NC MCOs: The Judge, Jury and Executioner

If you have been following my blog, then you are aware of the trials and tribulations North Carolina mental health care providers are going through with the Division of Medical Assistance (DMA) and DMA’s lack of supervision of the Managed Care Organizations (MCOs).

It  is about to get worse.

On March 14, 2013, House Bill 320 was introduced. On March 18, 2013, the Bill passed its first reading.

Folks, if this Bill is passed, the consequences to mental health care providers accepting Medicaid and Medicaid recipients suffering mental illness will be catastrophic.

To read the proposed Bill in full, click here.

As currently written, House Bill 320 allows the MCOs to suspend Medicaid payments if the provider’s contract has been suspended or terminated. Guess who decided to suspend or terminate the Medicaid contracts? The MCOs. (Hence acting as a Judge)

The House Bill also allows the MCO to suspend the Medicaid reimbursements to ALL MEDICAID PROVIDER IDs ATTACHED TO THE SAME IRS EMPLOYEE ID NUMBER.  Literally, allowing the suspension to apply to all IRS Employee ID Numbers will put most health care providers out of business if the MCO arbitrarily decides to suspend the Medicaid contract.

The House Bill also instructs the MCOs to provide 30 days notice to the other IRS Employee ID Numbers, but NO APPEAL PROCESS.

Meaning, if an MCO suspends a Medicaid contract (for any reason at all, correct or incorrect), that MCO can suspend all payments to all IRS Employee ID Numbers of the provider. Plus, the provider has zero appeal rights. (Hence acting as the jury).

Here is an example of how the MCOs tyranny actually works (This is a true story):

Provider X provides wonderful and needed mental health services to three rural counties.  MCO enters.  MCO audits.  MCO determines that provider had a high amount of document inaccuracy. Now, most people with little understanding of the Medicaid policies and procedures will think, “Hmmm, Well the provider’s documentation was poor. Certainly the providers should be expected to maintain proper records.” The problem is that the audits are not conducted appropriately.

For example, Provider X is cited for:

  • failing to have prior authorization for a service that does not require prior authorization;
  • failing to submit a Person-Centered Plan (PCP) when a PCP is not required;
  • failing to obtain consent for treatment when the consent was provided by the legal guardian and the auditor is confused because the last names do not match.

Post-audit, Provider X received notification that its Medicaid contract was terminated and all Provider X’s clients would need to be discharged.  Provider X repeatedly requested reasons for termination.  Provider X contacts multiple people at MCO and DMA asking, “Please explain how my documents were out of compliance!” DMA says, “Talk to MCO; it wasn’t me.” Provider X says, “DMA has your company listed as not in good standing; talk to DMA; it wasn’t me.”

Provider has no appeal rights.  Provider does not know an attorney or that this process is even wrong.

Sadly, Provider X discharges the 400+ mentally ill children from Provider X’s care, fires all staff, and closes its doors. (Hence acting as the executioner).

All because the MCO had the authority to run this provider out of business.

This story actually has already happened.  But it is my contention that the MCOs and DMAs actions are against the law, and, generally abhorrent.

However, if this House Bill becomes law, the actions described above will be legal.

Now some may question why the MCOs would discharge health care providers from its networks. Isn’t in everyone’s best interest to have health care providers for the mentally ill?  While the answer to most people, I believe, would be, yes, we need mental health providers, riddle me this:

An MCO receives its funds for each fiscal year at the beginning of the year.  Essentially, the MCO is prepaid for all its services it will eventually authorize.

In fact, in a Brief recently filed by an attorney for an MCO, the attorney wrote, “Under XXX’s waivers, XXX is designated as a Prepaid Inpatient Health Plan (PIHP), which means it accepts the risk for providing that care…This arrangement creates an incentive for XXX to provide the most efficient and cost-effective care. Any cost savings generated by XXX as a result of providing efficient and cost-effective care allow it to provide additional medical care for Medicaid beneficiaries enrolled in the plan.”

That Brief was written in an attempt to refuse medically necessary services to a profoundly mentally handicapped Medicaid recipient.  The recipient’s doctor wrote a letter informing the MCO that  the recipient required 24–hour care due to the recipient’s severe handicaps.

Yet, despite the affirmation that the recipient required 24-hour care, the MCO refused to provide that care, stating “efficiency and cost-effectiveness.

The attorney for XXX was correct though. The financial arrangement creates an incentive for the MCOs: to provide less services, to have fewer providers in the network, and to increase the revenue for the MCO.

The proposed House Bill also states that the health care providers have no appeal rights for prepayment review, and goes on to state that OAH has no jurisdiction over the MCOs.

The Office of Administrative Hearings (OAH) is the venue for complaints against state agencies and its agents.  This is put into place due to the overwhelming congestion in the public court systems.  Last month, in OAH, 15,000 Medicaid recipients appealed the denials.  Imagine if all complaints against MCOs had to go to superior court…

But more than the congestion in courts, by stating that OAH does not have jurisdiction over the MCOs, the General Assembly is stating that DMA does not have control over the MCOs. Essentially, DMA is foregoing all authority regarding Medicaid mental health.  By MCOs being in charge, our Medicaid mental health system becomes runs by private companies. DMA is no longer involved.

And the language of the proposed House Bill is not ambiguous.  It states, in part:

(c)        The venue for all legal actions concerning a dispute between an LME/MCO and a provider or applicant shall be in the superior court of the county in which the corporate office of the LME/MCO is located, unless the contract in effect between the LME/MCO and the provider or applicant specifies a different venue.

(d)        Notwithstanding any other law, OAH does not have jurisdiction over any dispute between an LME/MCO and a provider or applicant.

That’s strong language.

The MCO can suspend any Medicaid contract (Judge), deny any due process (Jury), and put any health care provider out of business (Executor) with zero repercussions on the MCOs.

Please, if you agree with me, contact your Representative in your district.  Someone told me one time that Representatives and Senators receive surprisingly few emails about specific Bills. So the Reps and Senators actually will read these emails. Please help raise awareness of the potential consequences of the House Bill 320.

Do not allow the MCOs to be the Judge, Jury and Executioner!



About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on March 20, 2013, in Congress, Division of Medical Assistance, Health Care Providers and Services, Legal Analysis, Legislation, MCO, Medicaid, Medicaid Contracts, Medicaid Recipients, Medicaid Reform, Medicaid Reimbursement, Mental Health, NC DHHS, North Carolina, OAH, Termination of Medicaid Contract and tagged , , , , , , . Bookmark the permalink. 12 Comments.

  1. Do you ever feel like Don Quixote?

  2. Thank You for all of intelligence and enlightening information.

  3. ” all of your intelligence” and fierceness when it comes to the MCO’s, Medicaid and North Carolina.

  4. Deatrice Davidson

    I am a parent of a CAP client..Been inthe system for 25yrs..I am in charlotte, N.C. We have been put on the IDD waiver, therefore money already cut..Why as of Jan.1 2013, is our monet being taxed.? The taxes are quite sufficient..Is making it hard to care for my son..He is now 39..My company says they are scared IRS will come after them..Can you explain this to me..Thankyouin advance..

    • Deatrice,

      Thank you for your question. I need more details to understand the question. The money is being taxed by whom? The federal gov? The state? And you mean the money the provider has? Not your personal money, right? And to what money exactly are you referring? Hope I can help.

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