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NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 a.m. on the morning of their release. The direct address of the court's home page is: http://www.courts.state.nh.us/supreme. THE SUPREME COURT OF NEW HAMPSHIRE ___________________________ Department of Health and Human Services No. 2005-473 PETITION OF MAXI DRUG, INC. & a. (New Hampshire Department of Health and Human Services) Argued: October 3, 2006 Opinion Issued: December 28, 2006 Cook & Molan, P.A., of Concord (Glenn R. Milner on the brief, and John S. Krupski orally), for the petitioners. Kelly A. Ayotte, attorney general (Suzanne M. Gorman, senior assistant attorney general, on the brief and orally), for the State. BRODERICK, C.J. The petitioners, a group of pharmacies and a pharmacy trade association (pharmacy providers), seek a writ of certiorari. They ask us to declare unlawful a program under which the New Hampshire Department of Health and Human Services (DHHS), acting as New Hampshire's Medicaid agency (and referred to variously as "NH Medicaid" or "NH Title XIX"), underpaid pharmacy providers for medical supplies and durable medical equipment (DME) they dispensed to Medicaid recipients as a way of recovering for prior claims DHHS had paid in full but for which Medicare was at least partially liable. We grant the petition. The following facts appear in the certified record: From October 1, 2001, through December 2002, the pharmacy providers dispensed medical supplies and DME to Medicaid recipients and submitted claims to DHHS. Those claims were submitted through a point-of-sale (POS) claim-processing system

maintained by First Health Services Corporation (First Health), under contract to DHHS. All the claims at issue were approved by First Health. The dispute involves claims that were submitted on behalf of Medicaid recipients who were also covered by Medicare, persons sometimes referred to as "dual eligibles." See Conn. Dept. of Social Services v. Leavitt, 428 F.3d 138, 141 (2d Cir. 2005). In a September 14, 2001 memorandum to pharmacy providers, First Health explained, among other things, that "[o]ther insurance must be billed first for all pharmacy claims . . . [and that] [c]laims for coordination of benefits where NH Medicaid is not the primary payer will be processed on-line." (Emphasis added.) That policy was repeated in an October 1, 2001 First Health memorandum to pharmacy providers. An October 23, 2001 First Health document titled "Program Particulars" noted: Most supplies may be submitted on-line. . . . Note: If the patient has Medicare coverage on the Day of Service, the provider must bill Medicare for (all) supplies. If during a subsequent audit, it is identified that Medicare was not billed, then New Hampshire Me[d]icaid will take action to recoup the reimbursement. The First Health on-line POS system did not include information that would allow pharmacy providers to determine whether a customer who was a Medicaid recipient was a dual eligible, and such information was not included on the Medicaid cards issued by DHHS. However, at all relevant times, DHHS's Office of Health Planning and Medicaid (OHPM) possessed sufficient information to determine whether the Medicaid recipients to whom the pharmacy providers dispensed medical supplies and DME were also covered by Medicare. A September 2002 "New Hampshire Medicaid Bulletin" reminded providers of an automated voice response (AVR) system that they could use to: (1) verify Medicaid eligibility by a recipient's NH Title XIX identification number; (2) verify recipient eligibility for specific dates of service; (3) obtain other insurance information; (4) obtain the correct spelling of a recipient's first and last names; and (5) obtain a recipient's date of birth. Regarding the relationship between the on-line POS system and the telephonic AVR system, a May 13, 1994 version of the "New Hampshire Medicaid Billing Manual" provided, in a section titled "Provider Responsibilities": You are asked to take reasonable measures to ascertain any third party resources available to the recipient. Verification may be done via the NH Medicaid ID Card through a Point of Sale device, personal computer interface, or by accessing the Automated Voice Response at EDS. NH Medicaid is the payor of last resort,

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therefore you are asked to bill any other third party resource(s) prior to submitting to NH Medicaid. (Emphasis added.) In a January 2003 memorandum, DHHS informed pharmacy providers that they would no longer be allowed to use the First Health POS system to submit claims for medical supplies or DME, and would be required to submit those claims "on either a HCFA 1500 form, or electronically as a crossover from the carrier." DHHS implemented the new procedure because, in its words, "some pharmacies have been billing the NH Title XIX Program, via the point-ofsale (POS) system, for medical supplies and DME which are covered under Medicare A and/or B." After explaining the change in procedure, DHHS noted that "[t]his is a temporary measure until system modifications are completed on the First Health claims processing system to allow for identification of NH Medicaid recipients who have Medicare A and/or B coverage." Finally, DHHS informed pharmacy providers that "[t]he Surveillance and Utilization Review Unit will be conducting an audit of medical supply and DME services billed by pharmacy providers [and that] [r]ecoupment will be initiated for all claims identified as those for which Medicare was not billed prior to the claim being submitted to NH Title XIX." (Emphasis omitted.) DHHS followed up in April 2003 with a letter from OHPM to pharmacy providers that referred to the January memorandum and asserted that "RSA 167:60, II, mandates repayment by a provider who has received notice of the overpayment and identification of the claims resulting in the overpayment" and that "[p]roviders who fail to repay identified overpayments may be suspended or terminated." (RSA 167:60 (2002) is part of a statutory subpart which, in April 2003, was titled "Medicaid Fraud," and which did not define the term "overpayment.") The letter then outlined the following procedure by which DHHS intended to recover the purported overpayments it made to pharmacy providers: Claims for medical supplies and/or DME which were submitted under your provider number and which were not first billed to Medicare are identified on the attached spreadsheet. No action is needed on your part to correct this identified overpayment. OHPM will begin the overpayment correction process in May 2003 by reversing all claims for medical supplies and DME which have been identified as having been billed to NH Title XIX before having been submitted to Medicare. You will see the reversed claims on your Remittance Advice (RA) beginning with checks dated May 9, 2003 and ending with checks dated May 23, 2003. Providers with an estimated recovery greater than $6,000.00 will have their claims recovered over the two pay cycles.

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You should submit the claims identified on the attached spreadsheet to Medicare, which will allow the claims to cross over to EDS for payment of co-pay/deductibles by NH Title XIX. As the Medicare time limit for claim filing is fifteen months after the end of the federal fiscal year, the claim filing deadline is December 31, 2003 for dates of service October 1, 2001 through September 30, 2002. The pharmacy providers did not submit claims to Medicare, as they were instructed, and DHHS carried out the recoupment procedure outlined in the letter. On October 13, 2004, the pharmacy providers petitioned for a declaratory ruling by the commissioner of DHHS, pursuant to RSA 541-A:1, V (1997) and New Hampshire Administrative Rules, He-C 209. Specifically, they sought declarations that: (1) DHHS's recoupment procedure violated federal and state law; (2) the monies DHHS recovered were owed to the petitioners; and (3) DHHS would not institute any similar recovery procedures in the future. When more than seven months passed without a ruling from the commissioner, the pharmacy providers requested a writ of certiorari from this court. The question presented for our review was: Whether it is illegal or unlawful for DHHS to withhold money it owes to Petitioners for valid Medicaid claims because DHHS believes that prior Medicaid claims were more appropriately billed to a third party, including Medicare, where federal law expressly requires that DHHS seek any such recoupment directly from the third party, including Medicare. In response to the request for certiorari, we ordered the commissioner to issue a declaratory ruling. When the commissioner did so, he declined to address the second and third issues raised in the petition. Regarding the first issue, he ruled that DHHS had the authority under federal law to undertake the recovery process outlined in its April 2003 letter. Specifically, he ruled that under 42 U.S.C.

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