IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2019-CC-00960-COA
NSCH RURAL HEALTH CLINIC APPELLANT
v.
DREW SNYDER, IN HIS OFFICIAL CAPACITY APPELLEES AS EXECUTIVE DIRECTOR OF THE DIVISION OF MEDICAID, AND THE DIVISION OF MEDICAID, OFFICE OF THE GOVERNOR, STATE OF MISSISSIPPI
DATE OF JUDGMENT: 06/06/2019 TRIAL JUDGE: HON. J. DEWAYNE THOMAS COURT FROM WHICH APPEALED HINDS COUNTY CHANCERY COURT, FIRST JUDICIAL DISTRICT ATTORNEYS FOR APPELLANT: CRANE D. KIPP GRAFTON ERIC BRAGG ATTORNEYS FOR APPELLEES: JANET McMURTRAY SAMUEL PHILIP GOFF NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES DISPOSITION: AFFIRMED - 10/06/2020 MOTION FOR REHEARING FILED: MANDATE ISSUED:
BEFORE WILSON, P.J., LAWRENCE AND McCARTY, JJ.
LAWRENCE, J., FOR THE COURT:
¶1. On October 10, 2017, NSCH Rural Health Clinic (North Sunflower) requested an
administrative hearing after the Mississippi Division of Medicaid (DOM) suspended
reimbursement payments for medical and dental services provided to Medicaid beneficiaries.
The services were suspended as a result of an ongoing investigation of potential fraud. The
DOM approved the administrative hearing but limited its scope to the sole issue of whether
good cause existed to not suspend or partially suspend such payments. On January 24, 2018, the hearing officer issued a recommendation to affirm the suspension of reimbursement
payments to North Sunflower. The DOM’s executive director adopted the hearing officer’s
recommendation on February 9, 2018. North Sunflower appealed the DOM’s decision to the
Hinds County Chancery Court.
¶2. On June 6, 2019, the chancery court entered its final judgment, dismissing North
Sunflower’s appeal and affirming the DOM’s decision. Aggrieved by the chancery court’s
decision, North Sunflower appealed. Finding no error, we affirm.
FACTS AND PROCEDURAL HISTORY
¶3. North Sunflower was a rural health care provider located in Ruleville, Mississippi,
which provided medical, dental, vision, and mental health care services to Medicaid
beneficiaries throughout the Mississippi Delta. North Sunflower’s clinic provided a wide
spectrum of services, offered extended hours of operation to the community, and accepted
walk-in patients. In conjunction with the clinic, North Sunflower also offered two offsite
outreach programs that provided services to surrounding communities for their medical and
dental needs. These outreach programs included (1) a dental outreach program that provided
dental services to nursing home residents at their respective facilities and (2) a school-
outreach program that provided “early and periodic screening and diagnostic treatment”
(EPSDT) as well as inoculations in schools and head-start program facilities throughout the
delta. Both dental and vision screenings were offered through the school-outreach program.
In 2012, the DOM approved the outreach programs to receive reimbursements for services
provided to Medicaid beneficiaries at the offsite locations.
2 ¶4. In 2017, the DOM received notice of allegations of fraud within North Sunflower’s
dental outreach program and more specifically, fraudulent billing under the primary code for
dental evaluations of nursing home patients.1 Pursuant to state and federal regulations, the
DOM referred the allegations of fraud to the Medicaid Fraud Control Unit (MFCU) at the
Mississippi Attorney General’s Office for further criminal investigation. Around that same
time, the DOM received notice of additional allegations of fraud within North Sunflower’s
school outreach program. On August 30, 2017, the DOM sent a letter to North Sunflower
providing notice that Medicaid reimbursements for the dental outreach program were being
suspended pending the results of the criminal investigation. On September 8, 2017, the
DOM sent North Sunflower an additional letter stating that it was suspending all Medicaid
reimbursements including reimbursements to the dental outreach program, the school-
outreach program, and the Ruleville clinic.
¶5. On October 10, 2017, North Sunflower requested an administrative hearing regarding
the suspension. On October 25, 2017, the DOM approved North Sunflower’s request for an
administrative hearing; however, the scope of the hearing was limited to a determination if
there was good cause to lift or limit the suspension. 23 Miss. Admin. Code Pt. 305, R. 1.2(E)
(adopted Nov. 1, 2016). No testimony or evidence was allowed pertaining to the substantive
facts regarding the credibility of the underlying allegations of fraud that led to the
suspension.
¶6. On November 16, 2017, an administrative hearing took place before hearing officer
1 “D0140” was the primary code for nursing home patient’s dental evaluations.
3 James Bell. At the administrative hearing, North Sunflower was given the opportunity to
present evidence to support its position that good cause existed to lift or limit the imposed
suspension. North Sunflower argued that the continued implementation of the suspension
would have an adverse effect on Medicaid beneficiaries’ access to necessary medical and
dental services that North Sunflower previously provided. Further, North Sunflower
attempted to offer evidence regarding the lack of credibility of the initial allegations of fraud;
however, after objection, it was not allowed to do so. Within its brief, North Sunflower
alleged that “though it had not been confirmed,” the company suspected that a former
employee was responsible for fraudulent billing and that her actions were potentially the
basis for the suspension. North Sunflower claimed that the fraudulent billing took place
without its knowledge or consent. But this evidence was not allowed or considered at the
administrative hearing. The DOM provided testimony that there would be no adverse effect
on Medicaid beneficiaries as a result of the suspension because there were alternate medical
and dental providers that offered the same types of services offered by North Sunflower.
After the administrative hearing, on December 11, 2017, the DOM lifted the suspension as
to the Ruleville clinic only. On January 24, 2018, hearing officer Bell issued his
recommendation to affirm the remaining suspension of reimbursement payments to North
Sunflower’s dental outreach program and school outreach program. On February 9, 2018,
the executive director of the DOM adopted the hearing officer’s recommendation and
affirmed the remaining suspensions.
¶7. On April 3, 2018, North Sunflower filed its notice of appeal in the Hinds County
4 Chancery Court. After oral and written argument from North Sunflower and the DOM, on
June 6, 2019, the chancery court entered its final judgment of dismissal, which affirmed the
DOM’s decision and dismissed all of North Sunflower’s claims. North Sunflower appealed.
STANDARD OF REVIEW
¶8. “In reviewing decisions of administrative agencies, this court will entertain the appeal
only to determine: whether or not the order of the administrative agency (1) was unsupported
by substantial evidence, (2) was arbitrary and capricious, (3) was beyond the power of
administrative agency to make, or (4) violated some statutory or constitutional right of the
complaining party,” Elec. Data Sys. Corp. v. Miss. Div. of Medicaid, 853 So. 2d 1192, 1202
(¶30) (Miss. 2013) (citing Mainstream Sav. & Loan Ass’n v. Washington Fed. Sav. & Loan
Ass’n, 325 So. 2d 902, 903 (Miss. 1976)). “In administrative matters, the agency, and not
the reviewing court, sits as the finder of fact.” Ross v. State, 286 So. 3d 673, 676 (¶5) (Miss.
Ct. App. 2019) (quoting Pub. Emps.’ Ret. Sys. v. Cobb, 839 So. 2d 605, 609 (¶12) (Miss. Ct.
App. 2003)). “The reviewing court may not substitute its judgment for that of the
administrative agency, or reweigh the evidence.” Id. The rebuttable presumption favors the
final result reached by the agency, the challenging party has the burden to prove otherwise.
Ross v. Epps, 922 So. 2d 847, 849 (¶4) (Miss. Ct. App. 2006) (citing State Bd. of Pub. Acct.
v. Gray, 674 So. 2d 1251, 1253 (Miss. 1996)).
ANALYSIS
¶9. North Sunflower alleged that the suspension imposed by the DOM was not supported
by substantial evidence, was arbitrary or capricious, exceeded the DOM’s authority, and
5 violated North Sunflower’s constitutional rights. More specifically, North Sunflower alleged
that the DOM failed to introduce evidence of any credible allegation of fraud and that North
Sunflower was entitled to an administrative hearing to challenge the sufficiency of the
allegation. North Sunflower also alleged that the DOM wrongfully determined that it lacked
good cause to lift the suspension of reimbursement payments in the midst of the investigation
process.
I. Credible Allegation of Fraud
¶10. North Sunflower alleged that apart from the general allegation of fraud set forth in the
DOM’s initial notice letter on August 30, 2017, there were no further details disclosed
regarding the allegation that led to the Medicaid reimbursement suspension. At the
administrative hearing, North Sunflower attempted to introduce evidence to rebut the
purported allegations of fraud. However, the objections of the DOM were sustained, and no
testimony or evidence was allowed. This appellate record is devoid of any specific details
concerning the initial fraud allegation that resulted in the reimbursement suspension. North
Sunflower argued that pursuant to federal and state regulations, it was entitled to an
administrative hearing on the credibility and sufficiency of the initial allegation of fraud.2
Further, North Sunflower alleges that even if the federal and state regulations did not provide
an avenue for administrative review of the fraud allegation, it should be afforded appellate
review consistent with caselaw. To that end, North Sunflower asserts in it’s brief that
“[w]here there is no provision for appeal, . . . the chancery court has jurisdiction for judicial
2 42 C.F.R. § 455.23(a)(3) (2012); 23 Miss. Admin. Code Pt. 300, R. 1.1(A)-(B) (amended Oct. 1, 2016).
6 review of the actions of such board or agency.” Charter Med. Corp. v. Miss. Health Planning
& Dev. Agency, 362 So. 2d 180, 181 (Miss. 1978). North Sunflower asserts that the MFCU’s
criminal investigation concerning the allegations of fraud does not constitute an adequate
remedy at law and that the DOM’s decision to make the referral to the MFCU was subject
to judicial review.
¶11. Neither party disputes that the DOM made its referral to the MFCU after receiving the
allegation of fraud against North Sunflower. Throughout the entirety of the administrative
hearing process and the appeal process, the MFCU was simultaneously conducting an
ongoing investigation concerning the allegations.
¶12. Federal regulations provide for the implementation of certain steps when a State
Medicaid agency is confronted with fraud allegations. Pursuant to 42 C.F.R. § 455.23(a),
when presented with a credible allegation of fraud, a State Medicaid agency must take the
following action:
(1) The State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud for which an investigation is pending under the Medicaid program against an individual or entity unless the agency has good cause to not suspend payments or to suspend payment only in part. (2) The State Medicaid agency may suspend payments without first notifying the provider of its intention to such payments. (3) A provider may request, and must be granted, administrative review where State law so requires.
(Emphasis added). Further, pursuant to 42 C.F.R. § 455.23(b)(2), the DOM was required to
give North Sunflower notice of the suspension as follows:
The notice must include or address all of the following: (i) State that payments are being suspended in accordance with this provision. (ii) Set forth the general allegations as to the nature of the suspension action, but need not
7 disclose any specific information concerning an ongoing investigation, (iii) State that the suspension is for a temporary period, as stated in paragraph (c) of this section, and cite the circumstances under which the suspension will be terminated, (iv) Specify, when applicable, to which type or types of Medicaid claims or business units of a provider suspension is effective, (v) Inform the provider of the right to submit written evidence for consideration by State Medicaid agency, and (vi) Set forth the applicable State administrative appeals process and corresponding citations to State law.
(Emphasis added). Finally, pursuant to 42 C.F.R. § 455.23(d)(1), “Whenever a State
Medicaid agency investigation leads to the initiation of a payment suspension in whole or
part, the State Medicaid Agency must make a fraud referral to either of the following: (i) To
a Medicaid fraud control unit established and certified under part 1007 of this title . . . .”
(Emphasis added).
¶13. Mississippi state regulations provide almost identical parameters that expound upon
the federal regulations regarding the fraud investigation process. Title 23 of the Mississippi
Administrative Code Part 305, Rule 1.2(B)-(C) states in part:
The Division of Medicaid must make a formal, written fraud referral to the Medicaid Fraud Control Unit (MFCU) for each credible allegation of fraud or an allegation that leads to the initiation of a payment suspension, in whole or in part. . . . The Division of Medicaid must suspend all payments to a provider when the Division of Medicaid determines there is a credible allegation of fraud for which an investigation is pending unless the Division determines that good cause exists to not suspend or partially suspend such payments. . . .”
(Emphasis added). Mississippi Code Annotated section 43-13-219 (Rev. 2015) created the
MFCU to function through the Mississippi Attorney General’s Office, with its role more
specifically described in Mississippi Code Annotated section 43-13- 221 (Rev. 2015). “The
Attorney General, acting through the director of the Fraud Control Unit, may, in any case
8 involving alleged violations of this article, conduct an investigation or prosecution.” Id.
This section bestows the power to issue subpoenas, make arrests and execute search warrants
unto to employees of the Attorney General’s Office working in the MFCU. Title 23 of the
Mississippi Administrative Code Part 305, Rule 1.2(E) state, “The Division of Medicaid may
grant an administrative hearing, if requested by the provider, as described in Miss. Admin.
Code Part 300, to determine whether or not good cause exists to remove a payment
suspension or suspend payment only in part.” (Emphasis added). Title 23 of the
Mississippi Administrative Code Part 300, Rule 1.1(A) provides in part that
[a]dministrative hearings shall be available to providers of services participating in the Mississippi Medicaid program. These hearings are for providers who are dissatisfied with a decision of the Division of Medicaid relating to disallowances, withholdings of funds, refusals in the renewal of a provider agreement, terminations of provider agreements, suspensions of provider participation or matters relating to payment rates or reimbursement if not previously considered by the Division of Medicaid under Public Notice or Public Hearing Procedures.
¶14. In this case, the fraud allegations were referred to the Medicaid fraud unit at the
Mississippi Attorney General’s Office. Further, there is no authority within the relevant
federal or state regulations that requires the DOM to provide an administrative hearing
concerning the sufficiency of the initial allegations of fraud or to disclose any specific
information regarding the fraud allegations under investigation. Pursuant to 42 C.F.R.
§ 455.23(b)(2), the DOM was required to give North Sunflower notice of the suspension to
include only general allegations but not to disclose any specific allegations concerning the
ongoing investigation. The regulation’s obvious goal was to protect the integrity and
9 confidentiality of an ongoing criminal investigation. To hold otherwise could potentially
undermine the ongoing criminal investigation being conducted by the Attorney General’s
Office. Pursuant to both federal and state regulations, the DOM referred the allegations of
fraud to the MFCU, gave North Sunflower the appropriate notice, and suspended
reimbursements pending the outcome of that investigation. North Sunflower’s assertion that
the DOM’s actual decision to refer the allegations of fraud was subject to judicial review is
without merit. Given the fact that both federal and state regulations mandated the DOM’s
referral of the allegations to the MFCU, its actions in that regard were certainly within the
parameters set forth in the law.
¶15. North Sunflower asserted a due-process violation as a result of being denied the
opportunity to challenge the credibility of the underlying fraud allegations. It has been
previously established that pursuant to federal and state regulations the DOM had no
obligation to provide North Sunflower with an administrative hearing specifically regarding
the credibility of the fraud allegations. But, it did have an obligation to grant administrative
review of the continued suspension of payments where state law requires. Pursuant to 23
Mississippi Administrative Code Part 305, Rule 1.2(E), state law required that North
Sunflower be provided with an administrative hearing to determine if good cause existed to
lift or limit the payment suspension. North Sunflower was granted a “good cause” hearing.
North Sunflower appeared at the hearing with counsel and presented its argument regarding
good cause to lift the suspension, thereby defeating a due process claim. The hearing officer
affirmed the suspension of payments as did the DOM. North Sunflower then appealed to the
10 Hinds County Chancery court and provided written briefs and engaged in oral arguments.
The Chancellor affirmed the decision of DOM and dismissed the appeal. That entire process
hardly sounds of due process violations.
¶16. Further, North Sunflower lacked a recognized property interest to support a violation
of a due-process claim of deprivation of liberty or property. “Property interests, of course
are not created by the Constitution. Rather, they are created and their dimensions are defined
by existing rules or understandings that stem from an independent source such as state law—
rules or understandings that secure certain benefits and that support claims of entitlement to
those benefits.” Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972). Nothing
within the federal or state regulations entitled North Sunflower to Medicaid reimbursement
payments during a pending fraud investigation. Specifically, 23 Mississippi Administrative
Code Part 305, Rule 1.2(B) required: “The Division of Medicaid must suspend all payments
to a provider when the Division of Medicaid determines there is a credible allegation of fraud
for which an investigation is pending . . . .” (Emphasis added). In Personal Care Products
Inc. v. Hawkins, 635 F.3d 155, 159 (5th Cir. 2011), the United States Court of Appeals for
the Fifth Circuit stated:
Nothing in Texas or federal law extends a property right in Medicaid reimbursements that are under investigation . . . . Federal law does not prohibit these payment holds and state law explicitly allows them. The statutory scheme does not give PCP a property interest in its present reimbursement claims while past claims are under investigation for fraud.
In this case, nothing within the federal regulations prohibited the suspension of Medicaid
reimbursement payments during an ongoing investigation of fraud, and the Mississippi
11 regulations specifically mandated suspension of all payments. Therefore, the DOM’s refusal
of an administrative hearing on the credibility of the initial fraud allegation did not constitute
a violation of due process. Further, the suspension of Medicaid reimbursement payments
was mandated by 42 C.F.R. § 455.23(a)(1).
¶17. Finally, North Sunflower relies on Charter Medical Corp. v. Mississippi Health
Planning and Development Agency, 362 So. 2d 180, 182 (Miss. 1978), which states, “Where
there is no provision for appeal and injured parties do not have a full, plain, complete and
adequate remedy at law, the chancery court has jurisdiction for judicial review of the actions
of such board or agency.” However, Charter is not applicable here. In this case North
Sunflower had a full, plain, complete, and adequate remedy of law pursuant to state
regulations outlined above. State regulations mandated referral to the MFCU upon receiving
a credible allegation of fraud, and upon accepting the referral, the Attorney General’s Office
could initiate a criminal investigation. Further, State regulations mandated the suspension
of Medicaid reimbursement payments as a result of the referral and investigation. Finally,
state regulations provided for an administrative hearing limited to whether good cause could
be proved to lift or limit the suspension. All of these steps were taken in the current case.
Therefore, we find no error in the chancery court’s decision regarding the denial of North
Sunflower’s request for a hearing regarding the credibility of the initial allegation of fraud.
II. “Good Cause” Determination
¶18. North Sunflower also asserted that good cause existed to lift the suspension of
Medicaid reimbursements imposed by the DOM. North Sunflower alleged that it was the
12 sole source of essential specialized services in the community by virtue of its extended hours
of operation and acceptance of walk-in patients at the Ruleville clinic and unique dental and
school outreach programs. North Sunflower further alleged that the suspension should be
lifted due to its service to beneficiaries within a Health Resources and Services
Administration (HRSA)-designated “medically underserved” area.
¶19. Both federal and state regulations allow the DOM to lift a suspension of Medicaid
reimbursement payments upon a showing of good cause. The Mississippi Administrative
Code provides as follows:
C. The Division of Medicaid must suspend all payments to a provider when the Division of Medicaid determines there is a credible allegation of fraud for which an investigation is pending unless the Division of Medicaid determines that good cause exists not to suspend or partially suspend payments or not to continue a payment suspension previously imposed including but not limited to . . . (2) [t]he Division of Medicaid determining . . . (c) [a] payment suspension would have an adverse effect on beneficiary access to necessary items or services because either of the following is true: (1) An individual or entity is the sole community physician or the sole source of essential specialized services in a community, or (2) The individual or entity serves a large number of beneficiaries within a Health Resources and Services Administration (HRSA) designated medically underserved area.
....
E. The Division of Medicaid may grant an administrative hearing, if requested by the provider, as described in Miss. Admin. Code Part 300, to determine whether or not good cause exists to remove a payment suspension or suspend payment only in part.
23 Miss. Admin. Code Pt. 305, R. 1.2(C) & (E) (emphasis added).
¶20. The DOM’s program integrity director, Alwin Dockins, testified that the DOM
evaluated and considered the factors set forth in 23 Mississippi Administrative Code Part
13 305, Rule 1.2(C) and determined that there was not sufficient evidence in this case to justify
lifting the suspension. Pursuant to 23 Mississippi Administrative Code, Part 305, Rule
1.2(C)(1), Dockins testified that he ran multiple reports to identify the existence of other
providers in the area that offered the same services provided by North Sunflower. Dockins
testified that he reviewed the specific counties and cities where North Sunflower was
offering its dental and school outreach program to determine if the Medicaid beneficiaries
in those areas would be deprived of those services if the suspension was not lifted. There is
nothing “specialized” about the types of services that North Sunflower provided through its
outreach programs. The services provided through those programs included routine dental
evaluations, screening and inoculations. Dockins ultimately determined that North
Sunflower was not the sole provider of those services, and moreover there were Medicaid
dentists all over the state to accommodate those Medicaid beneficiaries.
¶21. Further, Dockins testified that pursuant to 23 Mississippi Administrative Code Part
305, Rule 1.2(C)(2), the DOM considered the fact that North Sunflower provided services
in an area that the HRSA designated as “medically underserved.” However, the majority of
Mississippi has a “medically underserved” HRSA designation. The DOM acknowledged that
the HRSA designation was a factor in determining whether good cause existed but was only
one factor. Furthermore, if the HRSA designation was the only factor to be considered, the
DOM would never be able to suspend a payment for any provider upon a credible allegation
of fraud due to the fact that the majority of Mississippi falls into that category.
¶22. Finally, after considering beneficiary access to comparable medical and dental
14 treatment and North Sunflower’s HRSA “medically underserved” designation, the DOM
determined that it lacked good cause to lift or limit the imposed suspension. More
specifically, there was no adverse effect on beneficiary access to necessary items or services
as a result of the suspension. The DOM’s determination that there was not good cause to lift
the suspension is supported by substantial evidence and is not arbitrary or capricious.
CONCLUSION
¶23. The DOM’s decision not to lift the suspension of reimbursement payments was not
arbitrary nor capricious. Further, we find that the DOM acted within its power to deny North
Sunflower’s request for an administrative hearing on the credibility of the initial allegation
of fraud and to continue the suspension of reimbursements. Finally, we find that the actions
of the DOM did not violate any statutory or constitutional rights afforded to North
Sunflower. Accordingly, we affirm the chancery court’s judgment.
¶24. AFFIRMED.
BARNES, C.J., CARLTON AND WILSON, P.JJ., GREENLEE AND McCARTY, JJ., CONCUR. WESTBROOKS AND McDONALD, JJ., CONCUR IN RESULT ONLY WITHOUT SEPARATE WRITTEN OPINION.