Overinclusive NC Medicaid Recoupments and the Provider “Without Fault” Defense

“It is one thing to believe in witches, and quite another to believe in witch-smellers.” G.K. Chesterton

Similarly to the Salem witch trials in Salem, Massachusetts between February 1692 and May 1693, there has become a sort of mass hysteria surrounding Medicaid fraud.  While, obviously, Medicaid fraud needs to be found and fully prosecuted, who is to determine whether document noncompliance is fraud?  Or harmless and inadvertent error?  The witch-smellers? Good gracious, who can honestly tell me that they understand every aspect of Medicaid billing, including all of the federal statutes germane to Medicaid, and all the terms within DMA Polices and what exactly the terms mean? Medicaid is esoteric stuff.  Surely, providers deserve some leniency as to inadvertent errors. 

Fraud is an intentional deception made for personal gain or to damage another individual or entity. How can an inadvertent error constitute fraud? If I accidentally write the wrong date on a legal bill, can my client point out the error and refuse to pay due to document noncompliance? (The answer is NO, people)

Yet it seems as though the North Carolina RACs auditors are of the mindset that any error, however small and insignificant, causes noncompliance and the reimbursement for services rendered must be recouped.  According to the  AHIMA website, the RAC Program’s purpose is to reduce improper Medicare/Medicaid payments and implement actions to prevent future improper payments.  But who defines “improper?” Is there an element of intent? 

I guess I would also be of the mindset that all errors constitute noncompliance if I were paid 12.8% of what I recouped, too. 

So what defenses do providers have? Back in Salem in 1692-1693, the accused witches would plea, “No. I am not a witch.”  Providers are claiming, “No. My documents are compliant.”  But when the accusor has more power than the accused, the accused plea of, “I did not do it,” falls on deaf ears.

I have found a number of defenses for the health care provider.  One such defense is the provider “without fault” defense.  The provider “without fault” defense is just one of many defenses, and all defenses should be used, but here is an explanation of the provider “without fault” defense:

42 U.S.C. 1395pp states, in pertinent part,

Conditions prerequisite to payment for items and services notwithstanding determination of disallowance:
Where:

2) both such individual and such provider of services or such other person, as the case may be, did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services under such part A or part B of this subchapter

then to the extent permitted by this subchapter, payment shall, notwithstanding such determination, be made for such items or services (and for such period of time as the Secretary finds will carry out the objectives of this subchapter), as though section 1395y(a)(1) and section 1395y(a)(9) of this title did not apply and as though the coverage denial described in subsection (g) of this section had not occurred. (emphasis added)

The U.S. Court of Appeals described 42 U.S.C. 1395pp as “the statutory section [that] allows a [health care provider] to obtain a waiver of liability for overpayment receipt when coverage is later denied and the individual beneficiary of the [health care provider] “did not know, and could not reasonably have been expected to know,  that payment would not have been made for such [services]”…” MacKenzie Med. Supply, Inc. v. Leavitt, 506 F.3d 341, (4th Cir. 2007).

The MacKenzie case dealt with a durable medical equipment provider. The case actually did not end well for the DME provider based on the provider relying on Certificates of Medical Necessity as a sole basis for medical necessity. 

There has not been a ton of case law in which the provider asserted this “no fault” defense, so we really do not know the limitations or breadth of the defense.  But, the “no fault” defense should definitely be in the arsenal of defenses for the providers undergoing recoupment actions.  Let’s say, one arrow in the quiver of defenses.

Going back to the original quote:

“It is one thing to believe in witches, and quite another to believe in witch-smellers.” G.K. Chesterton

I am sure that the witch-smellers back in 1692-1693 had a personal investment in finding witches. I mean, who wants to live in the same community with a witch that could possibly put a spell on you?  Similarly the RACs have personal investments in the way of monetary incentives to cite noncompliance.

One way in which the citizens of Salem determined whether someone was a witch was the “Touch Test.”  If the accused witch touched the victim while the victim was having a fit, and the fit then stopped, that meant the accused was the person who had afflicted the victim.  Yet as ridiculous and asinine as the Touch Test sounds, people believed the witch-smellers.  Even lawyers and judges believed the witch-smellers.

But because of the mass hysteria of the witch hunts, the witch-smellers were believed. 

Today’s mass hysteria of Medicaid fraud is allowing the RACs to be overinclusive when determining noncompliance.  The state has asserted that, if there is grey area, the state errs on the side of the provider. 

From what I have seen, I believe that the state errs on the side of the providers as much as I believe in the “Touch Test” to determine witchcraft.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on May 6, 2013, in DHHS, Division of Medical Assistance, Durable Medical Equipment, Federal Law, Health Care Providers and Services, Legal Analysis, Medicaid, Medicaid Audits, Medicaid Fraud, North Carolina, Reconsideration Reviews, Regulatory Audits, Tentative Notices of Overpayment and tagged , , , , , , , , , , , . Bookmark the permalink. 3 Comments.

  1. Great blog post! I actually thought that PCG got paid their 8-10% fee percentage based on what they “Originally found as an Over payment by the provider”, and not what was paid in the end by the provider. To me that is ridiculous, and the state needs to put an end to this mess. You mentioned the “touch test” in your blog post, but how about the “smell test” with PCG if you get my drift.

    • “Smell test”. Haha. That’s good. The contingency fee type payments are actually allowed under federal law. North Carolina didn’t just make it up. Same as RACs recouping Medicare. To me, contingency creates a monetary bias. I understand the need to detect fraud, but not to the detriment of honest health care providers and Medicaid recipients. There needs to be due process implemented.

  1. Pingback: New Mexico Affords No Due Process Based on a PCG Audit! | medicaidlaw-nc

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