Monthly Archives: November 2023
NC Medicaid Providers Lost Their Property Right in the Continued Participation in Medicaid, According to COA
According to the 4th Circuit Court of Appeals, health care providers possess a property right interest in the continued participation in Medicare and Medicaid. Nationally, the Circuits are split. The rule is, at least in the 4th Circuit, that termination for cause of a provider’s Medicaid contract is allowed, if the cause is correct and the provider was afforded due process. On October 5, 2023, the NC Court of Appeals deviated from legal precedent and ruled no property right exists in B&D Integrated Services v. NC DHHS and its agent Alliance. The COA held that Alliance, a managed care organization (“MCO”) could terminate any provider for any cause at any time for any reason. The 4th Circuit and I beg to differ. I read the Decision, and the Petitioner, unfortunately, according to the Decision, failed to argue that it has a property right in continued participation in Medicaid. I have no earthly idea why Petitioner argued what it did, which is that OAH has no jurisdiction over provider appeals and the OAH decision should be vacated. I have no idea why Petitioner thought that was a good argument. I don’t know if arguing the property right argument would have resulted in a victory, but, to me, it is the most compelling argument. Petitioner failed to argue that MCOs are paid by the tax payor; MCOs are not private companies, so MCOs are agents of the State and must follow pertinent regulations. Instead, Petitioner argues that OAH does not have jurisdiction???? Curiouser and curiouser.
That was not the right argument to make.
And now, unless the General Assembly changes the law, B&D Integrated Health Services v. NC DHHS and its agent Alliance Health, holds that “Alliance was contractually allowed to terminate the contract, with or without cause or for any reason, upon 30 days’ notice.” Which is precisely what I have argued against for the last 15 years or so. See blog. And blog. And blog.
These MCOs are bequeathed a fire hose of tax dollar money and whatever they don’t spend, they keep for bonuses for the executives. Therefore, it is in the MCOs’ financial best interest to terminate providers, which means all the terminated providers’ consumers are immediately cut-off from their Medicaid services, and the MCO saves money.
The following paragraphs are from a Decision from OAH holding that Medicaid contracts are NOT terminable at will:
“In determining whether a property interest exists a Court must first determine that there is an entitlement to that property. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985). Unlike liberty interests, property interests and entitlements are not created by the Constitution. Instead, property interests are created by federal or state law and can arise from statute, administrative regulations, or contract. Bowens v. N.C. Dept. of Human Res., 710 F.2d 1015, 1018 (4th Cir. 1983). Under North Carolina case law, the Fourth Circuit Court of Appeals has determined that North Carolina Medicaid providers have a property interest in continued provider status. Bowens, 710 F.2d 1018. In Bowens, the Fourth Circuit recognized that North Carolina provider appeals process created a due process property interest in a Medicaid provider’s continued provision of services, and could not be terminated “at the will of the state.” The court determined that these safeguards, which included a hearing and standards for review, indicated that the provider’s participation was not “terminable at will.” Id. The court held that these safeguards created an entitlement for the provider, because it limits the grounds for his termination such that the contract was not terminable “at will” but only for cause, and that such cause was reviewable. The Fourth Circuit reached the same result in Ram v. Heckler, 792 F.2d 444 (4th Cir. 1986) two years later. Since the Court’s decision in Bowen, a North Carolina Medicaid provider’s right to continued participation has been strengthened through the passage of Chapter 108C. Chapter 108C expressly creates a right for existing Medicaid providers to challenge a decision to terminate participation in the Medicaid program in the Office of Administrative Hearings. It also makes such reviews subject to the standards of Article 3 of the APA. Therefore, North Carolina law now contains a statutory process that confers an entitlement to Medicaid providers. Chapter 108C sets forth the procedure and substantive standards for which OAH is to operate and gives rise to the property right recognized in Bowens and Ram. Under Chapter 108C, providers have a statutory expectation that a decision to terminate participation will not violate the standards of Article 3 of the APA. The enactment of Chapter 108C gives a providers a right to not be terminated in a manner that (1) violates the law; (2) is in excess of the Department’s authority; (3) is erroneous; (4) is made without using proper procedures; or (5) is arbitrary and capricious. To conclude otherwise would nullify the General Assembly’s will by disregarding the rights conferred on providers by Chapter 108C. This expectation cannot be diminished by a regulation promulgated by the DMA which states that provider’s do not have a right to continued participation in the Medicaid program because under the analysis in Bowen the General Assembly created the property right through statutory enactment.” Carolina Comm. Support Serv, Inc., at 22.
Carolina Comm. Support Serv., Inc. v. Alliance Behavioral Healthcare, 14 DHR 1500, April 2, 2015.
ALJ Decisions determining a property right exists went on to be upheld by the 4th Circuit. However, this new NC COA decision, B&D Integrated Health v. NC DHHS, threatens all providers. The reason that termination at will does not work for Medicare and Medicaid versus a private companies’ right to terminate:
- These are our tax dollars, not private money.
- It allows discrimination.
- It allows subjectivity.
- It allows bias.
- It allows an entity to overnight prevent consumers from receiving medically necessary health care services.
- It allows for an entity to, overnight, cause hundreds of staff members to lose their jobs.
B&D Integrated Health v. NC DHHS is a bad decision for health care providers. The Petitioner lost its case because it made the wrong argument. Its argument that administrative courts have no jurisdiction was a losing argument. Now State and federal contractors have more power to be subjective and discriminatory.
Now we have NC case law in State Court that fails to follow federal case law in the 4th Circuit.
We all know that there is no law, regulation or statute that medical records supporting payment by Medicare or Medicaid must be perfect. There is no mandatory 100% compliant standard. Because humans err. In light of the ongoing financial strain brought about by the pandemic and the constraints imposed by Congress on Medicaid coverage disenrollments, State Medicaid agencies are poised to explore additional audits to manage increasing Medicaid expenditures. Recent developments, such as additional flexibilities granted by CMS, suggest a shifting landscape in how States respond to these challenges.
Anticipating a more assertive approach by States in dealing with service providers, potential measures could include rate cuts and enhanced scrutiny through service audits. This prompts a crucial examination of States’ and providers’ rights under federal Medicaid law to audit service provisions and recover overpayments, a legally intricate and noteworthy domain.
Medicaid RAC Audits are governed by 42 CFR 455 Subpart F—Medicaid Recovery Audit Contractors Program. Other Medicaid alleged overpayments are dictated by 42 CFR Chapter 433.
To establish a foundational understanding, it’s essential to consider the mandate imposed by Congress in section 1902(a)(30)(A) of the Social Security Act. States are required to incorporate provisions in their Medicaid plans to “safeguard against unnecessary utilization of … care and services.” This underscores the federal interest in ensuring responsible use of matching funds, given the federal government’s financial contribution to the program.
A landmark case illustrating the complexities of this mandate is the 1999 decision by the Supreme Judicial Court of Massachusetts in Massachusetts Eye and Ear Infirmary v. Commissioner of Medical Assistance. The court evaluated Massachusetts Medicaid’s retrospective utilization review policy, emphasizing the need for meaningful definitions of terms like “inpatient” and “outpatient” to avoid arbitrary penalties on providers.
Moving to the realm of overpayments, CMS regulations, specifically at 42 C.F.R. § 433.316, provide guidance on how States should proceed when identifying overpayments. The regulations recommend written notification to providers, with states having the discretion to choose whether to notify in cases of suspected fraud. Furthermore, States are required to take “reasonable actions” based on state collections law to recoup overpayments, with a one-year timeframe to return the federal share of identified overpayments to CMS.
Determining when a State “discovers” an overpayment is a critical aspect outlined in the regulations. The discovery is pegged to specific events, such as the state contacting the provider, the provider notifying the state, formal initiation of recoupment, or a federal official identifying the overpayment. Significantly, the regulations focus more on CMS’s relationship with the state than on the state’s relationship with providers.
Recent legal precedents, such as the Wisconsin Supreme Court’s decision in Professional Home Care Providers v. Wisconsin Department of Health Services, underscore the need for states to operate within the bounds of their granted authority. In this case, the court rejected a Medicaid agency’s “perfection” policy, emphasizing that state law must align with CMS regulations in overseeing overpayment recovery.
As States grapple with revenue shortfalls exacerbated by the pandemic, the potential for increased efforts to recoup overpayments from providers looms large. Legal challenges, exemplified by recent decisions in Massachusetts and Wisconsin, underscore the delicate balance States must strike in these endeavors, emphasizing the limits within which they must operate as they navigate the complex terrain of Medicaid law and financial constraints.
Expect audits. Be ready to defend yourself. Self audits are so important. If you self audit and find a problem and self-disclose, you will not receive penalties. Self-disclosures are key. When I told a group of law students this key information, one asked, has you told a client to self-disclose and they refused? To which I said yes. One time. A female doctor informed me that she falsified 7 medical records, I said that she should disclose. She screamed at me in her language, fired me, and hired a new attorney and withheld the information about falsifying records.
She is jail currently.