Whether the DHHS had the authority to conduct inventory reconciliation audits; Subsection 19.2 of the Pharmacy Chapter of the Michigan Medicaid Provider Manual (MPM); Office of Inspector General (OIG); Administrative Law Judge (ALJ)

Holding that the trial court erred in determining that respondent-DHHS does not have the authority to conduct inventory reconciliation audits, the court reversed and remanded. OIG notified petitioner (which operated a pharmacy) “it owed an overpayment Medicaid had made to petitioner in the amount of $803,961.86.” The ALJ upheld the overpayment amount. The Director of the DHHS affirmed. Petitioner appealed. “In reversing the final order, the trial court found that an agency’s ability to conduct an inventory reconciliation audit is derived from Subsection 19.2,” and the DHHS-OIG “did not have the authority to order the production of certain documents under Subsection 19.2.” The court held the “trial court applied incorrect legal principles when it erroneously concluded the audit at issue was not based in law, and the trial court misapplied its own standard of review in rejecting” the DHHS’s decision. Thus, it reversed the determination “of the trial court finding that OIG’s authority to conduct inventory reconciliation audits is derived from and limited to Subsection 19.2.”