5th Circuit Finds Subject Matter Jurisdiction For Medicare and Medicaid Providers – Why Collards Matter
“I’d like some spaghetti, please, and a side of meatballs.” – This sentence is illogical because meatballs are integral to spaghetti and meatballs. If you order spaghetti – and -meatballs, you are ordering “spaghetti and meatballs.” Meatballs on the side is not a thing.
Juxtapose, a healthcare provider defending itself from an alleged overpayment, But during the appeal process undergoes a different penalty – the state or federal government begins to recoup future funds prior to a decision that the alleged recoupment is authorized, legal, or warranted. When a completely new issue unrelated to the allegation of overpayment inserts itself into the mix, then you have spaghetti and meatballs with a side of collard greens. Collard greens need to be appealed in a completely different manner than spaghetti and meatballs, especially when the collard greens could put the company out of business because of the premature and unwarranted recoupments without due process.
I have been arguing this for years based off of, not only, a 1976 Supreme Court case, but multiple state case law, as well as, success I have had in the federal and administrative courts, and BTW – logic.
On March 27, 2018, I was confirmed again. The Fifth Circuit Court of Appeals decided a landmark case for Medicare and Medicaid providers across the country. The case, Family Rehab., Inc. v Azar, 2018 U.S. App. LEXIS 7668, involved a Medicare home health service provider, which was assessed for approximately $7.8 million in Medicare overpayments. Family Rehab, the plaintiff in the case, relied on 88% to 94% of its revenue from Medicare. The company had timely appealed the alleged overpayment, and it was at the third level of the Medicare five step process for appeals. See blog. But there is a 3 – 5 year backlog on the third level, and the government began to recoup the $7.8 million despite the ongoing appeal. If no action were taken, the company would be out of business well-before any ALJ could rule on the merits of the case, i.e. whether the recoupment was warranted. How is that fair? The provider may not owe $7.8 million, but before an objective tribunal decides what is actually owed, if anything, we are going to go ahead and take the money and reap the benefit of any interest accrued during the time it takes the provider to get a hearing.
The backlog for Medicare appeals at the ALJ level is unacceptably long. See blog and blog. However, the federal regulations only prevent recoupment during the appeal process during the first and second levels. This is absolutely asinine and should be changed considering we do have a clause in the Constitution called “due process.” Purported criminals receive due process, but healthcare providers who accept Medicare or Medicaid, at times, do not.
At the third level of appeal, Family Rehab underwent recoupments, even though it was still appealing the decision, which immediately stifled Family Rehab’s income. Family Rehab, because of the premature recoupments, was at risk of losing everything, going bankrupt, firing its staff, and no longer providing medically necessary home health services for the elderly. This situation mimics a situation in which I represented a client in northern Indiana who was losing its Medicaid contract. I also successfully obtained a preliminary injunction preventing the provider from losing its Medicaid contract. See blog.
It is important to note that in this case the ZPIC had audited only 43 claims. Then it used a statistical method to extrapolate the alleged over-billings and concluded that the alleged overpayment was $7,885,803.23. I cannot tell you how many times I have disputed an extrapolation and won. See blog.
42 USC 1395(f)(f)(d)(1)(A) states that the ALJ shall conduct and conclude the hearing and render a decision no later than 90 days after a timely request. Yet the Fifth Circuit Court of Appeals found that an ALJ hearing would not be forthcoming not within 90 days or even 900 days. The judge noted in his decision that the Medicare appeal backlog for an ALJ hearing was 3 – 5 years. The District Court held that it lacked subject matter jurisdiction because Family Rehab had not exhausted its administrative remedies. Family Rehab appealed.
On appeal, Family Rehab argued the same arguments that I have made in the past: (1) its procedural due process and ultra vires claims are collateral to the agency’s appellate process; and (2) going through the appellate process would mean no review at all because the provider would be out of business by the time it would be heard by an ALJ.
What does collateral mean? Collard greens are collateral. When you think collateral; think collards. Collard greens do not normally come with spaghetti and meatballs. A collateral issue is an issue that is entirely collateral to a substantive agency decision and would not be decided through the administrative appeal process. In other words, even if Family Rehab were to only pursue the $7.8 million overpayment issue through the administrative process, the issue of having money recouped and the damage to the company that the recoupment was causing would never be heard by the ALJ because those “collateral” issues are outside the ALJ’s purview. The premature recoupment issue could not be remedied by an ALJ. The Fifth Circuit Court of Appeals agreed.
The collateral argument also applies to terminations of Medicare and Medicaid contracts without due process. In an analogous case (Affiliated Professional), the provider argued that the termination of its Medicare contract without due process violated its right to due process and the Equal Protection Clause and was successful.
The upshot is obvious, if the Court must examine the merits of the underlying dispute, delve into the statute and regulations, or make independent judgments as to plaintiff’s eligibility under a statute, the claim is not collateral.
The importance of this case is that it verifies my contention that if a provider is undergoing a recoupment or termination without due process, there is relief for that provider – an injunction stopping the premature recoupments or termination until due process has been completed.
When providers receive Tentative Notices of Overpayment (TNOs), we appeal the findings. And, for the most part, we are successful. Does our State of NC simply roll over when the federal government audits it??
A recent audit by Health and Human Services (HHS) Office of Inspector General (OIG) finds that:
“We recommend that the State agency:
- refund $1,038,735 to the Federal Government for unallowable dental services provided to MPW beneficiaries after the day of delivery; and
- increase postpayment reviews of dental claims, including claims for MPW beneficiaries, to help ensure the proper and efficient payment of claims and ensure compliance with
Federal and State laws, regulations, and program guidance.”
MPW is Medicaid for Pregnant Women. Recently, I had noticed that a high number of dentists were receiving TNOs. See blog. I hear through the grapevine that a very high number of dentists recently received TNOs claiming that the dentists had rendered dental services to women who had delivered their babies.
Now we know why…
However, my question is: Does NC simply accept the findings of HHS OIG without requesting a reconsideration review and/or appeal?
It seems that if NC appealed the findings, then NC would not be forced to seek recoupments from health care providers. We already have a shortage of dentists for Medicaid recipients. See blog and blog.
And if the federal auditors audit in similar fashion to our NC auditors, then the appeal would, most likely, be successful. Or, in the very least, reduce the recouped amount, which would benefit health care providers and taxpayers.
Whenever NC receives a federal audit with an alleged recoupment, NC should fight for NC Medicaid providers and taxpayers!! Not simply roll over and pay itself back with recoupments!
This audit was published March 2015. It is September. I will look into whether there is an appeal on record.
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.
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:
- First Level of Appeal: Redetermination by a Medicare carrier, fiscal intermediary (FI), or Medicare Administrative Contractor (MAC).
- Second Level of Appeal: Reconsideration by a Qualified Independent Contractor (QIC)
- Third Level of Appeal: Hearing by an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals
- Fourth Level of Appeal: Review by the Medicare Appeals Council
- 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:
- Reconsideration review
- Petition for Contested Case at OAH
- 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.
An Extreme Uptick in NC Medicaid Overpayments for June 2013, But Not in Collections! Something Faulty With the System???
Have you ever heard the phrase:
“If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck?”
Similarly, if something looks odd, it generally is. So when North Carolina overpayments go from $10 million to $80 million from one month to another, I think, “Something is fishy.” Especially when the A/R, or accounts receivable does not increase.
Now digressing….Humans are, generally, creatures of habit.
In my life, during my week days, I wake up early in the morning, go for a run with my dog, take a shower, go to work, at some point in the day, blog, go home and eat a family dinner, wind-down in front of the TV with my husband, and then go to bed. Repeat…Monday, Tuesday, Wednesday, Thursday, and Friday.
In order for me to change my routine (during the week days), it would take a substantial catalyst. For example, if, tomorrow, I won $1 million from a lottery, I would guess that my work day would differ, in that I would, most likely, work less. (Although, in my case, that may not be true, since I enjoy my work so much…but you get the point). Or if my husband were injured or to become sick…my work day would change because I would need to be by his side.
But, generally, my work day schedules are habitually identical.
Generally speaking, the same is for a corporation or a “corporate life.” As in, corporations are run by management (people, who are creatures of habit) so a corporate entity, generally, conducts its business daily in a like-manner…until some substantial catalyst occurs.
For example, a pharmaceutical company would run normally day-to-day, but when a new drug is approved by the FDA and inserted in the market, the company business may change to adapt to the new product.
Recently, I found a graph of activity with overpayments in Medicaid in North Carolina. The graph was created by Program Integrity (PI), part of the Division of Medical Assistance (DMA).
Apparently, in June 2013, the amount of overpayments identified by the State or third-party contractors significantly rose from the months prior. See the below graph:
I understand that the picture quality may not be great. But the title of this graph is, “Original notice of overpayment versus account receivable setup amount for same case.”
This is a graph taken off the Division of Medical Assistance (DMA), Program Integrity (PI) website. The whole report can be found here.
The blue-ish-purple line denotes the original amount of overpayment that was sent to the provider by the auditing entity (whether the audit is conducted by Public Consulting Group (PCG), HMS, DMA or another entity)…or the original amount the provider is told they are expected to pay to the State for Medicaid document noncompliance.
Notice that from July 2012 through May 2013, generally, the blue-ish-purple line is consistent. There is a small spike in January 2013, but for the most part, the blue-ish-purple lines are under $20 million in overpayments identified.
Then we get to June 2013. Holy crap, right??? The blue-ish-purple line went from under $10 million in overpayments found in May 2013 to almost $80 million.
A jump of over $70 million!!! (What kind of catalyst caused that activity?)
A jump of more than the 5 preceding months added together!
What I also find very interesting in this graph is the green line.
The green line demonstrates the amount of money actually owed to the State once the appeals are exhausted and someone, whether it be a judge or a DHHS hearing officer, decides is ACTUALLY owed…or ACTUALLY received.
In June 2013, while $80 million in overpayments were found, less than $5 million was actually recouped by the state. In other words, for whatever reason, over $75 million in overpayments was found to NOT be owed to the State, despite the original contention that the money was owed to the State.
Is the method used by the State (or whatever 3rd-party contractor) to determine the Medicaid overpayments SO FLAWED and SO INACCURATE that almost all the recoupments are wrong?
I get it. No method is perfect. But I would expect to see a method of recoupment that 10-15% of the overpayments were overturned. BUT ALMOST ALL RECOUPMENTS ARE OVERTURNED? (Or found to not be owed to the State).
I would seriously begin to question the method used to determine these faulty overpayments. Or, if not the method, the implementation.
But, be it the method or the implementation…something is seriously wrong here!!!
It may look like a duck, swim like a duck, and quack like a duck…but it, most definitely, is NOT a duck!
Jurisdiction…ugh…what a dry, boring topic. But wait!! Legal jurisdiction is imperative information for all my health care provider readers. Let me explain:
- Say you disagree with a Medicaid denial of services for one of your patients; or
- Say you disagree with the denial of your Critical Access Behavioral Health Agencies (CABHA) certification; or
- Say you disagree with being placed on prepayment review or undergoing a post-payment audit.
In what venue do you have to legally pursue the claim? Right now, some DMA-contracted companies are claiming that OAH does not have jurisdiction over them. In fact, I even have an Order signed by a Judge directing the contracted company to act, yet the company argues that OAH has no control over it. However, the State Plan states differently….
The Office of Administrative Hearings (OAH) has jurisdiction (meaning OAH can hear lawsuits against) state agencies. “Agency” is statutory defined as an agency or an officer in the executive branch of the government of this State and includes the Council of State, the Governor’s Office, a board, a commission, a department, a division, a council, and any other unit of government in the executive branch. A local unit of government is not an agency.
The state court system, instead is for civil actions. The district court division is the proper division for the trial of all civil actions in which the amount in controversy is ten thousand dollars ($10,000) or less; and the superior court division is the proper division for the trial of all civil actions in which the amount in controversy exceeds ten thousand dollars ($10,000).
Whether you are required to proceed legally at OAH or state court will impact your claim A TON!
The OAH Mission Statement is:
To serve the citizens of North Carolina, with quality and efficiency, by providing an independent forum for prompt and impartial resolution of administrative law contested cases involving citizens and state agencies; investigating alleged acts of unlawful employment practices in state government; functioning as the State’s codifier and publisher of all administrative rules; and reviewing rules before the Rules Review Commission.
Daily, OAH decides cases against the state government. Therefore, the judges at OAH are intimately involved in state legislation and the state governments limits. Also, OAH is a much faster process. A Contested Case Hearing filed in OAH will be heard in months (a preliminary injunction, even quicker); whereas a complaint filed in Wake County Superior Court may not be heard for years (it may be faster or slower in rural areas. I just don’t know).
From my cursory explanation of OAH, it would appear that any Medicaid issue against the state government would automatically be heard at OAH, right? Well, recently, I have encountered a number of Division of Medical Assistance’s agents arguing that (1) these agents are not agents, they are independent contractors; and (2) that OAH does not have jurisdiction over the agents.
Specifically, DMA contracts with companies to manage Medicaid, conduct audits, conduct investigations, etc. The Managed Care Organizations have been contracted with DMA to manage Medicaid behavioral health. Remember, since Western Highlands was consumed by Smokey Mountain, North Carolina now has 10 MCOs. They are, in no particular order:
- Coastal Care
- East Carolina Behavioral Health
- Alliance Behavioral Health
- Cardinal Innovations HealthCare Solutions
- CenterPointe Human Services
- Smokey Mountain Center
- Partners Behavioral Health Management
- MeckLink Behavioral Healthcare
So what if you have a legal disagreement with an MCO? State court or OAH? So far, all MCOs have declared themselves to be out of OAH jurisdiction.
However, remember my blog, “Final Agency Decision No Longer Needed in Appeals” from March 5, 2013? If not, feel free to go back and read it.
The point is, unless North Carolina receives a specific Waiver from the federal government, NC must follow federal law which requires a single state agency to administer Medicaid. If OAH is allowed a final decision, then, in essence, another entity is deciding a Medicaid issue.
So, is NC in violation of federal law? Well, yes, as to other federal laws, but not in this case. NC submitted a State Plan Waiver, which was granted on December 27, 2012.
The Waiver states, in pertinent part, OAH acknowledges and also agrees that the issue to be determined at final hearings conducted in accordance with this waiver is whether a single state Medicaid agency or one of its contractors or agents exceeded its authority or jurisdiction, acted erroneously, failed to use proper procedure, acted arbitrarily or capriciously, and/or failed to act as required by law or rule…”
According to the Waiver, it does not matter if the MCO is a contractor or agent. Either way, OAH has jurisdiction.
If you have been following my blog, then you are aware of the trials and tribulations North Carolina mental health care providers are going through with the Division of Medical Assistance (DMA) and DMA’s lack of supervision of the Managed Care Organizations (MCOs).
It is about to get worse.
On March 14, 2013, House Bill 320 was introduced. On March 18, 2013, the Bill passed its first reading.
Folks, if this Bill is passed, the consequences to mental health care providers accepting Medicaid and Medicaid recipients suffering mental illness will be catastrophic.
To read the proposed Bill in full, click here.
As currently written, House Bill 320 allows the MCOs to suspend Medicaid payments if the provider’s contract has been suspended or terminated. Guess who decided to suspend or terminate the Medicaid contracts? The MCOs. (Hence acting as a Judge)
The House Bill also allows the MCO to suspend the Medicaid reimbursements to ALL MEDICAID PROVIDER IDs ATTACHED TO THE SAME IRS EMPLOYEE ID NUMBER. Literally, allowing the suspension to apply to all IRS Employee ID Numbers will put most health care providers out of business if the MCO arbitrarily decides to suspend the Medicaid contract.
The House Bill also instructs the MCOs to provide 30 days notice to the other IRS Employee ID Numbers, but NO APPEAL PROCESS.
Meaning, if an MCO suspends a Medicaid contract (for any reason at all, correct or incorrect), that MCO can suspend all payments to all IRS Employee ID Numbers of the provider. Plus, the provider has zero appeal rights. (Hence acting as the jury).
Here is an example of how the MCOs tyranny actually works (This is a true story):
Provider X provides wonderful and needed mental health services to three rural counties. MCO enters. MCO audits. MCO determines that provider had a high amount of document inaccuracy. Now, most people with little understanding of the Medicaid policies and procedures will think, “Hmmm, Well the provider’s documentation was poor. Certainly the providers should be expected to maintain proper records.” The problem is that the audits are not conducted appropriately.
For example, Provider X is cited for:
- failing to have prior authorization for a service that does not require prior authorization;
- failing to submit a Person-Centered Plan (PCP) when a PCP is not required;
- failing to obtain consent for treatment when the consent was provided by the legal guardian and the auditor is confused because the last names do not match.
Post-audit, Provider X received notification that its Medicaid contract was terminated and all Provider X’s clients would need to be discharged. Provider X repeatedly requested reasons for termination. Provider X contacts multiple people at MCO and DMA asking, “Please explain how my documents were out of compliance!” DMA says, “Talk to MCO; it wasn’t me.” Provider X says, “DMA has your company listed as not in good standing; talk to DMA; it wasn’t me.”
Provider has no appeal rights. Provider does not know an attorney or that this process is even wrong.
Sadly, Provider X discharges the 400+ mentally ill children from Provider X’s care, fires all staff, and closes its doors. (Hence acting as the executioner).
All because the MCO had the authority to run this provider out of business.
This story actually has already happened. But it is my contention that the MCOs and DMAs actions are against the law, and, generally abhorrent.
However, if this House Bill becomes law, the actions described above will be legal.
Now some may question why the MCOs would discharge health care providers from its networks. Isn’t in everyone’s best interest to have health care providers for the mentally ill? While the answer to most people, I believe, would be, yes, we need mental health providers, riddle me this:
An MCO receives its funds for each fiscal year at the beginning of the year. Essentially, the MCO is prepaid for all its services it will eventually authorize.
In fact, in a Brief recently filed by an attorney for an MCO, the attorney wrote, “Under XXX’s waivers, XXX is designated as a Prepaid Inpatient Health Plan (PIHP), which means it accepts the risk for providing that care…This arrangement creates an incentive for XXX to provide the most efficient and cost-effective care. Any cost savings generated by XXX as a result of providing efficient and cost-effective care allow it to provide additional medical care for Medicaid beneficiaries enrolled in the plan.”
That Brief was written in an attempt to refuse medically necessary services to a profoundly mentally handicapped Medicaid recipient. The recipient’s doctor wrote a letter informing the MCO that the recipient required 24–hour care due to the recipient’s severe handicaps.
Yet, despite the affirmation that the recipient required 24-hour care, the MCO refused to provide that care, stating “efficiency and cost-effectiveness.
The attorney for XXX was correct though. The financial arrangement creates an incentive for the MCOs: to provide less services, to have fewer providers in the network, and to increase the revenue for the MCO.
The proposed House Bill also states that the health care providers have no appeal rights for prepayment review, and goes on to state that OAH has no jurisdiction over the MCOs.
The Office of Administrative Hearings (OAH) is the venue for complaints against state agencies and its agents. This is put into place due to the overwhelming congestion in the public court systems. Last month, in OAH, 15,000 Medicaid recipients appealed the denials. Imagine if all complaints against MCOs had to go to superior court…
But more than the congestion in courts, by stating that OAH does not have jurisdiction over the MCOs, the General Assembly is stating that DMA does not have control over the MCOs. Essentially, DMA is foregoing all authority regarding Medicaid mental health. By MCOs being in charge, our Medicaid mental health system becomes runs by private companies. DMA is no longer involved.
And the language of the proposed House Bill is not ambiguous. It states, in part:
(c) The venue for all legal actions concerning a dispute between an LME/MCO and a provider or applicant shall be in the superior court of the county in which the corporate office of the LME/MCO is located, unless the contract in effect between the LME/MCO and the provider or applicant specifies a different venue.
(d) Notwithstanding any other law, OAH does not have jurisdiction over any dispute between an LME/MCO and a provider or applicant.
That’s strong language.
The MCO can suspend any Medicaid contract (Judge), deny any due process (Jury), and put any health care provider out of business (Executor) with zero repercussions on the MCOs.
Please, if you agree with me, contact your Representative in your district. Someone told me one time that Representatives and Senators receive surprisingly few emails about specific Bills. So the Reps and Senators actually will read these emails. Please help raise awareness of the potential consequences of the House Bill 320.
Do not allow the MCOs to be the Judge, Jury and Executioner!