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Thomas v. Shewry

February 6, 2009


APPEAL from a judgment of the Superior Court of Sacramento County, Lloyd G. Connelly, Judge. Affirmed. (Super. Ct. No. 07CS01331).

The opinion of the court was delivered by: Davis, Acting P. J.


Plaintiff Pete Thomas, a podiatrist, filed this action for a writ of traditional mandate ordering defendant (who is the director of the Department of Health Care Services (DHCS)) to reconsider his application for reenrollment as a provider of Medi-Cal services without regard to his outstanding liability for an overpayment that a DHCS audit identified in July 1999 and that the DHCS caused to be entered summarily as a judgment in July 2002; in the alternative, he sought an order for the DHCS to provide him an opportunity to contest the audit determination on the merits. The trial court denied the petition. Plaintiff has filed a timely notice of appeal.

In his own words, plaintiff "is limiting his appeal only to the issue of whether . . . [the] DHCS'[s] failure to file a certificate in Orange County [his principal place of business] [to request a summary entry of judgment on the 1999 overpayment determination (Welf. & Inst. Code, § 14172)]*fn1 did not affect the enforceability of the July 1, 2002, [Sacramento County] Judgment [entered pursuant to section 14172]." We shall affirm.


The DHCS conducted on-site audits of plaintiff's records in November 1998 and May 1999 and an exit interview in May 1999. It then mailed a notice to plaintiff's attorney on July 28, 1999, (which counsel received the next day) of its determination that plaintiff owed reimbursement of $790,000 (all dollar amounts are rounded to the nearest $1,000) for overpayments to him under two different Medi-Cal provider numbers. This amount would be payable within 60 days from the July 28, 1999, notice unless plaintiff filed a request for a hearing within 30 days from receipt of the notice. However, plaintiff's attorney did not file a request for a hearing until September 1999.

In response to a second notice in April 2002 of the sum owing (plus interest) under one of the provider numbers, plaintiff's attorney initially asserted that there was a pending hearing on that sum, then asserted that plaintiff had filed a request for a hearing in September 1999 to which the DHCS had not responded. The DHCS subsequently filed a certificate on July 1, 2002, with the clerk of the Sacramento County Superior Court, attesting to a final 1999 administrative determination of an overpayment to plaintiff in the amount of $790,000 plus $112,000 in interest, from which plaintiff had not taken any appeal and which was within three years preceding the filing of the certificate. (§ 14172, subd. (a).)*fn2 A deputy clerk entered judgment on the same date. (Ibid.)

The petition alleged that plaintiff did not receive a notice of entry of this Sacramento County judgment and that the DHCS did not file a certificate of health care provider overpayment in Orange County (his principal place of business) as required under section 14172. Although the DHCS contested these allegations in its answer to the petition, the appellate appendix does not include any proof of service of the Sacramento County judgment or any certificate or judgment from Orange County, and the DFEH does not dispute these representations in its brief.

In May 2003, plaintiff's attorney again attempted to assert in a letter to the administrative appeals unit of the DHCS that the principal amount of $790,000 from 1999 was no longer due because the DHCS had failed to act on his September 1999 request for a hearing. The chief hearing officer of the DHCS responded that the DHCS had never received the request, but in any event it was untimely. However, he invited plaintiff to request a hearing to demonstrate good cause for an untimely request for a hearing on the merits of the 1999 determination.*fn3

In September 2003, plaintiff entered into a settlement agreement with the DHCS in connection with an accusation that had alleged improper billing practices. Plaintiff's status as a Medi-Cal provider had been suspended temporarily since 2000; he now agreed to the deactivation of his provider numbers for a minimum period of 34 months. At the end of this deactivation period, plaintiff could file an application for reenrollment as a Medi-Cal provider (in connection with which the DHCS could not consider any of the allegations of the accusation). The DHCS otherwise could base its decision on the application on "the circumstances existing at the time the application is submitted," without any "promises or representations regarding the . . . application being accepted" being made or implied under the settlement agreement. In accord with DHCS regulations, the settlement agreement included a provision that "All outstanding forms of indebtedness owed by the [plaintiff] to the [DHCS], including all audit overpayment liability, must be paid in full before the [DHCS] will accept and entertain a new Provider Application form from the [plaintiff]." (See 22 Cal. Code Regs., § 51000.50(a)(6).) Plaintiff alleged that he entered into the settlement agreement believing that the 1999 determination was not valid any longer.*fn4

Plaintiff filed his application for reenrollment in February 2007. The DHCS notified him in March 2007 that the application was incomplete; among the deficiencies were his failure to include documentation of "[debts] you owed to state health care programs that have not been paid in full and what arrangements have been made to fulfill the obligations." The notice specified that he must correct the deficiencies within 35 days. The DHCS does not have any record of any response to the notice, and accordingly notified him that by operation of law his application was denied as incomplete, and he had 60 days within which to appeal this determination. (See Welf. & Inst. Code, § 14043.65; 22 Cal. Code Regs., § 51000.50(d)(2), (f), (i).) The DHCS does not have any record of an appeal of the denial. Plaintiff filed the present petition in October 2007.

In its opposition to the petition, the chief of the audit division attested to the destruction of all documentation that supported the 1999 audit pursuant to the division's standard policies for document retention because the time to challenge the audit had long passed. Another DHCS employee attested to plaintiff's outstanding indebtedness to the DHCS as of December 2007, which was $1,461,000 (including an earlier audit from 1998) in principal and interest. Plaintiff had not entered into any voluntary repayment agreements as of that date.

In its ruling on the petition, the trial court noted the failure of plaintiff to file a timely administrative appeal either of the denial of his application for reenrollment, or the underlying 1999 obligation.*fn5 It also concluded that the 2002 Sacramento County judgment on the 1999 determination of overpayment was not invalid for the failure either to serve plaintiff with notice of its entry, or to obtain a second judgment in Orange County. Moreover, he had an independent ...

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