MaineHealth v. Lambrew

STATE OF MAINE SUPERIOR COURT
KENNEBEC, SS. CIVIL ACTION
DOCKET NO. AP-21-40

)
MAINEHEALTH, d/b/a Franklin )
Memorial Hospital, )
)
Petitioner,
)
)
V.
) DECISION AND ORDER
)
JEANNE M. LAMBREW,
)
Commissioner, State of Maine
Department of Health and Human
)
)
Services,
)
)
Respondent.
)

INTRODUCTION

In this Rule SOC appeal, Franklin Memorial Hospital (FMI--I) chal lengcs DHI-lS 's
recoupment of funds previously distributed to the hospital. Those funds were paid to FMH
as part of a federal incentive payment program designed to encourage adoption of
electronic health record technology among Medicaid/Medicare-participating providers.
Incentive payments have a Medicaid and Medicare share component. This case involves
the Medicaid share, which employs a specified formula for determining the incentive
payment amount. One variable in the formula-the number of Acute Medicaid Inpatient
Days-is at the center of this appeal.

Following a post-payment audit in 2018, DHHS found fewer Acute Medicaid
Inpatient Days than were originally calculated when the incentive payment was first made.
The result: The incentive payment amount reduced, and DHHS determined that FMH had
been overpaid. After a full administrative hearing, the Hearing Officer determined that
DHHS failed to meet its burden of demonstrating it was entitled to recoupment for the
amount alleged. The Commissioner, however, disagreed and affirmed DHHS's
recoupment determination. On appeal, FMH challenges the Commissioner's conclusions
as well as certain aspects of the audit process, taking issue with the data sources DI-II-IS
used to calculate Acute Medicaid Inpatient Days. Among other arguments, FMH also
challenges DHHS 's authority to conduct the 2018 audit and raises several issues
surrounding the calculation of the incentive payment.

BACKGROUND

Relevant Legal Context
This case requires the court to navigate a particularly complex area of law. To place
the facts and issues in their proper context, an overview of the relevant legal framework is
in order. Specifically, the court briefly reviews the federal program under which the
incentive payments were distributed; the State's role within that program; Maine's Health
Information Technology Plan and related DHHS rules; how the incentive payments are
calculated, and; the MaineCare reimbursement process.

The HITECH Act. Enacted in 2009, the federal Health Information Technology for
Economic and Clinical Health ("HITECH") Act was designed to encourage the adoption
of electronic health record ("EHR") technology by health care providers, including
hospitals. A.R. 414. To accomplish such an objective, the Act creates incentive payments
J'or eligible Medicaid/Medicare-participating providers that upgraded to EHR systems. 42
C.F.R. §§ 495 .2, 495 .4, 4101-02, 4201. Participation in the program is voluntary. A.R. 4 I 4.

Under the HITECH Act, states develop the procedures for participation in the EHR
incentive program through their existing Medicaid programs, subject to approval by the
federal Center for Medicaid and Medicare Services ("CMS"). A.R. 414. The role of a state
in the implementation of a Medicaid EHR program is to "determine[] the provider's
eligibility for the EHR incentive payment ... and approve[], process[], and make[] timely
payments using a process approved by CMS." 42 C.F.R. § 495.312(c); see also id. at §§
495.316, 495.318. States carry out these functions through a comprehensive state plan-­
the State Medicaid Health Information Technology Plan ("SMHP")-that CMS must
approve. Id. § 495.332. The applicable regulations provide that the state plan must include
"[a] detailed plan for monitoring, verifying and periodic auditing of the requirements for

2
receiving incentive payments." Id. § 495.316(b). States have flexibility in implementing
the EHR incentive payment program within federally established parameters. A.R. 414.

Maine's SMHP and Related Rules. DHHS submitted a draft SMHP in 2010 that was
revised at least twice in light of CMS's comments. CMS approved Maine's SMHP in June
2011, A.R. 415, and it was later revised in 2014. A.R. 1739.

Additionally, in 2011, DHHS promulgated administrative rules under the AP A lo
implement the MaineCare Health Information Technology Program (HIT Program). See
10-144 C.M.R. ch. 101, ch. I,§ 2; A.R. 415. Those rules were amended through the APA
rule-making process in 2014, with the amended rules taking effect in November 2014. A.R.
415. The amendments, inter alia, incorporated the SMHP into the MaineCare Benefits
Manual. See 10-144 C.M.R. ch. 101, ch. I,§ 2.01 ("Maine's SMHP, IAPD-U, and OMS
rules supplement federal law and rules, as amended, in areas where federal law and rules
delegate authority to states"); Houlton Reg'l Hosp. v. Lambrew, No. I-IOUSC-AP-19-01,
2019 Me. Super. LEXIS 96, *13 n.3 (Sept. 3, 2019).

The Incentive Pavment. The HITECH Act establishes a formula for calculating the
incentive payment amount. Formulas are used to calculate the Medicaid and Medicare
shares of the incentive payment. This appeal concerns the Medicaid share.

Generally speaking, the size of a hospital's incentive payment is linked to the size
of the Medicaid population the hospital serves; if the provider serves a greater volume of
Medicaid patients, the hospital will receive more money. To that end, the I-IITECH Act
utilizes a fraction, which divides a hospital's volume of acute-care inpatient bed days
attributable to Medicaid patients (the numerator) by the volume of inpatient bed days
overall (the denominator). This appeal is primarily concerned with numerator of the
fraction, i.e., "Acute Medicaid Inpatient Days." R. 417. 1 The larger the numerator, the

1
The terms "inpatient bed days," "acute-care inpatient bed days," "acute days," and other
variations are used interchangeably throughout the record to describe the fraction
numerator. The court primarily use the term "Acute Medicaid Inpatient Days·."

3
larger the fraction, and the larger the incentive payment. 2 The Hearing Officer described
the pertinent fraction as follows:

The Medicaid Share is equal to the following fraction:

(Numerator) -Sum for a 12 month period of:

• The estimated number of acute-care inpatient-bed-days
which are atiributable to Medicaid individuals;

and

• The estimated number of acute-care inpatient-bed-days
which are attributable to individuals who are enrolled in a
managed care organization, a pre-paid inpatienl health plan,
or a pre-paid ambulatory health plan under part 438 of this
chapter

(Denominator) - Product 0£:

• The estimated total number of acute-care inpatient-bed-days
with respect to the eligible hospital during such period;

and

• The estimated total amount of the eligible hospital's charges
during such period, not including any charges that are
attributable to charity care, divided by the estimated total
amount of the hospital's charges during such period.

ln computing acute-care inpatient-bed-days within the numerator of the fraction,
a State may nol include estimated acute-care inpatient-bed-days attributable to
individuals with respect to whom payment may be made w1der Medicare Part A, or
acute-care inpatient-bed-days attributable to individuals who are enrolled with a
Medicare Advantage organization under Medicare Part C. See, 42 C.F.R.
§495.310(g)(2).

2
For a more complete description ofthe incentive payment formula, see A.R. 416-17 .

4
Another layer of this case involves the data sources that may be used to calculate
Acute Medicaid Inpatient Days. Neither the HITECH Act nor CMS impose a mandate as
to which data sources should be used for this purpose. See A.R. 414. Instead, states are
afforded discretion to choose the best sources for their respective programs. See id. ln the
preamble to the applicable regulations, CMS stated that "there are a number of data sources
available that would allow States to accurately [capture] data for the purposes of calculating
the Medicaid Share." 75 Fed. Reg. 44314, 44501 (July 28, 2010); A.R. 1006. CMS went
on to list specific examples such as "Medicare cost reports, Medicaid cost reports, MMJ S
data, hospital financial statements, and accounting records" as reasonable choices. id.
Moreover CMS made clear that "States must describe their auditable data sources in their
SMHP and submit to CMS for review and approval." 75 Fed. Reg. 44314, 44450; A.R.
1005. In its SMHP, Maine specified that "[fjor hospitals, Medicare cost reports will be
used to verify the Medicaid patient volumes, and to calculate the payment amounts.'' A.R.
415, 1695-96.

Medicare Cost Reports. Hospitals file Medicare cost reports with the federal
government, and the state receives a copy as well. A.R. 570. Apparently, the report consists
of an itemization of costs for different areas of the hospital and includes a figure for Acute
Medicaid Inpatient Days. A.R. 570. This figure includes the number of bed days actually
paid by Medicaid as well as unpaid days that are otherwise Medicaid eligible. A.R. 494,
1005. Certain categories of days that must be excluded from the Medicaid share calculation
(e.g., nursery days, CHIP days, psychiatric unit bed days, etc.) are not discernable on the
basis of the Medicaid cost rep011 alone. A.R. 420.

MaineCare & MaineCare Reimbursement. In Maine, DI-IIIS administers
the Medicaid program, and Maine's Medicaid program is known as MaineCare. Doane v.
HHS, 2017 ME 193, iJiJ 18, 20, 170 A.3d 269.

5
DHHS reimburses hospitals through a cost report and settlement process pursuant
to the MaineCare Benefits Manual, Chapter III, Section 45. A.R. 418. The Law Court has
described this three-step process as follows:

First, prior to a particular fiscal year, DHHS estimates the total amount of
Medicaid reimbursement a hospital will be owed for the fiscal year. DHI-IS
pays that amount throughout the year in weekly interim payments. Second,
at the close of the hospital's fiscal year, DHHS issues a MaineCare Interim
Settlement based on cost data in the hospital's as-filed (but un-audited)
Medicare cost report. Third, DHHS issues a MaineCare Final Settlement
after it receives both the Notice of Program Reimbursement and the audited
Medicare cost report from Medicare.

HD Goodall Hosp. v. HHS, 2008 ME 105, ~ 3, 951 A.2d 828.

As part of the settlement process, MaineCare evidently tracks the Acute Medicaid
Inpatient Days that have actually been paid by the MaineCare program. A.R. 491-95, 2306.
The number ofMaineCare/Medicaid-paid days appears in the MaineCare Final Settlement.
A.R. 2306. 3

Facts

During the relevant time period (FYE June 30, 2010 and the 3 prior fiscal years),
FMH was licensed as an acute care non-critical hospital. A.R. 418. Not long after the
incentive payment program came online, DHHS determined that FMH was one of 36 non­
psychiatric hospitals eligible for Medicaid EHR incentive payments. A.R. 418. Using the
20 l O fiscal year for its base year, DHHS calculated the hospital's EHR incentive amount
as $1,548,684, which was to be paid over a period of three (3) years. A.R. 418,571, 1097­

3
With respect to the data sources used to calculate the final settlement figures, the
MaineCare Benefits manual specifies that DHHS will use charges from the MaineCare
paid claims history and the hospital's Medicare Final Cost Report, inter aLia. 10-144
C.M.R. ch. 101, ch. III, §§ 45.03-4, 45.03-5; see also A.R. 2335. The MaineCare paid
claims history is a state-compiled "summary of all claims billed by the hospital to
MaineCare for MaineCare eligible members that have been processed and accepted for
payment by MaineCare." 10-144 C.M.R. ch. 101, ch. III, § 45.01; see also A.R. 2325.
Thus, MaineCare has its own database from which it can draw information regarding paid
claims.

6
99. DHHS 's initial incentive payment calculation identified 2,436 Acute Medicaid
Jnpatient Days. A.R. 1098.

As states are required to perform post-payment audits of the EHR incentive
payments and return any overpayments to the federal government, DI-II-IS initiated a post­
payment audit ofFMI-I's incentive payment in 2012. A.R. 419. As a result of this audit, the
hospital's EHR incentive payment was increased to $1,552,906. A.R. 419, 1108-10. Once
again, DHI-IS found 2,436 Acute Medicaid Inpatient Days. A.R. 1109.

FMH received incentive payments during November 2011, May 2012, and
December 2013. A.R. 419. In 2015, Patricia Chubbuck-a manager of the EHR program-­
became concerned about the potential for an adverse review by the Office of the Inspector
General (OIG). A.R. 419. In 12 of the 14 states audited, OIG found ddiciencies in the
incentive payment calculations. A.R. 419. The deficiencies were evidently found in the
payments of states that had relied solely upon Medicare cost reports to calculate Medicaid
patient volumes. A.R. 419. Accordingly, DHHS engaged the accounting firm ofMyers and
Stauffer to perform audits of all 36 Maine hospitals that received incentive riayments. A. R.
419.

Myers and Stauffer conducted its audits of the Maine hospitals with the same
methodology it used for audits of hospitals in other states, i.e., requesting claims
information. A.R. 420. The accounting firm sought such claims-level records because CMS
guidance and federal regulations require that auditors include and/or exclude certain data
clements from the Medicaid share calculation (e.g., nursery days, CHIP clays, psychiatric
unit bed days, etc.). A.R. 420. Those elements are not discernable on the basis of the
Medicare cost report alone. A.R. 420.

On January 31, 2018, Myers and Stauffer notified FMH that it had been selected for
a desk audit. Myers and Stauffer requested that FMI-I provide a significant amount of
claims data related to fiscal years ending June 30, 2007, 2008, 2009, and 2010. A.R. 420.

During the audited timeframe (2007-2010), FMH used DI-II-IS's MeCMS system to
process claims. A.R. 418. As part of this process, FMI-I would submit a claim to MeCMS,

7
v,,hich would then issue a remittance advice. FMH would subsequently enter the remittance
advice into its patient accounts. A.R. 418. The MeCMS system, however, often incorrectly
denied claims and otherwise processed claims inaccurately. A.R. 418. I1 t the words of
former DHHS Commissioner Harvey, the MeCMS system was "a worst nightmare
realized." A.R. 418. Indeed, the Department took 8 years to issue the final cost settlement
for FMH's 2010 fiscal year due to all the "glitches" in the MeCMS system--a process that
normally takes only one year. A.R. 418. The 2010 MaineCare Final Settlement
acknowledged that "manual adjustments to MeCMS data were made as a result of the
termination of the MeCMS system.,'' A.R. 2302, and calculated a total of 2, l 79 paid Acute
Medicaid Inpatient Days. A.R. 492, 2301-18.

On February 26, 2018, FMH submitted the requested information to Myers and
Stauffer. FMH subsequently continued to supplement the information through July 2018.
A.R. 420. At the conclusion of its audit, Myers and Stauffer determined that FMI-I received
overpayments as part of the EHR incentive program. A.R. 420. In conducting the audit,
Myers and Stauffer relied solely upon the records supplied by the hospital: they did not
review records held by the state in the MaineCare paid claims history or otherwise. See,
e.g., A.R. 545-46, 2412.

On October 22, 2018, the Department issued a notice of debt to FMH demanding
repayment in the amount of $655,120.30. A.R. 420. The notice stated that the downward
adjustment to the incentive payment was necessary because: (1) the adjusted number of
discharges utilized in the average growth rate calculation was less than the number utilized
in the original calculation; (2) The adjusted number of total Acute Medicaid Days was less
than the number utilized in the original calculation; (3) The adjusted number of total acute
hospital days was less than the number utilized in the original calculation; (4) The adjusted
amount of total hospital charges was less than the amount used in the original calculation,
and; (5) The adjusted amount of charity care charges was less than the amount used in the
original calculation. A.R. 420-21.

FMH then requested an informal review of the audit's findings. On August 27, 2019,

8
DHHS issued its Final Informal Review Decision, which upheld the Myers and Stauffer's
findings. A.R. 421. 4 FMH requested an administrative hearing. A.R. 421.

On March 8-9, 2021, a hearing was held before Hearing Officer Tamra
Longanecker. Numerous exhibits were received into evidence and multiple witnesses
testified. For witnesses, DI-II-IS called Patricia Chubbuck (a contractor who runs program
operations for the Maine Medicaid EHR program) and Regan Mc Tier (a manager at Myers
and Stauffer). FMH, meanwhile, presented the testimony of Natasha Erb, the hospital's
Senior Director of Finance. 5

During the proceedings, FMH raised multiple arguments. Among these arguments,
FMH challenged DHHS' s authority to use claims information as a data source in
conducting the audit as opposed to the Medicare cost reports referred to in Maine's SMHP.
Jt further argued that DHHS was without authority to conduct the Myers ancl Stauffer audit
in the first place. Additionally, FMH took issue with Myers and Stauffer's calculation of
total Acute Medicaid Inpatient Days and contended that certain categories of days were
erroneously excluded from this total. FMH also challenged how the audit was performed,
including Myers and Stauffer's failure to reconcile its findings with those previously made
by MaineCare.

Ultimately, the Hearing Officer determined that DHI-IS had the authority to conduct
the audit using documentation other than the Medicare cost report. She concluded,
however, that DHHS failed to prove by a preponderance of the evidence "that its revised
EHR incentive payment calculation (based solely on claims information) was correct."

~ During the hearing, the Department conceded that it improperly calculated the so-called
·'CHIP factor," a proxy percentage used to estimate CHIP program days and remove them
l1:om the numerator of the Medicaid incentive payment calculation. After the conclusion
of the testimonial portion of the hearing, the Department submitted a revised CHIP factor
that reduced the alleged overpayment from $655,120.30 to $634,992.72. A.R. 1600-10.
5
Due to problems with the recording of Ms. Erb's testimony, FMH (with DHI--IS's
approval) submitted a written summary of the missing portion of the testimony. A.R. 814­
l 5; 763-68.

9
A.R. 434-35. Among other reasons, the Hearing Officer was persuaded by FMH ' s
arguments regarding the disparity between the total number of paid Acute Medicaid
Jnpatient Days found by MaineCare in the 2010 MaincCare Final Settlement (2,179) and

the number found by Myers and Stauffer in the 2018 post-payment audit (1,486). A.R. 43 3­
34. Moreover, the Hearing Officer was concerned that the claims information in the
hospital's records-the sole data source upon which Myers and Stauffer relied-was dravm
directly from the unreliable MeCMS system. Id. Thus, the Hearing Officer recommend ed
thal the Commissioner find as follows: (1) "The Depaiiment was permitted to conduct a
post-payment audit using documentation other than the Medicare cost report," and; (2)
"The Department was not correct when it determined that Franklin Memorial Hospital
received an overpayment for the EHR program in the sum of $634,992.72. " A.R. 422.

On October 22, 2022, the Commissioner issued a Final Decision in which she
accepted the Hearing Officer's first recommendation, but rejected the second
recommendation, concluding that DHHS correctly sought recoupment. A.R. 1-2 .
Additionally, the Commissioner accepted all but 2 of the Hearing Officer's factual findin gs
and made certain factual findings of her own. With respect to Myers and Stauffer' s
calculation of Acute Medicaid Days, the Commissioner adopted the "reasons set forth by
the Hearing Officer in her recommended decision" and concluded that "the total number
of Acute Medicaid Days and Acute Medicaid Days [sic] used in the post-payment audit
calculation was correct."

FMH timely appealed the Commissioner' s final decision.

STANDARD OF REVIEW

The Law Court has frequently reaffirmed the principle that judicial review of
administrative agency decisions is "deferential and limited." Passadumkeag Mountain
Friends v. Bd. of Envtl. Prat., 2014 ME 116, ~ 12, 102 A.3d 1181 (quoting Friends of
Lincoln Lakes v. Bd. ofEnvtl. Prat., 2010 ME 18, ~ 12, 989 A.2d 1128). Tbe court is not
permitted to overturn an agency's decision "unless it: violates the Constitution or statutes ;

10
exceeds the agency's authority; is procedurally unlawful; is arbitrary or capnc10us;
constitutes an abuse of discretion; is affected by bias or error of law; or is unsupported by
the evidence in the record." Kroger v. Dep 't of Envtl. Prat., 2005 ME 50, il 7, 870 A.2d
566. The party seeking to vacate a state agency decision has the burden of persuasion on
appeal. Anderson v. Me. Pub. Emp. Ret. Sys., 2009 ME 134, ~ 3,985 A.2d 501.

DISCUSSION

Among its numerous arguments on appeal, FMH takes issue with ( 1) the
Commissioner's determination that the total number of Acute Medicaid [npatient Days
used in Myers and Stauffer's 2018 audit was correct, and (2) Myers and Stauffer's failure
to consider DHHS 's records as part of that audit. For the reasons described below, the court .
Jinds these arguments persuasive. While the court's disposition of this appeal renders it
unnecessary to reach all of FMI-I's issues, the court nevertheless addresses the following
issues as well: whether DI-II-IS was required to use Medicare cost reports to calculate Acute
Medicaid Inpatient Days; whether DI-IHS had the authority to conduct the 2018 audit, and;
whether DHHS erred by failing to count Medicaid eligible (but unpaid) days in the
incentive payment audit.

1. The Commissioner's determination that the total number of Acute Medicaid
Inpatient Days used in Myers and Stauffer's 2018 audit was correct.

The total number of Acute Medicaid Inpatient Days was a source of considerable
dispute during the agency proceedings below. The Commissioner ultimately determined
that the figure calculated by Myers and Stauffer was accurate. Specifically, she stated:
·'For the reasons set forth by the Hearing Officer in her recommended decision, the total
number of Acute Medicaid Days and Acute Medicaid Days [sic] used in the post­
payment audit calculation was correct."
FMH argues that the Commissioner's determination is "both arbitrary, and not
supported by substantial evidence in the record," observing that it is " contradicted by
the plain language of the [Hearing Officer's] Recommended Decision." Pet. 's Br. at 44­
,~5. The court agrees that the Commissioner's determination regarding Acute Medicaid

11
J npatient Days -which was based on the "reasons set forth by the Hearing Officer"­

cannot be reconciled with the Hearing Officer's recommended decision.
In Section C and E of her recommended decision, the Hearing Officer addressed
FMH's contention that Myers and Stauffer failed to properly identify the total number
of Acute Medicaid Inpatient Days. See A.R. 431-35. And she was ultimately "persuaded
by FMH's arguments that the Department failed to prove by a preponderance of the
evidence that its revised payment calculation [wa]s correct." A.R. 433. While perhaps
the Hearing Ofiicer could have stated her underlying reasoning wilh better clarity, it is
evident to the court that the Hearing Officer's decision was motivated by two primary
concerns.
First, she was concerned that Myers and Stauffer's calculation of Acute Medicaid
Inpatient Days was derived solely from the hospital's records-the original source of
which was the notoriously unreliable MeCMS system. Moreover, Myers and Stauffer
foiled to look beyond those records to verify whether a Medicaid paymenl was actually
made with respect to the days they opted to exclude. See A.R. 433-34.
Second, the Hearing Officer was troubled that Myers and Stauffer's findings
regarding Acute Medicaid Inpatient Days could not be reconciled with the prior audit
findings of MaineCare. Notably, a disparity of 693 days existed between the total
number of paid Acute Medicaid Inpatient Days found by MaineCarc in the 20 l 0
MaineCare Final Settlement and the number found by Myers and Stauffer in the 2018
post-payment audit. A.R. 433-34.
Thus, it is apparent to the court that the Hearing Officer did not find that the total
number of Acute Medicaid Days used in the post-payment audit calculation was correct.
Yet, the Commissioner came to the opposite conclusion-despite having expressly
adopted the reasoning of the Hearing Officer and most of the Hearing Officer's findings.
The issue, then, is whether the Commissioner, having adopted the Hearing Officer's
determination regarding the accuracy of the Acute Medicaid Day calculation, reached a
conclusion that was reasonable, just, and lawful. See Maine Care Servs. v. Department

12
of Human Servs., No. AP-00-076, 2001 Me. Super. LEXIS 116, *8 (September 12,
2001 ). The court concludes it did not.
Addressing a similar situation, one Superior Court Justice accurately observed:
"The Commissioner was not required to adopt the Hearing Officer's findings. Adopting
those findings, however, preclude[ d] a review of the record to make findings and
conclusions inconsistent with the Hearing Officer1s findings." Id. at *9. In other words,
the Commissioner's "conclusions cannot ... be inconsistent with the adopted findings,
which are supported by the evidence in the record." Id.
Here, the Hearing Officer's findings and the Commissioner's conclusions based
on those findings cannot be reconciled. While the Commissioner concluded that Myers
and Stauffer's calculation of Medicaid Acute Days was accurate, that conclusion cannot
be sustained by the Hearing Officer's recommended decision. Indeed, the Hearing
Officer found that DHHSfailed to meet its burden of showing that Myers and Stauffer's
payment calculation-including its calculation of Acute Medicaid Inpatient Days--was
correct. Because the conclusion reached by the Commissioner is inconsistent with the
lindings and reasoning she adopted, the court finds her conclusion to be unsupported by
the record.

2. Myers and Stauffer's failure to consider DHHS's records.

FMH further takes issue with the 2018 audit on the grounds that it was based so lcly
on FMH's records. E.g., Pet. 's Br. at 39. FMH argues that Myers and Stauffer did not
review DHHS 'sown records and data regarding paid Acute Medicaid Inpatient Days- - an
omission FMH says constitutes a departure from the audit procedures contemplated in the
SMI-IP. See Pet.'s Br. at 39 n.31 & Pet's Reply at 7-11.
The SMHP sets forth the State's strategy for auditing incentive payments. As the
SMHP was promulgated as a rule in 2014, see Houlton Reg'l Hosp., 2019 Me. Super.
LEXIS 96, ** 13 n.3, 20; 10-144 C.M.R. ch. 101, ch. I,§ 2.01, it follows that post-payment
audits need to be conducted in accordance with the audit strategy set forth therein. A.It
541.

13
A summary of the State's audit strategy is outlined in Section D, Part 4 of the SMHP.
See A.R. 1746-4 7. There, the SMHP identifies the data sources auditors are to rely upon
and provides a general overview of the various steps in the audit process. As one of the
"Resources/Data Sources," the SMHP identifies "MIHMS"-the State system that houses
the State's data regarding claims paid by MaineCare. 6
Moreover, Appendix D-5 provides additional detail regarding the various steps in
the audit process. See A.R. 1965-68. While Appendix D-5 contemplates that data may be
requested directly from hospitals, see A.R. 1966, it also specifies that data will be pulled
from State data systems. A.R. 1965. Indeed, step "AUD-040-030" in the process reads as
follows:

AUD-040-030: Extract payment data from data sources
Description: Description: Audit cxtrncts data from State systems and data sources to complete
the audit on incentive payments.

Resource: Audit/MaineCare Services

Proposed Technology to leverage: OIT Developed HIT System and other
existing systems, MlHMS, AdvantageME

A.R. 1965.
Thus, the State's strategy for auditing incentive payments is two-pronged: It
involves (1) reviewing data held by the State and (2) reviewing records kept by tl1e hospital.
Such a two-pronged strategy makes sense from an accuracy standpoint as it provides
multiple sources from which data may be verified, cross-checked, and reconciled.
The Myers and Stauffer audit, however, relied solely upon FMH's own records. As
such, it did not review MaineCare's prior findings regarding paid Medicaid Inpatient Days
or reconcile the hospital's data with the information maintained by the State. Tbe failure to

6 See A.R.1633 ("Mil-IMS is an integrated system that supports claims processing, provider

enrollment, care management, program integrity, information management, and case
management"); A.R.1644 ("The primary functions ofMIHMS are getting and adjudicating
claims; providing the data for reporting, analysis, and payment; and all activities having
the necessary level of auditing and security to maintain the integrity of the process and
system.").

14
obtain and consider DHI-IS 's own records as pa11 of the audit process constituted a
deviation from the audit strategy contemplated in the SMHP.

3. Whether DHHS was required to use Medicare cost reports to calculate Acute
Medicaid Inpatient Days.

FMH argues that the SMHP identifies Medicare cost reports as the data source fo r
ascertaining Acute Medicaid Inpatient Days. Therefore, FMH contends, DI-II-IS 's post­
payment audit was limited to the information set forth in the Medicare cost report. See
generally Pet.' s Br. at 2 8-3 3.
This argument fails for the simple reason that such a limitation does not apply in the
audit context. In its SMHP, Maine specified that "[fjor hospitals, Medicare cost reports
will be used to verify the Medicaid patient volumes, and to calculate the payment
amounts. " A.R. 1695-96. But it did so in the context of outlining how it would calcula te
the initial payment. See A.R. 1694 (providing a high-level overview of the initial payment
process). The SMHP does not specify Medicare cost reports as the sole source from which
po.st-payment auditors must draw data. For good reason, too. As both the Commissioner
and Hearing Officer found , there are certain data elements that must be excluded from the
Medicaid share calculation (e.g., unpaid days) that are " not discernable using only
Medicare cost reports." Thus, DHHS's examination of data sources beyond the Medicare
cost report was appropriate.

4. Whether DHHS had the authority to conduct the 2018 audit.

FMH further challenges DI-II-IS 's general authority to conduct the audit.
Specifically, FMI-I argues that DHHS lacked the authority to conduct a second post­
payment audit. Pet.'s Br. at 27. Moreover, it asserts that DHHS ' s post-payment audit
authority is limited to hospitals participating only in the Medicaid incentive program.
FMH, however, participated in both the Medicaid and Medicare incentive program.
Chapter 1 of the MaineCare Benefits Manual broadly states that the Division of
Audit or its duly authorized agents "have the authority to monitor payments to any
MaineCare provider by an audit or post-payment review." 10-144 C .M.R. ch. 101, ch. 1, ~

15
1.16; A.R. 3 51. In addition, the Federal Register provides in relevant part: '·CMS approval
of the State Medicaid HIT plan does not relieve the State of its responsibilities to comply
vl'ith changes in Federal laws and regulations and to ensure that claims for Federal funding
are consistent with all applicable requirements." R. 1020. It follows from these authoriti(~S
that DHHS enjoyed the authority to initiate a second post-payment audit, particularly where
taxpayer money was at stake and questions were raised regarding the accuracy of the
original calculation.
FMH further maintains that DHHS's audit authority does not extend to hospitals
that are dually eligible for Medicaid and Medicare EHR incentive payments. It does not
appear that FMH raised this argument during the informal review proceedings or at the
administrative hearing stage. Although FMI-I addressed the issue in its ob_jection to the
Hearing Officer's recommended decision, its post-hearing challenges were not timely
presented. The issue is therefore unpreserved. Brown v. Town ofStarks, 20 15 ME 47, 1( 6,
l 14 A.3d 1003 ("In order to preserve an issue for appellate review, a party must timely
present that issue to the original tribunal; otherwise, the issue is deemed waived."); New
England Whitewater Ctr., Inc. v. Dep 't of Inland Fisheries & Wildlife , 550 A.2cl 56, 58
(Me. 1988) ("Generally, plaintiffs in a Rule SOC proceeding for review of final agency
action are expected to raise any objections they have before the agency in order to preserve
these issues for appeal."); see also R. 370 (10-144 C.M.R. ch. JO], ch. I, §
1.21) ("Subsequent appeal proceedings will be limited only to those issues raised during
the informal review process.").
5. Whether DHHS erred by failing to count Medicaid eligible (bu t unpaid) clays
in the incentive payment audit.

FMH maintains that a bed day should be counted as an Acute Medicaid Inpatient
Day (a.lea. "inpatient-bed day") if a patient was generally eligible for Medicaid, regardless
of whether Medicaid actually paid the hospital for the services provided. This position is
contrary to CMS' s interpretation.
On July 28 , 2010, CMS issued a series of comments and responses related to its
Jina! rule implementing the HITE CI-I Act. See A.R. 818-1093. In those comments, CMS

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addressed how inpatient-bed days should be calculated, in particular whether unpaid bed
days should be included in the "inpatient-bed day" calculation. CMS stated: "[T]he EHR

incentive payment calculation requires only paid inpatient-bed days." A.R. 1005.
Moreover, in an email dated October 24, 2012, CMS explained, "Zero pay Medicaid
eligible days must continue to be excluded from the Medicaid hospital incentive
calculation." R. 1611.

The court concludes that DI-II-IS is bound by this interpretation. The HITECH Act
makes clear that "inpatient-bed day" is a term with a meaning to be "estc1blished by the
Secretary" of Health and Human Services, which oversees CMS. 42 U.S.C. §
l 3 96b(t)( 5)(C). CMS has established a definition of "inpatient-bed days" in its
interpretation of the 1-IITECH Act. DHHS, meanwhile, is a state actor charged with
implementing but not interpreting the federal statute. 42 C.F.R. § 495.312(c). At bottom,
then, FMH's primary disagreement is with CMS's interpretation of a federnl provision. As
DI-II-IS has no authority to override CMS's interpretation of"inpatient-bed days," it cannot
be faulted for following federal directives in this area.

CONCLUSION
The entry is:

The Decision of the Commissioner is VACATED. The Case is REMANDED to the
Commissioner of the Department of Human Services for further proceedings, findings of
fr1ct or conclusions of law consistent with this Decision.

The clerk is directed to incorporate this Order into the docket of this case by notation
reference in accordance with M.R. Civ. P. 79(a) .

l
,
./ ~tf.jp_,/':,))
Dated: October 12, 2022
.::-··~%:22/t,· - r­
./
William R. Stokes
I
Entered on the docket l D { t2 2. 1 Justice, Superior Court

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