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Hidden Heights Assisted Living, Inc. v. State, Dept. of Health and Social Services, Div. of Health Care Services

Supreme Court of Alaska

December 31, 2009


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[Copyrighted Material Omitted]

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John C. Pharr, Law Offices of John C. Pharr, Anchorage, for Appellant.

Jonathan P. Clement, Assistant Attorney General, Anchorage, and Talis J. Colberg, Attorney General, Juneau, for Appellee.

Before FABE, Chief Justice, EASTAUGH, CARPENETI, WINFREE, and CHRISTEN, Justices.


CHRISTEN, Justice.


Medicaid provider Ernest Reeves, doing business as Hidden Heights Assisted Living, Inc. (" Hidden Heights" or " the facility" ), appeals the finding that the facility received $47,686.79 in Medicaid overpayments. We conclude that Hidden Heights cannot invoke the doctrine of equitable estoppel to prevent the Department of Health and Social Services (" DHSS" ) from enforcing the applicable record-keeping and audit regulations. But because DHSS agreed to give Hidden Heights an evidentiary hearing, we conclude it was an abuse of discretion to exclude documentary evidence Hidden Heights offered to prove that it provided compensable services. We remand for consideration of this evidence.


A. Facts

Reeves owns and operates Hidden Heights, a residential facility for elderly male adults. Reeves and a few employees provide care to five residents. The facility is certified as a home and community-based waiver

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provider; it has been enrolled as a Medicaid provider since 1999.[1]

Hidden Heights appeals the results of a ruling issued after DHSS conducted record and field audits of documentation supporting Hidden Heights's bills for services. Because an overview of federal and state Medicaid law is necessary to address Hidden Heights's appeal, we first discuss applicable federal and state law.

1. Medicaid audits and record-keeping requirements

The Medicaid program is " a cooperative federal-state partnership under which participating states provide federally-funded medical services to needy individuals." [2] A state's participation in the Medicaid program is voluntary, but " once a state decides to participate, it must comply with federal statutory and regulatory requirements." [3] Alaska participates in the Medicaid program, and DHSS promulgated regulations in 7 Alaska Administrative Code (AAC) 43 to implement and administer it.[4]

a. Applicable federal law

The federal Medicaid Act requires that states establish record-keeping requirements for providers.[5] It also requires that states audit provider records to monitor the use of Medicaid funds.[6] States must establish Medicaid provider agreements under which a provider agrees to (1) " [k]eep any records necessary to disclose the extent of services the provider furnishes to recipients," and (2) provide this information, as well as " any information regarding payments claimed by the provider for furnishing services under the plan," to a Medicaid agency upon request.[7] Additionally, under 42 U.S. C. § 1396a(a)(42), " [a] State plan for medical assistance must ... provide that the records of any entity participating in the plan and providing services reimbursable on a cost-related basis will be audited as the Secretary determines to be necessary to insure that proper payments are made under the plan." [8]

One purpose of record audits is to identify improper payments,[9] such as overpayments.[10] Under 42 C.F.R. § 433.304, " [o]verpayment means the amount paid ... to a provider which is in excess of the amount that is allowable for services furnished under section 1902 of the Act and which is required to be refunded under section 1903 of the Act." When a state identifies an overpayment, it must seek recoupment.[11] And the state's

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share of federal Medicaid funds is " reduced ... to the extent of any overpayment." [12]

b. Applicable Alaska law

Under Alaska's Medicaid program, providers like Hidden Heights may seek payment for " medical services rendered to Medicaid recipients," [13] but not for room and board.[14] Providers in Alaska are not required to submit supporting documentation at the time payment is requested, but they are required to maintain records of the services they provide [15] and to submit to record audits.[16]7 AAC 43.065 requires that providers " comply with applicable state and federal Medicaid law" and " cooperate in reports, surveys, reviews, or audits conducted by the department." [17]7 AAC 43.065 also states:

The provider shall retain records necessary to disclose fully to the division the extent of services provided to recipients. Information regarding any payment must be made available, upon request, to division and federal personnel.[[18]]

Since 1997, 7 AAC 43.030 has required that Medicaid providers maintain records to support requests for payment.[19] It states:

A provider shall maintain accurate financial, clinical, and other records necessary to support the care and services for which payment is requested. The provider is responsible to assure that the provider's designated billing service, or other entity responsible for the maintenance of financial, clinical, and other records, meets the requirements of this section.[[[20]]

The regulation also defines what provider records must contain: they must " identify patient information including (1) recipient receiving treatment; (2) specific services provided; (3) extent of each service provided; (4) date on which each service is provided; and (5) individual who provided each service." [21]

Alaska's Medicaid regulations have provided for post-payment audits of provider records since 1997.[22] Former 7 AAC 43.067, which was in effect when Hidden Heights submitted the billing records at issue, stated, in relevant part, that DHSS " may conduct a

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desk review, field audit, or audit of a provider to determine the provider's compliance with the requirements of 7 AAC 43.030 and with other requirements of this chapter." [23]7 AAC 43.032(d) authorized DHSS to identify overpayments on the basis of a provider's failure to provide ...

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