South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
Medshore Ambulance Service vs. SCDHHS

AGENCY:
South Carolina Department of Health and Human Services

PARTIES:
Appellant:
Medshore Ambulance Service

Respondents:
South Carolina Department of Health and Human Services
 
DOCKET NUMBER:
08-ALJ-08-0053-AP

APPEARANCES:
For the Appellant:
G. Christopher Kelly, Esquire
Noah M. Hicks, II, Esquire

For the Respondent:
George Burnett, Esquire
 

ORDERS:

ORDER OF REMAND

STATEMENT OF THE CASE

The above-captioned matter is before the Administrative Law Court (“ALC” or “Court”) pursuant to S.C. Code Ann. §§ 44-6-190 (2002) and 1-23-600(D) and (E) (as amended 2008) for

an administrative appeal.[1] The Appellant, Medshore Ambulance Service (“Medshore”), challenges the final administrative decision by Respondent, the South Carolina Department of Health and Human Services (“Department”). The Department’s Hearing Officer dismissed Medshore’s appeal for failure to timely comply with the directives contained in a letter the Hearing Officer sent to Medshore on October 24, 2007. Medshore contends that the dismissal of its appeal by the Department was arbitrary, prejudicial, and without sufficient cause. In response, the Department argues that the dismissal was proper.

After timely notice to the parties, oral arguments were held on June 5, 2008 at the Court in Columbia, South Carolina. Based upon the record, the parties’ briefs, oral arguments, and upon the applicable law, this matter is remanded to the Department to conduct a hearing on the merits.

BACKGROUND

On September 18, 2007, the Department issued a determination (“Determination” or “Determination Letter”) to Medshore after it had an informal conference with Medshore on August 30, 2007. In its Determination Letter, the Department informed Medshore that several errors were found when it reviewed documentation Medshore had submitted to it concerning Medicaid reimbursement for services provided by Medshore to its clients. Specifically, the Department held that Medshore had used outdated mileage forms and had provided unauthorized transport services for its clients and, as a result, Medshore had been overpaid the sum of $907,133.43, which the Department intended to recoup. On October 15, 2007, Medshore appealed the Determination to the Department and requested a fair hearing on the merits. In its Notice of Appeal, Medshore asserted that the amount Medicaid had overpaid was $3,779.09, not the figure of $907,133.43 asserted by the Department in its Determination Letter.

Based upon Medshore’s Notice of Appeal, on October 24, 2007, the Department Hearing Officer notified Medshore that pursuant to 27 S.C. Code Ann. Regs. 126-152, the Notice of Appeal must “state with specificity the adjustments or allowance in question, the nature of the issues in contest, the jurisdictional basis of your appeal and the legal authority upon which you rely in making an argument as to why the reimbursement, or a portion of it, should be set aside.” Because of the disparate recoupment amounts asserted by each party, the Hearing Officer stated in his letter that he was concerned whether Medshore fully understood the Department’s position on the recoupment amount. Further, he advised Medshore that it should seek representation of an attorney licensed to practice law in South Carolina; however, he stated that if Medshore chose to be represented by a non-attorney, he (the Hearing Officer) had to approve of such representation pursuant to the regulation. Also, the Hearing Officer stated that his approval of any non-attorney representation had to be given before Medshore could submit its amended Notice of Appeal, which must contain more certain and definite reasons for the appeal. Finally, the Hearing Officer gave Medshore fourteen (14) days to comply with the directives contained in his letter.

On November 9, 2007, the two shareholders of Medshore submitted a letter to the Hearing Officer in which they informed him that they wished to be represented in the matter by Richard A. Tibbetts, a non-attorney, and by G. Christopher Kelly, an attorney licensed in the state of Tennessee. They stated in the letter that Medshore understood the amount the Department claimed it owed, and that it would submit a “brief” to the Hearing Officer upon his request. The Hearing Officer did not respond to this letter. Unsure of how to proceed, on November 30, 2007, Medshore sent another letter to the Hearing Officer in which it outlined additional responses to the directives contained in his letter of October 24, 2007. Again, it reiterated its confusion concerning the amount owed to the Department for its use of outdated Medicaid forms and providing unauthorized transport services to its clients.

On January 7, 2008, the Hearing Officer issued the Department’s final agency decision and found that Medshore failed to timely comply with his October 24, 2007 letter; therefore, the Hearing Officer dismissed the appeal, with prejudice. On January 28, 2008, Medshore filed a Motion to Reconsider with the Hearing Officer. On January 31, 2008, the Hearing Officer denied the motion, again finding that Medshore failed to comply with the directives contained in his October 24, 2007 letter.

On February 8, 2008, Medshore filed a Notice of Appeal with this Court, challenging the Department’s final decision.

STANDARD OF REVIEW

This Court’s appellate review of final decisions of the Department is governed by the standards provided in S.C. Code Ann. § 1-23-380 (as amended 2008). See S.C. Code Ann. § 1-23-600(E) (as amended 2008). Section 1-23-380 provides that this Court “may not substitute its judgment for the judgment of the [Respondent] as to the weight of the evidence on questions of fact.” § 1-23-380(5). However, this Court, pursuant to § 1-23-380(5),

may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the [Board];

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Id.; see also Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981) (stating “‘[s]ubstantial evidence’ is not a mere scintilla of evidence nor the evidence viewed blindly from one side of the case, but is evidence which, considering the Record as a whole, would allow reasonable minds to reach the conclusion that the administrative agency reached or must have reached in order to justify its action.” Id. at 135, 276 S.E.2d at 306. “The findings of the agency are presumed correct and will be set aside only if unsupported by substantial evidence.” Hull v. Spartanburg County Assessor, 372 S.C. 420, 424, 341 S.E.2d 909, 911 (Ct. App. 2007) (citing Kearse v. State Health and Human Servs. Fin. Comm'n, 318 S.C. 198, 200, 456 S.E.2d 892, 893 (1995). Accordingly, “[t]he ‘possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.’” Grant v. S.C. Coastal Council, 319 S.C. 348, 461 S.E.2d 388 (1995) (citing Palmetto Alliance, Inc. v. S.C. Pub. Serv. Comm., 282 S.C. 430, 432, 319 S.E.2d 695, 696 (1984)).

Further, an abuse of discretion occurs when an administrative agency’s ruling is based upon an error of law, such as application of the wrong legal principle; or, when based upon factual conclusions, the ruling is without evidentiary support; or, when the trial court is vested with discretion, but the ruling reveals no discretion was exercised; or, when the ruling does not fall within the range of permissible decisions applicable in a particular case, such that it may be deemed arbitrary and capricious. State v. Allen, 370 S.C. 88, 94, 634 S.E.2d 653, 656 (2006) (application of standard to circuit court) (citing Fontaine v. Peitz, 291 S.C. 536, 539, 354 S.E.2d 565, 566 (1987); see also Converse Power Corp, 350 S.C. 39, 47 564 S.E.2d 341, 345 (Ct. App. 2002) (quoting Deese v. State Bd. of Dentistry, 286 S.C. 182, 184-85, 332 S.E.2d 539, 541 (Ct. App. 1985) (“A decision is arbitrary if it is without a rational basis, is based alone on one’s will and not upon any course of reasoning and exercise of judgment, is made at pleasure, without adequate determining principles, or is governed by no fixed rules or standards.”).

DISCUSSION

In this appeal, Medshore contends that it timely and sufficiently complied with the directives contained in the Hearing Officer’s letter, notwithstanding the limited time the Hearing Office gave it to comply. Further, Medshore argues that even if its responses were untimely or insufficient, dismissal of the case based upon mere technicalities was inappropriate.

“An abuse of discretion occurs when the trial court’s decision is based upon an error of law or upon factual findings that are without evidentiary support.” State v. Morris, 376 S.C. 189, 206, 656 S.E.2d 359, 368 (2008); Clark v. Cantrell, 339 S.C. 369, 389, 529 S.E.2d 528, 539 (2000) (“An abuse of discretion occurs when the trial court's ruling is based on an error of law or, when grounded in factual conclusions, is without evidentiary support.”). In its decision, the Department determined that Medshore did not timely comply with the directives contained in the Hearing Officer’s letter which, among other things, included its failure to provide a more definite and certain statement of the issues in controversy. However, the Court finds that the Hearing Officer’s decision is unsupported by the record in this matter.

In the October 24, 2007 letter, the Hearing Officer first instructed Medshore that, pursuant to 27 S.C. Code Ann. Regs. 126-152, if it wished to be represented in the matter by a non-attorney, it must provide in writing to the Hearing Officer “written unanimous consent of all of the owners or share-holders.” The Hearing Officer had to approve of the requested representation before the non-attorney could proceed with representing Medshore. Secondly, the Hearing Officer instructed Medshore to file a more definite and certain statement with regard to its initial Notice of Appeal. Next, the Hearing Officer gave Medshore fourteen (14) days from the receipt of the letter, or by close of business on November 9, 2007 – whichever date was the earliest – to comply with the directives contained in his letter. Lastly, the Hearing Officer informed Medshore that he had to consent to Medshore’s representation of a non-attorney before Medshore could file the more definite and certain statement.

On November 9, 2007, Mr. and Mrs. Greg Shore, the sole shareholders of Medshore, sent a letter to the Hearing Officer informing him of their “unanimous consent” to elect a non-attorney and an attorney licensed by the state of Tennessee to represent them in the instant matter. Further, they confirmed that they understood the full amount the Department was seeking to recoup from Medshore based upon the Department’s Determination Letter dated September 18, 2007. Finally, they stated they would submit “a brief” to the Hearing Officer upon his request.

Without responding to Medshore or its shareholders, the Hearing Officer dismissed Medshore’s appeal on January 7, 2008. In the Department’s Order of Dismissal, the Hearing Officer determined that Medshore failed to timely file a response to his October 24, 2007 letter. He determined that Medshore was required to file a response by November 8, 2007, and that its response dated November 9, 2007 was filed one day past the deadline he imposed. The Court finds that the time period imposed by the Hearing Officer and the Department’s subsequent dismissal of the appeal was unreasonable in light of the requirements placed upon Medshore. See Mictronics, Inc. v. S.C. Dep’t of Revenue, 345 S.C. 506, 548 S.E.2d 223 (Ct. App. 2001) (state policy favors the disposition of a matter based upon its merits rather than on technicalities). Medshore was given 14 days – or less, if it had received the letter at a later date – to comply with all of the Hearing Officer’s directives. The directives required: (1) that Medshore obtain the unanimous consent of all its stockholders to be represented by a non-attorney in the matter before the Department; (2) that Medshore reduce their unanimous consent to writing; (3) that Medshore send this information to the Hearing Officer; (4) that the Hearing Officer approve their selection of representation; (5) that the Hearing Officer inform Medshore of his decision; and finally, (6) that Medshore thereafter submit a more definite and certain statement to the Hearing Officer concerning its initial Notice of Appeal. Despite this short amount of time allowed by the Hearing Officer, Medshore sufficiently complied with the first three of the tasks as directed by the Hearing Officer. At this point, based upon the Hearing Officer’s own letter, he had to act and approve of their representation before Medshore could proceed. The Hearing Officer did not act or respond to Medshore’s written communication. Approximately three weeks later, Medshore again submitted a letter to the Hearing Officer – out of an abundance of caution – to ensure that it complied with all of the Hearing Officer’s instructions in his October letter. Again, the Hearing Officer did not respond. The only communication with Medshore by the Hearing Officer was the Order of Dismissal dated January 7, 2008, over one month after Medshore submitted its second letter to him.

If Medshore was one day late in responding to the Hearing Officer’s directives, it is apparent to the Court that there is excusable error. Medshore immediately sought to comply with all the directives of the Hearing Officer. It acted in good faith and there was no attempt to thwart the judicial system. Here, the facts present a controversy which is contested by the parties. Further, the amount the Department seeks to recoup is in excess of $900,000.00. There is no other forum for Medshore to receive any relief from the Department’s decision except through a hearing on the merits with the Department. The sanction by the Department in dismissing this case was extreme and severe. See Balloon Plantation, Inc. v. Head Balloons, Inc., 303 S. C. 152, 153, 399 S. E. 2d 439, 440 (Ct. App. 1990) (finding sanction dismissing counterclaim too severe.). The Court finds that there is no evidence in the record that Medshore acted in bad faith. Further, Medshore has shown a meritorious defense which is worthy of a hearing, and the Department will not suffer any prejudice if this case is heard on the merits.

For all the above reasons, the Court finds that the dismissal of this case with prejudice by the Department was an abuse of discretion. See Columbia Pools, Inc. v. Galvin, 288 S.C. 59, 339 S.E.2d 524 (Ct. App. 1986) (holding that a trial judge abused his discretion by denying a motion to set aside a default judgment granted after an answer was received one day late). Furthermore, the record simply does not support the Hearing Officer’s reasoning. Accordingly, this matter is remanded to the Department to conduct a hearing on the merits.

ORDER

For the reasons set forth above,

IT IS HEREBY ORDERED that this matter is REMANDED to the Department to conduct an administrative hearing regarding the merits of this case.

AND IT IS SO ORDERED.

______________________________

Marvin F. Kittrell

Chief Judge

July 1, 2008

Columbia, South Carolina



[1] The Administrative Procedures Act (“APA”) was amended and renumbered by R.413, H.3575, 117th Sess. (S.C. 2008) (eff. June 16, 2008). As of the date of this Order, no Act number has been assigned. Accordingly, all citations to the APA in this Order are to the recently amended and renumbered sections found in R.413.


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