N.P. VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES (NEW JERSEY DEPARTMENT OF HUMAN SERVICES)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0593-17T4

N.P.,

Petitioner-Appellant,

v.

DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES and UNITED
HEALTHCARE COMMUNITY
PLAN,

Respondents-Respondents.
_____________________________

Submitted December 6, 2018 – Decided May 24, 2019

Before Judges O'Connor and DeAlmeida.

On appeal from the New Jersey Department of Human
Services, Division of Medical Assistance and Health
Services.

Disability Rights New Jersey, attorneys for appellant
(August L. Pozgay, on the briefs).

Gurbir S. Grewal, Attorney General, attorney for
respondent Division of Medical Assistance and Health
Services (Melissa H. Raksa, Assistant Attorney
 General, of counsel; Jacqueline R. D'Alessandro,
Deputy Attorney General, on the brief).

Stradley Ronon Stevens & Young, LLP, attorneys for
respondent United Healthcare Community Plan (Corey
S. D. Norcross, on the brief).

PER CURIAM

Petitioner N.P. appeals from the September 27, 2017 final agency decision

of the Division of Medical Assistance and Health Services (Division), which

reversed the Administrative Law Judge's (ALJ) initial decision. The initial

decision found respondent United Healthcare Community Plan (United), a

managed care organization (MCO), failed to provide petitioner with notice of its

adverse benefit determination, contrary to N.J.A.C. 10:49-10.4 and 42 C.F.R.

438.404, and ordered United to provide the proper notice to petitioner. The ALJ

contemplated that after proper notice was served upon petitioner, a fair hearing

would be scheduled on the underlying substantive issue. For the reasons that

follow, we vacate the Division's final decision and remand for further

proceedings.

I

Petitioner is a severely impaired young woman, who resides at home with

her father, her primary caregiver. She requires monitoring twenty-four hours a

day. She cannot eat or speak, and is unable to sit, stand or change positions on

A-0593-17T4
2
her own. She is fed and hydrated through a gastrostomy tube. She needs oral

suctioning to prevent her from choking. She experiences frequent seizures,

which occur even when she sleeps, for which she requires treatment.

In 2000, petitioner commenced receiving sixteen hours a day of private

duty nursing (PDN) in her home. In 2016, she was receiving PDN from 3:00

p.m. to 10:00 p.m. and from 11:00 p.m. to 8:00 a.m. Petitioner attends school

during the week from 8:00 a.m. to 3:00 p.m. When she is not in school or there

is no nurse in her home, she is cared for by her father.

Petitioner's nursing care is paid by Medicaid. In particular, United pays

the nursing agency for the cost of providing nurses to petitioner and Unite d is

compensated by Medicaid. As a MCO, United contracted with the State to

provide or to oversee providing services to Medicaid beneficiaries in exchange

for a fixed, prospective payment from the State for each beneficiary. See

generally Medicaid Program; Medicaid Managed Care: New Provisions, 67 Fed.

Reg. 40,989 (June 14, 2002).

In early 2016, United notified petitioner's father it was reducing

petitioner's PDN services from 112 to 77 hours per week, effective March 1,

2016. United's reason was that, as her primary caretaker, the father was required

to provide petitioner with at least eight hours of care every day. Petitioner

A-0593-17T4
3
internally appealed United's determination, see N.J.A.C. 11:24-8.5, but it was

upheld. Petitioner filed a second internal appeal, see N.J.A.C. 11:24-8.6(a), but

United's determination was again upheld. Petitioner filed an external appeal

pursuant to N.J.A.C. 11:24-8.7(a), and the Department of Banking and Insurance

assigned the appeal to an independent utilization review organization (IURO)

for its review and decision.

On May 5, 2016, the IURO issued a written decision recommending that

United's decision to reduce petitioner's PDN from 112 to 77 hours per week be

overturned, because petitioner's need for 16 hours of PDN per day was medically

necessary in light of her medical condition. Specifically, the IURO's written

opinion stated in pertinent part:

[Petitioner] meets medical necessity criteria for
confinement in a skilled nursing facility, and placement
of the nurse in the home is done to meet the skilled
needs of [petitioner] only, not the convenience of the
family caregiver. It also follows recommendations
made by the American Academy of Pediatrics (AAP) in
regard to the "medical home" for children with
significant disabilities . . . and with the guidelines
outlined by the Centers for Medicare & Medicaid
Services (CMS) . . . . In addition, Noah et al discusses
how children who are chronically ill require the support
of trained family caregivers with the help of skilled
nursing support, as is requested in this case . . . .

....

A-0593-17T4
4
 Giving this enrollee one hundred and twelve
(112) hours per week of PDN care is appropriate for her
level of care and the standards of care. The enrollee
was previously approved for this level of nursing care,
and her nursing needs have not decreased. . . . She
requires around the clock medications, respiratory
treatments, feedings and oral suctioning. The requested
service allows the enrollee to attend school during the
day and for the caregiver to sleep at night.

[(Emphasis added).]

Because of its relevance to one of the issues, we note that, when summarizing

petitioner's history, the IURO remarked that "[petitioner] does not have a one

(1) on one (1) nurse during school hours."

It is not disputed the IURO's decision is binding upon United. See

N.J.A.C. 11:24-8.7. In a letter dated May 6, 2016, United advised petitioner that

the IURO had reversed United's decision to reduce the number of PDN hours to

be provided for her care. The letter stated:

Please be advised that [United] recently received
a copy of the letter from [the IURO] regarding the
status of the external appeal on behalf of [petitioner] for
coverage of continued private duty nursing services for
112 hours/week from 3/1/16 forward. It is our
understanding that you received a copy of this letter
dated 5/5/16[,] which reversed [United's] denial of
coverage for these services.

Based on this review, the initial denial for
continued private duty nursing services for 112

A-0593-17T4
5
 hours/week from 3/1/16 forward has been withdrawn,
and the services are approved.

Thereafter, on an unspecified date in June or July 2016,1 United faxed an

"Authorization Letter" to the nursing agency that provided private nurses to

petitioner. That letter advised the nursing agency that 35 of the 112 hours of

PDN to which petitioner was entitled every week had to be utilized during school

hours, "whether or not [petitioner] attends school."

Petitioner did not receive written notice of United's decision to allocate

the PDN hours between home and school. Petitioner's father learned of United's

decision from a telephone call placed to him from one of the nurses at the nursing

agency. On July 19, 2016, petitioner forwarded a letter to the Division, claiming

United had not provided her with a notice of the aforementioned change in her

benefits and that United was unwilling to provide her with notice. In her letter,

petitioner stated she was requesting a Medicaid fair hearing to challenge

United's determination that 35 of 112 hours of PDN she was to receive each

1
The parties state the Authorization Letter was sent on June 3, 2016, but the
copy of the letter provided in the record does not show the date of the letter.
There is a date of June 3, 2018 imprinted on the letter, but it is clear such date
was generated by a facsimile server, not to mention it is unlikely the letter was
drafted and sent to the nursing agency in 2018.
A-0593-17T4
6
week had to be used while she was at school, as well as United's failure to

provide notice to her of its determination.

The Division ultimately agreed to transmit the July 19, 2016 letter

requesting a fair hearing to the Office of Administrative Law, where it was filed

as a contested matter. After the fair hearing was scheduled, the matter was

adjourned so the parties could brief the issue of whether United properly notified

petitioner that it intended to allocate PDN services between petitioner's home

and school. At the conclusion of oral argument on that issue, the ALJ

determined petitioner had not been properly noticed and ordered United to do

so.

The ALJ also stated he would schedule a fair hearing. Although he did

not expressly state as such, in context it was clear the subject of that fair hearing

was going to be whether United could allocate the hours of petitioner's PDN

services between home and school. United then requested and the ALJ agreed

to provide a written decision on the issue of notice. The ALJ thereafter noted

his decision on notice was going to be an initial one and, thus, would have to be

reviewed and a final decision rendered by the Director of the Division. The ALJ

indicated he would schedule a fair hearing after the Division made its final

decision.

A-0593-17T4
7
 The salient points in the ALJ's written initial decision are as follows.

Citing N.J.A.C. 10:60-5.1(b), the ALJ noted PDN services rendered to Medicaid

beneficiaries receiving managed long-term support services are provided in the

home. In addition, N.J.A.C. 10:49-10.4(a)(1) states a Medicaid agent must

provide a Medicaid beneficiary timely advance notice of the agent's intention to

terminate, reduce or suspend assistance for a beneficiary. There is no question

United is a Medicaid agent and petitioner a Medicaid beneficiary.

The regulation states that the notice an agent is to provide to a beneficiary

must be in writing, state the action the agent intends to take, detail the reasons

for the proposed action, provide the specific regulations that support or the

change in federal or state law that requires the action, and the beneficiary's right

to a fair hearing. N.J.A.C. 10:49-10.4(a)(2). The beneficiary must receive such

notice at least ten days before the action is taken. N.J.A.C. 10:49-10.4(a)(1).

The ALJ rejected United's argument that it did not make a new

determination but, rather, had merely implemented the IURO's decision and,

thus, was not obligated to provide petitioner with any notice of the subject

action. The ALJ pointed out the IURO did not sanction the reduction of hours

in the home. The matter was reviewed by the IURO because United reduced the

number of PDN hours from 112 to 77 per week and petitioner challenged such

A-0593-17T4
8
action. After reviewing the matter, the IURO found 112 hours of PDN per week

medically necessary. The IURO did not state the hours should be allocated

between home and school.

United also argued the following comment in the IURO's written decision

justified United's allocation of hours between home and school: "[t]he requested

service allows the enrollee to attend school during the day and for the caregiver

to sleep at night." The ALJ observed that such comment:

in no way set forth that a portion of the 112 hours were
to be used while N.P. was at school; at best, this
statement represented [IURO's] hope that sufficient
PDN hours at home would have allowed N.P. to
continue to be able to attend school.

Nowhere in [the IURO's] decision did they specify that
35 hours per week were to be used at school and 77
hours per week were to be used at home.

It was [United] who made the determination to
reduce the number of weekly PDN hours to be provided
at home from 112 to 77, and required that 35 weekly
PDN hours were to be used at school. It was United
Healthcare's medical director who "mandated that the
PDN hours be used when the member attends school."

The ALJ concluded that, because it was United's determination to reduce PDN

hours in the home, United was required to provide notice to petitioner in

accordance with N.J.A.C. 10:49-10.4.

A-0593-17T4
9
 In addition, the ALJ observed federal regulation 42 C.F.R. 438.400(b)

requires a MCO to provide notice that is comparable to that required in N.J.A.C.

10:49-10.4. Although the ALJ cited 42 C.F.R. 438.400(b), it is clear he intended

to cite 42 C.F.R. 438.404(b). However, a reading of 42 C.F.R. 438.400(b)

defines the term adverse benefit determination, which includes:

(1) The denial or limited authorization of a
requested service, including determinations based on
the type or level of service, requirements for medical
necessity, appropriateness, setting, or effectiveness of
a covered benefit.

(2) The reduction, suspension, or termination of
a previously authorized service. . . .

42 C.F.R. 438.404(b) details the contents that the notice must provide to an

enrollee of an adverse benefit determination. 2 The ALJ concluded United did

not provide the kind of notice required by 42 C.F.R. 438.404(b).

The ALJ rejected United's argument that, given a fair hearing was to be

scheduled on the underlying substantive issue, the lack of any notice to

petitioner was harmless. The ALJ observed the notice a MCO is to provide an

enrollee must include certain information, which United did not provide to

2
We are aware 42 C.F.R. 438.400 and 42 C.F.R. 438.404 were amended
effective July 5, 2016. However, with respect to the issues raised on appeal, the
regulations remained essentially the same after the amendments went into effect.

A-0593-17T4
10
petitioner. The ALJ noted, "[t]here can be no due process when a petitioner

would be deprived of a meaningful hearing because he or she lacks knowledge

as to how and why an agency has taken a certain action."

We note here N.J.A.C. 10:49-10.4(a)(2) requires that notice:

means a written notice that includes a statement of the
action the Medicaid Agent or DMAHS intends to take,
reasons for the proposed departmental action, the
specific regulations that support, or the change in
Federal or State law that requires the action, the
claimant's right to request a fair hearing, or in cases of
a departmental action based on a change in law, the
circumstances under which a hearing shall be granted,
and the circumstances under which assistance shall be
continued if a fair hearing is requested.

In pertinent part, 42 CFR 438.404(b) requires that a notice include the

following:

(b) Content of notice. The notice must explain the
following:

(1) The adverse benefit determination the MCO
. . . has made or intends to make.

(2) The reasons for the adverse benefit
determination, including the right of the enrollee
to be provided upon request and free of charge,
reasonable access to and copies of all documents,
records, and other information relevant to the
enrollee's adverse benefit determination. Such
information includes medical necessity criteria,
and any processes, strategies, or evidentiary
standards used in setting coverage limits.

A-0593-17T4
11
 (3) The enrollee's right to request an appeal of the
MCO's . . . adverse benefit determination,
including inform ation on exhausting the MCO's
. . . one level of appeal described at § 438.402(b)
and the right to request a State fair hearing
consistent with § 438.402(c).

(4) The procedures for exercising the rights
specified in this paragraph (b).

(5) The circumstances under which an appeal
process can be expedited and how to request it.

The ALJ ordered United to provide the appropriate notice to petitioner,

and his initial decision was filed with the Director of the Division for her

consideration.

In reversing the initial decision, the Director noted the IURO had observed

that petitioner "does not have a one on one nurse during school hours." The

Director also noted the IURO had commented that 112 hours of PDN services

each week, "allows the enrollee to attend school during the day and for the

caregiver to sleep at night."

In the Director's view, when United decided that some of petitioner's PDN

services had to be rendered at school, United was not taking any independent

action. Rather, United was implementing the IURO's binding decision.

Therefore, the Director reasoned, United was not required to provide petitioner

with notice as mandated in N.J.A.C. 10:49-10.4 and 42 CFR 438.404, as it was

A-0593-17T4
12
not a new, adverse benefits determination. Finally, according to the Director,

although petitioner asked for a fair hearing to contest the implementation of

PDN services while she was at school, she failed to address such issue when

before the ALJ.

II

We recognize our role in reviewing agency decisions is limited. R.S. v.

Div. of Med. Assistance & Health Servs., 434 N.J. Super. 250, 260-61 (App.

Div. 2014). "An administrative agency's decision will be upheld 'unless there is

a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks

fair support in the record.'" Id. at 261 (quoting Russo v. Bd. of Trs., Police &

Firemen's Ret. Sys., 206 N.J. 14, 25 (2011)). "Appellate courts, however, are

not bound by an agency interpretation of a strictly legal issue when that

interpretation is inaccurate or contrary to legislative objectives." G.S. v. Dep't

of Human Servs., 157 N.J. 161, 170 (1999) (citation omitted). To determine

whether agency action is arbitrary, capricious, or unreasonable, we examine:

(1) whether the agency action violates the enabling act's
express or implied legislative policies; (2) whether
there is substantial evidence in the record to support the
findings upon which the agency based application of
legislative policies; and (3) whether, in applying the
legislative policies to the facts, the agency clearly erred
by reaching a conclusion that could not reasonably have
been made upon a showing of the relevant factors.

A-0593-17T4
13
 [H.K. v. Div. of Med. Assistance & Health Servs., 379
N.J. Super. 321, 327 (App. Div. 2005) (quoting Public
Serv. Elec. v. Dep't of Envtl. Prot., 101 N.J. 95, 103
(1985)).]

"The federal Medicaid Act, Title XIX of the Social Security Act, 42

U.S.C. §§ 1396 to 1396w-5, mandates a joint federal-state program to provide

medical assistance to individuals 'whose income and resources are insufficient

to meet the costs of necessary medical services.'" E.B. v. Div. of Med.

Assistance & Health Servs., 431 N.J. Super. 183, 191 (App. Div. 2013) (quoting

42 U.S.C. § 1396 -1). Although a State is not required to participate, "[o]nce a

state joins the program, it must comply with the Medicaid statute and federal

regulations." Ibid.

"The New Jersey Medical Assistance and Health Services Act, N.J.S.A.

30:4D -1 to -19.5, authorizes New Jersey's participation in the federal Medicaid

program." Id. at 192. DMAHS is the agency within the State Department of

Human Services that administers the Medicaid program. N.J.S.A. 30:4D-7.

Accordingly, DMAHS is responsible for protecting the interests of the New

Jersey Medicaid program and its beneficiaries. E.B., 431 N.J. Super. at 192

(citing N.J.A.C. 10:49-11.1(b)).

In our view, for the reasons set forth in the ALJ's initial decision, United

was obligated to provide petitioner with notice of its decision to use some of

A-0593-17T4
14
petitioner's weekly allotment of PDN services while she was in school, and such

notice had to be in accordance with N.J.A.C. 10:49-10.4(b) and 42 C.F.R.

438.404(b). United was not implementing the IURO's decision. The IURO did

not state petitioner was not getting the kind of care she requires while at school

or that the PDN hours allotted to her were to be divided between home and

school. The statements the IURO made upon which respondents rely to support

such argument are taken out of context. The IURO merely restored the number

of PDN hours petitioner had been receiving in her home for years. Therefore,

United was not advancing the IURO's decision when United divided PDN

services between home and school. United's decision to allocate PDN services

between home and school was a new and adverse benefits determination.

Therefore, petitioner was entitled to proper notice before such determination

was implemented.

Further, petitioner sought a fair hearing on the question of notice and

whether United was authorized to allocate petitioner's PDN services between

home and school. For the reasons previously stated, petitioner did not waive her

right to a fair hearing on the latter issue. The record reveals the parties'

expectation was that once there was a final decision from the Division on the

notice issue, a fair hearing on the substantive one was to be scheduled.

A-0593-17T4
15
 In addition, that there is to be a fair hearing on the substantive issue does

not overcome United's failure to provide proper notice. Among other things,

petitioner is entitled to know before the fair hearing United's reasons for its

proposed action and the law upon which it relies in support of such proposed

action. Petitioner is also entitled access to and copies of those records that are

relevant to United's determination. See N.J.A.C. 10:49-10.4(b) and 42 C.F.R.

438.404(b).

To the extent we have not specifically addressed an argument raised by

respondents, it is because they are without sufficient merit to warrant discussion

in a written opinion. R. 2:11-3(e)(1)(E).

The final decision is reversed and we remand this matter to the ALJ to

oversee that United provides the appropriate notice to petitioner, and to continue

this contested matter and address petitioner's substantive challenges to United's

adverse benefits determination.

Reversed and remanded to the ALJ for further proceedings in accordance

with this opinion. We do not retain jurisdiction.

A-0593-17T4
16