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Exhaustion of Administrative Remedies: Futile as the Caucus-Race?

Answer – Sometimes.

How many of you have received Remittance Advices from NCTracks that are impossible to understand, include denials without appeal rights, or, simply, are erroneous denials with no guidance as to the next steps?  While these were most prevalent in the first couple years after NCTracks was rolled out (back in July 2013), these burdensome errors still exist.

You are allowed to re-submit a claim to NCTracks for 18 months. How many times do you have to receive the denial in order for that denial to be considered a “final decision?” And, why is it important whether a denial is considered a final decision?

  1. Why is it important that a denial be considered a “final decision?”

As a health care provider, your right to challenge the Department of Health and Human Services’ (via CSC or NCTracks’) denial instantly becomes ripe (or appealable) only after the denial is a final decision.

Yet, with the current NCTracks system, you can receive a denial for one claim over and over and over and over without ever receiving a “final decision.”

It reminds me of the Causus-race in Alice and Wonderlandalice“There was no ‘One, two, three, and away,’ but they began running when they liked, and left off when they liked, so that it was not easy to know when the race was over. However, when they had been running half an hour or so, and were quite dry again, the Dodo suddenly called out ‘The race is over!’ and they all crowded round it, panting, and asking, ‘But who has won?'” – Alice in Wonderland.

On behalf of all health care providers who accept Medicaid in North Carolina and suffered hardship because of NCTracks, at my former firm, I helped file the NCTracks class action lawsuit, Abrons Family Practice, et al., v. NCDHHS, et al., No. COA15-1197, which was heard before the NC Court of Appeals on June 12, 2015. The Opinion of the Court of Appeals was published today (October 18, 2016).

The Court of Appeals held that the plaintiffs were not required to “exhaust their administrative remedies” by informal methods and the Office of Administrative Hearings (OAH) prior to bringing a lawsuit in the State Court for damages because doing to would be futile – like the Caucus-race. “But who has won?” asked Alice.

Plaintiffs argued that, without a “final decision” by DHHS as to the submitted claims, it is impossible for them to pursue the denials before the OAH.

And the Court of Appeals, in a 2-1 decision, agrees.

The Abrons decision solidifies my contention over the past 4-5 years that a reconsideration review is NOT required by law prior to filing a Petition for Contested Case at OAH…. Boom! Bye, Felicia!

Years ago, I informed a client, who was terminated by an managed care organization (MCO), that she should file Petition for Contested Case at OAH without going through the informal reconsideration review. One – the informal reconsideration review was before the very agency that terminated her (futile); and two – going through two processes instead of one costs more in attorneys’ fees (burdensome).

We filed in OAH, and the judge dismissed the case, stating that we failed to exhaust our administrative remedies.

I have disagreed with that ruling for years (Psssst – judges do not always get it right, although we truly hope they do. But, in judges’ defenses, the law is an ever-changing, morphing creature that bends and yields to the community pressures and legal interpretations. Remember, judges are human, and to be human is to err).

However, years later, the Court of Appeals agreed with me, relying on the same argument I made years ago before OAH.

N.C. Gen. Stat. 150B-22 states that it is the policy of the State that disputes between the State and a party should be resolved through informal means. However, neither 150B-22 nor any other statute or regulation requires that a provider pursue the informal remedy of a reconsideration review. See my blog from 2013.

I love it when I am right. – And, according to my husband, it is a rarity.

Here is another gem from the Abrons opinion:

“DHHS is the only entity that has the authority to render a final decision on a contested medicaid claim. It is DHHS’ responsibility to make the final decision and to furnish the provider with written notification of the decision and of the provider’s appeal rights, as required by N.C. Gen. Stat. 150B-23(f).”

N.C. Gen. Stat. 150B-23(f) states, ” Unless another statute or a federal statute or regulation sets a time limitation for the filing of a petition in contested cases against a specified agency, the general limitation for the filing of a petition in a contested case is 60 days. The time limitation, whether established by another statute, federal statute, or federal regulation, or this section, shall commence when notice is given of the agency decision to all persons aggrieved who are known to the agency by personal delivery or by the placing of the notice in an official depository of the United States Postal Service wrapped in a wrapper addressed to the person at the latest address given by the person to the agency. The notice shall be in writing, and shall set forth the agency action, and shall inform the persons of the right, the procedure, and the time limit to file a contested case petition. When no informal settlement request has been received by the agency prior to issuance of the notice, any subsequent informal settlement request shall not suspend the time limitation for the filing of a petition for a contested case hearing.”

2. How many times do you have to receive the denial in order for that denial to be considered a “final decision”?

There is no magic number. But the Court of Appeals in Abrons makes it clear that the “final decision” must be rendered by DHHS, not a contracted party.

So which we ask – What about terminations by MCOs? Do MCOs have the authority to terminate providers and render final decisions regarding Medicaid providers?

I would argue – no.

Our 1915b/c Waiver waives certain federal laws, not state laws. Our 1915 b/c Waiver does not waive N.C. Gen. Stat. 150B.

“But who has won?” asked Alice.

“At last the Dodo said, ‘everybody has won, and all must have prizes.'” – Only in Wonderland!

Sometimes, you just need to stop running and dry off.

The Assassination of Caesar, the Utter Ineptness of NCTracks, and Ignored Warnings

“If we do not learn from history, we are doomed to repeat it.”  George Santayana.

In William Shakespeare’s “Julius Caesar,” Caesar is warned to “Beware the Ides of March.”  See Act 1, Scene 2.  The “ides” of March is the fifteenth.  Back when Caesar established the Julian calendar, he also instituted the “ides” of a month.  Months have different “ides.”  The ides of January, for example, is the thirteenth; the ides of March, May, July and October is the fifteenth.

Caesar:
Who is it in the press that calls on me?
I hear a tongue shriller than all the music
Cry “Caesar!” Speak, Caesar is turn’d to hear.
 
Soothsayer:
Beware the ides of March.
 
Caesar:
What man is that?
 
Brutus:
A soothsayer bids you beware the ides of March

Not really sure what the point of the “ides” was, but, regardless, in 44 B.C., March 15th was the “ides” of March.

When Caesar was warned to “Beware the Ides of March,” Caesar would have known that the soothsayer was warning him about March 15th…a date certain.

Similarly, the Department of Health and Human Services (DHHS) was warned that NCTracks was not ready for its July 1, 2013, “go live”date.  Who was the soothsayer? The Office of State Auditor…Beth Wood.

In May 2013, prior to NCTracks going live, State Auditor Beth Wood published a Performance Audit that found hundreds of untested issues.  The audit warned DHHS that NCTracks was not ready to go live.  The May 2013 Performance Audit may as well have said, “DHHS, beware the first of July!”

Late in the day on March 15, 44 B.C., Caesar walked to the Theatre of Pompey, where he would be assassinated by more than 60 conspirators led by Brutus, his close ally…”Et tu, Brutus?” (Meaning…how could you, my closest friend, conspire against me?)

On his way to the theatre, Caesar sees the same soothsayer who had warned him of the ides of March.  Caesar joked, “The ides of March have come,” meaning to say that the prophecy had not been fulfilled, to which the seer replied “Aye, Caesar; but not gone.”  See Plutarch’s “Parallel Lives.”

I can only imagine the chill that ran down Caesar’s back when the soothsayer warned that the day was not over yet.

Yet, Caesar still walked to the theatre…despite the warning….

Despite the warnings in the May 2013, Performance Audit, DHHS still went live  on July 1, 2013.

Since going live, NCTracks has run into a large number of system defects. Providers in NC have been in uproar.  From not getting paid, to getting paid the wrong amount, to Medicaid/Medicare crossover issues, to taxonomy issues…the failures and defects of NCTracks have been felt by all Medicaid providers, despite the speciality.

About a month ago, NC General Assembly began demanding answers of DHHS and Computer Sciences Corporation (CSC), the entity that created NCTracks based on a $484 million contract.  On October 8, 2013, DHHS and CSC appeared before the Joint Legislative Oversight Committees on Health and Human Services and Information Technology to answer questions about NCTracks issues.

Remember, Sec. Aldona Wos stated, during the committee meeting, that DHHS was not warned by an entity of the risk to go live with NCTracks.  To which, Auditor Wood stated, “For the secretary to say there was no independent or anybody else that had given them a look at their risk readiness for going live on July 1 was not a true statement to the committee, and we felt like that the committee needed to know that information.”

State Auditor Wood is the soothsayer.  “Beware the first of July!”

Just as the soothsayer did for Caesar, prior to NCTracks going live, Wood warned DHHS that NCTracks was not ready.  Just like Caesar, DHHS did not stop NCTracks from going live (he went to the theatre anyway).  Just like Caesar’s death, the failure and ineptness of NCTracks was forewarned and could have been prevented.  Both DHHS and Caesar ignored the warnings.

So how bad is NCTracks?

According to the December 2013 Performance Audit, “the NCTracks system has encountered more than 3,200 defects.”

Here are the Audit’s findings:

FINDING #1: THE DEPARTMENT HAS AN INADEQUATE FRAMEWORK FOR THE TIMELY RESOLUTION OF NCTRACKS DEFECTS

Since going live, the NCTracks system has encountered more than 3,200 defects. More than 600 defects remain unresolved at the time of the audit.

FINDING #2: THE DEPARTMENT LACKS A COMPREHENSIVE MASTER ACTION PLAN TO ADDRESS NCTRACKS ISSUES

The Department does not have a comprehensive and cohesive master action plan to direct the remediation of technical and operational NCTracks issues.

FINDING #3: NCTRACKS GOVERNANCE CHANGES PRESENT BUDGETARY AND SYSTEM CAPABILITY RISKS TO THE STATE

Since July 1, 2013, there have been major updates to the approach the Department will take to implement required capabilities. These changes present budgetary and system functionality risks to the State.

FINDING #4: STATE GOVERNMENTS ‘REVOLVING DOOR’ CREATES A PERCEPTION OF BIAS OR CONFLICT OF INTEREST

A former DHHS employee who served for more than four years as the NCTracks Senior Program Manager and Associate Program Director now works for the NCTracks vendor, CSC, as the NCTracks Executive Account Director.

From Finding #4, it appears that CSC, like Brutus, is working hand in hand with DHHS.

If we do not learn from history, we are doomed to repeat it.  “Beware the ides of March!”

“Et tu, Brutus?”

NC State Auditor, Beth Wood, Calls Out Inaccuracies Stated at the NC Oversight Committee Regarding NCTracks

After the October 8, 2013, Oversight Committee meeting regarding NCTracks, our State Auditor, Beth Wood, had some clarifying remarks.  By clarifying, I mean, Wood points out the (we don’t want to use such a harsh words as “lies”) inadvertent mistruths that came to light at the October 8, 2013, Oversight Committee meeting.  (Click the blue phrase to see a portion of the video of the actual meeting).

One inadvertent mistruth was as follows:

During the Oversight Committee, Senator Parmon asked Secretary Wos whether any professional opinion had been given to the Department of Health and Human Service (DHHS) warning DHHS that NCTracks was not ready to go live July 1, 2013.

Secretary Wos answered: “No, Senator.”

Was the State Auditor’s May 2013 Performance Audit explicitly stating that NCTracks was not ready to go live not enough???? Or maybe Secretary Wos did not consider the Performance Audit a “professional opinion.”  She may have a point.  Perhaps the Performance Audit should be considered “professional fact.”

It is important to remember that this $484 million contract (which price tag has been surpassed) is funded by our tax dollars.

Here is Beth Wood’s response to the Oversight Committee:

October 10, 2013

Honorable Justin Burr
NC House of Representatives
300 N. Salisbury Street, Room 307A
Raleigh, NC 27603-5925

Dear Representative Burr,

The Office of the State Auditor has several concerns about incomplete information provided to the Joint Legislative Oversight Committee on Health and Human Services during its committee meeting on October 8, 2013. We would like to clarify some of the information provided to the committee by officials from the Department of Health and Human Services.

1. When Senator Parmon asked Secretary Wos whether the Department of Health and Human Services had received any professional opinions indicating that that the NC Tracks system may not be ready to go-live on July 1, the Secretary responded “No, Senator.” This answer ignores the work of our audit issued on May 22, 2013, titled: “NCTracks (MMIS Replacement) – Implementation.” The State Auditor met and presented Secretary Wos with the findings and recommendations as early as March 27, 2013, to allow her department to begin addressing problems uncovered in the audit.

The audit findings from our report included that:

  •  Independent assessments regarding system readiness and testing were flawed and put system readiness at risk
  • Access control and security environment were at risk on go-live
  • No formal criteria framework existed to determine if NCTracks was ready for go-live

“The Department should re-evaluate its current “Go” decision for July 1, 2013, once final Go/No-go criteria is established and documented,” our audit recommended. “This assessment should incorporate the final user acceptance testing and production simulation testing results.”

2. In his presentation, Mr. Cooper referenced NCTracks testing procedures done by DHHS and its vendor, CSC, prior to the July 1 go-live date and indicated that the system had met their benchmarks. Our audit, however, found several shortcomings in the testing of the system.

Our findings indicated that:

  • Out of 834 “critical” priority test cases affecting various Medicaid and provider business processes, 123 critical tests had failed and 285 critical test cases were not performed. The department itself defined which business processes were critical, and according to the department, “critical” test cases were absolutely required to be tested.
  • Our audit stated, “If user acceptance testing is accepted without addressing these issues, a high risk exists that critical NCTracks functions could have major errors on go-live and possibly lead to a delayed CMS certification of the system.”
  • Oversight over the production simulation testing process was inadequate. Our work found that the department allowed CSC to develop the acceptance criteria for its own work, one week prior to the end of the testing phase, and that the department lacked clear test benchmarks.

3. Mr. Cooper stated during this presentation that, “On February 28th we [DHHS] reached a point-of-no-return when the state had to cancel the HP contract.” This contradicts what Department leaders told state auditors during our NCTracks pre-implementation audit. During our audit, DHHS senior leadership repeatedly indicated that the termination of the contract with HP, the vendor for the Medicaid system that was replaced by NCTracks, should not be considered final acceptance of the project.

“According to the Department, the letter to HP does not constitute formal acceptance of the NCTracks system,” our audit states. “The Department has indicated that if the NCTracks system is not ready for go-live on July 1, 2013, HP will be willing to continue its services as long as needed. However, there is no guarantee that this continuation of services would occur or at what cost to the State as this is not in writing.”

The fact that Mr. Cooper and the Department now characterize the contract termination as a “point-of-no-return” indicates that the Department’s decision to go-live did not take into account the actual readiness of the system or the critical risks that were raised between February 28 and June 30.

Our full audit report on NCTracks can be viewed at http://www.ncauditor.net/EPSWeb/Reports/InfoSystems/ISA-2013-4410.pdf.

Our staff is available to answer any questions or concerns you may have about our work. If you wish to discuss this information with me, you can contact me at 919-807-7628.

Thank you for your work on behalf of the people of North Carolina.

Sincerely,

Beth A. Wood, CPA
North Carolina State Auditor