GEORGIA DEPARTMENT OF BEHAVIORAL HEALTH AND DEVELOPMENTAL DISABILITIES v. UNITED CEREBRAL PALSY OF GEORGIA (2016)

The plaintiffs in this case are providers and recipients of Medicaid services for individuals with intellectual and developmental disabilities who claim that the defendant administrative agencies and their commissioners failed to follow the required procedures before reducing the reimbursement rates paid to the providers and limiting the services available to the recipients. The plaintiffs did not submit their claims to the agencies for administrative review, instead filing this lawsuit in the trial court. The trial court granted the defendants' motion to dismiss the case for failure to exhaust administrative remedies, but the Court of Appeals reversed that ruling. See United Cerebral Palsy of Ga., Inc. v. Georgia Dept. of Behavioral Health & Developmental Disabilities, 331 Ga.App. 616, 771 S.E.2d 251 (2015). We granted certiorari to decide whether the Court of Appeals erred in holding that the defendants' alleged failure to give the plaintiffs proper notice of adverse agency decisions excused the plaintiffs from the exhaustion requirement. As explained below, the plaintiffs were required to raise their defective notice claims in the administrative review process in the first instance. Accordingly, we reverse the judgment of the Court of Appeals.

1. (a) Congress created the Medicaid program in 1965 through amendments to the Social Security Act. See Pharmaceutical Researchers & Mfrs. of Am. v. Walsh, 538 U.S. 644, 650, 123 S.Ct. 1855, 155 L.Ed.2d 889 (2003). The program provides subsidies to the states to furnish medical assistance to “families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.” 42 USC § 1396–1. Although a state's participation in the Medicaid program is voluntary, a state that elects to join must administer a state Medicaid plan that meets federal requirements. See Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 433, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004). Georgia participates in the general Medicaid program, and the Department of Community Health (“DCH”) is the state agency charged with developing and administering Georgia's Medicaid plan. See OCGA § 49–4–142.

A state Medicaid plan must establish a scheme for reimbursing health care providers for services provided to program beneficiaries. See 42 USC § 1396a (a); Wilder v. Virginia Hosp. Assn., 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). Since 1981, Congress has authorized states to obtain a waiver allowing the use of Medicaid funds for home and community based care provided to individuals with intellectual and developmental disabilities who otherwise would require institutionalization, including habilitation services, respite care, and case management. See 42 USC § 1396n (c); Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581, 601, 119 S.Ct. 2176, 144 L.Ed.2d 540 (1999). This case involves two Georgia waiver programs that the federal government approved in 2007—the Comprehensive Supports Waiver Program, or “COMP,” and the New Options Waiver Program, or “NOW.” The requirements of these waiver programs were incorporated into contracts, known as statements of participation, that the provider plaintiffs entered into with the Georgia Department of Behavioral Health and Developmental Disabilities (“DBHDD”).

(b) The General Assembly has recognized the need for a robust formal administrative review process to address complaints—which the statute refers to as “appeals”—by providers and recipients of Medicaid services, including disputes concerning reimbursement rates and service limitations. See OCGA § 49–4–153.¹ Pursuant to § 49–4–153(b), any Medicaid provider dissatisfied with “a decision of [DCH] with respect to a denial or nonpayment of or the determination of the amount of reimbursement paid or payable to such provider,” and any Medicaid recipient “aggrieved by the action or inaction of [DCH] as to any medical or remedial care or service which such recipient alleges should be reimbursed,” may obtain a hearing before an administrative law judge (“ALJ”) from the Office of State Administrative Hearings (“OSAH”) by filing a proper written request with DCH. The ALJ's decision on the dispute may be appealed by the losing party to the DCH Commissioner for a final agency decision. See OCGA § 49–4–153(b).

The statute sets forth various deadlines and other procedural requirements governing this administrative review process, and OCGA § 49–4–153(a) also authorizes DCH to “establish regulations regarding the manner in which the [administrative review] set forth in subsection (b) shall be conducted.” DCH has promulgated such regulations. See Ga. Comp. R. & Regs. 350–4–.01 to 3504–.30 (“DCH Rules”). For example, DCH Rule 350–4–.04 says:

The Department shall offer the opportunity for Administrative Review to any provider against whom it proposes to take an adverse action unless the Department is otherwise authorized by law to take such action without opportunity for appeal by the provider prior to the action's implementation. The procedures and deadlines for obtaining such Administrative Review and the deadlines for decisions thereon shall be published in the Policies and Procedures Manual for each service category to which they apply. Administrative Review shall be completed, if not waived by the provider, prior to implementation of the proposed action. Whenever the opportunity for Administrative Review is available to the provider, such Administrative Review must be timely obtained and completed for the provider to be entitled to a hearing.

See also DCH Division of Medicaid, Policies and Procedures for Medicaid/Peachcare for Kids § 505 (Jan. 1, 2016) (explaining that DCH “offers the opportunity for Administrative Review to any provider against whom it proposes to take an adverse action”); DCH Division of Medicaid, Policies and Procedures for Comprehensive Supports Waiver Program (COMP) and New Options Waiver Program (NOW) General Manual § 709.1 (Jan. 1, 2016) (requiring DCH to provide “written notice of the rights to appeal any reduction of COMP/NOW services” to recipients).²

How and when this administrative review process is initiated is discussed in DCH Rule 350–4–.05.³ DCH Rule 350–4–.06(g) authorizes the ALJ to determine whether a hearing request by which a provider or recipient seeks to initiate the administrative review process should be dismissed because “the requesting party has not met the prerequisites for obtaining a hearing.”

The statute also provides the opportunity for judicial review of Medicaid disputes. Under OCGA § 49–4–153(c), an aggrieved provider or recipient dissatisfied with the Commissioner's final decision may petition for review in the appropriate superior court—but only if the aggrieved party first “exhausts all the administrative remedies provided in [§ 49–4–153].” See also OCGA § 5013–19⁴ ; Perkins v. Dept. of Med. Assistance, 252 Ga.App. 35, 37, 555 S.E.2d 500 (2001) (“Under the Georgia Administrative Procedure Act, [judicial] appeal from decisions of [DCH] regarding a denial, nonpayment, or determination of the amount of reimbursement paid or payable requires an administrative appeal filed with [DCH].”).

(c) On August 8, 2013, United Cerebral Palsy of Georgia, Inc. and three other Georgia nonprofit corporations that provide services to Medicaid patients with intellectual and developmental disabilities under the COMP and NOW waiver programs, along with four individuals who receive those services (collectively, “plaintiffs”), filed a putative class action complaint against DCH, DBHDD, and their commissioners (collectively, “defendants”) in the Superior Court of Fulton County (“trial court”). The complaint alleged that since 2008, the defendants have used various unapproved and secretive methods to avoid paying providers the approved reimbursement rates and to limit the amount of services that recipients can receive, sometimes to below the amount that is medically necessary. According to the plaintiffs, the defendants made these reductions without public notice and comment as required by federal and state law and without giving the plaintiffs proper advance notice as required by the terms of the statements of participation, federal and state law, and constitutional due process. The complaint sought declaratory and injunctive relief, damages, and attorney fees and expenses for alleged breach of contract, as—applied violations of federal constitutional rights, violations of the Social Security Act, and violations of rights to administrative remedies under OCGA § 49–4–153(b)(1). It is undisputed that the plaintiffs had not sought any sort of formal administrative review of their claims; they took their case directly to the trial court.

On September 9, 2013, the defendants filed an answer and a motion to dismiss, arguing among other things that the plaintiffs filed their lawsuit prematurely without first exhausting their available administrative remedies. On November 21, 2013, the trial court entered an order dismissing the complaint for failure to exhaust administrative remedies.

The plaintiffs appealed, and the Court of Appeals reversed, with one judge concurring in the judgment only. See United Cerebral Palsy, 331 Ga.App. at 622, 771 S.E.2d 251. The Court of Appeals acknowledged that parties aggrieved by an agency decision generally must exhaust available administrative remedies before seeking relief by judicial review. See id. at 618, 771 S.E.2d 251. However, the court analyzed the provisions of OCGA § 49–4–153, the DCH Rules, and the Medicaid manuals; decided that the defendants had failed to give the plaintiffs prior written notice of adverse agency decisions as required; and concluded that the lack of proper notice excused the plaintiffs from having to seek administrative review of their claims regarding alleged reductions in reimbursement rates and covered services. See id. at 618–621, 771 S.E.2d 251. This Court granted certiorari to review that conclusion.

2. (a) Under long-standing Georgia law, the failure of plaintiffs to exhaust their available administrative remedies ordinarily precludes judicial relief. See Georgia Dept. of Community Health v. Georgia Soc. of Ambulatory Surgery Centers, 290 Ga. 628, 629, 724 S.E.2d 386 (2012). See also Perkins, 252 Ga.App. at 37, 555 S.E.2d 500 (“[T]imely judicial review of a final agency decision after an administrative appeal can be made to the superior court only if the condition precedent of exhaustion of an administrative appeal has first been completed. OCGA §§ 49–4–153(c); 50–13–19.”). As the United States Supreme Court has explained:

The doctrine of exhaustion of administrative remedies is well established in the jurisprudence of administrative law. The doctrine provides that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted. Exhaustion of administrative remedies serves two main purposes. First, exhaustion protects administrative agency authority. Exhaustion gives an agency an opportunity to correct its own mistakes with respect to the programs it administers before it is haled into ․ court, and it discourages disregard of [the agency's] procedures. Second, exhaustion promotes efficiency. Claims generally can be resolved much more quickly and economically in proceedings before an agency than in litigation․ In some cases, claims are settled at the administrative level, and in others, the proceedings before the agency convince the losing party not to pursue the matter in ․ court. And even where a controversy survives administrative review, exhaustion of the administrative procedure may produce a useful record for subsequent judicial consideration.

Woodford v. Ngo, 548 U.S. 81, 88–89, 126 S.Ct. 2378, 165 L.Ed.2d 368 (2006) (citations and punctuation omitted).

This Court has similarly observed that

“[t]he rationale for requiring exhaustion of administrative remedies is that resort to the administrative process will permit the agency to apply its expertise, protect the agency's autonomy, allow a more efficient resolution, and result in the uniform application of matters within the agency's jurisdiction.”

Ambulatory Surgery Centers, 290 Ga. at 629, 724 S.E.2d 386 (quoting Cerulean Cos. v. Tiller, 271 Ga. 65, 66, 516 S.E.2d 522 (1999)). We have also emphasized that “ ‘[o]nly in rare instances will the requirement of exhaustion be relaxed.’ “ Id. (quoting Moss v. Central State Hosp., 255 Ga. 403, 404, 339 S.E.2d 226 (1986)). Plaintiffs may bring their claims directly to court where there is no adequate administrative procedure available for challenging the type of administrative decision in question. See, e.g., Feminist Women's Health Ctr. v. Burgess, 282 Ga. 433, 436, 651 S.E.2d 36 (2007) (holding that exhaustion was not required where the plaintiffs challenged the constitutionality of the state Medicaid plan itself and no statute or rule authorized an administrative procedure for reviewing such facial challenges); Aldridge v. Georgia Hospitality & Travel Assoc., 251 Ga. 234, 237, 304 S.E.2d 708 (1983) (same where the plaintiff challenged the assessment of county inspection fees and no county ordinance or state law provided a means to challenge the imposition of such fees).

In addition, this Court has recognized a “futility” exception to the exhaustion requirement, defined narrowly as a situation where further administrative review would result in another decision on the same issue by the same body. Elbert County v. Sweet City Landfill, LLC, 297 Ga. 429, 433, 774 S.E.2d 658 (2015). See, e.g., Powell v. City of Snellville, 266 Ga. 315, 316, 467 S.E.2d 540 (1996) (holding that the plaintiff was not required to file an application for rezoning before going to court where the city government had already voted twice to rezone her property over her objection). Administrative review is not ordinarily deemed futile, however, because the aggrieved parties are pessimistic about obtaining a favorable outcome, see Elbert County, 297 Ga. at 433, 774 S.E.2d 658, even where plaintiffs seek to justify their pessimism based on positions taken by the administrative decision-maker outside of and prior to the normal administrative process, such as positions taken in defending a lawsuit brought without exhausting administrative remedies, see Ambulatory Surgery Centers, 290 Ga. at 629–630, 724 S.E.2d 386.

(b) This Court has never recognized a wholesale exception to the exhaustion doctrine for alleged procedural errors by an administrative agency. To the contrary, we recently explained that an agency's “ ‘failure to perfectly comply with all of the intricacies of the administrative process [does not] necessarily constitute extra-jurisdictional action by [the] agency’ “ that could excuse a failure to exhaust administrative remedies; thus, aggrieved parties cannot justify going straight to court merely by alleging that the agency “ ‘failed to meet certain statutory procedural requirements.’ “ Id. at 630, 724 S.E.2d 386 (citation omitted). “Long-standing Georgia law requires that a party aggrieved by a state agency's decision must raise all issues before that agency and exhaust available administrative remedies before seeking any judicial review of the agency's decision.” Tiller, 271 Ga. at 66, 516 S.E.2d 522 (emphasis added). See also We, the Taxpayers v. Board of Tax Assessors of Effingham County, 292 Ga. 31, 33, 734 S.E.2d 373 (2012) (reiterating in the context of tax disputes that “ ‘constitutional and procedural issues,’ “ as well as substantive tax issues, must normally be addressed to the administrative review process (citation omitted)); OCGA § 5013–19(a) (providing for immediate (i.e., interlocutory) judicial review of an agency “procedural ․ ruling” where review of the final agency decision would not provide an adequate remedy). Thus, generally speaking, procedural issues are subject to the exhaustion requirement just like substantive issues.

The exhaustion requirement is particularly important in this case, given that the plaintiffs question the methods by which the defendants determined and applied the service allotments for potentially thousands of Medicaid recipients and the reimbursement amounts for their providers. Resolving these issues inherently involves the defendants' expertise in the contours of the Medicaid program, applicable federal and state statutes and regulations, and the policies and procedures set forth in the Georgia Medicaid manuals.⁵ The plaintiffs acknowledge the difficult and specialized issues that would face a trial court or jury in resolving their claims; their brief discusses the “complexity of health care reimbursement methodology.” Such complex administrative decisions are clearly within the purview of administrative review, and executive agencies are entitled to apply their expertise to obtain uniformity of results by deciding such questions in the first instance. See, e.g., Bentley v. Chastain, 242 Ga. 348, 350351, 249 S.E.2d 38 (1978).⁶

The concept is straightforward: If a party believes an administrative agency made a procedural mistake regarding notice of an adverse decision, the aggrieved party should ordinarily give the agency the opportunity to correct the mistake (if indeed it was a mistake) through the established administrative review process, instead of asking a court to decide the notice dispute—much less the underlying substantive dispute—in the first instance.⁷

(c) The plaintiffs devote much of their briefs to arguing the merits of whether they got proper notice of the allegedly invalid agency actions and decisions, asserting that until they did, they could not start the administrative review process established by OCGA § 49–4–153. But the plaintiffs clearly had actual notice of the actions and decisions they dispute by the time they filed their complaint disputing these matters in August 2013. The question is whether at that point they could file their complaint in court and bypass the administrative review process. Allowing them to do so would require courts to decide both the notice issues and the underlying substantive issues in the first instance. Administrative law commits both sets of issues to the administrative process in the first instance.

This is not a situation where the agency plainly has no administrative review process available to consider the types of matters in dispute. OCGA § 49–4–153 establishes a process that appears amenable to review of the plaintiffs' notice and substantive claims, and the defendants have not taken the position that DCH's administrative review process is closed to consideration of either the notice or the substantive claims (although the defendants have offered arguments against the merits of both sets of claims). If presented to DCH with a demand for a hearing by an OSAH ALJ, it appears that there would be three basic possible outcomes (which might vary with regard to particular claims and claimants): (1) a ruling that no notice of adverse action was required, because there was no change in the rates of reimbursement or amount of services allowed; (2) a ruling that notice was properly given earlier and a consequent dismissal of the underlying substantive claims as untimely; or (3) a ruling that notice was not properly given and a corresponding ruling about whether the untimeliness of the substantive claims can and should be excused (or proper notice ordered to be given now) as a matter of contractual, regulatory, statutory, or constitutional law. If the ALJ reached the plaintiffs' substantive claims and found them to be meritorious, the ALJ could craft appropriate remedies based on the judge's expertise with the Medicaid statutes and rules.

If the plaintiffs were unsatisfied with the ALJ's rulings, they could seek review by the DCH commissioner. If still unsatisfied, they could properly seek judicial review. If the case got that far, the trial court could rule on whatever issues had been raised in the administrative process, but those issues likely would have been narrowed, and the court would have the benefit of the administrative record and the decision of administrative experts. See Woodford, 548 U.S. at 88–89; Ambulatory Surgery Centers, 290 Ga. at 629, 724 S.E.2d 386. We express no opinion on the merits of the plaintiffs' notice or substantive claims at this time, because the plaintiffs have not yet exhausted their administrative remedies as to those claims.

(d) The Court of Appeals cited two Georgia cases to support its conclusion that the plaintiffs were entitled to bypass DCH's administrative review process entirely and proceed directly to court to obtain a ruling on the merits of their notice and substantive claims. See Chatham County Bd. of Tax Assessors v. Emmoth, 278 Ga. 144, 598 S.E.2d 495 (2004); Fulton–DeKalb Hosp. Auth. v. Metzger, 203 Ga.App. 595, 417 S.E.2d 163 (1992). Emmoth and Metzger, however, involved aggrieved parties who sought administrative review of their claims, at least initially, before filing a lawsuit. See Emmoth, 278 Ga. at 145, 598 S.E.2d 495; Metzger, 203 Ga.App. at 597, 417 S.E.2d 163. Indeed, in Metzger, the hospital authority's agent advised the plaintiff that no further administrative review was available. See 203 Ga.App. at 597, 417 S.E.2d 163. By contrast, the plaintiffs here did not submit any of the claims alleged in their complaint to the formal DCH administrative review process, and there is no allegation that the defendants told them that such claims could not be considered in that process.

In addition, in Emmoth, unlike in this case, there is no indication that the agency disputed that it had failed to give proper notice; moreover, the remedy in Emmoth was not to allow the trial court to decide the ultimate merits of the taxpayer's preferential assessment claim, but rather to send that matter back to the Board of Tax Assessors to determine in the first instance. See id. at 146, 598 S.E.2d 495. To the extent that Emmoth may be read to suggest that a plaintiff need not exhaust administrative remedies whenever an administrative body has given her a notice of its decision without including statutorily required language regarding how to seek further administrative review of that decision, it is hereby disapproved.⁸

(e) For all of these reasons, we conclude, contrary to the Court of Appeals, that the plaintiffs were required to present their claims regarding improper notice of rate reductions and service limitations to DCH for administrative review before filing this lawsuit.

Judgment reversed.

NAHMIAS, Justice.

All the Justices concur.