MCOs Terminating Providers and Restricting the Freedom of Choice of Providers for Medicaid Recipients: Going To Far?

Who remembers Dennis Kozlowski?  He is the former CEO of Tyco International, and his net worth is estimated at $600 million.  However, his residence? A mansion? On his own island?

Nope.  He is currently serving 8.33 to 25 years at the Mid-State Correctional Facility in Marcy, New York.

In 2005 he was convicted of crimes related to $81 million in unauthorized bonuses and the payment by Tyco of a $20 million investment banking fee to Frank Walsh, a former Tyco director.  See Wikipedia.

So here you have this “rich-as-crap,” millionaire…going about his business, no doubt believing that he is smarter than anyone else and that he will never get caught.  Then all Hades breaks lose and he goes from Armani $10,000 suits to an orange, cotton jumpsuit.  Talk about riches to rags!

Now, I am by no means comparing Kozlowski’s criminal actions to NC managed care organizations (MCO).  By no means.  I am merely demonstrating that it is easy to continue doing the wrong thing…UNTIL you get caught.

Here’s a less dramatic example:

My eight-year-old has a hard time with food.  She eats slowly and we constantly have to tell her to eat.  (We think she has sinus problems and can’t taste the food…which we are looking into).  Anyway, last week when we cleaned her room, I found a stack of bags of carrots.  Like 10 bags of carrots.  I had been putting bags of carrots in her lunch and each day, she was hiding the carrots under the bed.  She didn’t want me to know that she wasn’t eating her carrots.  Again, she thought she wouldn’t get caught, so she kept doing the wrong thing….UNTIL she got caught.

Here in North Carolina, we have now set up this MCO system for Medicaid recipients needing behavioral health care services.

These MCOs have only gone live this past year.  These are new entities.  Our 1915 b/c Waiver (Waiver), which gives the MCOs the authority to do certain things is new. 

But, what if, these new entities are NOT following the Waiver?

Won’t they just keep not following the Waiver until they get caught?

That’s what Kozlowski did.  That’s what my 8-year-old did.

If you know Medicaid, you understand that federal law requires a “single state entity” to manage Medicaid.  In North Carolina the Department of Health and Human Services (DHHS), Division of Medical Assistance (DMA) is our “single state entity.” 

The Center for Medicare and Medicaid Services (CMS) is the federal agency that has to “ok” our State Plan and all Waivers.  The State Plan outlines the organization and function of DMA.  CMS has to authorize our State Plan, including each and every amendment to our State Plan.  Our State Plan is basically “The Law of Medicaid in NC.”  NC is required to follow the State Plan or risk losing federal funding for our Medicaid system.

Our Waivers, on the other hand, are our allowable exceptions to “The Law of Medicaid in NC.”  Think of the State Plan as the general rule and the Waivers as the exceptions.  Generally, all cars must stop at a red light.  The exceptions are police cars, ambulances and fire trucks with the sirens blaring and lights flashing.

Our State Plan states, generally, DHHS, DMA is the single state entity for Medicaid and must make all administrative and managerial decisions for the program.  The 1915 (b)/(c) Waiver says…well, the exception is that the local management entities (LMEs) or managed care organizations (MCOs) have SOME responsibilities. 

BTW: People in NC keep calling the MCOs:”LME/MCOs.”  In fact, I was at a meeting during which a a representative from DHHS called the MCOs “LME/MCOs.”  The woman asking the question with the microphone asked, “Why don’t we just drop the “LME” portion and call them “MCOs,” not “LME/MCOs?”  To which the gentleman answered, “Old habits are hard to break.”

Our 1915 b/c Waiver “waives” Section 1902(a)(4) of the Social Security Act, the freedom of choice of providers.  Generally, a Medicaid recipient has the freedom to choose a provider from whom he or she wants to receive services.  Our Waiver says, “Ok, Medicaid recipient, you can choose from any provider within your MCO’s catchment area.”  Meaning, if Sally the Medicaid recipient lives in Wake county, Sally could choose any provider within Alliance’s catchment area, Cumberland, Durham, Wake and Johnson counties.

But the Waiver does not stop there.

In order for the federal government to allow NC to place this restriction on Medicaid recipients, because it is a restriction, NC had to make some promises.

We promised in our Waiver to the feds:

“These providers support this initiative and consumers have at least as much choice in individual providers as they had in the non-managed care environment.”


I do not have exact numbers, but I would wager that Alliance has terminated, refused to contract with, or denied a contract to at least 100 providers.  Considering in the recent RFP Alliance chose so few providers to serve its catchment area, I can only imagine how many providers no longer can provider services within Alliance’s catchment area.  100? 200?  See my blog: “An Ominous Cloud Looms Over NC’s Mental Health System! And Radix Malorum Est Cupiditas!”

Is terminating providers giving the consumers as much choice as they had in the non-managed care environment?

I think not.

 But who is going to stop them from continuing down this path of eliminating choice of providers within the catchment areas?

Obviously, DHHS has proved itself to be incapable of such a feat.

So the MCOs are going about their businesses…thinking no one will ever catch them…that they are free to do whatever they want…just like Kozlowski (without the criminal behavior…we hope)…just like my daughter hiding the carrots….

It’s human nature.

We just keep doing the same things over and over…UNTIL someone tells us we have to change. 

Who will tell the MCOs to follow the Waiver?  Will it take a judge?

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on January 24, 2014, in "Single State Agency", Alliance, Behavioral health, CenterPoint, Division of Medical Assistance, EastPointe, Federal Government, Federal Law, Health Care Providers and Services, Legal Analysis, Managed Care, MCO, MeckLINK, Medicaid, Medicaid Contracts, Medicaid Providers, Medicaid Recipients, Medicaid Reimbursement, Medicaid Services, Mental Health, Mental Health Problems, Mental Illness, NC, NC DHHS, North Carolina, Provider Medicaid Contracts, Smokey Mountain Center, Termination of Medicaid Contract and tagged , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 10 Comments.

  1. We are a provider whom is outraged at what is going with the Alliance network you are right and thank you so much for your commentary.

    Paula Fleming, MA, LPCS, LCAS, CCS, CCSOTS Vice-President/Clinical Director Family First Support Center, Inc 110 SW Center St Mt Olive, NC 28365 (Office) 919.635.3344 (Fax) 919.635.3388 (Cell) 919.656.1163

    Our mission is to improve individual and family strengths by promoting positive communication and the development of problem-solving skills.

    “What we think, we become” -Buddha.

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  2. There is no choice and they have settled with “general practitioners” serving children with “specialty” needs in the Center Point area. After communication with the MCO and submission of my concerns to the CEO, I received a letter informing us of how to dispute the decision (To them no doubt). I am still contemplating legal proceedings in this situation but with no guarantees the cost is too high right now. Network Development could not find a choice of providers to serve our clients (trauma and sexual offense). In fact, only 1 of the 8 or 9 was willing and that provider is not certified in a trauma specific evidence-based practice. They gave us special contracting to continue serving our clients through their current episode of care. This is just my opinion but with the merger on their heels they have used the RFP’s as an opportunity to give contracts to the providers who will hire them after Administration is downsized. Of course, they state that it is to manage funding but they have already done that by authorizing less services so there is no reason to eliminate providers through this process. It will a judge!!

  3. You KNOW it will take a judge, responding to a class action lawsuit!
    That’s the only way. Other than a DOJ visit looking for more civil rights/ Olmstead violations with the lack of community based service options.

  4. Quote from this blog: “I do not have exact numbers, but I would wager that Alliance has terminated, refused to contract with, or denied a contract to at least 100 providers.” Ms. Emanuel, in court we would petition the judge to have the jury disregard that comment as “hearsay evidence”! Please stick to the known facts in your testimony. In fact, the world of Medicaid service provision is so complicated, that you would have to weigh each decision on its own merits. One overriding fact that the general public needs to know…many potential providers choose not to accept Medicaid clients because the system is more demanding of them in terms of business practices and reimbursement. And on an even broader topic…have you heard the state and U.S. is out of money? Never forget…the reduction in services is partially due to the lack of money to pay for them like previous decades.

    • Ron, You bring up good points. You are correct that many providers make the decision to not accept Medicaid. All the more reason that we should thank the providers that do accept Medicaid, despite the demand it places on their business practices and reimbursements.

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