You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Samissa Anchorage, Inc. v. State, Dept. of Health and Social Services (10/25/2002) sp-5639
Samissa Anchorage, Inc. v. State, Dept. of Health and Social Services (10/25/2002) sp-5639
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
SAMISSA ANCHORAGE, INC., an )
Alaska corporation, d/b/a North Star ) Supreme Court No. S-
10258
Adolescent Hospital, )
) Superior Court Nos. 3AN-99-
3432
Appellant, ) and 3AN-00-3637
CI
)
v. ) O P I N I O N
)
THE DEPARTMENT OF HEALTH ) [No. 5639 - October 25, 2002]
AND SOCIAL SERVICES, STATE )
OF ALASKA; KAREN PERDUE, )
in her official capacity as the )
Commissioner of the Alaska )
Department of Health and Social )
Services; THE MEDICAID RATE )
ADVISORY COMMISSION, STATE )
OF ALASKA; and JACK NIELSON, )
in his official capacity as the Executive )
Director of the Medicaid Rate )
Advisory Commission, )
)
Appellees. )
________________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sharon L. Gleason, Judge.
Appearances: John F. Sullivan, Inslee, Best,
Doezie & Ryder, P.S., Bellevue, Washington,
for Appellant. Julie E. Bryant, Assistant
Attorney General, Anchorage, and Bruce M.
Botelho, Attorney General, Juneau, for
Appellees.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
The State of Alaska made additional payments to a
medical services provider after the provider brought successful
administrative claims against the state to increase the Medicaid
reimbursement rates payable under AS 47.07.070. Does AS 09.50.280
require the state to pay the provider prejudgment interest?
Because the providers claims under AS 47.07.070 are not covered
by AS 09.50.250s waiver of sovereign immunity, we hold that the
state is not liable for prejudgment interest under AS 09.50.280.
We therefore affirm the superior courts denial of the medical
service providers claims for prejudgment interest.
II. FACTS AND PROCEEDINGS
Samissa Anchorage, Inc. (d/b/a North Star Hospital or
North Star) provided psychiatric services to state Medicaid
patients between 1993 and 1996. North Star challenged the 1993,
1994, and 1995 Medicaid reimbursement rates of the Department of
Health and Social Services (the department) in one administrative
claim and challenged the 1996 rate in another.1 North Star
ultimately appealed both challenges to the commissioner of the
department under 7 Alaska Administrative Code (AAC) 43.703 and
.704.2 North Star requested prejudgment interest in both
challenges.3
The departments June 1999 final decision in the rate
appeals for years 1993, 1994, and 1995 concluded that the rates
from those years should be recalculated because North Star was
entitled to additional reimbursement. The decision did not
address North Stars prejudgment interest claim. North Star filed
a superior court administrative appeal in July 1999 to compel the
department to reimburse North Star the amount that the
commissioner had determined North Star was underpaid; North Star
requested, among other things, prejudgment interest. In late
1999 the state issued North Star two checks totaling $723,295 to
reimburse North Star under the adjusted payment rate for the
medical services North Star had rendered in 1993, 1994, and 1995.
The reimbursement did not include prejudgment interest.
The department issued its final decision in North Stars
1996 rate appeal in February 2000. This time, the commissioner
expressly denied North Stars prejudgment interest claim, stating
that no statute or regulation authorizes an award of prejudgment
interest against the state in administrative proceedings related
to Medicaid rates pursuant to AS 47.07 or the Administrative
Procedures Act. North Star filed a superior court administrative
appeal from this ruling in March 2000. In May 2000 North Star
received a check for $959, to reimburse it under the adjusted
payment rate for the 1996 services. The reimbursement did not
include prejudgment interest.
Superior Court Judge Milton M. Souter consolidated
North Stars two appeals. North Star argued that it was entitled
to prejudgment interest under AS 09.50.250 and .280 because its
payment rate claims arose out of an express contract with the
state, and that the state waived sovereign immunity for contract
claims under AS 09.50.2504 and for prejudgment interest on those
contract claims under AS 09.50.280.5 North Star argued that it
was therefore entitled to prejudgment interest on its contract
claims. The department argued that the state did not waive
sovereign immunity under AS 09.50.250 for payment rate
challenges. The department asserted that North Star brought its
claim under the administrative procedures prescribed for
challenges of payment rates calculated under AS 47.07.070, and
consequently contended that North Star was not entitled to
prejudgment interest.
The superior court reversed the administrative denial
of prejudgment interest. It held that North Stars Medicaid
provider agreement is a contract. It further held that AS
09.50.250 expressly authorizes prejudgment interest in contract
cases regardless of whether they are first required to be pursued
in administrative proceedings. The superior court remanded to
the department for award of prejudgment interest.
The department petitioned for rehearing and Superior
Court Judge Sharon L. Gleason, to whom the case was reassigned
after Judge Souter retired, vacated the remand order to the
extent it allowed North Star to recover prejudgment interest.
Judge Gleasons decision on rehearing determined that North Star
could not have brought an action under AS 09.50.250 because
health care providers must challenge Medicaid payment rates under
7 AAC 43.7036 and .704.7 Judge Gleasons decision reasoned that
those sections of the administrative code establish procedures
that involve the Department of Health and Social Services, not
the Department of Administration as AS 09.50.250 and .280
require.
Applying our decision in Danco Exploration, Inc. v.
State, Department of Natural Resources,8 the superior court ruled
that administrative appeals are not encompassed within AS
09.50.250, and therefore prejudgment interest is not available
under that statutory provision in this administrative appeal.
The superior court further held that no other statutory waiver of
sovereign immunity allowing an award of prejudgment interest
against the state applied. The superior court vacated the
original remand order and affirmed the departments decision
denying prejudgment interest.9
North Star appeals.
III. DISCUSSION
A. Standard of Review
We independently review administrative agency decisions
when the superior court sits as an intermediate court of appeal.10
We apply the substitution of judgment test to legal questions
where no agency expertise is involved, such as questions of
statutory interpretation or other analysis of legal relationships
about which courts have specialized knowledge and experience.11
B. North Star Was Not Entitled To Recover Prejudgment
Interest.
North Star argues that it brought its payment rate
claims under AS 09.50.250, making it eligible for prejudgment
interest under AS 09.50.280. It asserts that sections .250 and
.280 allow prejudgment interest in this case because North Star
brought contract or quasi-contract claims. It contends that the
department erred because it did not recognize North Stars
contractual relationship with the department and asserts that
there was indeed a contractual relationship. Alternatively,
North Star argues that it has quasi-contractual claims based on
unjust enrichment. It asserts that it was unjustly denied the
correct rate for its services and that its claims therefore lie
within sections .250 and .280. Finally, North Star argues that
it is entitled to prejudgment interest because it exhausted
administrative remedies under section .250; because Alaska courts
award prejudgment interest as part of compensatory damages; and
because the plain language of AS 47.07.070(b)(1) evidences
legislative intent to require the department to reimburse health
care facilities for the time value of the money the department
incorrectly withheld.
The department argues that North Star could only bring
its payment rate claims under AS 47.07.070, the statute which
governs the Department of Health and Social Services rate-making
decisions. The department asserts that our decision in Danco12
precludes North Stars prejudgment interest claims.
1. Only the legislature can authorize prejudgment
interest awards against the state.
[U]nless interest is specifically authorized by
legislative enactment, it may not ordinarily be assessed against
the State in any action.13 In other words, only the legislature
can waive the states sovereign immunity and authorize an award of
prejudgment interest against the state. The question here is
whether the legislature authorized prejudgment interest awards in
payment rate challenges.
Alaska Statute 09.50.250 waives sovereign immunity and
allows actionable claims against the state that sound in
contract, quasi-contract, or tort. Alaska Statute 09.50.280
authorizes interest awards against the state for actions brought
under section .250. We noted in Stewart & Grindle, Inc. v. State
that [s]ince AS 09.50.250 and 09.50.280 were passed together and
amended together by the same legislative act, it is clear that AS
09.50.280 was intended to afford a right to pre-judgment interest
against the State only where AS 09.50.250 established a
substantive cause of action.14 Thus, this case turns on whether
North Star brought or could have brought an action under section
.250.
2. North Star is not entitled to prejudgment interest
because payment rate challenges are not cognizable
claims under AS 09.50.250.
We rejected a claim similar to North Stars in Danco,
the case that controls here. There we held that [administrative]
appeals [under 11 AAC 02.010] are not encompassed within AS
09.50.250.15 Judge Gleason in this case reasoned that the
administrative procedures for challenging payment rate decisions
were similar to the administrative procedures for challenging the
Department of Natural Resources decision that we reviewed in
Danco. The superior court held that North Star did not and could
not have maintained an independent contract action under AS
09.50.250 regarding Medicaid ratemaking decisions of the
Department of Health and Social Services.
North Star attempts to distinguish Danco by contending
that North Stars claims, unlike Dancos, sound in contract and
therefore lie within section .250. North Star argues that its
agreement with the department contains the necessary elements of
a contract, including a description of the services to be
provided, the conditions of payment, and an indemnity and hold
harmless provision. North Star asserts that both sides are
federally mandated to enter into the agreement16 and that the
right to sue for money owed originates with the agreement. It
consequently reasons that [t]he States failure to pay the full
rate required by the regulations and statutes incorporated into
the provider agreement constitutes a breach of contract.
Finally, North Star argues that courts in other jurisdictions
have deemed the Medicaid health care provider agreement a
contract.
The department responds that North Stars payment rate
claims are not contract claims. Alternatively, the department
asserts that it is irrelevant whether the provider agreement
between North Star and the department is a contract because our
decision in Danco prevented North Star from bringing an action
under section .250.
Danco involved a state lease sale in which Danco
Exploration, Inc. submitted a winning bid.17 After it was awarded
the leases, Danco missed a payment deadline by one day and
consequently was denied the leases. Danco appealed the
rescission to the commissioner of the Alaska Department of
Natural Resources (DNR) and later appealed the commissioners
decision to the superior court. The superior court reversed the
commissioners decision and ordered that the leases be issued to
Danco. Danco moved for an award of interest on its initial bid
deposit and on the balance of its bonus payment. The superior
court refused to award interest and Danco appealed.18
We reiterated what we had stated in Stewart & Grindle,
that only the legislature can authorize awards of interest
against the state and that [s]ection .280 only applies where AS
09.50.250 establishes a substantive cause of action.19 Danco
argued on appeal that its claims sounded in either tort or
contract, and therefore came within section .250.20
We noted that 11 AAC 02.010 provided the administrative
procedures through which a lease bidder could challenge a
decision of the DNR.21 We ultimately held that 11 AAC 02.010
appeals are not encompassed within AS 09.50.250. A party who
brings an appeal from a commissioners decision to the superior
court is bound by the result of such an appeal and may not
maintain a separate action under section .250.22
Danco controls here.23 With regard to waiver of
sovereign immunity under AS 09.50.250, we find no reason to
distinguish between the administrative procedures here and those
we reviewed in Danco. Accordingly, North Star could not have
maintained a section .250 action because its remedy was to pursue
the administrative procedure provided in 7 AAC 43.703 and .704;
this procedure required that North Star challenge the
commissioners denial by administrative appeal to the superior
court, and did not permit a separate action under section .250.
Although North Star refers us to cases from other jurisdictions
that allow prejudgment interest, our previous reading of AS
09.50.250 mandates our rejection of North Stars prejudgment
interest claims.
3. North Star has not demonstrated any other basis
for recovering prejudgment interest.
Alaska Statute 09.50.250 expressly permits one with a
contract claim against the state to bring an action in state
court, and claims under AS 44.77 may be brought under AS
09.50.250 if more than one year has elapsed without a
departmental decision after the claimant presents its AS 44.77
administrative claim.24
But North Stars disputes with the department about the
medical provider reimbursement rate were not contractual claims
and were not brought as contract actions in state court; they
concerned administrative rate-making and were brought as
administrative disputes. Because these rate challenges did not
lie within section .250, it does not matter, as North Star
argues, whether North Star had a contract with the state, whether
North Star exhausted administrative remedies, or whether its
claims can be characterized as ones for unjust enrichment. North
Star was required to bring its claims under AS 47.07. Alaska
Statute 47.07 does not itself award prejudgment interest and is
not listed in section .250s waiver of sovereign immunity.
Alaska Statute 09.50.250 does encompass some types of
claims medical services providers might bring. It provides that
A person who may present [a contract claim] under AS 44.77 may
not bring an action under [AS 09.50.250] except as set out in AS
44.77.040(c).25 Alaska Statute 44.77.040(c) permits a medical
services provider that contends that the department has not
decided within one year an administrative claim presented under
AS 44.77.010 to bring an action . . . under AS 09.50.250.26
Because section .250 contemplates such a claim and AS
44.77.040(c) expressly provides for it, a provider whose AS
44.77.010 administrative claim is undecided for more than one
year after it is submitted and who brings a successful action
against the state would be eligible to recover prejudgment
interest under AS 09.50.280. But that is not the type of claim
North Star has, and that is not how North Star proceeded here.
Instead, North Star challenged the payment rate determination
that the department made under AS 47.07.070. Likewise, it
brought its claims as administrative disputes in the Department
of Health and Social Services under 7 AAC 43.703 and not as a
superior court action under AS 44.77.040(c), or as claims to the
Department of Administration. North Stars claims were therefore
not ones as set out in AS 44.77.040(c), and were therefore not
within section .250.27
North Star understandably emphasizes the injustice and
inequity that will result if its interest claims are denied. It
also asserts that denial will encourage the department to drag
out these Medicaid rate appeals for as long as possible while the
state has the interest-free use of the funds. Our decision
insulates the department from prejudgment interest claims
resulting from delayed rate-making decisions, to the detriment of
service providers whose rate-making requests are delayed. But
such concerns are better addressed to the legislature, and do not
alter our reading of AS 09.50.250 and .280. Moreover, the
legislature provided a remedy for delay by establishing a
grievance reporting procedure under AS 47.07.075(b)(3).28 Its
adoption of this remedy implies that the legislature recognized
the possibility of delay, but chose to deal with it by adopting
the reporting procedure rather than permitting interest claims
against the state. We conclude that the legislature did not
intend prejudgment interest to be a remedy for delay.
IV. CONCLUSION
Because AS 09.50.250 does not apply to administrative
appeals brought under AS 47.07.070, we AFFIRM the superior court
decision that affirmed the departments denial of North Stars
prejudgment interest claims.
_______________________________
1 The department determines the rate at which health
service providers are reimbursed for services rendered to state
benefits recipients. AS 47.07.070 states, in part: (a) The
department shall set the prospective rate of payment to a health
facility under this chapter . . . based on a fair rate for
reasonable costs incurred by the facility.
2 To challenge payment rate determinations, providers may
request reconsideration of the rate by the executive director of
the Medicaid Rate Advisory Commission Staff under 7 AAC 43.701
(2002). Providers may file an administrative appeal to the
commissioner of the department under 7 AAC 43.703 (2002) to
challenge the executive directors determination in lieu of or
after the executive directors reconsideration. The commissioner
assigns the appeal to a hearing officer under 7 AAC 43.704 to
make a preliminary recommendation after conducting a hearing.
3 The parties, the department, and the superior court
have consistently referred to North Stars interest claim as one
for prejudgment interest. Although the administrative and
judicial procedure North Star followed here did not call for
entry of a judgment as that term is usually used, we will refer
here to North Stars interest claim as one for prejudgment
interest.
4 AS 09.50.250 states, in part:
A person or corporation having a contract,
quasi-contract, or tort claim against the
state may bring an action against the state
in a state court that has jurisdiction over
the claim. A person who may present the
claim under AS 44.77 may not bring an action
under this section except as set out in AS
44.77.040(c).
5 AS 09.50.280 states: If judgment is rendered for the
plaintiff, it shall be for the legal amount found due from the
state with interest as provided under AS 09.30.070 and without
punitive damages.
6 7 AAC 43.703 states, in part: (a) A party aggrieved by
a written determination of the executive director under 7 AAC
43.701(a) . . . may request reconsideration under 7 AAC 43.701(b)
or may file an administrative appeal to the commissioner.
7 7 AAC 43.704 provides the procedure by which the
commissioner assigns the administrative appeal to a hearing
officer; the hearing officer conducts a hearing; the hearing
officer proposes a decision; and the commissioner issues a
decision or refers the appeal back to the hearing officer.
8 924 P.2d 432 (Alaska 1996).
9 Judge Gleasons decision on rehearing stated:
North Star did not and could not have
maintained an independent contract action
under AS 09.50.250 regarding the Medicaid
ratemaking decisions of the Department of
Health and Social Services. Instead, health
care providers who dispute Medicaid rate
determinations must pursue administrative
procedures provided by [regulation],
including the right to judicial review. 7
AAC 43.703-704. The Alaska Supreme Court has
ruled in Danco that administrative appeals
are not encompassed within AS 09.50.250, and
therefore prejudgment interest is not
available under that statutory provision in
this administrative appeal. 924 P.2d at 434.
No other statutory provision authorizes an
award of prejudgment interest against the
State in administrative proceedings pursuant
to AS 47.07. The States sovereign immunity
can only be waived by the legislature, not
the court, and no waiver of the states
immunity with respect to the recovery of
prejudgment interest has occurred in this
administrative review proceeding.
(Footnotes omitted.)
10 Justice v. RMH Aero Logging, Inc., 42 P.3d 549, 552
(Alaska 2002).
11 Id. (internal quotation marks and citation omitted).
12 924 P.2d 432 (Alaska 1996).
13 Stewart & Grindle, Inc. v. State, 524 P.2d 1242, 1245
(Alaska 1974).
14 Id. (internal footnote omitted).
15 924 P.2d at 434.
16 42 C.F.R. 431.107(b) (2001) states, in part:
Agreements. A State plan must provide for an
agreement between the Medicaid agency and
each provider or organization furnishing
services under the plan in which the provider
or organization agrees to: (1) Keep any
records necessary to disclose the extent of
services the provider furnishes to
recipients; (2) On request, furnish to the
Medicaid agency, the Secretary, or the State
Medicaid fraud control unit . . . any
information maintained under paragraph (b)(1)
of this section and any information regarding
payments claimed by the provider for
furnishing services under the plan; (3)
Comply with the disclosure requirements
specified in part 445, subpart B of this
chapter; and (4) Comply with the advance
directives requirements for hospitals . . . .
17 924 P.2d at 433.
18 Id. at 433-34.
19 Id. at 434 (citing Stewart & Grindle, 524 P.2d at
1245).
20 We determined that [s]ince Danco did not purport to
bring this claim under section .250 its claim must be that it
could have done so, and that it would be unduly technical to deny
it interest based on a mere matter of form. Id.
21 Id. (citation omitted).
22 Id.
23 The department is correct that we did not need to
decide in Danco whether Danco and DNR had a contract. Similarly,
we need not decide whether North Star and the department had a
contract.
24 AS 09.50.250; AS 44.77.040(c).
25 AS 09.50.250.
26 AS 44.77.040(c) provides:
If the claimant does not accept the decision
of the Department of Administration, the
claimant may obtain judicial review of the
decision in accordance with AS 44.62.560 -
44.62.570. A claimant may also bring an
action under AS 09.50.250 - 09.50.300 at any
time after one year has elapsed since the
presentation of the claim under AS 44.77.010,
if no decision has been made by the
department.
27 In a footnote, the superior court remarked that North
Star could not rely on AS 44.77.040. The court correctly noted
that:
[Alaska Statute 44.77.040] does allow an
action under AS 09.50.250 with regard to
decisions of the Department of Administration
when that state agency has delayed making a
payment decision on a claim, including a
Medicaid claim, that had been presented to it
for over one year. . . . [T]hat statutory
provision is inapplicable to the review of a
different action by a different state agency
a Medicaid ratemaking determination by the
Department of Health and Social Services.
28 AS 47.07.075(b)(3) states in pertinent part:
[I]f either time limit set under (1) or (2)
of this subsection is not met, the department
shall report the noncompliance to the
legislature and the governor . . . with an
explanation of the length of delay, reasons
for the delay, and proposed corrective action
by the department to ameliorate the causes of
delay.
