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Tennessee Community Organizations v. Tennessee Department of Intellectual and Developmental Disabilities

Court of Appeals of Tennessee, Nashville

May 11, 2018

TENNESSEE COMMUNITY ORGANIZATIONS, ET AL.
v.
TENNESSEE DEPARTMENT OF INTELLECTUAL AND DEVELOPMENTAL DISABILITIES

          Session February 6, 2018

          Appeal from the Chancery Court for Davidson County No. 16-0183-IV Russell T. Perkins, Chancellor.

          KENNY ARMSTRONG, JUDGE

         Appellants, home and community based service providers and their professional trade organization, appeal the trial court's grant of summary judgment in favor of Appellee Tennessee Department of Intellectual and Developmental Disabilities. The case, which was filed as a declaratory judgment action, involves financial sanctions levied against Appellant providers by Appellee for billing for day services in excess of the 243-day limit imposed by a federal waiver. Appellants assert, inter alia, that the imposition of these fines exceeded Appellee's statutory and/or contractual authority. Discerning no error, we affirm the trial court's grant of summary judgment against Appellants on all counts of their petition.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed and Remanded

          William Beesley Hubbard and Robyn E. Smith, Nashville, Tennessee, for the appellants, Tennessee Community Organizations, Dawn of Hope, Inc., and Evergreen Life Services, Inc..

          Herbert H. Slatery, III, Attorney General and Reporter, and Alexander S. Rieger, Deputy Attorney General, for the appellee, Tennessee Department of Intellectual & Development Disabilities.

          Kenny Armstrong, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and W. Neal McBrayer, J., joined.

          OPINION

         I. Background

         Section 1915(c) of the Social Security Act authorizes the Secretary of Health and Human Services to waive certain Medicaid requirements to allow states to provide home and community based services ("HCBS") to meet the needs of individuals receiving long-term care services in their homes or communities. 42 U.S.C. § 139n(c)(1); 42 C.F.R. § 430.25. The HCBS waiver describes a comprehensive program designed to meet the needs of the waiver population; the waiver includes requirements and limitations on services provided by state providers that contract with the state to provide the waiver services. At issue in this appeal is the 2014 HCBS waiver (the "Waiver"). The Waiver specifically provides that, "Day Services shall be limited to a maximum of 5 days per week up to a maximum of 243 days per person per calendar year."[1] The parties do not dispute that, under the plain language of the Waiver, providers may be paid for no more than 243 days of service per calendar year for each person served and may be reimbursed for no more than five days of services per week.

         Tennessee Community Organizations ("TNCO") is a professional trade organization for HCBS providers. Dawn of Hope, Inc. ("Dawn") and Evergreen Life Services ("Evergreen, " and together with Dawn and TNCO, "Appellants") are providers and members of TNCO. TennCare is the state agency responsible for Tennessee's Medicaid programs and for compliance with the HCBS Waiver. TennCare contracts with the Tennessee Department of Intellectual & Developmental Disabilities ("TDIDD, " or "Appellee") to implement HCBS waiver services. To this end, TDIDD is authorized, by statute, to enter into contracts with providers to procure waiver services for eligible persons. Tenn. Code Ann. § 33-1-301(a). Both Dawn and Evergreen (together, "Providers") entered into contract with TDIDD under its standard provider agreement ("Agreement"). As discussed in further detail below, the Agreement requires, inter alia, that the Providers perform the waiver services in compliance with TDIDD's Provider Manual and the Waiver.[2]

         As noted above, the Waiver at issue limits the number of days a provider may bill for day services. It is undisputed that, for several years, both Evergreen and Dawn violated the billing cap set by the Waiver. Prior to 2013, if a provider was in violation of the Waiver, TDIDD either stopped paying or recouped overpayment for services the providers billed in excess of the cap. However, in 2013, the Comptroller for the State of Tennessee issued a performance audit of TDIDD. The Comptroller noted that, despite its statutory authority to do so, TDIDD was not imposing sanctions for providers' violations of the Waiver. The concern was that if the State failed to take appropriate action to ensure compliance with the Waiver, it could risk termination of the Waiver and the associated federal funding.

         Rather than levying sanctions immediately, TDIDD first decided to warn non-compliant providers so as to give them time to cure the billing issues. To this end, on July 14, 2014 and July 25, 2014, TDIDD sent warning letters to Dawn and Evergreen, respectively. The letters notified the Providers that each had billed in excess of the Waiver limits for 2012 and 2013. Although the letters set out the sanctions available under TDIDD Policy #80.4.6, discussed infra, neither provider was, in fact, sanctioned at this time. Rather, the letters stated that: "This letter serves as a sanction warning. Such a warning is not subject to appeal. Should future reviews find inappropriate billing of services, you may anticipate sanctions or other administrative action." Despite the warning letters, in 2014, both Evergreen and Dawn continued to bill for more than 243 days of day services for some service recipients. On October 12, 2015, TDIDD sent sanction letters to Evergreen and Dawn, notifying the Providers that they were being sanctioned for billing in excess of the 243-day waiver limit for 2014. Sanctions were assessed at $100.00 per day per recipient for each day billed over 243 days. Evergreen's sanctions totaled $2, 200; Dawn's sanctions totaled $10, 900. Evergreen did not appeal the sanctions; however, on October 23, 2015, Dawn requested an appeal hearing.

         On February 22, 2016, TNCO filed a petition for declaratory judgment in the Chancery Court of Davidson County (the "trial court"), asking the trial court to declare TDIDD Policy #80.4.6 (the "Policy"), and any sanctions issued pursuant to the Policy, invalid.[3] In Counts I, II, and III of the petition, Appellants assert that TDIDD Policy #80.4.6 is invalid because it is inconsistent with TDIDD's statutory authority to issue "civil penalties." In Count IV of the petition, Appellants assert that Policy #80.4.6 is void because it is a Rule that was not properly promulgated pursuant to the Uniform Administrative Procedures Act ("UAPA") as required by Tennessee Code Annotated Section 33-1-309(a). In Count V of the petition, Appellants assert that the Policy's provision for sanctions for violation of the Agreement is not a proper sanction for breach of the Agreement. In Count VI, Appellants assert that the assessments against Evergreen and Dawn violate TDIDD's statutory authority. In Count VII, Appellants contend that, in imposing sanctions, TDIDD failed to comply with the review period and statutory period for appeal. In Count VIII, Appellants reiterate that the sanctions are invalid because

          Policy #80.4.6, under which the sanctions were assessed, was an invalidly promulgated Rule, exceeded TDIDD's statutory authority to sanction, and imposed invalid sanctions for violation of the Agreement. In Count IX, Appellants assert that invoicing for more than 243 days of day services does not constitute a sanctionable offense.

         On January 31, 2017, the parties filed cross-motions for summary judgment. The trial court heard the motions for summary judgment on April 7, 2017. In its order of April 26, 2017, the trial court denied Appellants' motion for summary judgment and granted TDIDD's motion as to all counts. Appellants appeal.

         II. Issues

         The dispositive issue is whether the trial court erred in granting summary judgment in favor of TDIDD as to all counts of Appellants' petition. Appellants parse this question into seventeen issues as stated in their brief:

1. Whether TDIDD has statutory authority for its sanction policy and the sanctions.
2. Whether the sanction policy and the sanctions violate T.C.A. § 33-2-407, which authorizes TDIDD to monetarily sanction providers.
3. Whether the trial court erred by finding that T.C.A. 33-2-408 is a procedural statute but nevertheless authorizes TDIDD to monetarily sanction providers.
4. Whether the trial court erred by finding that T.C.A. § 33-2-408 authorizes TDIDD to monetarily sanction providers, in contravention of T.C.A. § 33-2-407 that specifies the process for TDIDD monetarily sanctioning providers.
5. Whether the trial court erred by finding that T.C.A. § 33-2-407 governs TDIDD assessing civil penalties upon providers, which T.C.A. § 33-2-408 independently governs TDIDD monetarily sanctioning providers.
6. Whether the provision in the Provider Agreement that authorizes TDIDD to monetarily sanction providers violates public policy and is invalid.
7. Whether the trial court erred by finding that TDIDD's authority to monetarily sanction providers is derived from contract.
8. Whether the trial court erred by finding that the sanctions were liquidated damages agreed to in the Provider Agreement.
9. Whether the Provider Manual gives TDIDD authority for its sanction policy and sanctions.
10. Whether the sanction policy is a rule and is void because it was not properly promulgated
11. Whether the trial court erred by finding that the sanction policy is of general applicability, but only concerns the internal management of state government and does not affect private rights, privileges or procedure available to the public.
12. Whether TDIDD failed to give providers fair notice that it was no longer screening invoices and that it was changing its long-term interpretation of the requirements of the Waiver concerning the invoicing of over 243 days.
13. Whether TDIDD failed to give providers fair notice that future involving of over 243 days was prohibited and punishable.
14.Whether the trial court erred in finding that the warning letters to providers and conversations with providers constituted fair notice.
15.Whether TDIDD's termination of screening invoices and change in its long-term interpretation of the requirements of the Waiver concerning the 243-day limit was required to be promulgated as a rule.
16.Whether the trial court erred in finding that invoicing over 243 days has always been a sanctionable offense and TDIDD only began to strictly enforce the requirement, which does not require rulemaking.
17.Whether TDIDD's change in its long-term interpretation of the requirements of the Waiver concerning the 243-day limit is not enforceable because TDIDD failed to assess in writing the fiscal impact of the changes upon provider.

         III. Standard of Review

         This case was decided on grant of summary judgment. Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn. R. Civ. P. 56.04. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist Healthcare-Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010); Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013); Rye v. Women's Care Center of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015). We review a trial court's ruling on a motion for summary judgment de novo, without a presumption of correctness. In doing so, we make a fresh determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied. Id. (citing Estate of Brown, 402 S.W.3d 193, 198 (Tenn. 2013); Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471 (Tenn. 2012)). For actions initiated on or after July 1, 2011, the standard of review for summary judgment is governed by Tennessee Code Annotated Section 20-16-101. The statute provides:

In motions for summary judgment in any civil action in Tennessee, the moving party who does not bear the burden of proof at trial shall prevail on its motion for summary judgment if it: (1) Submits affirmative evidence that negates an essential element of the nonmoving party's claim; or
(2) Demonstrates to the court that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim.

Tenn. Code Ann. § 20-16-101. Here, the material facts are not in dispute. Specifically, Appellants concede that Evergreen and Dawn's 2014 billings were in excess of the Waiver cap. However, the parties dispute the interpretation and applicability of the Policy, the statutory scheme, and the Agreement. The interpretation of written agreements and contracts are questions of law and, so, are particularly suited to disposition by summary judgment.

         To the extent our review requires interpretation of statutes, we are guided by the familiar principles of statutory construction. The primary objective of statutory construction is to determine the intent of the legislature and give effect to that intent. Walker v. Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 309 (Tenn. 2008). To achieve this objective, we begin by examining the plain language of the statute in question. Curtis v. G.E. Capital Modular Space, 155 S.W.3d 877, 881 (Tenn. 2005). This Court presumes that the legislature intended every word be given full effect. Lanier v. Rains, 229 S.W.3d 656, 661 (Tenn. 2007). Therefore, if the "language is not ambiguous ... the plain and ordinary meaning of the statute must be given effect." In re Adoption of A.M.H., 215 S.W.3d 793, 808 (Tenn. 2007). It is a well-settled rule of construction that "statutes 'in pari materia'-those relating to the same subject or having a common purpose-are to be construed together, and the construction of one such statute, if doubtful, may be aided by considering the words and legislative intent indicated by the language of another statute." Graham v. Caples, 325 S.W.3d 578, 581-82 (Tenn. 2010) (citing Wilson v. Johnson Cnty., 879 S.W.2d 807, 809 (Tenn. 1994)).

         Likewise, to the extent that adjudication of this appeal involves the interpretation of the provisions of the Agreement, we apply the standard of review applicable to contract interpretation. Because the interpretation of a written agreement is a matter of law, Allstate Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn. 2006), we undertake to interpret the language of the Agreement de novo. "A cardinal rule of contract interpretation is to ascertain and give effect to the intent of the parties." Id. (citing Christenberry v. Tipton, 160 S.W.3d 487, 494 (Tenn. 2005)). "In interpreting contractual language, courts look to the plain meaning of the words in the documents to ascertain the parties' intent." Id. (citing Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885, 889-90 (Tenn. 2002)).

         IV. Analysis

         Before addressing Appellants' specific arguments, it is helpful to discuss the interplay among the Waiver, the statutory scheme, TDIDD Policy #80.4.6, and the Agreement. In doing so, we apply the standards of review applicable to contract and statutory construction, which are set out supra.

         The statutory scheme, Title 33, concerning "Mental Health and Substance Abuse and Intellectual and Developmental Disabilities, " vests TDIDD with the "responsibility for system planning, setting policy and quality standards, system monitoring and evaluation, disseminating public information and advocacy for persons of all ages who have mental illness . . . or developmental disabilities." Tenn. Code Ann. § 33-1-201. To achieve its functions, TDIDD is authorized "to promote the use of private and public service providers . . . to achieve outcomes and accomplishments [to aid service recipients]." Id. In engaging these private and public service providers (such as Evergreen and Dawn), TDIDD is statutorily "empowered to enter into contractual agreements." Tenn. Code Ann. § 33-1-301(a); Tenn. Code Ann. § 33-1-302(a)(1) ("The department may: (1) Make . . . contracts . . . ."). Pursuant to its statutory authority to contract, TDIDD entered into Agreements with Evergreen and Dawn, discussed further infra.

         In addition to its authority to contract, the statutory scheme also vests TDIDD with power to promulgate certain rules that providers will be required to follows. For example, Tennessee Code Annotated Section 33-2-406 requires that a waiver services provider "shall obtain a license from [TDIDD]. . . in order to lawfully establish . . . a service or facility . . . ." To this end, Tennessee Code Annotated Section 33-2-404 states that TDIDD "shall adopt rules for licensure of services." Reading these provisions, in pari materia, it is clear that in order to obtain a license for lawful operation, a service waiver provider must adhere to the specific "rules for licensure of services" adopted by TDIDD. Likewise, Tennessee Code Annotated Section 33-1-309(d) states that "[a]ll methodology utilized by [TDIDD] for determining payment to service providers shall be adopted as rules . . . ." Under Tennessee Code Annotated Section 33-2-407(b), which addresses suspension or revocation of licenses, TDIDD must "establish by rule a schedule designating the minimum and maximum civil penalties within the ranges set in § 33-2-409 that may be assessed under this part for violation of each statute and rule that is subject to violation." In addition to its authority to adopt licensure, payment, and civil penalty rules, TDIDD is also statutorily authorized to "[m]ake and enforce rules that are necessary for the efficient financial management and lawful operation of the facilities, programs or services . . . ." Tenn. Code Ann. § 33-1-302(a)(3). The statute does not specifically define what constitutes "rules . . . for . . . lawful operation." Nonetheless, Tennessee Code Annotated Section 33-1-309(a) requires that "the department shall adopt all rules in accordance with the Uniform Administrative Procedures Act [("UAPA")]." Tennessee Code Annotated Section 33-2-404(b) allows TDIDD to periodically "amend its rules . . . to be consistent with the federal home-based and community-based settings final rule . . . ." From the foregoing statutes, we glean that TDIDD is statutorily authorized to promulgate rules concerning licensure, payments, civil penalties, and lawful operation of service providers' facilities. To be enforceable against a provider, these rules must be promulgated in accordance with the UAPA and must comport with federal requirements, including the Waiver.

         In the event that a waiver service provider violates a statutory requirements under Title 33, e.g., attempts to operate without a license (Tenn. Code Ann. § 33-2-405), or violates a Rule promulgated by TDIDD pursuant to its statutory authority, the statutory scheme vests TDIDD with authority to impose civil penalties on the provider. Specifically, Tennessee Code Annotated Section 33-2-407 provides:

(b) The department may impose a civil penalty on a licensee for a violation of this title or a department rule. Each day of a violation constitutes a separate violation. The department shall establish by rule a schedule designating the minimum and maximum civil penalties within the ranges set in § 33-2-409 that may be assessed under this part for violation of each statute and rule that is subject to violation. The department may exclude a statute or rule from the schedule if it determines that a civil penalty for violation of that statute or rule would not achieve the purposes of licensure. If the department has not adopted a rule designating the minimum and maximum civil penalty that may be assessed for violation of a statute or rule, the maximum civil penalty that may be imposed for violation of that statute or rule shall be the lowest figure set under the appropriate subsection of § 33-2-409 that applies to the violation.

Tenn. Code Ann. § 33-2-407(b) (emphasis added). From the emphasized language, TDIDD may only assess civil penalties if a provider violates a statutory requirement or a TDIDD rule. In the case of monetary civil penalties, Tennessee Code Annotated Section 33-2-409 limits the amount of the penalty, to-wit:

(a)A civil penalty of not less than two hundred fifty dollars ($250) and not more than five hundred dollars ($500) may be imposed on a licensee for a violation of a statute or rule.
(b)A civil penalty of not less than five hundred dollars ($500) and not more than five thousand dollars ($5, 000) may be imposed on a licensee for a second or subsequent violation of the same kind committed within twelve (12) months of the first penalty being imposed.

         In addition to its statutory authority to adopt rules for provider licensure, operation, payments, and to impose civil penalties for a provider's violation of these rules, TDIDD is also authorized to adopt "operating guidelines." Specifically, Tennessee Code Annotated Section 33-1-309(b) provides:

(b) All operating guidelines of the department of intellectual and developmental disabilities (sometimes referred to as "DIDD") and its successors shall be adopted pursuant to the procedure set forth in this subsection (b). For purposes of this section "operating guidelines" means instructions to service providers that the department deems or intends to be mandatory upon such providers. Interpretive instructions, other nonmandatory guidance from the department and rules adopted pursuant to the Uniform Administrative Procedures Act, are not operating guidelines.
(1) The adoption of operating guidelines shall be preceded by notice, public meeting, opportunity for comment and responses to such comments from the department; provided, however, in those instances in which the department determines that exigent circumstances require that the operating guideline be implemented prior to a public meeting, the department shall begin the process required by this section as soon as reasonably practicable after its implementation.
(2) The department shall provide notice in the Tennessee administrative register which shall include a general description of the subject of the operating guideline, the date, place and time of the public meeting and the opportunity for interested persons to provide oral or written comments. The date of the public meeting shall be no sooner than the first day of the month following the month of publication of the notice. The notice shall also include the name, address and telephone number of a contact person to provide additional information, including, if available, copies of the proposed operating guideline.
(3) A representative of DIDD shall be present to hear comments at a hearing required by this section. The representative shall be a person designated by the deputy commissioner of DIDD who is a director level or higher employee. This designee shall be authorized to conduct the meeting in such a manner as to ...

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