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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: June 7, 2018

NO. A-1-CA-35149

THE COUNSELING CENTER, INC.,
Respondent-Appellant,

NEW MEXICO HUMAN SERVICES
DEPARTMENT,

Petitioner-Appellee.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Francis J. Mathew, District Judge

Davis & Gilchrist, P.C.
Bryan J. Davis
Albuquerque, NM

for Respondent

New Mexico Human Services Department
Christopher P. Collins, General Counsel
John R. Emery, Deputy General Counsel
Santa Fe, NM

for Petitioner

OPINION

VARGAS, Judge.

{13} The New Mexico Human Services Department (HSD) appeals the district
court’s reversal of an administrative decision requiring The Counseling Center, Inc.
(TCC), a behavioral health care provider, to reimburse HSD for claimed
overpayments. HSD makes two arguments on appeal. First, HSD argues that the
district court erred when it overturned the administrative law judge’s conclusion that
TCC failed to satisfy its burden of proof because it did not audit one hundred percent
of the claims at issue. Second, HSD contends that the district court erroneously
concluded that the administrative law judge’s decision requiring TCC to return fees
mistakenly paid with Medicaid funds to HSD is not supported by substantial
evidence. Because the administrative law judge did not properly apply the regulations
governing the recovery of overpayments, we affirm the district court’s decision
regarding TCC’s burden of proof, though for reasons other than those stated by the
district court. Further, because substantial evidence supports the administrative law
judge’s finding that TCC was erroneously paid with Medicaid funds and federal law
requires that a provider who receives an overpayment of such funds must return them,
we reverse the district court on that issue. The case must be remanded to the

administrative law judge for further proceedings in accordance with our decision.

BACKGROUND

{2} In 1977 the Legislature created the Human Services Department, organized in
six different divisions, including the medical assistance division (MAD). See NMSA
1978, § 9-8-2 (1977); NMSA 1978, § 9-8-4(A)(3) (2007). The Human Services
Department Act requires HSD to contract for behavioral health treatment and support
services for New Mexicans. See NMSA 1978, § 9-8-7.1(A) (2007). In 2009
OptumHealth New Mexico, Inc. (OptumHealth), a managed care organization, was
awarded the statewide contract to manage and oversee the administration of these
behavioral health services. See 8.311.2.11(C) NMAC; NMSA 1978, § 9-7-
6.4(A), (B)(5) (2008) (creating a “collaborative,” comprised of secretaries from
various commissions and departments and chaired by the secretary of HSD, and
authorizing the collaborative to “contract for operation of one or more behavioral
health entities to ensure availability of services throughout the state”). OptumHealth,
in turn, contracted with statewide behavioral health care providers to provide
behavioral health services, with providers agreeing to provide services at a mutually-
agreed upon amount, or at a reimbursement rate defined by the Medicaid rate for
services rendered. See 8.311.2.11(C) NMAC.

{3} TCC, a behavioral health care provider in Alamogordo, New Mexico was

among the providers to contract with OptumHealth. As part of its contract with

OptumHealth, TCC provided behavioral health services for the state’s Medicaid
clients, as well as for clients of the Children, Youth and Families Department (CYFD)
and HSD’s Behavioral Health Services Division (BHSD).

{4} Between July 1, 2009 and January 2011, OptumHealth struggled to implement
its new billing system to manage the administration of behavioral health services in
New Mexico. During that time period, TCC received thirty-one reimbursement fee
schedules from OptumHealth. The reimbursement fee schedules TCC received from
OptumHealth listed the services TCC was allowed to provide and the reimbursement
rate for those services. The fee schedules were sometimes back-dated and contained
several mistakes, including missing service codes, missing modifiers, incorrect rates
and incorrect units, requiring that they be revised and reissued on numerous
occasions.

{5} In November 2012 OptumHealth asked to meet with HSD leadership to present
information regarding suspicious activities of several health care providers referred
to as the Rio Grande providers, including TCC. OptumHealth’s presentation
suggested aberrant billing patterns in the billings of the Rio Grande providers. After
hearing OptumHealth’s presentation, HSD hired Public Consulting Group (PCG) to
audit the Rio Grande providers.

{6 OnJune 21,2013, HSD leadership met with PCG and received its report. When

PCG presented its report to HSD, it had not yet had the opportunity to follow up with
providers to request additional documentation. Instead, PCG was advised to do no
further work, as HSD had decided to refer TCC and fourteen other providers to the
Medicaid Fraud Control Unit (MFCU) of the Attorney General’s Office for further
investigation. At the time it was directed to stop work, PCG had identified twenty-six
claims out of a 150 claim sample group that failed in a random sample audit of TCC
claims (PCG audit). That number was later reduced to nine when the Attorney
General requested and received additional documentation from TCC.

{7} | When the audit of TCC was referred to the Attorney General’s Office, TCC
was advised by HSD that all payments on state contracts, whether for Medicaid or
non-Medicaid services, were immediately suspended.

{833} The Attorney General’s Office conducted its investigation and issued its report
on January 10, 2014. The Attorney General’s investigation reviewed the PCG audit,
the OptumHealth audit and a referral that came into its office regarding TCC. The
Attorney General reported that the nine failed claims out of 150 randomly sampled
claims from the PCG audit resulted in overcharges totaling $5,264.24. The Attorney
General was able to resolve the concerns raised in the OptumHealth audit as part of
its investigation, and did not identify any inappropriate charges resulting from that

audit.

9} Finally, the Attorney General investigated the allegations set out in an
anonymous letter sent to its office in 2012, alleging that TCC employees had been
ordered to bill more time than was actually spent with clients, including Medicaid
clients, to destroy progress notes and assessments and treatment plans, and to sign
progress notes even though they had seen Medicaid clients for less than one hour. The
Attorney General’s Office was unable to substantiate the claims set out in the
anonymous letter by talking to current and former employees; however, one former
manager advised that TCC had been doing basic mental health assessments of clients
and billing them as enhanced assessments. Investigators from the Attorney General’s
Office met with the entire TCC staff and TCC attorneys in August 2013. The
investigators reported that “[a]ll of the staff believe that they are appropriately
preparing assessments and were surprised to learn that the assessments reviewed by
our office did not qualify as enhanced.” TCC staff denied ever hearing any
discussions about billing for enhanced assessments while only performing basic
assessments.

{10} Prior to meeting with TCC, the Attorney General’s Office performed an audit
ofarandom sample of thirty clients for whom TCC had submitted bills for behavioral
health services identified with an H0031 billing code between January 2010 and

March 20, 2013 (Attorney General’s audit). The H0031 billing code is used to bill for

several different types of behavioral health services to several different government
agencies, with billing to an agency defined by whether a modifier is used or not. The
H0031 billing code with no modifier indicated a billing to the BHSD. An H0031
billing code containing an HA modifier indicated an assessment of a minor billed to
CYFD or BHSD. Finally, claims submitted with the H0031 U8 code and modifier
denoted billing for services provided to adult Medicaid clients under the psychosocial
rehabilitation umbrella of services.

{11} At the conclusion of the Attorney General’s investigation, on February 20,
2014, HSD requested that TCC remit $343,000.49 to satisfy overpayments, including
extrapolated overpayments calculated from the results of the Attorney General’s audit
and the PCG audit. TCC timely filed a request for fair hearing pursuant to 8.352.3.9
NMAC. An administrative law judge (ALJ) held a four-day hearing to address the
validity of the methodology employed in extrapolating the overpayments made to
TCC, whether TCC improperly billed certain claims using the incorrect modifier, and
whether TCC was paid out of Medicaid funds for those claims.

{12} Atthe hearing, TCC challenged the failure of each of the nine claims found to
have failed by the PCG audit. TCC also challenged the failure of the claims that were
the subject of the Attorney General’s audit. The evidence showed that TCC submitted

thirty-nine claims related to thirty different clients using the H003 1 billing code, both

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with and without modifiers, with some clients receiving multiple assessments. At the
hearing, the parties stipulated that four of the claims submitted did not meet the
criteria to be billed as H0031 U8 claims. Of the remaining claims, TCC presented
evidence to the ALJ that nine of those claims should not have failed because TCC had
not billed them to Medicaid, though they were erroneously paid with Medicaid funds.
TCC also challenged the remaining failed claims in the Attorney General’s audit,
presenting evidence as to why each claim properly fell within the scope of the H0031
U8 billing code used when the claim was submitted.
{13} At the conclusion of the hearing, HSD requested that the ALJ direct TCC to
return overpayments totaling $379,135.26, representing the extrapolated
overpayments from the PCG audit and the Attorney General’s audit, including claims
properly billed by TCC, but erroneously paid from Medicaid funds.
{14} After hearing the evidence and arguments of the parties, the ALJ made findings
of fact. Among the findings made by the ALJ were findings that:
l. There were 706 claims submitted to and paid by OptumHealth to

TCC under code H0031 with the modifier of U8 for the time

period that is at issue. A random sample of 30 claims, all of

which had been determined to have failed, was applied to this

universe of 706 claims using a ratio-based analysis for

extrapolation. This resulted in an overpayment claim of
$285,468.91. ...

NUOnKRWNY

2. The Attorney General’s office reviewed the audit results from the
Public Consulting Group (PCG) regarding the 150 claims that
had been randomly sampled by PCG. The Attorney General’s
office determined that nine claims failed. When the nine claims
were extrapolated by PCG, that resulted in an overpayment claim
of $62,837.00....

18. OptumHealth would use incorrect funding sources with respect

to payment for TCC’s billings, which thereafter would require

corrections to be made....
15} Using its findings, the ALJ reached the following four conclusions:
1. Attorney General’s Audit of H0031 (U8) Claims and Extrapolated Results
{16} The ALJ concluded that the $285,468.91 in overpayments claimed by HSD
resulting from the Attorney General’s audit constituted prima facie evidence of the
overpayment. To rebut this prima facie showing, the ALJ concluded, TCC was
therefore “required to take certain steps, as the ‘burden of proof of compliance’
shifted to it” under 8.351.2.13(A) NMAC. Though the ALJ acknowledged that “TCC
did put forward a certain amount of credible evidence in opposition, it failed to
provide .. . the requisite ‘[one-hundred] percent audit of the universe of provider

records’ in support of its position.” As a result, the ALJ found HSD was entitled to

recover these monies.

2. PCG Audit and Extrapolated Results

{17}. Next, the ALJ applied the same rationale to the extrapolated overpayment
resulting from the nine failed claims set out in the PCG audit, concluding that because
TCC did not rebut HSD’s prima facie case with a one-hundred percent audit of the
more than 78,000 claims, HSD was entitled to recover its extrapolated overpayment
in the amount of $62,837.00.

3. H0031 Claims (No Modifier) Paid With Medicaid Funds

{18} The ALJ concluded that “the evidence establishes that TCC did not bill [H003 1
(no modifier)] claims to Medicaid” but that “the evidence establishes that TCC was
credited with an amount of $25,210.77 in Medicaid funds, in connection with there
having been numerous problems associated with the payor’s (OptumHealth)
interactions with TCC and its processing of TCC’s claims.” In reaching this
conclusion and finding in favor of HSD on the issue, the ALJ “afforded substantial
weight” to the testimony of Robert Stevens.

4, H0031 (HA) Claims Paid With Medicaid Funds

{19} Finally, the ALJ applied the same logic to HSD’s H0031 (HA) claims as it
applied to the H0031 claims without a modifier, finding that TCC had been credited
with the $5,618.58 in billings under code H0031 (HA). As such, the ALJ concluded

that HSD should prevail on that portion of its claim.

(203 In light of these four conclusions, the ALJ determined that “the weight of the
evidence goes in favor of HSD” and recommended that the MAD director of HSD
“uphold the overpayment in the total amount of $379,135.26.” HSD adopted the
ALJ’s recommendations, and TCC appealed the issue to the district court pursuant
to Rule 1-074 NMRA.

(21; The district court determined that the ALJ’s conclusions regarding the
extrapolated Attorney General audit claims and the extrapolated PCG audit claims
were not decided in accordance with the law. The district court then determined that
conclusions regarding the Medicaid payments of the H0031 (no modifier) claims and
H0031 (HA) claims were “not supported by substantial evidence[,]” focusing on the
limitations of and weaknesses in the testimony of HSD’s employee Robert Stevens.
As a result, the district court reversed the HSD decision adopting the ALJ’s
recommendation. It remanded the ALJ’s conclusions regarding the extrapolated
Attorney General audit and PCG audit claims for further proceedings, instructing the
agency to apply the preponderance of the evidence burden stated in 8.352.3.12(D)
NMAC. The district court also ordered that “[a]ny monies withheld with respect to
[H0031 (no modifier) claims and H0031 (HA) claims] shall be paid to [TCC.]” HSD

filed a petition for writ of certiorari seeking review of the decision, which we granted.

STANDARD OF REVIEW

(223 We review HSD’s decision to determine whether it acted fraudulently,
arbitrarily or capriciously, whether its decision was not supported by substantial
evidence, or whether it failed to act in accordance with law. See NMSA § 39-3-1.1(D)
(1999); Rio Grande Chapter of the Sierra Club v. N.M. Mining Comm'n, 2003-
NMSC-005, 4 17, 133 N.M. 97, 61 P.3d 806. “A ruling by an administrative agency
is arbitrary and capricious if it is unreasonable or without a rational basis, when
viewed in light of the whole record.” Rio Grande Chapter of the Sierra Club, 2003-
NMSC-005, § 17. In reviewing agency decisions, we remain mindful that “in
resolving ambiguities in the statute or regulations which an agency is charged with
administering, the Court generally will defer to the agency’s interpretation if it
implicates agency expertise.” Atlixco Coal. v. Maggiore, 1998-NMCA- 134, ] 30, 125
N.M. 786, 965 P.2d 370. However, in considering whether HSD’s actions were in
accordance with the law, we note that interpretation of a statute or regulation is a
matter of law that this Court reviews de novo; and, we are not bound by HSD’s or the
district court’s interpretation of the relevant statutes and regulations. N.M. Mining
Ass ’nv. N.M. Water Quality Control Comm'n, 2007-NMCA-010, 4 11, 141 N.M. 41,

150 P.3d 991 (citing Rio Grande Chapter of the Sierra Club, 2003-NMSC-005, ¥ 17).

DISCUSSION

{23} HSD’s arguments on appeal can be distilled to two issues. First, HSD contends
that the district court erred when it overturned the ALJ’s conclusions that TCC failed
to satisfy its burden of proof when it did not provide a one-hundred percent audit of
the universe of provider records to challenge the Attorney General’s audit and PCG
audit. Second, HSD argues that the district court erred when it held that HSD’s
decision requiring TCC to return payments erroneously paid with Medicaid funds was
not supported by substantial evidence.

A. One-Hundred Percent Audit Requirement

{24 To determine whether the ALJ applied the proper burdens of proof to the
parties at the fair hearing, we first consider the regulatory scheme applicable to
HSD-funded medical assistance programs, including the burdens of the parties in
proceedings to recover overpayments and the circumstances under which a
one-hundred percent audit of the claims universe is required. Next, we consider
whether the ALJ properly applied the regulations. Finding he did not, we affirm the
district court, though on grounds different than those stated in its decision. See Lynn
Hawkins v. McDonald’s, 2014-NMCA-048, J 23, 323 P.3d 932 (“Under the right for
any reason doctrine, we may affirm the district court’s order on grounds not relied

upon by the district court if those grounds do not require us to look beyond the factual

allegations that were raised and considered below.” (internal quotation marks and
citation omitted)); State v. Vargas, 2008-NMSC-019, ¥ 8, 143 N.M. 692, 181 P.3d
684 (stating that we may affirm the district court on grounds not relied upon if those
grounds do not require us to look beyond the factual allegations raised and considered
below).

HSD Regulations

{25} Overpayments are defined as “amounts paid to a MAD provider or other entity
in excess of the MAD allowable amount” and include “payment for any claim for
which the provider or other entity was not entitled to payment because an applicable
MAD NMAC rule and its requirements were not followed.” 8.351.2.13 NMAC. In
furtherance of recovering overpayments, HSD has promulgated regulations that
include procedures for auditing a provider’s records to determine whether the
provider has been overpaid for its services. See 8.351.2.13(A) NMAC (setting out
audit procedures for recovery of overpayments). First, the overpayment regulations
note that “[t]he audit findings generated through the audit procedure shall constitute
prima facie evidence in all MAD proceedings of the number and amount of requests
for payment as submitted by the provider[.]” 8.351.2.13(A)(1) NMAC. Because of
the voluminous number of claims submitted by providers, the regulations permit

MAD to employ statistical sampling and extrapolation techniques to derive the total

OnADNMA W

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overpayment a provider may have received. The regulation governing the recovery
of overpayments provides:
MAD’s procedures for auditing a provider or other entity may include
the use of random sampling and extrapolation. When this procedure is
used, all sampling will be performed using generally accepted statistical
methods and will yield statistically significant results at a confidence
level of at least 90 percent. Findings of the sample will be extrapolated
to the universe for the audit period.
8.351.2.13(A)(2) NMAC.
{26} The provider has the burden of proof of any noncompliance with statistical
sampling techniques in the event of any disagreement with MAD’s audit findings
arising from an audit utilizing sampling and extrapolation methodology. See
8.351.2.13(A)(3) NMAC.
{27} The provider or other entity may present evidence to show that the sample was
invalid; however, the evidence supporting such invalidity must include a one-hundred
percent audit of the universe of provider records used by MAD in the drawing of its
sample. 8.351.2.13(A)(3) NMAC. Any one-hundred percent audit must:
(a) be arranged and paid for by the provider or other entity;
(b) be conducted by a certified public accountant;
(c) demonstrate that a statistically significantly higher number

of claims and records not reviewed in MAD sample were in compliance
with MAD NMAC rules, and

(d) be submitted to MAD with all supporting documentation.
8.351.2.13(A)(3) NMAC.
{28} A provider may request an administrative hearing if it disagrees with a decision
of MAD with respect to recovery of overpayments resulting from incorrect billing,
lack of documentation to support the medical necessity of a service, claims that the
service was provided, or the imposition of a sanction or other remedy. See
8.352.3.10(C)(1)(c) NMAC. At the administrative hearing, “MAD has the burden of
proving the basis to support its proposed action by a preponderance of the evidence.”
8.352.3.12(D) NMAC.
Extrapolated Overpayment Claims
{29} At the hearing before the ALJ, TCC challenged both the statistical sampling
techniques used by HSD, as well as HSD’s claims that several of TCC’s claims failed
to satisfy the criteria for the payment sought. On appeal to the district court, however,
TCC’s appeal was limited to the issues related to its failed claims. During the fair
hearing, TCC challenged the failure of all but four of the claims used in the Attorney
General’s audit and PCG audit to extrapolate the alleged overpayment. HSD admits
that it has the burden to show that the cases randomly selected for audit failed when
it employs statistical sampling and extrapolation techniques to determine an

overpayment. Once HSD has shown that the case failed, HSD contends, then the

iw)

burden shifts to the provider to show that the claim actually did not fail. If the].
provider shows the claim should not have failed, then the extrapolated overpayment
is adjusted to reflect the fact that fewer claims failed than were initially noted. HSD
concedes that, even after it has established that the claims failed, it still has the burden
to mathematically prove the extrapolation and overpayment amount. Upon proof of
the extrapolation and overpayment amount, the burden shifts to the provider, who is
then obligated to produce evidence. HSD explains that, only if a provider disagrees
with the math—the manner in which the extrapolation was calculated and not just the
findings of failed claims—must the provider conduct a one-hundred percent audit of
the claims universe. While we agree with HSD’s interpretation of the burdens of the
parties under the regulations, we do not agree that this is how those burdens were
applied by the ALJ to this case.

30} At oral argument, HSD contended that the ALJ found that all of the claims
challenged by TCC at the fair hearing failed, pointing to the ALJ’s findings | and 2
as support for its argument. Therefore, HSD asserted, those claims were properly
included in its extrapolation. We do not interpret the ALJ’s findings to support HSD’s
position. Rather than making a finding that MAD had properly determined that the
claims failed, we interpret the ALJ’s findings as merely reporting the conclusions

reached by MAD and the Attorney General’s office, rather than making a

determination that he agreed with those conclusions. Referring to the Attorney
General’s audit, finding number | reports on “[a] random sample of 30 claims, all of
which had been determined to have failed,” while finding no. 2 states that upon
review of the PCG audit, “[t]he Attorney General’s office determined that nine claims
failed.” (Emphases added.) Nowhere in his findings does the ALJ indicate that he
agreed with the Attorney General’s office or MFCU, or that he had otherwise
determined that the claims failed. Instead, the ALJ’s findings and conclusions
indicate that he merely reported the outcomes of the audits as determined by MFCU
and the Attorney General’s office, note that “TCC did put forward a certain amount
of credible evidence[,]” but then fail to consider any of that evidence or reach any of
his own conclusions regarding the validity of those alleged failed claims because
TCC had not performed a one-hundred percent audit of the universe of provider
records. The district court correctly found that the ALJ improperly shifted the burden
of proof to TCC, as TCC was not required to provide a one-hundred percent audit of
the universe of providers before the ALJ could properly consider whether the claims
used to extrapolate TCC’s alleged overpayment actually failed.

31} As part of our review of the district court’s decision, we note that the district
court concluded that “[t]o require TCC to engage and complete a one-hundred percent

audit for the purpose of pursuing its rights at a hearing is unreasonable, especially

considering the reasonable time necessary . . . to meet the audit requirements of
8.351.2.13 [NMAC] and in light of 8.352.3.12(A) [NMAC], which does not mention
such a requirement.” To the extent that this issue may arise on remand, we take the
opportunity to address it now. While we agree that TCC was not required to perform
a one-hundred percent audit of the universe under the circumstances of this appeal,
we disagree with the district court’s broad conclusion that the regulation requiring a
one-hundred percent audit is unreasonable.

A One-Hundred Percent Audit is Reasonable

{32} “Rules and regulations enacted by an agency are presumed valid and will be
upheld if reasonably consistent with the statutes that they implement.” Earthworks’
Oil & Gas Accountability Project v. N.M. Oil Conservation Comm'n, 2016-NMCA-
055, 411,374 P.3d 710 (internal quotation marks and citation omitted). Because its
rule-making function involves the exercise of discretion, we defer to the agency when
reviewing its rule-making decisions. See id. We will not substitute our judgment for
that of the agency where there is no showing of an abuse of discretion. See Wilcox v.
N.M. Bd. of Acupuncture & Oriental Med.,2012-NMCA-106, J 7, 288 P.3d 902. To
successfully challenge the validity of a rule adopted by an administrative agency, the
party challenging the rule has the “burden of showing that the rule is arbitrary or

capricious by demonstrating that the rule’s requirements are not reasonably related

to the legislative purpose.” Earthworks’ Oil & Gas Accountability Project, 2016-
NMCA-055, 4 11 (alteration, internal quotation marks, and citation omitted).

{33} As set out above, the requirement for a one-hundred percent audit becomes
relevant only if a provider claims that the sample used to calculate the overpayment
was invalid. See 8.351.2.13(A)(3) NMAC. It does not apply to circumstances where
the issue is whether a particular claim was properly passed or failed during the course
of the audit or whether the mathematical calculation of the extrapolated overpayment
was accurate. Instead, should a provider wish to challenge the methodology used to
choose the sample size of the audit or to randomly select the claims for audit, the
regulation requires that, rather than merely choose a different sample size, or select
a different set of claims for audit, the provider must audit the entire universe of claims
at issue. See id. But see Chaves Cty. Home Health Serv., Inc. v. Sullivan, 931 F.2d
914, 921 (D.C. Cir. 1991) (holding that under federal law, a provider may challenge
accuracy of an extrapolation by separately presenting evidence of a different random
sample from the universe of claims or establish the validity of all or a sufficient
number of claims to demonstrate that the extrapolation is factually impossible of
correctness); N.C. Gen. Stat. Ann. § 108C-5(n)(2) (West 2014) (stating that a
provider may challenge error rate of extrapolated audit results by either conducting

a one-hundred percent file review or conducting a second audit upon a sample chosen

by the [dJepartment); 42 C.F.R. § 402.109(c) (2012) (providing that once the agency
“has made a prima facie case, the burden is on the respondent to produce evidence
reasonably calculated to rebut the findings of the statistical sampling study”).

{343 Initially, we note that the ALJ does not appear to have made any findings or
conclusions regarding the validity of the audit samples used to extrapolate the
overpayment claimed by HSD based on the Attorney General’s audit and the PCG
audit. While our courts have not previously addressed the propriety of the
requirement that a party challenging the validity of an audit sample show that the
sample was invalid by auditing one hundred percent of the universe of provider
records, the parties point us to the Seventh Circuit’s decision in I//inois Physicians
Union v. Miller, 675 F.2d 151 (7th Cir. 1982). The I/inois Physicians Union court
considered “whether the state, in attempting to preserve its welfare monies, may place
the burden on the physician to demonstrate that the [dJepartment’s calculations are
inaccurate.” /d. at 154. Finding “nothing improper with the [dJepartment’s
requirement that the physician, not the [dJepartment, conduct the one[-]hundred
percent audit[,]” id. at 158, the court held that it was not arbitrary or capricious to
require providers who are benefitting from publicly funded welfare programs to bear
the burden of conducting a one-hundred percent audit, “particularly when the state

has already borne the cost of the initial audit and the evidence to rebut that initial

determination is uniquely within the [provider’s] control.” Jd.

{35} In this instance, we cannot conclude that the requirement that a provider who
challenges the validity of a sample conduct a one-hundred percent audit of the claims
universe is not reasonably related to the legislative purpose. See Earthworks’ Oil &
Gas Accountability Project, 2016-NMCA-055, 4 11 (stating that to invalidate an
administrative rule, the party challenging the rule has the burden of showing that the
rule’s requirements are not reasonably related to the legislative purpose). States that
elect to participate in the Medicaid program are entitled to receive federal funds so
long as they “comply with requirements imposed by the [Social Security] Act and by
the Secretary of Health and Human Services.” Atkins v. Rivera, 477 U.S. 154, 157
(1986). The one-hundred percent audit requirement is reasonably related to HSD’s
compliance responsibilities, including its responsibility to recover overpayments
made to Medicaid providers, and is therefore not arbitrary or capricious or an abuse
of the agency’s discretion. As such, should the validity of the sample be an issue on
remand, the rule is not unreasonable or invalid.

HSD’s Obligation and Burden of Proof

{36} Finally, notwithstanding the regulation’s requirement that evidence of the
invalidity of MAD’s sample must include a one-hundred percent audit of the

universe, a provider’s failure to perform such an audit does not relieve HSD of its

obligation to prove the basis to support its claim for overpayment by a preponderance
of the evidence at the fair hearing, including proof that its sample was valid. See
8.352.3.12 NMAC. In this case, the ALJ concluded that the calculated overpayment
resulting from the sampling and extrapolation of the Attorney General’s audit and the
PCG audit constitute “[p]rima facie evidence. . . of the number and amount of
requests for payment as submitted by the provider or other entity.” 8.351.2.13(A)(1)
NMAC. We note that the ALJ appears to conflate the amount of the overpayment
calculated as a result of the Attorney General’s and PCG’s audits with the “number
[of requests] and amount of requests for payment as submitted by the provider[.]” See
id. Regulation 8.351.2.13(A)(1) NMAC states nothing more than the fact that the
information set out in the audit findings constitutes prima facie evidence of the
“requests for payment as submitted by the provider,” and makes no reference to or
assumptions about the validity of those claims or any determination of overpayment
by HSD. While the ALJ appears to have decided that the audit findings were prima
facie evidence of the overpayment, shifting the “burden of proof of compliance” to
TCC, the regulations do not support this conclusion. Not only must HSD prove by a
preponderance of the evidence at the fair hearing that the identified claims failed, but
also that its mathematical calculations of the overpayment were properly calculated

and the methodology it used to choose the sample was valid. Should a provider

challenge the validity of the sample, but fail to perform a one-hundred percent audit
of the claims universe, HSD is not relieved of its obligation to prove its validity by
a preponderance of the evidence. It simply has the opportunity to do so with little
resistance from the provider—with regard to the methodology used to choose the
sample. Should the ALJ determine that HSD’s methodology in choosing its sample
was unreliable, notwithstanding the provider’s failure to perform a one-hundred
percent audit, the ALJ could properly find that HSD failed to satisfy its burden by
proving by the greater weight of the evidence that its sample is valid. See Campbell
v. Campbell, 1957-NMSC-001, § 24, 62 N.M. 330, 310 P.2d 266 (stating that
“[p]reponderance of the evidence simply means the greater weight of the evidence”).
{37}. Because we affirm the district court’s decision regarding the burden of proof,
the district court shall remand this case back to the ALJ to make findings, applying
the preponderance of the evidence standard, related to the failed claims challenged
by TCC, related to any necessary adjustments to the total overpayment amount
claimed by HSD based on its extrapolation, and related to the validity of the sample
sizes used in the Attorney General’s audit and the PCG audit.

B. Payment of Claims From Medicaid Funds

{38} Finally, we address HSD’s claims that the district court erred when it

concluded that the ALJ’s decision requiring TCC to return fees mistakenly paid with

Medicaid funds to HSD is not supported by substantial evidence. The ALJ concluded
that TCC was credited with Medicaid funds in the amount of $25,210.77 for H003 1
(no modifier) claims and $5,618.58 for H0031 HA claims, notwithstanding that “TCC
did not bill these claims to Medicaid.” Finding the testimony of HSD’s witness,
Robert Stevens, to be lacking, the district court held that the ALJ’s conclusion that
TCC was credited with Medicaid funds was not supported by substantial evidence.
We disagree.

{439 On appeal, we review the whole record in the light most favorable to the ALJ’s
decision to determine whether substantial evidence supports that decision. See Duke
City Lumber Co. v. N.M. Envtl. Improvement Bd., 1984-NMSC-042, 9§ 13-14, 101
N.M. 291, 681 P.2d 717. “To conclude that an administrative decision is supported
by substantial evidence in the whole record, the court must be satisfied that the
evidence demonstrates the reasonableness of the decision. No part of the evidence
may be exclusively relied upon if it would be unreasonable to do so. The reviewing
court needs to find evidence that is credible in light of the whole record and that is
sufficient for a reasonable mind to accept as adequate to support the conclusion
reached by the agency.” Nat’/ Council on Comp. Ins. v. N.M. Corp. Comm’n, 1988-

NMSC-036, ¥ 8, 107 N.M. 278, 756 P.2d 558.

{40} The ALJ concluded that TCC did not bill H0031 (no modifier) and H0031 HA
claims to Medicaid, but that TCC was nonetheless paid with Medicaid funds for some
of those claims as a result of numerous problems associated with the manner in which
OptumHealth processed the claims. Of note is the fact that, while the district court
found a lack of substantial evidence to support the ALJ’s finding that TCC was
erroneously paid from Medicaid funds, on appeal, TCC concedes that though TCC
properly submitted its claims, OptumHealth, without TCC’s knowledge, “frequently
paid these claims using Medicaid funds.” The ALJ’s finding and TCC’s admission
about the source of payment for H0031 (no modifier) and H0031 HA claims are
supported by substantial evidence in the administrative record. Robert Stevens, the
bureau chief of the Program Policy and Integrity Bureau of MAD, testified that he
oversees the claims processing system for the State. Mr. Stevens testified about
records produced from MAD’s data warehouse showing claims submitted by
OptumHealth. Included among those records were records showing TCC H0031 (no
modifier) and H0031 HA claims paid by OptumHealth. MAD, he explained, receives
an “encounter claim” from OptumHealth, with OptumHealth retaining the information
it received from the provider. OptumHealth adds information to the encounter claim,
such as the amount OptumHealth paid on the claim, as well as the date it paid the

claim to the provider before submitting it to MAD. Mr. Stevens testified that the

records maintained by MAD for the H0031 (no modifier) and H0031 HA claims
showed that payment was erroneously paid to OptumHealth from Medicaid funds.
Based on Mr. Stevens’ testimony, the ALJ concluded that TCC was paid with
Medicaid funds for services that were not eligible for payment by Medicaid.

(414) “[ W]e will not reweigh the evidence nor substitute our judgment for that of the
fact[-]finder.” Las Cruces Prof’l Fire Fighters v. City of Las Cruces, 1997-NMCA-
044,49 12, 123 N.M. 329, 940 P.2d 177. “To conclude that substantial evidence exists
to support an administrative decision we need only find that there is credible evidence
for a reasonable mind to accept as adequate the result reached by the agency.” Jd. We
conclude that substantial evidence exists to support the ALJ’s finding that the H003 1
(no modifier) and H0031HA claims at issue were paid with Medicaid funds.

{42} TCC argues that the district court properly concluded that it was not required
to reimburse HSD for these payments because, as the ALJ found, TCC did not bill
those claims to Medicaid. Instead, TCC claims HSD must address any issues related
to erroneous payments to OptumHealth. HSD does not contend that TCC was not
entitled to payment for the H0031 (no modifier) and H0031 HA claims, arguing only
that it was not entitled to payment from Medicaid funds.

{43} In considering TCC’s argument, we note that federal law governing Medicaid

payments requires that one who receives an overpayment shall “report and return the

17
18

overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as
appropriate[.]” 42 U.S.C. §1320a-7k(d)(1)(A) (2012). Notwithstanding that TCC
properly billed the H0031 (no modifier) and HO031 HA claims, federal law requires
that overpayments of Medicaid funds must be returned. As none of the claims at issue
were entitled to be paid from Medicaid funds, they must be returned to the State. We
reverse the district court on this issue.

CONCLUSION

{44}. The decision of the district court is reversed as to the H003 1 (no modifier) and
H0031 HA claims erroneously paid from Medicaid funds. The district court is
affirmed on the remaining issues on appeal, and the district court is instructed to
remand this matter to the ALJ to make findings, applying the preponderance of the
evidence standard related to the failed claims challenged by TCC, related to any
necessary adjustments to the total overpayment amount claimed by HSD based on its
extrapolation, and related to the validity of the sample sizes used in the Attorney
General’s and the PCG audits.

45} IT ISSO ORDERED.

Ose Fanaa

JULIE J. VARGAS, Judge

1
WE CONCUR:
2
-
3
M. MONICA ZAMORA, Judge
4 5
STEPHEN G. FRENCH, Judge
28

June 7, 2018- The Counseling Center, Inc. v. New Mexico Human Services Department, No. A-1-CA-35149

Gesamter Gesetzestext

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