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Despite State Statute – Perhaps You Can Appeal Medicaid Prepayment Review!

It’s hard enough to be one of the providers to accept Medicare and Medicaid. The regulatory oversight is burdensome. You are always getting metaphorically yelled at for upcoding or bundling. See blog, thanking providers.

One of the absolute, most-Draconian penalty against a Medicare or Medicaid provider is prepayment review.

Prepayment review is exactly as it sounds. Before you receive payment – for services rendered – an auditor reviews your claims to determine whether you should be reimbursed. Prepayment review is the epitome of being guilty until proven innocent. It flies in the face of American due process. However, no one has legally fought its Constitutionality. Yet many provider-companies have been put out of business by it.

Generally, to get off prepayment review, you have to achieve a 75% or 80% success rate for three consecutive months. It doesn’t sound hard until your auditors – or graders – fail to do their job correctly and fail you erroneously.

Usually, when a provider is placed on prepayment review, I say, “Well, you cannot appeal being placed on prepayment review, but we can get a preliminary injunction to Stay the withhold of reimbursements during the process.” It tends to work.

Most State statutes have language like this:

“(f) The decision to place or maintain a provider on prepayment claims review does not constitute a contested case under Chapter 150B of the General Statutes. A provider may not appeal or otherwise contest a decision of the Department to place a provider on prepayment review.”

However, in a recent case, Halikierra Community Services, LLC v. NCDHHS, the provider disputed being placed on prepayment review and accused NCDHHS of a malicious campaign against it.

Halikierra was the largest, in-home, Medicaid health care provider and it alleged that 2 specific, individuals at DHHS “personally detested” Halikierra because of its size. As an aside, I hear this all the time. I hear that the auditors or government have personal vendettas against certain providers. Good for Halikierra for calling them out!

According to the opinion, these 2 DHHS employees schemed to get Halikierra on prepayment review by accusing it of employing felons, which is not illegal. (Just ask Dave’s Killer Bread). Halikierra sued based on substantive due process and equal protection rights, but not before being forced to terminate its 600 employees and closing its doors because of being placed on prepayment review. It also asserted a claim of conspiracy in restraint of trade under NCG.S. §75-1 against the individual DHHS employees.

The Court held that “[t]he mere fact that an agency action is nonreviewable under the Administrative Procedure Act does not shield it from judicial review.” The upshot? Even if a statute states that you cannot appeal being placed on prepayment review, you can sue for that very determination.

FYI – This case was filed in the Industrial Commission, which has jurisdiction for negligence conducted by the state agencies. Exhaustion of administrative remedies was not necessary because, per the state statute, being placed on prepayment review does not constitute a contested case in administrative court.