Summary
In Tome, the parties entered into the settlement agreement on December 28, 2006, well after the General Assembly's 2002 amendments which brought the Board under the Procurement Code, and granted subject matter jurisdiction over Medical Assistance provider reimbursement disputes to BHA.
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No. 557 C.D. 2008.
Argued: April 1, 2009.
Filed: July 20, 2009.
BEFORE: LEADBETTER, President Judge; McGINLEY, Judge; SMITH-RIBNER, Judge; JUBELIRER, Judge; SIMPSON, Judge; LEAVITT, Judge; BUTLER, Judge.
OPINION NOT REPORTED
Kimberly Tome, individually and by her parents, Sandra and John Tome, and her provider of services, Tomestead, Inc. (collectively, Petitioners), appeals from an order of the Board of Claims (Board) dismissing Petitioners' Claim for interest and attorney's fees against the Department of Public Welfare (DPW) for lack of subject matter jurisdiction. On appeal, this Court must determine whether the Board has jurisdiction over Petitioners' Claim for interest and attorney's fees that arose out of a breach of a settlement agreement entered into between Petitioners and DPW regarding Pennsylvania Medical Assistance (MA) Program reimbursements.
The MA Program is "a state plan for funding the provision of medical care and services to individuals in need of government aid, conducted with the assistance of federal funding and subject to extensive federal regulation." Department of Public Welfare v. Presbyterian Medical Center of Oakmont, 583 Pa. 336, 338, 877 A.2d 419, 421 (2005).
The following facts are taken from Petitioners' Claim and are not disputed. Kimberly Tome is a 51-year old individual with severe mental retardation, Smith-Magenis syndrome, and numerous other medical conditions. The Pennsylvania Consolidated Waiver Program (Waiver Program) provides funding for services for Kimberly. Kimberly's parents incorporated Tomestead, a Pennsylvania nonprofit corporation. Tomestead is a MA Program, which provides home and community-based services to Kimberly under the Waiver Program. DPW's responsibilities include overseeing the Waiver Program and authorizing the Waiver Program's funding through eligible MA providers, like Tomestead. In 2002 and 2004, DPW's fiscal agent in charge of Kimberly's Waiver Program services, York/Adams Mental Health and Mental Retardation Program (Program), denied, reduced, or terminated services to Kimberly that were funded under the Waiver Program. Petitioners appealed from the Program's decisions to the Bureau of Hearings and Appeals (BHA), which initially dismissed the appeals. However, on appeal to this Court, per DPW's request, we remanded the matters to BHA for consideration.
On December 28, 2006, Petitioners entered into a Stipulation of Settlement (Settlement Agreement) with DPW to resolve these appeals, whereby DPW agreed to make payments owed to Tomestead to compensate for services provided to Kimberly under the Waiver Program, which services had been recognized and authorized by DPW. Specifically, DPW:
agree[d] to pay . . . Tomestead . . . the total of $412,061.19, as payment in full for the following services:
(a) For Fiscal Year ("FY") 2002-2003, the amount of $115,187.00;
(b) For FY 2003-2004, the amount of $64,256.95;
(c) For FY 2004-2005, the amount of $71,792.01;
(d) For wages owed to John and Sandy Tome for FYs 2002-2003 through 2004-2005 including taxes, the amount of $160,825.23.
(Settlement Agreement ¶ 2.) DPW also stipulated in the Settlement Agreement that it would authorize payment for those services to Petitioners within 15 days of BHA's final order adopting the Settlement Agreement, which occurred on December 29, 2006. In exchange for DPW's payments, Petitioners agreed to withdraw certain appeals pending before BHA. However, on February 1, 2007, DPW announced that it would only pay $67,213.59 to Petitioners and was deferring payment of the remaining $344,847.60 due to an ongoing audit. DPW did not pay the $67,213.59 until April 26, 2007.
After DPW announced that it was going to defer payment to Petitioners, Petitioners requested an expedited hearing before BHA to enforce the terms of the Settlement Agreement pursuant to DPW's regulations and Paragraph 4 of the Settlement Agreement. (Letter requesting expedited hearing from Petitioners' counsel to Thomas E. Cheffins, Director of BHA, February 8, 2007.) After an enforcement hearing, BHA granted Petitioners' request on April 2, 2007, and ordered DPW to authorize payment of the entire settlement amount within five days of that order. DPW then requested a stay of that order and reconsideration by the Secretary of Public Welfare (Secretary). On June 13, 2007, the Secretary affirmed BHA's order enforcing the terms of the Settlement Agreement. In compliance with the Secretary's order, on June 19, 2007, DPW authorized the payment due under the Settlement Agreement, which Petitioners received in mid-July 2007.
Paragraph 4 of the Settlement Agreement provides that BHA "shall retain exclusive jurisdiction over any dispute which may arise with respect to the interpretation, application, or enforcement of the terms of this Stipulation, subject to appellate judicial review." (Settlement Agreement ¶ 4.)
On August 10, 2007, Petitioners sent a letter to DPW requesting that it remit payment of $4,399.63 to Tomestead for legal fees that Petitioners incurred in their effort to enforce the Settlement Agreement. Petitioners also requested interest in the amount of $8,817.64 that resulted from DPW's failure to authorize timely payment as required by the terms of the Settlement Agreement. DPW responded by letter that it could discern no basis for the request and asked Petitioners to provide authority in support of their request. On September 12, 2007, Petitioners sent a letter to DPW detailing its request and asked DPW to respond within 15 days. DPW did not respond to Petitioners' letter and did not pay any interest or legal fees to Petitioners.
Petitioners then filed their Claim with the Board of Claims, in which they sought statutory interest pursuant to Section 1507(a)(1) of The Fiscal Code, Act of April 9, 1929, P.L. 343, added by the Act of December 13, 1982, P.L. 1155, as amended, 72 P.S. § 1507(a)(1), for the settlement amounts which DPW wrongfully withheld in breach of the Settlement Agreement. Petitioners also sought reasonable attorney's fees that were necessarily incurred to obtain DPW's compliance with their Settlement Agreement pursuant to Section 3935(b) of the Procurement Code, 62 Pa. C.S. § 3935(b).
Section 1507(a)(1) provides:
In accordance with regulations prescribed by the Secretary of the Budget, each Commonwealth agency which acquires property or services from a business concern or a qualified small business concern but which does not make payment for each such complete delivered item of property or service by the required payment date may pay an interest penalty to such business concern, and shall pay an interest penalty to any qualified small business concern, in accordance with this section on the amount of the payment which is due.
72 P.S. § 1507(a)(1).
Section 3935(b) provides:
(b) Attorney fees. — Notwithstanding any agreement to the contrary, the prevailing party in any proceeding to recover any payment under this subchapter may be awarded a reasonable attorney fee in an amount to be determined by the Board of Claims, court or arbitrator, together with expenses, if it is determined that the government agency, contractor or subcontractor acted in bad faith. An amount shall be deemed to have been withheld in bad faith to the extent that the withholding was arbitrary or vexatious.
62 Pa. C.S. § 3935(b).
DPW filed preliminary objections to Petitioners' Claim alleging legal insufficiency of the Claim and lack of subject matter jurisdiction. While the Board ultimately agreed with DPW that it did not have subject matter jurisdiction to hear the Claim, the Board based its decision on different reasons than those argued by DPW. The Board stated that the Procurement Code generally provides the Board with exclusive jurisdiction over claims arising from contracts entered into by a Commonwealth agency, like the Settlement Agreement at issue in this case. However, the Board held that it lacked subject matter jurisdiction because the Board has no jurisdiction in disputes involving payment to providers of MA services. The Board stated:
DPW alleged that the Board lacked subject matter jurisdiction because:
[T]he terms of the Settlement Agreement specifically vests DPW's Bureau of Hearings and Appeals (BHA) with jurisdiction over claims involving the enforcement of the Settlement Agreement's terms or, in the alternative, should the Board have jurisdiction over the Claim, Claimants failed to file a contract controversy with the contracting officer within six (6) months from the date the claim accrued as required by 62 Pa. C.S. 1712.1(b).
(DPW's Preliminary Objections ¶ 2.)
[W]e do not believe we can ignore the genesis of the settlement agreement, the source of payment from the medical assistance program nor the identity of the claimant as a medical assistance provider in light of the express provisions of Section 1724(c) [of the Procurement Code]. The Board cannot assert subject-matter jurisdiction over this settlement agreement, and must dismiss this claim. See in accord, [Department of Public Welfare] v. Presbyterian Medical Center of Oakmont, [ 583 Pa. 336,] 877 A.2d 419 (2003).
(Board Op. at 4.)
On appeal, Petitioners argue that the Board erred in dismissing their Claim for lack of subject matter jurisdiction. Petitioners assert that the Claim sought only interest on the amount overdue and attorney's fees Petitioners incurred in enforcing the Settlement Agreement with DPW, a matter well within the Board's exclusive jurisdiction under Section 1724(a)(1) of the Procurement Code. Petitioners argue that the Board wrongly relied on Section 1724(c) of the Procurement Code to dismiss their Claim because the Claim did not arise from the operation of the MA Program. Petitioners argue that the dispute relating to the MA Program had been fully and finally dealt with by the parties in the terms of the Settlement Agreement and by BHA and the Secretary in enforcing those terms. Petitioners assert that they had no recourse in seeking costs incurred in enforcing the Settlement Agreement other than filing their Claim with the Board.
Our review is "limited to determining whether constitutional rights have been violated, whether an error of law has been committed or whether necessary findings of fact are supported by substantial evidence."Department of Public Welfare v. Presbyterian Medical Center of Oakmont, 826 A.2d 34, 36 n. 6 (Pa.Cmwlth. 2003).
Specifically, Paragraph 25 of the Claim states:
25. The interest amount owed to Tomestead was calculated starting from February 1, 2007 up to the dates that the Department authorized the payment of the outstanding settlement as following:
$412,019.61 at 6% per annum from February 1 through April 26, 2007, or o 6% x $412,019.61 x (1/365 x 85 days) = $5,756.89
$344,806.02 at 6% per annum from April 27 through June 19, 2007, or o 6% x $344,806.02 x (1/365 x 54 days) = $3,060.72
$5,756.89 + $3,060.71 = $8,817.61 total interest due
(Claim ¶ 25.)
The Legislature enacted the Act of December 3, 2002, P.L. 1147, No. 142 (Act 142), which, among other things, added 62 Pa. C.S. §§ 1721 — 1726, to replace the former Board of Claims Act, removed subject matter jurisdiction over MA provider reimbursement disputes from the Board, and required that all such disputes be heard by BHA. Act 142 went into effect following DPW's publication and issuance of its standing practice order on June 28, 2003. See 33 Pa. Bull. 3053 (June 28, 2003). Of relevance for this proceeding, Act 142 added Section 1724 of the Procurement Code, which provides, in relevant part:
Section 12.1 of Act 142 repealed 62 Pa. C.S. §§ 1721- 1726, and Section 12.2 of Act 142 replaced the repealed sections with the current language in 62 Pa. C.S. §§ 1721- 1726.
(a) Exclusive jurisdiction. — The board shall have exclusive jurisdiction to arbitrate claims arising from all of the following:
(1) A contract entered into by a Commonwealth agency in accordance with this part and filed with the board in accordance with section 1712.1 (relating to contract controversies). . . .
. . . .
(c) Limitations. — The board shall have no power and exercise no jurisdiction over a claim asserted under subsection (a)(1) unless it is filed with the board in accordance with section 1712.1. . . . The board shall have no power and exercise no jurisdiction over claims for payment or damages to providers of medical assistance services arising out of the operation of the medical assistance program established by the act of June 13, 1967 (P.L. 31, No. 21), known as the Public Welfare Code.
62 Pa. C.S. § 1724(a)(1), (c) (italicized emphasis added).
Act 142 expressly relinquished the Board's exclusive jurisdiction by taking away any power or jurisdiction " over claims for payment or damages to providers of medical assistance services arising out of the operation of the medical assistance program." 62 Pa. C.S. § 1724(c). Based on this statutory limitation, the Board was correct in recognizing that the contractual aspect of the matter is not determinative; but, rather, it must look at the underlying claim for payment before it. Here, the underlying claim for payment arose from an agreement settling a dispute over MA provider reimbursement payments owed by DPW to Petitioners. Petitioners are "providers of medical assistance services," who seek payment from DPW of attorney's fees and interest related to their enforcement of the Settlement Agreement, which arose "out of the operation of the medical assistance program." Thus, Section 1724(c) precludes the Board's jurisdiction in this matter.
We also note that Section 102(e) of the Procurement Code exempts medical assistance provider agreements from the Procurement Code's provisions by stating that "[n]othing in this part shall apply to medical assistance provider agreements administered by the Department of Public Welfare. . . ." 62 Pa. C.S. § 102(e).
Petitioners also contend that the Board wrongly relied on the Supreme Court's decision in Oakmont to dismiss their Claim because the Claim neither related to any matters within DPW's specific expertise and delegated legislative authority, nor derived from the application and interpretation of DPW's regulations. Oakmont dealt with a claim filed with the Board prior to 2003 and before the Legislature's enactment of Act 142. Oakmont, 583 Pa. at 338, 344, 877 A.2d at 420, 425. In Oakmont, the service provider, a nursing facility, filed a claim with the Board styled as a contract action grounded in the nursing facility's "provider agreement," which is an agreement between DPW and MA providers. The claim disputed DPW's calculation of reimbursement payments due and owed to the nursing facility for nursing care and services that were previously provided pursuant to the MA Program. The Board found in favor of the nursing facility on claims for reimbursement under the MA Program, and DPW appealed. On appeal, this Court vacated the Board's order and dismissed the matter, concluding that the Board did not have jurisdiction because the nursing facility's challenges were to "DPW's application of its regulations." Department of Public Welfare v. Presbyterian Medical Center of Oakmont, 826 A.2d 34, 37 (Pa.Cmwlth. 2003). This Court stated that, "[t]o determine whether the Board of Claims has jurisdiction the focus must be on the nature of the underlying claims and not the mere existence of a contractual relationship between the parties." Id.
On appeal, the Supreme Court affirmed. The Supreme Court held that although an "MA provider's relationship with DPW has contractual overtones, . . . the specter of a dual-track system for adjudicating provider rights would undermine the exclusive aspect of the Board of Claims' jurisdiction." Oakmont, 583 Pa. at 352, 877 A.2d at 429. The Supreme Court explained that the litigation should fall to BHA, "[p]articularly as the Board of Claims Act cannot be fully realized relative to MA provider reimbursement challenges (in light of the federal-law requirement for an agency appeals/exceptional process . . .)." Id. at 352, 877 A.2d at 430. In determining that the Board's exclusive jurisdiction over contractual matters was not intended to vest the Board with jurisdiction over matters within BHA's "special competence and prescribed authority," the Supreme Court noted:
In Oakmont, the Supreme Court quoted the federal requirement at 42 C.F.R. § 447.253(e), which provides:
Provider Appeals. The Medicaid agency must provide an appeals or exception[] procedure that allows individual providers an opportunity to submit additional evidence and receive prompt administrative review, with respect to such issues as the agency determines appropriate, of payment rates.
Oakmont, 583 Pa. at 348 n. 16, 877 A.2d at 427 n. 16 (quoting 42 C.F.R. § 447.245(e)).
Our present decision obviates the distinction that the Commonwealth Court appears to have been making between complex and simpler MA provider reimbursement claims. To the extent that a claim is within the broad scope of the federal regulation directing state agencies administering MA programs to maintain an appeals process, it falls under our decision here.
Id. at 353 n. 21, 877 A.2d at 430 n. 21. Oakmont was decided prior to the enactment of Act 142 and focused on reimbursement rate payments pursuant to a provider agreement. However, the principle articulated in that case, that a contractual aspect of a matter does not vest jurisdiction with the Board, remains instructive and supports our conclusion that the statutory limitation of the Board's jurisdiction applies to this matter.
Accordingly, we affirm the order of the Board.
While DPW agreed with the Board that it lacks subject matter jurisdiction over Petitioners' Claim, DPW disagreed with the Board's opinion that it generally retains jurisdiction over all settlement agreements. DPW contends that this statement is false because settlement agreements do not meet the Procurement Code's definition of a "contract." However, because of our disposition, we need not address this issue.
ORDER
NOW, July 20, 2009, the order of the Board of Claims in the above-captioned matter is hereby affirmed.
I write separately to note that the BHA found, expressly, that the Department of Public Welfare "acted without good faith by delaying the payments agreed upon" in its Settlement Agreement with the Tomes. Reproduced Record at 196a. Given this bad faith, the Tomes should have a remedy available to them, if not with the Board of Claims, then within another tribunal.
Judge Simpson joins in this concurring opinion.