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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Smart v. State, Dept of Health & Social Services (8/20/2010) sp-6502

Smart v. State, Dept of Health & Social Services (8/20/2010) sp-6502, 237 P3d 1010

     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,


KEIRSTEN SMART, on behalf of )
herself and all those similarly situated, ) Supreme Court No. S-13438
Appellant, ) Superior Court No. 3AN-07-09827 CI
v. ) O P I N I O N
STATE OF ALASKA, ) No. 6502 August 20, 2010
JACKSON, in her official capacity as )
Commissioner of the Department, )
in his official capacity as Deputy )
Commissioner of the Division, )
Appellees. )
Appeal    from     the
          Superior Court of the State of Alaska,  Third
          Judicial  District, Anchorage,  Sen  K.  Tan,

          Appearances:  James  J. Davis,  Jr.,  Goriune
          Dudukgian, and Ryan Fortson, Northern Justice
          Project, Anchorage, for Appellant.  Megan  R.
          Webb,  Assistant Attorney General, Anchorage,
          and  Daniel  S.  Sullivan, Attorney  General,
          Juneau, for Appellees.

          Before:   Carpeneti,  Chief  Justice,   Fabe,
          Winfree, Christen, and Stowers, Justices.

          FABE, Justice.
          The  State  of Alaska Department of Health  and  Social
Services  (DHSS) is authorized by regulation to use statistically
valid  sampling methodologies to calculate overpayments  made  to
providers  of Medicaid services who are subject to  audit.   DHSS
created a protocol that details its auditing methodology, and  an
independent  auditor used this protocol in the audit of  Medicaid
provider Keirsten Smart.  At the conclusion of the audit process,
DHSS sought to recoup overpayments made to Smart.  Smart did  not
appeal the final audit results or recoupment decision to DHSS but
instead  brought a lawsuit in superior court, alleging that  DHSS
violated her due process rights and that the protocol used in her
audit  should  have  been promulgated as a regulation  under  the
Alaska  Administrative Procedure Act (APA).  The  superior  court
dismissed  the  lawsuit,  concluding  that  Smarts  due   process
challenges  were  barred because she had failed  to  exhaust  her
administrative remedies and that the protocol did not  constitute
a regulation under the APA.
          Because DHSS failed as a matter of law to provide Smart
with adequate notice of its recoupment decision and her right  to
appeal,  we  remand the case with instructions that the  superior
court  order  DHSS  to  provide Smart an opportunity  to  request
administrative review of DHSSs recoupment decision.  We also take
this  opportunity to affirm the superior courts holding that  the
protocol does not constitute a regulation and therefore need  not
have been promulgated under the APA.
     A.   Medicaid Auditing Procedures
          As we recently explained:
          The Medicaid program is a cooperative federal-
          state  partnership under which  participating
          states   provide   federally-funded   medical
          services  to  needy  individuals.   A  states
          participation  in  the  Medicaid  program  is
          voluntary,  but  once  a  state  decides   to
          participate,  it  must  comply  with  federal
          statutory    and   regulatory   requirements.
          Alaska  participates in the Medicaid program,
          and  DHSS promulgated regulations in 7 Alaska
          Administrative Code (AAC) 43 to implement and
          administer it.[1]
          Federal  law  requires that states  receiving  Medicaid
funds   audit  payments  to  Medicaid  providers.2   The   Alaska
Legislature  enacted  a law in 2003 requiring  DHSS  to  annually
contract  for  independent audits of a statewide  sample  of  all
medical  assistance  providers in order to identify  overpayments
and  violations  of  criminal statutes.3  When  overpayments  are
identified,  DHSS must begin procedures to recoup the overpayment
amount.4   A  Medicaid provider that fails to refund overpayments
to  DHSS  is  subject  to sanctions, including  termination  from
participation in the Medicaid program.5
          In  2006 DHSS passed a regulation providing that it may
use statistically valid sampling methodologies to select Medicaid
claims  for review or audit and to calculate overpayment  amounts
          to providers.6  In promulgating this regulation under the APA,
DHSS  received  several comments asking it to  elaborate  on  the
meaning  of  statistically  valid  sampling  methodologies.    In
response,  DHSS  stated that the methodology is always  open  for
inspection  and  conforms to industry standards.   Providers  are
made aware of this at the beginning of the [auditing] process.
          During  discovery, DHSS provided Smart with a  protocol
governing  audits   (the  Protocol).  The  Protocol  details  how
auditors  are  to determine the universe of a Medicaid  providers
claims;  select  sample  claims  from  that  universe;  determine
overall overpayments to the provider based on overpayments in the
sample  claims (a process known as extrapolation);  and  validate
their procedures.
     B.   Audit of Keirsten Smart
          Smart  is a self-employed care coordinator who provides
medical  assistance  to Medicaid-eligible individuals  through  a
program   that   allows  individuals  who  would   otherwise   be
institutionalized to remain in their communities or their  homes.
In  order  to  receive  Medicaid payments from  DHSS,  Smart  was
required to sign an enrollment form in which she agreed to comply
with  all applicable review and audit regulations and regulations
relating  to recoupment/recovery of overpayment.  In  March  2006
DHSS informed Smart that she would be subject to an audit by  the
independent  auditor  Myers and Stauffer  LC,   who  communicated
directly with Smart the following month. Neither letter discussed
how   Smart   was  selected  for  an  audit  or  the  statistical
methodology  to  be  used.  The audit,  covering  the  period  of
April  1,  2004  through  March 31, 2005, included  474  Medicaid
claims resulting in payments by DHSS of $102,310.
          In  May  2007, based on documents that Smart submitted,
Myers   and  Stauffer  issued  preliminary  findings  identifying
overpayments in the amount of $1,040 among the sample  claims  it
reviewed.  Smart sent further documentation to Myers and Stauffer
explaining the Medicaid claims identified as overpayments  within
30 days of receiving this letter.  The firm then withdrew all but
one  finding  of  overpayment in the amount of $240.   Smart  had
refunded  the $240 payment in September 2006, early in the  audit
          On June 28, 2007, DHSS sent Smart a letter attaching  a
final  audit report that identified the period audited, the total
number  of  claims submitted during that period,  and  the  total
payment by DHSS; however, the letter did not explicitly state the
overpayment amount that DHSS intended to recoup or even that DHSS
intended  to  recoup money.  The letter informed Smart  that  she
could  appeal  the  results of the final audit  by  submitting  a
written  request  to  the commissioner of  DHSS  identifying  the
challenged  audit and the basis for the challenge  and  including
any documentation she wished the commissioner to consider.  Smart
did not appeal.
          The  attached final audit report, prepared by Myers and
Stauffer, found that based on a statistically valid extrapolation
of estimated Medicaid overpayments [in the amount of $240] . .  .
[the  t]otal extrapolated overpayments for the provider  for  the
time period April 1, 2004 to March 31, 2005 are $2,370.00.    The
          DHSS letter and final audit report did not include a copy of the
Protocol used by Myers and Stauffer.7  Rather, the report  stated
that  the  audit  was  conducted in accordance  with  attestation
standards  set  forth  in  Government  Auditing  Standards  (2003
Revision)  .  .  .  [and  t]he full text of  the  procedures  are
contained in the [DHSS] Medicaid Provider Payment Audit  Program.
The report also included a Statistical Report as an appendix that
provided  raw  numbers  from  the  audit  and  showed  the  basic
calculations that resulted in the extrapolated overpayment amount
multiplying the sample average overpayment per claim by the total
number of claims.
          On  August  6, 2007, DHSS sent Smart a letter demanding
payment  of $2,370 within 30 days of receipt of the letter.   The
letter  stated  that the assessment constituted  a  final  agency
decision and provided no opportunity for administrative review of
the recoupment decision.
     C.   Proceedings
          Smart  filed a putative class action complaint  against
DHSS  on  September  7,  2007, which she amended  several  months
later.   She asserted two claims.  First, she alleged  that  DHSS
violated  the  APA  by  failing  to  promulgate  its  method  for
conducting audits of Medicaid providers as a regulation and  that
the use of that method is therefore invalid.  Second, she alleged
that  DHSS  violates the due process rights of Medicaid providers
by  issuing  notices of recoupment decisions that do not  provide
the  factual and legal bases for the proposed recoupment  and  by
failing  to  afford providers a right to a hearing.  Among  other
forms of relief, Smart sought disgorgement of any funds DHSS  had
recouped  from  Medicaid  providers pursuant  to  the  challenged
          DHSS  moved  to  dismiss Smarts complaint,  or  in  the
alternative  for summary judgment, arguing that: (1) the  lawsuit
is  barred  by  Smarts  failure  to  exhaust  her  administrative
remedies;  (2) DHSS complied with the APA because its methodology
is  not  a  regulation subject to the APA; and (3) DHSS  did  not
violate  Smarts due process rights because it provided  her  with
notice  of  its audit procedures and regulations and  would  have
provided  her with a hearing had she appealed her audit  results.
Smart  filed  an opposition to the motion to dismiss  and  cross-
moved for summary judgment on her claims.
          The  superior court granted DHSSs motion to dismiss and
denied  Smarts cross-motion for summary judgment.  It found  that
DHSSs  auditing methodology did not constitute a regulation under
the APA and that, despite there being genuine questions regarding
the  adequacy  of DHSSs notice and appeals process, Smart  waived
her  right  to  raise  these issues by  failing  to  exhaust  her
administrative remedies.  Smart appeals.
          Whether  a  type of claim generally requires exhaustion
of  administrative remedies is a legal question that we review de
novo.8   We  review  for abuse of discretion a  determination  of
whether  a  plaintiff  exhausted those remedies  or  whether  the
failure  to  exhaust should be excused.9  If  a  court  finds  no
effective remedy is available, it will generally be an  abuse  of
          discretion to require exhaustion of remedies.10
          We   review   de   novo  questions  of  statutory   and
constitutional construction . . . , adopting the rule of law that
is  most  persuasive in light of precedent, reason, and policy.11
This  includes  whether an agencys notice and hearing  procedures
comply with due process12 and whether an agency action constitutes
a regulation that must be promulgated in compliance with the APA.13
     A.   DHSS  Provided Defective Notice To Smart And  Therefore
          Must  Provide  Her A New Opportunity To  Challenge  Its
          Recoupment Decision.
          Pursuant to 7 AAC 43.1490,14  Medicaid providers such as
Smart  were  able to appeal the findings of a final audit  and  a
determination of overpayment.  A two-paragraph notice  DHSS  sent
to  Smart referenced this regulation and informed Smart that  she
had  30 days in which to appeal the results of the attached final
audit  report.   Smart  did not file an appeal.   Instead,  after
receiving  a  letter from DHSS more than 30 days later  demanding
repayment of $2,370, she filed a lawsuit in superior court.
          DHSS  moved  to dismiss Smarts complaint on the  ground
that,  by  failing to file an appeal to the agency, she  had  not
properly  exhausted  her administrative remedies.   The  superior
court agreed in part, concluding that Smart was required to first
exhaust  her administrative remedies before filing an independent
[due  process] claim against DHSS.  It found that she had  failed
to  do  so  and  that the failure was not excused, and  therefore
declined  to  address  the  merits of  her  due  process  claims,
although it ruled on her APA claim.
          Where,    as   here,   a   regulation   provides    for
administrative review of an agency decision, a person  ordinarily
must  exhaust  such  administrative remedies before  bringing  an
action  in  superior court challenging the decision.15   We  have
noted  that  the basic purpose of the doctrine of  exhaustion  of
administrative remedies is to allow an administrative  agency  to
perform  functions  within  its special  competence   to  make  a
factual  record, to apply its expertise, and to correct  its  own
errors so as to moot judicial controversies. 16  By permitting an
agency  to correct its errors and a complainant to obtain  relief
without  judicial  intervention,  the  administrative  exhaustion
requirement  promotes both administrative autonomy  and  judicial
          The period during which a party may seek administrative
review  of an agency decision, and thereby exhaust administrative
remedies,  commences  once  the party has  sufficient  notice  to
challenge the decision.  To be adequate for this purpose,  notice
must  clearly identify the proposed agency action and the  partys
right  to  seek administrative relief.18  But to comply with  due
process, notice must also be reasonably calculated, under all the
circumstances,  to inform interested parties of action  affecting
their  property rights.19  As we have held in the similar context
of  recoupment  of  overpayment to foster  parents,  due  process
requires  notice of recoupment of overpayment to include specific
factual  reasons  and legal authority for the recoupment  and  []
also  inform  the  [recipients] of their  right  to  contest  the
          Smart  argues that DHSSs notice failed even to  apprise
her  of  how  much DHSS sought to recoup and was constitutionally
defective.   She  contends  that DHSSs notice  violated  her  due
process  rights  by failing to inform her of:  (1)  why  she  was
selected for the audit; (2) the methodology that was used for the
audit; and (3) how DHSS calculated its repayment demand.
          Smart  received  a total of six separate communications
from DHSS and Myers and Stauffer.  These communications failed to
provide  Smart with adequate and timely notice of DHSSs  proposed
recoupment  decision before Smarts right to appeal this  decision
had  expired.   The June 28, 2007 letter informed  Smart  of  her
right  to appeal within 30 days the results of the attached final
audit  report,  but  did  not  state  that  DHSS  had  reached  a
recoupment  decision  and  intended  to  recoup  an  extrapolated
overpayment  amount  of  $2,370.   The  five-page  audit   report
referenced  this  extrapolated amount  on  its  final  page,  but
nowhere  in the audit report, accompanying letter, or  any  prior
communication, did DHSS or Myers and Stauffer inform  Smart  that
she   would  be  responsible  for  an  extrapolated  rather  than
overpayment  amount.21   DHSSs  first  clear  statement  that  it
intended  to  recoup $2,370 from Smart came  in  a  letter  dated
August  6,  2007, after 30 days had passed.  The  letter,  titled
Smart  had  failed  to  timely appeal  her  audit  findings,  the
recoupment  decision constituted a final agency  decision.  Thus,
Smart  was  not clearly informed of DHSSs proposed recoupment  of
$2,370  before  her  right  to  seek  administrative  relief  had
          Moreover,  none  of  the  communications  included  the
statistical methodology used by the auditor and described in  the
Protocol.   For example, the communications did not  explain  how
the auditor defined the universe of claims, determined the sample
size,   verified   the  sampling  procedures,   or   extrapolated
overpayments to the universe.  The final audit report included an
appendix  disclosing the raw numbers and basic calculations  used
to  determine the total extrapolated overpayment amount  but  did
not explain these calculations in simple language.
          When  reviewed  in  their totality, the  communications
were  insufficient to permit Smart to challenge DHSSs  recoupment
decision.  DHSS failed to communicate to Smart in a timely manner
the amount it sought to recoup and whether this determination was
based  on  statistically  valid  sampling  methodologies.   As  a
result,   Smart   was  unable  to  challenge  DHSSs   overpayment
determination.  The burden on DHSS of correcting  this  defective
notice  and  complying with due process is  minimal:   DHSS  must
clearly state the calculated overpayment amount and the right  to
appeal in the same notice and attach the Protocol to the notice.22
By  doing  so,  Medicaid providers will be able  to  more  easily
understand  whether  the  recoupment is justified,  identify  the
specific facts in dispute, and resolve potential errors.23
          For the foregoing reasons, we hold that DHSSs notice to
Smart  did  not comply with due process and did not provide  even
the  minimal information necessary to commence the period  during
          which Smart could seek administrative review.  Smart now has the
information  to which she was entitled: she has been informed  of
the  intended recoupment amount in the final DHSS notice and  has
obtained  the  Protocol through discovery.24  Now  that  she  has
received  this  information,  DHSS  must  provide  her  with   an
opportunity  to challenge its recoupment decision.  We  therefore
remand  this  case  to  the superior court with  instructions  to
direct  DHSS  to  provide  Smart 30  days  in  which  to  request
administrative review of DHSSs recoupment decision.25
     B.   The  Protocol  Is Not A Regulation That  Needed  To  Be
          Promulgated Pursuant To The APA.
          We  address one additional issue that can be determined
as a matter of law and would not benefit from further development
at the administrative level.  Smart argues that the Protocol is a
regulation  and  that DHSS was required to comply  with  the  APA
process  for  adopting new regulations.  The  APA  lays  out  the
minimum  procedural requirements for the adoption, amendment,  or
repeal  of  administrative regulations, including notice  and  an
opportunity  for public comment on the proposed agency  action.26
The  APA is meant to reduce the risk of arbitrary application and
to inform the public of regulations.27  It is undisputed that DHSS
did  not promulgate the Protocol in compliance with the APA.  The
only  question is whether the Protocol constitutes  a  regulation
under  the  APA such that compliance was required.   If  it  does
constitute  a  regulation, as Smart argues, then the  failure  of
DHSS  to  satisfy the procedural requirements of  the  APA  would
render its implementation of the Protocol invalid.28
          Smart  argues that the Protocol is a regulation because
it   is   not  a  common-  sense  interpretation  of   the   term
statistically valid sampling methodologies, but rather involve[d]
a  number  of unpublicized, result-driving policy decisions  that
should have received public input and were unforeseeable even  by
a  highly  trained statistician.  DHSS responds that the Protocol
is merely the implementation of a policy decision and a formulaic
tool  used  by  the  auditor to calculate  a  Medicaid  providers
overpayment. DHSS also argues that the Protocol does  not  create
any  new  substantive  requirements, as  Medicaid  providers  are
already  required to retain and submit documentation upon request
and  return  overpayments.  We believe that DHSS has  the  better
          [T]he  legislature intended for the term regulation  to
encompass  a  variety of statements made by  agencies.29   Alaska
Statute 44.62.640(a)(3) defines regulation broadly as:
          every rule, regulation, order, or standard of
          general application . . . adopted by a  state
          agency  to  implement,  interpret,  or   make
          specific the law enforced or administered  by
          it,  .  .  .  includ[ing] manuals,  policies,
          instructions,    guides    to    enforcement,
          interpretive bulletins, interpretations,  and
          the  like,  that  have the effect  of  rules,
          orders,  regulations, or standards of general
          application  .  . . ; whether  a  regulation,
          regardless  of  name,  is  covered  by   this
          chapter depends in part on whether it affects
          the  public  or  is  used by  the  agency  in
          dealing with the public[.]
          Although the definition of regulation is broad, it does
not  encompass  every  routine, predictable interpretation  of  a
statute by an agency.30  Because [n]early every agency action  is
based,  implicitly  or  explicitly, on  an  interpretation  of  a
statute  or  regulation, subjecting every interpretation  to  the
procedural  requirements  of the APA  would  result  in  complete
ossification  of the regulatory state.31  Thus, in Alaska  Center
for   the   Environment  v.  State,  we  rejected  a   plaintiffs
characterization  of  the  Office  of  Management   and   Budgets
interpretation of the term major energy facility as a  regulation
that should have been promulgated pursuant to the APA.32  We held
that  it  was  not an APA regulation but merely  a  common  sense
interpretation  of a regulation according to its own  terms  that
imposed  no  new substantive requirements nor made existing  ones
any more specific.33
          DHSSs  interpretation of statistically  valid  sampling
methodologies,  like  the  Office  of  Management   and   Budgets
interpretation  of the term major energy facility,  is  a  common
sense  interpretation of a regulation.  While formulation of  the
Protocol  may  have  involved  policy  decisions,  Smarts  expert
conceded that the Protocol uses a formula [that] appears  in  all
statistics  books  to  calculate  the  appropriate  sample  size.
Furthermore, the method of calculating overpayments  outlined  in
the  Protocol does not impose any new substantive requirements.34
Pursuant to statute and DHSS regulations, Medicaid providers  are
required to keep records, provide them to auditors, and reimburse
overpayments   identified  in  audits.35   Finally,   given   the
requirement  that  DHSS use audit methods that are  statistically
valid,  we  do not believe there is a meaningful risk  that  DHSS
will  vary  its audit requirements at whim or based  on  improper
influences.36  Any such risk is mitigated by the disclosure of the
audit  methodology  to Medicaid providers subject  to  audit,  as
required by this opinion.
          We therefore hold that the Protocol is not a regulation
that  must  be  promulgated pursuant to the APA.  DHSSs  properly
promulgated regulation authorizing the use of statistically valid
sampling methodologies is sufficient.
          For  the  foregoing  reasons, we REVERSE  the  superior
courts  dismissal  of Smarts due process claims  for  failure  to
exhaust  administrative  remedies and REMAND  this  case  to  the
superior court with instructions to direct DHSS to provide  Smart
30  days in which to request review of DHSSs recoupment decision.
We AFFIRM the superior courts dismissal of Smarts APA claim.
     1     Hidden Heights Assisted Living, Inc. v. State, Dept of
Health  &  Soc. Servs., 222 P.3d 258, 261 (Alaska 2009)  (quoting
Garner  v.  State,  Dept of Health & Soc. Servs.,  Div.  of  Med.
Assistance, 63 P.3d 264, 268 (Alaska 2003)).

     2     See 42 U.S.C.  1396a(a)(42) (2009); 42 C.F.R.  447.202

     3     AS  47.05.200(a), adopted by ch.  66,   3,  SLA  2003.
Audit  is  defined  by  regulation as the  process  of  obtaining
competent   evidentiary  material  about   a   provider   through
inspection, observation, inquiry, and confirmation sufficient  to
support   a   reasonable  basis  for  determining  the  providers
compliance  with the legal requirements of the Medicaid  program.
7 AAC 160.110(i)(1).

     4    See AS 47.05.200(b).

     5    See 7 AAC 105.400(21); 7 AAC 105.410(a)(1).

     6     7  AAC 43.1470 (repealed 2010).  In February 2010 this
regulation was replaced by a nearly identical regulation found at
7 AAC 160.120.

     7    The final line of the Protocol provided to Smart during
discovery states: All of the above is provided to the provider in
the  final audit report so that the math and assumptions  can  be
tested.  This was not true in Smarts case.

     8     State,  Dept  of Revenue v. Andrade, 23  P.3d  58,  65
(Alaska 2001).

     9    Id.

     10    Hymes v. DeRamus, 222 P.3d 874, 883 (Alaska 2010).

     11     Pepper  v. Routh Crabtree, APC, 219 P.3d  1017,  1020
(Alaska 2009).

     12    Heitz v. State, Dept of Health & Soc. Servs., 215 P.3d
302, 305 (Alaska 2009).

     13     Alaska Ctr. for the Envt v. State, 80 P.3d  231,  243
(Alaska 2003).

     14     In  February 2010 this regulation was replaced  by  a
nearly identical regulation found at 7 AAC 160.130.

     15    Matanuska Elec. Assn, Inc. v. Chugach Elec. Assn, Inc.,
99  P.3d  553, 560 (Alaska 2004) (A party must generally  exhaust
administrative remedies before bringing an action challenging  an
agency  decision; this allows the agency to apply  its  expertise
and  correct  its own errors.); Mount Juneau Enters.  v.  City  &
Borough  of  Juneau, 923 P.2d 768, 777 (Alaska  1996)  (Since  an
administrative  appeal  is clearly provided  for,  exhaustion  of
remedies is required in this case.).

     16     Mount Juneau Enters., 923 P.2d at 776-77 (quoting Ben
Lomond,  Inc.  v. Municipality of Anchorage, 761  P.2d  119,  122
(Alaska 1988)).

     17    See State, Dept of Labor, Wage & Hour Div. v. Univ. of
Alaska,  664  P.2d  575,  581  (Alaska  1983)  (The  doctrine  of
exhaustion  of  administrative  remedies  is  an  expression   of
administrative   autonomy   and  a   rule   of   sound   judicial
administration. (citing B. Schwartz, Administrative Law  172,  at
498 (1976))); Eidelson v. Archer, 645 P.2d 171, 176 (Alaska 1982)
(A  complaining party may be successful in vindicating his rights
in  the administrative process.  If he is required to pursue  his
administrative remedies, the courts may never have to  intervene.
(quoting McKart v. United States, 395 U.S. 185, 194-95 (1969))).

     18     Cf. Alaska R. App. P. 602(a)(2) (stating that the 30-
day  time limit for appealing agency decisions to superior  court
does not begin to run until the agency has issued a decision that
clearly  states that it is a final decision and that the claimant
has  [30]  days  to appeal); 7 AAC 105.260(d), (f)(3)  (requiring
recoupment notice for overpayments other than those identified in
audits  to  include: (1) the reason for the recoupment;  (2)  the
amount  of  the overpayment that the department will recoup;  and
(3) notice of the providers right to an appeal).

     19     City  of Homer v. Campbell, 719 P.2d 683, 686 (Alaska
1986)  (citing  Mullane v. Cent. Hanover Bank & Trust,  339  U.S.
306, 314 (1950)).

     20    Heitz v. State, Dept of Health & Soc. Servs., 215 P.3d
302, 308 (Alaska 2009); see also Baker v. State, Dept of Health &
Soc. Servs., 191 P.3d 1005, 1009-13 (Alaska 2008).

     21     Smart had already refunded the one actual overpayment
identified  by  the  audit, in the amount of  $240,  long  before
receiving this letter from DHSS and thus had little incentive  to
challenge the final audit report.

     22     See  Baker,  191  P.3d at 1009-13 (holding  that  due
process  required  notice of reduction  of  authorized  hours  of
personal  care  attendant  services  to  include  the  form  that
provided the basis for calculating benefits).

     23     Heitz, 215 P.3d at 307; see also Allen v. State, Dept
of  Health & Soc. Servs., Div. of Pub. Assistance, 203 P.3d 1155,
1167-68 (Alaska 2009) (holding that adequate notice should  allow
its  recipient to assess whether or not the agencys  calculations
are accurate and to detect and challenge mistakes).

     24     It  would thus serve little purpose to order DHSS  to
reissue  due process-compliant notice to Smart and we decline  to
do  so.  Cf. Allen, 203 P.3d at 1169-70 (ordering agency,  if  it
wished  to  pursue  recoupment claim, to  issue  adequate  notice
showing how the claim was calculated).

     25     Smart  also  contends that DHSSs  failure  to  afford
audited  Medicaid  providers with a right  to  a  pre-deprivation
hearing violates due process.  According to DHSS, it has provided
such  hearings since 2008, when a superior court  determined that
pre-deprivation  hearings were required  by  due  process.    See
Muhlenbruch  v.  State, Dept of Health &  Soc.  Servs.,  Div.  of
Health Care Servs., No. 3AN-06-12098 CI (Alaska Super., Feb.  12,
2008).  DHSS did not appeal that ruling and concedes in its brief
that  it  is legally bound by the ruling.  DHSS further  suggests
that  Smarts audit would have been held in abeyance had she filed
an appeal of the final audit report and that she would eventually
have  been provided a hearing before the Office of Administrative
Hearing under DHSSs new procedures.  Because Smart did not appeal
her  final audit report, we do not know what process Smart  would
have  been  accorded  and  whether it would  have  satisfied  due
process.  As counsel for Smart conceded at oral argument, we need
not  address  the hearing issue given DHSSs representations.   If
Smart  on  remand  requests review of DHSSs recoupment  decision,
DHSS represents that she will be entitled to a hearing.

     26     AS  44.62.280.  Specifically, an agency must  provide
notice  of the proposed regulation, AS 44.62.190, hold  a  public
hearing at which interested persons may submit comments regarding
the  proposed  regulation, AS 44.62.210,  and  file  any  adopted
regulation  with  the  lieutenant  governor,  AS  44.62.040;  the
lieutenant  governor  must then publish  the  regulation  in  the
Alaska Administrative Register, AS 44.62.130.

     27     Squires  v. Alaska Bd. of Architects,  Engrs  &  Land
Surveyors, 205 P.3d 326, 335 (Alaska 2009).

     28     See  Jerrel v. State, Dept of Natural Res., 999  P.2d
138, 144 (Alaska 2000).

     29     Id. at 143 (citing Messerli v. Dept of Natural  Res.,
768 P.2d 1112, 1117 (Alaska 1989)).

     30     Alyeska Pipeline Serv. Co. v. State, Dept  of  Envtl.
Conservation, 145 P.3d 561, 573 (Alaska 2006).

     31    Id.

     32    80 P.3d 231, 243-44 (Alaska 2003).

     33    Id.

     34     Cf. Agency for Health Care Admin. v. Custom Mobility,
Inc.,  995  So. 2d 984, 986 (Fla. Dist. App. 2008)  (The  formula
[for  calculating overpayment] does not by its own effect  create
rights,  require  compliance, or have the direct  and  consistent
effect of law, because it is a mere formula and does not give the
service provider any rights, or require compliance.).

     35    See AS 47.05.200; 7 AAC 105.220-.240.

     36     Jerrel v. State, Dept of Natural Res., 999 P.2d  138,
144 (Alaska 2000).

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