Monthly Archives: September 2013

Sec. Aldona Wos Appoints Sandy Terrell as Acting Medicaid Director

With Carol Steckel’s surprise resignation only 8 months after accepting the job as North Carolina Medicaid Director, Sec. Aldona Wos (appointed by Gov. McCrory) underwent the important, yet, probably, difficult job of appointing a new Medicaid Director to stand-in starting October 11, when Ms. Steckel effectively resigns. 

Well, folks, I tell you what…I bet that finding a person willing to stand in as Medicaid Director was a daunting task.  With the amount of negative publicity recently published against the Department of Health and Human Services (DHHS), I can only imagine that the first few people Sec. Wos approached answered with a resounding….NO!…Or when Hades freezes over!! (BTW: I was not asked).

Enter stage left: Sandy Terrell,  MS, RN, Assistant Director.

On September 9, 2013, Ms. Terrell presented a slide show at the North Carolina Institute of Medicines annual conference.  According to one of Terrell’s slides, she wrote that there would be “changes within the Division of Medical Assistance.”  Boy, was she right!!  Did she know about Steckel????!!!!

We (the public) found out about Steckel’s resignation September 23, 2013.  Terrell was appointed Friday, September 27, 2013.  So it is unlikely that Terrell knew about Steckel’s future resignation.

Let’s compare: Steckel v. Terrell


  • Coordinated the Louisiana’s response to the federal Patient Protection and Affordable Care Act of 2010 (PPACA) legislation.
  • Led initiatives to improve the Louisiana’s public health care services while reducing costs, and to revamp its information technology capabilities, taking extensive advantage of the private and academic sectors.
  • Led Alabama Medicaid from 1988-1992 and from 2003-2010.
  • Served as president of the National Medicaid Directors’ Association and worked to create the independent organization serving the needs of Medicaid programs.
  • Provided instrumental support to the Republican Governors Association in developing a report titled “A New Medicaid: A Flexible, Innovative and Accountable Future.”
  • Quit NC Medicaid in 8 months


  • Is a licensed RN
  • Worked in Medicaid since 2010 (3-years experience)
  • Has not quit NC Medicaid in 3 years

Hmmmm.  Well, who know? Personally, I had high hopes for Steckel in NC Medicaid.  I found her qualified, intelligent and, seemingly, compassionate about Medicaid.  Yet, 8  months into her job, she leaves.

I do not find Terrell qualified; I have no idea whether she is intelligent (most likely she is, given her career success) or compassionate about Medicaid.

But, crystal ball holder, I am not.  Maybe Terrell is what NC Medicaid needs.  Maybe not.

It seems, as of now, that Terrell will only be the stand-in during the interim between Steckel departing and Wos finding a permanent Medicaid Director.  Given the current DHHS situation and public negativity, I can only wonder who would be so bold as to accept the position as NC Medicaid Director.  Undoubtedly, Wos is hearing a lot of “NO’s” and “When Hades freezes over!”

Without question, Director Steckel’s position will be a hard position to fill permanently.

CSC, the Creator of NCTracks, Pays $97.5 Million in Settlement for “False and Misleading Information” Regarding the Company’s Performance as to a Computer Records Contract

You know the magazine Cosmopolitan?  Well, back in 1999, Cosmo decided to branch out from magazines and create a Cosmo yogurt.  Never heard of it?  That’s because Cosmo pulled the yogurt off the market within 18 months of entering the market.  Cosmo yogurt was a complete flop.  But, still, Cosmo yogurt was on the market for 18 months.

Remember “New Coke?” (I’m showing my age).  But back in the late 70s and early 80s, Coca-Cola launched the “New Coke.”  It was an utter flop and consumers demanded the original Coke to return.

If it takes 18 months for NCTracks to be “pulled from the market,” a great number of our Medicaid providers will either be (1) out of business; or (2) no longer accepting Medicaid.

It is indisputable (at least if you do not work for the Department of Health and Human Services (DHHS)) that NCTracks is severely OFF-TRACK.

Providers are going out of business because they are not receiving Medicaid reimbursements.  Or the reimbursements are below the standard reimbursement rates.  There are Medicare and Medicaid crossover problems.  Not to mention providers are extremely frustrated with the amount of time they need to devote to NCTracks issues.  See September 19, 2013, article by Rose Hoban.

Why has NCTracks been such a failure?

Obviously, I do not have the answer to that haunting question.  Believe me, I have heard it all.  I’ve heard that McCrory wants NCTracks to fail because NCTracks was past Gov. Perdue’s baby.  I’ve heard that McCrory wants NCTracks to fail because then he can privatize Medicaid.  I’ve heard that Computer Science Corporation (CSC), the company that writes the computer language for NCTracks is inept.  I’ve heard that CSC begged Wos not go “live,” but Wos pushed the go “live” date.  I’ve heard that the employees at CSC have no idea what they are doing.  I’ve even heard that all the Republican governors have conspired to fo everything in their power to derail the Affordable Care Act (ACA) and this is just one example.

Most likely, none of the above is completely correct…or a small bit of everything.  Regardless, the NCTracks system is hurting our providers that accept Medicaid.  It should not be a party issue.  It is a North Carolina issue.  And, just think how popular the administration would be if they came out tomorrow and trashed the whole NCTracks system….Now that would be something!!!

With all that said, I found an interesting tidbit the other day about CSC.

September 9, 2013, CSC settled a lawsuit with its shareholders for $97.5 million.  Is this germane to the NCTracks tomfoolery that we are all enduring?  Perhaps not…but…perhaps.

Shareholders of CSC (which, BTW, is a BILLION dollar company) brought a class action lawsuit against CSC over alleged false statements about accounting and the company’s performance on a multibillion-dollar contract.  Click on “class action lawsuit” to read the Complaint.

A Memorandum filed in support of the Complaint alleged that CSC “made false or misleading statements or omitted to disclose material facts” about internal controls over financial reporting and about CSC’s performance on a $5.4 billion electronic patient records contract with the U.K.’s National Health Service.

The plaintiffs alleged that the false and misleading statements regarding the controls over financial reporting and CSC’s performance on the $5.4 billion contract caused the stock to artificially inflate then plummet when the truth came out.

After reading the Complaint, this is what I gleaned that CSC allegedly did with respect to the electronic patient records contract (sound like what CSC has here in NC?):

Under the National Health Service (NHS) Contract, CSC agreed to build a computerized medical records system and develop the necessary software to create digitized medical records for all UK residents living within the regions covered by the contract.

This is directly from the Complaint…I find it very interesting…(the non-italicized words are mine):

The core component of the NHS Contract—the software system called Lorenzo , [NCTracks] intended to enable the digital medical records system—was to be delivered by 2012 [July 1, 2013]. The significance of the NHS Contract to CSC placed the project squarely in the spotlight of Wall Street analysts. Accordingly, virtually all conference calls between the Company and investors and virtually all public announcements during the Class Period addressed the progress and status of the NHS Contract. Throughout the Class Period, Defendants repeatedly asserted that CSC was “on track” and “making progress” and that the contract remained profitable to the Company. Likewise, CSC and the Individual Defendants continuously denied media reports critical of CSC’s performance of the contract. As analyst reports throughout the Class Period demonstrate, investors believed Defendants. However, Defendants’ representations were false because they had known, at least since May 2008, that CSC could not deliver the Lorenzo system [NCTracks] as promised. The Class Period begins on August 5, 2008, the date of Defendants’ first public misstatements following May 2008. Lead Plaintiff’s investigation has revealed that, as of May 2008, CSC and the Individual Defendants knew that the NHS Contract could not be fulfilled. In early 2008, CSC’s Board of Directors dispatched an internal team of experts to the UK to review progress on the NHS Contract. The team concluded that “from a technology and operational perspective,” CSC could not perform the NHS Contract [NCTracks]. The members of the team were in agreement that CSC simply could not deliver the software necessary to perform under the contract. As such, the contract was a “loser,” and, per Generally Accepted Accounting Principles (“GAAP”), CSC should have recognized a loss on the NHS Contract in 2008. CSC and the Individual Defendants concealed these facts from the public, and have never taken a loss on the contract. In the midst of public scrutiny, the UK Government commenced an investigation through a committee of Parliament with oversight over public spending. The committee reached similar conclusions: CSC could not deliver on the NHS Contract. Indeed, the Parliamentary inquiry revealed evidence that CSC had likely known it could not deliver since 2006.

If I am reading the allegations correctly, the plaintiffs asserted that CSC promised a computer program regarding electronic patient records that CSC knew it could not deliver.


As an aside, CSC’s reported revenue for fiscal year 2011 (ending April 1, 2011) was $16.04 billion, and net income attributable to CSC shareholders was $740 million. CSC common stock is listed and trades on the NYSE under the ticker symbol “CSC.”

 Companies deal with marketing/products failures every day.  Just look at Cosmo’s yogurt failure. Or Coca-Cola’s “New Coke” flop.

Cosmo pulled the yogurt off the market within 18 months.  Consumers demanded that Coca-Cola return to the original Coke recipe.

Could it be possible that CSC has 2 product failures???

The Lorenzo system???



SB 553: Read the Plain Language of the Statute….Or…”Do You Understand the Words That Are Coming Out of My Mouth?”

One of my pet peeves is when people park in handicapped parking spots (especially at the grocery store…because, of course, they are just running in for one thing) without a handicapped sticker or any physical ailment. The handicapped spot is meant to be used by a person with a handicap, not the person in a hurry.  Or when the person in the grocery store has 14 items, yet still stands in the “10 items or less line.”  “10 items or less” means “10 items or less!!”  There is a reason for the theory behind “10 items or less.”  When people exploit the “10 items or less” aisle that were not intended to benefit from “10 items or less,” the very purpose of the “10 items or less line” is thwarted.

“Do you understand the words that are coming out of my mouth?”

Similarly, in law school, you learn to read statutes with what is called “The Plain Meaning Rule.”  The Plain Meaning Rule means that if the statutory language is clear on its face (prima facie) and there is no reasonable doubt as to its meaning, then the judge will simply apply the language of the statute to the case at hand.

As in, if the sign says “10 items or less,” do not stand in line with 14 items.

This week I have 5 hearings.  (I know…ugh, right?! Good thing I love my job and believe in my cause).  Well, it is Tuesday.  So far in two of my hearings, opposing counsel representing the managed care organizations (MCOs) have argued that SB 553 applies to providers and holds that providers cannot appeal grievances to the Office of Administrative Hearings (OAH).  And that OAH has no jurisdiction over the MCOs for these appeals.


Ok, seriously, you are probably reading this thinking…what the heck is Knicole talking about….usually I understand her rants…but what is SB 553 and why is she arguing that it does not apply to providers….

SB 553, or Session Law 2013-397 states, in pertinent part, “Right to LME/MCO Level Appeal. – There is no right to appeal the resolution of a grievance to OAH or any other forum.”

No right to appeal to OAH?? Or any other forum?? Basically, you must appeal within the MCO…you must exhaust all administrative remedies prior to appealing to OAH.

What venue does “no-OAH-or-any-other-forum” leave? Reading the plain language of SB 553, you have a right to an MCO level appeal…nothing else (until you exhaust the appeal at the MCO).  Yet, per common  sense, if an MCO makes a decision with which you do not agree, and you appeal to the very people who made the adverse decision, the “reconsidered decision,” more times than not, will be identical to the original adverse decision. 

So for SB 553 to mandate that no right to appeal a grievance at OAH is HUGE!! And I would argue that SB 553 takes away a right to appeal at OAH that is (a) embedded with the OAH Mission Statement; and (b) found with NC General Statutes 150B.

But to whom does SB 553 apply?


The MCOs in the last 2 days have argued that SB 553 applies to Medicaid provider.  So to whom does SB 553 apply???

Remember the “Plain Meaning Rule?”  Let’s look at the plain language of the Session Law. Let’s start with the title.  The title of Part 1of SB 553 (the part at issue) is:


Medicaid enrollees.

The title does NOT say “Medicaid enrollees and Medicaid providers.”  Nope.  Enrollees.  Period.

Further, enrollee is defined as:

Enrollee. – A Medicaid beneficiary who is currently enrolled with a local management entity/managed care organization.

If the title states that it applies to “Medicaid enrollees,” then, per the title, the Session Law does NOT apply to Medicaid providers (unless they are appealing on behalf of a Medicaid recipient…standing in the shoes of the Medicaid recipient).

If the sign says “10 items or less,” it means “10 items or less.”  Simply count the number of items in your grocery cart.  If the items equal to less than or equal to 10, go to the “10 items or less line.”  If the items in your cart equal greater than 10, do not stand in the “10 items or less line.”


Do you understand the words coming out of my mouth???!!!

Editorial: The real trouble at DHHS: Failing the needy – Winston-Salem Journal: Editorials

Editorial: The real trouble at DHHS: Failing the needy – Winston-Salem Journal: Editorials.

Carol Steckel, State Medicaid Director, Resigns!!

Carol Steckel, our North Carolina Medicaid Director resigned today after 8 months on the job!!!

We had high hopes for Ms. Steckel.  We brought Ms. Steckel in from Louisiana to “fix” our “broken” Medicaid system.  Today she resigned.


How Managed Care Organizations Will Be the Downfall of Mental Health in NC

And see @NCCapitol’s blog:

How Managed Care Organizations Will Be the Downfall of Mental Health in NC

Lately, mental health has been a topic of great interest to many people.  Tragedies like the Navy Yard shooting bring the mental health issue even more to the forefront.  Remember, the shooter had complained about auditory hallucinations prior to the horrible event.

Yet North Carolina, like many other states, has implemented the managed care system for Medicaid behavioral health.  These managed care organizations (MCOs) will be the downfall of the mental health care system.

That’s a pretty strong statement, huh? How could these MCOs be the downfall of mental health?

Let me explain…

Currently, in NC we have hundreds of thousands of mental health care providers across the state.  Most of the behavioral health care providers are not huge companies.  Many thousands of these providers are small businesses with under 10 staff, although there are certainly some that staff numerous psychiatrists and hundreds of employees.  Regardless, in the aggregate, these behavioral health care provider staff millions of North Carolinians.  (I don’t have the data on the numbers, so these numbers are estimates).

Not only do we rely on these behavioral health care providers to staff millions of North Carolinians, but these providers also service our 1.5 million Medicaid recipients with any mental health care issue.

I doubt I would receive any opposition to the statement that these behavioral health care providers across NC are assets to our community.  They provide employment for some and mental health services for others.  Without our behavioral health care providers, our Medicaid recipients would (a) not receive medically necessary treatment; and (b) most likely, be hospitalized, incarcerated, or simply non-productive citizens. Not to mention the number of people who would become unemployed if the behavioral health care providers went our of business.

Many studies have proven that, in fact, many mentally ill not receiving care end up in prisons or the emergency room (ER).  For example,  in one study, “More Mentally Ill Persons Are in Jails and Prisons Than Hospitals: A Survey of the States,” the authors found that:

Using 2004–2005 data not previously published, we found that in the United States there are now more than three times more seriously mentally ill persons in jails and prisons than in hospitals. Looked at by individual states, in North Dakota there are approximately an equal number of mentally ill persons in jails and prisons compared to hospitals. By contrast, Arizona and Nevada have almost ten times more mentally ill persons in jails and prisons than in hospitals. It is thus fact, not hyperbole, that America’s jails and prisons have become our new mental hospitals.

The way to combat the fact that many mentally ill become hospitalized or jailed is to have enough behavioral health care providers to service all the people in-need and to allow people easy access to the providers at all times.  It only makes sense. If we have people needing mental health care services, we need enough providers to service them.  This is Logic 101, people.

Well, when we switched over the managed care system for behavioral health, at first, we didn’t see a huge impact.  Yes, we missed ValueOptions.  Yes, we hated the process of provider credentialing and obtaining additional contracts with the new MCOs (I mean, good gracious, we already had the contract with the Department of Health and Human Services (DHHS).  How many contracts would we need?)  But, at first, the MCOs were not crippling.  Killing a ton of trees? Yes.  But crippling? No.

Our government leaders performed two (2) fatal flaws when implementing the MCOs.  (1) The MCOs were allowed to conduct a closed network after a short period of time; and (2) the MCOs were not statewide.  Well, there were probably many more flaws, but these were the most fatal.


The MCOs are allowed via statute to contract with the number of providers that it deems necessary for its catchment area.  If, for example, MeckLINK, the MCO in Meckeleburg county, decides that 1 provider can service all the mental health needs of Medicaid recipients in Mecklenburg county, then MeckLINK may contract with only one provider.

What happens to the rest of the behavioral health providers in Mecklenburg county?  Well, those providers do not have contracts with MeckLINK to provide services within Mecklenburg county.  Never mind that the provider had signed a 5-year lease in downtown Charlotte.  No other provider except for the one that MeckLINK contracts with can provide services in Mecklenburg county.

So you say, so what? The providers can provide services in 99 other counties.

But, what if a provider has been in business for 15 years.  What if the mentally ill that the provider services are severely mentally ill?  What if that provider was the only person that some Medicaid recipients trusted?  What if those Medicaid recipients refuse to switch providers?  Who suffers?  Because, despite any other contention, behavioral health care providers are not fungible.

Or…change it from MeckLINK to Smokey Mountain Center (SMC), which starting next month will have a 23 county catchment area.  23 counties!!

What happens when SMC determines that it will only contract with 2 providers per county?

Are the thousands of behavioral health care providers who reside and service those 23 counties that can no longer provider services all to move out of SMC’s catchment area in order to continue their careers?

No, realistically, if SMC decides that it will only contract with 2 providers per county, all other providers within SMC’s catchment area go out of business.  All employees of those thousands of providers are  unemployed.  Unemployment sky-rockets and the need for Medicaid and food stamps sky-rocket.


The MCOs in NC are not statewide.  What does that mean?  That means that every MCO in NC has its own catchment area…or jurisdiction.  If you are a provider in Wake county, you must have a contract with Alliance Behavioral Health (Alliance).  If you are a provider in Pitt county, you must have a contract with East Carolina Behavioral Health (ECBH).

Other states have implemented MCOs differently.  Such as New Mexico…not that the MCOs are working great in NM, but I do agree with this one facet of NM MCOs.  Other states have MCOs that are statewide.  Each MCO has providers across the state, and…get this…the Medicaid recipients get to choose with which MCO they want to deal.

Think about it…Medicaid recipients having a choice among MCOs depending on the providers with which the MCO contracts.

But not in NC.

In NC, Medicaid recipient Alice may choose to go to Dr. Jane in Charlotte.  In fact, Alice has gone to Dr. Jane for years.  Alice suffers schizophrenia with visual hallucinations.  Dr. Jane has known Alice for so long that Dr. Jane can tell when Alice is going through a more troubling than normal bout.  But last week MeckLINK determined that it would not contract with Dr. Jane and demanded that Dr. Jane transition all clients.

So, Dr. Jane transitions Alice to Dr. Kelly and closes up her shop.  Dr. Jane and her 16 employees file for unemployment, food stamps and subsidized housing…oh, and Medicaid.

Alice decides she hates Dr. Kelly and is convinced that Dr. Kelly had devised a plot to rid her of Dr. Jane.  Remember, people who suffer from mental illnesses don’t always think rationally…

So Alice never goes to any appointments with Dr. Kelly.  Instead, she begins to use heroin again.

Sound far off? Crazy? Unrealistic?

I beg to differ.

The way in which the MCOs are set-up in NC allows the MCOs to unilaterally decide to contract with one provider, but not the other.  Or even scarier, just 1 provider.  The MCO set-up in NC allows the MCOs to determine that certain providers cannot service the population within its catchment area.


If our MCOs continue to terminate Medicaid provider contracts at the rate that they are currently, thousands and thousands of providers will soon be out of business.  Hundreds of thousands of citizens will be unemployed (the staff of the provider companies).  Unemployment will increase.  The need for Medicaid and food stamps will increase.  The very few behavioral health care providers that are still allowed to provide services to Medicaid recipients will be overwhelmed, unable to meet the needs of every single recipient.  Medicaid recipients will not receive individual, unique mental health care; Medicaid recipients will be overlooked (whether they don’t go to appointments, become hospitalized or incarcerated).

And something very tragic will happen here in NC.  And not on a Navy Yard.

Hence the downfall of mental health in NC.

MeckLINK: Parting Is Such Sweet Sorrow!…or…And Then There Were Nine…And Counting!

“Parting is such sweet sorrow, That I shall say good night till it be morrow.” Anyone know who said that famous line?  Juliet said it to Romeo (William Shakespeare) in Act II, Scene 2 of Romeo and Juliet.  Much different from Act 5, Scene 3 when Romeo commits suicide by poison when he believes his beloved Juliet is dead.

“Here’s to my love! (drinks the poison) O true apothecary, Thy drugs are quick. Thus with a kiss I die.”

Are we soon to part with MeckLINK Behavioral Health (“MeckLINK”)?

As of now, MeckLINK is one of 11 managed care organizations (MCOs) managing behavioral health care for Medicaid recipients in North Carolina.  We will say good-bye to Western Highlands September 30, 2013, so starting October, we will have 10 MCOs.

Is MeckLINK the next doomed MCO?  The next MCO to go poof!

According to the Charlotte Observer, Phil Endress, the CEO of MeckLINK, who was under fire a couple of weeks ago before the Mecklenburg county commissioners, has resigned, effective September 30, 2013.  Coincidental that Endress is resigning the day that Western Highlands is scheduled to disappear? Poof!

Mr. Endress appeared in North Carolina in August 2012 to run MeckLINK.  Since August 2012 (basically 1 year, give or take) Endress hired over 200 employees to run MeckLINK. (Talk about administrative burden).

So what happens to all the 200 employees hired by Endress when MeckLINK goes poof?  Who knows.  But, at least, Endress has a job.  He is moving to Jersey City, New Jersey, to become a director for a private mental health care company.  The 200 employees Endress hired? Well, he is not taking them with him.

What will become of mental health in Mecklenburg county?

Well, I know for many health care providers in Mecklenburg county parting will  NOT such sweet sorrow.  It will just be sweet. Recently, MeckLINK has terminated multiple provider agencies from its network (in our opinion without merit) and denied services for Medicaid recipients (in our opinion that are medically necessary).  But what will happen to Mecklenburg county Medicaid providers and recipients if MeckLINK goes poof?

Rumor has it that either Smokey Mountain Center or Alliance Behavioral Health will take over.

If Smokey takes over MeckLINK, Smokey will be, by far the largest MCO in North Carolina, geographically.   Smokey already covers:Serving individuals with mental health, developmental disability and substance abuse issues in Alexander, Alleghany, Ashe, Avery, Caldwell, Cherokee, Clay, Graham, Haywood, Jackson, Macon, McDowell, Swain, Watauga and Wilkes Counties

Add the 8 counties that Western Highlands is handing over to Smokey Sept. 30th and Mecklenburg county and Smokey would manage 24  of the 100 counties in North Carolina.  Whew! That’s a large jurisdiction.

If, on the other hand, Alliance takes over MeckLINK, then Alliance will not be the largest MCO in area, but, perhaps, the most Medicaid-funded and largest as to population-served.

Alliance currently manages Wake, Durham, Johnston and Cumberland counties.  Add Mecklenburg county and Alliance is in control of the most populated cities in North Carolina: Raleigh, Durham, Charlotte, Smithfield (ok, Smithfield is not that big, but it has outlets!), Fayetteville, Apex, Garner, Clayton…the most populous cities and towns in NC.

We started with 11 MCOs. We are down to 9.  The song “Another One Bites the Dust,” comes to mind. [Bum, bum, bum].

Remember, McCrory seems to want to run the number down to 3.

6 more to bite the dust?

“The McCrory administration envisions three or four competing private managed care organizations would deliver Medicaid services, replacing the monopolistic Community Care of North Carolina model now in place”

Parting is such sweet sorrow.

Thy drugs are quick. Thus I die with a kiss.

Are we all to end like Romeo?

Remember, we started the MCO system THIS YEAR. (Not counting Cardinal, which was the test-model prior to all MCOs  going live).  As in 9 months ago.  How scary is it that the whole MCO system (11 MCOs to manage behavioral health for Medicaid recipients) is unraveling to 9 within 9 months of inception.  Where will we be a year from now?

Maybe McCrory is right.  We will have 3-4 MCOs.

It’s like Darwin’s theory.  Survival of the fittest.

Western Highlands and MeckLINK were the weakest.  Who is next?  Eastpointe?  East Carolina Behavioral Health?  Time will tell.  And apparently time is fairly swift.  Like the poison drunk by Romeo, we may not have to wait long to see which MCOs survive and which MCOs fail.

If I were a betting man (which, obviously, I am not), I would go “all-in” on Alliance or Smokey.

NC Medicaid Audits: Is There a Silver Lining? (Maybe Even Two!)

Normally I am “silver lining” type of person. You know…the whole, “The sun will come out tomorrow, bet your bottom dollar that tomorrow, there’ll be sun,” mentality…

But when it comes to North Carolina Medicaid audits conducted by Public Consulting Group (PCG) or HMS, I have failed to find the silver linings.  You, as a health care provider, receive a Tentative Notice of Overpayment (TNO) for $1 million and go through various stages of acceptance: surprise, horror, anger, befuddlement, and fear.  In order to defend yourself, you have to shell out tens of thousands of dollars for an attorney (hopefully one that understands Medicaid audits).  Then spend countless hours compiling all the documents for the attorney to review and use at the reconsideration review.  Then take off a day to attend the reconsideration review, losing even more clinical hours, only to disagree with the Department of Health and Human Services (DHHS) Hearing Officer’s decision.  Spend more money in legal fees to appeal the DHHS decision to the Office of Administrative Hearings (OAH).  Possibly hire an extrapolation expert at even more expense.  Only to prove, finally, that the PCG and/or HMS audit was erroneous and you owe nothing.  Or $100. Or $1000.

Where is the silver lining in that process?

That you owe nothing in the end? But you paid exhorbent amounts to the attorney.

Well, there could be a silver lining… (maybe even two)…

Recently, the IRS released a couple private letter rulings as to whether paid overpayments could be tax-deductible.

OK, what  the heck is a private letter ruling?

According to Wikipedia, private letter rulings “(PLRs), in the United States, are written decisions by the Internal Revenue Service (IRS) in response to taxpayer requests for guidance.  A private letter ruling binds only the IRS and the requesting taxpayer. Thus, a private ruling may not be cited or relied upon as precedent.”

The most important part of the above-referenced definition of a PLR is that the PLR is binding only on the IRS and the requesting taxpayer.  Obviously, this means that if the IRS wrote 2500 PLRs saying that paid overpayments in Medicaid audits are tax-deductible, those 2500 PLRs are not binding as to you (unless you were one of the 2500 taxpayers asking for a PLR).

Regardless, PLRs are demonstrative as to how the IRS determines [whatever is determines in the PLR].  Because, despite the fact that PLRs are not binding on all taxpayers, I would find it odd if the IRS issued 2500 PLRs stating that the paid overpayments are tax-deductible, then the IRS turn around and refuse to allow you to treat the overpayment as a tax deduction.  Although, I am sure stranger things have happened.

In the first PLR, which, BTW, is not fun to read.  Who uses all this legalese???  Taxpayer B asks whether (1) the money he paid to the insurance company could be deducted as a loss incurred in a trade or business; and (2) the money paid to a Government Entity E and Government Entity F in the tax years in which the installment payments are made under the settlement agreement can be deducted. (I made Taxpayer B a male because the PLR makes him a male.  I have no idea as to the gender of Taxpayer B).

In Year 1, the Insurance Company sued … Taxpayer B for insurance fraud, demanding both compensatory and punitive damages.   In the second year, the state of New Jersey indicted Taxpayer B… for insurance fraud.  Taxpayer B agreed to pay $X in restitution to Government Entity E and Government Entity F.

Taxpayer B has represented (a) that he previously included in his gross income in prior tax years the amounts he now seeks to deduct and (b) that he and all other defendants in [both] lawsuits are jointly and severally liable for the amounts due under the settlement agreement because the language of the settlement agreement imposes joint liability upon the defendants and New Jersey law imposes joint and several liability upon members of a limited liability company.

So…can Taxpayer B deduct the money paid to the insurance company and the government as a business loss????

Or, in other words, could you (a health care provider who accepts Medicaid) deduct any money paid to PCG or HMS arising our of a regulatory audit as a business loss?

According to the PLR: 

We conclude that Taxpayer B may deduct the payments he made to the Insurance Company and to Government Entity E and Government Entity F in the years the payments were made or will be made, provided that he received or will receive no contribution from any other party and included the amounts he paid or will pay in his gross income in prior tax years.


The second PLR is basically identical to the first, except that Taxpayer A is at issue.  For the PLR, click here.

So what does this mean?  Why should North Carolina Medicaid providers care that 2 taxpayers were able to deduct the monies paid to the government/insurance companies as a business loss?

Because, these PLRs are demonstrative that, perhaps, the IRS would view regulatory audit paybacks to PCG or HMS as an allowable tax deduction as a business loss.

So, you receive a TNO in the amount of $1 million.  You spend $20,000 litigating the $1 million to $1000.  I know, it sucks, right?? (Not that the amount was decreased by $999,000, but that it cost $20,000 to reduce the amount $999,000).

The silver lining? Maybe you can deduct the $1000 paid as a business loss.

But what about the $20,000 attorneys’ fees???

Let me preface this with:

I am no tax expert.  I know Medicaid, not tax. If you want real tax advice, go to a real tax attorney.  But, I did find…Publication 529, which states the following:

Legal Expenses

You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.

You can also deduct legal expenses that are:

  • Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
  • For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
  • To collect taxable alimony.

 A definitive answer?


But…a possible two silver linings!  The sun will come out tomorrow, bet your bottom dollar that tomorrow, there’ll be sun!!!!

Lawsuit Against PCG: Allegations That PCG is Inept and Malicious!

It seems that Public Consulting Group’s (PCG) unscrupulous behavior has no bounds.

On June 6, 2013, LDP, Inc. d/b/a Leader Services sued PCG in the Eastern District of Pennsylvania.  (Case No.: 2:13-cv-03128-AB).

According to the Complaint, Leader and PCG are direct competitors.  Leader was the Pennsylvania’s Department of Education (DOE) contractor responsible for executing Medicaid claims for the school-based ACCESS program.  In 2011, the Pennsylvania DOE requested bids from companies.  PCG won the bid by submitting a bid at less than half the amount paid under previous years. (Already fishy).

Many school agencies were concerned about the switch from Leader’s computer program to PCG’s program.  Leader offered to serve as an intermediary during the switch.

Leader alleges that PCG took active steps to thwart Leader’s intermediary role, such as changing its data formatting and not paying claims submitted by Leader.  The biggest allegations is that PCG failed to process hundreds of thousands of claims for Medicaid payments submitted by Leader, which resulted in tens of millions of dollars of health-related services provided by school agencies to go unpaid.

The press got wind and some stories were written about PCG doing a “poor job.”

PCG turned around and began disparaging Leader.  PCG held conference calls and meetings asserting that the schools were not paid because of Leader, not PCG.  Leader confronted PCG and PCG provided (for the first time) error logs (basically a log of why the claims were unpaid and as a basis for the disparaging remarks that the claims were not paid because of Leader).

Leader reviewed the error logs, only to discover that the majority of “errors” were errors because of PCG!!! (Hmmmm..sound familiar?).

What???? PCG erroneously auditing something?  Say it is not so!! (This is sarcasm, people).

After seeing how PCG conducted itself in New Mexico (auditing 15 behavioral health care providers at the request of HSD, but after flying to Arizona to determine which companies should take over the 15 providers, and never showing the providers the claim audit findings) and how PCG is conducting itself in North Carolina (sending providers Tentative Notices of Overpayment saying the provider owes hundreds of thousands, if not millions of dollars, only to discover that the PCG auditors were wrong and the provider really owes a $100), I cannot say I am surprised that PCG would fail to process claims, blame Leader, and produce a report supposedly showing Leader’s errors, but, in reality, the errors being on PCG shoulders.

No. Not surprising.

Although, remember, this is a Complaint.  The courts have not rendered a decision.  There is a chance that Leader made all this up….there is also a chance that PCG is inept and malicious.

Leader sued PCG for

1. Tortious interference with contract;

2. Unfair competition;

3. Commercial disparagement; and

4. Defamation.

Coincidentally, some of the cause of action would be the very same causes of action I would advise the NM behavioral health care providers to assert.