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.
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 Specifically, the Department held that Medshore had used outdated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
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