Opinion
HHBCV166031927S
04-25-2017
Key Personnel, Inc. v. Department of Social Services
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Sheila A. Huddleston, Judge.
The plaintiff, Key Personnel, Inc., appeals from the final decision of the defendants, the Commissioner and the Department of Social Services (department), substantially upholding the findings of a Medicaid audit that concluded that the plaintiff had received overpayments of $167,404 as a result of clerical errors. As discussed below, the court affirms the department's decision and dismisses the appeal.
FACTUAL AND PROCEDURAL HISTORY
The plaintiff is a Connecticut business that provides skilled nursing and home care services to the state's elderly and disabled population. The department administers the Connecticut Home Care Program for Elders (program) pursuant to General Statutes § 17b-342. The program is designed to help elderly persons who are at risk of institutionalization receive the support they need to age in place at home. The program provides a wide range of medical and non-medical services, including, for purposes of this appeal, homemaker, companion, and chore services. It is funded in part by the state and in part by a federal Medicaid waiver. The department administers the program through contracts with " access agencies" that coordinate the delivery of program services. The access agencies in turn contract with providers such as the plaintiff to provide services to clients of the program. The plaintiff has a provider contract with an access agency, the Agency on Aging of South Central Connecticut (AASCC). The department's office of quality assurance is responsible for auditing payments to providers for services rendered under the program. Record (R.), p. 424.
The Medicaid program, established in 1965 as Title XIX of the Social Security Act, and codified at 42 U.S.C. § 1396 et seq., is a joint federal-state venture providing financial assistance to persons whose income and resources are inadequate to meet the costs of necessary medical care. See Burinskas v. Department of Social Servs., 240 Conn. 141, 148, 691 A.2d 586 (1997). Although a state's participation in the Medicaid program is voluntary, participating states must develop a plan, approved by the secretary of health and human services, containing reasonable standards for determining eligibility for and the extent of medical assistance. Connecticut participates in the Medicaid program and has tasked the department of social services with its administration. See id. ; see also General Statutes § 17b-260.
See General Statutes § 17b-342(e); Regs., Conn. State Agencies § 17b-342-1(b)(1).
The department audits providers to determine, among other things, whether the billings properly reflected the type and amount of services rendered; whether proper documentation was maintained to evidence the services provided and the medical necessity for them; and whether the provider adhered to all the terms and conditions of its provider service agreement with AASCC. R., p. 424.
The department previously audited the plaintiff in 2004 for claims paid in 2002 and 2003. During that period, the department had paid the plaintiff $94,176. The department examined 100 out of 596 claims and found four clerical errors in the plaintiff's billing or documentation of services, for which it recouped $342.04. It took one audit exception for failing to get a client's signature on a " per visit" basis. It did not make a financial adjustment for that error, but expected the plaintiff to rectify it. R., p. 425.
On September 4, 2013, the department notified the plaintiff that it would conduct another audit. On October 21 and 22, 2013, the department was at the plaintiff's offices, collecting copies of documents and speaking with the plaintiff's officers and employees. Approximately eight months later, on June 4, 2014, the department provided the plaintiff with its preliminary audit report. R., p. 392.
The appeal alleges that the department visited its offices on October 28 and 29, 2013. See Administrative Appeal, ¶ 15. The record indicates that the department's auditors conducted the audit at the plaintiff's offices on October 21 and 22, 2013. See, e.g., R., pp. 17, 392. The court found no explanation for this discrepancy, but concludes that it makes no difference in the analysis of any of the issues presented.
The plaintiff, through counsel, objected to the preliminary report because it had not been provided within sixty days of the audit's conclusion, as provided by General Statutes § 17b-99(d)(5). The plaintiff denied that the department retained jurisdiction over the audit, but attended an exit conference on October 29, 2014, to preserve its rights. On December 17, 2014, the department issued its final audit report. It found that the program had paid the plaintiff $1,686,807 over the three years subject to audit, and that the plaintiff had been overpaid by $167,710 as a result of errors in documentation. R., pp. 3-16. This was based on an audit of 100 sample claims out of a " paid claims universe" of 7, 650 claims. The department found seventeen documentation errors in the 100 claims, at an average of $21.92 per selected claim. Applying an extrapolation methodology, it multiplied that error amount over the paid claim universe to calculate the audit adjustment. R., p. 16. A cover letter with the final report indicated that the department would deduct the disallowed payments over twenty-four cycles of future payments. R., p. 2.
On January 16, 2015, the plaintiff filed a request for review of items of aggrievement with the department, as permitted by General Statutes (Rev. to 2013) § 17b-99(d)(8). It raised five " general audit issues" and contested certain specific audit findings. It challenged, as general issues, the department's loss of jurisdiction when it failed to produce a preliminary audit report within sixty days; the department's failure to publish audit regulations pursuant to General § 17b-99(d)(11); lack of transparency in the audit; an incorrect " audit universe size"; and the assessment of an excessive financial penalty for minor clerical errors. R., pp. 17-22. It submitted numerous documents with its request for review, including a list of the sample claims reviewed by the department. R., pp. 23-178.
Pursuant to General Statutes § 17b-99(d)(8), the commissioner of social services designated a department attorney to serve as the review officer for the audit report. R., p. 182. The department filed a response to the plaintiff's items of aggrievement; R., pp. 201-90; to which the plaintiff filed a reply. R., pp. 293-303. The department requested and received permission to reply to the plaintiff's reply. R., p. 304. After receiving the department's reply, on May 1, 2015, the review officer deemed the record closed. R., p. 309.
On June 8, 2015, however, the review officer issued an order opening the record for further review. R., p. 313. In that order, the review officer stated that in Walgreen Co. v. Dept. of Social Services, Superior Court, judicial district of New Britain, CV 14-6027264-S, (May 8, 2015, Schuman, J.) (60 Conn.L.Rptr. 356), the court had ordered the department to disclose documents concerning the extrapolation method used in a departmental audit. Because the plaintiff in this case had identified the " audit universe size" as one of its items of aggrievement and had attempted without success to obtain information from the department about its sampling and extrapolation methodology, the review officer ordered the department to provide the documents that the plaintiff had previously requested. He further ordered that, after reviewing the documents, the plaintiff could submit additional evidence and arguments in support of its claim that the audit universe size was incorrect. R., p. 313. The department complied with that order. R., pp. 316-63. The plaintiff subsequently submitted an additional brief, arguing that the methodology revealed in the documents was not published, was not based on valid statistical sampling, and did not comply with federal audit guidelines for the Medicare program. R., pp. 366-70. The plaintiff did not submit additional evidence. The department replied to the plaintiff's brief and submitted an opinion from the department's director of quality assurance, John F. McCormick, who represented that the department's extrapolation method complied with governmental auditing standards and was statistically valid and reliable. R., pp. 379-86. The department also produced screen shots of the 100 sample claims used in the audit, taken on September 4, 2013, the date on which the list was randomly generated. R., pp. 388-90.
The review officer issued his final decision on November 30, 2015. R., pp. 391-413. Except for an error with respect to the amount of one sample claim, the review officer upheld the department's audit report. He declined to review any arguments made for the first time in the brief filed by the plaintiff after the disclosure of the department's sampling methodology on the ground that they were not within the original items of aggrievement. R., p. 398. He directed the department to issue a revised final audit report consistent with his findings. On December 11, 2015, the plaintiff moved for reconsideration and requested a stay of any recoupment until the issues were fully resolved. R., pp. 414-20. On December 15, 2015, however, the department issued the revised final report. After making the adjustment directed by the review officer, the revised final report stated an overpayment of $167,404. The department indicated that within thirty days, it would instruct its claims processor to deduct the overpayment from future payments to the plaintiff. R., p. 421. On December 18, 2015, the review officer denied the motion for reconsideration and the motion for a stay, stating that because the final decision was not a contested case subject to the provisions of the Uniform Administrative Procedure Act, there was no right to reconsideration of the final decision and the department lacked authority to issue a stay. R., p. 438. The plaintiff filed a timely appeal in this court and moved for a stay, which was denied by Judge Schuman on February 16, 2016.
APPLICABLE LEGAL STANDARDS
This appeal is brought pursuant to the Uniform Administrative Procedure Act (UAPA), General Statutes § § 4-166 et seq., and in particular, General Statutes § 4-183. At the outset, it is important to recognize the standard of review that constrains the court. The scope of judicial review under the UAPA is very restricted. " With regard to questions of fact, it is [not] the function of the trial court . . . to retry the case or to substitute its judgment for that of the administrative agency." (Citations omitted; internal quotation marks omitted.) Goldstar Medical Services, Inc. v. Dept. of Social Services, 288 Conn. 790, 800, 955 A.2d 15 (2008). " [A] plaintiff who challenges an agency decision has the heavy burden of demonstrating that the department's factual conclusion lacks substantial support on the whole record." (Internal quotation marks omitted.) Bridgeport Dental, LLC v. Commissioner of Social Services, 165 Conn.App. 642, 650, 140 A.3d 263, cert. denied, 322 Conn. 908, 140 A.3d 221 (2016).
General Statutes § 4-183(j) provides: " The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court shall affirm the decision of the agency unless the court finds that substantial rights of the person appealing have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) in excess of the statutory authority of the agency; (3) made upon unlawful procedure; (4) affected by other error of law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. If the court finds such prejudice, it shall sustain the appeal and, if appropriate, may render a judgment under subsection (k) of this section or remand the case for further proceedings. For purposes of this section, a remand is a final judgment."
" Judicial review of the conclusions of law reached administratively is also limited. The court's ultimate duty is only to decide whether, in light of the evidence, the [agency] has acted unreasonably, arbitrarily, illegally, or in abuse of its discretion . . . Conclusions of law reached by the administrative agency must stand if the court determines that they resulted from a correct application of the law to the facts found and could reasonably and logically follow from such facts." (Citations omitted; internal quotation marks omitted.) Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 800.
The plaintiff's claims on appeal concern the interpretation and application of General Statutes § 17b-99(d), the statute governing the department's audit procedures (audit statute). To put these claims in context, it is useful to trace the evolution of the audit statute.
Before 2005, § 17b-99 had three subsections. Subsections (a) and (b) concerned fraud by providers. Subsection (c) required the department to distribute a copy of the rules, regulations, standards, and laws governing its programs to all providers of services and authorized it to adopt regulations to provide for withholding of payments currently due to offset money previously obtained " as the result of error or fraud." General Statutes (Rev. to 2003) § 17b-99(c).
In 2004 and 2005, Medicaid providers complained to the legislature that the department's audit procedures unduly penalized them for minor clerical or record-keeping errors where fraud was not at issue. They claimed that the department disallowed claims based on minor errors in their documentation but had never given them specific guidance as to the types of documentation it required. Worse still, the disallowances based on minor errors found in a small sample of claims were then extrapolated across the " universe" of their claims to impose very substantial financial penalties. See, e.g., Conn. Joint Standing Committee Hearings, Human Services, Pt. 3, 2005 Sess., pp. 846-54, 862-64, 883-86.
For example, one provider testified about an audit of her home care services company, where clerical errors totaling $69 were extrapolated into a repayment obligation of $10,375. She testified that she had an office staff of three people to handle scheduling, bookkeeping, field supervision, and billing for 500 visits to 200 different clients each week. The department had not given her a provider manual detailing its policies and procedures. The documents being audited were timesheets submitted by homemakers who filled them out, not in a controlled office environment, but in an elderly client's home while wrapping up with one client after two hours of vacuuming, dusting, and cleaning, and while readying themselves to go to another client's home. The clients were required to sign the time sheets for each visit. Some of the errors found by the department involved clients who signed time records with initials or an X, where the department could not find documentation that such signatures had been approved by the access agency's case manager. Others involved travel time, where the department disallowed part of a claim for homemaking services because the homemaker had allegedly not allowed enough time for travel between two clients who lived next to each other in a housing complex. There were no missing time sheets, no time sheets without some sort of client signature, and no accusation of fraud. See Conn. Joint Standing Committee Hearings, Human Services, Pt. 3, 2005 Sess., pp. 843-44, 883-84.
The legislature responded by enacting Public Acts 2005, No. 05-195 (P.A. 05-195). Codified as § 17b-99(d) (audit statute), P.A. 05-195 contained nine subdivisions that, among other things, limited the use of extrapolation for clerical errors to certain situations, including situations where the aggregate value of the claims exceeded $150,000. Among other provisions, the audit statute required the department to give provider agencies thirty days' advance notice of an audit, to produce a preliminary audit report within sixty days after the conclusion of the audit, to hold an exit conference before producing a final audit report, and to designate an impartial person, not employed in the department's office of quality assurance, to conduct a review of all " items of aggrievement" filed by a provider within thirty days of the final report. See General Statutes (Rev. to 2005) § 17b-99(d)(1), (5), (6) and (8).
The audit statute enacted in 2005 failed to correct the problems described by the providers who testified before the human services committee. As a result, the legislature amended it several times over the years between 2005 and 2015. See Public Acts 2010, No. 10-116 (P.A. 10-116), § 1; Public Acts 2014, No. 14-162 (P.A. 14-162), § 1; and June Sp. Sess. Public Acts 2015, No. 15-5 (P.A. 15-5), § 400.
One concern expressed to the legislature in 2010 was the opacity and reliability of the sampling and extrapolation methodology used by the legislature. As one provider testified, " for extrapolation to be reliable the sample must be random and statistically valid; otherwise, the results of the audit are biased and unreliable." Conn. Joint Standing Committee Hearings, Human Services, Pt. 2, 2010 Sess., p. 595. Because the department refused to disclose its sampling and extrapolation methodology even in response to Freedom of Information Act requests, the providers suspected that the methodologies used were not truly random and were not statistically valid. Id. In P.A. 10-116, the legislature responded to this concern by requiring the department to promulgate regulations " to ensure the fairness of the audit process, including, but not limited to, the sampling methodologies associated with the process." P.A. 10-116, § 1, as codified in General Statutes (Rev. to 2011) § 17b-99(d)(11). It required the department to furnish a copy of such regulations with the initial notice of an audit. See General Statutes (Rev. to 2011) § 17b-99(d)(1). It also required the department's review officer to issue a final decision after a review of a provider's items of aggrievement, and, importantly, for the first time, it provided a right of judicial review. See General Statutes (Rev. to 2011) § 17b-99(d)(8) and (9). More specifically, § 17b-99(d)(9) was amended to allow an aggrieved provider " to appeal a final decision to the Superior Court in accordance with the provisions of chapter 54, " which is the chapter containing the UAPA. The appeal was limited, however, by the fact that P.A. 10-116 did not provide for a contested case hearing under the UAPA.
Between October 2013, when the audit at issue began, and December 2015, when the audit review process concluded, § 17b-99(d) was amended two more times. See P.A. 14-162, § 1, and P.A. 15-5, § 400. In 2014, while considering the bill that became P.A. 14-162, the legislature's human services committee again heard testimony from many providers--including dentists, pharmacists, physicians, and providers of homemaker services--about the statistically suspect quality of the department's extrapolation methodology, about the department's failure to promulgate regulations to make the audit process fair and transparent, about the department's failure to publish protocols and provider manuals to make the reporting requirements clear, and about the need for a contested hearing before an impartial administrative law judge to ensure that providers would have an opportunity to make a record for judicial review. See, e.g., Conn. Joint Standing Committee Hearings, Human Services, Pt. 3, 2014 Sess., pp. 1109-10, 1120-22. At the time of the public hearing, the department's proposed regulations were awaiting action by the legislative regulation review committee. The commissioner urged the legislature to wait until the regulatory process was completed to consider further amendments to the audit provision. See Conn. Joint Standing Committee Hearings, Human Services, Pt. 3, 2014 Sess., pp. 1045, 1049. The legislature nevertheless approved a bill that, for the first time, defined " extrapolation" and " universe, " allowed providers to present evidence at exit conferences, and required the department to provide free training on how to enter claims to avoid clerical errors. See P.A. 14-162, § 1. The department subsequently withdrew its proposed regulations, and a revised version was rejected by the legislative regulation review committee late in 2014.
In 2015, the legislature further amended § 17b-99(d) in P.A. 15-5, § 400. In apparent frustration at the department's failure to promulgate acceptable regulations over five years, the legislature deleted the requirement that the department adopt audit regulations and, instead, imposed more stringent statutory requirements to ensure the statistical validity of the department's sampling and extrapolation methodologies. See General Statutes (Rev. to 2017) § 17b-99(d)(1) and (4). It also eliminated the agency review by a review officer and substituted a contested hearing under the UAPA to afford an opportunity for dissatisfied providers to present evidence and to examine and cross examine witnesses. See General Statutes (Rev. to 2017) § 17b-99(d)(9).
Except for the plaintiff's claim about the size of the audit " universe, " which involves the 2014 revision to § 17b-99(d), it appears to be undisputed that the version of § 17b-99(d) that applies to this case is the 2013 revision in effect when the audit began. All references to § 17b-99(d) in this decision are to the 2013 revision unless otherwise noted.
See Section II below.
DISCUSSION
The plaintiff raises eight issues on appeal. First, it claims that the department lost jurisdiction to complete the audit when it failed to issue a draft audit report within sixty days after it concluded its field audit at the plaintiff's office on October 28 and 29, 2013. Second, it claims that the decision erroneously upheld an audit that was improperly conducted upon a universe of third-party claims. Third, it claims that the audit was based on an artificially inflated sample. Fourth, it claims that it was prejudiced by the department's failure to enact regulations to ensure the fairness of the audit process. Fifth, it claims that the department arbitrarily and capriciously assessed financial penalties for clerical errors of first impression. Sixth, it claims that the final decision is clearly erroneous in view of the reliable, probative and substantial evidence in the record because the audit failed to comply with federal audit guidelines published by the Centers for Medicare and Medicaid Services (CMS) in the Medicare Program Integrity Manual. Seventh, it claims that it was prejudiced because the department failed to record and transcribe the exit conference in which the plaintiff allegedly presented evidence to refute the auditor's findings. Eighth, it claims that the department acted in excess of its statutory authority and violated statutory and constitutional law by ordering immediate recoupment of the entire amount. The court will address each of these claims, and the department's response thereto, in turn, bearing in mind the limited scope of review that applies in an administrative appeal pursuant to § 4-183.
I
The plaintiff first claims that the department lost jurisdiction over the audit when it failed to issue a preliminary audit report within sixty days after it concluded its audit, as required by § 17b-99(d)(5). In relevant part, that subdivision provides as follows: " The commissioner . . . shall produce a preliminary written report concerning any audit conducted pursuant to this subsection, and such preliminary report shall be provided to the provider that was the subject of the audit not later than sixty days after the conclusion of such audit."
The plaintiff argued to the review officer, as it argues on appeal, that the timing requirement language in § 17b-99(d)(5) is mandatory and jurisdictional. The department disputed that the draft report was untimely, claiming that the audit had not reached a " conclusion" until the director of the audit division determined that the preliminary report was complete, and further claiming that the preliminary audit report was mailed on the same day that the director made that determination. The review officer rejected both positions. He observed that § 17b-99(d)(5) " does not define when an audit concludes for purposes of starting the sixty-day clock running." R., p. 394. He found that the department's position, that the audit was concluded when the preliminary report was issued, was " plainly erroneous" in light of the statute's clear differentiation between the conclusion of the audit and the issuance of the preliminary audit report. R., p. 394. He also disagreed with the plaintiff's contention that " an audit concludes when the auditors leave the provider's facility." R., p. 394. He then looked to Katz v. Commissioner of Revenue Services, 234 Conn. 614, 617, 662 A.2d 762 (1995), for guidance as to whether a statutory time limit is mandatory or directory. Relying on Katz, he determined that failure to comply with the time limits in § 17b-99(d)(5) did not strip the department of its jurisdiction over the audit. R., pp. 395-96.
On appeal, the plaintiff argues that the time limit for the preliminary audit report in § 17b-99(d)(5) was intended to be mandatory and jurisdictional because (1) the audit statute uses the word " shall" rather than " may" to describe the department's duty to issue the report no later than sixty days after the audit's conclusion, and (2) the audit statute creates a " right" that did not exist at common law. The department argues that the court must defer to the department's interpretation of the statutory requirement.
The court disagrees with the department as to the standard of review. It nevertheless concludes, upon plenary review, that the time limit imposed by § 17b-99(d)(5) for a preliminary audit report is directory.
Our appellate courts have long held " that because [a] determination regarding a [tribunal's] subject matter jurisdiction is a question of law, our review is plenary . . . Subject matter jurisdiction involves the authority of the [tribunal] to adjudicate the type of controversy presented by the action before it . . . [A tribunal] lacks discretion to consider the merits of a case over which it is without jurisdiction . . . The subject matter jurisdiction requirement may not be waived by any party, and also may be raised by a party, or by the [tribunal] sua sponte, at any stage of the proceedings, including on appeal." (Internal quotation marks omitted.) Commissioner of Mental Health & Addiction Services v. Saeedi, 143 Conn.App. 839, 848-49, 71 A.3d 619 (2013) (Saeedi) . In Saeedi, an administrative appeal in a whistleblower case brought pursuant to General Statutes § 4-61dd, the Appellate Court concluded that it was required to conduct a plenary review of a human rights referee's determination of jurisdiction. Moreover, " [i]n light of the strong presumption in favor of jurisdiction, we require a strong showing of a legislative intent to create a time limitation that, in the event of noncompliance, acts as a subject matter jurisdictional bar." (Internal quotation marks omitted.) Saeedi, supra, 143 Conn.App. 849; see also Williams v. Commission on Human Rights & Opportunities, 257 Conn. 258, 267, 777 A.2d 645 (2001).
A
The court turns first to the plaintiff's claim that the sixty-day time period is mandatory because the statute repeatedly uses the word " shall" to describe the department's obligations to conduct audits within a specified time frame. In Elec. Contrs. v. Ins. Co. of the Pa., 314 Conn. 749, 104 A.3d 713 (2014) (Electrical Contractors), our Supreme Court engaged in a comprehensive analysis of factors to be considered in determining whether a statutory time limit is meant to be mandatory or directory. It commented that its " past decisions have indicated that the use of the word shall, though significant, does not invariably create a mandatory duty." (Internal quotation marks omitted.) Id., 757. It continued: " Indeed, we frequently have found statutory duties to be directory, notwithstanding the legislature's use of facially obligatory language such as 'shall' or 'must.' See, e.g., Weems v. Citigroup, Inc., 289 Conn. 769, 788-94, 961 A.2d 349 (2008) (employer's use of improper form did not invalidate wage deductions); United Illuminating Co. v. New Haven, 240 Conn. 422, 462-67, 692 A.2d 742 (1997) (assessor's failure to provide notice within thirty days of hearing did not invalidate assessment); Metropolitan District Commission v. AFSCME, Council 4, Local 184, 237 Conn. 114, 122, 676 A.2d 825 (1996) (failure to hold executive session did not require that arbitrators' award be vacated); Katz v. Commissioner of Revenue Services, 234 Conn. 614, 617, 662 A.2d 762 (1995) (commissioner's failure to act on refund claim within ninety days did not preclude denial of claim); Leo Fedus & Sons Construction Co. v. Zoning Board of Appeals, 225 Conn. 432, 446, 623 A.2d 1007 (1993) (zoning board of appeals not subject to automatic approval doctrine on basis of its failure to hold public hearing within statutory time limit); Jones v. Mansfield Training School, 220 Conn. 721, 726-28, 601 A.2d 507 (1992) (use of word 'shall' was directory and did not create exclusive remedy for injured worker); Ghent v. Planning Commission, supra, 219 Conn. [511, ] 516 and n.4, [594 A.2d 5 (1991)] (commission's failure to file transcript of hearing with court did not invalidate appeal); Tramontano v. Dilieto, 192 Conn. 426, 433, 472 A.2d 768 (1984) (acts of public official performed at time beyond limit prescribed are nonetheless effective); Broadriver, Inc. v. Stamford, 158 Conn. 522, 529-30, 265 A.2d 75 (1969) (redevelopment agency's failure to file return within ninety days of notice to property owner did not invalidate statutory taking), cert. denied, 398 U.S. 938, 90 S.Ct. 1841, 26 L.Ed.2d 270 (1970); Gallup v. Smith, 59 Conn. 354, 356-58, 22 A. 334 (1890) (that judge of adjoining district was cited in by disqualified judge, rather than by clerk, did not invalidate subsequent appointment of trustee); see also 719 J. Evans, 'Mandatory and Directory Rules, ' 1 Legal Stud. 227, 252-53 (1981) (arguing for presumption in favor of treating ambiguous rules as directory because legislature always has option to expressly identify rules as mandatory and holding rules directory provides courts greater flexibility in deciding consequences of breach). We therefore look to other relevant considerations, beyond the legislature's use of the term 'shall, ' to ascertain the meaning of the statute." Electrical Contractors, supra, 314 Conn. 757-58.
" Our prior cases have looked to a number of factors in determining whether such requirements are mandatory or directory. These include: (1) whether the statute expressly invalidates actions that fail to comply with its requirements or, in the alternative, whether the statute by its terms imposes a different penalty; (2) whether the requirement is stated in affirmative terms, unaccompanied by negative language; (3) whether the requirement at issue relates to a matter of substance or one of convenience; (4) whether the legislative history, the circumstances surrounding the statute's enactment and amendment, and the full legislative scheme evince an intent to impose a mandatory requirement; (5) whether holding the requirement to be mandatory would result in an unjust windfall for the party seeking to enforce the duty or, in the alternative, whether holding it to be directory would deprive that party of any legal recourse; and (6) whether compliance is reasonably within the control of the party that bears the obligation, or whether the opposing party can stymie such compliance." Electrical Contractors, supra, 314 Conn. 758-59. No one of these considerations is dispositive, but each should be considered in the context of the relevant language, structure, history and purpose of the statute as a factor in determining whether the duty at issue was mandatory or directory. Id., 759 n.10.
The first two factors described above are addressed to the statutory text. See id., 759. " A reliable guide in determining whether a statutory provision . . . is mandatory is whether the provision is accompanied by language that expressly invalidates any action taken after noncompliance with the provision." Katz v. Commissioner of Revenue Services, supra, 234 Conn. 617. In the present case, § 17b-99(d) does not include any express penalty for the department's failure to issue its preliminary report within sixty days after the audit's conclusion. This factor favors a determination that the sixty-day time limit is directory rather than mandatory.
On the other hand, § 17b-99(d)(5) does provide that the " preliminary report shall be provided to the provider . . . not later than sixty days after the conclusion of such audit." (Emphasis added.) Both the use of " shall, " which is often used to describe a mandatory duty, and the use of " not later than, " a negative term, suggest that the sixty-day period was intended to be mandatory. See State v. Reddy, 135 Conn.App. 65, 73-74, 42 A.3d 406 (2012) (noting that the use of the word " shall" " generally suggests a mandatory action" and the use of the negative terminology " not later than" similarly imported a mandatory action). The second factor under Electrical Contractors thus supports the plaintiff's argument.
The third factor to be considered is " whether the requirement relates to a matter of substance or one of convenience." Electrical Contractors, supra, 314 Conn. 758. " If it is a matter of substance, the statutory provision is [generally held to be] mandatory. If however, the legislative provision is designed to secure order, system and dispatch in the proceedings, it is generally held to be directory." (Internal quotation marks omitted.) Id., 760-61. In Electrical Contractors, the Supreme Court acknowledged that " where the legislature has imposed a statutory deadline we may assume that it intends for the action in question to be accomplished expeditiously. Nevertheless, the inclusion of a relatively brief deadline does not necessarily imply that expediency is an essential purpose of the statute. Indeed, in a number of cases, both this court and the Appellate Court have concluded that such statutory deadlines are directory where there is no express legislative guidance to the contrary and no indication that the legislature intended the deadline to be jurisdictional. Compare United Illuminating Co. v. New Haven, supra, 240 Conn. 463 (requirement that assessor provide notice of assessment within thirty days of hearing held directory), Katz v. Commissioner of Revenue Services, supra, 234 Conn. 617 (requirement that commissioner act on tax refund claim within ninety days held directory), Leo Fedus & Sons Construction Co. v. Zoning Board of Appeals, supra, 225 Conn. 446 (zoning board of appeals not subject to automatic approval doctrine on basis of its failure to hold public hearing within statutory time limit), Broadriver, Inc. v. Stamford, supra, 158 Conn. 529-30 (requirement that redevelopment agency return notice of proposed taking to clerk of Superior Court within ninety days held directory), and In re Adrien C., 9 Conn.App. 506, 509, 512, 519 A.2d 1241 (requirement that commissioner file petition to terminate parental rights at least ninety days prior to expiration of child's commitment held directory), cert. denied, 203 Conn. 802, 522 A.2d 292 (1987), with Vartuli v. Sotire, 192 Conn. 353, 359, 472 A.2d 336 (1984) (compliance with sixty-five-day decision requirement held mandatory where statute provided that approval would be presumed in absence of timely commission decision to contrary)." Electrical Contractors, supra, 314 Conn. 761-62.
A consideration of the cases discussed in Electrical Contractors where time limits were determined to be directory leads to the conclusion that this factor favors a determination that the time limit in § 17b-99(d)(5) is directory. In § 17b-99(d)(5), as in the cases cited above, there is no express legislative guidance that the time limit is mandatory, and there is no indication that the legislature intended the deadline to be jurisdictional. Moreover, nothing in § 17b-99(d)(5) indicates that the department's failure to provide a preliminary report within sixty days after the conclusion of the audit will result in a presumption that the audited accounts are to be accepted without adjustment or correction. By contrast, in Vartuli v. Sotire, where a time limit was found to be mandatory, the statutory scheme provided that the failure of a local zoning authority to act on a coastal site plan within the required time period resulted in automatic approval of the plan. Vartuli v. Sotire, supra, 192 Conn. 358-65.
The fourth factor to be considered is the legislative history of the provision, its surrounding circumstances, and the full legislative scheme of which it is part. Electrical Contractors, supra, 314 Conn. 758, 762-64. The court has reviewed the entire legislative history of P.A. 05-195, where § 17b-99(d)(5) originated, and has found nothing to suggest that the timing of a preliminary audit report was a matter of particular concern. The advocates for the audit statute at that time were primarily concerned with the lack of clear guidance to help them avoid clerical errors. They were also concerned with extrapolation, which they experienced as unduly punitive for minor clerical errors when no fraud was involved, and the absence of any appeal to a disinterested adjudicator. See, e.g., Conn. Joint Standing Committee Hearings, Human Services, Part 3, 2005 Sess., pp. 885-89. The legislative history thus supports a determination that the timing provision in § 17b-99(d)(5) was intended to be directory rather than mandatory.
The court has also considered the circumstances surrounding the legislative enactment and the statutory scheme as a whole. In particular, the court has considered the federal regulatory context in which the department must administer the Medicaid program, including audits of providers. The state is required to develop a state Medicaid plan, to be approved by the federal Centers for Medicare and Medicaid Services (CMS), that provides for a statistics-based evaluation of Medicaid providers. See Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 794 n.2 and 816-18, and see 42 C.F.R. § 456.22. Federal regulations further provide that a state must repay the federal share of any overpayments to a Medicaid provider within one year of the date the overpayment is discovered either by the state or by a federal review. See 42 C.F.R. § § 433.312(a)(2), 433.316(a) and (e). This repayment obligation exists whether or not the state has recovered the overpayment from the provider. See 42 C.F.R. § 433.312(a)(2) (" The State Medicaid agency must refund the Federal share of overpayments at the end of the 1-year period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider"). In view of the federal repayment obligation, it would make no sense for our legislature to divest the department of jurisdiction to recover overpayments merely because it was unable to provide a preliminary audit report within sixty days. The surrounding circumstances and the entire legislative scheme, including the governing federal regulations, therefore support a determination that the sixty-day time limit is intended to be directory rather than mandatory.
The fifth factor is " whether holding a requirement to be mandatory would result in an unjust windfall for the party seeking to enforce the duty or, in the alternative, whether holding it to be directory would deprive that party of any legal recourse." Electrical Contractors, supra, 314 Conn. 758, 764-66. Construing the timing requirement for a preliminary audit report to be mandatory and jurisdictional could result in a windfall to any provider whose audit was not completed within sixty days but, when completed, revealed a substantial overpayment. It would be contrary to public policy to allow a provider to keep improper payments simply because the department was unable to complete an audit within sixty days. In contrast, construing the timing requirement to be directory would not preclude a provider from obtaining departmental review after the preliminary report was issued; nor would it preclude judicial review if the provider was aggrieved by the disposition of the departmental review. This factor favors a determination that the timing provision is directory.
The sixth and final factor to be considered is " whether compliance is reasonably within the control of the party that bears the obligation, or whether the opposing party can stymie such compliance." Electrical Contractors, supra, 314 Conn. 759, 766-67. As to this point, the legislative history of P.A. 05-195 reveals that the department relied on extrapolation because its staff of twenty-four auditors could not otherwise adequately monitor payments to more than six thousand Medicaid providers that submitted, collectively, millions of claims each year. See Conn. Joint Standing Committee Hearings, Human Services, Pt. 4, 2005 Sess., pp. 925-26. The fact that the department had a small audit staff and a vast number of providers and claims to be audited suggests that compliance with a sixty-day period for completing any particular audit was not completely within the department's control. This factor, then, tends to support a determination that the sixty-day period for issuing the preliminary audit report is meant to be directory rather than mandatory.
Considering all of the relevant factors, then, the court concludes that the requirement in § 17b-99(d)(5) that the department issue a preliminary audit report within sixty days after concluding the audit was intended to be directory rather than mandatory.
B
The plaintiff also claims that the sixty-day time limit for a preliminary audit report must be mandatory because the audit statute created a right not known at common law. For this argument, it relies primarily on such cases as Diamond National Corp. v. Dwelle, 164 Conn. 540, 543, 325 A.2d 259 (1973); Lostritto v. Community Action Agency of New Haven, Inc., 269 Conn. 10, 848 A.2d 418 (2004); and Ecker v. West Hartford, 205 Conn. 219, 231-32, 530 A.2d 1056 (1987). Those cases stand for the proposition that " [w]here a statute gives a right of action which did not exist at common law . . . and fixes the time within which the right must be enforced, the time fixed is a limitation or condition attached to the right; it is a limitation of the liability itself as created, and not of the remedy alone." (Internal quotation marks omitted.) Diamond National Corp. v. Dwelle, supra, 164 Conn. 543. This line of cases is plainly inapplicable to the audit provision in § 17b-99(d)(5) because that provision did not create a right to audit Medicaid providers.
Both judicial precedents, such as Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 795, and the legislative history of the audit statute make it clear that the department had been conducting Medicaid audits using extrapolation methods for many years before the legislature enacted § 17b-99(d) to regulate the department's existing audit practices. Indeed, in Goldstar, our Supreme Court recognized that the department's " audit process . . . is mandated by federal law and is meant to ensure compliance with [M]edicaid rules and regulations." Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 805. Examples of federal laws and regulations requiring Medicaid audits, cited in Goldstar, include 42 U.S.C. § 1396a(a)(37)(B), which requires state Medicaid plans to provide for procedures [for] . . . postpayment claims review, " and 42 C.F.R. § 447.253(g), which requires the state's Medicaid agency to " provide for periodic audits of the financial and statistical records of participating providers." The Goldstar court also relied upon an opinion of the federal Health Care Financing Administration, which summarized a long-standing body of federal law recognizing the government's " common-law right of recoupment, and its corollary power of recovery by offset." United States Dept. of Health and Human Services, Health Care Financing Authority Ruling No. 86-1, " Use of Statistical Sampling to Project Overpayments to Medicare Providers and Suppliers" (February 20, 1986), p. 4; see also Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 817. A common-law right of recoupment necessarily implies a right to review the claims submitted by a provider to determine whether the claims were properly submitted. The plaintiff's claim that the department had no right to conduct audits before § 17b-99(d) was enacted is meritless.
II
The plaintiff next claims that the final decision of the review officer is " fatally flawed" because it upheld findings erroneously based on a universe of " third-party claims." In asserting this claim, it relies on the 2014 amendment to § 17b-99(d) that defines " universe" as " a defined population of claims submitted by a provider during a specific time period." See P.A. 14-162, § 1.
In relevant part, section 1 of P.A. 14-162 amended § 17b-99(d) to add the following definitions: " For purposes of this subsection 'extrapolation' means the determination of an unknown value by projecting the results of the review of a sample to the universe from which the sample was drawn; 'provider' means a person, public agency, private agency or proprietary agency that is licensed, certified or otherwise approved by the commissioner to supply services authorized by the programs set forth in said chapters; and 'universe' means a defined population of claims submitted by a provider during a specific time . . ."
In its items of aggrievement, the plaintiff alleged that " [t]here is no apparent logic or discernible algorithm associated with the 'Paid Claim Universe' of 7, 650, utilized in the extrapolation process." R., p. 19. It represented that over the audit period it submitted 3, 504 invoices to AASCC, the access agency, which then submitted them to the department. The department had not explained how it arrived at a paid claim universe of 7, 650. R., p. 19. It was also concerned that the claims used by the department covered " random and inconsistent time periods and amounts." R., p. 19.
In response to the plaintiff's items of aggrievement, the department stated that " the universe is based on how claims are processed by the access agency and not based on the invoices submitted to the access agency." R., p. 203. It provided no further explanation of what that meant. The plaintiff appears to assume that the universe was based on invoices submitted by AASCC to the department, but the record does not disclose exactly how the plaintiff's 3, 504 invoices were repackaged into 7, 650 units of claims.
When the plaintiff replied to the department's explanation about the role of the access agency, it changed the argument presented in its initial item of aggrievement. Relying on a Medicaid regulation from the state of Washington, the plaintiff argued that a " claim" is " each item/service billed by a provider" to the state's Medicaid program, and that the plaintiff's 3, 504 monthly invoices to AASCC during the audit period contained an estimated " tens or hundreds of thousands" of line item claims. R., p. 298. It argued that each line item of service should have been treated as a single claim for purposes of the audit. R., p. 298. It pointed out that the sample claims used by the department in the audit varied widely in size, with the smallest sample claims covering a period of one day and the largest sample claims covering periods of twenty-eight days. R., p. 297. It argued that it " is mathematically and statistically erroneous to extrapolate purported disallowances from a mega-Claim, covering a 28-day period, across a Universe with a multitude of Claims covering 1-day periods--whereby the amount of the disallowances from the mega-Claims vastly consumes the total amounts billed for the Claims covering 1-day periods." R., p. 297.
The department argued, in response to the plaintiff's reply, that its extrapolation methodology was " statistically valid, " " fair, reliable, and accurate, " and complied with generally accepted governmental auditing standards. R., p. 307. It further argued that another state's regulations had no bearing on an audit performed in Connecticut.
A week after the record in this appeal was closed (R., p. 309), the Superior Court issued an order in a different case that prompted a further order by the review officer in this case. In Walgreen v. Dept. of Social Services, supra, 60 Conn.L.Rptr. 356, a pharmacy had challenged the department's failure to respond to its discovery requests about the sampling and extrapolation methodology used in its audit. The department objected, claiming that no regulation required it to provide discovery about the audit process. Observing that the department had failed, after more than enough time, to enact rules designed " to ensure the fairness of the audit process, including, but not limited to the sampling methodologies associated with the process, " as required by § 17b-99(d)(11), the court held that it was " fundamentally unfair for the department to breach its duty to enact relevant rules and then object to discovery because it has no such rules." Walgreen, supra .
After receiving the order in Walgreen, the review officer, acting sua sponte, ordered the department to provide the plaintiff with information it had previously requested regarding the audit universe size. R., p. 313. He further ordered that the plaintiff would have the opportunity to " submit additional evidence and arguments in support of its claim that the audit universe size was incorrect" after reviewing the information to be provided. R., p. 313. In response to the review officer's order, the department disclosed additional information about its sampling and extrapolation methodology. R., pp. 314-62.
After reviewing the department's disclosure, the plaintiff filed a five-page brief but did not submit evidence of any sort. It renewed, and again changed, its attack on the audit universe. It now argued that the department had ignored the new definition of " universe" in General Statutes § 17b-99(d). In 2014, the legislature had amended § 17b-99(d) to define " universe" as " a defined population of claims submitted by a provider during a specific time period." The plaintiff argued that, under this definition, the department was required to consider the tens of thousands of line items billed by the plaintiff as the " universe, " but instead used claims aggregated in some unknown manner by AASCC. R., p. 368.
In response, the department argued that the definition of " universe" on which the plaintiff now relied was not in § 17b-99(d) when the audit was conducted. It also argued that even if the new definition of " universe" applied, the department's methodology did not violate the statute because " it did select its claims from a universe of claims" submitted by the plaintiff. R., p. 381. It argued that the statute did not require that the claims had to be submitted directly to the department. In addition, the department submitted a letter by John McCormick, a certified public accountant and the department's director of quality assurance, who represented that he was familiar with statistical sampling and extrapolation, that the methodology used by the department was consistent with standards published by the federal General Accounting Office, and that the " final financial audit adjustment validly, reliably and accurately calculated the overpayments" to the plaintiff during the relevant audit period. R., pp. 384-86.
In the final decision, the review officer gave short shrift to the plaintiff's claims concerning the audit universe. R., pp. 399-400. He summarized in one paragraph the audit universe claim in the plaintiff's original items of aggrievement. He did not discuss the further development of the plaintiff's claim in its reply to the department's response or in its supplemental brief after the department's supplemental disclosure. He then summarized, in a second paragraph, the department's initial response to that claim. In a third paragraph, he quoted the definitions of " extrapolation" and " universe" in the 2014 version of § 17b-99(d), apparently accepting, at least for the purpose of his analysis, that those definitions applied to an audit conducted before they were enacted. He stated: " Thus, extrapolation must be based on a universe made up of claims submitted by a provider, and not, as the provider asserts, invoices submitted by an access agency." R., p. 400. He then ruled as follows: " I conclude that the Department correctly based the universe on claims submitted by the provider to the access agency and not on the invoices submitted by the provider to the access agency." R., p. 400.
On appeal, the plaintiff protests, correctly, that the review officer mischaracterized the plaintiff's argument. At no time did the plaintiff argue that the audit universe should have been based on " invoices submitted by an access agency." But the fact that the review officer mischaracterized the plaintiff's argument does not resolve the issue for purposes of appeal. It appears that the review officer was focusing on the plaintiff's initial argument, as framed in its items of aggrievement, where it argued that it had submitted 3, 504 invoices to AASCC and could not understand how the department derived a universe of 7, 650 claims. See R., p. 19. It was only later, after the department stated that it had based the universe on " how claims are processed by the access agency" (R., p. 203) that the plaintiff began to discuss AASCC invoices--and then it was to argue that AASCC invoices should not be the basis of the universe.
Although the review officer did not correctly characterize the plaintiff's arguments, he nevertheless concluded that the universe had been based on the claims submitted by the plaintiff to the access agency. That was essentially the argument the department had made: as long as the audit universe consisted of claims submitted by the plaintiff, the department's methodology was consistent with the statute, regardless of how the plaintiff's claims were processed by the access agency.
On appeal, the plaintiff again points to the discrepancies in the sample claims used by the department. It argues, for instance, that it is improper to include in the same universe some claims that cover only one day of services and some claims that cover twenty-eight days of services. However plausible this argument may sound, it is unsupported by substantial evidence in the record. In an administrative appeal under § 4-183, the court is not the trier of fact. It is required to review the record before the agency's adjudicator to determine whether the agency's decision is supported by " substantial evidence." Although the plaintiff vigorously argued that the department's methodology must have been skewed, the plaintiff never offered expert evidence to contest the statistical validity of the department's methodology. It instead relied on a hodgepodge of arguments based on regulations governing different programs and tried to make statistical arguments based on isolated examples from the data provided by the department. Expert evidence was necessary, however, to challenge the statistical validity of the department's methodology.
The court is not without sympathy for the plaintiff's position. The plaintiff was hampered by the department's inexcusable failure to provide adequate information about its methodology before the plaintiff filed its items of aggrievement. The plaintiff was also constrained by the statutory procedure in place during the review, which did not require the department to afford it a contested case hearing. But the review officer did ultimately order the department to disclose the information the plaintiff had requested. He also afforded the plaintiff an opportunity to submit additional evidence and arguments after the information was disclosed. At that point, even if it could not have done so before, the plaintiff could have presented an opinion by an expert in statistics to demonstrate flaws in the department's audit universe or sampling and extrapolation methodology. It did not do so. It chose instead to rely solely on arguments that the universe of claims used by the department was contrary to the statute and the CMS manual. The department, in contrast, presented both evidence and arguments to rebut the plaintiff's position. It presented McCormick's opinion letter as evidence to rebut the plaintiff's position as to the statistical validity of the department's methodology. R., pp. 384-86.
In Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 642, the Appellate Court considered how the substantial evidence standard applies in the unusual context of the department's audit process under the 2013 version of § 17b-99(d). Although it noted that not all of the language used to describe the substantial evidence standard specifically applies where there was no formal hearing in a contested case, it nevertheless adhered " to the principles of deference to the agency as well as insistence upon the substantial rights of the individual." Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 649 n.9. " The substantial evidence standard requires that the plaintiff do more than simply show that another decision maker, such as the [Superior Court], might have reached a different conclusion. Rather than asking the reviewing court to retry the case de novo . . . the plaintiff must establish that substantial evidence does not exist in the record as a whole to support the agency's decision." (Internal quotation marks omitted.) Id., 649-50. It stressed that a plaintiff who challenges an agency's decision bears a heavy burden of " demonstrating that the department's factual conclusion lacks substantial support on the whole record." (Internal quotation marks omitted.) Id., 650.
The plaintiff in Bridgeport Dental argued that the record in that case was " bereft of evidence" and contained only " inferences and conclusions" of the review officer. The Appellate Court disagreed because the plaintiff had the opportunity to present evidence to support its claims. This case differs from Bridgeport Dental in that the plaintiff here initially lacked critical information about the department's methodology, while in Bridgeport Dental the plaintiff claimed to have the missing evidence in its own records. Nevertheless, the plaintiff here was afforded the opportunity to make the record it needed for judicial review. Like the plaintiff in Walgreen, it could have provided an expert opinion to challenge either the sufficiency of the information the department provided or the validity of its methodology. It chose not to do so.
In sum, although the plaintiff's arguments about the audit universe are plausible enough to raise concerns about the adequacy of the department's statistical methodology, those arguments are not supported by substantial evidence in the administrative record. The department's arguments, in contrast, are supported by the opinion of a person claiming to have expertise in statistical sampling in governmental audits.
The 2014 amendment to § 17b-99(d) defined " universe" as a " defined population of claims submitted by a provider during a specific time period." Even assuming that this definition applied to an audit begun in 2013, the amendment neither defined " claim" nor prohibited consideration of claims submitted by a provider to an access agency rather than directly to the department. The review officer found that the audit universe was correctly based on " claims submitted by the provider to the access agency." R., p. 400. That finding is supported by the record and is not inconsistent with the text of the statute.
The plaintiff's real issue with the audit universe appears to have been that it was constructed out of tens of thousands of line item claims that had been somehow inappropriately aggregated by the access agency. That argument required expert evidence about statistical sampling and extrapolation methodologies. In the absence of such evidence supporting the plaintiff's arguments, and in the presence of evidence supporting the department's arguments, the court cannot conclude that the review officer's final decision was clearly erroneous in light of the substantial evidence on the whole record.
III
The plaintiff's third claim on appeal is that the final decision was unreliable and flawed because the extrapolation methodology belatedly disclosed by the department revealed that the department had used an " inflated" sample size. R., p. 369. It is undisputed that the documents disclosed by the department in response to the review officer's order of disclosure contained a sample size chart. The sample size chart indicated that, for a universe consisting of 5, 882 to 16, 890 claims, the sample size should be 95 claims. R., p. 359. It is also undisputed that the department used 100 samples rather than 95. In its supplemental brief to the review officer, the plaintiff argued that the enlarged sample size artificially inflated the error rate because two errors were found in the last five samples selected. R., pp. 369-70. The department disputed that claim as a matter of fact. R., pp. 381-82. It also presented McCormick's letter opinion, which stated that " [s]ampling risk varies inversely with sample size: the smaller the sample size the greater the sampling risk . . . The DSS Office of Quality Assurance reduced the sampling risk by selecting and reviewing a sample size of 100 paid claims for each of these categories of paid claims." R., pp. 384-85. The review officer did not rule on the plaintiff's claim that the sample size was improperly inflated.
On appeal, the department argues that this claim should not be reviewed because (1) it was not raised in the plaintiff's items of aggrievement and (2) it is not supported by the evidence in the record. The first argument is fairly debatable. It is usually the case that a plaintiff's failure to raise an issue in its initial items of aggrievement would preclude review in an administrative appeal. See, e.g., Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 664-65 (limiting review to issue as originally framed by plaintiff in initial statement of aggrievement, not as subsequently elaborated). In this case, however, the department concealed the information necessary to discover the claim until the review officer ordered disclosure late in the review process, long after the items of aggrievement had been filed. If failure to present the issue in the initial items of aggrievement were the only impediment to review, the court might conclude that fundamental fairness required the agency to allow the plaintiff to amend his items of aggrievement in these circumstances.
The department's second argument, however, is well taken. When given the opportunity to present new evidence and arguments to the review officer after the disclosure of the sample size chart, the plaintiff presented only arguments, not evidence. The department presented McCormick's opinion that the increase in the sample size reduced the sampling risk. In the absence of evidence to the contrary, the plaintiff cannot prevail on this claim.
IV
The plaintiff's fourth claim is that its substantial rights were prejudiced because the department failed to enact regulations to ensure the fairness of the audit process. The review officer rejected this claim, concluding that the plaintiff had failed to show that it sustained some personal prejudice as a result of the department's failure to act.
The department's failure to enact regulations is undisputed. " An administrative agency's failure to comply with a statutory mandate to adopt procedural rules can be challenged, however, only by making a showing that some personal prejudice has resulted from the agency's failure to act." In re Zoarski, 227 Conn. 784, 795, 632 A.2d 1114 (1993). Such prejudice may be shown if an agency's failure to act deprives a party of a meaningful opportunity to defend itself. See id.
In this case, the plaintiff argues that it presented several specific claims to the review officer showing how the department's failure to enact regulations prejudiced it. Rather than providing analysis of these areas of claimed prejudice, however, it merely directs the court to paragraph 87 of its appeal, where it cites to various claims it made to the review officer. Such a conclusory approach provides an inadequate basis for this court's review. The court is not required to review issues that have been improperly presented through an inadequate brief. " Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly." (Internal quotation marks omitted.) State v. Buhl, 321 Conn. 688, 724, 138 A.3d 868 (2016). In this case, although the plaintiff cites appropriate authorities for the general principle of law, it fails to engage in any reasoned analysis applying the law to the facts of this case. This is, in itself, a sufficient reason to reject this claim. There are other reasons to reject it as well.
First, several of the plaintiff's claims of prejudice relate to the fact that the department did not enact regulations defining when the audit process was " concluded" for purposes of calculating the " mandatory" sixty-day time limit in which the department was required to issue its preliminary audit report. In Section I above, the court has rejected the claim that the time limit in § 17b-99(d)(5) is mandatory. The plaintiff's claims of prejudice on this ground are unfounded.
Second, the plaintiff assumes that regulations would encompass requirements that it believed to be desirable, such as a requirement for an administrative hearing in which it could present evidence. As the Appellate Court observed in Bridgeport Dental, however, " we have no way of knowing what regulations hypothetically may have been enacted." Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 659. Moreover, there was no legislative directive prohibiting the department from conducting audits before its regulations were adopted. Id.
Third, several of the plaintiff's claims of prejudice concern the department's failure to disclose information related to the sampling and extrapolation methodologies. A similar claim (but a stronger one, because it was supported by evidence) resulted in a remand in the Walgreen case. In this case, however, the review officer took the directive in Walgreen seriously and, sua sponte, ordered the department to disclose the information the plaintiff had previously sought in this case. He also afforded the plaintiff an opportunity to present evidence and arguments in response to the disclosed information. The review officer's action negated the potential prejudice the plaintiff might have suffered if forced to proceed through the review without the requested information.
Finally, some of the plaintiff's claims of prejudice concern its dissatisfaction with the information disclosed by the department in response to the review officer's order. For instance, it claimed that it was unable to confirm that the alleged billing errors were in the original list of sample claims. However, in response to that argument in the plaintiff's supplemental brief, the department produced screen shots of the original list of sample claims, confirming that its earlier disclosure of the sample claim list accurately presented the samples, albeit sorted in a different order. Compare R., pp. 44-49 with R., pp. 388-90. The plaintiff has failed to present any analysis to support its claims that it never obtained certain information.
In sum, the court finds no basis in the plaintiff's inadequately briefed argument or in the record presented to disturb the review officer's conclusion that the plaintiff failed to show the personal prejudice required to sustain a claim based on an agency's failure to enact regulations.
V
The plaintiff next claims that the review officer arbitrarily and capriciously concluded that the department could impose financial penalties based on clerical errors, regardless of whether such errors were found in a previous audit. See R., pp. 400-01. The plaintiff concedes that § 17b-99(d) does not prohibit the recovery of overpayments that are based on clerical errors. It claims, however, that a statement made by the department's deputy commissioner in a legislative hearing on the audit bill in 2005 constituted a " regulation" that bound the department to forego financial penalties based on first-time clerical errors. The plaintiff claimed that, contrary to the department's purported regulation, it was penalized for " errors of first impression."
The deputy commissioner, Michael Starkowski, testified as follows: " When we go out there with facilities and they have a problem with a clerical problem or they have an error in a number of situations, we will not take a financial penalty the first time that error occurs. But we will identify the error, work with the provider, and if that error occurs a second time or occurs repetitively, then we will take a financial penalty." Conn. Joint Committee Hearings, Human Services, Pt. 3, 2005 Sess., pp. 805-06.
The review officer rejected the plaintiff's argument on both legal and factual grounds. First, he concluded that the department was not " bound by testimony given ten years ago by a Department representative before a legislative committee." R., p. 401. Second, he found that the department audited the plaintiff in 2004 and recouped overpayments based on clerical errors that, if not identical to the errors identified in this audit, were sufficiently similar to put the provider on notice of the need to correct its record-keeping. R., pp. 401-03.
The plaintiff claims that the deputy commissioner's legislative comment amounted to a regulation under Maloney v. Pac, 183 Conn. 313, 439 A.2d 349 (1981), and under the UAPA's definition of regulation. In Maloney, the court observed that " [t]he criteria that determine whether administrative action is a 'regulation' are neither linguistic nor formalistic. It is not conclusive that an agency has, or has not, denominated its action a 'regulation' or that it has, or has not, promulgated it procedurally in the fashion that would be required of a 'regulation.' . . . The test is, rather, whether a rule has a substantial impact on the rights and obligations of parties who may appeal before the agency in the future." (Citations omitted; internal quotation marks omitted.) Maloney v. P. supra, 183 Conn. 325-26. The comment in Maloney is consistent with the UAPA's definition of " regulation, " which provides, in relevant part, that " regulation" means " each agency statement of general applicability, without regard to its designation, that implements, interprets, or prescribes law or policy, or describes the organization, procedure, or practice requirements of the agency." General Statutes § 4-166(16).
Neither Maloney nor the UAPA supports the claim that a single comment by a departmental representative constitutes an agency regulation. Both refer to something more substantive, and more substantial, than isolated remarks. The plaintiff cites In re Tyriq T., 313 Conn. 99, 131, 96 A.3d 494 (2014), to bolster its claim, asserting that the Supreme Court in that case relied upon the legislative testimony of the commissioner of correction " with regard to statements of policy and procedure." Pl. Br., p. 28. Tyriq T. does not support the plaintiff's claim. In point of fact, the reference to which the plaintiff alludes appears in a dissenting opinion, not the opinion of the court. Moreover, the dissenting justice did not assert that the commissioner's comments represented an agency regulation, or even an agency position; he merely cited her comments about the inadequacy of services provided to children in the custody of the Department of Correction to support an argument that juveniles face a risk of irreparable harm when incarcerated in adult facilities. None of the cases cited by the plaintiff support its claim that an isolated remark in a legislative hearing creates a regulation that binds an agency to a particular course of action.
The review officer also found, as a matter of fact, that the errors found in the 2013 audit were clerical errors similar to those found in the plaintiff's 2004 audit. In 2004, the department recouped overpayments from the plaintiff for clerical errors, such as an improperly signed time sheet or billing for homemaker services when the relevant time sheet indicated that companion services had been provided. R., p. 6. The 2004 audit also revealed an error where an appropriate client signature was not on a " per visit" basis. It did not make a financial adjustment for that error but expected the plaintiff to rectify it. R., p. 6. In the 2013 audit at issue here, the errors included the failure to detail the activities performed, the failure to obtain client signatures on a " per visit" basis, and reporting homemaker services while billing for companion services. R., pp. 8-9.
The review officer agreed with the department that provider errors resulted in improper payments being made under the Medicaid program. R., p. 402. He concluded that the department did not violate any regulation when it recovered overpayments that resulted from clerical errors, including insufficient documentation. His factual findings are supported by substantial evidence in the record, and his legal conclusion is not affected by any error of law.
VI
The plaintiff next claims that the audit procedures employed by the department are neither published, nor based upon valid statistical sampling, nor compliant with guidelines published by CMS in the Medicare Program Integrity Manual (CMS manual). Pl. Br., pp. 29-31. The department responds that this claim is unreviewable because it was not raised in the plaintiff's items of aggrievement and that, if reviewed, it is unsupported by the record. Def. Br., pp. 16-19. The plaintiff argues, in reply, that it could not have raised this issue in its items of aggrievement because the department did not disclose its sampling and extrapolation methodology before the plaintiff was required to file its items of aggrievement. Pl. Rep. Br., pp. 1-5. It also claims that the department waived its right to challenge the plaintiff's failure to raise this claim by failing to move to strike the claim from the plaintiff's appeal pursuant to Practice Book § § 10-6 and 10-7. Pl. Rep. Br., 6-7. In the particular circumstances presented here, and without condoning the department's failure to provide sufficient information for the plaintiff to evaluate the validity of the sampling and extrapolation with its draft audit report before the review officer ordered it to so in response to the Walgreen decision, the court agrees with the department.
A
The plaintiff's items of aggrievement contain no mention of the CMS manual and no claim that the department was required to comply with the CMS manual's guidelines on statistical sampling and extrapolation. Instead, in its initial items of aggrievement, the plaintiff complained merely of " lack of transparency in the audit." R., p. 19. In a two-paragraph statement under that item, the plaintiff argued that the department had not provided it with the 100-claim sample that was purportedly randomly generated, but had rather provided it with a sample listing dated September 24, 2014, nearly a year after the audit was conducted. It further asserted that the department had requested three years' worth of files on each case, leading the plaintiff to suspect that it had combed the files to find errors not in the original sample and that the sample provided had then been made to conform to the findings after the fact. R., p. 19. It also argued that it was unable to examine and confirm the integrity of the audit. R., p. 19.
On appeal, the department asserts that the plaintiff's claim that the department altered the sample list to conform with its findings of errors in a broader group of records is inconsistent with the presumption of regularity afforded to administrative actions and is factually unsupported. The court agrees. " Public officials are presumed to have done their duty until the contrary appears." Leib v. Board of Examiners for Nursing, 177 Conn. 78, 84, 411 A.2d 42 (1979). Moreover, after the review officer ordered the supplemental disclosure, the department disclosed screen shots of the original sample list generated on September 4, 2013, at the commencement of the audit. The plaintiff did not thereafter point to a single claim in the sample list it had previously received that did not appear on the screen shots of the original list. The factual issue raised in the original items of aggrievement, if not abandoned by the plaintiff's failure to address it on appeal, is unsupported by the record.
B
The plaintiff's claim on appeal that the department's sampling and extrapolation methodology does not comply with the CMS manual's guidelines for Medicare audits was not raised in its initial items of aggrievement. The plaintiff contends that it could not have raised this claim before it received the supplemental disclosure and that therefore the review officer should have treated the claim as an amendment to its items of aggrievement. The court disagrees for the following reasons.
First, nothing prevented the plaintiff from asserting, in its initial items of aggrievement, that the CMS manual governed the department's audit process and that the department had failed to produce sufficient information to allow it to determine whether the department had complied with that obligation. Raising the claim in its initial items of aggrievement would have allowed the department to address the legal question--whether the CMS manual's Medicare audit guidelines were legally binding on the department's conduct of its Medicaid audit--and would also have allowed the review officer to consider whether the department should be ordered to disclose its methodology at that time.
Second, even when the plaintiff did raise the issue of compliance with the CMS manual in its post-disclosure brief, it did not establish that any specific law or regulation required the department to comply with the CMS manual. It argued to the review officer, as it argues on appeal, that in Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 816, our Supreme Court had " authorized the department's use of statistical extrapolation based upon federal guidelines and precedent." R., p. 367. It then asserted that the department had " run afoul" of Goldstar because its extrapolation methodology was not based on statistics but on a " simplistic arithmetic formula." R., p. 367.
Goldstar did not require the department to use the CMS manual's methodology, or any other specific methodology, in conducting its audit. In Goldstar, the plaintiff had challenged the department's general authority to use extrapolation, not the specific extrapolation methodology used. In concluding that extrapolation was permitted, the Goldstar court examined federal judicial precedents, certain federal regulations, and a ruling by the federal Health Care Financing Authority (HCFA), Ruling No. 86-1 (February 20, 1986). These authorities recognized that statistical sampling is the " only feasible method available " of recouping overpayments in the Medicaid program in view of the scale of claims presented. Goldstar Medical Services, Inc. v. Dept. of Social Services, supra, 288 Conn. 816, quoting HCFA Ruling No. 86-1 (emphasis added in Goldstar ).
Third, the plaintiff's purported reliance on the CMS manual is based on an incomplete quotation from a particular section. The plaintiff quotes chapter 8, section 8.4.1.1 of the manual, which provides, in the paragraph quoted by the plaintiff, that " [t]hese instructions are provided to ensure that a statistically valid sample is drawn and that statistically valid methodologies are used to project an overpayment where the results of the review indicate that overpayments have been made." Pl. Br., p. 29, n.21. The very next paragraph of section 8.4.1.1., however, expressly states that " [f]ailure to follow one or more of the requirements contained herein does not necessarily affect the validity of the statistical sampling that was conducted or the projection of the overpayment. An appeal challenging the validity of the sampling methodology must be predicated on the actual statistical validity of the sample as drawn and conducted ." (Emphasis added.) CMS Manual, chapter 8, section 8.4.1.1. The plaintiff offered no evidence to challenge the actual statistical validity of the sample as drawn and conducted by the department and as disclosed pursuant to the review officer's supplemental order. The plaintiff's use of isolated sentences from the CMS manual, taken out of context, is misleading and unpersuasive.
C
The plaintiff also argues that the department waived its right to challenge the applicability of the CMS manual by failing to move to strike this claim from the plaintiff's appeal. It cites in support of this claim Practice Book § § 10-6, 10-7, and 14-6. Practice Book § 10-6 prescribes the order of pleadings in a civil action; Practice Book § 10-7 provides that " the filing of any pleading provided for by the preceding section will waive the right to file any pleading which might have been filed in due order and which precedes it in the order of pleading provided in that section, " and Practice Book § 14-6 provides in part that " administrative appeals are civil actions subject to the provisions and exclusions of General Statutes § 4-183 et seq. and the Practice Book." The court does not agree that these provisions preclude the department from asserting that the plaintiff's failure to raise this claim in its items of aggrievement bars it from asserting the claim on appeal. A court's review of administrative actions under § 4-183 is confined to a review of the record before the administrative agency. General Statutes § 17b-99(d)(8) (Rev. to 2013) required the plaintiff to present to the review officer " a detailed written description of each specific item of agreement." By failing to raise the applicability of the CMS manual, as a legal question, in its items of aggrievement, the plaintiff did not comply with that requirement.
The plaintiff's argument that it should have been permitted to amend its items of aggrievement after the department's supplemental disclosure is superficially attractive but ultimately unpersuasive. The plaintiff did not move to amend its items of aggrievement, but attempted instead to shoehorn its argument concerning the CMS manual into its earlier more general claim concerning the lack of transparency in the department's audit process. If the plaintiff had expressly moved to amend its items of aggrievement after receiving the department's supplemental disclosure, and if the plaintiff had supported such a motion with expert evidence that the supplemental disclosure revealed an improper methodology, the court might well have found an abuse of discretion in the denial of such a motion to amend. On the record presented, however, the plaintiff failed to exhaust its administrative remedy by failing to move to amend its items of aggrievement and by failing to present evidence in support of such a motion. Given the review officer's sua sponte supplemental order of disclosure, which reflects a proper concern for the plaintiff's right to fundamental fairness in the proceeding, the plaintiff cannot plausibly argue that a motion to amend would have been futile. See, e.g., Peruta v. Commissioner of Public Safety, 128 Conn.App. 777, 20 A.3d 691, cert. denied, 302 Conn. 919, 28 A.3d 339 (2011) (affirming dismissal of action for failure to exhaust administrative remedies; discussing futility exception). The exhaustion doctrine implicates the court's jurisdiction to consider claims in an administrative appeal. Id., 789. Because the plaintiff did not seek to amend his items of aggrievement to include this claim, he is barred from asserting it on appeal.
In sum, the court lacks jurisdiction to consider a claim not raised in the items of aggrievement submitted to the review officer, and, even if the court had jurisdiction to consider the claim, the arguments presented do not establish that the review officer's final decision is clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record.
VII
The plaintiff next argues that it was prejudiced by the department's failure to record and transcribe the exit conference on October 29, 2014. The department argues that this claim is unreviewable because it was not presented to the review officer in the items of aggrievement. The court agrees with the department.
" It is well established that a court will not set aside an agency's determination upon a ground not theretofore fairly presented for its consideration." (Internal quotation marks omitted.) Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 656. Although there are limited exceptions that may allow judicial review for claims of constitutional error, jurisdictional error, or error in construing the administrative agency's authorizing statute; see id., 657; no such exceptions are present here.
The plaintiff bases this argument on General Statutes § 4-183(g), which requires the agency to " transcribe any portion of the record that has not been transcribed" and to transmit the same to the court. When the audit and the audit review at issue were conducted, however, General Statutes § 17b-99(d) did not require the department to record the exit conference or to afford the plaintiff a contested case hearing. In 2013, § 17b-99(d)(6) provided merely that " [t]he commissioner . . . shall . . . hold an exit conference with any provider that was the subject of any audit pursuant to this subsection for the purpose of discussing the preliminary report"), and § 17b-99(d)(8) provided for a review by the commissioner's designee of the plaintiff's items of aggrievement, without reference to a hearing of any sort. There was no requirement that the department receive " testimony" at the exit conference. If the plaintiff had offered any " testimony" at the exit conference, moreover, it could have memorialized such testimony in affidavits when it presented its items of aggrievement.
General Statutes § 17b-99(d) was amended, effective July 1, 2015, to eliminate review by a departmental review officer and to require, instead, a contested case hearing. See P.A. 15-5, § 400; see General Statutes § 17b-99(d)(9) (Rev. to 2017). The plaintiff has not and does not argue that the 2015 amendment, which took effect while the audit review in this case was pending, was retroactively effective and required the department to afford it a contested case hearing.
Nor can the department be faulted for failing to provide to the review officer any documents that the plaintiff may have presented at the exit conference. The plaintiff had the opportunity to submit any evidence it deemed necessary for the review officer's consideration when it submitted its items of aggrievement. Any documents from its own records that supported its arguments with respect to particular claims were particularly within its own knowledge, and, indeed, it presented many such documents with its items of aggrievement. See R., pp. 23-178. " Unlike the traditional review of a contested case, here the basis of the administrative action was the audit. The audit was derived from information peculiarly within the plaintiff's knowledge." Bridgeport Dental, LLC v. Commissioner of Social Services, supra, 165 Conn.App. 655. Nothing precluded the plaintiff from presenting to the review officer any documentary evidence it had presented at the exit conference.
The court concludes that this issue is not one that falls within the narrow exceptions permitting a trial court to review issues not presented in the first instance to the agency.
VIII
The plaintiff's final argument is that the department acted in excess of its statutory authority and statutory law by ordering recoupment. It complains, in particular, that in the final report, the department ordered immediate recoupment, rather than the recoupment over twenty-four payment periods mentioned in its initial transmittal of the draft audit report. The department argues that this was not raised in the plaintiff's items of aggrievement and is therefore unreviewable. For reasons similar to those discussed in section VII above, the court agrees with the department. The plaintiff did not object to the general principle of recoupment in its items of aggrievement. It now argues that the department could not recoup payments because it did not adopt a regulation pursuant to General Statutes § 17b-99(c), which authorized the department to adopt regulations " for the withholding of payments currently due in order to offset money previously obtained as the result of error."
The plaintiff's claim is unfounded--as the plaintiff has known at least since the department objected, on January 29, 2016, to the plaintiff's motion for stay, where the department cited its duly adopted regulation on recoupment. See Docket Entry No. 105, p. 8. The department's regulation provides: " Any payment, or part thereof, for Medical Assistance Program goods or services which represents an excess over the payment authorized, or a violation due to abuse or fraud, shall be payable to the department. Any such sum not returned to the department by a provider may be recovered in an action brought by the department against the provider. Such sums may also be recouped from current payment due the provider in accordance with law ." (Emphasis added.) Regs., Conn. State Agencies § 17b-262-533.
The court concludes that the issue of recoupment does not fall within the narrow exceptions permitting a trial court to review issues not presented in the first instance to the administrative agency.
CONCLUSION
After careful review of the entire record and all arguments of counsel, the court concludes that the plaintiff has failed to show that the department acted unreasonably, arbitrarily, illegally, or in abuse of its discretion. The plaintiff has failed to show that the department lacked jurisdiction to complete the audit or that its final decision was otherwise affected by errors of law. Accordingly, the appeal is dismissed.