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06/21/2019 09:08 AM CDT




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                                  Nebraska Supreme Court A dvance Sheets
                                          303 Nebraska R eports
                                                 TRAN v. STATE
                                                Cite as 303 Neb. 1




                               A nn Tran, appellant, v. State of Nebraska
                               and Nebraska Department of H ealth and
                                  Human Services, Division of Medicaid
                                    and Long -Term Care, appellees.
                                                 ___ N.W.2d ___

                                        Filed May 3, 2019.   No. S-17-1303.

                 1. Administrative Law: Judgments: Appeal and Error. A judgment or
                    final order rendered by a district court in a judicial review pursuant to
                    the Administrative Procedure Act may be reversed, vacated, or modified
                    by an appellate court for errors appearing on the record.
                 2. ____: ____: ____. When reviewing an order of a district court under
                    the Administrative Procedure Act for errors appearing on the record, the
                    inquiry is whether the decision conforms to the law, is supported by com-
                    petent evidence, and is neither arbitrary, capricious, nor unreasonable.
                 3. Judgments: Appeal and Error. An appellate court, in reviewing a dis-
                    trict court’s judgment for errors appearing on the record, will not substi-
                    tute its factual findings for those of the district court where competent
                    evidence supports those findings.
                 4. Administrative Law: Statutes. Agency regulations properly adopted
                    and filed with the Secretary of State of Nebraska have the effect of
                    statutory law.
                 5. Statutes: Appeal and Error. Statutory language is to be given its plain
                    and ordinary meaning, and an appellate court will not resort to inter-
                    pretation to ascertain the meaning of statutory words which are plain,
                    direct, and unambiguous.
                 6. Administrative Law: Presumptions: Proof. When challenging the
                    decision of an administrative agency, the presumption under Nebraska
                    law is that the agency’s decision was correct, with the burden of proof
                    upon the party challenging the agency’s actions.
                 7. Administrative Law: Medical Assistance. The Department of Health
                    and Human Services may impose sanctions against a Medicaid service
                    provider for (1) presenting any false claim for services for payment,
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               Nebraska Supreme Court A dvance Sheets
                       303 Nebraska R eports
                                  TRAN v. STATE
                                 Cite as 303 Neb. 1

      (2) failing to make available to the department records of services pro-
      vided to Medicaid clients when requested, and (3) breaching the terms
      of the Medicaid provider agreement.
 8.   ____: ____. Sanctions available to the Department of Health and Human
      Services for a Medicaid service provider violation include termination
      from the Medicaid program, suspension or withholding of payments,
      recoupment from future payments, or provider education.
 9.   ____: ____. The decision of the sanction to be imposed for a Medicaid
      service provider violation is left to the discretion of the director of the
      Department of Health and Human Services.
10.   ____: ____. The director of the Department of Health and Human
      Services considers the following factors in determining an appropriate
      sanction for a Medicaid service provider violation: (1) seriousness of the
      offenses, (2) extent of violations, (3) history of prior violations, (4) prior
      imposition of sanctions, (5) prior provision of provider education, (6)
      provider willingness to comply with program rules, (7) whether a lesser
      sanction will be sufficient to remedy the problem, and (8) actions taken
      or recommended by peer review groups and licensing boards.
11.   Administrative Law: Courts: Appeal and Error. In a de novo review
      by a district court of the decision of an administrative agency, the level
      of discipline imposed by the agency is subject to the district court’s
      power to affirm, reverse, or modify the decision of the agency or to
      remand the case for further proceedings.

  Appeal from the District Court for Lancaster County: John
A. Colborn, Judge. Affirmed.
   Julie A. Jorgensen, of Morrow, Willnauer & Church, L.L.C.,
for appellant.
   Douglas J. Peterson, Attorney General, and Ryan C. Gilbride
for appellees.
  Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
  Funke, J.
  Ann Tran appeals the order of the district court for Lancaster
County affirming the decision of the Nebraska Department of
Health and Human Services (DHHS) to terminate her status as
a Medicaid service provider. We affirm.
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           Nebraska Supreme Court A dvance Sheets
                   303 Nebraska R eports
                          TRAN v. STATE
                         Cite as 303 Neb. 1

                         BACKGROUND
   Tran immigrated to the United States from Vietnam in 2002.
In 2015 and 2016, Tran provided personal assistance services
(PAS) to Nebraska Medicaid clients. Tran fulfilled a need for
service providers for elderly Vietnamese individuals, especially
due to her ability to speak Vietnamese.
   On October 7, 2016, DHHS issued a letter to Tran indicat-
ing that DHHS was conducting a review of Tran’s claims for
payment due to overlapping services and that her payments
under the Nebraska Medical Assistance Program, also known
as Medicaid, had been suspended pending the outcome of the
review. The letter stated that the review would be performed
“to ensure that funds are only spent on medically necessary and
appropriate services.” As part of the review, DHHS asked Tran
to submit documents, including service needs assessments and
authorizations for each client, monthly or weekly work logs,
and required billing forms. DHHS advised Tran to conduct a
self-audit on all services she provided from May 2015 through
October 7, 2016.
   At the conclusion of its investigation, DHHS determined
that Tran had overlapped services between clients and had
failed to provide DHHS documentation of her services. Based
on these failures to adhere to the standards for participation
in Medicaid, DHHS terminated Tran’s provider agreements
for good cause. On November 23, 2016, DHHS issued a let-
ter to Tran informing her of her permanent exclusion from the
Medicaid program, effective immediately.
   Tran timely appealed to DHHS. In her appeal request, Tran
admitted she may have overlapped services because of emer-
gency situations. She indicated that her work schedule required
flexibility in order to accommodate the special needs of her
clientele. Tran further admitted that she did not retain copies of
her weekly timesheets. Tran apologized and said that the audit
was a learning experience for her.
   An administrative hearing was held on March 15, 2017,
after which the DHHS director of the Division of Medicaid
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              Nebraska Supreme Court A dvance Sheets
                      303 Nebraska R eports
                              TRAN v. STATE
                             Cite as 303 Neb. 1

and Long-Term Care (Director) issued a written order affirm-
ing DHHS’ action. The Director found that Tran “billed for
overlapping services and when requested to present documents
to support billing admitted that she does not keep documenta-
tion.” The Director found that Tran’s actions were contrary to
the Medicaid regulations and that DHHS’ action was proper.
Tran timely filed a petition for review in district court pursu-
ant to the Administrative Procedure Act (APA), Neb. Rev. Stat.
§§ 84-901 to 84-920 (Reissue 2014 & Cum. Supp. 2016).
   On November 28, 2017, the district court entered an order
affirming DHHS’ decision to terminate Tran as a Medicaid
service provider. The court found that DHHS’ decision was
supported by the evidence and applicable authority. The court
rejected Tran’s argument that she was never informed that she
was required to retain records of the services she provided.
The court found that Tran’s (1) presentment of false claims for
payment, (2) failure to make available to DHHS her records
of serv­ices, and (3) breach of the terms of her provider agree-
ments each constituted grounds for sanctions, and that the
sanction imposed of permanent exclusion from the Medicaid
program was within the Director’s discretion. Tran timely
appealed from the adverse decision of the district court. We
moved the appeal to our docket pursuant to our statutory
authority to regulate the caseloads of the appellate courts of
this State.1
                  ASSIGNMENTS OF ERROR
   Tran assigns, restated and consolidated, that the district
court erred in (1) finding that Tran billed for overlapping serv­
ices and (2) affirming DHHS’ excessive sanction of permanent
exclusion from the Medicaid program.
                  STANDARD OF REVIEW
   [1-3] A judgment or final order rendered by a district court
in a judicial review pursuant to the APA may be reversed,

1
    See Neb. Rev. Stat. § 24-1106 (Cum. Supp. 2018).
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              Nebraska Supreme Court A dvance Sheets
                      303 Nebraska R eports
                                TRAN v. STATE
                               Cite as 303 Neb. 1

vacated, or modified by an appellate court for errors appear-
ing on the record.2 When reviewing an order of a district court
under the APA for errors appearing on the record, the inquiry
is whether the decision conforms to the law, is supported
by competent evidence, and is neither arbitrary, capricious,
nor unreasonable.3 An appellate court, in reviewing a district
court’s judgment for errors appearing on the record, will not
substitute its factual findings for those of the district court
where competent evidence supports those findings.4
                          ANALYSIS
   Tran argues on appeal that (1) the court’s finding that Tran
billed for overlapping services is not based on competent evi-
dence and (2) DHHS’ sanction to permanently exclude Tran
from the Medicaid program is arbitrary and capricious.
   [4,5] Agency regulations properly adopted and filed with
the Secretary of State of Nebraska have the effect of statutory
law.5 Statutory language is to be given its plain and ordinary
meaning, and we will not resort to interpretation to ascertain
the meaning of statutory words which are plain, direct, and
unambiguous.6
   Medicaid is administered by DHHS.7 DHHS is required
by state and federal law to review activities related to the
kind, amount, and frequency of Medicaid services billed to
ensure that funds are spent only for medically necessary and

2
    Leon V. v. Nebraska Dept. of Health & Human Servs., 302 Neb. 81, 921
    N.W.2d 584 (2019); J.S. v. Grand Island Public Schools, 297 Neb. 347,
    899 N.W.2d 893 (2017).
3
    Leon V., supra note 2.
4
    Id.; Lingenfelter v. Lower Elkhorn NRD, 294 Neb. 46, 881 N.W.2d 892
    (2016).
5
    See, Leon V., supra note 2; Merie B. on behalf of Brayden O. v. State, 290
    Neb. 919, 863 N.W.2d 171 (2015).
6
    Id.
7
    Neb. Rev. Stat. § 68-908(1) (Reissue 2018); 471 Neb. Admin. Code, ch. 1,
    § 001.01 (2009).
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              Nebraska Supreme Court A dvance Sheets
                      303 Nebraska R eports
                              TRAN v. STATE
                             Cite as 303 Neb. 1

appropriate services.8 Medicaid covers PAS under the program
guidelines and limitations.9 Medicaid PAS are typically pro-
vided in a client’s home.10 These services include, for example,
providing assistance with hygiene, toileting, mobility, nutrition,
and medications.11
   To be eligible to participate in Medicaid, each provider
must have an approved service provider agreement (SPA) with
DHHS.12 Each PAS provider must adhere to the provider stan-
dards listed in the SPA.13 DHHS may terminate a provider’s
SPA for failing to meet the conditions of the agreement.14 By
signing the SPA, a provider agrees to:
         1. Fully meet standards established by the federal
      Department of Health and Human Services, and any
      applicable state and federal laws governing the provision
      of their services;
         2. Provide services according to the regulations and
      procedures of [DHHS].
         ....
         6. Submit claims which are true, accurate, and com-
      plete; [and]
         7. Maintain records for all services provided for which
      a claim has been made, and furnish, on request, the
      records to [DHHS].15
   On July 8, 2015, Tran signed an SPA with DHHS. In doing
so, Tran agreed to comply with applicable DHHS regula-
tions, policies, and procedures. Tran assured that she would

 8
     471 Neb. Admin. Code, ch. 1, § 004.03 (2003).
 9
     471 Neb. Admin. Code, ch. 1, § 002 (2009).
10
     See, 42 C.F.R. 440.167(a)(3) (2018); 471 Neb. Admin. Code, ch. 15,
     § 001.02 (2004).
11
     471 Neb. Admin. Code, ch. 15, § 003.01 (2004).
12
     471 Neb. Admin. Code, ch. 2, § 001.03 (2015).
13
     471 Neb. Admin. Code, ch. 15, § 006.01 (2013).
14
     471 Neb. Admin. Code, ch. 2, § 001.03.
15
     Id.
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                Nebraska Supreme Court A dvance Sheets
                        303 Nebraska R eports
                                   TRAN v. STATE
                                  Cite as 303 Neb. 1

document and retain records “to fully disclose the extent of
the services provided to support and document all claims, for
a minimum period of six years,” and allow “[state] offices
responsible for program administration or audit to review serv­
ices records.” Tran executed an addendum to the agreement in
which she agreed to provide PAS for Medicaid recipients and
assured that she would “bill only for services which are autho-
rized and actually provided.” On July 17, 2016, Tran electroni-
cally signed and submitted a new SPA, in which she agreed to
adhere to all conditions of the Nebraska Medicaid regulations
and acknowledged that she may be terminated from the pro-
gram if any of the conditions were violated. From May 2015
through October 2016, Tran provided PAS to Medicaid clients
pursuant to the DHHS-approved agreements and submitted cer-
tified timesheets in support of claims for payment.

                    Competent Evidence of
                     Overlapping Services
   Tran argues the court’s determination that she billed for
overlapping services is not supported by the record. She claims
that she provided her clients services for the full number of
hours that were authorized. She argues that DHHS initiated the
audit based on inaccurate information and that DHHS failed to
account for its “mistaken belief” prior to terminating Tran as a
Medicaid service provider.16
   The administrative record established that DHHS’ investi-
gation of Tran began based on a concern that Tran had over-
lapped her Medicaid service hours with other employment.
Tran worked as a substitute teacher at Lincoln Public Schools
(LPS) on an on-call basis. On September 30, 2016, DHHS’
program integrity unit received a fraud referral concerning
Tran’s billing practices. The record showed that, for example,
Tran submitted claims to DHHS for providing PAS to Medicaid
clients on September 24, 2015, from 8 a.m. to noon and 12:30

16
     Brief for appellant at 11.
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           Nebraska Supreme Court A dvance Sheets
                   303 Nebraska R eports
                         TRAN v. STATE
                        Cite as 303 Neb. 1

to 3:30 p.m. Yet, Tran’s payroll information at LPS showed
that she worked on September 24 from 8:15 a.m. to 3:45 p.m.
DHHS submitted audit documents into the record which iden-
tified 41 instances, from September 2015 through September
2016, in which Tran overlapped Medicaid service hours with
hours worked at LPS.
    Upon learning of DHHS’ investigation, Tran contacted
DHHS’ program integrity investigator to inform her that LPS’
payroll information did not accurately reflect the hours that
Tran had actually worked at LPS. Prior to the hearing, a human
resources official for LPS submitted an affidavit informing
DHHS of LPS’ payroll practices. The official explained that
“[w]hen a substitute works 3.75 hours or more it is reflected
as a full day on payroll. The time entries displayed on the
payroll summaries for our substitutes are therefore not neces-
sarily accurate as to the employee’s actual hourly schedule.”
In addition, a substitute at LPS receives a full day of payment
even if the need for the substitute is canceled, and the payroll
system would not reflect that a payment had been made for a
canceled assignment. On cross-examination, the investigator
admitted this meant that portions of DHHS’ audit documents
which reflected the hours that Tran worked at LPS were
not accurate.
    Separate from Tran’s employment with LPS, DHHS identi-
fied several other instances in which Tran had billed for serv­
ices which overlapped between Medicaid clients. For example,
DHHS’ audit documents showed that in September 2015, Tran
overlapped services between clients M.D. and X.C. for a period
of at least 4 hours once a week for 4 consecutive weeks. Tran
similarly overlapped services between clients for periods of
between 2 and 4 hours on a weekly basis in October 2015.
Although less frequent and for shorter periods of time, the
record shows instances that Tran overlapped services between
clients in November and December 2015 and in January,
February, May, and September 2016. These instances were
unrelated to Tran’s employment with LPS.
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              Nebraska Supreme Court A dvance Sheets
                      303 Nebraska R eports
                              TRAN v. STATE
                             Cite as 303 Neb. 1

   Tran testified that she had a practice of completing her
service provider timesheets approximately 1 week prior to
actually providing services to clients. She admitted that after
she provided the services, she did not correct the billing docu-
ments prior to submitting them. As a result, the timesheets
Tran submitted to DHHS were not an accurate reflection of
the time periods she actually provided services to Medicaid
clients. Tran testified that the timesheets accurately stated the
total number of hours that she worked, but were based on an
estimated schedule.
   In evaluating Tran’s appeal, both DHHS and the district
court declined to consider the billing time that overlapped
between Tran’s Medicaid and LPS work. DHHS’ decision to
exclude Tran from participating as a Medicaid service pro-
vider was instead based, in part, on “overlapping services
between clients.” The district court affirmed and stated that
irrespective of Tran’s employment at LPS, “there were several
other instances where [Tran] overlapped services for Medicaid
clients.”
   [6] When challenging the decision of an administrative
agency, the presumption under Nebraska law is that the agen-
cy’s decision was correct, with the burden of proof upon the
party challenging the agency’s actions.17 Tran disputed that
there was any factual overlap in services provided. She testi-
fied that she provided all of the hours that were authorized to
each of her clients, provided additional hours free of charge,
and even after the audit continued to provide services to her
clients without pay. Each of her four Medicaid clients sub-
mitted affidavits stating that “[Tran] always completed the
allotted number of hours for me even if the actual times the
services were provided were slightly different than what was
scheduled.” Although this evidence supports Tran’s position,
Tran has not proved that the district court failed to base its

17
     Gridiron Mgmt. Group v. Travelers Indemnity Co., 286 Neb. 901, 839
     N.W.2d 324 (2013).
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               Nebraska Supreme Court A dvance Sheets
                       303 Nebraska R eports
                               TRAN v. STATE
                              Cite as 303 Neb. 1

decision on competent evidence. The court articulated in its
order that it considered Tran’s evidence and determined that
her evidence was “outweighed by the evidence of overlap-
ping services and inaccurate service provider timesheets in
the record.”
   Tran’s explanations as to why her billing timesheets showed
that she overlapped services do not withstand scrutiny. Her
testimony was that she filled out her timesheets in advance
based on an estimated schedule. Accepting Tran’s testimony
as true, the timesheets should not have shown any overlapping
of serv­ices. The impact of Tran’s overlapped billing is that she
billed for work that was not performed, because she could not
have provided services to two clients in different locations at
the same time. Tran argued that her clients were elderly and
that servicing two clients within the same timeframe was nec-
essary in emergency situations. However, the PAS regulations
indicate the correct response to an emergency is to locate tem-
porary coverage when unable to provide services as scheduled,
not to submit bills for both clients.18
   In short, Tran agreed to comply with DHHS’ billing stan-
dards and practices, Tran did not comply with these conditions,
and Tran admitted in her testimony and briefs that she did not
comply with these conditions. As a result, we must conclude
that the district court’s factual findings that Tran submitted
bills which overlapped services between Medicaid clients is
supported by competent evidence in the record. Moreover, the
record contains independent grounds for terminating Tran’s
SPA’s based on her complete failure to maintain required
records and submit those records to DHHS upon request,
which Tran does not challenge on appeal. Tran’s first assign-
ment of error is without merit.
                Evidence Supported Sanction
   [7-10] DHHS may impose sanctions against a provider for
(1) presenting any false claim for services for payment, (2)

18
     See 471 Neb. Admin. Code, ch. 15, § 006.05 (2005).
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              Nebraska Supreme Court A dvance Sheets
                      303 Nebraska R eports
                               TRAN v. STATE
                              Cite as 303 Neb. 1

failing to make available to DHHS records of services pro-
vided to Medicaid clients when requested, and (3) breaching
the terms of the Medicaid provider agreement.19 The sanctions
available to DHHS include termination from the Medicaid
program, suspension or withholding of payments, recoupment
from future payments, or provider education.20 The decision
of the sanction to be imposed is left to the discretion of the
Director.21 The Director considers the following factors in
determining an appropriate sanction: (1) seriousness of the
offenses, (2) extent of violations, (3) history of prior viola-
tions, (4) prior imposition of sanctions, (5) prior provision of
provider education, (6) provider willingness to comply with
program rules, (7) whether a lesser sanction will be sufficient
to remedy the problem, and (8) actions taken or recommended
by peer review groups and licensing boards.22
   DHHS must notify the provider at least 30 days before the
effective date of the sanction, unless extenuating circumstances
exist, and shall give the provider an opportunity to submit
additional information or to appeal the sanction.23 The provider
must file the appeal within 30 days of the date of the notice of
the sanction.24 When a sanction is imposed, DHHS shall give
general notice to the public of the restriction, its basis, and
its duration.25
   Tran argues that DHHS abused its discretion in permanently
excluding Tran from the Medicaid program. Tran contends that
there was no intent to deceive DHHS and that she fully cooper-
ated with the audit and wanted to bring her billing records into
compliance. She argues that under the circumstances, DHHS

19
     471 Neb. Admin. Code, ch. 2, § 002.03 (2015).
20
     471 Neb. Admin. Code, ch. 2, § 002.04A (2015).
21
     471 Neb. Admin. Code, ch. 2, § 002.05 (2015).
22
     Id.
23
     Id.
24
     Id.
25
     Id.
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                      303 Nebraska R eports
                              TRAN v. STATE
                             Cite as 303 Neb. 1

should have considered lesser sanctions such as requiring pro-
vider education.
   As indicated, on an appeal from an order of the district
court under the APA, we review the court’s decision for errors
appearing on the record. Our inquiry is whether the court’s
decision is supported by competent evidence and the law, and
is neither arbitrary, capricious, nor unreasonable. Here, the dis-
trict court concluded that permanently excluding Tran from the
Medicaid program was an appropriate sanction based on the
applicable law and facts in evidence.
   [11] We agree that the sanction imposed against Tran was
harsh, and that under the circumstances, we may have imposed
a different sanction. However, it is not for this court to fashion
the sanction in the first instance and we recognize that reason-
able people may disagree regarding the appropriate sanction
to impose. As we addressed in Prokop v. Lower Loup NRD,26
a district court’s de novo review extends to the entirety of
an administrative order, and a district court in reviewing an
administrative order is required to make independent factual
determinations and reach independent conclusions with respect
to the matters at issue. In a de novo review by a district court
of the decision of an administrative agency, the level of disci-
pline imposed by the agency is subject to the district court’s
power to affirm, reverse, or modify the decision of the agency
or to remand the case for further proceedings.27 Accordingly,
pursuant to its de novo review, the district court had the abil-
ity to modify the sanction imposed, but concluded the sanction
imposed was supported by the evidence.
   However, our review is limited to reviewing an order of
a district court under the APA for errors appearing on the
record; the inquiry is whether the decision conforms to the
law, is supported by competent evidence, and is neither arbi-
trary, capricious, nor unreasonable; and we will not substitute

26
     Prokop v. Lower Loup NRD, 302 Neb. 10, 921 N.W.2d 375 (2019).
27
     See Rainbolt v. State, 250 Neb. 567, 550 N.W.2d 341 (1996).
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                       303 Nebraska R eports
                                 TRAN v. STATE
                                Cite as 303 Neb. 1

our factual findings for those of the district court where
competent evidence supports those findings.28 Therefore, we
find that the district court reasonably concluded the sanction
was supported by the evidence and that the sanction was not
so disproportionate to rise to the level of arbitrary or capri-
cious action.
   Tran is correct that DHHS chose to implement one of the
most serious sanctions within its authority by terminating her
participation in Medicaid. Though DHHS did not discuss the
factors that it considered in determining the sanction, based
on the record, it is evident that DHHS gave significant consid-
eration to the extent of Tran’s violations. It is undisputed that
Tran failed to properly record the times she worked for specific
clients which resulted in overlapping billings. Tran admitted
that she received nearly $880 in overpayments. Further, Tran
failed to maintain proper billing records that were generated
throughout her time as a service provider. As a result, Tran was
unable to provide DHHS copies of the records when requested.
The lack of recordkeeping made it impossible for Tran to con-
duct the self-audit required by DHHS as part of its review. It
was not unreasonable for DHHS to consider these failures to
adhere to the requirements under the SPA and DHHS regula-
tions as grounds for expulsion from the program.29
   While Tran indicated a willingness to comply with program
rules, the evidence is clear that Tran did not comply. Tran
argued throughout this process that she was unaware of the
billing requirements and that she knew of other service provid-
ers who did not follow the requirements. However, the SPA
and DHHS regulations clearly set forth Tran’s duty to comply
and the record shows that Tran was aware that breaching the
terms of her agreements could result in her termination. It

28
     Leon V., supra note 2.
29
     See, e.g., Siddiqui v. Com’r, N.Y. State DSS, 170 A.D.2d 922, 566 N.Y.S.2d
     970 (1991); Matter of Camperlengo v. Perales, 120 A.D.2d 883, 502
     N.Y.S.2d 310 (1986).
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would not be unreasonable for DHHS to evaluate the evidence
of Tran’s billing practices and recordkeeping and conclude that
it would be best if Tran no longer participated in the program.
Even though Tran is correct that DHHS could have imposed
education requirements on Tran rather than terminate her serv­
ices, the regulations do not mandate that any particular form
of sanction be imposed against a service provider who fails to
comply with program standards.
   We emphasize the highly deferential standard of review
applicable to the Director’s decision of the appropriate sanc-
tion. As explained, we do not find the district court’s affirm­
ance of the sanction imposed by DHHS to be arbitrary, capri-
cious, or unreasonable. We will not require DHHS to continue
to contract with service providers who have failed to comply
with the requirements of the Medicaid program. This assign-
ment of error is without merit.
                      CONCLUSION
  We affirm the decision of the district court.
                                                   A ffirmed.
