To Disclose or Not to Disclose: The Answer Could Terminate Your Medicaid Contract

Changes of ownership of a facility can spur RAC, MAC, and MCO audits. In fact, federal regulations require disclosure of changes of ownership within 35 days after any change of ownership. 42 CFR 455.104. The regulations require disclosure, but there is no guidance regarding acceptance of said change of ownership. In other words what if your company undergoes a change in ownership and the MCO or MAC terminates the participation agreement because they don’t appreciate who the new owner is. The federal regulations also require disclosure of any convictions related to Medicaid. 42 CFR 455.106. In the particular case I am discussing, the MCO audited this company 10-15 times over two years. There seemed to be a personal vendetta, for whatever reason, against the company from higher-ups at the MCO.

Managed care can be tricky because, by definition, it removes the management of Medicaid and Medicare from the government agencies into these quasi-private/quasi-governmental agencies. I still think that managed care violates 42 CFR 410(e), the single state agency requirement that states that “The Medicaid agency may not delegate, to other than its own officials, the authority to supervise the plan or to develop or issue policies, rules, and regulations on program matters.” Despite my personal opinion, managed care is definitely the trend. To date, 40 States have managed care organizations (MCOs) to manage Medicaid.

This company is a behavioral health care provider, which provides substance abuse services, SAIOP, SACOT, PSR, OPT, urine tests; they run a Suboxone clinic, a laboratory, and a pharmacy. It also provides free/charitable transportation services to get the consumers to the facility without receiving any money in return. The CEO was accused of personal, tax fraud. He and his wife never submitted their own taxes; they relied on professionals. One, below-stellar accountant performed the companies’ taxes and the CEO’s personal taxes a few years ago. I am no tax expert, but apparently the problem was that he took no salary for two years while the facility was bringing in little profit. His wife is a physician, so they were able to sustain on one income. A lot of confusion later and multiple tax and criminal attorneys, CEO pled guilty to a personal tax plea. It is a Martha Stewart mistake, not a Bernie Madoff. The guilty plea was not germane to Medicaid.

Once the CEO pleads guilty to the personal plea, the newspaper publishes a story. The MCO first terminates the contract based on 42 CFR 455.106, which requires disclosure if – and the exact wording is important – “Has been convicted of a criminal offense related to that person’s involvement in any program under Medicare, Medicaid, or the Title XX services program since the inception of those programs.” This guilty plea was not related to Medicaid so the termination was erroneous.

Concurrently, in light of the CEO’s plea, he steps down and his wife who is also a medical physician steps in to transition as CEO to keep the company going. Obviously, a company is bigger than its CEO’s personal transgressions. 200 staff and hundreds of consumers relied on its viability as a company.

Once we argued that the personal guilty plea was not related to Medicaid, the MCO added the additional reason for termination – failing to disclose a change in ownership. A double whammy!

We were able to successfully file a preliminary injunction arguing that irreparable harm would ensue if the termination were upheld. We also argued that the terminations were erroneous. The Judge agreed in this case agreeing that a company is indeed bigger than its CEO’s transgressions.

We always think about audits involving medical records. But audits can also involve audits of corporate disclosures or nondisclosures of managerial issues. Audits of provider executive teams can be deadly to any company.

Terminations of provider agreements are always tricky because, most often, the MCO or MAC will argue that it can terminate the Medicaid/care contract at will. I disagree, first and foremost. See blog, “Property Rights.”

If a facility is terminated for cause, that reason better be accurate!

In this case, the CEO had no duty to disclose his personal, guilty plea per the regulations. Secondly, the MCOs’ assertion that it had no notice of the transfer of ownership was equally as disingenuous. The facility had been open and honest regarding the transition of the company to a new CEO. While no formal notice was ever provided, there was clear communication about the transition to/from the MCO.

Thus, we were successful in obtaining an injunction; thereby keeping the company viable.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on May 17, 2021, in Behavioral health, Health Care Providers and Services, Knicole Emanuel, Legal Remedies for Medicaid Providers, Medicaid, Medicaid Advocate, Medicaid Appeals, Medicaid Attorney, Medicaid Audits, Medicaid Contracts, Medicaid Providers, Medicare, Medicare and Medicaid Provider Audits, Medicare Attorney, Mental Health Problems, RAC Audits, Termination of Medicaid Contract and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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