NC Medicaid Contracts: Terminable at Will…or Are They?

During opening arguments during a recent Injunction Hearing against NC Department of Health and Human Services (DHHS), opposing counsel argued that the NC Medicaid contract is terminable at will.

Meaning, if DHHS felt the desire, it could terminate, for whatever reason, every single health care provider accepting Medicaid from the Medicaid contract except one.  And allow one provider to be the Medicaid service monopoly, (I know, drastic example, but if the Medicaid contract is truly terminable at will, the example is plausible), none of the terminated providers could appeal, and, even worse, none of the Medicaid recipients all of a sudden discharged by their providers would have any recourse.

I felt obliged to research.

According to 10A NCAC 22F.0605, “All provider contracts with the North Carolina State Medicaid Agency are terminable at will.  Nothing in these Regulations creates in the provider a property right or liberty right in continued participation in the Medicaid program.”

Snap! Very harsh!

Yet I did not stop at this NC Code.  Sometimes, not all the time, but sometimes, states do not always enact Codes that follow federal law. So I continued.

According to the History Note of 10A NCAC 22F.0605, the aforementioned Code is based on authority from 42 CFR Part 455.  Hmmmm…Federal law.

422 CFR § 455.13   “Methods for identification, investigation, and referral,” states:

The Medicaid agency must have—

(a) Methods and criteria for identifying suspected fraud cases;

(b) Methods for investigating these cases that—

(1) Do not infringe on the legal rights of persons involved; and

(2) Afford due process of law; and

(c) Procedures, developed in cooperation with State legal authorities, for referring suspected fraud cases to law enforcement officials.

The phrases that should have jumped out to you are “infringe on the legal rights,” and “due process.”  These phrases should have jumped out at you, despite the fact that I italicized them.

But, but, but…. the NC Code specifically stated that providers do not have a property right or liberty right in participation with the Medicaid program!!

Folks, let me tell you a secret.  When state law flies in the face of federal law, federal law wins.  Why?  Ask our Founding Fathers.

Article VI of the U.S. Constitution states, in pertinent part:

This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.

Notwithstanding 42 CFR Part 455.13’s language, Part 455.106 explains certain circumstances in which the Medicaid agency MAY terminate a provider, such as nondisclosure of conviction of a criminal offense.  The fact that 42 CFR Part 455  times in which the Medicaid agency MAY terminate providers inherently indicates that the Medicaid contracts are not terminable at will.

Of course, in order to legally determine whether 10A NCAC 22F.0605 violates federal law, someone would need to bring a lawsuit, or declaratory judgment.

But, until that occurs, I think I have a great argument that the termination of a providers’ Medicaid contract, without a hearing, does constitute a taking without due process.


About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on March 5, 2013, in Federal Law, Health Care Providers and Services, Legal Analysis, Legislation, Medicaid, Medicaid Appeals, Medicaid Contracts, North Carolina and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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