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IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT

AmCare, Inc., d/b/a Miller :

Memorial Nursing Center,

: No. 04AP-209

Appellant-Appellant,

(C.P.C. No. 03CVF-07-8281)

v. (REGULAR CALENDAR)

Ohio Department of Job and Family

Services, :

Appellee-Appellee. :

O P I N I O N

Rendered on June 2, 2005

Buckingham, Doolittle & Burroughs, LLP

, and

Thomas W.

Hess

, for appellant.

Jim Petro

, Attorney General, and

Juliane E. Barone

, for

appellee.

Geoffrey E. Webster

and

J. Randall Richards

, for Amicus

Curiae, The Ohio Academy of Nursing Homes, Inc.

APPEAL from the Franklin County Court of Common Ple

as.

PETREE, J.

{¶1}

Appellant, AmCare, Inc., dba Miller Memorial Nursin

g Center, appeals from

a judgment of the Franklin County Court of Common P

leas affirming the order of

appellee, Ohio Department of Job and Family Service

s, which determined that appellant

must repay a total of $452,312.43 to it as a result

of Medicaid provider overpayments.

No. 04AP-209

The Ohio Academy of Nursing Homes, Inc., has filed

an amicas curiae brief. For the

following reasons, we affirm the judgment of the tr

ial court.

{¶2}

Appellant owned and operated a 200-bed nursing home

as a Medicaid

provider. Appellant was paid for its participation

as a provider based on prospective rates

established from cost report information. For purp

oses of 1994 fiscal year (from July 1,

1993 to June 30, 1994) reimbursement, appellant fil

ed a six-month cost report for each

half of the 1992 calendar year. Appellant filed th

e first six-month cost report for the 1992

calendar year on October 1, 1992, and the second co

st report on April 20, 1993. These

two cost reports were used to determine the reimbur

sement per diem rate (the

"prospective rate") for the 1994 fiscal year pursua

nt to Am.Sub.H.B. No. 904, Section

126,

as well as the applicable version of Ohio Adm.Code

5101:3-3-20(A).

{¶3}

Similarly, for purposes of 1995 fiscal year (from J

uly 1, 1994 to June 30,

1995) reimbursement, appellant filed a six-month co

st report for each half of the 1993

calendar year. Appellant filed the first six-month

cost report for the 1993 calendar year on

February 10, 1994, and the second cost report on Ma

y 2, 1994. These two cost reports

were used to determine the reimbursement per diem r

ate (the prospective rate) for the

1995 fiscal year, pursuant to Am.Sub.H.B. No. 904,

Section 126, as well as the applicable

version of Ohio Adm.Code 5101:3-3-20(B).

{¶4}

By being a Medicaid provider, appellant agreed that

the payments under

the agreement were subject to an audit process. Pu

rsuant to R.C. 5111.27(B), appellee

conducted audits of the cost reports corresponding

to the 1994 and 1995 fiscal years. As

Am.Sub.H.B. No. 904, Section 126, provided that "[

n]otwithstanding section 5111.26 of the Revised Cod

or any other provision of the Revised Code," the ra

tes for fiscal years 1994 and 1995 shall each be ba

sed

No. 04AP-209

a consequence of the audits of the cost reports, ap

pellee ultimately determined that

appellant had received Medicaid overpayments for th

e 1994 and 1995 fiscal years of

$87,232.32, and $365,080.11, respectively. The aud

it findings corresponding to the 1992

calendar year cost reports were issued to appellant

on March 29, 1996, and the audit

findings corresponding to the 1993 calendar year co

st reports were issued to appellant on

April 25, 1997. In view of the dates that the cost

reports were filed, the record indicates

that the audit findings were issued within three ye

ars of the filing of the corresponding

second six-month cost reports but not within three

years of the filing of the corresponding

first six-month cost reports.

{¶5}

Appellant challenged the overpayment determinations

in an administrative

hearing held in March 2003. In the administrative

hearing, appellant asserted that

appellee failed to comply with the requirements of

R.C. 5111.27(B) as to the issuance of

the audit reports. Appellant did not factually dis

pute the overpayment determinations for

the 1994 and 1995 fiscal years. Its contention was

that the overpayment determinations

were void because appellee failed to timely issue t

he audit reports, and therefore

appellant's demand for repayment was invalid. On J

une 26, 2003, the hearing examiner

submitted his recommendation to appellee. The hear

ing examiner determined that the

reports were timely issued, and accordingly recomme

nded that appellee implement the

proposed adjudication orders as written.

{¶6}

On July 21, 2003, appellee issued an adjudication o

rder adopting the

hearing examiner's report and recommendation. Appe

llee accordingly concluded that

two

six-month cost reports. We note that R.C. 5111.26

provides for the filing of "an

annual

cost report."

(Emphasis added.)

No. 04AP-209

appellant owed $87,232.32 for fiscal year 1994, and

$365,080.11 for fiscal year 1995.

Pursuant to R.C. 119.12, appellant appealed from th

is order to the Franklin County Court

of Common Pleas.

{¶7}

The Franklin County Court of Common Pleas affirmed

the order of appellee,

finding that the order was supported by probative,

substantial, and reliable evidence, and

in accordance with law. In making this finding, th

e trial court determined that the statutory

provision relating to the three-year time period fo

r the issuance of audit reports is

directory and not mandatory.

{¶8}

Appellant appeals from this judgment and has assert

ed the following two

assignments of error:

1. The lower court erred when it found that the Ohi

Department of Job and Family Services' order of Jul

y 21,

2003, was supported by reliable, probative, and sub

stantial

evidence and was in accordance with the law.

2. The lower court erred when it found the three-y

ear time

period for the Ohio Department of Job and Family Se

rvices to

issue an audit as described in Ohio Revised Code Se

ction

5111.27(B) was directory and not mandatory.

{¶9}

The common pleas court's "review of the administrat

ive record is neither a

trial

de novo

nor an appeal on questions of law only, but a hybr

id review in which the

court 'must appraise all the evidence as to the cre

dibility of the witnesses, the probative

character of the evidence, and the weight thereof.'

Lies v. Ohio Veterinary Med. Bd.

(1981), 2 Ohio App.3d 204, 207, quoting

Andrews v. Bd. of Liquor Control

(1955), 164

Ohio St. 275, 280.

{¶10}

An appellate court's review of an administrative de

cision is more limited

than that of a common pleas court.

Pons v. Ohio State Med. Bd.

(1993), 66 Ohio St.3d

No. 04AP-209

619, rehearing denied, 67 Ohio St.3d 1439. Regardi

ng factual issues, an appellate

court's review is limited to determining whether th

e common pleas court abused its

discretion in finding that the agency's decision wa

s supported by reliable, probative, and

substantial evidence.

Pons

, supra. An "abuse of discretion connotes more tha

n an error

of law or judgment; it implies that the court's att

itude is unreasonable, arbitrary or

unconscionable." (Citations omitted.)

Blakemore v. Blakemore

(1983), 5 Ohio St.3d 217,

219. On questions of law, however, the court revie

ws de novo.

Univ. Hosp., Univ. of

Cincinnati College of Medicine v. State Emp. Relati ons Bd.

(1992), 63 Ohio St.3d 339.

{¶11}

Appellant argues in this appeal that the audits wer

e not timely completed,

and therefore the "findings associated with the unt

imely audits are automatically void."

(Appellant's brief, at 5.) Appellant also argues t

hat the three-year time period for issuing

an audit report under R.C. 5111.27(B) is mandatory

and not directory. As noted above,

the trial court determined that the provisions of R

.C. 5111.27(B) relating to the three-year

period are directory and not mandatory. According

to appellant, the trial court, in affirming

the order of appellee, failed to follow this court'

s decision in

Ohio Academy of Nursing

Homes, Inc. v. Ohio Dept. of Human Services

(2002), 149 Ohio App.3d 413. We find

nothing in

Ohio Academy of Nursing Homes

relating to whether the time period for issuing

an audit report under R.C. 5111.27(B) is mandatory

or directory.

{¶12}

We find that the central issue in this matter is wh

ether R.C. 5111.27(B)

placed a mandatory duty upon appellee to issue audi

t reports within three years after the

first six-month cost reports were filed, thereby vo

iding any determination associated with

audit reports not issued within three years of the

first six-month cost reports. Our

resolution of this issue disposes of this appeal.

No. 04AP-209

{¶13}

The three-year time period language regarding the i

ssuance of an audit

report is found in R.C. 5111.27(B). R.C. 5111.27(B

) provides, in pertinent part, as

follows:

The department may conduct an audit, as defined by

rule

adopted by the director of job and family services

accordance with Chapter 119. of the Revised Code, o

f any

cost report and shall notify the nursing facility o

r intermediate

care facility for the mentally retarded of its find

ings.

* * *

The department shall issue the audit report no late

r than

three years after the cost report is filed

, or upon the

completion of a desk or field audit on the report o

r a report for

a subsequent cost reporting period, whichever is ea

rlier.

During the time within which the department may iss

ue an

audit report, the provider may amend the cost repor

t upon

discovery of a material error or material additiona

l information.

The department shall review the amended cost report

for

accuracy and notify the provider of its determinati on.

(Emphasis added.)

{¶14}

Regarding overpayment determinations, as occurred i

n this case, R.C.

5111.27(B) must be viewed in conjunction with R.C.

5111.28, which provides, in pertinent

part, as follows:

(B) If the provider properly amends its cost report

under

section 5111.27 of the Revised Code,

the department makes

a finding based on an audit under that section

, or the

department makes a finding based on an exception re

view of

resident assessment information conducted under tha

section after the effective date of the rate for di

rect care costs

that is based on the assessment information,

any of which

results in a determination that the provider has re

ceived a

higher rate than it was entitled to receive

the department

shall recalculate the provider's rate using the rev

ised

information. The department shall apply the recalcu

lated rate

to the periods when the provider received the incor

rect rate to

determine the amount of the overpayment. The provid

er shall

refund the amount of the overpayment.

No. 04AP-209

(Emphasis added.)

{¶15}

Preliminarily, we note that the filing of two cost

reports for each applicable

calendar year was necessary in this case to determi

ne the corresponding prospective

rate. Appellee conducted audits of each of those c

ost reports, and determined that there

was an overpayment for the 1994 and 1995 fiscal yea

rs. Thus, in order to determine

whether the prospective rate was correct and whethe

r there was an overpayment for a

particular period, appellee needed to consider audi

t findings relating to both cost reports

for the particular calendar year.

{¶16}

The Supreme Court of Ohio has stated that " 'the wo

rd "shall" shall be

construed as mandatory unless there appears a clear

and unequivocal legislative intent

that [it] receive a construction other than [its] o

rdinary usage.' "

Ohio Civ. Rights Comm.

v. Countrywide Home Loans, Inc.

, 99 Ohio St.3d 522, 2003-Ohio-4358, ¶4, quoting

Dorrian v. Scioto Conservancy Dist.

(1971), 27 Ohio St.2d 102, paragraph one of the

syllabus. See also

State ex rel. Cincinnati Bell Tel. Co. v. Pub. Util

. Comm.

, 105 Ohio

St.3d 177, 2005-Ohio-1150 (finding that, based on t

he use of the word "shall" in

R.C. 4903.21, upon service or waiver of the notice

of appeal as provided in R.C. 4903.13,

the Public Utilities Commission has a clear legal d

uty to transmit a transcript of

proceedings in an appeal, even if the Supreme Court

of Ohio may lack jurisdiction in the

appeal).

{¶17}

Countrywide Home Loans, Inc.

, the Supreme Court of Ohio addressed

the issue of "whether R.C. 4112.05(B)(7) is a statu

te of limitations for the filing of

complaints by [the Ohio Civil Rights Commission ("O

CRC")] or whether it is a directory

provision to encourage the orderly processing of di

scrimination claims." Id. at ¶3. R.C.

No. 04AP-209

4112.05(B)(7) provides that any complaint issued by

OCRC, pursuant to R.C.

4112.05(B)(5), after the complainant filed the char

ge, pursuant to R.C. 4112.05(B)(1),

"shall be so issued within one year after the compl

ainant filed the charge with respect to

an alleged unlawful discriminatory practice." The

court held that the provision is a

mandatory statute of limitations. See

Countrywide Home Loans, Inc.

{¶18}

A statutory time provision may be directory, even w

ith "shall" as the

operative word. See

In re Davis

(1999), 84 Ohio St.3d 520, 522. In

State ex rel. Jones v.

Farrar

(1946), 146 Ohio St. 467, at paragraphs one, two,

and three of the syllabus, the

Supreme Court of Ohio held as follows:

1. A statute is mandatory where noncompliance with

its

provisions will render illegal and void the steps o

r acts to

which it relates or for which it provides, and is d

irectory where

noncompliance will not invalidate such steps or act s.

2. As a general rule, statutes which relate to the

essence of

the act to be performed or to matters of substance

are

mandatory, and those which do not relate to the ess

ence and

compliance with which is merely a matter of conveni

ence

rather than substance are directory.

3. As a general rule, a statute providing a time fo

r the

performance of an official duty will be construed a

s directory

so far as time for performance is concerned, especi

ally where

the statute fixes the time simply for convenience o

r orderly

procedure; and, unless the object or purpose of a s

tatutory

provision requiring some act to be performed within

specified period of time is discernible from the la

nguage

employed, the statute is directory and not mandator y.

{¶19}

State ex rel. Smith v. Barnell

(1924), 109 Ohio St. 246, the Supreme

Court of Ohio stated:

Whether a statute is mandatory or directory is to b

ascertained from a consideration of the entire act,

its nature,

No. 04AP-209

its object, and the consequences which would result

from

construing it one way or the other.

Where the instructions of a statute are given merel

y with a

view to the proper, orderly, and prompt conduct of

business,

the provisions may generally be regarded as directo ry.

A statute specifying a time within which a public o

fficer is to

perform an official act regarding the rights and du

ties of others

is directory merely,

unless the nature of the act to be

performed or the phraseology of the statute or of o

ther

statutes relating to the same subject-matter is suc

h that the

designation of time must be considered a limitation

upon the

power of the officer.

Id. at 255. (Citations omitted; emphasis added.)

{¶20}

In this case, R.C. 5111.27(B) provides that if appe

llee conducts an audit of

a cost report

appellee "shall" issue the

audit report within three years of the filing of th

cost report. In

Countrywide Home Loans, Inc.

, the Supreme Court of Ohio found the

general rule of statutory construction as stated in

Dorrian

, supra, to be instructive, even

though

Dorrian

"essentially dealt with the question whether there was a mandatory duty to

act, and not when the act was to be done."

State ex rel. Webb v. Bd. of Edn. of Bryan

City School Dist.

(1984), 10 Ohio St.3d 27, 31

The

Countrywide Home Loans, Inc.

case

is distinguishable with the case at bar because tha

t case involved a time limitation on the

filing of a complaint, and this case involves the a

ct of issuing an audit report.

Furthermore, we observe that the majority in

Countrywide Home Loans, Inc.

did not

discuss or overrule

Farrar

; it apparently found

Farrar

inapplicable under the facts of the

case.

{¶21}

We concur with the trial court's finding that the g

eneral rule stated in

Farrar

is applicable to this case and that the

Barnell

exception is inapplicable. In this case,

No. 04AP-209

appellant essentially argues that R.C. 5111.27(B) p

recludes appellee's recovery of

overpayments on the basis that audit reports were n

ot issued within three years of the

filing of the

first six-month cost reports. However, notwithstan

ding the use of the word

"shall" regarding the issuance of an audit report,

R.C. 5111.27(B) does not express an

intent that appellee is precluded from recovering o

verpayments if an audit report is not

issued within three years of a cost report. When v

iewed in context, it is clear that the

three-year time provision in R.C. 5111.27(B), relat ing to the issuance of audit reports, is a

directory provision, and not a statutory limitation

on appellee's ability to recover

overpayments. In sum, we agree with the trial cour

t's assessment that "it appears the

Barnell

exception or limitation does not apply because of t

he lack of legislative expression

of intention to arrest the power of appellee to, in

this case, seek recompense merely

because of an untimely release of an audit report"

(Decision and Judgment Entry, at 5) or

more specifically, the untimely release of the audi

t findings corresponding to the first six-

month cost reports.

{¶22}

Considering the foregoing, we conclude that the tim e restriction contained in

R.C. 5111.27(B), regarding the performance of the o

fficial duty of issuing an audit report,

does not serve as a limitation on the recovery of o

verpayment by appellee in this case. In

other words, we do not view the time restriction fo

r the issuance of an audit report

contained in R.C. 5111.27(B) as a limitation on app

ellee's ability to seek repayment for

fiscal years 1994 and 1995. Therefore, we hold tha

t R.C. 5111.27(B) did not impose a

mandatory duty upon appellee to issue audit reports

corresponding to the first of two six-

month cost reports within three years of appellant'

s filing of each of those cost reports.

The audit findings were valid and could be relied u

pon in determining overpayment.

No. 04AP-209

{¶23}

The trial court did not err in finding appellee's J

uly 21, 2003 order to be

supported by reliable, probative, and substantial e

vidence and to be in accordance with

law. Based on the foregoing, we overrule appellant

's two assignments of error and

therefore affirm the judgment of the Franklin Count y Court of Common Pleas.

Judgment affirmed.

BROWN, P.J., and KLATT, J., concur.

__________________