DISTRICT COURT CLEEK FILED IN MY OFFI 7/25/2016 2:38:51 STEPHEN T. PACHECO FIRST JUDICIAL COURT STATE OF NEW MEXICO COUNTY OF SANTA FE HOGARES, INC., v. No. NEW MEXICO HUMAN SERVICES Case assigned to Mathew, Francis DEPARTMENT. RULE 1?074 NOTICE OF APPEAL Pursuant to N.M.S.A. 27-2-12, N.M.A.C. 8.352316, and Rule 1-074 N.M.R.A., Appellant/Petitioner Hogares, Inc. (?Hogares?) hereby ?les this Notice of Appeal of the June 23, 2016, ?nal agency decision of the New Mexico Human Services Department (the ?Department?) to adopt the recommendation of Administrative Law Judge Aldo Jadrnicek that Hogares was overpaid in the amount of $3,102,823.00 from July 1, 2009, through January 31, 2013 Case No. A true and correct copy of the Decision is attached as Exhibit A. Hogares contends that the Department?s June 23, 2016, overpayment decision, and the Administrative Law udge?s decision that it adopts, was reached in error, and therefore all amounts held by the Department for claims submitted by Hogares for reimbursement must be released and the decision must be reversed. Because the Department?s foregoing decisions are arbitrary and capricious, and undertaken in bad faith, Hogares requests that this Court award it attorney fees in connection with this appeal. In support of its Notice of Appeal, Hogares further states as follows: Jorge Montes J. I. PARTIES AND COUNSEL 1. Appellant Hogares is a provider of behavioral health services that participates in the New Mexico Medicaid program. Its principal place of business was formerly in Albuquerque, New Mexico. 2. Appellee Department, which is the party against which the appeal is being taken, is the single state agency authorized to administer New Mexico? 3 Medicaid program. It is based in Santa Fe, New Mexico. II. LEGAL AUTHORITY 3. This Court has authority to hear this appeal pursuant to N.M.S.A. 27-2- 12, N.M.A.C. 8.352.316, and Rule 1-074 N.M.R.A, or in the alternative Rule 1-075, N.M.R.A. 4. This matter is ripe for appeal because there are no further actions to be taken by the Department with respect to its ?nal agency decision that Hogares was overpaid in amount of $3,102,823.00. Now that the Department has determined the alleged existence of an overpayment in an amount certain, the decision is ?nal and it will simply withhold that amount from a larger sum it owes to Hogares (but currently is Withholding). STATEMENT OF ISSUES AND RELEVANT BACKGROUND A. The 2013 Audit and ?Temporary? Withholding Action. 5. Beginning in February 2013, Public Consulting Group performed an audit of Hogares on behalf of the Department. PCG provided Hogares with its audit report on June 21, 2013. Although PCG initially took the position that it found no credible evidence of fraud (a determination that it was later told to revisit by the Department), it determined that Hogares owed an alleged extrapolated overpayment to the Department. 2 6. By letter dated June 24, 2013, the Department informed Hogares that it would be suspending payments to Hogares for services provided to the Medicaid program based on what the Department had ?determined as a preliminary matter that there is a credible allegation of fraud.? 7. The June 24, 2013, Notice of Suspension assured Hogares that ?[t]he check withhold is temporary, as stated in paragraph of 42 CPR. 455.23, and only until: (1) The prosecuting authorities determine that there is insuf?cient evidence of fraud or alleged fraud or willful misrepresentation by the provider; or (2) Legal proceedings related to the provider?s alleged fraud or willful misrepresentation are completed.? 8. As a result of the fraud allegation, the Department referred the matter to the Medicaid Fraud Control Unit of the New Mexico Attorney General?s Of?ce and stated that ?[a]ny further investigation and/or subsequent proceedings related to the allegation(s) will be directed by 9. In response to the Notice of Suspension, Hogares submitted a Good Cause Request dated June 25, 2013, along with a supplemental letter dated June 27, 2013, both of which requested release of the payment withhold. 10. The Attorney General?s Of?ce cleared Hogares of all fraud allegations more than two years later, as stated in its correspondence to Hogares dated February 5, 2016. The February 5, 2016, letter attached a report by Medicaid Fraud and Elder Abuse Division of the Attorney General? Of?ce ?nding that Hogares had overbilled the Medicaid program. 11. The Department did not release Hogares from the payment suspension, per its clear speci?cation in the June 24, 2013, Notice of Suspension that the suspension was based on credible allegations of fraud and its authority under 42 CPR. 455.23, and that the suspension would end once the prosecuting authorities?MFCU?determined that insuf?cient evidence of fraud existed. 12. HSD still has not released the funds that were originally suspended due to, ostensibly, credible allegations of fraud, but which are now being unlawfully withheld. 13. Hogares is at this point caught in an inde?nite and legally unauthorized payment withholding action without the ability to contest accusations or ?ndings through a fair hearing, or any other hearing procedure. 14. Hogares attended a hearing with the Fair Hearings Bureau on April 18, 2016, through April 28, 2016. From April 18, 2016, through April 28, 2016, a hearing concerning the Department?s overpayment demand was held before the Administrative Law Judge Aldo adrnicek. At the hearing, Hogares conceded that six claims were properly classi?ed as overpayments. Hogares disputed the remaining claimed amount. 15. In a Decision dated June 8, 2016, Administrative Law Judge Aldo adrnicek recommended that the Department rule in its own favor except as to four claims.1 The Department issued its ?nal agency decision adopting Administrative Law Judge Aldo adrnicek?s recommendation on June 23, 2016. Hogares is hereby appealing those decisions?Administrative Law Judge Aldo admicek?s recommendation, and the Department?s ?nal agency decision adopting Administrative Law Judge Aldo adrnicek?s recommendation. C. The Final Decisions Being Appealed, and the Grounds for the Appeal. 1 In particular, Administrative Law Judge Aldo Jadrnicek recommended that the Director of the Medical Assistance Division of the New Mexico HSD direct the Department to perform a new extrapoiation re?ecting the adjustments to the two overbilled claims under code H2015 and removing the code 90847 and the code Q3104 claims. 16. The ?nal overpayment decision should be reversed or set aside for the following reasons. The Department?s Overpayment Decision. 17. The bulk of the current overpayment amount of $3,102,823.00 traces to an extrapolation audit that relies on incorrect or inaccurate clinical data. Section 8.351 .2.13 of the New Mexico Administrative Code provides that the Department may use statistical sampling techniques to conduct a recovery audit to recoup any extrapolated amounts overpaid to a Medicaid provider. The Department, via its contractor, PCG, used such techniques in this case, drawing a sample of 150 claims. 18. initial clinical review of these 150 claims identi?ed 65 claims which the Department alleged were overpayments. The extrapolation yielded the total overpayment amount being demanded of $9,474,655.00 (on January 20, 2016). That amount was subsequently reduced to $7,970,241.00 (on March 4, 2016), then again to $4,944,037.00 (on April 8, 2016), then again to $4,913,490.00 (on April 13, 2016), and ?nally to $3,102,823.00 (on June 24, 2016). Moreover, as of the date of the Administrative Law Judge?s recommended decision, a total of 24 claims remained at issue between the parties.2 19. The factual evidence adduced at the hearing is clear that only six of the 28 claims3 found to be overpayments were improper, however. The evidence shows that the 2 At the start of the Fair Hearing, a total of 30 claims remained at issue between the parties. As noted previously, Hogares conceded six claims during the course of the Fair Hearing. The remaining 35 claims (65 [initially found failing by 6 [conceded by Hogares] 24 [stiil at issues as of the date of the Administrative Law Judge?s recommended decision] 35) were passed by BSD and are no longer at issue. 3 At the start of the Fair Hearing, a total of 30 claims remained at issue between the parties. As noted previously, Hogares conceded six claims during the course of the Fair Hearing. The other two claims (30 6 2 22) were recommended to be removed per Administrative Law Judge Aldo Jadrnicek?s recommendation to the Director of the Medical Assistance Division of the New Mexico HSD, which was subsequently adopted. remaining 22 claims were properly submitted by Hogares. The Administrative Law Judge?s decision to the contrary concerning the 22 disputed ?overpayments? was not founded on sufficient evidence to withstand judicial review. As such, the Department?s extrapolated results should be reduced accordingly. D. Attorneys? Fees. 20. The Department has acted in bad faith through its conduct in numerous ways, including without limitation its previous refusal to release any withheld funds in excess of the alleged overpayment being sought which wreaked havoc on Hogares?s ?nances, its attempt to collect alleged overpayment amounts associated with an extrapolation audit of payments that had already been subjected to numerous separate and distinct audits, its unlawful referral of Hogares to the New Mexico Attorney General for fraud allegations that were found to lack even credibility, and the overall length of this process. A 21. Under New Mexico law, a court may award attorneys? fees to a litigant as a sanction for bad faith, or frivolous or vexatious litigation, by the other party. See State ex rel. NM State Highway Tramp. Dep?t v. Baca, 120 NM. 1, 5, 896 P.2d 1148, 1152 (N .M. 1995). That sanction is warranted here. Hogares is entitled to its attorneys? fees incurred in connection with all of the overpayment recovery proceedings involving it and the Department, whether at the administrative stage or before a judicial court. 22. Hogares will further specify the basis for relief in its Statement of Appellate Issues, which will be ?led at a later date. CONCLUSION WHEREFORE, Hogares hereby ?les this Notice of Appeal challenging the Department?s ?nal agency decision, as well as the Administrative Law Judge?s recommended decision described above. Respectfully submitted this the 22nd day of July, 2016. DAVIS GILCHRIST, P.C. By: ?Electronically Filed? Bryan J. Davis Bryan J. Davis, Esq. 1005 Marquette Ave NW Albuquerque, NM 87102 Tel: 505-435-9908 Fax: 505-435-9909 Attorneys for Hogares, Inc. CERTIFICATE OF SERVICE The undersigned certi?es that a copy of the foregoing document was served on the following parties via Electronic Service and the Electronic Filing System on the date filed. John Emery, Of?ce of General Counsel ohnR.Emerv@state.mn.us DAVIS, GILCHRIST LEE, P.C. By: ?Electronically Filed? Bryan J. Davis Bryan J. Davis