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SSI Medical Services, Inc. v. State

September 14, 1995


On appeal from the New Jersey Division of Medical Assistance and Health Services.

Approved for Publication September 14, 1995

Before Judges Michels, Stern and Humphreys. The opinion of the court was delivered by Humphreys, J.s.c. (temporarily assigned).

The opinion of the court was delivered by: Humphreys

The New Jersey Division of Medical Assistance and Health Services ("DMAHS") has a policy of requiring a higher standard of proof of the timely filing of a Medicaid claim than would be required in "general business practice." The Acting Director of DMAHS applied that policy and rejected a recommendation by Jaynee LaVecchia, Chief Administrative Law Judge ("CALJ"), that certain claims of plaintiff SSI Medical Services, Inc. ("SSI") be allowed. The Acting Director followed the recommendation of the CALJ that other claims of plaintiff be rejected. Plaintiff appeals the Acting Director's decision.

After a thorough review of the record and the briefs and arguments of counsel, we agree with the findings and recommendations of the CALJ in her comprehensive and well stated written opinion of March 24, 1994. We specifically do not agree with the DMAHS's policy of requiring a higher standard of proof. We add the following with respect to the claims which the CALJ recommended be allowed.


The issue in this case is whether plaintiff submitted the claims in a timely manner. The CALJ, after hearing the witnesses and reviewing the evidence, found that the claims listed in Attachment A to her opinion had not been timely submitted because there had been no timely follow up inquiry by plaintiff. The CALJ found that the claims listed in Attachment B to her opinion should be allowed. Plaintiff had made a timely inquiry with respect to the Attachment B claims.

The Acting Director stated:

The Director REVERSES the recommended decision on the Attachment-B claims because he disagrees with the Chief ALJ's findings and Conclusions for two reasons.

The first reason is that the policy of the New Jersey Medicaid program has been that a provider of service must present "documentary evidence of filing" of the claims with the fiscal agent, Jewish Hospital and Rehabilitation Center v. DMAHS, 92 N.J.A.R. 2d (DMA) 53, 58 (1992). As indicated in the holding of the above-cited case, this Division has historically required a higher standard for proof of timely filing of a claim than the general business practice with regard to processing and mailing set-forth in the line of cases on which the Chief ALJ relied in reaching her decision.

The reason for requiring a higher standard of proof concerning the timely filing of a Medicaid claim is two-fold. The first reason, which is not an issue in this case, is to protect the integrity of the Medicaid program which pays providers of service millions of dollars in both State and Federal funds. The second reason, which is in issue in this case, is to avoid a disallowance of the federal share of the Medicaid payments because a claim was not filed within twelve months from the date of service (42 CFR 447.45(d)) and to comply with the State legislative mandate set-forth in N.J.S.A. 30:4D-7, that the Commissioner maximize federal funding.

The Director also rejects the Chief ALJ's recommendation to process the Attachment-B claims for payment because the Petitioner's proofs do not satisfy the requirements to create the presumption of receipt as set-forth in the line of cases relied on by the Chief ALJ.

The Acting Director also concluded that ample proof had been presented to rebut any presumption of receipt. In addition, he said that contrary to the CALJ's finding, a claimant had only one year, not one year and ninety days to submit a claim. Finally, he concluded that the evidence was not sufficient to support a Conclusion that the "Medicaid claims processing unit at Prudential was a 'black hole' that routinely lost claims."


We do not agree with the Acting Director that a Medicaid claimant must meet a higher standard of proof. We are mindful that public money is involved and care must be taken to protect against corruption, fraud and improvidence. However, there is no indication in this record of any corruption, fraud or improvidence. The Acting Director admitted in his opinion that the integrity of the Medicaid Program is not in issue here.

Those who have valid claims against the government ordinarily need not bear a heavier burden in proving those claims than claimants against private parties. Justice Holmes' oft quoted statement that "men must turn square corners when they deal with the Government," Rock Island, A. & L.R. Co. v. United States, 254 U.S. 141, 143, 41 S. Ct. 55, 56, 65 L. Ed. 188, 189 (1920), has in recent times been transformed into "in dealing with the public, government must 'turn square corners.'" F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426, 495 A.2d 1313 (1985) (citation omitted). Furthermore, in dealings with the public, government may not "exploit litigational or bargaining advantages that might otherwise be available to private citizens." W.V. Pangborne & Co. v. New Jersey Dep't of Transp., 116 N.J. 543, 561, 562 A.2d 222 (1989). Government must also "adhere to strict standards in its contractual dealings." Id. at 562. The DMAHS's "policy" that those who submit claims to it must adhere to a higher standard of proof does not conform to modern concepts of the duty of government to the public which it serves.

The DMAHS's policy is also contrary to the general rule that the traditional preponderance of the evidence standard applies to the vast majority of administrative agency matters. 2 Davis & Pierce, Administrative Law Treatise § 10.7 (3d ed. 1994); Fairfax Hospital Ass'n, Inc. v. Califano, 585 F.2d 602, 611-12 (4th Cir. 1978). See also Bender v. Clark, 744 F.2d 1424 (10th Cir. 1984) (Government's interest in implementing congressional leasing policy on federal lands did not warrant placing a higher burden of proof on a challenger to a government determination regarding that land). Exceptions are those rare cases in which the Constitution or a statute requires a higher standard. See Administrative Law Treatise, (supra) , at § 10.7. No such constitutional or statutory requirement is present here. Nor has the agency implemented its policy by adopting a rule or regulation thereby giving fair notice of its policy to those who file claims with it. See Metromedia, Inc. v. Director, Div. of Taxation, 97 N.J. 313, 331, 478 A.2d 742 (1984) (general administrative polices should be implemented by rules, not individual adjudications).

Furthermore, we understand from oral argument that federal funding will not be jeopardized if we uphold the plaintiff's claims. A Medicaid agency is permitted to "make payments at any time in accordance with a court order, to carry out hearing decisions or agency corrective actions taken to resolve a dispute. . . ." 42 C.F.R. § 447.45(d)(4)(iv) (1990).

Thus, resolution of the factual issues here must be governed by the usual standards of proof. If the proofs establish by a preponderance of the evidence that plaintiff submitted these claims in a timely fashion, then the claims should be processed for payment.


The CALJ conducted a plenary hearing. In her written opinion of March 24, 1994, she made a thorough analysis of the testimony and documentary evidence. She concluded that SSI mailed the claims to Prudential and that the mailing raised a presumption of receipt.

The evidence clearly merited the CALJ's finding that the claim forms in question were mailed by plaintiff to Prudential. The following evidence was presented by testimony and affidavits. The Medicaid claim forms were prepared by Renee Mills, an employee of plaintiff. Photocopies of the forms were made for plaintiff's files and the originals placed in a pile for submission to the fiscal agent of DMAHS. After some fifty to seventy-five forms were collected, Ms. Mills personally addressed the mailing envelopes. She included plaintiff's return address and the address for delivery. The forms were then deposited in plaintiff's mail baskets. Plaintiff's mail room clerks were instructed to collect mail from each of the mail baskets on a daily basis. Once collected, the individual pieces of mail were stamped with the appropriate amount of postage using plaintiff's postage meter. Each envelope was then placed in a bin obtained by plaintiff from the U.S. Postal Service. Every weekday, other than federal ...

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