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Mazzitti and Sullivan Counseling Services, Inc. v. Dep't of Public Welfare

IN THE COMMONWEALTH COURT OF PENNSYLVANIA


October 7, 2010

MAZZITTI AND SULLIVAN COUNSELING SERVICES, INC., PETITIONER
v.
DEPARTMENT OF PUBLIC WELFARE, RESPONDENT

The opinion of the court was delivered by: Senior Judge Kelley

Submitted: April 23, 2010

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE JAMES R. KELLEY, Senior Judge.

Mazzitti and Sullivan Counseling Services, Inc. (Mazzitti) petitions for review of a Final Order issued by the Secretary of the Department of Public Welfare (DPW). The Secretary's order upheld an order of the DPW's Bureau of Hearings and Appeals (BHA), which had adopted the Recommendation of a DPW Administrative Law Judge (ALJ) dismissing Mazzitti's claim for payment under the Pennsylvania Medical Assistance (MA) Program for outpatient mental health services that it had provided to children under 21 years of age. We affirm.

Mazzitti was established in 1983 offering outpatient drug and alcohol addiction treatment programs. Mazzitti has maintained its drug and alcohol treatment license with the Commonwealth since 1983.

In 1994, DPW added outpatient mental health services to children under 21 years of age such as Mobile Therapy (MT), Behavior Special Consultant (BSC), and Therapeutic Staff Support (TSS), also known as "wraparound services", to its fee schedule.*fn1 All enrolled providers in the MA program are given a provider type number. Only a qualified and enrolled Provider Type 50, and certain enrolled psychiatrists, licensed psychologists, and the like, could submit claims for payment to DPW for the provision of wraparound services.*fn2 However, a qualified and enrolled Provider Type 50 could subcontract for the provision of wraparound services.*fn3

In 1996, Mazzitti began working as a subcontractor with Meadows Psychiatric Clinic (Meadows), a qualified and enrolled Provider Type 50, for the provision of wraparound services. The agreement between Mazzitti and Meadows provided that Meadows would train Mazzitti's staff and supervisor and monitor their work, and pay Mazzitti 75% of what DPW paid to Meadows for its provision of wraparound services. However, a number of billing issues arose between Mazzitti and Meadows.

In 1997, Mazzitti's employee in charge of record-keeping resigned. As a result, Mazzitti hired Mona Olvera as a case manager. In addition, Olvera was the principal for Healthy Options, Inc. (Healthy Options). Olvera approached Mazzitti about working with her and Healthy Options for the provision and billing for wraparound services. Although Olvera represented to Mazzitti that Healthy Options had a Provider Type 50 "license" with DPW, Healthy Options was not an enrolled Provider Type 50 approved for the provision of wraparound services; rather, it was only enrolled and approved by DPW for the provision of case management services. Mazzitti did not contact DPW to determine whether Healthy Options could seek reimbursement from DPW as an enrolled Type 50 provider for wraparound services.

Ultimately, on January 2, 1998, Mazzitti and Olvera entered into a subcontract agreement under which Mazzitti would provide wraparound services and Healthy Options would submit the billing to DPW for the services. Under the agreement, Mazzitti agreed to abide by DPW's rules and regulations, and Healthy Options agreed to pay Mazzitti 90% of what DPW paid to Healthy Options. Because Healthy Options had no billing department or staff, Mazzitti did the data entry and billing to DPW, and kept the billing records for Healthy Options, using software supplied by Olvera. Olvera instructed Mazzitti to use Healthy Options' Type 50 provider MA identification number (MAID) and group enrollment number when submitting the billing to DPW. Healthy Option and Mazzitti agreed that all checks and remittance advices received from DPW would be sent to Mazzitti.

In February of 1998, service descriptions were submitted to DPW under Healthy Options' name for MT and TSS services provided by Mazzitti. DPW's Office of Mental Health and Substance Abuse Services (OMHSAS) denied the service descriptions because Healthy Options was not a licensed mental health provider and did not qualify to provide wraparound services.

In April of 1998, service descriptions were submitted to DPW for MT and TSS services under the name of Ivonne Acrich, M.D., a psychiatrist employed by Mazzitti. OMHSAS approved these service descriptions.

In 1998 and 1999, additional service descriptions were submitted to DPW for MT, TSS and BSC services under the names of five psychologists who worked for Mazzitti, including John Ramos. These service descriptions were approved by OMHSAS.

On June 2, 1998, Olvera called DPW's Bureau of Quality Management and Program Integrity (BPI) to inquire into why claims for payment were being denied. During the course of the telephone call, BPI became aware that Healthy Options was submitting claims under its MAID for unauthorized wraparound services. On June 5, 1998, BPI sent a letter to Healthy Options advising that it was improper for Healthy Options to submit billing for wraparound services, that Healthy Options must cease such billing, and that BPI was going to initiate a review of Healthy Options' billing to DPW.

After the June 5, 1998 letter, claims for wraparound services were no longer submitted to DPW under Healthy Options' MAID number. Rather, Olvera instructed Mazzitti to use Dr. Acrich's MAID number as Dr. Acrich was an authorized provider of wraparound services. In addition, Olvera instructed Mazzitti to resubmit certain denied TSS service claims using Dr. Acrich's MAID number, and to resubmit certain denied BSC service claims using Mr. Ramos's MAID number.

However, Dr. Acrich did not provide wraparound services, did not supervise the wraparound program, and did not provide clinical oversight of the wraparound program. Moreover, Mazzitti resubmitted these claims to DPW using Dr. Acrich's MAID number knowing that Dr. Acrich did not provide MT, BSC, or TSS wraparound services.

BPI initiated a review to determine if Healthy Options would be required to reimburse DPW for its prior improper billing for wraparound services. BPI also reviewed Meadows' and Dr. Acrich's billing histories because they had submitted claims for recipients for whom Healthy Option's MAID number had been used to submit claims. By letter dated December 14, 1998, DPW notified Healthy Options that Dr. Acrich could only bill for services described and rendered in the service descriptions submitted to OMHSAS, and not for services provided by Healthy Options.

By letters dated January 5, 1999, BPI requested medical records and other documents from Healthy Options, Olvera, Dr. Acrich, and Meadows, and a number of documents were submitted in response to the request. In addition, although Mazzitti knew that Healthy Options was being audited, Mazzitti did not seek an explanation of the nature of the audit from Olvera. Moreover, Mazzitti did not contact DPW regarding the Healthy Options audit. Finally, during this time, the relationship between Mazzitti and Olvera began to deteriorate, and Olvera had an altercation with one of Mazzitti's partners.

In February of 1999, Dr. Acrich received an IRS Form 1099 for wraparound service fees that had been paid by DPW to her, but that she had never received. In addition, checks and bills started coming to Mazzitti from DPW with Dr. Acrich's and Healthy Options' names on them. Although Mazzitti held onto the checks, Mazzitti did not contact DPW regarding the checks assuming that it was a problem that Olvera had to work out with DPW.

By letter dated May 3, 1999, Mazzitti gave Healthy Options a 30-day notice that it was terminating their contract. On May 5, 1999, Mazzitti notified Olvera that she was not to conduct any Healthy Options business at its facilities. Mazzitti continued to accept new MA recipients and to provide wraparound services even though it had severed its ties with Healthy Options, and knew that it did not have a license and could not bill DPW for these services. In addition, even though Mazzitti was aware that Dr. Acrich was not providing wraparound services, it continued to use Dr. Acrich's MAID number to submit claims for payment to DPW in June of 1999 for services that it had provided in May of 1999.

On May 27, 1999, BPI was notified by the Medicaid Fraud Unit of the Attorney General's Office that it had initiated a criminal investigation into the matter and that BPI had to cease its investigation. Mazzitti became aware of the criminal investigation in early June of 1999. Mazzitti continued to provide wraparound services even after it became aware of the criminal investigation. Mazzitti was hoping that it could enter into another subcontracting arrangement with another enrolled Type 50 provider and that it would be able to submit claims for these wraparound services.

In June of 1999, officials from the Medicaid Fraud Unit and BPI interviewed Dr. Acrich. Dr. Acrich stated that her MAID number had been used for billing purposes, unbeknownst to her, for wraparound services that she had not provided or supervised.

In December of 1999, Olvera committed suicide. As a result, BPI ended its review of Healthy Options, and determined to not seek reimbursement from her estate for MA payments that had been made.

Up to March of 1999, after which Mazzitti began holding the checks sent by DPW, Healthy Options paid Mazzitti 90% of the amount that DPW had paid for wraparound services that were improperly billed and that had not been provided by an enrolled provider. In total, approximately $203,449.00 was paid by DPW for claims submitted under Dr. Acrich's MAID number, and $61,862.75 was paid by DPW for claims submitted under Healthy Options' Type 50 provider MAID number. Mazzitti did not reimburse DPW for any of the money paid by Healthy Options.

On July 30, 2001, Mazzitti initiated the instant action in the Board of Claims (Board). In this case, Mazzitti is seeking the payment of $121,090.00 from DPW, comprised of a payment totaling $99,661.00 for the checks that were sent by DPW but that were held by Mazzitti, and a payment totaling $21,429.00 for wraparound services that it had provided after it had terminated its agreement with Healthy Options. In the complaint filed with the Board, Mazzitti sought payment from DPW in the foregoing amounts under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel.

In May of 2005, a hearing was conducted before the Board. However, on February 6, 2006, the Board transferred the matter to DPW's BHA in accordance with the Pennsylvania Supreme Court's decision in Department of Public Welfare v. Presbyterian Medical Center of Oakmont, 583 Pa. 336, 877 A.2d 419 (2005).*fn4

On July 10, 2007, the parties agreed to submit the matter to the BHA based upon the record created before the Board. On January 23, 2009, the ALJ issued a Recommendation that Mazzitti's claim for payment be denied. On January 30, 2009, the BHA issued an order adopting the ALJ's Recommendation. On February 27, 2009, the Secretary issued an order granting Mazzitti's motion for reconsideration. However, on August 14, 2009, the Secretary issued a Final Order upholding the BHA's order adopting the ALJ's Recommendation denying Mazzitti's claim for payment. Mazzitti then filed the instant appeal.*fn5

In this appeal, Mazzitti claims*fn6 that the Secretary erred in upholding the BHA's order because: (1) BHA erred in determining that it is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel; and (2) BHA's determination that it is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel is not supported by substantial evidence.

Mazzitti first claims that the Secretary erred in upholding the BHA's order because BHA erred in determining that it is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel. We do not agree.

It is well settled that "[a] court may deprive a party of equitable relief where, to the detriment of the other party, the party applying for such relief is guilty of bad conduct relating to the matter at issue. The doctrine of unclean hands*fn7 requires that one seeking equity act fairly and without fraud or deceit as to the controversy in issue.." Terraciano v. Department of Transportation, 562 Pa. 60, 69, 753 A.2d 233, 237-238 (2000) (citations omitted). As the Pennsylvania Supreme Court has noted:

[T]he doctrine of unclean hands is far more than a mere banality. It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant. That doctrine is rooted in the historical concept of court of equity as a vehicle for affirmatively enforcing the requirements of conscience and good faith.. Thus while 'equity does not demand that its suitors shall have led blameless lives' . as to other matters, it does require that they shall have acted fairly and without fraud or deceit as to the controversy in issue..

Shapiro v. Shapiro , 415 Pa. 503, 506-507, 204 A.2d 266, 268 (1964) quoting Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co. , 324 U.S. 806, 814-15 [(1945)].

Jacobs v. Halloran, 551 Pa. 350, 359-360, 710 A.2d 1098, 1103 (1998).

As noted above, it was found as fact in this case that Mazzitti submitted claims to DPW for reimbursement using Dr. Acrich's MAID number for wraparound services, and resubmitted denied claims under her MAID number for wraparound services, knowing that she did not provide wraparound services. These findings are amply supported by the certified record in this case.*fn8

Moreover, this type of fraudulent billing is specifically prohibited by the Code. In particular, Section 1407(a)(7) of the Code states that "[i]t shall be unlawful for any person to . [s]ubmit a claim which misrepresents . the identity of the attending, prescribing or referring practitioner; or the identity of the actual provider." 62 P.S. § 1407(a)(7).*fn9

Thus, Mazzitti's direct and complicit conduct in the execution of this fraudulent billing scheme, which directly relates to the payment for the provision of wraparound service that Mazzitti now seeks, compels the application of the doctrine of unclean hands and precludes the grant of such relief under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel. See, e.g., Jacobs, 551 Pa. at 360, 710 A.2d at 1103-1104 ("Fyffe-McFadden's dishonesty regarding the identity of the driver of the vehicle constitutes bad faith which is directly relevant to the delay in prosecution from which she seeks relief. To allow her to benefit from a delay in which she in part created is inequitable and will not be permitted.") (footnotes omitted).*fn10 As a result, the Secretary did not err in upholding the BHA's order because BHA did not err in determining that Mazzitti is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel, and Mazzitti's assertion to the contrary is patently without merit.

Finally, Mazzitti claims that the Secretary erred in upholding the BHA's order because BHA's determination that it is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel is not supported by substantial evidence. Again, we do not agree.

As noted above, it was found as fact in this case that Mazzitti submitted claims to DPW for reimbursement using Dr. Acrich's MAID number for wraparound services, and resubmitted denied claims under her MAID number for wraparound services, knowing that she did not provide wraparound services. In addition, as outlined above, these findings are amply supported by the certified record in this case. See RR at 23-24, 57-58, 62-63, 64, 68, 80-81.

We have previously noted that "substantial evidence" is evidence which outweighs inconsistent evidence and which a reasonable person would accept as adequate to support a conclusion. Gray. Also, it is within the discretion of the fact-finder to make credibility determinations and these determinations will not be disturbed on appeal. Id.

As the factual determinations in this matter are supported by substantial evidence, they will not be disturbed by this Court in this appeal. Gray. In addition, these findings amply support the Secretary's Final Order upholding the BHA's determination that Mazzitti is not entitled to payment under the alternate equitable theories of quantum meruit, unjust enrichment and equitable estoppel. See Jacobs.

Accordingly, the Secretary's Final Order is affirmed.

Judge McCullough concurs in the result only.

ORDER

AND NOW, this 7th day of October, 2010, the Final Order of the Secretary of the Department of Public Welfare, dated August 14, 2009 at No. 94-06-044M, is AFFIRMED.

JAMES R. KELLEY, Senior Judge


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