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There Is Only One Head Chef in the Medicaid Kitchen, Part Deux!

In a groundbreaking decision published today by the Court of Appeals (COA), the Court smacked down Public Consulting Group’s (PCG), as well as any other  contracted entity’s, authority to wield an “adverse decision” against a health care provider. This solidifies my legal argument that I have been arguing on this blog and in court for years!

The Department of Health and Human Services (DHHS) is the “single state agency” charged with managing Medicaid. Federal law requires that that one agency manage Medicaid with no ability to delegate discretionary decisions. Case law in K.C. v. Shipman upheld the federal law. See blog.

Yet, despite K.C. v. Shipman, decided in 2013, in Court, DHHS continued to argue that it should be dismissed from cases in which a contracted vendor rendered the adverse decision to recoup, terminate, or suspend a health care provider. DHHS would argue that it had no part of the decision to recoup, terminate, or suspend, that K.C. Shipman is irrelevant to health care provider cases, and that K.C. v. Shipman is only pertinent to Medicaid recipient cases, to which I countered until I was “blue in the face” is a pile of horse manure.

DHHS would argue that my interpretation would break down the Medicaid system because DHHS cannot possibly review and discern whether every recoupment, termination, and/or suspension made by a contracted vendor was valid (my words, not theirs). DHHS argued that it simply does not have the manpower, plus if it has the authority to contract with a company, surely that company can determine the amount of an alleged overpayment…WRONG!!

In fact, in DHHS v. Parker Home Care, LLC, the COA delineates the exact process for the State determining an overpayment with its contracted agent PCG.

  1. DHHS may enter into a contract with a company, such as PCG.
  2. A private company, like PCG, may perform preliminary and full investigations to collect facts and data.
  3. PCG must submit its findings to DHHS, and DHHS must exercise its own discretion to reach a tentative decision from six options (enumerated in the NC Administrative Code).
  4. DHHS, after its decision, will notify the provider of its tentative decision.
  5. The health care provider may request a reconsideration of the tentative decision within 15 days.
  6. Failure to do so will transform the tentative decision into a final determination.
  7. Time to appeal to OAH begins upon notification of the final determination by DHHS (60 days).

Another interesting part of this decision is that the provider, Parker Home Care, received the Tentative Notice of Overpayment (TNO) in 2012 and did nothing. The provider did not appeal the TNO.

However, because PCG’s TNO did not constitute a final adverse decision by DHHS (because PCG does not have the authority to render a final adverse decision), the provider did not miss any appeal deadline. The final adverse decision was determined to be DHHS’ action of suspending funds to collect the recoupment, which did not occur until 2014…and THAT action was timely appealed.

The COA’s message to private vendors contracted with DHHS is crystal clear: “There is only one head chef in the Medicaid kitchen.”

DMA, LIke the Titanic, Has Difficulty Changing Course

At a preliminary injunction hearing today, I realized that NC Division of Medical Assistance (DMA), like the Titanic, has difficulty changing its course.

It is my contention (and, I argue, the 4th Circuit’s position, as well) that a Managed Care Organization (MCO) does not have the authority, without DMA’s express authorization, to terminate, suspend or refuse to contract with any provider.  PERIOD.  I don’t care if the provider has phantom clients and is billing Medicaid 34/hr/day.  (People, I am obviously against Medicaid fraud. I am trying to make a point).

An MCO cannot, without express authorization from DMA, terminate, suspend, or refuse to contract with any provider.

Why do I think this? (besides the fact that this is a better position for my clients). And why do I think DMA is Titanic-like?

On or about May 10, 2013, the 4th Circuit published K.C. v. Shipman (“Shipman”).  The second sentence of Shipman says it all, “PBH [the MCO at-issue in this particular case], a local subdivision of the state that  manages the delivery of plaintiffs’ Medicaid services pursuant to a contract with NCDHHS.” Hmmmm…too legalese-like?

FYI: NCDHHS = NC Dept. of Health and Human Services (DHHS), which is the state agency that manages DMA, which is the division that manages Medicaid.  For a complete list of DHHS’ divisions, click here.

Shipman goes on to say, “states should enjoy both an administrative benefit (the ability to designate a single state agency to make final decisions  in the interest of efficiency) but also a corresponding burden (an accountability regime in which an agency cannot evade federal requirements by deferring to the actions of other entities).” (emphasis added).  Accountability, People!!!  That’s what I am talking about!

In other words, DMA, as the single state entity, cannot contract with a third-party and NOT carry the burden of supervising that third-party and insuring that the third-party follows federal law. Or even simpler, the single state entity cannot contract out of (or divorce itself from) federal laws and hide behind a contract.  Or even simpler, a teacher at a school cannot suspend a student without the authorization of the principal/school.

Yet, despite Shipman, MCOs are still contending that, “DMA cannot tell us what to do.”

Yet, despite Shipman, MCOs are still terminating, suspending and refusing to contract with providers without the express authority of DMA.

Yet, despite Shipman, TODAY, in my preliminary injunction hearing (the transcript of which will be a public record), the MCO’s attorney argued that (per case law from 1941) the MCO is an independent contractor (hence DMA having no control over the MCO).  The DMA attorney piggy-backed the MCO argument and pointed out that DMA had taken no action in this case (i.e., the provider’s Medicaid contract was NOT terminated according to DMA).  In other words, the teacher tried to expel a student from school without the school/principal authorizing the expulsion…or even backing it up.

It is as if Shipman came out May 10, 2013, and, here on now May 28, DMA (or its agents the MCOs) is struggling to change its course.  But, like the Titanic, DMA is too big, too heavy and too dinosaur-ish to move quickly adapt or change to comply with new federal law (although, even prior to Shipman, I argued it is absolutely obvious that an MCO is the agent of the state…it’s just nice to have some “auth-or-i-TIE” to back my argument).

“Iceberg!” (Shipman)

At the moment that someone yelled, “Iceberg,” what did the Titanic do?

1. Some say the officer in charge had a 30 second delay in giving the order to change the ship’s course after the spotting of the iceberg.  Apparently, he was dumbfounded for 30 seconds.  Can’t say I blame him.  Pretty scary stuff!  But, some say, that 30 second delay sunk the Titanic.

2. Some say when the iceberg was spotted, the steersman, Robert Hitchins, went into a panic and turned the Titanic the wrong way.  Remember, the Titanic was launched back when sailors were more used to sailing ships.  They learned on “Tiller Orders.”  If you want to go one way, you push the tiller the other way.  So it is not surprising that, in a panic, Hitchins would have resorted to Tillers Orders.

3. Some say the Titanic sank because it was the largest ship afloat.  The Titanic was only the second of three Olympic class ocean liners operated by White Star Line.  It carried 2,224 passengers.  Because of the Titanic’s massive size, the hull plates buckled inward along her starboard side and opened 5 of 16 watertight compartments to the sea.

4. Some say (this has nothing to do with sinking, but with loss of life), the Titanic lacked enough lifeboats.  The Titanic had enough lifeboats for 1,178 people, slightly more than 1/2 of the passengers.  Supposedly, the reason the Titanic had insufficient lifeboats was because of outdated maritime safety regulations.

Similarly, DMA, like the Titanic, has made some “sink-able” errors, but with administration committed to change, let’s hope we can correct the “sink-able” errors before the Medicaid behavioral health system sinks.  Because, instead of 2,224 passengers, Medicaid carries 1.5 million passengers.

Let’s review  the Titanic-like errors of DMA. For the sake of this blog, the “Iceberg!” moment was the publication of K.C. v. Shipman.

1. K.C. v. Shipman was published May 10, 2013.  It is now May 28, and DMA and the MCOs are still arguing in court that MCOs are not agents of DMA.  An 18 day delay is a bit more than a 30 second delay, but the similarity is there nonetheless.

2. A panicked turn the wrong way…Shipman came out and legal advocates for DMA and the MCOs instantly begin to argue, “Yeah, but…”  Yeah, but Shipman does not apply to providers…Yeah, but Shipman only applies to managed care, not fee-for-services…Yeah, but just because PBH is an agent of the state, it does not mean that all MCOS are agents. Folks, an agent is an agent is an agent.  A panicked turn the wrong way is merely a way of denial (and I am not talking about the river De-Nile).  And, some say, the panicked turn the wrong way sunk the Titanic.

3.  Largest ship afloat; large bureaucratic agency.  I do not have the data, but I am willing to bet that DHHS/DMA is one of the biggest NC governmental agencies.  In January, the State Auditor released a Medicaid audit.  According to the January audit, “[i]n SFY 2011, North Carolina Medicaid incurred administrative expenses of approximately $648.8 million which when compared to MAP spending of $10.3 billion produced an ADM/MAP percentage of 6.3 percent. This percentage was significantly greater than the ratio for states with comparable spending.”  With that much spending on administration, the agency can’t be small!  Like the Titanic, big things are hard to maneuver or change course.  The hull plates begin to buckle. Imagine an elephant going through an obstacle course at top speed…it just isn’t pretty.

4.   Like too few lifeboats, Medicaid’s mental health system has too few providers and too many wanting for a seat on the lifeboat.  Not to mention, the MCOs seem to have taken it upon themselves to insure there are too few providers by terminating Medicaid contracts, suspending Medicaid contracts and refusing to enroll providers.  Today, my client informed me (and, folks, this is not verified; it is hearsay) that during the time in which this provider’s certain Medicaid contracts were terminated by this one MCO, that this one MCO also terminated 27 other providers’ Medicaid contracts.  It’s as if, prior to setting sail, a person brought the captain an extra few thousand lifeboats, and, instead of putting the lifeboats on the ship, the captain said, “No thanks. We don’t have room.”  But as to Medicaid behavioral health, we have too many in need and not enough providers providing services.  (Again, this does not go to the reason of the sink-age  (I know that is not a word) of the Titanic, but rather to the number of deaths/recipients not receiving medically necessary mental health services.

In sum, today I decided that DMA is like the Titanic.  So big that both were/are very difficult to change its course.  Since Shipman, DMA has had an 18 day delay digesting the decision (and counting).  Since Shipman, DMA has panicked and turned the wrong way.  Since Shipman, DMA has shown it is just too big to move quickly (and it’s hulls may be buckling).  Since Shipman, DMA has proven too little providers and too many Medicaid recipients in-need is not a healthy combination.

Remember the saying, “[T]hose that do not learn from history are doomed to repeat it?”

People, the Titanic sank!