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Commonwealth v. Samaritan Alliance, LLC

Court of Appeals of Kentucky

February 21, 2014

COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES; HONORABLE AUDREY TAYSE HAYNES, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE CABINET FOR HEALTH AND FAMILY SERVICES APPELLANTS
v.
SAMARITAN ALLIANCE, LLC, D/B/A SAMARITAN HOSPITAL APPELLEE

Page 758

APPEAL FROM FRANKLIN CIRCUIT COURT. HONORABLE THOMAS D. WINGATE, JUDGE. ACTION NO. 08-CI-00294.

BRIEF FOR APPELLANTS: Michael W. Board, Frankfort, Kentucky.

ORAL ARGUMENT FOR APPELLANTS: D. Brent Irvin, Frankfort, Kentucky.

BRIEF FOR APPELLEE: Stephen R. Price, Sr., John W. Woodard, Jr., Allison Brown Vermilion, Louisville, Kentucky.

ORAL ARGUMENT FOR APPELLEE: John W. Woodard, Jr., Louisville, Kentucky.

BEFORE: CLAYTON, DIXON, AND MAZE, JUDGES. ALL CONCUR.

OPINION

Page 759

AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

MAZE, JUDGE:

The Cabinet for Health and Family Services and the Cabinet's Secretary (collectively, " the Cabinet" ) bring this interlocutory appeal from an order of the Franklin Circuit Court denying its motion to dismiss the breach of contract and fraud claims brought against it by Samaritan Alliance LLC, d/b/a Samaritan Hospital (" Samaritan" ). The Cabinet argues that Samaritan's claims for breach of contract and fraud are barred by the doctrine of sovereign or governmental immunity. We conclude that the legislature has waived the Cabinet's immunity from the breach of contract claim by operation of Kentucky Revised Statutes (KRS) 45A.245. We further find that KRS 13B.150 allows Samaritan to present evidence of extrinsic fraud as part of its statutory appeal from the Cabinet's Final Order, but Samaritan cannot assert an independent claim for damages arising out of that alleged fraud. Finally, we conclude that the substantive matters regarding the validity of Samaritan's statutory appeal are not properly raised in this interlocutory appeal. Hence, we affirm in part, reverse in part, and remand for additional proceedings.

During the periods relevant to this action, Samaritan owned and operated Samaritan Hospital, a 366-bed acute care hospital in Fayette County. The Cabinet administers the Kentucky Medical Assistance Program (KMAP), which provides for implementation of the Federal Medicaid Program in Kentucky. Samaritan entered into a Medicaid Provider Agreement with the Cabinet. The Agreement provided that the Cabinet would reimburse Samaritan for Medicaid services provided at rates governed by state and federal statutes and regulations.

Samaritan alleges that, beginning in 2003, the Cabinet misapplied the regulations governing reimbursement for certain outpatient services. Samaritan states that the Cabinet's actions resulted in a substantial underpayment of Medicaid reimbursements. When Samaritan received notice of its Medicaid rates for the year beginning July 1, 2004, it filed a request for a Dispute Resolution Meeting (DRM). The Cabinet held the DRM on May 25, 2005, but has never issued a decision on the matter. Samaritan filed requests for DRMs regarding its reimbursements for the years beginning July 1, 2005, and 2006, respectively. Samaritan states that the Cabinet has not responded to those appeals.

On April 11, 2007, the Cabinet sent a letter stating that it had overpaid Medicaid reimbursements to Samaritan in the amount of $241,687 and that it was seeking reimbursement of that amount. Five days later, Samaritan filed for bankruptcy. On May 25, 2007, Samaritan responded to the Cabinet's April 11, 2007 letter. Samaritan stated that it was objecting to the Cabinet's claim for reimbursement. Samaritan also reminded the Cabinet of its pending ...


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