Category Archives: Transparency

NC State Auditor Finds Cardinal Expenditures Unreasonable!!(Finally) #Wastedtaxdollars

The NC State Auditor Beth Wood released an audit report on Cardinal Innovations yesterday, May 17, 2017. Here are the key findings. For the full report click here.

BACKGROUND

Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. Cardinal is responsible for managing, coordinating, facilitating and monitoring the provision of mental health, developmental disabilities, and substance abuse services in 20 counties across North Carolina. Cardinal is the largest of the state’s seven LME/MCOs, serving more than 850,000 members. Cardinal has contracted with DHHS to operate the managed behavioral healthcare services under the Medicaid waiver through a network of licensed practitioners and provider agencies.

KEY FINDINGS

• Cardinal spent money exploring strategic opportunities outside of its core mission

• $1.2 million in CEO salaries paid without proper authorization

• Cardinal’s unreasonable spending could erode public trust

KEY RECOMMENDATIONS

• Cardinal should consult and collaborate with members of the General Assembly before taking any actions outside of its statutory boundaries

• The Office of State Human Resources should immediately begin reviewing and approving Cardinal CEO salary adjustments

• The Department of Health and Human Services should determine whether any Cardinal CEO salary expenditures should be disallowed and request reimbursement as appropriate

• Cardinal should implement procedures consistent with other LME/MCOs, state laws, and federal reimbursement policy to ensure its spending is appropriate for a local government entity

My favorite? Recoup CEO salaries. Maybe we should extrapolate.

Darkness Surrounds MCO Mergers: Are Closed Meetings for MCOs Legal?

Recently, Eastpointe Human Services’ board voted unanimously to consolidate with Cardinal Innovations Healthcare, which would make the merged entity the managed care organization (MCO) overseeing 1/3 of NC’s Medicaid, behavioral health services – 32 counties, in all.

The Board’s decision is subject to the approval of the Secretary, but Eastpointe hopes to consolidate by July 1st.

Whether a consolidation between Eastpointe and Cardinal is good for Medicaid recipients and/or our community, I have no opinion.

But the reason that I have no opinion is because the negotiations, which all deal with public funds, have occurred behind closed doors.

Generally, it is our public policy that public bodies’ actions are to be conducted openly. This is why you can stroll on over to our courthouse and watch, virtually, any case be conducted.  There are rare cases in which the court will “seal” or close the record, such as to protect privileged health information or the identity of children.  Our public policy that strongly encourages open sessions for public entities exists for good reason.  As tax payers, we expect full disclosure and transparency as to how our tax dollars are being used.  In a way, all tax paying NC residents are shareholders of NC.  Those who spend our tax dollars owe us a fiduciary duty to manage our tax dollars in a reasonable and responsible manner, and we should be able to attend all board meetings and review all meeting minutes. The MCOs are the agents of the single state entity, Department of Health and Human Services (DHHS), charged with managing behavioral health care for the Medicaid and state-funded population suffering with mental health/developmentally disabled /substance abuse (MR/DD/SA) issues.  As an agent of the state, MCOs are public entities.

But, as I am researching the internet in search of Eastpointe and Cardinal board meeting minutes, I realize that the MCOs are initiating closed meetings and quoting N.C. Gen. Stat. § 143-318.11, ” Closed sessions” as the  basis for being able to conduct closed sessions.  And the number of closed sessions that I notice is not a small number.

The deliberations of a merger between two MCOs are highly important to the public. The public needs to know whether the board members are concerned about improving quality and quantity of care. Whether the deliberations surround a more inclusive provider network and providing more services to those in need. Whether the deliberations consider using public funds to create playgrounds or to fund more services for the developmentally disabled. Or are the board members more concerned with which executives will remain employed and what salaried are to be compensated?

You’ve heard of the saying, “Give him an inch and he’ll take a mile?”  This is what is going through my mind as I review the statute allowing public bodies to hold closed sessions.  Is the statute too open-ended? Is the closed session statute a legal mishandling that unintentionally, and against public policy, allows public meetings to act privately? Or are the MCOs misusing the closed session statute?

So I ask myself the following:

1. Is N.C. Gen. Stat. § 143-318.11 applicable to MCOs, or, in other words, can the MCOs conduct closed sessions? and, if the answer to #1 is yes, then

2. Are the MCOs overusing or misusing its ability to hold closed sessions? If the answer to #3 is yes, then

3. What can be done?

These are the three questions I will address in this blog.

Number one:

Is N.C. Gen. Stat. § 143-318.11 applicable to MCOs, or, in other words, can the MCOs conduct closed sessions?

According to the statute, “”public body” means any elected or appointed authority, board, commission, committee, council, or other body of the State, or of one or more counties, cities, school administrative units, constituent institutions of The University of North Carolina, or other political subdivisions or public corporations in the State that (i) is composed of two or more members and (ii) exercises or is authorized to exercise a legislative, policy-making, quasi-judicial, administrative, or advisory function.”

The MCOs are bodies or agents of the state that are composed of more than 2 members and exercises or is authorized to exercise administrative or advisory functions to the extent allowed by the Waivers.

I determine that, in my opinion, N.C. Gen. Stat. § 143-318.11 is applicable to the MCOs, so I move on to my next question…

Number two:

 Are the MCOs overusing or misusing its ability to hold closed sessions?

As public policy dictates that public bodies act openly, there are enumerated, statutory reasons that a public body may hold a closed session.

A public body may hold a closed session only when a closed session is required:

  1. “To prevent the disclosure of information that is privileged or confidential pursuant to the law of this State or of the United States, or not considered a public record within the meaning of Chapter 132 of the General Statutes.
  2. To prevent the premature disclosure of an honorary degree, scholarship, prize, or similar award.
  3. To consult with an attorney employed or retained by the public body in order to preserve the attorney-client privilege between the attorney and the public body, which privilege is hereby acknowledged. General policy matters may not be discussed in a closed session and nothing herein shall be construed to permit a public body to close a meeting that otherwise would be open merely because an attorney employed or retained by the public body is a participant. The public body may consider and give instructions to an attorney concerning the handling or settlement of a claim, judicial action, mediation, arbitration, or administrative procedure. If the public body has approved or considered a settlement, other than a malpractice settlement by or on behalf of a hospital, in closed session, the terms of that settlement shall be reported to the public body and entered into its minutes as soon as possible within a reasonable time after the settlement is concluded.
  4. To discuss matters relating to the location or expansion of industries or other businesses in the area served by the public body, including agreement on a tentative list of economic development incentives that may be offered by the public body in negotiations, or to discuss matters relating to military installation closure or realignment. Any action approving the signing of an economic development contract or commitment, or the action authorizing the payment of economic development expenditures, shall be taken in an open session.
  5. To establish, or to instruct the public body’s staff or negotiating agents concerning the position to be taken by or on behalf of the public body in negotiating (i) the price and other material terms of a contract or proposed contract for the acquisition of real property by purchase, option, exchange, or lease; or (ii) the amount of compensation and other material terms of an employment contract or proposed employment contract.
  6. To consider the qualifications, competence, performance, character, fitness, conditions of appointment, or conditions of initial employment of an individual public officer or employee or prospective public officer or employee; or to hear or investigate a complaint, charge, or grievance by or against an individual public officer or employee. General personnel policy issues may not be considered in a closed session. A public body may not consider the qualifications, competence, performance, character, fitness, appointment, or removal of a member of the public body or another body and may not consider or fill a vacancy among its own membership except in an open meeting. Final action making an appointment or discharge or removal by a public body having final authority for the appointment or discharge or removal shall be taken in an open meeting.
  7. To plan, conduct, or hear reports concerning investigations of alleged criminal misconduct.
  8. To formulate plans by a local board of education relating to emergency response to incidents of school violence or to formulate and adopt the school safety components of school improvement plans by a local board of education or a school improvement team.
  9. To discuss and take action regarding plans to protect public safety as it relates to existing or potential terrorist activity and to receive briefings by staff members, legal counsel, or law enforcement or emergency service officials concerning actions taken or to be taken to respond to such activity.”

Option 1 clearly applies, in part, to privileged health information (PHI) and such.  So I would not expect that little Jimmy’s Medicaid ID would be part of the board meeting issues, and, thus, not included in the minutes, unless his Medicaid ID was discussed in a closed session.

I cannot fathom that Option 2 would ever be applicable, but who knows?  Maybe Alliance will start giving out prizes…

I would assume that Option 3 is used most frequently.  But notice:

“General policy matters may not be discussed in a closed session and nothing herein shall be construed to permit a public body to close a meeting that otherwise would be open merely because an attorney employed or retained by the public body is a participant.”

Which means that: (1) the closed session may only be used to talk about specific legal strategies and not general policies.  For example, arguably, an MCO could hold a closed session to consult with its attorney whether to appeal a specific case, but not to discuss whether, generally, the MCO intends to appeal all unsuccessful cases.

and

(2) the MCO cannot call for a closed session “on the fly” and only because its attorney happens to be participating in the board meeting.

As I am rifling through random board meeting minutes, I notice the MCO’s attorney is always present.  Now, I say “always,” but did not review all MCO meeting minutes. There may very well be board meetings at which  the attorneys don’t attend. However, the attorney is present for the minutes that I reviewed.

Which begs the question…Are the MCOs properly using the closed sessions?

Then I look at Options 4, and 5, and 6, and 7, and 8, and 9…and I realize, Geez, according to one’s interpretation, the statute may or may not allow almost everything behind closed doors. (Well, maybe not 9).  But, seriously, depending on the way in which each Option is interpreted, there is an argument that almost anything can be a closed session.

Want to hold a closed session to discuss why the CEO should receive a salary of $400,000? N.C. Gen. Stat. § 143-318.11(5)(ii).

Want hold a closed session to discuss the anonymous tip claim that provider X is committing Medicaid fraud? N.C. Gen. Stat. § 143-318.11(7).

Want to hold a closed session to discuss how an MCO can position itself to take over the world? N.C. Gen. Stat. § 143-318.11(4).

In an atmosphere in which there is little to no supervision of the actions of the MCOs, who is monitoring whether the MCOs are overusing or misusing closed sessions?

Number three:

What can you do if you think that an MCO is holding closed sessions over and above what is allowed by N.C. Gen. Stat. § 143-318.11?

According to N.C. Gen. Stat. § 143-318.16A, “[a]ny person may institute a suit in the superior court requesting the entry of a judgment declaring that any action of a public body was taken, considered, discussed, or deliberated in violation of this Article. Upon such a finding, the court may declare any such action null and void. Any person may seek such a declaratory judgment, and the plaintiff need not allege or prove special damage different from that suffered by the public at large.”

Plus, according to N.C. Gen. Stat. § 143-318.16A, “[w]hen an action is brought pursuant to G.S. 143-318.16 or G.S. 143-318.16A, the court may make written findings specifying the prevailing party or parties, and may award the prevailing party or parties a reasonable attorney’s fee, to be taxed against the losing party or parties as part of the costs. The court may order that all or any portion of any fee as assessed be paid personally by any individual member or members of the public body found by the court to have knowingly or intentionally committed the violation; provided, that no order against any individual member shall issue in any case where the public body or that individual member seeks the advice of an attorney, and such advice is followed.”

 In sum, if you believe that an MCO is conducting a closed session for a reason not enumerated above, then you can institute a lawsuit and request attorneys’ fees if you are successful in showing that the MCO knowingly or intentionally committed the violation.

We should also appeal to the General Assembly to revise, statutorily, more narrowly drafted closed session exceptions.

Embezzlement at MCO Eastpointe and the Freedom of Information Act

How many times have I blogged about the unsupervised, unharnessed actions of the managed care organizations (MCOs) in our State, which happen to be managing billions of our tax dollars for Medicaid behavioral health care? These MCOs, which are in the process of consolidating to create even larger MCOs and to handle even more tax dollar money, are running rampant and unsupervised by the Department of Health and Human Services (DHHS). See blog. And blog.

DHHS is the single state agency charged with managing Medicaid for NC. According to federal law, the single state agency may not delegate certain duties. Our 1915 b/c Waiver allows DHHS to waive some duties related to behavioral health, but not all. For example, it is, ultimately, DHHS’ duty to ensure that our Medicaid recipients have access to care.

It is, ultimately, DHHS’ duty to ensure that the MCOs are following the law.

However, recently, that duty was picked up by the State Bureau of Investigation (SBI). Thank goodness someone is reviewing the MCO’s books!

SBI arrested former Eastpointe CFO William Robert Canupp on December 16, 2015, for nine charges of financial fraud and embezzlement. Eastpointe is one of our MCOs and manages behavioral health care for Medicaid and state-funded programs in 12 counties. These allegations of fraud and embezzlement are from when Canupp worked at Eastpointe.

This recent arrest demonstrates a real need for accountability at the MCOs. While Eastpointe and the other MCOs are terminating health provider contracts and denying/reducing services, who is reviewing these decisions. Apparently, not DHHS.

What can you do?

As you should know, the MCOs are not private entities. They are agents of the state and receive funding from county, state, and federal funds. In other words, the MCOs manage and spend our tax dollars. Therefore, these entities are liable to us for all expenditures and are subject to the Freedom of Information Act or FOIA. The FOIA allows any one of you to request any financial record, any document showing access to care, any document showing monies spent on actual care versus administrative costs, or any other information you desire and the MCOs must provide it to you.

Here is a link to a sample public records request.

The MCOs are bound by NC General Statute, Chapter 132 and must allow you to examine any requested documents within a reasonable time.

Use the FOIA to get answers!

The Nine Habits of a Highly Effective Secretary for DHHS

With the recent passing of the torch from Aldona Wos to Rick Brajer (see blog), I’ve been thinking about…

What are the qualifications of a Secretary of DHHS?

What exactly are the qualities that would make a great Secretary of DHHS?  Remember, in Mary Poppins, when the children draft their requirements for a nanny?  Or, better yet, what are the “Seven Habits of a Highly Effective” Secretary for DHHS?  Or…in this case, the “Nine Habits”…

Here are my “Nine Habits of a Highly Effective Secretary of DHHS;” our Secretary of DHHS should have the following:

  1. A health care background
  2. A successful track record of his/her ability to manage large companies or agencies
  3. An understanding of the Medicaid system, and, maybe, even have first-hand knowledge of how the system affects recipients and providers
  4. A relationship with someone on Medicaid or a parent of someone on Medicaid
  5. A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid
  6. Both the capacity to listen and speak and do both eloquently and genuinely
  7. True empathy about the physical and mental health of Medicaid recipients and about providers, plus have the patience to handle all types of demographic differences
  8. An understanding that he/she is handling tax payers’ money, that redundancy in staff is excess administrative costs, and ability to trim the fat
  9. An ability to communicate with both the Senate and the House and to be frank with both

wosbrajer

Let us analyze the qualifications of Wos that we came to witness over the last few years, as well as, review the qualifications of soon-to-be Sec. Brajer with information to which we are privy.

Let’s see if both, either, or neither have these “Nine Habits of a Highly-Effective Secretary for DHHS.”

  1. Health care background:

Wos: Yes. And, yet, maybe not.  She is an M.D. Although I do not know whether she ever practiced medicine in North Carolina.  According to Wikipedia, (which is never wrong) Wos “prides herself on her work in the field of preventing HIV and AIDS.”  However, I was unable to find a single clinic in which Wos provided services.  While, generally, an “M.D.” automatically bestows a certain aura of understanding health care, I question whether this “M.D.” automatically has a working knowledge of billing for and receiving reimbursements under Medicaid in North Carolina.

Brajer: Hmmmm.  This one is more tricky. The two companies that Brajer owned, Pro-nerve LLC and LipoScience Inc., are health care related, in that Pro-nerve was an intraoperative neuromonitoring (IONM) company and LipoScience sold a diagnostic tool to health care providers.  Arguably, both companies are health care related, at least, in an ancillary way.  However, Brajer is not a health care professional, and, to my knowledge, has never rendered health care services. Furthermore, neither of Brajer’s companies was successful; quite the opposite is true, in fact. From my understanding, one company declared bankruptcy and the other was not far behind.  Which brings us to the next category…

Answer: Both…kinda.

2. A successful track record of his/her ability to manage large entities:

Wos: Prior to acting as the Secretary to DHHS, Wos served as the Ambassador to Estonia until 2006.  What she did besides political functions between 2006 and 2012, I do not know. Acting as an Ambassador does not entail managing large entities.  The most managerial skills that I can find in her background, prior to being appointed Secretary, are related to political fund-raising. Since I would not call her brief reign as Secretary of DHHS a success, I give Wos a “two thumbs down” on this criterion.

Brajer: He managed two companies.  We can bicker as to whether these companies should be considered large…neither employed 17,000 employees.  Regardless, the “successful” criterion appears to be lacking.

Answer: Neither…pickles.

3. An understanding of the Medicaid system:

Wos: “You’re asking me without having all the data available to answer a question,” she told lawmakers on October 8, 2013.  In her defense, she responded as such when asked whether the State was moving toward privatization for Medicaid.  No one could know the answer, except, maybe, McCrory.

On the other hand, the implementation of NCTracks was nothing short of a catastrophe of epic proportion. See blog. See blog.  Anyone with nominal knowledge of the Medicaid system would have, at least, paused to consider keeping HP Enterprises under contract during the switch to NCTracks or pushed back the go-live date.

Brajer: Unknown

Answer: Here’s to hoping that Brajer does.  I’m cheering for you! Go! Fight! Win!

4. A relationship with someone on Medicaid or a parent of someone on Medicaid:

Wos: Unknown.  If I were shaking a proverbial “8 Ball,” it would read, “Doubtful.”

Brajer: Unknown. Perhaps one of his former employees at Pro-nerve, LLC and LipoScience, Inc. is on Medicaid.

Answer: Gimme a ‘B’! B! Gimme a ‘R’! R! Gimme a ‘A’! A! Gimme a ‘J’! J! Gimme a ‘E’! E! Gimme a ‘R’! R! Whats that spell? Brajer!!

5.  A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid.

Wos: Unknown. Whatever Wos’ knowledge of regulations and clinical coverage policies is or lacked, she, initially, made up for any knowledge lacked with the key hire and quick resignation of Carol Steckel.  Unfortunately, Steckel’s experience was never replaced.

January 2013: “I am pleased to say that we are already taking steps to address some of these issues,” Wos said. “Now, the most important of this is that we have hired Ms. Carol Steckel, a nationally recognized — nationally recognized — expert in Medicaid to run our Medicaid program for the state. Carol is already moving ahead with systemic reviews of operations in this division. She is reviewing and establishing new policies and procedures.”

September 27, 2013: Steckel resigns. And blog.

Brajer: Unknown.

Answer: B! R! A! J! E! R! Let’s go, Brajer!

6. Both the capacities to listen and speak and do both eloquently.

Wos: Wos brandished an ability to speak publicly with ease.  Listening, on the other hand….eh?

Brajer: Unknown

Answer: I think you can, I think you can, I think you can…

7. Genuine concern about the physical and mental health of Medicaid recipients AND about providers PLUS have the patience to handle all types of demographic differences

Wos: She seems to think so. Her country club does not discriminate.

Brajer: Unknown

Answer: Go! Go! Go! Go! Go, Brajer!!

8. An understanding that he/she is handling tax payers money and that redundancy in staff is excess administrative costs and trim the meat

Wos: “My obligation as secretary is to find the best possible team in order to get the job done.”  Les Merritt served as CFO of DMA on a $300,000-plus contract.  Joe Hauck was paid over $228,000 for 6 months of advise to Wos.  Matt McKillip was paid $87,500 to serve as chief policy maker without any health care background.  Ricky Diaz pulled in $85,000 as communications director. Id.  Wos has handed out $1.7 million in pay hikes to 280 staffers, many with “no career or educational experience for the jobs they hold.” Id. The implementation of the MCOs also fell under Wos’ watchful eye.  The MCO system has created thousands upon thousands of high-paying jobs with our Medicaid dollars.  I believe that in the “trim the fat” category, Sec. Wos scores a goose egg.

Brajer: Unknown.

Answer: Please, Brajer! For the love of Pete!

9. Ability to communicate with both the Senate and the House and to be frank with both.

Wos: “Separation pay” v. “Severance pay?

In April 2013: “I think the word transparency can get pretty dangerous,” Wos said. “Because what does transparency mean? If transparency means that we’re in a planning process and you’re asking us, ‘Tell us all the things you’re planning,’ well, my goodness, allow us to work, and then we’ll give you everything that you want.”

Brajer: Unknown

Answer: Brajer, Brajer, He’s our man! If he can’t do it…[gulp].

____________________________________________

It concerns me that so many of future Sec. Brajer’s core abilities/habits to run and manage DHHS and the Medicaid program in a highly effective manner are unknown.  Nothing like placing all your money on red!  But we have HIGH hopes for Brajer!!!  Don’t let us down!!

The whole point of this blog is to pause and really contemplate what characteristics would comprise a great Secretary for DHHS. Obviously, the Governor has the full authority to appoint the Secretary, meaning that we taxpayers have little to no input as to whether we deem a person qualified, except in the indirect method of voting or not voting for the Governor.

Call this blog an exercise in examining what habits, if in existence, would make the most highly effective Secretary of DHHS and an opinion as to whether these habits exist in our former and future Secretaries.

We are cheering for Brajer!  But…

One fact about the future is that it is unknown.

North Carolina Medicaid Reform Update – Round and Round She Goes

Given how long the Medicaid reform discussions have been going on at the legislature, you may be glazed over by now. Give me the memo when they pass something, right? Fair enough, let’s keep it brief. Where do things stand right now?

Last Wednesday, the Senate staked out its position in the ongoing debate between the House and the McCrory administration.

The Senate’s newest proposal is an unusual mix of different systems and new ideas. Not willing to commit to one model for the whole Medicaid program, the latest version of the bill includes something new called Provider Led Entities, or “PLEs.” PLEs are yet the latest in the alphabet soup of different alternatives to straight fee-for-service billing for Medicare/Medicaid. You’ve all heard of HMOs, PPOs, MCOs, and ACOs. PLEs appear to be similar to ACOs, but perhaps for political reasons the Senate bill sponsors saw the need to call the idea something different.  See Knicole Emanuel’s blog.

In any event, as the name suggests, such organizations would be provider-led and would be operated through a capitated system for managing the costs of the Medicaid program. The Senate bill would result in up to twelve PLEs being awarded contracts on a regional basis.

PLEs are not the only addition to the Medicaid alphabet soup that the Senate is proposing in its version of HB 372. The Senate has also renewed its interest in taking Medicaid out of the hands of the N.C. Department of Health and Human Services entirely and creating a new state agency, the Department of Medicaid (“DOM”).

(One wonders whether the continual interest in creating a new Department of Medicaid independent of the N.C. Department of Health and Human Services had anything to do with embattled DHHS Secretary Wos stepping down recently.)

The Senate also proposes creating a Joint Legislative Oversight Committee on Medicaid (“LOC on Medicaid”).

But creating the DOM and using new PLEs to handle the provision of Medicaid services is not the whole story. Perhaps unwilling to jump entirely into a new delivery system managed by a wholly new state agency, the Senate bill would keep LME/MCOs for mental health services in place for at least another five years. Private contractor MCOs would also operate alongside the PLEs. The North Carolina Medicaid Choice coalition, a group which represents commercial MCOs in connection with the Medicaid reform process, is pleased.

One very interesting item that the Senate has included in its proposed legislation is the following requirement: “Small providers shall have an equal opportunity to participate in the provider networks established by commercial insurers and PLEs, and commercial insurers and PLEs shall apply economic and quality standards equally regardless of provider size or ownership.” You can thank Senator Joel Ford of Mecklenburg County for having sponsored this amendment to the Senate version of House Bill 372.

By pulling the Medicaid reform proposal out of the budget bill, the matter appears headed for further negotiation between the House and the Senate to see if the two can agree this year, unlike last year.

By legislative standards, that counts as forward progress… Here come the legislative discussion committees to hash it out more between the two chambers. We will keep a close eye on the proposals as they continue to evolve.

By Robert Shaw

Lawyer photo

 

Consider Nominating This Blog for the 2015 Best Legal Blog Contest (Please)!

The 2015 Legal Blog Contest is here!

For all you that follow this blog, thank you!  I hope that you agree that I provide you with valuable and up-to-date information on Medicaid/care regulatory issues.  At least, that is my hope in maintaining this blog.  And maintaining this blog takes a lot of time outside my normal, hectic legal career and my time as a mom and wife.  Don’t get me wrong…I love blogging about these issues because these issues are near and dear to my heart.  I am passionate about health care, health care providers, Medicaid and Medicare, and access to quality care.

If you are a follower, then you know that I try to keep my readers current on Medicaid/care fraud, federal and state laws, legal rights for health care providers, bills in the General Assembly germane to health care, extrapolation issues, CMS rulings, managed care matters, reimbursement rates, RAC audits and much, much more!

If you enjoy my blog, I ask a favor. Please consider nominating my blog for the 2015 Best Legal Blog Contest.

If you want to nominate my blog, please click here.

Scroll down until you see this:

blog contest

Enter your name, email address, my blog address. which is:

https://medicaidlawnc.wordpress.com/

For category, click on “Niche and Specialty.”  I do not believe the other categories correctly describe my blog.

And type a reason why you enjoy my blog.  Much appreciated!

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.

NC State Auditor Finds Eastpointe Guilty of Accepting Kickbacks!

Last week I traveled to Houston, Dallas, and Denver to meet with other health care attorneys of Gordon & Rees.  It was a great trip and I met some wonderful colleagues.  But I was happy to get home to my family, including our new addition of 9 peacock eggs.

Yes, 9 peacock eggs!!

Here is a pic:

peacock eggs

(I know that there are 10 eggs in the picture, but we will not talk about the 10th.  Just know that we have high hopes that the other 9 are viable and survive!!  As of today, at 1:00 pm, all 9 eggs are chirping, but no cracks yet!!)

Oh, and, before I forget…Watch ABC news tonight.  I was interviewed for a story about one of my clients.

Anyway, while I was gone, I was unable to post a blog regarding the State Auditor’s most recent audit report regarding Eastpointe.  So here it is…

As the managed care organizations (MCOs) continue to accuse health care providers of fraud, waste, and abuse (FWA), it seems from a recent State Auditor report that, at least, one of the MCOs itself is guilty of the very accusation that they are alleging against providers.  See blog. And blog.

There is an old story:

A wolf, passing by, saw some shepherds in a hut eating for their dinner a haunch of mutton. Approaching them, he said: What a clamor you would raise, if I were to do as you are doing!

Moral:
Men are too apt to condemn in others the very things they practice themselves

The audit findings beg the questions…Is it only Eastpointe? Or all 9 MCOs? How much Medicaid money is lining the pockets of MCO executives, instead of paying for medically necessary services for Medicaid recipients?  Beth Wood  only audited Eastpointe. Is this only the tip of the iceberg?

According to our State Auditor, Eastpointe former executive has lined his pockets with $547,595+…

Here are the key findings from the NC State Auditor’s report regarding Eastpointe:

KEY FINDINGS

  • Former CFO facilitated apparent kickbacks totaling $547,595 from two Eastpointe contractors
  • Former CFO purchased three vehicles totaling $143,041 without a documented business purpose
  • Former CFO purchased $18,600 of equipment for personal use
  • Former CFO, Chief Executive Officer (CEO), and other employees used Eastpointe credit cards to make $157,565 of questionable purchases
  • Inadequate CEO and area board oversight contributed to operational failures

Eastpointe is one of 9 MCOs in NC charged with managing and supervising Medicaid behavioral health care services. So what do we do when the entity IN CHARGE of managing Medicaid money is mismanaging tax dollars???

Where is the supervision??

Over the last few years, since the MCOs went live across the state, I have seen the MCOs terminate Medicaid providers for no cause, claim providers owed money, penalties, plans of corrections (POC), and/or refuse to contract with providers for reasons as silly as:

  • Failing to put shoes on a paraplegic (no feet), because the assessment included that the patient required help dressing;
  • Using green ink (a personal favorite) on a service note;
  • Having signatures on service notes that are difficult to read (so the auditors assume that the person doesn’t have the correct licenses).

Here, we have the State Auditor finding that Eastpointe’s former CFO unilaterally hired two contractors to improve Eastpointe’s building (paid for with Eastpointe’s funding), but the former CFO accepting over half a million dollars.  This is no green ink! This is no insignificant finding!!

What is Eastpointe’s funding?

eastpointe funding

As you can see, 72.7% of Eastpointe’s funding is pure Medicaid money. When Eastpointe’s former CFO received $547,595 in kickbacks, 72%, or $394,268.40, should have been used to provide Medicaid behavioral health care services.

These are our tax dollars, people!!  These are our tax dollars budgeted to aid our most needy population with behavioral health care services!!  These are our tax dollars budgeted to provide psychiatric services, substance abuse services, and services for those with developmental disabilities!!!!

Our State Auditor states in her report, “The former CFO may have violated several state laws including fraud, misrepresentation, and obtaining property by false pretenses.”

Let’s look at a couple of those statutes that may have been violated:

42 U.S. Code § 1320a–7b imposes criminal penalties for acts involving Federal health care programs, and federal dollars pay a portion of our Medicaid program.

North Carolina General Statute § 14-234 states: “No public officer or employee who is involved in making or administering a contract on behalf of a public agency may derive a direct benefit from the contract except as provided in this section, or as otherwise allowed by law.”

The question becomes was the former CFO of Eastpointe, at the time of the receipt of kickbacks a “public officer” or “employee who is involved in making or administrating a contract on behalf of a public agency?” I believe the answer is yes, at least as to the latter.

Here is the point in this blog that my personal views will be aired. I find the former CFO’s behavior significantly opprobrious and reprehensible.

Here we have an MCO which is in charge of behavioral health care for our most vulnerable and needy populations…not just those in poverty, but those in poverty suffering from mental illness, substance abuse, and/or developmental disabilities (MH/SA/DD). Obviously, those Medicaid recipients suffering from MH/SA/DD will not have the means to hire a private attorney to defend their interests. When they receive denials for authorizations or reductions in services, they are defenseless. Sure, some children have strong advocate parents, but, on the whole, those suffering from MH/SA/DD have little to no advocates.

Juxtapose someone sitting in the role of a CFO…a chief financial officer of a company. Think he or she can hire a private attorney?? Think he or she has advocates or means to hire advocates??
How can someone in power abuse that power to the detriment of the under-privileged and sleep at night? I find the State Auditor’s audit findings repugnant beyond comprehension.

We are left with a former CFO who may or may not have committed criminal activity, but, who, at least according to the State Auditor, has received kickbacks. We are left with questions.

Is it only Eastpointe? Or all 9 MCOs? How much Medicaid money is lining the pockets of MCO executives, instead of paying for medically necessary services for Medicaid recipients?  Will there be justice?

We can only hope that this audit is a catalyst to consequences.

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!

Medicaid Providers: Do Not Omit Information on Your Medicaid Application or NC Ct of Appeals Says, “You Can Lose Your Medicaid Contract Without Notice.”

We’ve all told our share of little, white lies, right?  “Yes, honey, you look fantastic in that dress!” Or… “I never think about my ex-boyfriend!”  But omissions are also lies.  People have told me in the past that omissions are not lies, but they are, obviously, wrong.  Even in the court of law, a nonverbal action (or omission) can be used against you.

For example, if your neighbor comes up to you and accuses you of killing his cat and you say nothing except shut the door, you better believe that when your neighbor testifies in court that your “nonassertion” or “non- dispution” (I know, not a word) his allegation will be admitted into the court, or at least the attempt will be made.  Even though the “nonassertion” would be considered hearsay.

Hearsay is an out of court statement made by someone other than the testifying witness to be admitted to prove the truth of the matter asserted.  For example,  if I were on the stand and I said, “My neighbor told me that he killed my cat.”  If, in fact, I was testifying in a trial in which I was trying to prove that my neighbor killed my cat, then my statement would be hearsay and not admitted into evidence.  The same would be true if I were testifying that I accused my neighbor of killing my cat and he said nothing.  His nonadmission would be hearsay as well…because a normal person would protest to killing the cat if accused and innocent.

However, in the law, there are always grey areas.  Sometimes when the “statement” is nonverbal, the hearsay objection will be overlooked. Attorneys argue that the hearsay rule is almost always, in the abstract, phrased in terms of “statements” or “utterances” and the possible application of the rule to “conduct” may not be immediately apparent.

However, CAVEAT, In the world of Medicaid, omissions can cost you your Medicaid contract.

In a recent North Carolina Court of Appeals decision, Powell’s Medical Facility v. NC DHHS, the NC Court of Appeals upheld the trial court’s decision to uphold the Division of Medical Assistance’s (DMA) termination of Dr. Eddie N. Powell’s (I know, really? Who’s name is legally Eddie and not Edward?) Medicaid contract based on Dr. Powell’s omission on his Medicaid verification packet to Computer Sciences Corporation (CSC).

In 2009, CSC began to re-verify Medicaid providers in an effort to determine that all Medicaid providers met criteria as a Medicaid provider (yes, folks, this is the very same CSC that has catastrophically rolled-out NCTracks).

In Dr. Powell’s case, DMA informed him, in the termination letter, that if a provider were convicted of a criminal offense or made “any mistatement…or omission while submitting the provider application” that DMA had the authority to terminate a provider without notice.

Dr. Powell’s attorneys argued that the termination was erroneous because “the sole basis for DMA’s decision to terminate Dr. Powell’s participation in Medicaid is the mere existence of Dr. Powell’s criminal conviction.”  (emphasis in the original)(Notice, people, that I have not told you what the criminal offense was…that is on purpose.  Once I read the criminal conviction, I was tainted for the remainder of the Court’s opinion.  So you will find out the criminal conviction at the end.  Those of you impatient readers, can scroll down.  But, for now, imagine that the criminal conviction is for stealing a loaf of bread for his family.  See “Les Miserables” by Victor Hugo.)

The Court, however, disagreed.

A witness for the Respondent  (DMA) testified on recross that Dr. Powell’s termination was based on (1) the conviction (of stealing bread); and (2) the OMISSION to disclose his conviction (of stealing bread) on his application.

Supposedly, the result of the this opinion is that if you were convicted of a criminal offense and it does not involve something really, really, bad (such as stealing bread) and you DO disclose it on the Medicaid application that you would not be terminated. 

Moral of the story? Disclose everything!

If you were convicted of littering when you were 18, disclose it.

The problem with Dr. Powell? He was not convicted of littering when he was 18.  He also was not convicted of stealing bread for his starving family like Jean Valjean.

He was convicted of the felonies of incest and taking liberties with a minor, who is his stepdaughter.  (To which my husband, asked, “Is it incest if it was his stepdaughter?”  To which, I said, “Hmmmmm. I don’t know.  I am not a criminal attorney.”)

Regardless, Dr. Powell is a convicted sex offender.

Interestingly, one issue before the NC Court of Appeals was whether a Medicaid contract is a “property right” to a provider.  That is a HUGE issue for NC Medicaid providers!!! This issue goes back to the whole “is a Medicaid contract terminable at will?”  Obviously, DMA and the managed care organizations want the Medicaid contracts to be terminable at will so they can terminate a contract without due process. 

But the NC Court of Appeals did not rule as to this very important issue.  The Court ruled that “even assuming, arguendo, that Dr. Powell’s enrollment was not terminable at will, DMA had substantial evidence to terminate the contract.

However, the moral is obvious. We don’t need Aesop to tell us the moral.  If you are a Medicaid provider and have been convicted of a criminal offense in the past, disclose the conviction on all Medicaid applications.  Period.