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Colwell v. Iowa Department of Human Services

Supreme Court of Iowa

February 8, 2019

ROBERT F. COLWELL JR., Appellee,
v.
IOWA DEPARTMENT OF HUMAN SERVICES, Appellant.

          Appeal from the Iowa District Court for Polk County, Arthur E. Gamble, Judge.

         An agency appeals an adverse judicial review decision by the district court.

          Thomas J. Miller, Attorney General, J. Bradley Horn and Gretchen Kraemer, Assistant Attorneys General, for appellant.

          Rebecca A. Brommel of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., for appellee.

          WIGGINS, JUSTICE.

         A managed care organization (MCO) denied reimbursement of claims submitted by a dentist who contracts with the MCO as a provider. The dentist sought review by the Iowa Department of Human Services (DHS) of the MCO's denials of reimbursement. DHS denied the dentist's requests for a state fair hearing, reasoning that the issue was a contract dispute between the MCO and the dentist and thus was not appealable to DHS under Iowa law. The dentist filed a petition for judicial review, challenging DHS's denials of his requests for state fair hearings. The district court agreed with the dentist and found DHS incorrectly interpreted Iowa Code section 249A.4(11) (2016).[1] The district court held Iowa law "allows and requires DHS to create a review mechanism for providers." The district court also held under Iowa Administrative Code rule 441-7.1 (2014), [2] the dentist had both an individual right and the right as a provider on behalf of his patients to be heard at a state fair hearing. Further, the district court held the dentist could seek reimbursement from his indigent patients for claims not covered or reimbursed by the MCO. Lastly, the district court found DHS must pay for the dentist's attorney fees because DHS's decision to deny a state fair hearing was "legally unsound, unreasonable and unsupported by substantial evidence." DHS appeals on all issues.

         On appeal, we find section 249A.4(11) does not require DHS to give the dentist a state fair hearing. However, we find the administrative rules do require DHS to give the dentist a state fair hearing. We also find the dentist may bill patients for services not covered or reimbursed by the MCO, but only to the extent as set forth in this opinion. Finally, we reverse the judgment of the district court awarding the dentist attorney fees under Iowa Code section 625.29(1).

         Therefore, we remand the case back to the district court to enter a judgment consistent with this opinion. After doing so, the district court shall remand the case back to DHS to provide a state fair hearing appeal to the dentist.

         I. Background Facts and Proceedings.

         In 2013, the Iowa legislature established the Iowa Health and Wellness Plan (the Plan), which expanded healthcare coverage for low-income, uninsured adults who were not previously eligible for Medicaid. See 2013 Iowa Acts ch. 138, div. XXXIII (codified at Iowa Code ch. 249N (2014)). The Plan includes coverage for certain dental benefits-i.e., the Dental Wellness Program. See id. § 170 (codified at Iowa Code § 249N.5(1) (2014)).

         Beginning in April 2014, DHS and Iowa Medicaid Enterprise (IME) entered into a series of amended contracts with Delta Dental of Iowa, establishing Delta Dental as an MCO for the dental benefits. As such, Delta Dental conducts all aspects of the implementation and ongoing management of the Dental Wellness Program, including processing claims and building a network of dentists to serve in the program.[3] Pursuant to the contract, DHS and IME make capitated payments to Delta Dental for Delta Dental's administration of the plan. These capitated payments are the total obligation of DHS with respect to the costs of dental care and services provided. Delta Dental is responsible for paying providers for all covered services rendered. In the event a payment is in dispute, the contract provides, "[Delta Dental] shall have a system in place for Enrollees and Providers acting upon their behalf, which includes a Grievance process, an Appeal Process, and access to the Agency's fair hearing system."

         Dr. Robert Colwell is a dentist practicing in Council Bluffs, Iowa, and Bellevue, Nebraska. Colwell became a participating dentist in Delta Dental's network in April 2014. At that time, he entered into a Participating Dentist's Dental Wellness Plan Agreement with Delta Dental, which incorporated the Delta Dental Wellness Plan Office Manual (Office Manual). Gretchen Hageman, government program director at Delta Dental, testified the documents Delta Dental uses with it its providers are approved by DHS. This includes the Office Manual that incorporates the state fair hearing appeal process.

         Colwell provided services to Plan participants until late 2014. He submitted claims to Delta Dental for the Plan patients, and Delta Dental denied reimbursement for a number of those claims in whole or in part for a lack of documentation and other errors.

         Shortly thereafter, in January 2015, Delta Dental terminated its provider agreements with Colwell and his associates. Colwell appealed, which ultimately led to a settlement agreement between the parties. The 2016 settlement agreement reinstated Colwell as a provider and allowed Colwell to seek an appeal for claims denied in whole or in part prior to January 2015, pursuant to the formal appeals process set forth in the 2016 Office Manual. Colwell appealed those denied claims.

         On October 12, 2016, Delta Dental issued two letters stating its final decisions on Colwell's appeals. Delta Dental upheld nearly all of its prior decisions denying claims Colwell submitted. On November 10, Delta Dental sent Colwell an addendum to the October 12 letters, stating, "You have the right to seek a state fair hearing with respect to the claims that were re-reviewed and disallowed. The state fair hearing process is outlined in the DWP Provider Manual." The DWP Provider Manual is the Office Manual incorporated in the Participating Dentist's Dental Wellness Plan Agreement with Delta Dental.

         Colwell sought a state fair hearing for the denied claims. In a letter to DHS, Colwell wrote, "We are making an appeal on behalf of . . . our patients, the enrollees." DHS declined to grant Colwell a state fair hearing, saying, "The issue you appealed is not an issue [DHS] can grant a hearing on. This appears to be a contract issue between Delta Dental and yourself." Colwell requested that DHS reconsider, stating he satisfied the criteria for which DHS could grant a state fair hearing for a provider. Again, DHS denied Colwell's request to reopen the appeal based on its conclusion this was a contract issue between Delta Dental and Colwell because Colwell's claims arose from the 2016 settlement agreement.

         The 2016 Office Manual, in effect at all times material to this action, states,

Covered Enrollees, and Participating Dentists acting on the behalf of a Covered Enrollee, have access to the Grievance System.
This system includes an Appeals and Complaint Process and access to the Iowa Department of Human Service's state fair hearing system.

         The Office Manual further states, "A Participating Dentist may request the hearing if the State permits the Participating Dentist to act as the Covered Enrollee's authorized representative." The terms of these provider contracts depend upon what the state allows.[4]

         Iowa Code section 249A.4(11) creates the review process mandated by federal law. It provides the DHS director "[s]hall provide an opportunity for a fair hearing . . . to an individual whose claim for medical assistance under this chapter is denied or is not acted upon with reasonable promptness." Iowa Code § 249A.4(11). DHS created chapter 7 to define the nature of the appeal rights. See Iowa Admin. Code r. 441-7. Rule 441-7.1 states in relevant part,

"Aggrieved person" means a person against whom the department has taken an adverse action. This includes a person who meets any of the following conditions:
7. For providers, a person or entity:
• Whose claim for payment or request for prior authorization of payment has been denied in whole or in part and who states that the denial was not made according to department policy. Providers of Medicaid services must accept reimbursement based on the department's methodology.
• Who has been notified that the managed care reconsideration process has been exhausted and who remains dissatisfied with the outcome.
• Who, as a managed care organization (MCO) provider or Iowa plan contractor when acting on behalf of a member, has a dispute regarding payment of claims.

Id. r. 441-7.1. Colwell sought judicial review, claiming he was entitled to a state fair hearing under the Code and the rules. The district court found Colwell was entitled to a state fair hearing under the Code and the rules. Colwell also sought a ruling that he could seek reimbursement from his indigent patients for claims not covered or reimbursed by Delta Dental. The district court found he could. Finally, the district court found DHS must pay for the dentist's attorney fees under Iowa Code section 625.29 because DHS's decision to deny a state fair hearing was "legally unsound, unreasonable and unsupported by substantial evidence." DHS appeals.

         II. Issues.

         DHS raises four issues in this appeal. First, whether Iowa Code section 249A.4(11) requires DHS to provide state fair hearings for providers. Second, whether Colwell has a right to a state fair hearing individually and on behalf of his patients under the rules. Third, whether Colwell may bill patients for services not covered or reimbursed by Delta Dental. Fourth, whether Colwell is entitled to an award of attorney fees.

         III. Standard of Review.

         Iowa Code section 17A.19 governs judicial review of agency action. Iowa Code § 17A.19. In a judicial review action on appeal, our job is to determine whether in applying the applicable standards of review under section 17A.19(10), we reach the same conclusions as the district court. Banilla Games, Inc. v. Iowa Dep't of Inspections & Appeals, 919 N.W.2d 6, 12 (Iowa 2018). The petitioner challenging agency action has the burden of demonstrating the prejudice and invalidity of the challenged agency action. Iowa Code § 17A.19(8)(a).

         The applicable standard of review depends upon the error asserted by the petitioner. Burton v. Hilltop Care Ctr., 813 N.W.2d 250, 256 (Iowa 2012). When the legislature has clearly vested interpretive authority with an agency, we defer to the agency's interpretation of the statutory language and reverse only when the agency's interpretation is "irrational, illogical, or wholly unjustifiable." Gartner v. Iowa Dep't of Pub. Health, 830 N.W.2d 335, 343 (Iowa 2013) (quoting NextEra Energy Res. LLC v. Iowa Utils. Bd., 815 N.W.2d 30, 37 (Iowa 2012)). However, when the legislature has not clearly vested interpretive authority with an agency, our standard of review is for errors of law. Id. "To determine whether an agency has been given authority to interpret statutory language, 'we carefully consider "the specific language the agency ...


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