Category Archives: Denials of Medicaid Services

Class Action Lawsuit Alleges Right to Inpatient Hospital Stays: Hospitals Are Damned If They Do…and Don’t!

Hospitals – “Lend me your ears; I come to warn you, not to praise RACs. The evil that RACs do lives after them; The good is oft interred with their appeals; So let it be with lawsuits.” – Julius Caesar, with modifications by me.

A class action lawsuit is pending against U.S. Health and Human Services (HHS) alleging that the Center for Medicare and Medicaid Services (CMS) encourages (or bullies) hospitals to place patients in observation status (covered by Medicare Part B), rather than admitting them as patients (covered by Medicare Part A). The Complaint alleges that the treatments while in observation status are consistent with the treatments if the patients were admitted as inpatients; however, Medicare Part B reimbursements are lower, forcing the patient to pay more out-of-pocket expenses without recourse.

The United States District Court for the District of Connecticut refused to dismiss the class action case on February 8, 2017, giving the legal arguments within the Complaint some legal standing, at least, holding that the material facts alleged warrant investigation.

The issue of admitting patients versus keeping them in observation has been a hot topic for hospitals for years. If you recall, Recovery Audit Contractors (RACs) specifically target patient admissions. See blog and blog. RAC audits of hospital short-stays is now one of the most RAC-reviewed issues. In fiscal year 2014, RACs “recouped” from hospitals $1.2 billion in allegedly improper inpatient claims. RACs do not, however, review outpatient claims to determine whether they should have been paid as inpatient.

On May 4, 2016, CMS paused its reviews of inpatient stays to determine the appropriateness of Medicare Part A payment. On September 12, 2016, CMS resumed them, but with more stringent rules on the auditors’ part. For example, auditors cannot audit claims more than the six-month look-back period from the date of admission.

Prior to September 2016,  hospitals would often have no recourse when a claim is denied because the timely filing limits will have passed. The exception was if the hospital joined the Medicare Part A/Part B rebilling demonstration project. But to join the program, hospitals would forfeit their right to appeal – leaving them with no option but to re-file the claim as an outpatient claim.

With increased scrutiny, including RAC audits, on hospital inpatient stays, the class action lawsuit, Alexander et al. v. Cochran, alleges that HHS pressures hospitals to place patients in observation rather than admitting them. The decision states that “Identical services provided to patients on observation status are covered under Medicare Part B, instead of Part A, and are therefore reimbursed at a lower rate. Allegedly, the plaintiffs lost thousands of dollars in coverage—of both hospital services and subsequent skilled nursing care—as a result of being placed on observation status during their hospital stays.” In other words, the decision to place on observation status rather than admit as an inpatient has significant financial consequences for the patient. But that decision does not affect what treatment or medical services the hospital can provide.

While official Medicare policy allows the physicians to determine the inpatient v. observation status, RAC audits come behind and question that discretion. The Medicare Policy states that “the decision to admit a patient is a complex medical judgment.” Ch. 1  § 10. By contrast, CMS considers the determination as to whether services are properly billed and paid as inpatient or outpatient to be a regulatory matter. In an effort to avoid claim denials and recoupments, plaintiffs allege that hospitals automatically place the patients in observation and rely on computer algorithms or “commercial screening tools.”

In a deposition, a RAC official admitted that if the claim being reviewed meets the “commercial screening tool” requirements, then the RAC would find the inpatient status is appropriate, as long as there is a technically valid order. No wonder hospitals are relying on these commercial screening tools more and more! It is only logical and self-preserving!

This case was originally filed in 2011, and the Court of Appeals overturned the district court’s dismissal and remanded it back to the district court for consideration of the due process claims. In this case, the Court of Appeals held that the plaintiffs could establish a protected property interest if they proved their allegation “that the Secretary—acting through CMS—has effectively established fixed and objective criteria for when to admit Medicare beneficiaries as ‘inpatients,’ and that, notwithstanding the Medicare Policy Manual’s guidance, hospitals apply these criteria when making admissions decisions, rather than relying on the judgment of their treating physicians.”

HHS argues that that the undisputed fact that a physician makes the initial patient status determination on the basis of clinical judgment is enough to demonstrate that there is no due process property interest at stake.

The court disagreed and found too many material facts in dispute to dismiss the case.

Going forward:

Significant discovery will be explored as to the extent to which hospitals rely on commercial screening tools. Also whether the commercial screening tools are applied equally to private insureds versus Medicare patients.

Significant discovery will be explored on whether the hospital’s physicians challenge changing a patient from inpatient to observation.

Significant discovery will be explored as to the extent that CMS policy influences hospital decision-making.

Hospitals need to follow this case closely. If, in fact, RAC audits and CMS policy is influencing hospitals to issue patients as observation status instead of inpatient, expect changes to come – regardless the outcome of the case.

As for inpatient hospital stays, could this lawsuit give Medicare patients the right to appeal a hospital’s decision to place the patient in observation status? A possible, future scenario is a physician places a patient in observation. The patient appeals and gets admitted. Then hospital’s claim is denied because the RAC determines that the patient should have been in observation, not inpatient. Will the hospitals be damned if they do, damned if they don’t?

damned

In the meantime:

Hospitals and physicians at hospitals: Review your policy regarding determining inpatient versus observation status. Review specific patient files that were admitted as inpatient. Was a commercial screening tool used? Is there adequate documentation that the physician made an independent decision to admit the patient? Hold educational seminars for your physicians. Educate! And have an attorney on retainer – this issue will be litigated.

Documentation Errors Could Affect Your License to Practice!

Written by Robert Shaw, Partner at Gordon & Rees.

Readers of this blog know well what financial harm can come from documentation problems, particularly resulting from Medicare and Medicaid auditors. But just as significantly, these problems can affect your participation rights in federal programs, and could even affect your license to practice. A case in point is a recent decision from the North Carolina Court of Appeals about disciplinary action taken against a dentist.

In Walker v. North Carolina Board of Dental Examiners, the Court of Appeals, in an opinion filed today, addressed findings by auditors that the dentist had not properly documented “the reasons for prescribing narcotic pain medications for a number of patients in her treatment records.” Well, you might ask, What Does The Rule Say? There is in fact a rule on the records that dentists must keep, similar to the rules in most other health care specialties. It is the Record Content Rule in 21 N.C.A.C. 16T .101.

(By the way, now is a great time to review every rule that you must follow in order to keep proper records and to figure out what the legal requirements are. Many providers did this at one time but fail to keep up to speed on the latest rule changes, which gets them into trouble. Or, they keep records based on how someone taught them. But, that’s not a legal defense!)

The Court of Appeals found that Dr. Walker did NOT violate the Record Content Rule, which does not require documentation of the medical reasons for prescribing pain medication. So, the Board of Dental Examiners got it wrong by citing Dr. Walker for a violation of 21 N.C.A.C. 16T .101. That rule only requires that the dentist document “[n]ame and strength of any medications prescribed, dispensed or administered along with the quantity and date.”

But that was not the end of the matter. The Board also cited Dr. Walker for violating N.C. Gen. Stat. 90-41(a)(12), which provides that the Board of Dental Examiners “shall have the power and authority to . . . [i]nvoke . . . disciplinary measures . . . in any instance or instances in which the Board is satisfied that [a dentist] . . . [h]as been negligent in the practice of dentistry[.]” This is very broad power.

So, what is the standard to be applied under this general “negligent in the practice of dentistry” statute? At the disciplinary hearing, two expert witnesses (other North Carolina dentists) testified that “the applicable standard of care require[s] North Carolina dentists to not only record [the] prescription [of] controlled substances, but the reason for prescribing those medications.” This is, in effect, an unwritten standard of practice that dentists, at least according to these witnesses, should follow in North Carolina. Perhaps importantly, Petitioner acknowledged that she had participated in training programs that advised that dentists should record the reasons for medications that they prescribe. But nevertheless, this rule was not in the North Carolina Administrative Code, a clinical coverage policy, or other policy statement published by the Board (at least that was cited in the opinion).

The Court of Appeals affirmed that the Board had the authority to discipline the petitioner for failing to follow these general standards of care in North Carolina, based on testimony of two practicing North Carolina dentists!

What does this mean? It means that your licensing board could cite general record-keeping practices in your field as the basis for disciplinary action against you under a catch-all negligence standard. While each board is governed by its own set of rules and statutory authority, Walker v. North Carolina Board of Dental Examiners is a powerful reminder that record-keeping is serious business, and you could be legally obligated to follow standard practices in your field in addition to the legal maze of federal and state regulations and policies governing health care records.

NCTracks: There’s a Hole in My Bucket !!

My mom taught me a song when I was young called, “A Hole in the Bucket.” It is a maddening song about a lazy husband named Henry who begins the song telling his wife Liza that “There’s a hole in the bucket, dear Liza, dear Liza….” To which Liza sings, “Then fix it, dear Henry, dear Henry…”

The song continues with Henry singing excuses and impediments to his ability to fix the hole in the bucket and Liza explaining to Henry how to overcome these excuses. The song goes around and around until, in order to fix the bucket, Henry would have to sharpen an ax on a stone that “is too dry,” and the only way to wet the stone is with the bucket that has a hole. “There’s a hole in the bucket…” And the songs starts anew and can be sung continuously, never-ending.

My husband and daughter audibly groan when I begin such song.

And you can’t blame them! It is discouraging and frustrating when something is caught in a never-ending circle with no end and no conclusion.  It is human nature to try to resolve issues; it is also ingrained in Americans’ minds that hard work yields results. When hard work yields nothing but a big, fat goose-egg, it is exacerbating.

Kind of like claims in NCTracks…

When NCTracks went live on July 1, 2013, providers immediately began to complain the claims were being erroneously denied and they were receiving no reimbursements. Folks with whom I spoke with were at their wits-ends, spending hours upon hours trying to discern why claims were being denied and what process they could undertake to fix “the hole in the bucket.”

The problem persisted so long and I was contacted by so many providers that I instigated the NCTracks class action lawsuit, which is still pending on appeal, to the best of my knowledge, at my former firm.  Although it was dismissed at the Business Court level, I believe it is on appeal. See blog.

Providers complained that, when they contacted CSC’s Help Desk regarding denied claims, the customer service representatives would have little to no understanding of the claims process and instruct them to re-file the denied claims, which created a perpetual cycle of unadjudicated claims.

“It was infuriating!” One provider explained. “It was as if we were caught in the spin cycle with no hope of stopping. I wanted to yell, ‘I’m dry all ready!!'”

“I was spending 20+ a week on NCTracks billing problems,” another said.

To which, I said, “There’s a hole in the bucket, dear Liza, dear Liza.”

Over two years after the “go live” date, the Department has now (finally) informed providers that there is an informal reconsideration review process for denials from CSC.

The September 2015 Medicaid Bulletin states that:

“This article provides a detailed explanation of the N.C. Division of Medical Assistance (DMA)  procedures for Informal Reconsideration Review of adverse claim actions (denials, disallowances and adjustments) made by its fiscal agent, CSC.”

The Bulletin provides a 30 day time period during which a provider can appeal a denied claim:

“Time Limit for Submission of Request

  • A provider may request a reconsideration review within 30 calendar days from receipt of final notification of payment, payment denial, disallowances, payment adjustment, notice of program reimbursement and adjustments. If no request is received within the respective 30 calendar day period, DMA’s action will become final.”

(emphasis in original).

You must request reconsideration review within 30 calendar days of the final notification.  BUT what exactly is “final notification?” The initial denial? The second denial after re-submitting? The third? Or, what if, your claim is pending…for months…is that a denial?  When CSC tells you to re-submit, does the time frame in which to file a reconsideration review start over? Or do you have to appeal every single denial for every single claim, even if the claim is re-submitted and re-denied 10 times?

This new informal appeal process is as clear as mud.

Notice the penalty for NOT appealing within 30 days…”DMA’s action will become final.”

This means that, if you fail to appeal a denial within 30 days, then the claim is denied and you cannot request a reconsideration review. Theoretically, there is a legal argument that, once the “final decision” is rendered, even if it were rendered due to you failing to request a reconsideration review, you would have 60 days to appeal such final decision to the Office of Administrative Hearings (OAH). Although, acting as the Devil’s advocate, there is an argument that your failure to request a reconsideration review and taking the appeal straight to OAH is “failing to exhaust your administrative remedies.” See blog. Which could result in your appeal being dismissed for lack of jurisdiction. This goes to show you the importance of having your attorney involved at the earliest juncture, otherwise you could risk losing appeal rights.

Let’s think about the “time limit for submission of request” in a real-life hypothetical.

You keep receiving denials for dialysis claims for no apparent reason. You received 20 denials on September 4, 2015. You contact a CSC customer service representative on September 8, 2015, four days later, due to Labor Day weekend. The customer service representative instructs you to re-file the claims because you must include the initial date of treatment in order to have the claims processed and paid (which was not required with HP Enterprises’ system). Is this the “final notification?” It does not seem so, since you are allowed to re-submit…

You revise all 20 claims to include the first treatment date on the claim and re-submit them on September 9, 2015. Since you re-submitted prior to the September 10th cutoff, you expect payment by September 16, 2015, 12 days after the initial denial.

You receive your explanation of benefits (EOBs) and 5 claims were adjudicated and paid, while 15 were denied again.

You contact CSC customer service and the representative instructs you to re-submit the 15 claims.  The rep does not know why the claims were denied, but she/he suggests that you review the claims and re-submit. After hours of investigative work, you believe that the claims were denied because the NPI number was wrong…or the incorrect address was processed…or…

You miss the September 17th cut-off because you were trying to figure out why these claims were denied.  you submit them for payment for the September 29th checkwrite date (25 days after the initial denial).

At this point, if any claims are denied, you wouldn’t know until October 6th, 32 days after the initial denial.

In my scenario, when is the final adjudication?

If the answer is that the final adjudication is at the point that the provider tries all possible revisions to the claims and continues to re-submit the claims until he/she cannot come up with another way to re-submit, then there is never final adjudication. As in, the provider could continue various changes to the billing ad nauseam and re-submit…and re-submit…and re-submit…”There’s a hole in the bucket!”

If the answer is that the final adjudication is the initial denial, then, in my scenario, the provider would be required to appeal every single denial, even for the same claim and every time it is denied.

You can imagine the burden to the provider if my second scenario is correct. You may as well hire a full-time person whose only task is to appeal denied claims.

Regardless, this new “Informal Reconsideration Review” purports to create many more questions than answers.

So may rules are enacted with good intentions, but without the “real life” analysis. How will this actually affect providers?

“There’s a hole in the bucket, dear Liza, dear Liza.”

Then fix it.”

State Auditor Finds Robeson County School NOT Using Medicaid Money

Our State Auditor Beth Wood’s most recent audit finds that The Public Schools of Robeson County failed to spend approximately $1 million in Medicaid dollars intended for special needs children in schools!!

See audit report.

“The Public Schools of Robeson County (School District) did not use approximately $1 million per year in Medicaid administrative reimbursements to provide required services to students with disabilities. The School District missed this opportunity to better serve students with disabilities because it was unaware of a contractual requirement to use the Medicaid reimbursements to provide required services.

Over the last three years, the School District reported that it used $26,780 out of $3.16 million in Medicaid administrative reimbursements to provide services to students with disabilities.

The amounts reportedly spent each year are as follows:

• $ 8,969 out of $1,010,397 (0.89%) in 2013

• $12,043 out of $872,299 (1.38%) in 2012

• $ 5,768 out of $1,278,519 (0.45%) in 2011”

The question that I have after reading the audit report is…WHERE IS THE MONEY?

Was this $1 million given to the school system and spent on items other than services for children? Is the school district sitting on a surplus of money that was unspent? Or was this amount budgeted to the school system and the remainder or unspent money is sitting in our state checking account?

To me, it is relatively unclear from the audit report which of the above scenarios is an accurate depiction of the facts.  If anyone knows, let me know.

NCTracks Lawsuit Dismissed! Judge Finds Providers Failed to Exhaust Their Administrative Remedies!

Remember July 1, 2013? Providers across North Carolina probably still suffer PTSD at the mention of the “go-live” date for NCTracks.  If you remember July 1, 2013, you probably also remember that my former firm filed a class action lawsuit on behalf of the physicians in NC who suffered losses from NCTracks’ inception.

There was oral argument at the NC Business Court.

Judge McGuire, of the NC Business Court, dismissed the NCTracks class action lawsuit stating the providers failed to exhaust the administrative remedies.  The Order reads, in part:

“Ultimately, the burden of proving that administrative remedies are inadequate in this action rests on Plaintiffs.  Jackson, 131 N.C. App. at 186.  Although sympathetic to the apparently difficult administrative process, the Court concludes that, particularly in light of the fact that not a single Plaintiff has attempted to use the available administrative procedures to resolve their Medicaid reimbursement claims, Plaintiffs have simply failed to satisfy this burden.  Accordingly, Defendants’ Motions to Dismiss pursuant to Rule 12(b)(1) should be GRANTED.”

While I understand the logic applied to come to this decision, I do not necessarily agree with the outcome.  There are exceptions to the exhaustion of administrative remedies, which, in my humble opinion, are present here.

(This blog contains my own opinions as to the NCTracks ruling and not those of my present or former firms.  It is not intended to claim any ruling was incorrect or inconsistent with case law, rules, and statutes).

(Try to read the foregoing sentences in a fast-paced, tiny, whispery voice, like a pharmaceutical commercial).

Regardless, where does this decision leave the physicians in NC who suffered under an, admittedly, botched, beginning of NCTracks? (Even DHHS recognized the imperfections at the beginning).

First, what is the doctrine of failure of administrative remedies? (I was going to start with what is NCTracks, but you do not know what NCTracks is, you probably should begin reading some of my earlier blog posts: blog; and blog; and blog).

In a nutshell, the exhaustion doctrine dictates that if a party disagrees with an adverse action of a state agency that the party must exhaust its administrative remedies before asking for relief from a civil court judge.

What?

Law 101: The Office of Administrative Hearings (OAH) has limited jurisdiction. It only has jurisdiction over those matters specifically granted to it by statute. If you have an issue with a final adverse decision of a state agency, you sue at OAH. In other words, if you want to sue a state agency, such as DHHS, or any of its agents, like an MCO, you sue at OAH, not Superior Court.  An Administrative Law Judge, or ALJ, presides over the court.  While OAH is more informal than Superior Court, OAH follows the rules of civil procedure unless an administrative rule exists.

If a Superior Court were to find that the party failed to exhaust its administrative remedies, then the court would find that the party lacked subject matter jurisdiction; i.e., the court is holding that it does not have the authority to determine the legal question at issue.

You would be back to square one, and, potentially, miss an appeal deadline.

In the Medicaid world this is similar to a managed care organization (MCO) having an informal review process internally which would be required prior to bringing a Petition for Judicial Review at OAH.

Were you to bring a Petition for Judicial Review at OAH prior to attending an informal reconsideration review at the MCO, the ALJ would, most likely, dismiss the case for failure to exhaust your administrative remedies.

But in the NCTracks case, the Plaintiffs sued DHHS and Computer Science Corporation (CSC).  CSC is, arguably, not a state agency. The only way in which you could sue CSC at OAH would be for an ALJ to determine that CSC is an agent of a state agency.  And, who knows? Maybe CSC is an agent of DHHS.  Judge McGuire does not address this issue in his Order.

Many of you may wonder why I opine that CSC is not an agent of the state, yet surmise that the MCOs are agents of DHHS.  Here is my reasoning: DHHS, in order to bestow or delegate its powers of administering behavioral health to the MCOs, was required to request a Waiver from the federal government.  Unlike with CSC, DHHS merely contracted with CSC; no Waiver was required.  That Waiver (two Waivers, really, the 1915(b) and 1915(c)) allow the MCOs to step into the shoes of DHHS….to a degree…and only as far as was requested and approved by CMS…no more.  I view CSC as a contractor or vendor of DHHS, while the MCOs are limited agents.

Going back to NCTracks…

One can surmise that, because Judge McGuire dismissed the entire lawsuit and did not keep CSC as a party, Judge McGuire opined that CSC is an agent of DHHS.  But there is a possibility that the providers sue in OAH and an ALJ determines that OAH is not a proper venue for CSC.  Then what? Back to Superior Court and/or Business Court?

Why do you have to exhaust your administrative remedies? It does seem too burdensome to jump through all the hoops.

The rationale behind requiring parties to exhaust their administrative remedies is that those entities (such as OAH) that hear these specialized cases over and over and develop an expertise to decide the certain esoteric matters that arise under their jurisdiction. Also, the doctrine of separation of powers dictates that an agency created by Congress should be allowed to carry out its duties without undue interference from the judiciary.

For example, Judges Don Overby and Melissa Lassiter, ALJs at the NC OAH have, without question, presided over more Medicaid cases than any Superior Court Judge in the state (unless a Superior Court is a former ALJ, like Judge Beecher Gray).  The thinking is that, since Overby and Lassiter, or, ALJs, generally, have presided over more Medicaid cases than the average judge, that the ALJs have formed expertise in area.  Which is probably true.  It cannot be helped.  When you hear the same arguments over and over, you tend to research the answers and form an opinion.

So there is the “why,” what about the exceptions?

There are exceptions to the general rule of having to exhaust your administrative remedies that may or may not be present in the NC tracks case.  If you ask me, exceptions are present. If you ask Judge McGuire vis-à-vis his Order, there are no exceptions that were applicable.

One such exception to the general rule that you must exhaust your administrative remedies is if bringing a case at the informal administrative level would be futile.  If you can prove futility, then you are not required to exhaust your administrative remedies. Another exception is if you are requesting monetary damages that cannot be awarded at the administrative law level.

Where the administrative remedy is inadequate, a plaintiff is not required to exhaust that remedy before turning to the courts. Shell Island, 134 N.C. App. at 222. The burden of establishing the inadequacy of an administrative remedy is on the party asserting inadequacy. Huang v. N.C. State Univ., 107 N.C. App. 110, 115 (1992).

What DHHS argued, in order to have the case dismissed for lack of subject matter jurisdiction, and Judge McGuire agreed with, is:

that adequate administrative remedies exist for all health care providers when NCTracks improperly denies claims.

This holding is not without questions.

Some providers re-bill denied claims over and over.  There is a question as to when do you appeal?  The first denial? The second? The Fourteenth?  At which point do you accept the denial from NCTracks as a “final agency decision?”  Do you use the “3 strikes and you’re out” rule?  Do you give NCTracks a mulligan? Or do you wait until NCTracks “fouls out” with a 6th denial?

Another question that remains hanging in the wake of the NCTracks dismissal is how will providers handle the sheer volume of denials. Some providers receive voluminous denials.  Some RAs can be hundreds of pages long.

Let’s contemplate this argument in a hypothetical.  You run a nephrology practice.  The bulk of your patients are Medicaid (90% Medicaid, although 50% are dual eligible with Medicaid/Medicare). You have approximately 500-700 patients, who come see your doctors because they are in need of dialysis.  You know that if a person does not receive dialysis that there is a chance that the person can enter Stage 5 (end stage renal disease) and die quickly. However, upon July 1, 2013, when NCTracks went live, you stopped receiving Medicaid payments completely.  Do you stop accepting and treating your Medicaid patients? Obviously you do not stop accepting Medicaid patients?  But your practice cannot sustain itself.  Even if you continue to treat Medicaid patients, at some point, you will  be out of business, failing to meet payroll, and being forced to involuntarily not treat your patients.

Your patients in need of dialysis come to the office 3x per week.  A single hemodialysis treatment typically costs up to $500 or more — or, about $72,000 or more per year for the typical three treatments per week.

Let’s approximate with 500 patients.  500 patients multiplied by 3x per week is 1,500 per week. That is 1,500 denials per week.  What Judge McGuire is saying is that your office is burdened with appealing 1,500 denials per week.  Or 6,000 denials per  month. Or 72,000 appeals per year.

Which of your office staff will be charged with appealing at OAH 72,000 denials per year? The physicians?  You, the office manager (because you obviously have nothing else to do)?  The receptionist? Hire someone new?  For how much?  How will you recoup the cost of appealing 72,000 denials per year?  How many hours does it cost to appeal one?  Hire an attorney?

Obviously, my example is one of an extreme case with 100% denials. But the sentiment holds true even for 30%, 40%, or 50% of denials. The sheer volume would be overwhelming.

And you can imagine the backlog that would be created at OAH.

Judge McGuire’s decision that plaintiffs failed to exhaust their administrative remedies issue appears to be based, in part, that because no plaintiff had tried to go to OAH, plaintiffs could not convince him that the administrative remedy was non-functional.

“Significantly, none of the Plaintiffs even attempted to use the administrative procedures to address the failure to pay claims and other issues they allegedly encountered in attempting to use NCTracks. Instead, Plaintiffs allege that the administrative process would have been futile and inadequate to provide the relief they seek.”  See Abrons Family Practice v. DHHS and CSC, ¶ 36 (emphasis added).

What now?

Well, first of all, when I moved to Gordon & Rees, I left this case in the capable hands of my former partners, so I have no special intelligence, but I wager that this is not the end.

There are choices. They could:

(1) Appeal the decision to the Court of Appeals;

(2) File an insurmountable number of petition’s at OAH; or

(3) Do nothing.

For some reason, I have my doubts that #3 will occur.

What do you think???  What should the Plaintiffs do now in the wake of this dismissal?

A Brave New World With Mergers and Acquisitions of Behavioral Health Care Providers: Not Always Happily Ever After!

Unintentionally, I misrepresented the Benchmark panel discussion on which I appeared last Thursday. See blog.  I thought that I would be sitting on the panel along with MCO representatives. I honestly cannot tell you from where I got this idea. Maybe it was a subconscious desire. Regardless, the panel discussion was about merges and acquisitions among behavioral health care providers. While the subject of managed care organizations (MCOs) did come up, managed care was not the primary subject.  And the only MCO representative that I saw was Smokey Mountain’s attorney.

panelpic2

Nevertheless, the panel discussion went fantastic and was informative for those who attended.  I will summarize the panel discussion here for those who could not attend.  First, if you are a behavioral health care provider in NC, joining an association, such as Benchmarks, is an asset.  Not only do you get the benefit of attending educational programs, but you also have the opportunity to meet other behavioral health care providers across the state at the events.  You never know the potential relationships that could be created by attending a Benchmark event.

Going back to the panel…

There were 5 people sitting on the panel.  Besides myself, the panel consisted of Robert Shaw, Senior Counsel with me at Gordon & Rees, Frank Williams, a broker who facilitates mergers and acquisitions for health care providers, and two CEOs of health care providers who have undergone successful mergers and/or acquisitions.

The general consensus of the panel was that the future of behavioral health care will be larger companies which offer multiple services, instead of mom and pop shops that provide few types of services.  The panel was intended to bring potential mergers/acquisitions together in one venue and to educate the providers on “Do’s and Don’ts of Merging/Acquiring,” which is summarized below.

This consensus is generally derived from the MCO atmosphere here in NC.  Right or wrong, the MCOs are operating in closed networks and have the financial incentives to save money by contracting with fewer providers and decreasing authorizations for Medicaid services requested by Medicaid recipients.  See blog. And blog. And blog.

The MCOs seem to be terminating or refusing to contract with smaller health care providers, which, in turn, incentivize small health care providers to join other providers in order to grow its footprint.

Merging or acquiring a company is similar to partnering with another person in marriage.  Both parties have to familiarize themselves with the other’s habits, expectations, learn the other’s faults/liabilities, and, ultimately, have to work together on projects, issues and other matters.  And as we can discern from today’s high divorce rate, not everyone lives happily ever after.

Some marriages, as well as mergers, simply do not work.  Others live happily ever after.

The two provider panelists shared successful merger/acquisition stories.  Both shared experiences in creating new and larger entities effectively.  Both panelists were happy with the mergers/acquisitions and hopeful as to what the future will bring both new entities.

But all mergers and acquisitions do not have happy endings.  The two entities do not always live happily ever after.

Robert and I shared a story of an acquisition from Hades. There is no other way to describe the outcome of the acquisition.

The story of these two companies begins with the fact that the companies leased space in the same building.  One company was on floor 2 and the other was on floor 1.  The staff knew each other in passing.

The problem with the merger of these companies stemmed from a difference in culture.

Theoretically, the two companies did everything right.  The owner of the company getting acquired agreed to stay and work for the company buying it in order to ensure consistency. The buying company agreed to hire all the seller’s employees at their current salaries.  The acquisition was to be seamless.

The problems arose when news of the acquisition passed to the employees.  There was genuine discontentment with the arrangement.  The employees from the seller reacted with hostility and resentment.  Prior to the acquisition, the seller was fairly lax in regulatory compliance.  For example, if a service note was not drafted and filed the date of services….eh?…not that big of a deal.  Well, the buyer had strict document compliance rules for daily service notes.  Anytime more stringent policies are enacted on employees, there is sure to be a negative reaction.  The buyer also expected the seller’s employees to provide more services for the same salary received before the acquisition.

There was no legal or logical step omitted in the acquisition of the one company to the other.  On paper, the acquisition should have been successful.  But, then, personalities got in the way of happily ever after.

The other panelists offered great advice as to mergers and acquisitions, both from the providers’ view and a broker’s view.  I have compiled the advice that I recall below.  I have taken the liberty to provide analogous dating advice, as well, since marriages and mergers/acquisitions are so similar.  Hope it helps!!

Do’s and Don’ts of Mergers/Acquisitions

  • Do not let the secret out.

One provider panelist explained that if your employees learn of a possible merger/acquisition, they will kill the deal. Confide only in the CEO of the firm of which you are looking to merge, acquire, or sell.  Those dating: Never tell other that you want to marry (until the appropriate time).

  • Look outside your catchment area.

The reason companies merge/acquire is to grow.  Think of potential companies outside your own catchment area to grow even more.  For example, if you are in Alliance’s catchment area, think of merging with a company in ECBH/Eastpointe’s area.  Those dating: Have you exhausted your resources? Think of others, such as church, Match.com, etc.

  • Do your due diligence

This is a task as important as the oxygen you breath.  The last thing that you want is to acquire or merge with a company that owes $500,000 in employment taxes or an alleged overpayment.  Part of due diligence will be to check the credentials of every single staff member.  If someone is acting in the role of a LCAS, ensure the person is appropriately licensed.  Those dating: Is he/she employed? Have significant debt?

  • Review the other company’s documentation policies

This could be lumped into the due diligence section, but I think its importance is worth emphasizing.  Whatever service(s) the other company provides, what are its policies as to documentation? Does the provider have a computer program to maintain electronic health records (EHR)? Does it employ paper copies? Does the other company require the providers to submit daily service notes? Look at your own documentation policies.  Contemplate whether your own documentation policies would mesh well with the other company’s policies.  Those dating: How does your potential partner document spending, taxes, and calendared events?

  • Analyze both company’s corporate culture

Merging or acquiring a company is difficult in many ways, but it’s also hard on staff.  Imagine walking into work one day and you notice that the staff had doubled…or tripled.  And you and your colleagues are being told what to do by someone you never met.  This is not an uncommon occurrence with mergers and acquisitions.  Sometimes accepting change of supervision or team members can be a bitter pill to swallow.  How will you work through employee issues?  Personality clashes?  Ego fights?  Those dating: Analyze both person’s personalities, dispute resolutions, religion and beliefs.  Do you like his/her friends?

In addition to the potential conflicts with employees that stay with the merged entity, you also need to contemplate which employees, if any, may, potentially leave the new entity.  Disgruntled employees are a liability.  Those dating: How does he/she treat ex-partners?

  • Research the company’s relationship with its MCO

In our current MCO atmosphere, it is imperative to know, before merging or acquiring, whether the company has a good relationship with its MCO.  What if you acquire the company and its MCO refuses to continue to contract with the new entity.  Knowing the company’s relationship with the MCO is not an absolute.  As in, the company may believe it to have a good relationship with the MCO, while, in truth, it does not.  Ask to review some correspondence between the company and the MCO to discern the tone of the communications.  Those dating: How does he/she treat his/her mother/father?

  • Surround yourself with knowledge

Have a broker and an attorney with expertise in Medicaid.  Those dating: What do your friends think?

To watch the video of me speaking as a panelist for Benchmark, click here.  Scroll down until you see the video with Robert and me.

Otherwise, I hope you live happily ever after!

CMS Certifies NCTracks!!! NC Will Get 19 Million from the Feds!

As I am driving back to the office after lunch, I hear on the news that CMS has certified NCTracks!  This is huge on so many levels, and I will have to add another blog about once I get more information.  So after 2 years and almost 8 months after its go-live date, NCTracks is certified.

Had CMS not certified NCTracks, then NC would have lost millions of dollars in federal dollars to fund the computer program created by Computer Sciences Corporation (CSC).

I am going to look into the standards for the certification…I know there are over 600 criteria that must be met for certification…but what is the threshold? An ‘A?’ Or do you squeak by with a ‘D?’

In the meantime, NC will receive approximately $19 million from the federal government.  NCTracks had replaced the decades-old computer system created by HP Enterprises back in the summer of 2013.

CSC is a named Defendant in a class action lawsuit filed on behalf of physicians across NC alleging that the computer system was fraught with errors when it went live, including erroneous denials and heavy administrative burdens.

See blog.

Remember, this was not NCTracks’ first rodeo with an attempted certification from CMS.  Back in 2013, CMS did not certify NCTracks.

In 2013, NCTracks did not meet a federal certification deadline that could have saved the state more than $9 million in annual operation costs.  See article.

 

Breaking News: Knicole Emanuel and Team Move to the National Law Firm of Gordon & Rees!!

April 2015 has turned into a month of change for my family and me.

I am so excited to announce that as of today, I am a partner at Gordon & Rees.  Robert Shaw will be joining as a senior counsel and Todd Yoho, our paralegal, will also be joining.  So “Team Medicaid” is staying together!! Both Robert and Todd are integral parts of this team.

Yes, I will remain in Raleigh.  Yes, I will still maintain this blog!

I did not take this decision lightly.  I enjoyed every second of my time at Williams Mullen.  The attorneys over at WM are top-notch and will be greatly missed.

However, Gordon & Rees (GR) provides us with a national platform, as it is the 89th largest firm in the country!!!!!

GR has 600+ lawyers in 21 different states!! This national platform will enable us to grow our practice across the country.  We (GR) do not have an office in New Mexico yet…

In this type of practice, my clients are health care providers that provide health care to our most needy population.  Every time that we “win” for our clients, we are allowing that client/health care provider to continue to accept Medicare/caid and to continue to serve their patients.  Now we will have the opportunity to help health care providers all over the country!!! This is such an amazing opportunity, and I feel so blessed.

And it doesn’t stop there!

Concurrent with my transition to GR, my family has purchased a new house!!! We close on April 10th and the movers are coming April 11th.  It is almost 5 acres with a four-stall barn and a lighted round ring for evening riding.  For those who know me, my family and I have wanted a small horse farm for years.  We are so excited! Although, between you and me, I may be taking away my husband’s debit card soon.  He believes that prior to our move, we need to have a tractor, a golf cart, hay, fencing, a donkey, and multiple other farming paraphernalia.  I disagree.

Oh, and we cannot forget the trial in New Mexico fast approaching…and another trial 2 weeks afterward.  This is just how I like it! I love my family, and I love my job!

So, Happy Easter, everyone!!!

My new email is:

kemanuel@gordonrees.com

The appearance of my blog may change in the near future…but the content will not.  I will continue to blog on the ongoing plights of those health care providers who choose to accept Medicaid/care, the Goliaths who stand in their way, the laws and regulations surrounding this esoteric, but so important topic, and the impact of public health on our tax dollars!

“Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.” Calvin Coolige.

Medicare and Medicaid Appeal Deadlines and Procedures: Laws that EVERY Health Care Provider Should Know

If you are a physician, most likely, you are not a lawyer.  And vice versa.  While there are exceptions, generally, the professions of physicians and attorneys are mutually exclusive.  Personally, one reason I went to law school is because I am awful at math.  However, presumably, I would be able to write a killer essay on early Shakespearean comedies, much unlike my primary care physician.

That said, there are things that every physician who accepts Medicare or Medicaid should know: (1) appeal deadlines; and (2) appeal procedures.

Ignoring either appeal deadlines or procedures does not make them go away.

 Appeal deadlines

They exist.  And if you fail to appeal an adverse decision within the required timeframe, you will be barred from appeal.  Knowing the appeal deadline is imperative!

Putting off hiring legal counsel can lead to missing an appeal deadline.

A client came to me a year or so ago.  We will call him Artagnan, or Art, for short.  Art had received a Tentative Notice of Overpayment (TNO) alleging that Art owed the Department of Health and Human Service (DHHS) $1,780,534.15.  Art hired Attorney Richie.  Richie properly appealed the TNO to a reconsideration review and got the amount decreased by approximately $500.

Per NC statute, you have 60 days to appeal a reconsideration review decision to the Office of Administrative Hearings (OAH).  Art asked Richie to appeal the reconsideration review and paid Richie additional money for the appeal.

Art came to me for a consultation over 90 days after the reconsideration review decision, and we found that no appeal had been filed.  Obviously, Art was upset.

I offered to file a motion throwing ourselves on the mercy of the court, asking for an exception due to the former attorney’s failure to appeal and Art’s reliance on Richie to appeal.  I warned Art that this was a longshot and, most likely, we would lose.

And we did.

The Judge determined (accurately, in my opinion) that OAH has no jurisdiction over the matter once the 60 days has lapsed.

Moral of the story: Know the appeal deadlines.  Abide by the appeal deadlines.

Appeal deadlines (in NC) (these are the general rules and exceptions exist, so go to a lawyer for advice as to your particular situation):

For a Medicaid reconsideration review – 15 days

For a Medicaid petition to OAH – 60 days

For a Medicare redetermination – 120 days

For a Medicare reconsideration – 180 days

For a Medicare ALJ Hearing – 60 days

Procedures to appeal

There are different avenues to follow for appeals depending on  the adverse decision that you are appealing.

For example, for a Medicare payment dispute, there are 5 levels of appeal.

The levels are:

  1. First Level of Appeal: Redetermination by a Medicare carrier, fiscal intermediary (FI), or Medicare Administrative Contractor (MAC).
  2. Second Level of Appeal: Reconsideration by a Qualified Independent Contractor (QIC)
  3. Third Level of Appeal: Hearing by an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals
  4. Fourth Level of Appeal: Review by the Medicare Appeals Council
  5. Fifth Level of Appeal: Judicial Review in Federal District Court

For a Medicaid payment dispute, there are only, generally, 3 levels of appeal.

The levels are:

  1. Reconsideration review
  2. Petition for Contested Case at OAH
  3. Judicial Review at Superior Court

It is imperative that you and your lawyer follow each step without attempting to jump a level.  There is a legal requirement to “exhaust your administrative remedies” prior to going to court.  For example, if a Medicaid provider filed a lawsuit in Superior Court because of a TNO without first going through the reconsideration review and OAH, the Superior Court judge will dismiss the claim for failing to exhaust your administrative remedies.

Therefore, any health care provider who accepts Medicare and/or Medicaid needs to be highly aware of appeal deadlines and appeal procedures.  Allowing too much time to pass before hiring your attorney and filing an appeal can result in a loss of appeal rights.

Medicaid Reform in a House Divided and MCO, ACO…Who Cares?

We are living in the most polarized society in recent American history. A recent study shows that the feeling of political partisanship has more than doubled over the past 2 decades. So since 1995, politically, America has parted the Red Sea with voters increasingly ebbing away from the middle.

Even more interesting is that, according to the same 2014 study, political animosity is at an all-time, recent high. I say “recent” because I cannot fathom a more polarized society than the society in the 1850s-1860s leading up to the Civil War. So, when I say “recent,” I mean post-invention of the telephone.

According to the Pew Research Center, “[i]n each party, the share with a highly negative view of the opposing party has more than doubled since 1994. Most of these intense partisans believe the opposing party’s policies “are so misguided that they threaten the nation’s well-being.””

partisanship

If BOTH parties express this identical sentiment, someone is wrong.

So, now, here, in this extremely polarized society, our NC General Assembly is tackling one of our most important and most divisive issues…Medicaid Reform.

But, you say, “Knicole, our General Assembly is an overwhelming Republican majority.  Our Governor is Republican.  How can this vast and deep political polarization prevent NC from creating a new, better, non-broken Medicaid system?”

In NC, even the Republicans are polarized, at least as to the issue of Medicaid reform.  The two differing opinions as to Medicaid reform can be found in our separate houses: the Senate and the House of Representatives (House).  As for our executive branch, Governor McCrory sides with the House.

The houses are divided by acronyms: ACOs (House) versus MCOs (Senate).

The House plan for Medicaid reform involves accountable care organizations (ACOs).  The ACO plan includes physicians, hospitals and other health care providers collaborating to serve Medicaid recipients and assuming the monetary risks.  For example, one ACO may be liable for 6000 Medicaid recipients.  The ACO would be given X dollars per Medicaid recipient to cover the person’s overall health care.  Say the ACO, via its health professionals, conducts a preventative breast exam on a woman and discovers a lump.  The ACO would pay to remove the lump and, hopefully, the woman is ok.  If the ACO fails to practice preventative medicine and the woman is diagnosed with breast cancer, then the ACO must finance the more expensive surgery and chemotherapy required.  The ACO’s incentive would be to provide the best, proactive health care because, regardless, the ACO will be liable for that individual’s care.  With ACOs, there is a financial incentive to keep people healthy and the profit is shared with the state.

The Senate plan for Medicaid reform involves managed care organizations (MCOs).  Unlike ACOs, MCOs will not be comprised of health care providers.  The MCOs will be large companies that will be charged with managing Medicaid by contracting with a network of providers.  Many Medicaid services require prior authorization, which would be in the hands of the utilization review team employed by the MCO.  Similar to the ACO, the MCO would be given an amount of money based on the number of Medicaid recipients within its network.  The profit for the MCO is the money remaining at the end of the fiscal quarter that was not spent on services for Medicaid recipients.

What is better?  Does better mean the most cost-savings?  Does better mean the best quality of care for Medicaid recipients?

In order to determine whether the MCO-model or ACO-model is better and what exactly “better” means, you have to follow the money.  For both models, you have to ask, “If the actual medical services provided cost double the anticipated amount, who bears the burden?” And, conversely, “If the actual medical services provided cost half the anticipated amount, who pockets the profit?”

There are numerous ways for an insurer to be paid.  At one end of the spectrum, you have capitation; while at the other end of the spectrum you have a more typical financial relationship in which the insurer simply pays the health care provider its reasonable and usual amount.

Capitation is how we currently have our MCOs set up for behavioral health care in North Carolina.  As we currently use capitation for our MCOs, I would assume that the Senate-model MCOs would also be capitated.  Capitation places the risk on the MCO because the MCO receives a fixed amount regardless of actual cost.  However, there is concern (or should be) that the MCOs will provide patients less care than needed in order to pocket a profit.

On the other hand, ACOs typically do not rely on full capitation.  The ACOs may share the risk, and, therefore, the profit, with the state.

Another HUGE difference between ACOs and MCOs is that, with MCOs, the insurer in effect dictates what a health care provider is allowed to do.  For example, say a dentist believes that a person is in need of dentures.  Maybe 4-5 teeth have already fallen out and the remaining teeth are suffering more mild rot.  The dentist requests prior authorization from the MCO to extract teeth, create a mold of the mouth, and order dentures to be custom-created.  The MCO denies the requests saying, for example, not enough teeth have fallen out or not enough rot is present in the remaining teeth.  The dentist’s hands are tied to the decision of the MCO, unless the patient can fork over the cost of care that the MCO refuses to authorize.  And, BTW, the person who denied the request may have graduated from college with a BA in History . . . or in any event something else other than a field of medical or dental care

An ACO, on the other hand, is run by physicians, hospitals, and other health care providers. Theoretically, the decisions to authorize services would be made by those same people who swore the Hippocratic Oath.

With regard to healing the sick, I will devise and order for them the best diet, according to my judgment and means; and I will take care that they suffer no hurt or damage.

(I doubt a History major ever swore to heal the sick).

There has also been contemplation as to whether the General Assembly should remove the responsibility of managing Medicaid from the Department of Health and Human Services (DHHS) completely.  Obviously, this suggestion is extreme and would require a Waiver from the federal government to transfer the “single state agency” requirement from DHHS to another entity.

Regardless of what decisions are made…whether the GA requires a private Medicaid panel to usurp Medicaid responsibilities from DHHS….whether NC adopts an MCO-model or an ACO-model for Medicaid reform….as it currently stands, our houses are divided.  No bills pass a divided legislature.

The Senate and House both indicate that Medicaid reform is a forefront issue during this long session, but, so far, there has been no indication of a Great Compromise.