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Athol Memorial Hospital v. Commissioner of the Division of Medical Assistance8/6/2002
enied any reimbursement for the treatment, including reimbursement at the lower outpatient rate. See 130áCode Mass. Regs. §á415.414(B) (2000). As of Octoberá1, 1998, the division began to allow reimbursement in such cases at the outpatient rate, provided that the services for which reimbursement was sought were medically appropriate.
From March 1, 1994, through Mayá31, 1999, MassPRO reviewed 81,627 inpatient admissions under the Medicaid program. It approved 74,090 (91%) and denied 7,537 (9%). On timely and adequate requests for reconsideration by the hospitals, see 130áCode Mass. Regs. §á450.211(C) (1997), MassPRO reviewed again 2,836 denials based on either medical necessity or billing errors, and overturned 721 (25%). From Marchá1, 1994, through Mayá31, 1999, 852 denials of reimbursement for inpatient admissions were appealed to the division's board of hearings. See 130áCode Mass. Regs. §§á450.241 etáseq. (1999). The board of hearings decided eleven appeals in favor of the hospitals, 184 were decided in favor of the division, and two were approved in part and denied in part. The remaining appeals were withdrawn either at, after, or prior to the hearing, or are pending. None of the cases decided in favor of the hospitals was decided on the ground that the regulations were invalid, although the record does not disclose if any of the prevailing hospitals raised that issue before the board of hearings.
At all relevant times, the regulation governing review of claims required the hospitals to pursue administrative remedies when challenging an adverse decision of the division before seeking judicial review in the Superior Court. With regard to the claims at issue here -- those for which the medically appropriate service had been provided on an inpatient basis, but for which reimbursement had been denied -- the hospitals did not exhaust the administrative remedies prescribed by the regulations.
2. Discussion.
The hospitals argue that they were not required to exhaust administrative remedies because (a)átheir claims were for breach of contract; (b)áthe question of the validity of the division's regulations is a question of law for the court to determine; and (c)áexhaustion would have been futile because the division refused to consider the legality of its own regulations.
(a) Breach of contract. The hospitals first contend that they were not subject to the requirements of G.áL. c.á30A, the statute providing for judicial review of decisions of State administrative agencies, and they were not required to exhaust administrative remedies because their claims did not assert errors in decisions made by an administrative agency, but rather breach of contract. Contract claims against a governmental agency may be brought in a judicial rather than an administrative forum if the agency involved does not have authorization to consider such claims. See Liability Investigative Fund Effort, Inc. v. Medical Malpractice Joint Underwriting Ass'n of Mass., 409 Mass. 734, 741-745 (1991); Warner Ins. Co. v. Commissioner of Ins., 406 Mass. 354, 360-361 (1990).
The provider contracts incorporate by reference the claims review regulations promulgated by the division. The regulations require the division to determine whether inpatient hospital services were medically necessary, to be eligible for payment under the Medicaid program. They specify in detail the procedure by which hospitals may obtain review of the denial of their claims. The regulations expressly require hospitals to exhaust their administrative remedies before seeking judicial review. The regulations were promulgated pursuant to legislative authority. General Laws c.á118E, §á38, states: "The division may al
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