Opinion
No. CV 05 4004413S
June 27, 2006
MEMORANDUM OF DECISION
The plaintiffs, Goldstar Medical Services, Inc.(Goldstar) and Donald Bouchard (Bouchard) have appealed from a decision of the Department of Social Services (DSS), first proposed as a decision by hearing officer Rafael Garbalosa on December 2, 2003, and reviewed at a hearing by DSS commissioner Patricia Wilson-Coker (Wilson-Coker) on February 10, 2004, and approved as a final decision by Wilson-Coker on January 12, 2005. The administrative appeal was timely filed on March 3, 2005.
In the final decision, Wilson-Coker made findings of fact and conclusions of law. They may be summarized as follows.
1. During the period from January 3, 1992 through October 15, 1999, Goldstar was a vendor and provider of oxygen and oxygen-related services and supplies, was a party to a provider agreement, and participated in the Connecticut Medicaid program as a MEDS provider and held a provider manual.
Said agreement provided in relevant part that the provider agreed to follow the "laws, rules, regulations, policies and amendments which govern the Connecticut Medical Assistance Program as specified by the Federal Government and State of Connecticut." (DSS Exhibits 49, 50.)
2. Goldstar is considered by DSS as a medical equipment, devices, and supplies (MEDS) provider (Type 62) because it provides Medicaid recipients with oxygen therapy services.
3. Bouchard was the President and owner of Goldstar, a business located in Farmington, Connecticut.
4. In order to participate in the Medicaid program, Goldstar, through Bouchard, was required to enter into a Provider Agreement with the DSS which it did on January 3, 1992 and again on July 3, 1996.
7. As president and owner of Goldstar, Bouchard was responsible for ensuring Goldstar adhered to the terms and conditions of the provider contract with the DSS. This included ensuring that billing staff was trained in Medicaid policy and regulations and were supervised to ensure adherence with those policies and regulations.
8. An oxygen concentrator is an electronically operated stationary device that draws room air, separates the gases in the air, and delivers the oxygen in high concentration to the patient. It is provided by the facility as part of its per diem rate.
9. Another type of stationary system is the stationary liquid system. This system is supplied by an oxygen provider and includes the oxygen, reservoir, regulator, flow meter, humidifier, nebulizer, cannula or mask, and tubing.
10. A portable oxygen system provides oxygen in portable small liquid cylinders and small gas tanks that enables patients to ambulate away from their stationary systems.
11. A durable humidifier is one that is not disposable, and not designed or intended for single patient use.
12. Oxygen prescribed on a PRN, pro re nata, basis means "as the situation demands" and differs from an order for continuous oxygen.
13. Oxygen prescribed on a continuous basis means "around the clock."
15. A CMN, also known as Medicare Form HCFA-484, is the physician's certification that oxygen therapy is medically necessary for the patient.
22. As part of administering the Medicaid program, DSS is responsible for conducting audits of oxygen therapy service providers, as well as other Medicaid providers in the State of Connecticut.
24. In July of 1997, [Gloria] D'Anzi [of DSS] was assigned to conduct a full-scale audit of Goldstar for the period from January 1, 1995 through June 30, 1997 [hereinafter Audit]. During that period, Medicaid payments to Goldstar totaled $479,693.00 for 3,496 paid claims. 26. In a full-scale audit, the DSS reviews a sample of the universe of paid claims that are selected by computer using a random sampling method. For the Audit, there were 93 randomly selected claims.
42. The DSS issued Goldstar's final Audit Report, dated July 30, 1999, on August 3, 1999, which was mailed on that date to Bouchard's counsel, Joseph Vitale. The Audit Report found 69 out of the 93 sample claims (74%) contained errors resulting in Goldstar receiving excess Medicaid reimbursement. The total extrapolated Audit Report adjusted error amount was $261,303.45.
43. The extrapolation method used to arrive at the Audit Report adjusted error amount is explained at page 3 in the Audit Report.
44. The final Audit Report contained 16 findings. The DSS found that (1) original CMNs were not on file; (2) third-party payment resources were not exhausted; (3) there were billings for non-covered oxygen usage; (4) CMNs were not on file; (5) the CMNs were not complete; (6) claims were submitted for the rental of portable oxygen systems without a physician's order on file; (7) claims were billed for portable oxygen systems for recipients who were not utilizing oxygen concentrators; (8) there was inappropriate billing of humidifiers; (9) claims were submitted for services involving portable oxygen equipment but nursing narratives indicated the recipient's oxygen needs were met by stationary systems; (10) claims were made for overlapping dates of service; (11) claims were submitted using procedure codes for oxygen therapy services that conflicted with services documented in the recipient's record; (12) Goldstar was paid by the nursing facility for oxygen used in portable oxygen units and Goldstar also billed the DSS for portable oxygen add-on units; (13) Goldstar billed Medicare and Medicaid for the same service; (14) there was no documentation supporting specific claims for portable oxygen services; (15) there was altered documentation; and (16) claims were submitted for services relating to portable oxygen equipment and humidifiers but there was no documentation that they were delivered.
45. The DSS held $83,250.17 in payments due to Goldstar and has applied that recoupment amount to the Audit Report adjustment. Accordingly, the amount outstanding on the Audit Report adjustment is $178,053.28.
47. In a letter dated September 15, 1999, David Parrella [hereinafter Parrella], DSS's Director of Medical Care Administration, notified Goldstar that the DSS intended to revoke Goldstar's Medicaid provider number.
48. On October 23, 2000, the DSS issued its first Notice to Goldstar and Bouchard that it was proposing to impose sanctions upon them.
77. Bouchard and Goldstar employees knew, in July 1993, that the DSS would not approve a request for prior authorization for a stationary liquid oxygen system for oxygen ordered PRN by the patient's prescribing physician.
78. If a Goldstar delivery invoice indicated the liter flow but did not identify the frequency of use, [an employee of Goldstar] assumed the oxygen was ordered on a continuous basis. [This employee] did not take any steps to confirm whether the physician's order at the facility was, in fact, continuous.
79. After determining that the nursing homes' oxygen concentrators could provide oxygen for rates under 3 liters per minute and that the costs for that oxygen would be paid by the DSS under the nursing homes' per diem rate, the DSS decided not to approve prior authorization requests from oxygen providers for oxygen orders under 3 liters per minute.
80. Bouchard and Goldstar employees knew, in July 1993, that the DSS' standard for approving requests for prior authorization for stationary liquid oxygen systems was three to four liters per minute.
81. The DSS MEDS fee schedules identified those oxygen therapy services provided by MEDS providers to Medicaid recipients who resided in long-term care facilities that required prior authorization by the DSS before the service may be provided and billed to and paid by the Medicaid program.
82. When prior authorization was required by the DSS in order for MEDS providers to provide oxygen therapy to Medicaid recipients in long-term care facilities (including the Goldstar nursing facilities), the MEDS providers had to submit requests for prior authorization to the DSS and were required to do so on Form W-619, "Authorization Request for Professional Services."
83. As provided by DSS regulations, the DSS permitted MEDS providers to make verbal requests for initial prior authorization for oxygen therapy services requiring prior authorization. The verbal request had to contain patient identifier information, a description of the service, and the physicians' order for the oxygen therapy service, which the DSS entered in a log maintained by the DSS.
84. For requests for prior authorization that were made verbally, if a MEDS provider received approval verbally, the MEDS provider was required to subsequently submit to the DSS a completed W-619 and a CMN to document the necessity of the services.
90. All initial physician orders for oxygen therapy placed by the nursing facilities to Goldstar that are billed directly to DSS were required to be accompanied by a CMN, completed and signed by the prescribing physician.
91. If the physician changed the oxygen therapy orders for Medicaid recipients, the MEDS provider was required to get a fully revised CMN from the physician reflecting the revised oxygen therapy order.
92. Not all requests for prior authorization for oxygen therapy services submitted by MEDS providers were approved by the DSS. For example, if requests for prior authorizations that were submitted in writing were not accompanied by a completed and signed CMN, the DSS might either deny the request for prior authorization, or hold approval until a completed CMN was submitted.
107. Bouchard and Goldstar employees knew that DSS' regulations and policy required Goldstar to maintain CMNs to support claims for oxygen therapy submitted to the DSS.
125. The reimbursement in the MEDS fee schedules for oxygen therapy equipment and services administered through a stationary or portable oxygen system varied depending on the liter flow of oxygen prescribed by the prescribing physician.
126. A portable oxygen system is not medically necessary for all patients prescribed oxygen therapy by their physician.
127. The DSS relied on the information submitted by the MEDS providers on the W-619, CMN, and HCFA-1500 to make a determination regarding whether to approve the request and payment for oxygen therapy services and/or equipment, and assumed that the information on these forms was true, accurate, and complete.
183. Bouchard was responsible for submitting requests for prior authorization for liquid stationary oxygen systems to the DSS from at least 1993 through May 1997.
210. Goldstar did not provide training to its Medicaid billing specialists on the proper procedures for ordering and billing the DSS for oxygen therapy services.
211. Bouchard and Goldstar billing specialists consistently filled in Blocks 1-6 of the CMNs that were supposed to be completed by a physician or a physician's employee, sometimes before mailing the CMNs to the physician for his or her signature.
212. Bouchard and Goldstar knew that Blocks 1-6 of the CMN were to be completed only by the prescribing physician or that physician's employee.
213. Charlene, a Goldstar billing specialist, told Burkhardt that she filled in information in Blocks 3A, 4, and 5 of the CMN "to help the doctor out."
214. Bouchard and Goldstar employees filled in missing information in Blocks 1-6 of the CMN after the prescribing physician returned the CMN to Goldstar.
[After number 206] The Commissioner also made the following findings regarding individuals serviced by Goldstar under the direction of Bouchard:
1. Patient MLB — Block 4 on the Certificate of Medical Necessity (CMN) indicates continuous service, but the doctor's orders were "as needed."
2. Patient AR — the doctor ordered 2 liters per minute, but the CMN block read "continuous."
3. Patient JD — the doctor ordered 2 liters per minute," PNR." The reimbursement was for "continuous." 4. Patient MH — the doctor ordered 2 liters per minute" PNR." The CMN stated 3 liters per minute and "continuous."
5. Patient WN — the doctor ordered 4 liters per minute" PNR." Goldstar supplied a liquid stationary oxygen system.
6. Patient RR — the doctor ordered "PNR," but the CMN stated" continuous."
7. Patient CS — the doctor ordered 2 liters per minute, the CMN block 4 reads 4 liters per minute.
8. At the Bridgeport Healthcare center — Goldstar's billings on three patients did not match the doctor's orders.
9. Patient JK — the doctor ordered 3 liters per minute. Goldstar provided a stationary oxygen system, and stated that it had conducted an oxygen saturation test. The evidence showed that it had never conducted the saturation test.
10. Patient RL — the doctor ordered 2 liters per minute" PNR." The CMN read 3-4 liters per minute.
11. Patient SM — the doctor ordered "PNR." The CMN read 4 liters per minute.
12. Patient DR — the doctor ordered 2 liters per minute. The CMN read 4 liters per minute, continuous.
13. Regarding humidifiers, durable humidifiers were supplied to RL, MC and SR where disposable humidifiers were appropriate.
The Commissioner made the following further findings:
Falsification of Claims for Portable Oxygen Systems
350. Burkhardt submitted claims for portable oxygen systems to DSS when a Goldstar delivery invoice indicated that such a system was delivered to a Medicaid recipient residing in a long-term care facility, regardless of whether the physician prescribed a portable oxygen system and certified the medical necessity of such a system on the CMN.
351. There were thirty-two (32) instances where Goldstar submitted claims for a portable oxygen system where there was no documentation in the recipient's medical record at the long-term care facility establishing the need for the service.
352. There were fifteen (15) instances where Goldstar submitted claims utilizing procedure codes for oxygen therapy services that conflicted with services in the recipient's medical record at the long-term care facility.
353. There were ten (10) instances where Goldstar submitted claims to DSS for the rental of a portable oxygen system where the physician did not order such a system and certify the medical necessity of the portable system on a CMN.
354. There were forty-eight (48) instances where Goldstar submitted claims for portable oxygen systems when the recipient was using a stationary liquid oxygen system.
355. Goldstar did not properly train its Medicaid billing specialists to submit claims for portable oxygen systems in accordance with Medicaid regulations and policies.
Failure to Bill Third-Party Payment Sources
356. A Medicaid provider is required to exhaust all sources of third-party liability prior to submitting a claim for reimbursement to DSS.
357. There were eleven (11) instances where Goldstar submitted claims for oxygen therapy services and equipment when other third-party payment resources were responsible for payment.
Billing the DSS and Third Party for Same Service
358. There was one (1) instance where Goldstar billed and was paid by the DSS for oxygen therapy services, and also billed and was paid by Medicare for the same oxygen therapy services.
Failure to Maintain Documentation
359. A Medicaid provider is required to maintain in its files all required documentation for at least five (5) years, and make such documentation available for review by authorized DSS personnel.
361. There were forty-two (42) instances where Goldstar failed to maintain a CMN on file supporting claims for oxygen therapy services and equipment.
362. There were fifty-four (54) instances where Goldstar maintained incomplete CMNs on file such that information that was necessary to substantiate claims to DSS for oxygen therapy services and equipment was missing.
363. There were five (5) instances where Goldstar submitted claims to DSS for portable oxygen systems and failed to maintain any documentation to support that the services were delivered to the Medicaid recipient.
364. There were three (3) instances where claims were submitted for portable oxygen systems and durable humidifiers where Goldstar maintained no documentation to support delivery of the services or equipment.
Overlapping Payments to Goldstar
365. A Medicaid provider is required to submit claims for reimbursement in accordance with DSS policy and instruction and to exercise care in the submission of said claims to ensure the provider does not accept compensation in excess of the authorized reimbursement rate or receive reimbursement from the DSS in excess of that to which the provider is entitled to under the Medicaid program.
366. There were three (3) instances in which Goldstar was paid by a long-term care facility for the oxygen content used in a portable oxygen system by a Medicaid recipient when DSS had also reimbursed Goldstar for the portable oxygen system, including the oxygen content, for the same Medicaid recipient covering the same period.
367. There were four (4) instances where claims for oxygen therapy services had overlapping dates of service.
The Commissioner concluded that the respondents had committed fraud and abuse in violation of the Medicaid program in a variety of ways. They had made false representations to DSS and had violated the rules of vendor participation. They had failed to pursue third-party resources and had not complied with documentation requirements. There were instances of double billing and altered forms. Insufficient attention had been given to oversight of the staff of Goldstar. Bouchard was well aware of the Medicaid requirements and had actively participated in the violations by Goldstar.
The Commissioner issued an order of restitution against both defendants in the amount of $198,193.55. She also suspended both Goldstar and Bouchard from the Medicaid program for a period of five years. As indicated, this administrative appeal was subsequently filed on March 3, 2005.
In light of the disciplinary orders issued to the plaintiffs, aggrievement is found. ABC, LLC v. State Ethics Commission, 264 Conn. 812, 823-24 (2003).
Jurisdiction
The plaintiff Goldstar raises a variety of jurisdictional challenges against the sanctions imposed by DSS. First, the plaintiffs challenge the jurisdiction of DSS to sanction Goldstar Medical Services, Inc. when it was no longer a "provider" at the time of the entry of the order against it. The plaintiffs rely upon the language of § 17b-99(c), which provides in relevant part that "[t]he Department . . . shall distribute to all vendors who are providers in the medical assistance program a copy of the rules, regulations, standards and laws governing the program. The Commissioner of Social Services shall adopt by regulation . . . administrative sanctions against providers in the Medicare program or Medicaid program . . . including suspension from the program, for any violations of the rules, regulations, standards or law. The commissioner may adopt regulations in accordance with the provisions of chapter 54 to provide for the withholding of payments currently due in order to offset money previously obtained as the result of error or fraud." (Emphasis added.)
A regulation adopted by DSS under the authority of General Statutes § 17b-99(c) provides in relevant part that "[i]f the Department has reason to believe that a vendor has committed a violation, which violation has not resulted in a criminal conviction, the Commissioner may impose one or more of the administrative sanctions outlines in Sec. 17-83k-5 of these Regulations . . ." Section 17-83k-5(a) in turn provides that "[s]anctions shall include, but shall not be limited to any one or more of the following: (1) An order to make restitution, with interest at the rate provided by statute, as a condition of continued participation. (2) Suspension from participation. (3) Limitation on a provider's participation.
The plaintiffs argue that because DSS had already revoked its provider status before beginning administrative proceedings against Goldstar, it was no longer a "provider" and could therefore no longer be subject to the regulatory framework adopted under the authority of § 17b-99. It argues both the suspension and order of restitution are void.
It would defy common sense, however, to hold that the legislature intended a provider to be able to avoid an appropriate penalty by merely leaving the program. In an analogous situation, the courts have held that a judge may not escape censure merely by resigning his post. See In re Steady, 641 A.2d 117, 118 (Vt. 1994); Matter of Backal, 660 N.E.2d 1104, 1106-07 (N.Y. 1995). Moreover, DSS regulations allows a provider or vendor to seek reinstatement. See § 17-83k-7(b). Without interpreting the DSS' authority to allow proceedings against Goldstar after its provider number had been revoked, providers could simply jump in and out of the program upon discovery of impropriety. The plaintiffs concede that Goldstar was a "provider" as defined under the statute at the time of all the alleged violations. DSS should therefore have jurisdiction to consider sanctions even if the provider is not at the time licensed by the agency.
Second, the plaintiffs challenge the jurisdiction of DSS to sanction Donald Bouchard personally.
As indicated, Regulations § 17-83k-5(a) provides that "[s]anctions [against a vendor] shall include, but shall not be limited to any one or more of the following: (1) An order to make restitution, with interest at the rate provided by statute, as a condition of continued participation. (2) Suspension from participation. (3) Limitation on a provider's participation." Vendor is further defined in Regulations § 17-83k-1(b)(1) to include "any person acting . . . on behalf of any entity."
Goldstar argues that because it is undisputed that Bouchard never had a provider number of his own, DSS is without authority to either suspend or hold him personally liable for the monetary sanction. In response, DSS argues that the state regulations at issue must be interpreted to conform with those federal requirements that enable the state to participate in the Medicaid program. Specifically as to the suspension, the state cites to the "federal enforcement floor requirements," which provide that "[t]he State agency must have administrative procedures in place that enable it to exclude an individual or entity for any reason for which the Secretary could exclude such individual or entity under parts 1001 or 1003 of this chapter. The period of such exclusion is at the discretion of the State agency." 42 C.F.R. § 1002.210 (1992). As to the suspension, then, the cited federal regulatory requirements support the state's position that Bouchard, individually, can be suspended.
Indeed, Bouchard is co-recognized in signing the state provider agreement that he would be bound by the applicable federal regulations. (DSS Exhibit 49.)
As to monetary sanctions against Bouchard individually, DSS has argued that § 17-83k-4a applies sanctions to Bouchard as a "vendor," defined in the regulations to include one acting on behalf of an entity. As indicated, Section 17-83k-5(a) provides that "[s]anctions shall include . . . (1) An order to make restitution . . . against a vendor."
The statutory authority for the regulatory sanction of restitution against Goldstar cannot be found to support the regulation allowing for an order of restitution against Bouchard personally on the facts. The Department's final decision noted that the Commissioner invoked standard tort principles holding an officer personally liable for his torts. Those tort principles, while possibly relevant to a separate civil action against Bouchard, though, do not translate appropriately under the jurisdiction of an administrative hearing. Here, the only findings related to Bouchard's actions are those on behalf of Goldstar Medical Services, Inc., and in furtherance of the company. The final decision, though, makes no finding related to commingling of assets between Bouchard and Goldstar Medical Services, Inc., or any other improper conduct that would support an analogy to piercing the corporate veil.
The Commissioner stated: "I note that `[A]n officer of a corporation does not incur personal liability for its torts merely because of his official position. Where, however, an agent or officer commits or participates in the commission of a tort, whether or not he acts on behalf of his principal or corporation, he is liable to third persons injured thereby.' Scribner v. O'Brien, 169 Conn. 389, 363 A.2d 160 (1975). It is `unnecessary to pierce the corporate veil in order to find . . . the [corporate officers] . . . personally liable for their misrepresentations.' Kilduff v. Adams, Inc., 219 Conn. 314, 331, 593 A.2d 478 (1991). `It is black letter law that an officer of a corporation who commits a tort is personally liable to the victim regardless of whether the corporation itself is liable.' Id. Therefore, I may hold Bouchard personally liable for any fraudulent misconduct and may impose sanctions personally upon him for such misconduct." (Final decision, p. 59.)
DSS has argued that monetary sanctions, similar to the federal floor enforcement, are provided for federally under 42 U.S.C. § 1320a-7a ("Federal Civil Monetary Penalties"), thereby requiring this court to interpret our regulations to abide by federal requirements. The Federal Civil Monetary Penalties Act, however, does not specifically require the state agency to provide for monetary sanctions against an individual who never received a provider number independent of the corporation. The state statute itself only allows for sanctions against vendors or providers. This is not to say that our state framework does not closely track the federal provisions cited by DSS. Notably, the state could have both criminal and civil tort remedies available to recover such fines and losses from Bouchard. See General Statutes § 53a-290. Bouchard would have been subject to the imposition of a restitution order by the commissioner if he had already been convicted. See § 17-83k-3(8). Accordingly, the court finds that while the Commissioner had the authority to suspend Bouchard personally, she lacked the authority to impose regulatory monetary sanctions on him.
General Statutes § 53a-290 provides: "A person commits vendor fraud when, with intent to defraud and acting on such person's own behalf or on behalf of an entity, such person provides goods or services to a beneficiary under sections 17b-22, 17b-75 to 17b-77, inclusive, 17b-79 to 17b-103, inclusive, 17b-180a, 17b-183, 171-260 to 17b-262, inclusive, 17b-264 to 17b-285, inclusive, 17b-357 to 17b-361, inclusive, 17b-600 to 17b-604, inclusive, 17b-749, 17b-807 and 17b-808 or provides services to a recipient under Title XIX of the Social Security Act, as amended, and, (1) presents for payment any false claim for goods or services performed; (2) accepts payment for goods or services performed, which exceeds either the amounts due for goods or services performed, or the amounts authorized by law for the cost of such goods or services; (3) solicits to perform services for or sell goods to any such beneficiary, knowing that such beneficiary is not in need of such goods or services; (4) sells goods to or performs services for any such beneficiary without prior authorization by the Department of Social Services, when prior authorization is required by said department for the buying of such goods or the performance of any service; or (5) accepts from any person or source other than the state an additional compensation in excess of the amount authorized by law."
To summarize, the federal regulation setting forth the "enforcement floor requirements" supports the sanction of suspension of Bouchard through the state statute and regulation adopted thereunder. There is, however, no state statute or federal regulation to support the state regulation allowing an administrative order of restitution against Bouchard individually under these facts. In keeping with the general rule, "any regulations which exceed the authority granted to the commissioner are void." Citrano v. Berkshire Mutual Ins. Co., 171 Conn. 248, 255 (1976). Giglio v. American Economy Ins. Co., 278 Conn. (to be released July 4, 2006) (regulation invalid if inconsistent with statute).
Notice of Amendments
During the course of the administrative hearing, DSS made amendments to the notice of regulatory violations, pointing to further violations by Goldstar under DSS' existing legal theories. The plaintiffs claim that this procedure violated their rights to notice under the UAPA, citing Dunn v. Freedom of Information Commission, Superior Court, judicial district of Hartford, Docket No. CV 96 0560956 (July 18, 1997, Maloney, J.) ( 20 Conn. L. Rptr. 103). Both Dunn, as well as the plaintiffs' case of Murphy v. Berlin Board of Education, 167 Conn. 368, 374, 355 A.2d 265 (1974), though, hold that the notice requirements support the established rule that DSS is obliged to give adequate notice, and the burden of showing otherwise is on the plaintiffs. See Tele Tech of Connecticut Corp. v. Department of Public Utility Control, 270 Conn. 778, 813, 855 A.2d 174 (2004). The court in Murphy held that the charges received after the hearing commenced were not in any way "matters asserted" in the notice letter from the Board of Education. She was "wholly unaware" of the charges prior to the hearing. Id. at 376.
The hearing commenced on October 16, 2001, and on January 2, 2002, DSS filed a "Third Amended Notice of Regulatory Violations" and a "Fourth Supplemental Response to the Request for a More Definite and Detailed Statement." At oral argument, DSS indicated that these filings were in response to the Defendant's "Third Supplemental Response to the Request for More Definite and Detailed Statement," filed on December 12, 2002, which DSS notes was also following the commencement of the hearing.
The same cannot be said in the present case. Here, the supplemental charges entirely related to disclosures about the CMN forms, the subject matter that was before the hearing officer. In addition, certain documents that formed the basis of the supplemental charges were obtained after resolution of discovery objections raised before the hearing commenced. Despite the plaintiffs' argument that the charges were "entirely new," the plaintiffs have not met their burden of demonstrating inadequate notice under these circumstances.
Improper Rule Making
The plaintiffs claim that DSS was acting without regulatory authority in three instances where it was obligated to adopt a regulation justifying their actions. Specifically, the plaintiffs argue that DSS was required to adopt a regulation before (1) holding that Goldstar was only permitted to submit bills for oxygen supplied above the one or two liter rate, (2) utilizing the "extrapolation method" during its audit, and (2) using nursing home medical records to prove Goldstar's allegedly fraudulent submissions instead of the doctor who made the original order.
It is well settled that an agency is not required to promulgate a regulation regarding every point over which it has jurisdiction. "Implicit in this formulation is the recognition that a regulation must be a rule of sufficient generality to impinge substantially on others who will deal with the agency at a future time." Persico v. Maher, 191 Conn. 384, 401, 465 A.2d 308 (1983). See also Maloney v. Pac, 183 Conn. 313, 325, 439 A.2d 349 (1981) (rule of State Traffic Commission not required to be promulgated as a regulation).
No regulation, or rule of general applicability, was required to be in place for DSS to act in any of the three challenged actions. With regard to the "liters per minute" challenge, DSS did have a regulation in place requiring nursing homes to provide its own equipment to provide oxygen at the one to two liter rate. See Regs., Conn. State Agencies § 17-134d-83. The agency determined after investigation of Goldstar's submitted bills that it was improper for it to be reimbursed for services provided at this level which the nursing homes already should have had the capability of providing. With regard to the extrapolation method, federal regulations provide that "[t]o promote the most effective and appropriate use of available services and facilities the Medicaid agency must have procedures for the on-going evaluation, on a sample basis, of the need for and the quality and timeliness of Medicaid services." (Emphasis added.) 4 C.F.R. § 456.22 (2005). The court finds that the extrapolation method used by DSS in this case followed the federal guidelines, and that there is no need for a more specific state regulation detailing the sampling method utilized.
Finally, with regard to the use of medical records, the court finds that such an issue is entirely related to evidentiary rules, and that there is no need for a specific regulation related to the introduction of that evidence. The case relied upon by the plaintiffs, Morales v. St. Francis Hospital, 9 Conn.App. 379, 384 519 A.2d 86 (1986), does not require that documentary evidence of tampering must be produced only through a doctor's testimony. In Morales, the trial court used the availability of the doctor as one factor in deciding admissibility. Here, the hearing officer in the context of an administrative appeal was free to reach an opposite conclusion.
Therefore DSS did not err in enforcing its determination in absence of a regulation.
Ex Parte Discussions
The plaintiffs argue that they should be entitled to a remand for new proceedings due to an improper ex parte conversation between the hearing officer and DSS. Specifically, the plaintiffs argue that a February 1, 2002, letter, sent to the hearing officer by DSS, was an ex parte communication. This letter, though, was responded to by the plaintiffs on February 5, 2002, before the hearing officer ruled on the matter (also on February 5th). Therefore General Statutes § 4-181(c) barring ex parte communications without opportunity for plaintiffs to comment was not violated, and the plaintiffs' motion for a remand on this ground must fail. See also Henderson v. Department of Motor Vehicles, 4 Conn.App. 143, 147, 493 A.2d 242 (1985), aff'd, 202 Conn. 453, 521 A.2d 1040 (1987); Martone v. Lensik, 207 Conn. 296, 303, 541 A.2d 488 (1988) (rule on ex parte communication prevents one party from gaining improper influence on the decision made).
Notice of Charges
The plaintiffs argue that the notice of charges in general was inadequate to comply with due process under Hart Twin Volvo Corp. v. Commissioner of Motor Vehicles, 165 Conn. 42, 47, n. 2, 327 A.2d 588 (1973), and Levinson v. Board of Chiropractic Examiners, 211 Conn. 508, 534 560 A.2d 403 (1989). Specifically, the plaintiffs claim that the notice consisted of overly vague claims of fraud and abuse, without referencing either statutes or specific instances of conduct where the plaintiffs are said to have violated.
"`[D]ue process requires that the notice given must . . . fairly indicate the legal theory under which such facts are claimed to constitute a violation of the law.' (Internal quotation marks omitted.) Levinson v. Board of Chiropractic Examiners, 211 Conn. 508, 535, 560 A.2d 403 (1989). `[A]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity [to be heard].' (Internal quotation marks omitted.) Worsham v. Greifenberger, 242 Conn. 432, 440, 698 A.2d 867 (1997), quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). `[A]n essential function of notice is to enable the recipient to choose for himself whether to appear or default, acquiesce or contest . . . with regard to proceedings affecting the recipient's interests.' (Citation omitted; internal quotation marks omitted.) Worsham v. Greifenberger, supra, 440. `The fundamental reason for the requirement of notice is to advise all affected parties of their opportunity to be heard and to be apprised of the relief sought . . . Adequate notice will enable parties having an interest to know what is projected and, thus, to have an opportunity to protest . . . [N]otice . . . is not required to contain an accurate forecast of the precise action which will be taken on the subject matter referred to in the notice. It is adequate if it fairly and sufficiently apprises those who may be affected of the nature and character of the action proposed, so as to make possible intelligent preparation for participation in the hearing . . .' (Citations omitted; internal quotation marks omitted.) Hartford Electric Light Co v. Water Resources Commission, 162 Conn. 89, 119, 291 A.2d 721 (1971)." Cornelius v. Dep't. of Banking, 94 Conn.App. 547, 545-55 (2006).
Under the standard set in Levinson and its progeny, the court cannot find that there was inadequate notice in the present case. Here, as in Cornelius, the notice referenced by the plaintiffs must be read together with other information at the plaintiffs' disposal. Here, it is clear from the record that the plaintiffs were recipients of the state's specific audit findings, as well as the plaintiffs' responses thereto. See DSS Ex. 21-23, 90. Reading those materials in conjunction with the notice of charges and the amendments thereto, the court finds that the plaintiffs were adequately notified of the charges.
Burden of Proof
The plaintiffs further claim that the hearing officer incorrectly set the level of the burden of proof that DSS had to meet for a favorable disposition, arguing that the correct burden of proof to impose on fraudulent conduct is proof by clear and convincing evidence. The court disagrees with this contention, relying on former judge Hodgson's decision in Swiller v. Commissioner of Public And Addiction Services, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 705601 (October 10, 1995, Hodgson, J.) ( 15 Conn. L. Rptr. 532). Judge Hodgson held in Swiller that the executive boards subject to the UAPA may both constitutionally and legally employ the standard of preponderance of evidence for the burden of proof. See also Steadman v. Securities and Exchange Commission, 450 U.S. 91, 101 S.Ct. 999 (1981) (holding that where a legislature has not imposed a different standard, absent countervailing constitutional restraints, the "preponderance of evidence" standard is correct).
Substantial Evidence
One group of issues raised by the plaintiffs relate generally to the factual findings and conclusions reached in the final decision.
First, the plaintiffs contend that despite calling DSS investigators, Goldstar employees, and nursing staff employed by Goldstar clients, DSS was obliged to call a doctor who had signed the patient's orders and who would confirm the falsification of documents in order to meet its burden of proof. In this same vein, the plaintiffs further argue that the hearing officer erred in relying upon documents other than the CMN in determining that the plaintiffs altered or falsified the submitted CMNs. The plaintiffs argue that testimony from those specific doctors who made the orders, and who were not called to testify at the hearing, would be the only form of evidence that DSS could utilize in order to meet their burden of proof.
This issue arises in the following example. In DSS exhibit 224, the physician orders for patient "J.D." indicate that she is to receive oxygen "as needed." However, the CMN filed by Goldstar indicates that she is to receive the continuous supply of oxygen, which would significantly increase the reimbursement from Medicaid. The hearing officer used this discrepancy to conclude that Goldstar's employees made an error in completing the CMN.
The plaintiffs, in contending that the hearing officer was bound by the CMN documents themselves and could not hear evidence beyond them, are making an argument similar to the "parol evidence rule." But even under that doctrine, parol evidence is still admissible to show fraud. See TIE Communications, Inc. v. Kopp, 218 Conn. 281, 289, 589 A.2d 329 (1991); Harold Cohn Co. v. Harco International, 72 Conn.App. 43, 49, 804 A.2d 218 (2002) ("Fraud vitiates all contracts, written or otherwise; no rule of law, including the parol evidence rule, deprives a trial court [or a hearing officer] of the power to allow oral testimony to prove fraud"). The oral evidence that contradicted the CMN documents was therefore properly received by the hearing officer.
In any event, "[t]he erroneous admission of evidence will not invalidate an administrative order unless substantial prejudice is affirmatively shown . . . The burden is on the plaintiff to prove that the evidentiary ruling of an administrative hearing officer is arbitrary, illegal or an abuse of discretion." Griffin v. Muzio, 10 Conn.App. 90, 94 (1987). As in Muzio, "[t]he plaintiff has not even come close to meeting such burden of proof." Id.
The contention regarding appropriate witnesses is also affected more generally by the substantial evidence doctrine. More specifically regarding witnesses, the case of Shelton v. Statewide Grievance Committee, 277 Conn. 99, 111, 890 A.2d 104 (2006), states: "We are mindful that the fact finder is best able to judge the credibility of the witnesses and to draw necessary inferences therefrom because as a practical matter, it is inappropriate to assess credibility without having watched a witness testify, because demeanor, conduct and other factors are not fully reflected in the cold, printed record." (Citations, internal quotation marks and brackets omitted.) See also United Jewish Center v. Brookfield, 78 Conn.App. 49, 56 (2003) (the credibility of witnesses and the determination of factual issues are within the province of the agency hearing officer). Therefore the court rejects the contention of Goldstar that the hearing officer was obliged to have those physicians who signed the challenged CMNs testify.
Goldstar also contests the factual conclusion that improper reimbursements were sought for durable oxygen equipment and a similar conclusion that the Medicaid reimbursement forms were improperly completed by Bouchard and Goldstar employees. The decision repeatedly concluded that Goldstar's staff completed CMN forms to its advantage and that the forms did not agree with the physician's actual orders. The decision also concluded in some instances Goldstar's staff physically altered the orders on the CMN forms after a physician had completed the form.
Such contentions must be rejected under the "substantial evidence" rule of administrative appeals. As the court declared in MacDermid, Inc v. Department of Environmental Protection, 257 Conn. 128, 137, 778 A.2d 7 (2001): "Substantial evidence exists if the administrative record affords a substantial basis in fact from which the fact in issue can be reasonably inferred . . . This substantial evidence standard is highly deferential and permits less judicial scrutiny than a clearly erroneous or weight of the evidence standard of review . . . the burden is on the plaintiff to demonstrate that the agency's factual conclusions were not supported by the weight of substantial evidence on the whole record." (Citations, quotation marks, and brackets omitted.) Id., 137. See also Director, Department of Information Technology v. FOIC, 274 Conn. 179, 187-88, 874 A.2d 785 (2005) (issue is whether the agency's determinations are reasonably supported by substantial evidence in the record taken as a whole); Rudy's Limousine Service v. Commissioner, DOT, 78 Conn.App. 80, 93, 826 A.2d 1161 (2003) (quoting MacDermid).
The court finds that there is substantial evidence in this record to support the challenged findings and conclusions of the hearing officer, most relevant of which are set forth above, that the plaintiffs question. The return of record is 99 pages long and includes: (1) the testimony of D'Anzi regarding the scope of the audit (Record pages 09636-09738); (2) acknowledgment by plaintiff Bouchard of the basic findings of the audit (DSS exhibit 90); (3) the testimony of Burkhardt on May 10, 2002 (Record pages 11237-11316) demonstrating that Bouchard instructed his staff to complete the CMNs; (4) the testimony of DSS employee Simms and nursing supervisor Macrino supporting the findings that individual patients had their CMNs altered (Record, Volume IV, Macrino testimony, October 17, 2001, page 112, Simms testimony, January 24, 2002, p. 86-92); (5) numerous completed CMN forms that show discrepancies when compared with the doctors' orders (Record, Volume III, pages 33-70, full exhibits).
Expert Testimony
The plaintiffs argue that the Commissioner exceeded her authority by ignoring the expert testimony of the plaintiff's witness, Anne Spenard, on the inconsistency of the medical records. Because Spenard's testimony was the only expert testimony submitted, the plaintiffs argue that Tanner v. Conservation Commission, 15 Conn.App. 336, 544 A.2d 258 (1988), does not allow the Commissioner to come to a contrary conclusion. "Since . . . Tanner, however, our appellate courts have handed down decisions that point out that the trier of fact is not required to believe unrebutted expert testimony, but may believe all, part or none of such unrebutted expert evidence." Bancroft v. Commissioner of Motor Vehicles, 48 Conn.App. 391, 405, 710 A.2d 807 (1998), citing Pickles v. Goldberg, 38 Conn.App. 322, 325, 660 A.2d 374 (1995). Further, "[a]n administrative agency is not required to believe any witness, even an expert . . . Nor is an agency required to use in any particular fashion any of the materials presented to it as long as the conduct of the hearing is fundamentally fair." Manor Development Corporation v. Conservation Commission, 180 Conn. 692, 697 [parallel cite] (1980). Regarding the plaintiff's expert, Spenard, the hearing officer observed that he did not rely on her observations that related only to general billing practices at nursing homes. Her testimony did not explain the overwhelming irregularities, alterations and falsifications in the documents submitted to DSS for payment. Final decision, Conclusion of Law G. Accordingly, the court finds that the Commissioner did not exceed her authority in discrediting the testimony of the plaintiffs' expert.
Improper Audit
Finally, the plaintiffs contest both the decision of DSS in making Goldstar subject to an audit, and also the general fairness of the audit. The audit in this case produced a report as set forth in exhibit 23. There is not strict control from the federal regulation on selecting a provider for an audit. See 42 C.F.R. § 455.13 (2002). The decision to make an approved provider the subject of an audit is left to the sound discretion of the agency. See City of Bridgeport v. Department of Social Services, Superior Court, judicial district of New Britain, Docket. No. CV 01 0509057 (February 8, 2002, Cohn, J.) ( 31 Conn. L. Rptr. 351). As the plaintiffs admit, a prior business of Bouchard's had been subject to an audit that revealed problems. Among other reasons, it would be both reasonable and within the discretion of for DSS to decide to conduct an audit of Goldstar based on its prior experience with Bouchard.
The hearing officer found that the process of conducting the audit had been fair to the plaintiffs. Sufficient information on the audit's protocol and conclusions had been set forth in exhibit 23. Bouchard acknowledged in DSS exhibit 90 that the findings of the audit were basically correct; he claims, though, that the mistakes found were due to billing errors. As indicated in MacDermid, Inc. v. Department of Environmental Protection, 257 Conn. 128, 138-39, 778 A.2d 7 (2001), DSS is entitled to great deference in its interpretation of its own regulations.
Relatively quickly in the audit, it became clear that there were discrepancies between physicians' orders and the CMN forms as submitted. There were also a number of photocopied CMN forms with amendments in Goldstar's files.
The court orders that the appeal be dismissed except with regard to the order regarding monetary sanctions against Bouchard personally. To that extent, the appeal is sustained.
So ordered.