COURT OF APPEALS OF VIRGINIA
Present: Judges Beales, Alston and Senior Judge Haley
UNPUBLISHED
Argued at Richmond, Virginia
ALICE C. TYLER VILLAGE
FOR CHILDHELP
MEMORANDUM OPINION BY
v. Record No. 0028-16-2 JUDGE ROSSIE D. ALSTON, JR.
JANUARY 17, 2017
CYNTHIA B. JONES, DIRECTOR,
VIRGINIA DEPARTMENT OF
MEDICAL ASSISTANCE SERVICES
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Margaret P. Spencer, Judge
Albert W. Shay (Morgan, Lewis & Bockius, LLP, on briefs), for
appellant.
Usha Koduru, Assistant Attorney General (Mark R. Herring,
Attorney General; Cynthia V. Bailey, Deputy Attorney General;
Kim F. Piner, Senior Assistant Attorney General, on brief), for
appellee.
Alice C. Tyler Village for Childhelp (Childhelp) appeals the circuit court’s decision to
affirm the opinion of Director Cynthia Jones of the Virginia Department of Medical Assistance
Services (DMAS) holding that DMAS overpaid Childhelp $1,173,264.06 in Medicaid funding.
Childhelp asserts four assignments of error:
I. Regarding Error Code 9004, for the Period of July 20, 2008
through March 31, 2009 during which Childhelp used a
revised treatment form, the decision of the Director is not
supported by substantial evidence as it ignores the record
evidence of Childhelp and the testimony of Childhelp’s
witnesses, which the hearing officer found to be persuasive.
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
II. Regarding Error Code 9008, for the period January 1, 2008
through July 19, 2008, the Director erred in not applying
contract standards of law to determine whether any
deficiency in Childhelp’s documentation constituted a
material breach of the provider agreement, and if it did, in
not requiring DMAS to prove the amount of damages
incurred by DMAS that arose from such breach.
III. Regarding Error Code 9004, for the period of January 1,
2008 through July 19, 2008 the Director’s determination
that Childhelp failed to comply with the requirements of
Manual Section B.1.b. by not furnishing twenty-one
sessions of treatment interventions per week is not
supported by substantial evidence and is error.
IV. The Director erred under Code § 32.1-325.1(B) because she
failed to adopt the hearing officer’s recommended decision
when such decision complied with applicable law and
DMAS policy, and failed to provide due deference to the
findings of fact made by the hearing officer.
We find that under the applicable standard of review that the Director erred under Code
§ 32.1-325.1(B) by failing to adopt the hearing officer’s recommended disposition of the matter.1
Thus, the matter is reversed and remanded to be considered consistent with the factual findings
of the hearing officer.
BACKGROUND
On March 21, 2002, Childhelp entered into an agreement with DMAS to receive
Medicaid funding. Childhelp is a not-for-profit residential treatment center that provides
services to abused, neglected, and at-risk children who suffer from severe mental, emotional, and
behavioral disorders. DMAS is the agency in the Commonwealth responsible for administering
1
Because we find consistent with Childhelp’s fourth assignment of error, that the circuit
court erred when it upheld the Director’s decision disregarding the hearing officer’s
recommended decision, it is unnecessary for this Court to address the other assignments of error.
See Luginbyhl v. Commonwealth, 48 Va. App. 58, 64, 628 S.E.2d 74, 77 (2006) (“[A]n appellate
court decides cases ‘on the best and narrowest ground available.’” (quoting Air Courier
Conference v. Am. Postal Workers Union, 498 U.S. 517, 531 (1991) (Stevens, J., concurring))).
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the Medicaid program. The agreement laid out what Childhelp was required to do to receive
Medicaid funding, which included keeping “such records as DMAS determines necessary,” and
“furnishing DMAS, on request, information regarding payments claimed for providing services
under the state plan.” The agreement also included a provision stating: “the applicant agrees to
comply with all applicable state and federal laws, as well as administrative policies and
procedures of DMAS.” These policies and procedures included the Psychiatric Services
Provider Manual, provided by DMAS, which sets out how psychiatric facilities seeking
Medicaid funding should be run.
On February 11, 2008, the accounting firm of Clifton Gunderson LLP, working for
DMAS, conducted an audit of Childhelp’s facility. After conducting the audit, JoAnn Hicks, an
employee of Clifton Gunderson, wrote to Childhelp to discuss the deficiencies that she found
among their patient records, including that the records did not provide the appropriate
documentation to prove that their patients received the required twenty-one non-billable
treatment sessions each week.
In July of 2008, Childhelp started using a revised form when documenting the twenty-one
non-billable treatment sessions. This new form included a column for Childhelp’s employees to
note the plan for each patient’s next treatment session.
On July 14, 2008, Childhelp provided Clifton Gunderson LLP with supporting
documents to prove that they were in compliance with the agreement and the Psychiatric
Services Provider Manual. Clifton Gunderson LLP reviewed the supplemental documentation,
and wrote a letter on April 28, 2009 to notify Childhelp that there were no longer any
deficiencies in their billing records.
In 2010, Clifton Gunderson LLP began another audit of Childhelp, reviewing medical
records ranging from January 1, 2008 to March 31, 2009. On September 29, 2010, Hicks
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informed Childhelp that there were two issues with their records, delineated as Error Code 9004
and 9008. Error Code 9004 represented that a provider had failed to properly document
twenty-one non-billable treatment sessions per week for each patient. Error Code 9008 stood for
the cases where a provider failed to provide sufficient progress notes to meet the documentation
requirement. Because of these issues, Hicks stated that Childhelp had been overpaid
$1,173,264.06 by DMAS.
On October 28, 2010, Childhelp filed an appeal of the audit, and on January 28, 2011 an
internal fact finding conference was held. On March 30, 2011 an informal appeal decision was
issued upholding a finding of overpayment by DMAS to Childhelp. Childhelp appealed the
informal appeal decision on April 27, 2011, and on August 4, 2011 a hearing took place in front
of Hearing Officer William S. Davidson.
Dr. Mark Horner, an employee of Childhelp, testified at the August 4, 2011 hearing.
Dr. Horner stated that he reviewed DMAS’s decision suggesting that Childhelp did not provide
or adequately document the twenty-one non-billable weekly treatment sessions for each patient.
Dr. Horner testified that the treatment form used by Childhelp adhered to the requirements of the
Psychiatric Services Provider Manual Chapter IV(B)(2)(c), which states that to count toward the
twenty-one non-billable treatment sessions, “progress notes for each session must describe how
the activities of the session relate to the recipient-specific goals, the frequency and duration of
the session, the level of participation in the treatment, the type of session (group, individual) and
the plan for the next session.” Dr. Horner stated that Childhelp abided by this provision because
daily participation of the children is specifically documented, the type of session is listed on the
form, and a variety of therapeutic sessions approved by the Psychiatric Services Manual were
used. The sessions included “socialization skills, self-care skills like calming down, taking care
of personal hygiene and transitioning into bed, which is critical for children who have either been
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deprived or neglected.” Additionally, there was a comprehensive plan of care for each patient
that contextualized the interventions within the comprehensive treatment plan that licensed
professionals developed to help children improve.
Dr. Deborah Mack, another employee of Childhelp, also testified at the hearing that she
was aware of the requirement that each child receive twenty-one non-billable treatment sessions
per week. According to Dr. Mack, the treatment sessions were documented in the initial plan of
care near the end of each child’s report. On a daily basis the childcare counselors monitored
progress towards each child’s goals; this was documented on the problem behavior list in the
medical record. Dr. Mack looked at several different children’s files and identified where the
treatment sessions were located and how they were documented. From this information, she
testified that each child had the opportunity to receive more than twenty-one treatment sessions
during the weekdays. Dr. Mack stated that the treatment documentation form described the
purpose of the treatment, the frequency and duration of the treatment session, what the patient’s
level of participation was, the types of session and where it was located, and what the facility had
planned for each resident’s next session.
Brooks Haas, Childhelp’s resident manager, testified at the hearing that Childhelp
provided many different types of sessions for their patients, from recreation, to hygiene and
self-soothing. Each of these sessions catered to different behavioral issues. Haas testified about
how different intervention techniques were used on the children to meet their needs and to help
with their behavioral problems. He detailed what he included in each patient report, such as the
child’s level of participation, purpose of the treatment, how the child responded to treatment, and
additional skills that counselors could envision their patients developing.
Hicks, a Senior Manager with Clifton Gunderson LLP, who helped perform audits on
Childhelp, stated that the Psychiatric Services Provider Manual specifically stated what had to be
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included in the documentation for each patient to meet the requirement of twenty-one
non-billable treatment sessions. If twenty-one distinct sessions were not present in a patient’s
records, from an audit standpoint, then a retraction for the week of services would occur. Hicks
testified that there was no description of the interventions relating to the client-specific goals
within the documentation she reviewed, which was a requirement. Hicks stated that she
considered recreation and social skills as part of the twenty-one sessions. However, she could
not determine the therapeutic value of activities that fell under the categories of
self-soothing/nurturing, hygiene, and manners. According to Hicks, these are basic human
requirements and Childhelp did not provide a description for how these activities related to
client-specific goals and treatment. In Hicks’s expert opinion, where the auditors identified an
error code, Childhelp did not comply with DMAS’s documentation requirements.
On October 26, 2011, after hearing the testimony, reviewing all the exhibits, and
examining the Psychiatric Services Provider Manual, the hearing officer recommended
overturning DMAS’s determination that Childhelp had been overpaid $1,173,264.06 in Medicaid
funding.
On December 22, 2011, DMAS’s Director issued the final agency decision in which she
declined to adopt the hearing officer’s recommendation, citing legal error. Childhelp was
ordered to pay DMAS back $1,173,264.06 in Medicaid funding.
Childhelp filed an appeal of the final agency decision with the Circuit Court of the City
of Richmond. A hearing was held on July 30, 2014. The circuit court issued its opinion on
December 12, 2015 upholding the final agency decision that Childhelp had been overpaid for
Medicaid funding because it met the standard set forth in Code § 32.1-325.1(B). This appeal
followed.
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ANALYSIS
Childhelp argues that the Director of DMAS erred when she did not adopt the hearing
officer’s recommended decision. We agree.
To address this issue, we must consider Code § 32.1-325.1(B), which provides: “[t]he
Director shall adopt the hearing officer’s recommended decision unless to do so would be an
error of law or Department policy. Any final agency case decision in which the Director rejects
a hearing officer’s recommended decision shall state with particularity the basis for rejection.”
In analyzing statutes, the appellate court reviews the issue de novo. 1st Stop Health Servs. v.
Dep’t of Med. Assistance Servs., 63 Va. App. 266, 275, 756 S.E.2d 183, 188 (2014).
In 1st Stop Health Services, this Court found that the Director of DMAS did not err when
disagreeing with a hearing officer’s determination that a particular form was unnecessary to
verify billing records and by disagreeing with the hearing officer’s conclusion that a Medicaid
provider had borne its burden of proof. 63 Va. App. at 276, 756 S.E.2d at 188. The Court also
found that the Director articulated the reasoning behind her decision to reject the hearing
officer’s recommendation with ample particularity. Id.
In this case, the parties had a formal hearing before a hearing officer on August 4, 2011.
After considering all of the relevant evidence, the hearing officer recommended overturning
DMAS’s retraction of $1,173,264.06 in Medicaid funding. The Director declined to follow the
hearing officer’s recommendation, found legal error, and told Childhelp they needed to refund
the money to DMAS. As in 1st Stop Health Services, the Director here listed reasons in the final
agency decision for not following the hearing officer’s recommendation. However, unlike in 1st
Stop Health Services, the final agency decision was not accomplished with the required level of
specificity. See id. In 1st Stop Health Services, appellant was told to have a specific form to
verify billing records, but appellant did not do so. Id. This case is not factually similar.
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Here, the Director determined that “manners, nurturing, and self-soothing were not
identified as interventions because they were not noted in the plans of care as interventions.”
However, at the hearing Childhelp’s witnesses were able to articulate exactly how these activities
helped patients and could count toward the twenty-one non-billable sessions. The Director also
stated in the final agency decision that: “[a] Provider’s statements may not be used to substitute
for DMAS documentation.” This is generally true, but when sessions are documented in each
patient’s report and employees can further establish the link between each session and a patient’s
plan of care, those sessions should be taken into consideration. Looking at the hearing officer’s
recommendation, he determined that the evidence presented regarding different sessions and
patients’ plans of care established such a link. The Director of DMAS is authorized to reject the
factual findings of the hearing officer that are not based on the hearing officer’s express
observations of the demeanor of the witnesses. Beverly Health & Rehab. Servs. v. Metcalf, 24
Va. App. 584, 591, 484 S.E.2d 156, 160 (1997). However, the hearing officer is the one that
listens to the testimony of the witnesses and makes a determination based on the evidence
presented to him. Code § 32.1-325.1(B) provides that the Director should adopt the hearing
officer’s recommendation unless “to do so would be an error of law or Department policy,”
showing that the Director should give deference to the hearing officer’s recommendation. It is
also important to note that in a previous 2008 audit, Childhelp was able to submit supplemental
documentation to further explain how it abided by the terms of its agreement with DMAS, and
the auditors ultimately found no billing errors. This shows that Childhelp could reasonably
assume that they would have the opportunity to explain any issues found by the auditors.
A final agency decision must identify specific reasons why a hearing officer was wrong
and how there was no evidentiary support for the recommendation. When Childhelp’s
employees testified, they were able to tell the hearing officer exactly where the twenty-one
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non-billable treatment sessions were listed, how they fit into each patient’s plan of care, and how
each continued their treatment. To allow the Director of DMAS to disregard the
recommendation of the hearing officer simply because she does not agree with his
recommendation would undermine the procedural integrity currently in place. The hearing
officer is the individual who actually listens to witnesses testify and makes factual
determinations. In these particular circumstances, the Director erred by not adopting the hearing
officer’s recommended decision.
CONCLUSION
For the reasons state above, this Court reverses the decision of the circuit court, and
remands the case to be considered on remand consistent with the factual findings of the hearing
officer.
Reversed and remanded.
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