Services, Appellants

No. 20170238

Supreme Court of North Dakota.

Filed February 1, 2018

Monte L. Rogneby (argued) and Justin J. Hagel (appeared), Bismarck, ND, for appellee.

James E. Nicolai (argued) and Elizabeth Fischer (appeared), Bismarck, ND, for appellants.

VandeWalle, Chief Justice.

[¶ 1] The North Dakota Department of Human Services appealed from a district court judgment reversing the Department's order deciding Sanford HealthCare Accessories received overpayments for medical equipment supplied to Medicaid recipients and ordering recoupment. We reverse and remand, concluding the district court erred in deciding the Department's failure to comply with the statutory time requirement for issuing its final order precluded the Department from acting.

I

[¶ 2] Sanford is enrolled as a Medicaid Durable Medical Equipment and Supply Provider, providing medical equipment and services to North Dakota Medicaid recipients. Sanford bills the Department for the equipment, supplies, and services by submitting Medicaid claims to the Department. The Department pays Sanford under the Medicaid program. The Department has published its documentation requirements and procedures for billing Medicaid claims in a Manual for Durable Medical Equipment, Orthotics, Prosthetics and Supplies.

[¶ 3] The Patient Protection and Affordable Care Act, 42 U.S.C. § 18001 et seq. (2010), and related federal regulations require states to establish a Medicaid Recovery Audit Contractor Program to audit past payments to ensure the state's Medicaid billing procedures and policies were followed by providers who requested payment of Medicaid claims. The Department contracted with an audit contractor, Cognosante, to review provider submitted Medicaid claims to evaluate whether the claims satisfied the state's Medicaid billing procedures.

[¶ 4] Cognosante audited Sanford's claims for services provided between January 1, 2011, through December 31, 2013, and identified various claims that had been paid but did not meet billing procedures. Cognosante determined those claims were overpayments and the Department was entitled to seek recoupment. It determined the Department was entitled to recoup $251,916.26 from Sanford for various billing errors, omissions, and irregularities.

[¶ 5] On September 15, 2015, Sanford appealed to the Department numerous claims worth $164,809.96 under N.D.C.C. § 50–24.1–24, requesting reversal of the audit findings. Sanford did not appeal 111 claims worth $85,164.00. Sanford provided documents and other information supporting its request for review.

[¶ 6] On April 27, 2016, the Department issued an order, finding Sanford did not comply with billing procedures, overpayment was made in the amount of $109,747.89 on the claims Sanford appealed, and recoupment was proper. The Department also ordered Sanford to remit payment of $85,164.00 for the claims Cognosante found were overpaid but Sanford did not appeal to the Department. The Department ordered Sanford pay a total of $194,911.89.

[¶ 7] Sanford appealed to the district court. Sanford argued the Department's decision was not in accordance with the law because the Department did not comply with statutory requirements.

[¶ 8] The district court reversed the Department's decision, concluding the decision was not in accordance with the law because the Department failed to comply with the statutory time requirement for issuing its decision under N.D.C.C. § 50–24.1–24(5). The court ruled the statute requires the Department to issue its final decision within seventy-five days of receipt of the notice of request for review, the legislature intended the Department issue its decision within a reasonable time frame, and the seventy-five day time limit may be extended for a reasonable amount of time upon a showing of good cause. The court explained the Department far exceeded the seventy-five days allowed by statute and it was not persuaded by the Department's arguments that the decision was delayed because the documents Sanford submitted were a "disorganized mess" and that Sanford was not prejudiced by the delay.

II

[¶ 9] We exercise limited appellate review of an administrative agency's decision under the standards set out in N.D.C.C. § 28–32–46. Coon v. N.D. Dep't of Health , 2017 ND 215, ¶ 7, 901 N.W.2d 718. The agency's decision will be affirmed unless:

1. The order is not in accordance with the law.

2. The order is in violation of the constitutional rights of the appellant.

3. The provisions of [N.D.C.C. ch. 28–32] have not been complied with in the proceedings before the agency.

4. The rules or procedure of the agency have not afforded the appellant a fair hearing.

5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

6. The conclusions of law and order of the agency are not supported by its findings of fact.

7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.

8. The conclusions of law and order of the agency do not sufficiently explain the agency's rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.

N.D.C.C. § 28–32–46. We review the agency's decision and the record compiled before the agency, but we give respect to the district court's sound reasoning. Coon , at ¶ 7.

III

[¶ 10] The Department argues the district court erred in concluding its decision was not in accordance with the law because the Department failed to render its decision within the time required under N.D.C.C. § 50–24.1–24(5). The Department contends the statutory time limit is directory, not mandatory, and Sanford did not allege or prove it was prejudiced by the delayed decision.

A

[¶ 11] Section 50–24.1–24, N.D.C.C., provides the procedure for a provider to appeal a denial of payment for a medical assistance claim, stating:

2. A provider may request a review of denial of payment under this section by filing within thirty days of the date of the department's denial of the claim a written notice with the department which includes a statement of each disputed item and the reason or basis for the dispute....

3. Within thirty days after requesting a review, a provider shall provide to the department all documents, written statements, exhibits, and other written information that support the provider's request for review, together with a computation and the dollar amount that reflects the provider's claim as to the correct computation and dollar amount for each disputed item.

4. The department shall assign to a provider's request for review someone other than any individual who was involved in the initial denial of the claim. A provider who has requested review may contact the department for an informal conference regarding the review anytime before the department has issued its final decision.

5. The department shall make and issue its final decision within seventy-five days of receipt of the notice of request for review. The department's final decision must conform to the requirements of section 28–32–39. A provider may appeal the final decision of the department to the district court in the manner provided in section 28–32–42, and the district court shall review the department's final decision in the manner provided in section 28–32–46. The judgment of the district court in an appeal from a request for review may be reviewed in the supreme court on appeal by any party in the same manner as provided in section 28–32–49.

[¶ 12] Section 50–24.1–24(5), N.D.C.C., states the department "shall make and issue its final decision within seventy-five days[.]" Sanford contends this provision is mandatory and requires the department to issue its final decision reviewing a denial of payment within seventy-five days.

[¶ 13] Statutory interpretation presents a question of law, which is fully reviewable on appeal. Opp v. Dir., N.D. Dep't of Transp. , 2017 ND 101, ¶ 6, 892 N.W.2d 891. The primary objective in interpreting a statute is to determine the legislature's intent. Mosser v. Denbury Res., Inc. , 2017 ND 169, ¶ 13, 898 N.W.2d 406. To determine the legislative intent we first look at the language of the statute. Id. Words are given their plain, ordinary, and commonly understood meaning, unless they are specifically defined or contrary intention plainly appears. N.D.C.C. § 1–02–02.

[¶ 14] "Ordinarily, the word ‘shall’ in a statute creates a duty which is mandatory and the word ‘may’ creates a duty which is directory; however, where it is necessary to effect the legislative intent, the word ‘shall’ will be construed as ‘may.’ " Solen Pub. Sch. Dist. No. 3 v. Heisler , 381 N.W.2d 201, 203 (N.D. 1986). We have said mandatory and directory statutes both impose duties, but we have explained that they have different consequences for failing to perform the duty, stating:

If the prescribed duty is essential to the main objective of the statute, the statute is mandatory and the failure to comply with it will invalidate subsequent proceedings; however, if the duty is not essential to accomplishing the main objective of the statute but is designed to assure order and promptness in the proceeding, the statute is directory and the failure to comply with it will not invalidate subsequent proceedings.

Id. We have generally interpreted statutory provisions requiring public officers to perform within a specified time to be directory so that the interests of private parties and the public will not be injured by the delay. Id. at 204. A statutory provision may be construed to be directory to avoid harsh, unfair, or absurd consequences when a mandatory construction may injure a party not at fault. See id.

[¶ 15] The primary objective of N.D.C.C. ch. 50–24.1 is to provide medical care and services to people...