New Hope Wellness, LLC v. Sentara Health Plans

• Court: Court of Appeals of Virginia
• Decided: May 26, 2026
• Docket: 0792252
• Status: Published

Opinion

COURT OF APPEALS OF VIRGINIA

Record No. 0792-25-2

NEW HOPE WELLNESS, LLC v. SENTARA HEALTH PLANS

Present: Chief Judge Decker, Judges Ortiz and Callins Argued at Richmond, Virginia Opinion Issued May 26, 2026

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Claire G. Cardwell, Judge

Cullen D. Seltzer (Nathan C. Mortier; William P. “Scott” Daisley III; Sands Anderson PC, on briefs), for appellant.

Belinda D. Jones (Christian & Barton, LLP, on brief), for appellee.

PUBLISHED OPINION BY JUDGE DANIEL E. ORTIZ

Medical providers and insurance companies disputing their Medicaid cost reimbursements

can resolve such disputes before the Department of Medical Assistance Services (“DMAS”) and

must exhaust the agency’s administrative remedies before litigating their contract disputes. Absent

parties’ compliance with the administrative process, the circuit court is without subject matter

jurisdiction. In light of our legislature’s comprehensive regulatory framework governing Medicaid

funds, the mere fact that the dispute between New Hope Wellness, LLC (“New Hope”) and Sentara

Health Plans (“Sentara”) is one of contract interpretation does not change New Hope’s obligation

to exhaust its administrative remedies first. For this reason, we decline New Hope’s invitation to

skip the line and allow it to bring an independent challenge to certain reimbursements. Agreeing with the circuit court’s determination that it did not have subject matter jurisdiction to hear New

Hope’s premature effort at judicial review, we affirm.

BACKGROUND1

New Hope is a credentialed behavioral health services provider and entered a Provider

Agreement with Sentara, a health insurance carrier, to join Sentara’s network. In 2022, Sentara

audited New Hope’s healthcare claims and found documentation deficiencies in breach of the

Provider Agreement. Sentara notified New Hope of its intent to retract $433,381.96 in Medicaid

funds overpaid to New Hope. Upon New Hope’s request for reconsideration, Sentara upheld its

overpayment retraction demand. New Hope internally appealed Sentara’s decision, but again the

carrier upheld its demand for repayment.

On April 1, 2024, representatives for New Hope and Sentara entered into a Corrective

Action Plan (“CAP”) related to Sentara’s audit findings. The CAP required New Hope to

implement corrective measures moving forward to come into compliance with federal and state

guidelines and remain within Sentara’s network. Among other contractual obligations, the CAP

required New Hope to create an “education plan” for their coding and billing staff moving forward,

and to follow the billing and recordkeeping guidelines promulgated by DMAS. The CAP also

informed New Hope of Sentara’s legal obligation to report the discrepancies uncovered by the

audit to state and federal authorities. Notably, though, the CAP was silent on the issue of Sentara’s

retraction demand.

On April 19, 2024, New Hope appealed Sentara’s internal decision to DMAS as provided

for by Code §§ 2.2-4019, 2.2-4021, and 32.1-325.1. New Hope characterized its appeal as done

1 Although subject matter jurisdiction “requires no factual development or evidentiary record to consider,” Watson v. Commonwealth, 297 Va. 347, 352 (2019), “[w]e recite what occurred in the circuit court as indicated by the pleadings and other undisputed contents of the record,” Ruderman v. Pritchard, 76 Va. App. 295, 299 n.2 (2022) (citing Watson, 297 Va. at 349-50). -2- “out of an abundance of caution” due to its position that the CAP had effectively settled and

resolved the audit, “cur[ing] any alleged breach of the Provider Agreement by New Hope.” On

May 3, 2024, New Hope requested that Sentara “formally rescind any demand for remittance,

repayment, or retraction” of the disputed funds. Sentara did not do so.

Despite ample statutory authority necessitating New Hope’s compliance with the

administrative process governing its appeal before DMAS, New Hope filed a complaint for breach

of contract against Sentara in the Circuit Court of the City of Richmond on August 28, 2024. New

Hope argued that Sentara’s retraction demand constituted a breach of the Provider Agreement.

Sentara moved to dismiss for lack of subject matter jurisdiction or, alternatively, for a stay pending

the conclusion of the DMAS appeal in the case.2

At argument on its motion, Sentara explained that its audit of New Hope’s behavioral

health services for the relevant period was “pretty customary” and that audited providers routinely

take advantage of Sentara’s internal “reconsideration process and other appeals,” just as New Hope

had done. Rejecting the notion that the CAP forgave the overpayment demand, Sentara

characterized the document as a plan which enabled New Hope to continue to offer behavioral

health services through Sentara’s network despite the outstanding Medicaid funds subject to its

recission demand. New Hope alleged that to subject its breach of contract claim to DMAS’s

administrative process would cause significant harm to New Hope. New Hope suggested that the

CAP was a stand-alone settlement agreement and that, as such, it was within the conventional

2 We denied Sentara’s request for leave to file supplemental briefing without prejudice to our taking judicial notice of the outcome of the administrative proceeding. Pursuant to Virginia Rule of Evidence 2:201(a), we take notice that DMAS’s final decision upholding Sentara’s retraction demand has been issued and that New Hope has appealed that decision to the circuit court in a separate proceeding. Because DMAS’s final decision is beyond the scope of our review, this Court expresses no opinion as to whether New Hope’s appeal to the circuit court from DMAS’s final decision dated July 21, 2025 would be proper. -3- expertise of the courts to exercise jurisdiction and apply contract interpretation principles to the

document.

The circuit court granted Sentara’s motion to dismiss, finding that it lacked subject matter

jurisdiction to hear New Hope’s judicial appeal and that New Hope had failed to appropriately

exhaust its available administrative remedies. The circuit court also held that the appeal of

Sentara’s audit, and the issue of whether the CAP constituted a settlement of New Hope’s

outstanding repayments, were matters within DMAS’s “special competence.” In the alternative,

the circuit court applied the doctrine of primary jurisdiction in favor of the agency’s assertion of

jurisdiction over the case. Pointing to its observation that “[t]he CAP appear[ed] to be . . . a typical

sanction in an audit dispute,” the circuit court found that the enforcement of the CAP fell within

DMAS’s administrative discretion to resolve the underlying audit dispute. New Hope appeals.

ANALYSIS

Subject matter jurisdiction is a threshold question. See Knight v. Ottrix, 69 Va. App. 519,

524 (2018). When a case is most appropriately placed before an administrative agency, our case

law is quite clear. “It is a long settled rule of judicial administration that no one is entitled to

judicial relief for a supposed or threatened injury until the prescribed administrative remedy has

been exhausted.” Fauquier Cnty. Dep’t of Soc. Servs. v. Robinson, 20 Va. App. 142, 152 (1995)

(internal citations omitted). Consequently, if the circuit court lacked subject matter jurisdiction,

then this Court has no jurisdiction to provide the relief sought.

I. Standard of Review

Subject matter jurisdiction is “a court’s power to adjudicate a class of cases or

controversies.” In re Commonwealth, 278 Va. 1, 11 (2009) (quoting Jenkins v. Dir., Va. Ctr. for

Behav. Rehab., 271 Va. 4, 13 (2006)). It “can only be acquired by virtue of the Constitution or of

some statute. Neither the consent of the parties, nor waiver, nor acquiescence can confer it.” Pure

-4- Presbyterian Church of Wash. v. Grace of God Presbyterian Church, 296 Va. 42, 49 (2018)

(quoting Humphreys v. Commonwealth, 186 Va. 765, 772 (1947)). Evidence of a court’s subject

matter jurisdiction “must affirmatively appear on the face of the record, that is, the record must

show affirmatively that the case is one of a class of which the court rendering the judgment was

given cognizance.” Jones v. Commonwealth, 42 Va. App. 142, 146 (2004) (en banc) (quoting

Owusu v. Commonwealth, 11 Va. App. 671, 673 (1991)). Because it is a question of law, we

review jurisdiction de novo. See Knight, 69 Va. App. at 523-24.

“To state the obvious, circuit courts have subject matter jurisdiction over contract disputes,”

Pure Presbyterian, 296 Va. at 56, and “exercise that authority ‘[u]nless ousted of jurisdiction by

law,’” Ashland, LLC v. Va.-Am. Water Co., 301 Va. 362, 370 (2022) (alteration in original)

(quoting Appalachian Power Co. v. John Stewart Walker, Inc., 214 Va. 524, 530 (1974)). “Thus, a

circuit court has jurisdiction over a common law contract claim unless a provision of the

Constitution or an enactment of the General Assembly strips it of that authority.” Id. The question

becomes whether the legislature has acted to limit the circuit court’s jurisdiction in this case. We

find that it has.

II. A comprehensive statutory framework provides an administrative avenue for New Hope to make its arguments.

As a state receiving Medicaid funds, Virginia is required by federal law to create and

maintain an agency that issues regulations governing the Commonwealth’s medical assistance

program. See 42 U.S.C § 1396a(a). DMAS is the state agency responsible for administering

Virginia’s Medicaid program. Code § 32.1-323; see also Cmty. Alts. Va. v. Jones, No. 1882-17-4

(Va. Ct. App. Aug. 7, 2018) (noting DMAS’s statutory authority to administer the Virginia

Medicaid program); Avante at Roanoke v. Finnerty, 56 Va. App. 190, 192-93 (2010) (same). A

key aspect of DMAS’s statutory duties is to “assure financial accountability” for Medicaid funds

expended in Virginia. Dep’t of Med. Assistance Servs. v. Ablix, No. 0767-14-2 (Va. Ct. App. Mar. -5- 17, 2015) (citing 42 C.F.R. § 441.302(b)). The Director of DMAS is statutorily authorized to

exercise DMAS’s administrative discretion to “[m]ake rules and regulations that it follows in

administering the plan.” 42 C.F.R. § 431.10(b)(2)(ii).

This Court has long acknowledged that DMAS has the “experience and competence

necessary to determine the reimbursement due qualified providers for their reasonable costs

incurred while delivering health care services.” Fralin v. Kozlowski, 18 Va. App. 697, 701 (1994)

(referencing DMAS’s statutory authority under Code §§ 32.1-323 to -331.06). To that end, the

General Assembly vested the Director with the power to audit Medicaid providers and collect

overpaid Medicaid funds. Code § 32.1-325.1:1(B); see also Smith v. Liberty Nursing Home, Inc.,

31 Va. App. 281, 288 (2000) (discussing the authority of the Director of DMAS to recover

overpayments from Medicaid providers). If providers dispute DMAS’s determinations, they can

seek an informal fact finding proceeding under the Virginia Administrative Process Act

(“VAPA”). Code § 2.2-4019. If still unresolved, the dispute is then eligible for a formal

administrative hearing under Code § 2.2-4020.

Only after DMAS makes a final agency decision does an aggrieved party have the right to

judicial review under Code § 2.2-4026. This is because Virginia has long acknowledged that

litigants must exhaust their prescribed administrative remedies before they are “entitled to judicial

relief.” Fauquier Cnty., 20 Va. App. at 152 (explaining the exhaustion requirement).3 Thus, a

3 The exhaustion requirement is a “long settled rule,” and Virginia is not unique in requiring litigants to abide by it. Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938) (explaining the federal exhaustion requirement); see Cavalier Tel., LLC v. Va. Elec. & Power Co., 303 F.3d 316, 322 (4th Cir. 2002); Taylor-Callahan-Coleman Cntys. Dist. Adult Prob. Dep’t v. Dole, 948 F.2d 953, 958-59 (5th Cir. 1991) (dismissing for failure to exhaust remedies under FLSA); Diaz v. United Agric. Emp. Welfare Benefit Plan & Tr., 50 F.3d 1478 (9th Cir. 1995) (same for ERISA claimants); see also Woodford v. Ngo, 548 U.S. 81, 88-91 (2006) (explaining policy reasons for the exhaustion requirement). -6- Medicaid provider who disagrees with a determination on Medicaid funds has an obligation to

comply with the administrative process before appealing to this Court.

III. New Hope’s actions demonstrate that it took advantage of its prescribed administrative remedies, and the current proceeding before this Court is improper.

New Hope assigns error to the circuit court’s finding that it lacked subject matter

jurisdiction to determine whether the CAP constituted a settlement contract. It argues that because

contract disputes fall within the statutorily granted expertise of the courts, DMAS lacks expertise to

interpret the CAP, an alleged settlement contract. Essentially, on appeal, New Hope asks this

Court to adopt New Hope’s view that the case is merely a contract dispute. We reject New Hope’s

characterization.

New Hope and Sentara jointly entered the CAP after Sentara’s audit and resulting demand

for repayment of overpaid Medicaid funds. By its own terms, the CAP explains that it is designed

to bring New Hope into compliance with “state and federal guidelines and [its] contract with

[Sentara].” At bottom, the dispute between New Hope and Sentara is one concerning Medicaid

funds and the repayment thereof. The General Assembly has enacted a comprehensive statutory

scheme contemplating administrative and judicial review of determinations that affect those

Medicaid funds. See Code §§ 32.1-323 to -331.06. This Court can assume that both parties were

fully aware of this fact, and of the overall statutory scheme governing the disbursement and

collection of Medicaid funds. Despite New Hope’s assertions otherwise, there is nothing about the

contractual form of the CAP which, in itself, puts it beyond DMAS’s purview.

Here, New Hope had a series of administrative remedies available by virtue of the

comprehensive statutory scheme governing Medicaid funds. Recognizing this, New Hope initiated

the DMAS review process. Under this process, New Hope was entitled to both an informal fact-

finding review and a formal hearing before DMAS. See Code §§ 2.2-4019 to -4020. Only once

both of those processes are undertaken and a final DMAS decision rendered, can New Hope then -7- initiate the judicial review process under Code § 2.2-4026. The fact that its dispute centers on

disbursed Medicaid funds mandates that we adhere to the process prescribed by the legislature. As

a Medicaid provider, New Hope is fully aware of the extensive regulations that govern its

participation in the Medicaid program. Creative arguments do not change the fact that New Hope

must respect the rules of engagement in Virginia’s Medicaid program.

By so finding, we do not hold that New Hope is precluded from judicial review altogether.

Rather, judicial review must come at the conclusion of the administrative process, a rule known to

New Hope when it filed its administrative appeal. But because DMAS had not issued its final

agency decision when New Hope appealed this matter to the circuit court, and New Hope still

maintained the ability to appeal the final agency decision, the circuit court was correct in holding

that it lacked subject matter jurisdiction.

IV. We decline to assert jurisdiction.

Without subject matter jurisdiction, a court “cannot proceed at all in any cause,” and the

only function remaining to the court is “that of announcing the fact and dismissing” the case. Pure

Presbyterian, 296 Va. at 50 (quoting Ex Parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1869)); see

also Morrison v. Bestler, 239 Va. 166, 170 (1990) (holding that any judgment made on the merits

without subject matter jurisdiction is void). We conclude that this Court lacks subject matter

jurisdiction to weigh the parties’ arguments in this case because the General Assembly divested the

circuit courts of such power, and we decline to reach the merits of New Hope’s other arguments on

these grounds.4 New Hope is required to exhaust its statutorily-prescribed remedies from DMAS

before seeking judicial intervention. Accordingly, our review is at its end.

4 By concluding that we lack jurisdiction to address New Hope’s arguments in the present appeal, we note that our decision does not strip New Hope of its opportunity to challenge Sentara’s characterization of the CAP. But New Hope was correct to first file its administrative appeal with DMAS, and our judicial review cannot take place during the pendency of the administrative process. -8- CONCLUSION

Ultimately, New Hope asks this Court to overstep its jurisdictional bounds on appeal, and

we decline to do so. For the reasons discussed in this opinion, we affirm the circuit court’s

dismissal of New Hope’s judicial appeal for lack of subject matter jurisdiction during the pendency

of its administrative proceeding.

Affirmed.

-9-