MassHealth’s Uncivil Action

Peter Martin, Esq.

How long may a person wait to bring a legal claim against another? for some especially egregious acts, such as the sexual abuse of a minor, Massachusetts law says 35 years. A civil action must be brought against the Commonwealth for the actions of a public employee within three years after the cause of action accrues. What about actions instituted by the Commonwealth against its citizens? How about forever?

This was the issue addressed in a recent Supreme Judicial Court decision involving a MassHealth recoupment claim asserted against a home health agency. In 2005, MassHealth sent an audit notice to the Suburban Home Health Care agency but did not initiate recovery proceedings against the agency until 2016. According to the agency, in early 2006, MassHealth’s audit contractor advised the agency the audit did not disclose any issues. Nothing further happened until late 2016 when MassHealth issued to the agency an initial determination of overpayment of over $95,000. After the agency responded to MassHealth’s new audit contactor, the agency did not hear from MassHealth until September of 2019, when it received a final determination of overpayment of approximately $75,000. Shortly thereafter, the agency filed for an adjudicatory hearing with the MassHealth board of hearings.

At the same time, the agency filed suit against MassHealth, alleging MassHealth ought to be held to the six-year statute of limitations that applies to legal actions relating to contract disputes. MassHealth responded in part by arguing that since an overpayment recoupment procedure was not an “action” and the contractual statute of limitation applies only to “actions,” no statute of limitations of any length constrains MassHealth from pursuing providers for overpaid services, no matter how much time has elapsed since those services were rendered. At trial, the court ruled the agency failed to exhaust its administrative remedies, though it also found exhaustion was not required in this case, and the six-year contractual statute of limitations applied only to civil actions and not to administrative collection procedures. This case thus raises two legal issues: first, what exceptions apply to the general rule that prior to seeking judicial relief, the plaintiff must exhaust available administrative remedies; and second, is a MassHealth overpayment recovery procedure a kind of civil action to which the statute of limitations applies?

As to the first issue, the Court noted the rationale for the administrative exhaustion rule is to preserve the integrity of both the administrative and judicial processes, which allows the agency to apply its specialized expertise to the issue presented and preserves judicial resources. An exception to the rule may apply where the underlying facts are not in dispute so the issue posed is of a purely legal nature suitable for judicial resolution. An exception may apply also where the issue posed is one of wider public significance. The court ruled the exception applied to Suburban Home Health Care’s case because it did not dispute the overpayment determination or its factual basis, but solely MassHealth’s right to pursue recoupment, and because of the importance of the issue posed by the case.

Regarding the second issue, the Court evaluated MassHealth’s actions and concluded its cause of action against the agency accrued no later than 2005, when it sent the audit notice and received records from the agency. MassHealth then failed to follow up for over 10 years. The court also reviewed the purposes of statutes of limitation. Such statutes encourage litigants to commence actions while evidence and witnesses are available and before memories fade. Application of a statute of limitations to MassHealth recoupment procedures would serve those purposes, as well as aligning with MassHealth’s “financial incentive to detect and recover all overpayments as quickly as possible.” Next, the court noted Massachusetts does not have a specific statute of limitation applicable to MassHealth’s recoupment efforts and in that case the analysis turns to “the essential nature of the right” at issue. Given the relationship between providers and the Mass- Health program is governed by a provider agreement, the court concluded the essential nature of the right at issue was a contractual one, thereby justifying application of the six-year contractual statute of limitations to MassHealth recoupment proceedings.

The court rejected MassHealth’s contention that an overpayment recovery proceeding is not an “action” as used in the limitations statute and noted other administrative proceedings are subject to statutes of limitations. The court also noted when, in other cases, it determined that no statute of limitations was intended to apply, there was clear legislative guidance to that effect. MassHealth had argued that because the legislature had imposed a statute of limitations on proceedings involving other violations of MassHealth rules, its failure to do so with respect to MassHealth overpayment recoupment proceedings demonstrated a specific legislative intent not to so limit such proceedings. Normally, this is a compelling argument, but the court rejected it in part because “we discern no reason why the legislature would not want to impose a statute of limitations.” The court here, attributing to the legislature a state of mind founded on no specific factual findings, appears to be straining toward a desired outcome based not upon technical legal doctrine but common sense and fairness.

That conclusion is supported by the following passage, where the court addressed the obvious unfairness and impracticality of allowing an administrative agency to commence a proceeding long after the acts underlying that proceeding have taken place:

“We also are struck by the absurd consequences of Mass- Health’s argument. Taken to its logical conclusion, MassHealth’s argument would mean that no administrative proceeding would have a time deadline for commencement or conclusion unless the legislature expressly imposed a statute of limitations. Like Rip Van Winkle, an administrative agency could wake up 20 or even 100 years later and bring enforcement proceedings against a provider or other party doing business with the government. We do not believe that was the legislature’s intention.”

Sometimes, the court will note an absurdity resulting from legislation and conclude the best solution is to have the legislature fix the problem it created. Here, the court seems to have been swayed by the same sense of absurdity and unfairness health care providers often feel when they discern rules of procedure unfairly burden them but do not apply to government agencies. This decision, though it may not have been arrived at through the most exacting legal analysis, comes as a welcome relief to all health care providers. They will no longer be forever at risk of Mass- Health recoupment claims.