NCGS 108C-7 Violates Federal Law

North Carolina health care providers are being placed on prepayment review.  A prepayment review is when Program Integrity (PI) withholds Medicaid reimbursements from a health care provider until the provider can show 3 consecutive months of at least 70% accuracy rates.  So far there have been boundless errors on the part of the Division of Medical Assistance (DMA) and its agents.

But what about the actual North Carolina General Statute that allows prepayment reviews? Was the statute written in accordance with federal law?


NCGS 108C-5 states, “(a) The Department may suspend payments to a provider in accordance with the requirements and procedures set forth in 42 C.F.R. § 455.23. ”

42 C.F.R. 455.23 states:

(a) Basis for suspension. (1) The State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud for which an investigation is pending under the Medicaid program against an individual or entity unless the agency has good cause to not suspend payments or to suspend payment only in part.
(2) The State Medicaid agency may suspend payments without first notifying the provider of its intention to suspend such payments.
(3) A provider may request, and must be granted, administrative review where State law so requires.
NCGS 108C-7 states:

(f) The decision to place or maintain a provider on prepayment claims review does not constitute a contested case under Chapter 150B of the General Statutes. A provider may not appeal or otherwise contest a decision of the Department to place a provider on prepayment review. (2011-399, s. 1.)

Ok, so the federal law states an administrative hearing must be allowed “where State law so requires.”  North Carolina does not allow for an administrative hearing.

North Carolina is allowed to not allow for an administrative decision, right? Not if North Carolina wants to follow 42 CFR 455.23 is its entirety.

42 CFR 455.23 also states:

(c) Duration of suspension. (1) All suspension of payment actions under this section will be temporary and will not continue after either of the following:
(i) The agency or the prosecuting authorities determine that there is insufficient evidence of fraud by the provider.
(ii) Legal proceedings related to the provider’s alleged fraud are completed.
Legal proceedings?
Also in 42 CFR 455.23:
(2) The notice must include or address all of the following:
(i) State that payments are being suspended in accordance with this provision.
(ii) Set forth the general allegations as to the nature of the suspension action, but need not disclose any specific information concerning an ongoing investigation.
(iii) State that the suspension is for a temporary period, as stated in paragraph (c) of this section, and cite the circumstances under which the suspension will be terminated.
(iv) Specify, when applicable, to which type or types of Medicaid claims or business units of a provider suspension is effective.
(v) Inform the provider of the right to submit written evidence for consideration by State Medicaid Agency.
(vi) Set forth the applicable State administrative appeals process and corresponding citations to State law.
If the federal government did not intend for an appeal process or intend that a state could disallow an appeal process, the federal government would not have written so many subsections into federal regarding appeal processes.
What if “where state law allows” actually means “the venue that is allowed under state law,” NOT “if state law allows.”
It is important to note that the states must follow all of Section A, 42 CFR 455.  After reading the entire section I am convinced that the federal government intended for an appeal process.
42 CFR 455.13 states:
Methods for identification, investigation, and referral.
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.
[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3755, Jan. 27, 1983]
Placing a provider on prepayment review with no due process is an obvious infringement on the legal rights of the persons involved.  Federal law did not allow a state to simply not allow a provider appeal rights. On the contrary, federal law makes it very clear in numerous places that an appeal process SHOULD be in place.
Yet NC does not allow a provider to appeal prepayment review status.
Righting this wrong will take challenging the legality of NCGS 108C-7.  Who’s with me??

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on March 14, 2013, in Division of Medical Assistance, Federal Law, Health Care Providers and Services, Legal Analysis, Legislation, Medicaid, Medicaid Appeals, NC DHHS, NCGS 108C-7, Prepayment Review and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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