(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued September 9, 1996 -- Decided November 20, 1996
HANDLER, J., writing for a unanimous Court.
In this appeal, the Court addresses the standard of proof required to demonstrate whether
reimbursement claims submitted by a medical provider under the Medicaid program were timely filed and
the sufficiency of the evidence under that standard.
New Jersey is a participant in the Medicaid program, which is administered by the Division of
Medical and Health Services (“DMAHS”). Under the program, medical providers are reimbursed for
treatment or equipment furnished to eligible individuals from the New Jersey Medicaid Program fund.
SSI Medical Services, Inc. (“SSI”), a provider of medical equipment, filed a notice of appeal with
the Office of Administrative Law in response to the denial of payment on disputed claims by the State's
fiscal agent, Unisys. At the hearing before the Chief Administrative Law Judge (“CALJ”), SSI claimed that
it mailed the reimbursement forms within the statutorily prescribed period. SSI submitted into evidence
photocopies of employee affidavits attesting to SSI's standard procedure for mailing of Medicaid claims.
The State submitted its computer printout of claims received during a one-year period showing no record of
timely receipt of SSI's claims.
The CALJ issued a written preliminary decision recommending payment on one-half of the claims,
finding that the evidence supported the conclusion that the claims were completed and mailed in accordance
with SSI's procedure and custom. The CALJ further ruled that SSI could rely only on the presumption of
proper mailing and receipt for a reasonable period of time. Because Medicaid regulations required the
submission of claims within twelve months of the provision of services and allowed inquiries into unsettled
claims no later than ninety days after the expiration of the twelve-month period, the CALJ recommended
payment only of those claims for which SSI had produced a copy of resubmitted billing mailed either within
the twelve-month period or within the additional ninety-day inquiry period.
The CALJ's decision was reviewed by the Acting Director of DMAHS, who disallowed payment of
both those claims for which there was no evidence of resubmission and those for which there was proof of
resubmission. The Acting Director rejected payment of even those claims for which there was evidence of
resubmission because SSI had failed to meet the “heightened standard of proof” historically required by the
Division to demonstrate proof of mailing. SSI appealed the Acting Director's decision.
The Appellate Division disapproved of the standard of proof required by the Acting Director to
demonstrate proof of mailing, finding that it was higher than the traditional preponderance of the evidence
standard generally applied in agency matters. The court held that proof of mailing could be established by
evidence of habit or routine practice and that the evidence presented by SSI fully supported the CALJ's
conclusion that the resubmitted claims were properly and duly mailed. The dissent concluded that the Acting
Director had not required a higher standard of proof than that ordinarily required of any litigant, considering
the applicable standard of proof for demonstrating proper mailing to require evidence that the office custom
was actually followed in a particular case. The dissent further noted that, even if the law were otherwise, it
would still defer to the standard applied by the Acting Director as the agency director charged with
interpreting and administering the law governing the agency.
Based on the dissent, the State filed an appeal as of right to the Supreme Court.
HELD: In the absence of any administrative rule or regulation to the contrary, the traditional preponderance
of the evidence standard applies to administrative agency matters. In order to raise a presumption of mailing
and receipt and meet the preponderance of the evidence standard, evidence of office custom requires other
corroboration that the custom was followed in a particular instance.
1. Ordinarily, courts have a limited role in reviewing the decision of an administrative agency, reversing only
if the agency decision is arbitrary, capricious or unreasonable. However an agency has no expertise to decide
purely legal issues, such as the standard of proof required to prove a particular claim. (pp. 6-7)
2. New Jersey cases have recognized a presumption that mail properly addressed, stamped, and posted was
received by the party to whom it was addressed. (pp. 7-8)
3. The evidence in this case supports the finding that SSI mailed the claims to DMAHS and that the
mailing raised a presumption of receipt. (pp. 9-11)
4. In all cases, courts should evaluate the nature and worth of the corroborative evidence offered to
determine whether it meets the preponderance of the evidence standard and raises a presumption of mailing
and receipt. (pp. 11-12)
5. The presumption of receipt derived from proof of mailing may be overcome by evidence that the notice
was never in fact received. (pp.12-13)
6. In proceedings before administrative agencies, the parties are not bound by the rules of evidence. If
DMAHS believes that a heightened standard of proof is necessary to maintain the integrity of the Medicaid
system, then it has the power to implement such a rule. (pp. 13-14)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and
COLEMAN join in JUSTICE HANDLER's opinion.
SUPREME COURT OF NEW JERSEY
A-
10 September Term 1996
SSI MEDICAL SERVICES, INC.,
Appellant-Respondent,
v.
STATE OF NEW JERSEY, DEPARTMENT OF
HUMAN SERVICES, DIVISION OF MEDICAL
ASSISTANCE AND HEALTH SERVICES,
Respondent-Appellant.
Argued September 9, 1996 -- Decided November 20, 1996
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at
284 N.J. Super. 184 (1995).
John K. Worthington, Deputy Attorney General,
argued the cause for appellant(Peter G.
Verniero, Attorney General of New Jersey,
attorney; Joseph L. Yannotti, Assistant
Attorney General of counsel).
William S. Greenberg argued the cause for
respondent (McCarter & English, attorneys;
Mary Ann Mullaney, on the brief).
The opinion of the Court was delivered by
HANDLER, J.
The State of New Jersey participates in the Medical
Assistance Program established under the Social Security Act.
Those who are eligible for benefits under the program receive
medical and health care from qualified "providers" of services.
Providers are reimbursed from the New Jersey Medicaid Program
fund.
In this case a provider under the program furnished medical
equipment to patients. The State approved certain reimbursement
claims submitted by the provider. However, it rejected other
claims on the grounds that the evidence did not demonstrate that
they had been filed within the time period required for the
submission of claims.
On appeal, the Appellate Division reversed the determination
of the State.
284 N.J. Super. 184 (1995). Based on a dissent,
the State filed an appeal as of right to this Court. The sole
issue in this case relates to the standard of proof required to
demonstrate whether reimbursement claims were timely filed and
the sufficiency of the evidence under that standard.
The Medical Assistance Program was established by Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 to 1396u. The Medicaid program is a federal-state cooperative program that is jointly funded by the state and federal governments. See N.J.S.A. 30:4D-2. The program enables participating states to furnish assistance to individuals whose economic resources are insufficient to meet the costs of necessary medical care. The Department of Human Services, through the Division of Medical and Health Services ("DMAHS"), is the state agency that administers the Medicaid program in New Jersey. N.J.S.A. 30:4D-5. Those who
are eligible for benefits under the program are given treatment,
care, or medical equipment from a qualified "provider" of
services. The provider is reimbursed, not by the patient-beneficiary but from the New Jersey Medicaid Program fund. The
State may then seek reimbursement from the federal government.
Plaintiff SSI Medical Services, Inc. ("SSI") is a qualified
provider. It provides therapeutic beds and other specialized
equipment to patients to assist them in their treatment of
recuperation from illness, generally at the request of a
physician. In November 1992, SSI filed a notice of appeal with
the Office of Administrative Law in response to the denial of
payment on the disputed claims by the State's fiscal agent,
Unisys, which, in November 1991, replaced Prudential Insurance
Co. ("Prudential") as DMAHS's fiscal agent. A hearing was held
before the Chief Administrative Law Judge ("CALJ"). SSI claimed
that it mailed the reimbursement forms within the statutorily
prescribed period. SSI submitted into evidence photocopies of
the disputed claims contained in patient files as well as
employee affidavits attesting to SSI's standard procedure for
mailing Medicaid claims. The State submitted its computer
printout of claims received between 1990 and 1991, demonstrating
no record of timely receipt of SSI's claims.
The CALJ issued a written preliminary decision recommending
payment on one-half of the claims. The CALJ found that the
evidence supported a conclusion that the claims were completed
and mailed in accordance with SSI's procedure and custom. The
CALJ was persuaded by the fact that the missing claims were
randomly dated, thereby indicating that the loss of claims was
random or sporadic rather than a loss attributable to an entire
batch of sequentially-dated claims.
The CALJ further ruled that SSI could rely only on the
presumption of proper mailing and receipt for a reasonable period
of time. Medicaid regulations require the submission of claims
within twelve months of the provision of services and allow
inquiries into unsettled claims no later than ninety days after
the expiration of the twelve-month period. See N.J.A.C. 10:49-7.2(c), (g). The CALJ then divided the claims into two groups:
those for which SSI had produced no evidence of resubmittal and
those for which SSI had produced a copy of resubmitted billing
mailed either within the twelve-month period for timely
submission of claims or within the additional ninety-day inquiry
period. For those claims in the former group, the CALJ concluded
that SSI had exceeded the bounds of reasonableness in relying on
the presumption of receipt and recommended rejection of the
claims. For the latter group of claims, the CALJ recommended
that those be treated as timely submitted.
The decision was reviewed by the Acting Director of DMAHS,
who affirmed the decision disallowing payment on the first group
of claims (those of which there was no evidence of resubmittal)
and reversed the decision allowing payment on the apparently
resubmitted claims. The Acting Director's stated reasons for
rejecting the claims are as follows:
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 [1
992 WL 279813] (1992). As
indicated in the holding of the above-cited
case, this Division has historically required
a higher standard of 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 at 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 Acting Director concluded that SSI failed to meet this
"heightened standard of proof." SSI appealed.
The Appellate Division found that the standard of proof
required by the Acting Director to demonstrate proof of mailing
is higher than the traditional preponderance of the evidence
standard generally applied in agency matters, and it disapproved
use of that higher standard. 284 N.J. Super. at 188. The court
held that proof of mailing could be established by evidence of
habit or routine practice and that the evidence presented by SSI
employees responsible for processing the disputed claims fully
supported the CALJ's conclusion that the resubmitted claims were
properly and duly mailed. Id. at 191. The dissent concluded
that the Acting Director had not required a higher standard of
proof than that ordinarily required of any litigant in a claim
against a private entity. Id. at 199, 200-01 (Michels, J.,
dissenting). Considering the applicable standard of proof for
demonstrating proper mailing, the dissent determined that under
common law evidence of office custom must be accompanied by
evidence that the custom was followed in the particular case.
Id. at 198-99. It further noted that were the law otherwise, it
would still defer to the standard applied by the Acting Director
as the agency director charged with interpreting and
administering the law governing the agency. Id. at 200.
The Acting Director of DMAHS ruled that the resubmitted claims should be disallowed because SSI did not present "documentary evidence" that the claims had been filed. The Acting Director stated that the DMAHS has historically required a higher standard of proof of timely filing of a claim than "general business practice" evidence. It is this final agency decision that forms the basis for our review.
Courts have a limited role in reviewing the decision of an administrative agency. George Harms Constr. v. Turnpike Auth., 137 N.J. 8, 27 (1994); Public Serv. Elec. v. New Jersey Dep't of Envtl. Protection, 101 N.J. 95, 103 (1985). Ordinarily, reversal
is appropriate only if the decision of the agency is arbitrary,
capricious or unreasonable, or not supported by substantial
credible evidence in the record as a whole. Impey v. Board of
Educ.,
142 N.J. 388, 397 (1995); Dennery v. Board of Educ.,
131 N.J. 626, 641 (1993); Henry v. Rahway State Prison,
81 N.J. 571,
579-80 (1980).
However, an agency has no expertise to decide purely legal
issues. Greenwood v. State Police Training Ctr.,
127 N.J. 500,
513 (1992); Mayflower Sec. v. Bureau of Sec.,
64 N.J. 85, 93
(1973). In such situations, de novo review is appropriate.
Baylor v. Department of Human Serv., 235 N.J. Super. 22, 26-27
(App. Div. 1989), aff'd,
127 N.J. 286 (1990); Grancagnola v.
Planning Bd.,
221 N.J. Super. 71, 75-76 (App. Div. 1987) (citing
Mayflower Sec., supra, 64 N.J. at 93). This case presents a
legal question regarding the standard of proof required in order
to demonstrate proof of mailing as an evidentiary element in
establishing the timely submission of claims. We believe that
the Appellate Division was correct in rejecting the Acting
Director's "heightened" evidentiary standard.
New Jersey cases have recognized a presumption that mail properly addressed, stamped, and posted was received by the party to whom it was addressed. Bruce v. James P. MacLean Firm, 238 N.J. Super. 501, 505 (Law Div.), aff'd o.b., 238 N.J. Super. 408, (App. Div. 1989); Tower Management Corp. v. Podesta, 226 N.J.
Super. 300, 304 n.3 (App. Div. 1988); Cwiklinski v. Burton,
217 N.J. Super. 506, 509-10 (App. Div. 1987). The conditions that
must be shown to invoke the presumption are (1) that the mailing
was correctly addressed; (2) that proper postage was affixed; (3)
that the return address was correct; and (4) that the mailing was
deposited in a proper mail receptacle or at the post office.
Lamantia v. Howell Tp.,
12 N.J. Tax 347, 352 (1992).
The question presented in this case is what level of proof
must be demonstrated in order to trigger the presumption of
mailing. In the absence of any administrative rule or regulation
to the contrary, the traditional preponderance of the evidence
standard applies to administrative agency matters. In re Polk,
90 N.J. 550, 561 (1982); Atkinson v. Parsekian,
37 N.J. 143, 149
(1962); see also Fairfax Hospital Ass'n v. Califano, 585 F.2d
602, 611-12 (4th Cir. 1978) (in proceeding before the Medicare
Provider Reimbursement Review Board, proponent of fact must
establish that fact by preponderance of the evidence). Thus, in
respect of the ultimate issue in this case, if the proofs
establish by a preponderance of the evidence that SSI submitted
the claims in a timely fashion, then the claims should be
processed for payment.
The Acting Director considered what evidence would be
required to demonstrate mailing as a factor in establishing that
the claims were received in a timely fashion. He relied on an
administrative decision, Jewish Hosp., supra,
92 N.J.A.R 2d
(DMA) 53, which purports to require a higher standard than the
traditional preponderance of the evidence standard and applying
that standard he concluded that SSI would be required to produce
"documentary evidence" of mailing.
The Appellate Division correctly concluded that the standard
of proof applicable to determine timely submission, including the
ancillary factors probative of that issue, such as mailing, was
the traditional preponderance of the evidence. 284 N.J. Super.
at 188. The court also recognized that proof of mailing can be
established by evidence of habit or routine practice. Id. at
191. However, evidence of office custom alone is insufficient to
trigger the presumption of mailing and receipt. Weathers v.
Hartford Ins. Group,
77 N.J. 228, 234 (1978). Evidence of office
custom requires other corroboration that the custom was followed
in a particular instance, in order to raise a presumption of
mailing and receipt and meet the preponderance of the evidence
standard. Cwiklinski v. Burton, supra, 217 N.J. Super. at 510.
The evidence in this case under the proper standard of proof
supports the finding that SSI mailed the claims to DMAHS and that
the mailing raised a presumption of receipt. SSI produced
affidavits from three employees, which recited SSI's office
procedure for filing claim forms. The Medicaid claim forms are
prepared by Renee Mills. At the close of each month Ms. Mills
matches all invoices with prior approval from the Medicaid
physicians and signs and dates the forms. A photocopy of each
original form is placed in the patient's file and the original is
placed in a pile for submission to DMAHS's fiscal agent. When a
sufficient number of original claims accumulate, Ms. Mills places
the claims in an envelope, which she personally marks with the
address of delivery and SSI's return address. The forms are then
deposited in SSI's mail baskets and mail room clerks collect the
mail from each of the mail baskets on a daily basis. Once
collected, the clerks stamp the individual pieces of mail with
appropriate postage and place them in a bin obtained by SSI from
the U.S. Postal Service. Every weekday, other than federal
holidays, a U.S. Postal Service employee arrives at SSI's offices
in the early evening and collects the mail for delivery.
Ms. Mills testified that the claim forms at issue have
submission dates which were "relatively evenly scattered
throughout the year." This fact refutes any inference that SSI
failed to submit one envelope with a substantial group of claim
forms in it.
SSI produced detailed and specific evidence by testimony and
affidavits from the persons who were responsible for office
procedures involving the mailing of the claim forms. SSI also
produced photocopies from the patient files of the missing claim
forms. Finally, SSI demonstrated that the missing claim forms
were randomly dated, dispelling the inference that claim forms
were missing because SSI had failed to mail a particular batch of
claims that included the missing forms. In sum, the evidence
viewed as a whole meets the preponderance of the evidence
standard demonstrating the custom or practice of mailing and that
it was followed in respect of the contested claims, thus,
creating a presumption of mailing and receipt.
We recognize decisional authority that mailing based in part
on evidence of business custom or practice also requires proof
that the custom or practice was actually followed on the specific
occasion in order to establish the fact of mailing. Cwiklinski
v. Burton, supra, 217 N.J. Super. at 511; see also Weathers v.
Hartford Ins. Group, supra, 77 N.J. at 235 (noting that evidence
from postal employees concerning verification of contents of
mailed envelopes would have established stronger proof). Those
cases express a sound rule, particularly when the issue of
mailing arises in a context where it would be expected that those
charged with the duty of mailing would be capable of testifying
that the documents at issue were actually mailed or that the
custom or practice was actually followed. However, in a case
such as this, where the business organization is large, the
nature of the business operations is complex, and the items
mailed on a daily basis are voluminous, it may not be possible
for individuals engaged in mailing activities to recall actual
mailing of a document or whether the custom or practice of
mailing was followed on a given day. In this case, for example,
during 1991, SSI submitted on a monthly basis between $200,000 to
$300,000 Medicaid claims to Prudential, DMAHS's former agent. In
such cases, other corroborating proof creating the reasonable
inference that the custom was followed on the given occasion may
suffice to establish proof of mailing.See footnote 1
The presumption of receipt derived from proof of mailing is
"rebuttable and may be overcome by evidence that the notice was
never in fact received." Szczesny v. Vasquez,
71 N.J. Super. 347, 354 (App. Div. 1962); see Waite v. Doe,
204 N.J. Super. 632,
636 (App. Div. 1985), certif. denied,
102 N.J. 398 (1986). At
the time these claim forms were allegedly submitted the State's
fiscal agent was Prudential. All of the information contained in
Prudential's data system from September 1989 through November
1991 was transferred to the claims history file of Unisys, the
State's current fiscal agent. According to Prudential, all
outstanding claims received during 1990 and 1991 would have been
contained in its computer system and transferred when Unisys took
over. DMAHS produced only "generalized statements" that its
former fiscal agent, Prudential, had searched its files without
finding the claims in question. There was also unrebutted
testimony that many claim forms had in the past been "lost" at
Prudential and had to be resubmitted. In addition, the CALJ
found that the "random dates of the claim forms in issue are a
factor in SSI's favor -- no batched claims were lost here -- only
individual claim forms occurring sporadically over more than a
year in time." That evidence indicates that the claim forms were
more than likely missing because they had been lost after receipt
rather than because they had not been mailed and received. The
evidence supports a finding that the presumption of receipt was
not rebutted.
In proceedings before administrative agencies, the parties are not bound by the rules of evidence. N.J.S.A. 52:14B-10(a). If DMAHS believes that a heightened standard of proof is necessary to maintain the integrity of the Medicaid system, DMAHS has the power to implement such a rule. See Texter v. Department
of Human Services,
88 N.J. 376 (1982) (noting that administrative
regulation may have become obsolete and remanding to agency for
further regulatory proceedings). Under the current regulations,
a timely claim for payment of non-institutional services, such as
those provided by SSI, to any Medicaid recipient provides only
that it shall be received by the New Jersey Medicaid Fiscal Agent
within "[o]ne year of the date of service" or within "[o]ne year
of the earliest date of service entered on the claim form if the
claim form carries more than one date of service . . . ."
N.J.A.C. 10:49-7.2. Nowhere in the relevant regulation does the
agency require "documentary evidence" of mailing. If such
evidence is deemed necessary, it should be provided in an
administrative rule that would provide fair notice of DMAHS's
policy to those who file claims. See Metromedia, Inc. v.
Director, Div. of Taxation,
97 N.J. 313, 331 (1984) (holding that
general administrative policies should be implemented by rules,
not individual adjudications). DMAHS is free to amend its
regulations to require "documentary proof" of mailing or to
mandate that all submissions be sent by certified mail. Until
such a regulation is passed, however, the traditional
preponderance of the evidence standard must be followed.
Accordingly, the judgment of the Appellate Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN,
GARIBALDI, STEIN and COLEMAN join in JUSTICE HANDLER's opinion.
NO. A-10 SEPTEMBER TERM 1996
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
SSI MEDICAL SERVICES, INC.,
Appellant-Respondent,
v.
STATE OF NEW JERSEY, DEPARTMENT OF
HUMAN SERVICES, DIVISION OF MEDICAL
ASSISTANCE AND HEALTH SERVICES,
Respondent-Appellant.
DECIDED November 20, 1996
Chief Justice Poritz PRESIDING
OPINION BY Justice Handler
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 In all cases, courts should evaluate the nature and worth of the corroborative evidence offered to determine whether it meets the preponderance of the evidence standard and raises a presumption of mailing and receipt. As the forms of communication change, different proofs will have to be established in order to demonstrate mailing. One of the fastest growing methods of communication is electronic mail or e-mail. E-mail is a computer-to-computer version of the postal service that enables users to send and receive messages and in some instances graphics or voice messages, either to individual recipients or in broadcast form to larger groups. In order to establish proof that electronic messages have been sent, courts may look, for example, to proof of electronic mail return-receipt or to confirmation of downloading or printing. As new technologies continue to develop, the sort of proofs required to demonstrate proof of mailing and receipt will likewise change.