Overpayment Recovery Requires an Independent Legal Bar at the Time of Payment; PCA Choice Care Plans Must Be Kept in Agency Files

Introduction

In In the Matter of the SIRS Appeal by Best Care, LLC (Minn. Oct. 15, 2025), the Minnesota Supreme Court resolved two consequential questions for the state’s Medical Assistance (Medicaid) oversight regime:

• What DHS must prove to recover money under Minn. Stat. § 256B.064, subd. 1c(a), when an audit uncovers documentation defects; and
• Whether personal care assistance (PCA) provider agencies must retain copies of care plans for recipients who choose the PCA Choice model.

The case arose after DHS’s Surveillance and Integrity Review Section (SIRS) sought over $420,000 from Best Care, a PCA provider agency, following a post-payment audit of claims from September–December 2018. DHS characterized six categories of recordkeeping problems—ranging from missing timesheets and care plans to timesheets lacking required elements—as “abuse” under Minn. Stat. § 256B.064, subd. 1a, and pursued monetary recovery under subd. 1c(a).

The opinion delivers two major holdings. First, proof of “abuse” alone does not entitle DHS to monetary recovery; DHS must also show that, at the time of payment, another statute or valid regulation independently barred payment for the services at issue (or that an error caused the vendor to receive more than authorized). Second, even for PCA Choice participants, the provider agency must keep the recipient’s current care plan in the agency’s file and the home—resolving a long-standing conflict in the PCA statute.

Summary of the Opinion

• Monetary recovery under § 256B.064, subd. 1c(a): DHS must prove two things:
  1. That the vendor engaged in conduct described in subd. 1a (e.g., “abuse” such as failing to maintain required health service records) or that a vendor/department error occurred; and
  2. That the vendor was “improperly paid as a result of” that conduct or error. The Court interprets this to mean either:
     • (a) Had DHS known of the conduct before payment, it would have been legally prohibited from paying by some statute or valid regulation independent of subd. 1a; or
     • (b) A vendor or department error caused the vendor to receive more than permitted by law (e.g., a numerical overpayment).
  The Court rejects DHS’s position that showing subd. 1a “abuse” alone suffices for recovery and remands to the court of appeals to apply this causation/legal-prohibition standard to each error category.
• Care-plan retention for PCA Choice: Under Minn. Stat. § 256B.0659, subd. 7(a), a copy of the current PCA care plan must be kept both in the recipient’s home and in the provider agency’s file, including for PCA Choice recipients. This specific care-plan rule controls over the more general documentation rule in subd. 28 that otherwise allows documentation to be kept in the agency file or the home. Failing to keep PCA Choice care plans in the agency file is “abuse” under § 256B.064, subd. 1a.
• Disposition: Affirmed in part, reversed in part, and remanded. The “dual-location” care-plan holding is affirmed; the monetary-recovery orders are remanded for analysis under the newly announced standard.

Analysis

1) Precedents and Authorities Cited and How They Shaped the Decision

• In re SIRS Appeal by Nobility Home Health Care, Inc., 999 N.W.2d 843 (Minn. 2024): Nobility held that “failure to maintain health service records as required by law” is “abuse” under § 256B.064, subd. 1a(1), and clarified that overpayment recovery is not itself a “sanction.” Best Care builds directly on Nobility’s premise—accepting that Best Care’s documentation deficiencies constitute “abuse”—but goes further by defining what DHS must prove to obtain monetary recovery for that abuse. The Court explicitly answers a question Nobility left open: proving abuse is not enough for recoupment under subd. 1c(a).
• Statutory-interpretation cases: The Court deploys core canons to construe § 256B.064, subd. 1c(a):
  • Anti-surplusage and whole-text reading: State v. Thompson, 950 N.W.2d 65 (Minn. 2020); Allan v. R.D. Offutt Co., 869 N.W.2d 31 (Minn. 2015). The phrase “improperly paid … as a result of” must be given independent meaning; it cannot be read away as mere description.
  • Text, structure, and tense: Hagen v. Steven Scott Mgmt., Inc., 963 N.W.2d 164 (Minn. 2021) (structure matters); State v. Schmid, 859 N.W.2d 816 (Minn. 2015) (verb tense significance). The past-tense “paid” directs attention to whether the payment should have been made when it was made.
  • Expressio unius / negative implication across provisions: Cambria Co., LLC v. M&M Creative Laminants, Inc., 11 N.W.3d 318 (Minn. 2024). Where the Legislature uses causation language in subd. 1c but not in subd. 3(d), courts cannot ignore that difference.
  • Harmonization and specific-controls-general: State by Smart Growth Mpls. v. City of Minneapolis, 954 N.W.2d 584 (Minn. 2021); Connexus Energy v. Comm’r of Revenue, 868 N.W.2d 234 (Minn. 2015). These canons guide the care-plan holding: subd. 7(a)’s specific care-plan rule controls over subd. 28’s general documentation placement rule.
• Medicaid framework: The opinion situates Minnesota’s Medical Assistance within federal Medicaid law (e.g., 42 U.S.C. § 1396b(d)(2)(C) one-year recoupment effects) and state regulatory obligations (Minn. R. 9505.2165, 9505.2175), emphasizing that “conditions of payment” can be set by validly promulgated rules.

2) The Court’s Legal Reasoning

A. The meaning of “improperly paid … as a result of” in § 256B.064, subd. 1c(a)

The Court reads the text as containing a distinct causation element: DHS must show not only sanctionable conduct (or error), but that the payment was improper because of that conduct/error. The Court rejects DHS’s attempt to treat any payment following “abuse” as ipso facto improper. Doing so would erase “as a result of” and collapse subd. 1c(a) into subd. 1a—contrary to the statute’s structure distinguishing sanctions (subds. 1a–1b) from monetary recovery (subd. 1c).

The Court likewise declines the court of appeals’ looser “funds in excess of entitlement” shorthand as the sole yardstick. Instead, it anchors the analysis to the lawfulness of the payment at the time it was made, and it requires an independent legal source (other than subd. 1a) that would have barred payment had DHS known the facts then.

The resulting rule:

• Path 1: Proscribed conduct + independent legal prohibition at time of payment. DHS must prove:
  • (i) the vendor engaged in conduct described in subd. 1a (e.g., failure to maintain required health service records), and
  • (ii) had DHS known of the precise conduct before paying, a statute or validly promulgated regulation—independent of subd. 1a—would have legally prohibited DHS from making the payment at that time.
  Examples of potential independent prohibitions may include Minnesota Rules or statutes that designate certain documentation as a “condition for payment” (e.g., Minn. R. 9505.2175, subp. 1; Minn. Stat. § 256B.0659, subd. 12(a)), but the analysis is granular: the agency must tie the specific deficiency to a clear legal bar operative at the payment moment.
• Path 2: Vendor or department error produces an overpayment. If a payment error—intentional or not—caused the vendor to receive more than the law authorizes, DHS may recover the excess. The Court’s $25,000 vs. $52,000 hypothetical illustrates proportionality: DHS may recoup the $27,000 overage, not the entire sum.

Two important clarifications:

• The “had DHS known” formulation does not require actual contemporaneous knowledge, but it does require that the governing law—besides subd. 1a—would have barred payment under the true facts.
• Internal DHS policies or practices are not “statutes or valid regulations.” The prohibition must be grounded in positive law (statutes or duly promulgated rules).

B. Care-plan retention: subd. 7(a) (specific) controls over subd. 28 (general)

The PCA statute contains a facial conflict:

• Subd. 7(a): A copy of the current care plan is required in both the recipient’s home and the provider agency’s file.
• Subd. 28(a)(2)(iv): Required documentation is to be kept in the agency file or the recipient’s home.

Because the conflict cannot be harmonized reasonably, the Court applies the specific-controls-general canon. Subd. 7’s focus is the care plan in particular—its development, content, and placement; subd. 28 is a broad catalog of documentation categories and a general location rule. The specific mandate in subd. 7(a) therefore prevails: agencies must keep care plans in both locations for all PCA recipients, including PCA Choice.

The Court rejects the argument that PCA Choice displaces subd. 7(a). The “unless otherwise provided” clause in subd. 18(a) governs recipient duties, not provider agency file-keeping obligations; and nothing in subds. 18–19 excuses agencies from the dual-location care-plan rule. Policy sense supports the outcome: even as fiscal intermediaries, agencies must bill off timesheets that “correspond to” care plans, and without an in-file plan the agency cannot ensure claims accuracy.

3) Impact and Practical Implications

A. A new, bright-line recovery framework for DHS

• No automatic recoupment from “abuse” alone. DHS must connect the dots between the particular noncompliance and an independent legal prohibition on payment, operative at the time of payment. Alternatively, DHS must prove an error caused a dollar overage.
• Independent legal source matters. DHS cannot bootstrap subd. 1a’s “abuse” label into recoupment authority. Statutes and valid rules that explicitly make documentation a “condition of payment” will be crucial. Expect DHS and ALJs to scrutinize Minn. R. 9505.2165–.2185 and § 256B.0659’s payment predicates.
• Proportionality in error cases. Where the second prong applies (vendor/department error), recovery is limited to the amount in excess of what was authorized—not the entire claim.

B. Guidance for providers

• Care plans: Provider agencies must maintain current PCA care plans in their files and in recipients’ homes for all PCA recipients, including PCA Choice. Failure is “abuse” and can support sanctions and, under the new test, potentially monetary recovery if a valid rule made plan retention a condition of payment at the time.
• Timesheets and required elements: Because § 256B.0659, subd. 12(a)–(c) and Minn. R. 9505.2175 treat timesheet documentation as a condition of payment, DHS may argue that certain missing elements at the time of payment triggered a legal bar. Providers should ensure:
  • Arrival/departure times with a.m./p.m. designations;
  • Recipient and PCA identifying information and signatures;
  • Provider agency name/contact;
  • UMPI numbers when required.
  The Best Care opinion flags the “lose-lose” dynamic around UMPI issuance delays. On remand, whether these defects were payment-prohibitive will turn on the precise rule language and timing.
• Record access vs. payment validity: A failure to timely produce records during an audit may support sanctions for access violations, but recoupment still requires proving that, at the time of payment, law independently barred payment for the underlying services because of a documentation failure—not merely because production to auditors was late.

C. Litigation posture and agency practice

• Remand work: The court of appeals must apply the new standard to each of DHS’s six error categories:
  • Missing care plans (including PCA Choice);
  • Missing timesheets (later restored);
  • Care plans missing required elements (late signatures, missing data);
  • Timesheets missing required elements (e.g., UMPI), or altered post-service to add UMPI; and
  • Shared care mis-designations where the billing rate was not inflated.
  For each, the key questions will be: What statute or valid rule, independent of subd. 1a, made payment unlawful at the time? Or, alternatively, did an error cause a numeric overpayment?
• Rulemaking and guidance: DHS may seek to clarify “conditions of payment” via rulemaking, but any recovery must continue to rest on statutes or duly promulgated rules—not internal guidance.
• Federal one-year clock: Although not at issue here, DHS’s need to address overpayments within federal timelines (42 U.S.C. § 1396b(d)(2)(C)) will keep pressure on prompt, precise legal analysis of payment bars.

Complex Concepts Simplified

• Sanctions vs. Monetary Recovery:
  • Sanctions (subds. 1a–1b): Penalties (e.g., suspension, termination) based on proscribed conduct like “abuse.” No causal showing of payment impropriety is required.
  • Monetary Recovery (subd. 1c): DHS can take money back only if the vendor was “improperly paid as a result of” the conduct or error—meaning either an independent legal bar to payment existed at the time, or an error produced an overage.
• “Independent legal prohibition” at the time of payment: The payment was unlawful when made because a statute or validly promulgated regulation (not § 256B.064, subd. 1a itself) made payment contingent on a requirement that was unmet (e.g., a rule making specific documentation a condition of payment).
• UMPI timing problem: DHS testimony indicated PCAs may work while a UMPI is pending, but DHS cannot reimburse until the UMPI is assigned. If timesheets are submitted lacking UMPI, or later altered to add it, the question is whether any rule at the time of payment made payment unlawful, notwithstanding DHS’s own operational policies. Best Care sends this back for rule-based analysis.
• Specific-controls-general: When two provisions conflict, the one addressing the particular subject (care plans in subd. 7) governs over a more general provision (documentation placement in subd. 28).

Key Takeaways

• DHS cannot recover money under § 256B.064, subd. 1c(a) merely by proving “abuse.” It must also prove either an independent legal bar to payment existed when the claim was paid, or an error caused a dollar overage.
• Care plans must be kept in both the recipient’s home and the provider agency’s files for all PCA recipients, including PCA Choice. Failure is “abuse.”
• The court of appeals must now apply the new recovery standard to each category of Best Care’s documentation defects.
• Providers should tighten documentation and file-retention practices; DHS should ground recoupment demands in explicit statutes or rules that made the payments unlawful when paid.

Conclusion

Best Care is a pivotal clarification of Minnesota’s Medical Assistance recoupment law. It draws a bright line between sanctionable conduct and recoverable overpayments, insisting on a real legal link between a documentation defect and the legality of the underlying payment. At the same time, it resolves a statutory conflict that bedeviled PCA Choice practice: provider agencies must keep care plans in their files just as they do for traditional PCA recipients.

Going forward, DHS’s recoupment claims must do more than invoke “abuse.” They must identify the specific statute or valid rule (outside § 256B.064, subd. 1a) that made the payment unlawful at the time, or show an actual overpayment caused by error. Providers, for their part, should treat care-plan retention as a dual-location, non-negotiable obligation and align billing documentation meticulously with statutory and regulatory “conditions of payment.” As Minnesota transitions from PCA to CFSS, Best Care’s principles will continue to orient fair, lawful, and precise overpayment adjudication.