Halikierra Cmty. Servs.

Opinions

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA23-897

Filed 18 June 2024

Wayne County, No. 21 CVS 1422

HALIKIERRA COMMUNITY SERVICES, LLC, Petitioner,

v.

N. C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF MEDICAL ASSISTANCE, DIVISION OF HEALTH BENEFITS, Respondent.

Appeal by Petitioner from Order entered 25 April 2023 by Judge William W.

Bland in Wayne County Superior Court. Heard in the Court of Appeals 1 May 2024.

Ralph Bryant Law Firm, by Ralph T. Bryant, Jr., for Petitioner-Appellant.

Attorney General Joshua H. Stein, by Assistant Attorney General Adrian W. Dellinger, for the State.

HAMPSON, Judge.

Factual and Procedural Background

Halikierra Community Services LLC (Petitioner) appeals from an Order

denying Petitioner’s Petition for Judicial Review of a Final Decision issued by an

Administrative Law Judge and affirming the Final Decision. The Record before us

tends to reflect the following:

Respondent, the North Carolina Department of Health and Human Services

(DHHS), is the executive agency responsible for overseeing the provision of certain

services, including Medicaid, in North Carolina. The Division of Health Benefits is a

Opinion of the Court

sub-agency within DHHS responsible for the direct administration of North

Carolina’s Medicaid program. N.C. Gen. Stat. § 108A-54 (2021). During the time

periods relevant to this case, Petitioner was a licensed home care agency enrolled

with the North Carolina Medicaid Program to provide personal care services to

Medicaid beneficiaries.

The requirements for providers to render personal care services to Medicaid

beneficiaries are laid out in Medicaid Clinical Coverage Policy 3L. To participate in

the Medicaid program, providers are required to enter into a provider agreement with

DHHS, 42 CFR § 431.107(b) (2021), and bill DHHS for reimbursement. N.C. Gen.

Stat. § 108C-2(10) (2021); 10A N.C.A.C. 22F .0104 (2018). North Carolina’s Medicaid

Provider Participation Agreement requires providers to abide by all state and federal

laws and regulations; DHHS’s medical coverage policies; and guidelines, policies,

provider manuals, implementation updates, and bulletins published by DHHS or its

sub-agencies.

On 24 June 2018, Petitioner was placed on prepayment review pursuant to

N.C. Gen. Stat. § 108C-7. Notice of this placement was sent to Petitioner by the

Carolina Centers for Medical Excellence (CCME), a DHHS contractor. This notice

described the prepayment review process and explained the requirements for a

provider to be removed from prepayment review.

Medicaid providers submit claims for reimbursement of services through an

electronic system called NCTracks. When a provider is on prepayment review, the

-2-

claims submitted to NCTracks are sent to CCME and CCME requests any records

required to support each claim. For each claim at issue here, CCME sent Petitioner

an “Original Records Request” letter, which listed the specific documents Petitioner

needed to submit for the claim to be processed and approved. All of the records

requested were documents Petitioner was already required to maintain by law or

under the Medicaid Clinical Coverage Policy. If the documents Petitioner submitted

were insufficient, CCME sent a second request letter listing the missing documents

and providing time for Petitioner to submit those documents. If Petitioner failed to

submit the required documents or if the submitted documents showed non-

compliance with the relevant clinical policies, CCME processed and denied the claim.

In total, CCME denied $982,789.50 of claims submitted by Petitioner while it was on

prepayment review.

On 6 August 2018, DHHS sent Petitioner a letter alleging it had “credible

allegations of fraud” against Petitioner and notified Petitioner of the immediate

suspension of all payments to it as a result, retroactive to 1 August 2018. On 14

December 2018, Petitioner appealed this action by filing a contested case petition

with the Office of Administrative Hearings (OAH). On 3 January 2019, DHHS

notified Petitioner it had rescinded the August 2018 action.

On 2 October 2018, DHHS sent Petitioner a notice of termination of its

participation in the Medicaid provider network due to alleged non-compliance with

certain requirements. On 14 December 2018, Petitioner appealed this action by filing

-3-

a contested case petition with the OAH. On 15 March 2019, DHHS issued another

notice of a decision to terminate Petitioner from the North Carolina Medicaid

program. This notice stated Petitioner’s termination was due to its failure to meet

the minimum claims accuracy rate required during the prepayment review period.

On 9 May 2019, Petitioner appealed by filing a contested case hearing with OAH. On

5 July 2019, OAH consolidated the cases regarding the October 2018 and March 2019

actions for hearing. On 17 September 2020, DHHS rescinded both the 2 October 2018

and 15 March 2019 administrative actions. Thus, as of 17 September 2020, all of

DHHS’s administrative actions initiated against Petitioner had been rescinded.

This matter, including DHHS’s denial of payment for the $982,789.50 in claims

submitted by Petitioner, came on for hearing before an Administrative Law Judge

(ALJ) on 8 December 2020. On 14 July 2021, the ALJ entered a Final Decision, which

concluded Petitioner had failed to meet its burden of proving it had provided all of

the required documentation for its claims when it submitted the claims and that its

claims should not have been denied. Based on its Findings and Conclusions, the

ALJ’s Final Decision upheld DHHS’s decision to deny payment for Petitioner’s

outstanding claims.

On 10 August 2021, Petitioner filed a Petition for Judicial Review, appealing

the Final Decision. The trial court held a hearing on this Petition on 31 January

2023. On 25 April 2023, the trial court entered an Order denying Petitioner’s Petition

for Judicial Review and affirming the ALJ’s Final Decision. On 23 May 2023,

-4-

Petitioner timely filed Notice of Appeal to this Court.

Issues

The issue on appeal is whether the trial court erred by denying Petitioner’s

Petition for Judicial Review and affirming the Final Decision entered by the ALJ.

Analysis

I. Mootness

As an initial matter, during the underlying judicial review, Petitioner

contended OAH lost jurisdiction to hear the underlying case when DHHS rescinded

the Notices of Termination. Whether Petitioner is entitled to stay in the Medicaid

program, however, is merely tangential to the matter at hand in this case—whether

Petitioner is entitled to payment for its denied claims.

Indeed, when Petitioner made this argument below, the trial court correctly

noted the North Carolina Administrative Code gives providers 18 months to refile

denied claims. After that time period elapses, claim denials become final. 10A

N.C.A.C. 22B .0104(b) (2018). Here, at the time of the underlying judicial review, the

18-month refile period for the $982,789.50 of Petitioner’s denied claims had passed.

Therefore, the claim denials were final. The finalization of those claim denials thus

became a final agency action, which is appealable under the Administrative

Procedure Act. See N.C. Gen. Stat. § 150B-43 (2021) (“Any party or person aggrieved

by the final decision in a contested case, and who has exhausted all administrative

remedies made available to the party or person aggrieved by statute or agency rule,

-5-

is entitled to judicial review of the decision under this Article[.]”).

II. Denial of Payment

“The North Carolina Administrative Procedure Act (APA), codified at Chapter

150B of the General Statutes, governs trial and appellate court review of

administrative agency decisions.” Amanini v. N.C. Dep’t of Hum. Res., 114 N.C. App.

668, 673, 443 S.E.2d 114, 117 (1994). The APA provides a party aggrieved by a final

decision of an ALJ in a contested case a right to judicial review by the superior court.

N.C. Gen. Stat. § 150B-43 (2021). “A party to a review proceeding in a superior court

may appeal to the appellate division from the final judgment of the superior court[.]”

N.C. Gen. Stat. § 150B-52 (2021). The APA sets forth the scope and standard of

review for each court.

The APA limits the scope of the superior court’s judicial review as follows:

(b) The court reviewing a final decision may affirm the decision or remand the case for further proceedings. It may also reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as

-6-

submitted; or

(6) Arbitrary, capricious, or an abuse of discretion.

N.C. Gen. Stat. § 150B-51(b) (2021). The APA also sets forth the standard of review

to be applied by the superior court as follows:

In reviewing a final decision in a contested case, the court shall determine whether the petitioner is entitled to the relief sought in the petition based upon its review of the final decision and the official record. With regard to asserted errors pursuant to subdivisions (1) through (4) of subsection (b) of this section, the court shall conduct its review of the final decision using the de novo standard of review. With regard to asserted errors pursuant to subdivisions (5) and (6) of subsection (b) of this section, the court shall conduct its review of the final decision using the whole record standard of review.

N.C. Gen. Stat. § 150B-51(c) (2021).

Although the standards of review superior courts are to apply are clearly

articulated in our statutes, nowhere in its briefing to this Court does Petitioner

clearly articulate the standard of review it believes we should apply. Indeed, at the

outset of its argument, Petitioner merely restates what is effectively the same

argument it raised below: DHHS “has acted arbitrarily and capriciously and

substantially prejudiced [P]etitioner’s rights; exceeded its authority, and acted

erroneously, failed to use proper procedure, or failed to act as required by law[.]”

“The scope of review to be applied by the appellate court under this section is

the same as it is for other civil cases.” N.C. Gen. Stat. § 150B-52 (2021). “Thus, our

appellate courts have recognized that ‘[t]he proper appellate standard for reviewing

-7-

a superior court order examining a final agency decision is to examine the order for

errors of law.’ ” EnvironmentaLEE v. N.C. Dep’t of Env’t & Nat. Res., 258 N.C. App.

590, 595, 813 S.E.2d 673, 677 (2018) (quoting Shackleford-Moten v. Lenoir Cnty. Dep’t

of Soc. Servs., 155 N.C. App. 568, 572, 573 S.E.2d 767, 770 (2002) (citation omitted)).

This process is a “twofold task: (1) determining whether the trial court exercised the

appropriate scope of review and, if appropriate, (2) deciding whether the court did so

properly.” Holly Ridge Assocs., LLC v. N.C. Dep’t of Env’t & Nat. Res., 361 N.C. 531,

535, 648 S.E.2d 830, 834 (2007) (citation and quotation marks omitted). “As in other

civil cases, we review errors of law de novo.” Hilliard v. N.C. Dep’t of Corr., 173 N.C.

App. 594, 596, 620 S.E.2d 14, 17 (2005) (citation omitted).

Here, the trial court set out the standard of review it applied in its Order as

follows: “Given the nature of the alleged error asserted by the [P]etitioner, this court

applied a ‘whole record’ standard of review of the Final Decision’s Findings of Fact

and applied a de novo standard of review of the Final Decision’s Conclusions of Law.”

The trial court found there was substantial evidence to support the ALJ’s Findings of

Fact and the ALJ’s Conclusions of Law correctly applied the law to those Findings.

Relevant to the sole issue of payment denial, the ALJ found Petitioner

submitted the claims at issue, but it “did not provide the requested additional

information to support the denied claims.” Further, the ALJ found “[DHHS]

introduced evidence of each claim that was submitted by Petitioner . . . For the claims

that were denied, the Coverage Policy citation for which the claim was non-compliant

-8-

was noted.” Additionally, “[DHHS] provided the contemporaneous notes of the initial

reviewers regarding the specific policy provisions for which the claims were denied

as non-compliant.” Importantly, the ALJ found “Petitioner presented no evidence

that any one of the 23,000 claims that were denied while Petitioner was on

prepayment review should not have been denied at the time of CCME’s initial review,

and thus, should be overturned.” Accordingly, the trial court found there was

“substantial evidence to support the Findings of Fact” after reviewing “the whole

[R]ecord, the Final Decision, the briefs submitted in this matter, and the arguments

of counsel[.]”

“It is well settled that in cases appealed from administrative tribunals,

‘[q]uestions of law receive de novo review,’ whereas fact-intensive issues ‘such as

sufficiency of the evidence to support [an agency’s] decision are reviewed under the

whole-record test.’ ” N.C. Dep’t of Env’t. & Nat. Res. v. Carroll, 358 N.C. 649, 659,

599 S.E.2d 888, 894 (2004) (quoting In re Appeal of Greens of Pine Glen Ltd., 356 N.C.

642, 647, 576 S.E.2d 316, 319 (2003)). When the trial court applies the whole record

test, it “must examine all record evidence—that which detracts from the agency’s

findings and conclusions as well as that which tends to support them—to determine

whether there is substantial evidence to justify the agency’s decision.” Watkins v.

N.C. State Bd. of Dental Exam’rs, 358 N.C. 190, 199, 593 S.E.2d 764, 769 (2004)

(citation omitted). “Substantial evidence is such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.” Lackey v. N.C. Dep’t of Hum.

-9-

Res., 306 N.C. 231, 238, 293 S.E.2d 171, 176 (1982) (quoting State ex rel. Comm’r of

Ins. v. N.C. Fire Ins. Rating Bureau, 292 N.C. 70, 80, 231 S.E.2d 882, 888 (1977)).

Here, the trial court correctly applied whole record review. The Record

contains substantial evidence supporting the trial court’s decision to affirm the ALJ’s

Order. In its Findings, the trial court noted its review of the ALJ’s Final

Determination, the Record in its entirety, and the briefs and arguments of both

parties. In turn, the Final Decision pointed to specific evidence in the Record

supporting the ALJ’s determination. This evidence included DHHS documents for

each claim that was denied, noting the Coverage Policy citation with which the claim

was non-compliant, and contemporaneous notes made by initial reviewers regarding

specific policy provisions with which each claim was non-compliant. DHHS also

provided examples of the types of non-compliant claims at issue in this case, which

the trial court detailed. Moreover, the Final Decision correctly noted Petitioner

presented no evidence that any of its denied claims should not have been denied at

the time of CCME’s initial review. Thus, based on the evidence in the Record, the

trial court correctly applied whole record review to conclude there was substantial

evidence to justify the ALJ’s Final Decision.

On the issue of payment denial, the trial court concluded the ALJ’s Final

Decision should be affirmed. Again, the trial court expressly noted it reviewed the

ALJ’s Conclusions of Law de novo. The ALJ concluded: “Petitioner failed to meet its

burden of proving that (i) all required documentation was provided at the time the

- 10 -

claim was submitted and was available for review by the prepayment review vendor

and (ii) the claim should not have been denied at the time of the vendor’s initial

review.” The ALJ also noted in its Conclusions that “ ‘[u]nconvered services’ includes

non-compliance with Clinical Coverage Policies 3K1, 3K-2 and 3L” and “Petitioner

agreed as a condition of participation in the NC Medicaid program to abide by the

Clinical Coverage Policies developed by [DHHS].”

These Conclusions were based on the trial court’s Findings, which show

Petitioner failed to provide any evidence its claims complied with the Coverage

Policies and should not have been denied. In the absence of evidence to the contrary,

the trial court correctly affirmed the ALJ’s Final Decision denying payment to

Petitioner.

Petitioner alleges the trial court erred in affirming the payment denials

because DHHS improperly delegated its discretionary decision-making authority to

CCME, a private contractor. On the issue of delegation, this Court has previously

concluded “both federal and state regulations clearly contemplate that the role of a

private company will be limited to the performance of duties that do not include

rendering a discretionary decision as to the most appropriate course of action in a

particular case.” N.C. Dep’t of Health & Hum. Servs. v. Parker Home Care, LLC, 246

N.C. App. 551, 566, 784 S.E.2d 552, 561 (2016). Accordingly, this Court held: “a

private company . . . does not have the authority to substitute for DHHS” in making

decisions “that require the exercise of discretion and the application of DHHS’s policy

- 11 -

priorities[.]” Id.

In the case sub judice, however, CCME did not make any discretionary

decisions. Rather, CCME merely applied expressly established criteria as articulated

in the Clinical Coverage Policies. While Petitioner is correct to say DHHS cannot

delegate discretionary decisions to a private contractor, payment denial in this

instance did not entail the exercise of any discretion on CCME’s part. Petitioner’s

attempt to cast these claim denials as an administrative sanction in the prepayment

review process is misplaced. Whether Petitioner was on prepayment review is

entirely separate from whether it properly filed its claims with the required

documentation in order to be reimbursed. As DHHS aptly notes, “[t]he ability to deny

payment for claims that do not meet [the Clinical Coverage Policies] requirements is

inherent to the claim submission and review process.” This is consistent with the

trial court’s Finding that “[w]hile these denied claims may have been the basis of the

two termination notices, the causal relationship does not go both ways and the

recission of the termination notices does not prove that the claims were improperly

denied.”

Thus, we conclude the trial court correctly applied the appropriate standards

of review in the instant case. Therefore, the trial court did not err in affirming the

ALJ’s Final Decision. Consequently, the trial court properly denied Petitioner’s

Petition for Judicial Review.

Conclusion

- 12 -

Accordingly, for the foregoing reasons, we conclude there was no error in the

trial court’s Findings or Conclusions and affirm its Order.

AFFIRMED.

Judges GORE and FLOOD concur.

- 13 -