Juro's United Drug v. Montana Department of Public Health & Human Services

No. 03-075
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 117
JURO’S UNITED DRUG,
Plaintiff and Appellant,
v.
MONTANA DEPARTMENT OF PUBLIC
HEALTH AND HUMAN SERVICES,
Respondent and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis & Clark, Cause No. BDV-2001-540
Honorable Jeffrey M. Sherlock, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Wendy Holton, Attorney at Law, Helena, Montana
For Respondent:
Barbara Hoffmann, Special Assistant Attorney General, Department
of Public Health and Human Services, Helena, Montana
Submitted on Briefs: August 28, 2003
Decided: May 4, 2004
Filed:
__________________________________________
Clerk
Chief Justice Karla M. Gray delivered the Opinion of the Court.
¶1 Juro’s United Drug (Juro’s) appeals from the order on judicial review entered by the
First Judicial District Court, Lewis and Clark County, upholding a final administrative
decision. We affirm.
¶2 The restated issue on appeal is whether the District Court erred in upholding a final
administrative decision which concluded that a department’s interpretation of an
administrative rule as precluding reimbursement of shipping costs for diapers was reasonable
and not plainly inconsistent with the rule’s spirit.
BACKGROUND
¶3 The Montana medicaid program (Medicaid) is a joint federal-state program that
provides necessary medical services to qualified individuals. The Department of Public
Health and Human Services (Department) administers Medicaid in Montana. Section 53-6-
101(1), MCA. Juro’s is a Medicaid-enrolled provider of medical supplies–including
diapers–and durable medical equipment in Billings, Montana.
¶4 Juro’s transported diapers to its customers in the Billings area–including its Medicaid
customers–at no extra charge via a company truck and driver. It sent diapers via common
carrier to its customers outside the Billings area. Juro’s billed its non-Medicaid customers
outside the Billings area for the costs of shipping diapers. It submitted claims to the
Department for reimbursement of costs for shipping diapers to Medicaid recipients outside
the Billings area using Medicaid code W2839, “Shipping Charges for Minor Supplies.”
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Between October 1, 1995 and March 31, 2000, those claims totaled $10,220.94. The
Department reimbursed the claims.
¶5 The Department subsequently audited paid claims data from October 1, 1995 through
March 31, 2000 (the audit period). In August of 2000, it notified Juro’s that the $10,220.94
was improperly billed and paid under Medicaid code W2839 because Rule 37.86.1806(7),
ARM, the language of which was in effect throughout the audit period, provided that
“Medicaid will not reimburse delivery fees in addition to the amount reimbursed for
diapers.” Stated differently, the Department interpreted the Rule to preclude Medicaid
reimbursement of any costs associated with transporting diapers from the provider to
Medicaid recipients.
¶6 Juro’s disputed the Department’s interpretation. It contended the Rule only precluded
reimbursement for “provider travel” costs, such as those Juro’s incurred in transporting
diapers to its customers in the Billings area via company truck. It also argued that Medicaid
code W2839 authorized claims for the costs of shipping “minor supplies,” and noted the
Department had previously indicated “minor supplies” included diapers. Juro’s requested
a “fair hearing” before a hearing officer of the Montana Board of Public Assistance (Board).
The hearing occurred in December of 2000.
¶7 Juro’s operations manager, Janna Jurovich, testified at the hearing. Frank Malek
testified for the Department. The hearing officer’s subsequent Fair Hearing Decision
(Decision) ultimately concluded the Department’s interpretation of the Rule’s term “delivery
fees” to include both costs of shipping via common carrier and “provider travel” costs with
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regard to diapers was reasonable and not inconsistent with the Rule. Accordingly, it ordered
Juro’s to reimburse the Department for the improperly submitted and paid charges associated
with shipping diapers to its Medicaid patients outside the Billings area during the audit
period.
¶8 Juro’s appealed to the Board, which unanimously adopted the Decision, and then
petitioned the District Court for judicial review. The District Court affirmed, and Juro’s
appeals. Juro’s does not challenge any finding of fact in the Decision.
STANDARD OF REVIEW
¶9 The interpretation of an administrative rule is a question of law. State Personnel v.
Investigators, 2002 MT 46, ¶ 62, 308 Mont. 365, ¶ 62, 43 P.3d 305, ¶ 62 (citations omitted).
Under the Montana Administrative Procedure Act (MAPA), a district court may review an
administrative decision in a contested case to determine–among other things–whether the
substantial rights of the party seeking review have been prejudiced because the decision is
“affected by . . . error of law.” See § 2-4-704(2)(a)(iv), MCA. This Court employs the same
standard when reviewing a district court’s order affirming or reversing an administrative
decision. Marble v. Dept. of Health & Human Serv., 2000 MT 240, ¶ 16, 301 Mont. 373,
¶ 16, 9 P.3d 617, ¶ 16 (citation omitted). Consequently, like the District Court, we determine
whether the Decision’s conclusion that the Department’s interpretation of the Rule was
reasonable and not plainly inconsistent with the Rule’s spirit is correct. See Langager v.
Crazy Creek Products, Inc., 1998 MT 44, ¶ 13, 287 Mont. 445, ¶ 13, 954 P.2d 1169, ¶ 13
(citation omitted).
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DISCUSSION
¶10 Is the Decision’s conclusion that the Department’s interpretation of Rule
37.86.1806(7), ARM, was reasonable and not plainly inconsistent with the Rule’s spirit
correct?
¶11 As stated above, Rule 37.86.1806(7), ARM, provided that “Medicaid will not
reimburse delivery fees in addition to the amount reimbursed for diapers.” The Decision set
forth the following analysis:
Obviously, basic physical differences can be seen between delivering a
product to a customer via company truck versus shipping the product by
common carrier. But despite the obvious differences, there are obvious
similarities as well. Both methods have the ultimate purpose of transferring
a product to a customer, and there is a financial cost associated with either
mode of transfer. In this case it is concluded that the similarities carry the day.
The Decision concluded the Department’s interpretation of the Rule’s term “delivery fees”
to include shipping fees for diapers is “reasonable and not inconsistent with ARM
37.86.1806(7).”
¶12 In Easy v. Dept. of Natural Res. & Conserv. (1988), 231 Mont. 306, 309, 752 P.2d
746, 748 (citations omitted), we determined that an “agency’s interpretation of its rule is
afforded great weight,” courts should “defer to that interpretation unless it is ‘plainly
inconsistent’ with the spirit of the rule,” and the interpretation will be upheld “so long as it
lies within the range of reasonable interpretation permitted by the wording.” We note that
Easy was not a MAPA case, but we have applied its principles in MAPA cases. See State
Personnel, ¶ 63; Brady v. Montana Dept. of Justice, 1999 MT 153, ¶ 22, 295 Mont. 75, ¶ 22,
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983 P.2d 292, ¶ 22. Conversely, of course, we do not defer to an “incorrect agency
decision.” Grouse Mountain Assoc. v. PSC (1997), 284 Mont. 65, 69, 943 P.2d 971, 973.
¶13 Juro’s primary assertion of error in the Decision’s conclusion regarding the
Department’s interpretation is that the Department changed its interpretation when it assessed
the overpayment in 2000. In support of this position, Juro’s points to the 1995 notice of the
Rule’s amendment, the actual reimbursement of claims for diaper shipping costs during the
audit period, and a 2001 amendment to the Medicaid rules. Juro’s also argues the analysis
of similarities and differences between shipping and delivery in the Decision was improper,
and the “common meaning” of the term “deliver” indicates the term “delivery fees” does not
include shipping costs. We address each argument in turn.
1995 Notice of the Rule’s Amendment
¶14 Juro’s asserts the following comment and response in the 1995 notice of amendment
to the Rule (before it was renumbered) indicates the Department initially interpreted the Rule
to prohibit reimbursement of provider travel only, and the Department should be bound by
that interpretation:
COMMENT: Why will the department not cover delivery services for diapers?
RESPONSE: [Another rule from the same subchapter regarding Medicaid
prosthetic devices, durable medical equipment and medical supplies] states
that provider travel is not reimbursable; delivery is a form of provider travel,
which is not separately reimbursable for any durable medical equipment. The
department believes the proposed fee for diapers is reasonable to reimburse
providers and assure access for recipients without an additional delivery fee.
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18 Mont. Admin. Reg. 1973 (Sept. 28, 1995). According to Juro’s, the Department changed
its position in 2000 by interpreting the Rule to preclude reimbursement for both “provider
travel” and common carrier delivery.
¶15 The Department responds that its interpretation of the Rule did not change between
1995 and 2000. It correctly observes that the comment and response relied upon by Juro’s
does not address the meaning of the term “delivery fees” or limit that term to “provider
travel.” The commentary merely addresses the Department’s reasons for not reimbursing
delivery services. Moreover, the description of delivery as “a form of provider travel”
suggests that “provider travel” is a broader term than Juro’s posits here.
¶16 The Department also characterizes Rule 37.86.1806(7), ARM, as a cost containment
measure which set an all-inclusive fee for diapers. The response quoted above is not
inconsistent with this characterization.
¶17 In addition, the Department points to another comment and response in the 1995
notice of the Rule’s amendment:
COMMENT: How did medicaid come up with fees for diapers, shields and
pads?
RESPONSE: The department sent surveys to all suppliers that provide diapers
for medicaid recipients and asked them about prices charged for diapers, and
the amount needed to continue supplying medicaid recipients with diapers.
Prices ranged from 40 cents to $1.50. Suppliers on the upper end of the scale
were also increasing prices charged to medicaid because they were delivering
as well as selling diapers to their medicaid clients. We then looked at
suppliers in particular areas and found that there were already suppliers in all
areas supplying diapers at 70 cents or less. The department has not received
any comments from suppliers indicating that they would not be providing
diapers because of the new medicaid fee schedule. The department believes
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the proposed fee is reasonable and adequate to reimburse providers and assure
access for recipients.
18 Mont. Admin. Reg. 1970 (Sept. 28, 1995).
¶18 This commentary reveals that, in setting a “reasonable and adequate” fee, the
Department considered the impact of transport costs–namely, that some suppliers were
“increasing prices . . . because they were delivering”–but providers also existed “in all areas
supplying diapers at 70 cents or less.” The Department’s discussion of its fee-setting process
indicates that the intent behind the Rule was to contain costs. Other subsections of the Rule
reflect a similar intent. See, e.g., Rule 37.86.1806(1)(a), ARM (providing that the
Department will pay a provider the provider’s customary charge for the item or the price set
by the Department’s fee schedule, whichever is lower). Overall, the commentary lends
support to, but in any event does not establish error in, the Decision’s conclusion that the
Department’s interpretation of the Rule as precluding reimbursement of shipping costs was
neither “plainly inconsistent” with the Rule’s spirit nor outside the range of reasonable
interpretation. See State Personnel, ¶ 63.
Actual Reimbursement
¶19 Juro’s next argues the Department’s actual reimbursement of Medicaid code W2839
claims for diaper shipping costs during the audit period “reinforced” Juro’s interpretation that
the Rule precluded reimbursement for provider delivery only. In other words, Juro’s
contends that the Department’s reimbursement of diaper shipping costs over the years
equates to the Department’s interpretation of the Rule as authorizing such reimbursement.
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¶20 The record reflects the Department pays claims on an “as submitted” basis and later
audits those payments. As a practical matter, the Department–similar to many
businesses–cannot audit every claim as received. The Department audits claims and assesses
overpayments only after paying claims during an audit period. Thus, the Department’s
payments do not constitute an interpretation of the Rule as allowing reimbursement of diaper
shipping costs.
¶21 Moreover, the Montana Legislature has expressly provided that the Department “is
entitled to collect from a provider, and a provider is liable to the department for . . . the
amount of a payment . . . to which the provider was not entitled, regardless of whether the
incorrect payment was the result of department or provider error or other cause . . . .”
Section 53-6-111(2)(a)(i), MCA. Juro’s argument that the Department’s reimbursement of
claims precluded it from later determining the reimbursed claims constituted an overpayment
would render § 53-6-111(2)(a)(i), MCA, meaningless. We refrain from interpreting a statute
in a manner that would defeat its purpose. Hawley v. Board of Oil and Gas Conservation,
2000 MT 2, ¶ 12, 297 Mont. 467, ¶ 12, 993 P.2d 677, ¶ 12 (citation omitted). Therefore, we
reject Juro’s argument.
2001 Amendment
¶22 Juro’s also asserts in a footnote, without any supporting authority, that the
Department’s 2001 amendment to its rules “adds credence” to its contention that the
Department changed its interpretation. As amended, the rules provide that the Department
does not reimburse “any delivery, mailing or shipping fees or other costs of transporting the
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item to the recipient’s location” for prosthetic devices, durable medical equipment, and
medical supplies–including diapers. See 8 Mont. Admin. Reg. 605 (Apr. 26, 2001).
¶23 We generally apply the same principles in construing administrative rules as we do
in construing statutes. Glendive Medical Center, Inc. v. DPHHS, 2002 MT 131, ¶ 15, 310
Mont. 156, ¶ 15, 49 P.3d 560, ¶ 15 (citation omitted). Amendments are presumed to indicate
an intent to change existing law. See, e.g., State ex rel. Mazurek v. District Court, 2000 MT
266, ¶ 18, 302 Mont. 39, ¶ 18, 22 P.3d 166, ¶ 18 (citations omitted). The presumption is not
conclusive, however, because an amendment may merely clarify the lawmaker’s intent. See
Mont. Dept. of Rev. v. Am. Smelting & Refining (1977), 173 Mont. 316, 325, 567 P.2d 901,
906 (citation omitted); Madison v. Pierce (1970), 156 Mont. 209, 216-17, 478 P.2d 860, 864.
¶24 Here, the Department stated that the 2001 amendment would “clarify” its longstanding
policy not to pay any delivery fees or shipping costs for diapers and durable medical
equipment. See 8 Mont. Admin. Reg. 610 (Apr. 26, 2001). Absent both authorities to the
contrary and a developed argument, we decline to address Juro’s assertion regarding the
2001 amendment further. See Rule 23(a)(4), M.R.App.P.
Similarities and Differences
¶25 As noted above, the Decision stated shipping and delivery were similar, because both
involve associated costs and the ultimate purpose of transferring a product to a customer.
Juro’s asserts this analysis is irrelevant to the interpretation of the Rule’s language that
“Medicaid will not reimburse delivery fees in addition to the amount reimbursed for
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diapers.” We disagree. In determining whether the Department’s interpretation of the Rule
is reasonable, the central question is whether the term “delivery fees” includes shipping
costs. The analysis of similarities and differences between delivery and shipping relates to
this question.
¶26 Juro’s also challenges the observation in the Decision that both shipping and delivery
incur costs. It contends the failure to distinguish the “incremental” shipping costs added to
a business’s overhead from the “fixed costs” of provider delivery constitutes error. However,
Juro’s does not support this conclusory statement with citation to authority or substantial
discussion. See Rule 23(a)(4), M.R.App.P. While it is true that fixed and incremental costs
are different, both are costs. Juro’s simply does not articulate a rationale for its notion that
the issue of whether the Department’s interpretation of the Rule is reasonable rests in any
way on the distinction between types of costs.
“Common Meaning”
¶27 Finally, Juro’s argues the Department intended to distinguish the term “delivery” from
the term “shipping” by using the term “delivery fees” in the Rule and the term “shipping
charges” in the description of Medicaid code W2839, under which Juro’s submitted the
claims at issue. Specifically, it argues “the most common meaning of the term ‘deliver’ is
to hand over, which implies a direct transaction between two parties. On the other hand, the
term ‘ship’ means to cause to be transported–this implies that a middleman has a part in the
transaction.” This analysis apparently stems from entries in Webster’s New Collegiate
Dictionary, the year and edition of which are not of record, submitted at the hearing. Juro’s
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does not provide any authority regarding implicit meanings or the selection of a word’s
“most common meaning.”
¶28 As the Department observes, and Juro’s witness conceded at the hearing, the
submitted dictionary entry for the word “deliver” contains more than one definition.
Moreover, Juro’s implicitly concedes in its brief on appeal that the word “deliver”
encompasses shipping by using the word “[d]eliveries” to describe the transport of packages
“shipped via United Parcel Service.”
¶29 An appellant bears the burden of establishing error. Hawkins v. Harney, 2003 MT 58,
¶ 35, 314 Mont. 384, ¶ 35, 66 P.3d 305, ¶ 35 (citation omitted). Based on the multiple
dictionary definitions, Juro’s concessions that “deliver” has more than one meaning, and the
lack of authority provided on appeal, we conclude Juro’s has not met its burden of
establishing error based on the “common meaning” of the term “deliver.”
¶30 We conclude the Decision’s conclusion that the Department’s interpretation of the
Rule as precluding reimbursement of shipping costs for diapers was reasonable and not
plainly inconsistent with the Rule’s spirit is correct. Therefore, we hold the District Court
did not err in upholding the final administrative decision.
¶31 Affirmed.
/S/ KARLA M. GRAY
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We concur:
/S/ JOHN WARNER
/S/ JIM REGNIER
/S/ PATRICIA O. COTTER
/S/ W. WILLIAM LEAPHART
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