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The Courts Order Medicare to Stop Recouping Alleged Overpayments Without Due Process!

New case law supports due process for Medicare providers. As first seen on RACMonitor.

Due process is one of the cornerstones of our society. Due process is the universal guarantee and found in the Fifth Amendment to the United States Constitution, which provides “No person shall…be deprived of life, liberty, or property, without due process of law,” and is applied to all states by the 14th Amendment. From this basic principle flows many legal decisions determining both procedural and substantive rights.

For Medicare and Medicaid providers, however, due process, in the past, has been nonexistent. Imagine that you are accused of owing $5 million to the government. Perhaps it was a CPT® code error. You disagree. You believe that your documentation was proper and that you filed for reimbursement correctly. You appeal the decision that you owe $5 million. You continue conducting business as normal. Suddenly, you realize the government is recouping the $5 million now. Prior to any hearing before a judge. You haven’t been found guilty. What happened to innocent until proven guilty? What happened to due process?

For Medicare appeals there is a five-step appeal process. The law requires the government not to recoup during the first and second levels of appeal. But the first and second levels are jumping through hoops and are not normally successful. It is at the third level – the appeal to an impartial administrative judge – that the alleged recoupments are overturned.

After the second level, according to the black letter of the law, the government can begin recouping the alleged overpayment.

Sadly, in the past, the courts have held that it is proper for the government to recoup reimbursements after the second level. Even though, no hearing has been held before an impartial judge and you haven’t been found guilty of owing the money.

On Sept. 27, 2018, another U.S. District Court in South Carolina has agreed with courts in Texas by granting a provider’s request for a Temporary Restraining Order (TRO) to prevent the Centers for Medicare and Medicaid Services (CMS) from recouping monies until after Administrative Law Judge (ALJ) hearings have been held (Accident, Injury and Rehabilitation, PC, c/a No. 4:18-cv-02173, September 27, 2018).

A new trend in favor of providers seems to be arising. This is fantastic news for providers across the country!

Accident, Injury & Rehab, PC found that the ALJ stage of the appellate process is the most important for providers, as it provides the first opportunity for plaintiff to cross examine defendant’s witnesses and examine the evidence used to formulate the statistical sample. According to the American Hospital Association (AHA), 66 percent of Recovery Audit Contractor (RAC) denials are reversed by an ALJ (I actually believe the percentage is higher). The court found that plaintiff’s procedural due process rights were violated by premature recoupment. The court granted Accident, Injury & Rehab, PC’s preliminary injunction restraining and enjoining the government from withholding Medicare payments during the appeal process.

When the government starts recouping filing a preliminary injunction has been shown it to be the best course.

In the past, most preliminary injunctions asking the court to order the government to stop recoupments until a hearing was held was dismissed based on jurisdiction. In other words, the courts held that the courts did not have the authority to render an opinion as to recoupments prior to a hearing. Now, however, the trend is turning, and courts are starting to rule in favor of the provider, finding a violation of procedural due process based on a collateral claim exception.

There are four criteria in order to win a preliminary injunction. A party seeking a preliminary injunction must establish all for the following criteria: (1) that the party is likely to succeed on the merits; (2) that the party is likely to suffer irreparable harm in the absence of preliminary injunction; (3) that the balance of the equity tips in the party’s favor; and (4) that injunction is in the public interest.

There is an esoteric legal theory called exhaustion of administrative remedies. So jurisdiction is the question. There are exceptions to the judicial bar. The Supreme Court of United States articulated a collateral claim exception. The Supreme Court permitted a plaintiff to bring a procedural due process claim requesting an evidentiary area hearing before the termination of disability benefits. There are nonwaivable and waivable jurisdictional elements the nonwaivable requirement is that a claim must be presented to the administrative agency. The waivable requirement is that administrative remedies be exhausted.

The Collateral claim exception is when a party brings a claim in federal court when that “constitutional challenge is entirely collateral to its substantive claim of entitlement.”

The new trend in case law is that the courts are finding that the provider’s right to not undergo recoupment during the appeal process is a collateral issue as to the substantive issue of whether the provider owes the money. Therefore, the courts have found jurisdiction as to the collateral issue.

The proverbial ship has sailed. According to courts in Texas and now South Carolina, CMS cannot recoup monies prior to hearings before ALJs. Providers facing large recoupments should file TROs to prevent premature recoupments and to obtain due process.

Hospital May Lose Its Medicare Contract, Threatens CMS

Hospital is shocked to learn that its Medicare contract with Health and Human Services may be terminated by April 16, 2017. Medicaid services may also be adversely affected. The hospital was notified of the possible Medicare contract termination on March 27, 2017, and is faced with conceivably losing its Medicare contract within a month of notification. Legal action cannot act fast enough – unless the hospital requests an emergency temporary restraining order, motion to stay, and preliminary injunction and files it immediately upon learning that its Medicare contract is terminated.

The Center for Medicare and Medicaid Services (CMS) threatened Greenville Memorial Hospital, part of Greenville Health System, in South Carolina, that Medicare reimbursements will cease starting April 16, 2017. According to CMS, Memorial’s emergency department is not compliant with Medicare regulations.

A public notice in the Greenville News says: “Notice is hereby given that effective April 15, 2017, the agreement between GHS Greenville Memorial Hospital, 701 Grove Road, Greenville, S.C. 29605 and the Secretary of Health and Human Service, as a provider of Hospital Services and Health Insurance for the Aged and Disabled Program (Medicare) is to be terminated. GHS Greenville Memorial Hospital does not meet the following conditions of participation. 42 CFR 482.12 Governing Body, 42 CFR 482.13 Patients’ Rights and 42 CFR 482.23 Nursing Services.”

“The Centers for Medicare and Medicaid Services has determined that GHS Greenville Memorial Hospital is not in compliance with the conditions of coverage. The Medicare program will not make payment for hospital services to patients who are admitted after April 16, 2017.”

The findings came after an onsite audit was conducted on March 13, 2017. Memorial was notified of the report on March 27, 2017.

Memorial must have submitted a corrective action plan by April 3, 2017, but it has not been released.

The emergency department at Memorial treats about 300 patients per day. An employee of Memorial estimates that the termination would lose net revenue from Medicare and Medicaid could potentially reach around $495 million. Greenville Memorial received $305 million in Medicare funding and $190 million from Medicaid in the most recent fiscal year, accounting for nearly six in 10 patients, officials said.

While CMS and Memorial refuse to discuss the details of the alleged noncompliance, CMS’ public notice cites three CFR cites: 42 CFR 482.12 Governing Body, 42 CFR 482.13 Patients’ Rights and 42 CFR 482.23 Nursing Services.

42 CFR 482.12 requires that hospitals have governing bodies and plans to follow Medicare regulations. Subsection (f) specifically requires that if a hospital has an emergency department that the hospital must follow 42 CFR 482.55 “Conditions of Participation,” which states that “The hospital must meet the emergency needs of patients in accordance with acceptable standards of practice.

(a) Standard: Organization and direction. If emergency services are provided at the hospital –

  1. The services must be organized under the direction of a qualified member of the medical staff;
  2. The services must be integrated with other departments of the hospital;
  3. The policies and procedures governing medical care provided in the emergency service or department are established by and are a continuing responsibility of the medical staff.

(b) Standard: Personnel.

  1. The emergency services must be supervised by a qualified member of the medical staff.
  2. There must be adequate medical and nursing personnel qualified in emergency care to meet the written emergency procedures and needs anticipated by the facility.”

The Memorial audit stemmed from a March 4, 2017, death of Donald Keith Smith, 48, who died as a result of traumatic asphyxiation. After an altercation, the patient was placed on a gurney, supposedly, face-down. South Carolina’s Department of Health and Environmental Controls Site Survey Agency investigated the hospital after the death and the audit found that hospital security officers improperly restrained Smith, strapping him face down to a gurney during an altercation, rendering him unable to breathe. The death was ruled a homicide.

Memorial terminated the security officers involved in the death.

Now the hospital is faced with its own potential death. The loss of Medicare and, perhaps, Medicaid reimbursements could financially kill the hospital. Let’s see what happens…

Judge Orders State’s Termination of Provider’s Medicaid Contract To Be REVERSED, Despite the Unilateral Termination!!

THE CASES LISTED BELOW ARE ILLUSTRATIVE OF THE MATTERS HANDLED BY THE FIRM. CASE RESULTS DEPEND UPON A VARIETY OF FACTORS UNIQUE TO EACH CASE. NOT ALL CASE RESULTS ARE PROVIDED. CASE RESULTS DO NOT GUARANTEE OR PREDICT A SIMILAR RESULT IN ANY FUTURE CASE UNDERTAKEN BY THE LAWYER.

[The names and services involved have been changed to protect the innocent. Lawyers have so many rules to follow…probably due to litigation].

Imagine that the State of North Carolina knocks on your office door and informs you that you are no longer allowed to accept Medicaid and/or Medicare reimbursement rates. That for whatever reason, you are no longer allowed to bill for Medicaid and/or Medicare services. You would expect a reason, right? You would expect the reason to be correct, right?

But what if the reason is invalid?

A North Carolina administrative judge recently held that the State’s reason for terminating a Medicaid provider’s contract must be accurate, and REVERSED the State’s decision to terminate its Medicaid contract with my client.  Here’s the story:

The State terminated my client’s contract to provide chiropractic services.

In this case it was a bit of a duress contract (as are most Medicaid contracts) – a “take or leave it” offer to the local service provider.  If you are a provider and want to continue to serve Medicaid recipients, you have no choice but to sign whatever contract the State gives you. You cannot negotiate. You’d be told to sign the contract “as is,” or you do not provide services. I know of a provider who, before he signed a contract with the State, crossed out a number of clauses. The State just sent him a clean, un-altered contract, same as the original, and told him sign it, no changes allowed.

Going back to my case…

My client is a provider that provides chiropractic services. In this case, the State inaccurately claimed that my client provided services without a proper license.

Upon the State’s termination of my client’s contract for chiropractic services, we filed a petition to the Office of Administrative Hearings in 2013 and asked the administrative law judge for a temporary restraining order, a motion to stay the termination, and a Preliminary Injunction to enjoin the State from terminating my client’s Medicaid provider contract.

The administrative law judge (ALJ) issued the temporary restraining order in May 2013. According to judge, we demonstrated a likelihood of success on the merits and that any failure to award the injunction would cause irreparable harm.

Obtaining an injunction, however, was not a complete victory. We had won an opening battle, but not the war.

A temporary injunction is exactly that…temporary. We had two additional hurdles to overcome: (1) a hearing at which we would have to prove to the judge that we were likely to succeed and the irreparable harm would be so irreparable that the judge should award us a longer injunction, at least until we could have a full hearing on the merits; and (2) a final hearing on the merits.

We received the Final Decision from the ALJ last week. The judge found that my client performed its contractual and legal obligations and that the State acted erroneously in determining that my client had breached its contract. The judge found the weight of the evidence sufficient to prove that my client provided services with a proper license.

If you think a 2 year injunction is pretty long, from May 2013 to now, you are right.

But think about this…from May 2013, through today and into the foreseeable future, as long as the contract is in effect, my client has been and will be able to provide medically necessary chiropractic services to those in need and receive reimbursements for those medically necessary services. This case shows why it is important for providers to assert their rights when those are violated.

And it shows also that the State is not allowed to arbitrarily violate those provider rights.

Preliminary Injunctions: In NC Medicaid, Extraordinary Circumstances Call for Extraordinary Measures

Preliminary injunctions…Prior to law school, had you asked me what a preliminary injunction was I probably would have said, generally, that an injunction is a legal remedy to stop someone from doing something.

Now, post-law school and after approximately 13-years of legal experience, I know now that I would have been only partially right prior to law school.

First, I understand that preliminary injunctions are extraordinary measures.  But don’t extraordinary circumstances call for extraordinary measures?

There are 2 types of injunctions: preventive and mandatory.

How could an injunction help you, as a Medicaid provider? (And, believe me, it can!!)

I have used injunctions in many different ways to help Medicaid providers.  Here are some examples:

  • A provider’s Medicaid contract is terminated…a preventive injunction can be put in place to stay the termination until a determination of the termination’s validity (Secret: If any entity other than the Department of Health and Human Services (DHHS), Division of Medical Assistance (DMA) terminated the Medicaid contract, most likely, the termination is not valid).
  • A provider’s Medicaid reimbursements are suspended…a preventive injunction can be put into place to stay the suspension of payments until a determination of the suspension’s validity.
  • A provider, who has provided Medicaid services for years and has had a Medicaid contract with DHHS for years, is denied enrollment by a Managed Care Organization (MCO)…a mandatory injunction could force the MCO to contract with the provider.

The last example is an example of a mandatory injunction.  Mandatory injunctions, generally, are more difficult to convince a judge to order than a preventive injunction.  However, in the context of Medicaid, generally, the providers have compelling stories that will warrant any type of injunction…extraordinary circumstances.

But a preliminary injunctions is not the first step.

Normally when I draft a Motion for Preliminary Injunction, I use North Carolina Civil Procedure, Rule 65.

Rule 65. Injunctions.

(a)        Preliminary injunction; notice. – No preliminary injunction shall be issued without notice to the adverse party.

(b)        Temporary restraining order; notice; hearing; duration. – A temporary restraining order may be granted without written or oral notice to the adverse party or that party’s attorney only if (i) it clearly appears from specific facts shown by affidavit or by verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party’s attorney can be heard in opposition, and (ii) the applicant’s attorney certifies to the court in writing the efforts, if any, that have been made to give the notice and the reasons supporting the claim that notice should not be required.

Temporary Restraining Order? I thought we were talking about injunctions!!! Now I am confused!!

Do not fret!

Notice that, according to Rule 65, a preliminary injunction may NOT be issued without notice to the adverse party.  However, a Temporary Restraining Order (TRO) CAN be granted withOUT notice to the adverse party.

How this plays out in real life is that, when I want an injunction, I file a “Motion to Stay, Temporary Restraining Order, and Preliminary Injunction.”  I file the Motion in the Office of Administrative Hearings (OAH), which is great, because, generally, the Administrative Law Judges (ALJs) have a deep understanding of Medicaid laws, rules and regulations.

According to Rule 65, the Judge, in his or her discretion may grant the TRO, then schedule the preliminary injunction within 7-10 days.

The fact that a Judge can grant a TRO quickly and without notice to the adverse party clearly shows how extraordinary a TRO is.

But extraordinary circumstances call for extraordinary measures.  Or, in Latin, “extremis malis extrema remedia.”

Example:

Alice is a health care provider who accepts Medicaid.  Alice has a small practice; she only has 3 employees and maybe 40 clients.  She provides mental health care to needy adults in Mecklenburg county.  MeckLINK is her MCO.  On August 1, 2013, MeckLINK sends correspondence to Alice stating that as of August 5, 2013, Alice’s Medicaid contract will be terminated.  Alice panics.  Not only is her small practice her only source of revenue…her livelihood…her career, but she would have to close her practice immediately if MeckLINK failed to pay her even one time.

What are Alice’s choices?

A:   Cry. Give up;

B:   Cuss out MeckLINK, only to have MeckLINK provide her additional legal bases for the termination;

C:   Appeal through MeckLINK’s informal appeal, only to have the termination become effective August 5th, despite the appeal, schedule the informal appeal within 30 days, and go bankrupt prior to the informal appeal; or

D:   Get a TRO/preliminary injunction

Personally, I go with ‘D.’

If you do file a Motion to Stay, TRO and Preliminary Injunction and the Judge follows the legal protocol, the TRO should be granted within a few days.  Then a preliminary injunction (PI) should be scheduled within 7-10 days.  At the PI hearing, you must show: (1) likelihood of success on the merits; and (2) irreparable harm.

How do you show likelihood of success on the merits? Well, in my example, MeckLINK was the acting entity taking the action to terminate Alice’s Medicaid contract.  But federal law dictates that a single state entity manage Medicaid.  It is my position that MeckLINK does not have the authority to unilaterally and without DHHS’ express authorization to terminate a Medicaid contract. Make the argument…show likelihood of success on the merits.

How do you show irreparable harm? Damages must be more than just monetary. Damages must be irreparable…as in, not fixable with mere money.  Obviously, monetary damages are at issue.  But also, goodwill/reputation in the community, staff morale, fear of bankruptcy, effect of bankruptcy on Alice, Alice’s family, staff, effect on Medicaid recipients (not receiving the medically necessary services), impact on the community, etc.  Show irreparable harm…get the PI.

Once you meet your burden of proof for preliminary injunction, then the injunction is upheld until a full hearing on the merits.  Usually, the full hearing on the merits will not be scheduled for many months.  So the PI enables you to continue to do business as usual…as if no termination had ever been threatened.  Status quo. (The existing state of affairs).

Had Alice’s TRO and PI NOT been granted?

Alice would have lost her business.  Her 3 staff members would have been unemployed.  Alice’s family would have been without income.  Her 3 staff would have been without income, perhaps they would have applied for unemployment.  Her landlord would not have been paid.  The 40-ish  Medicaid recipients would not have received medically necessary services.  The Medicaid recipients would have decomposed…perhaps becoming hospitalized or incarcerated…or on the street.  Alice’s reputation in the community would have been that “MeckLINK shut Alice down! She must have been doing something wrong.”  Alice would have become depressed…convinced that she were a failure.  Alice, due to zero income, would have lost her home; her husband would have left her.  (No one can really comprehend the harm of closing a business. The consequences could be more dire than my description).

These are extraordinary circumstances. And extraordinary circumstances call for extraordinary measures!

What Is the Legal Process for Contesting a Termination of a Medicaid Contract?

What is the legal process?
How long does it take?
How much does it cost?
What is the likelihood of success?
If I win, what will happen?

These are probably the most FAQ by providers who have either been placed on prepayment review or been through prepayment review, only to have their Medicaid contracts terminated at the end of six months.

First, what is prepayment review?

If you are an old hat to this blog, then skip this section. Most likely, you already know what the dreaded term “prepayment review” means. If you are a newbie, prepayment review is a status. A bad status. A status created by the Department of Health and Human Services (DHHS). In essence, prepayment review means that, for 6 months, you must have all claims evaluated by a third-party prior to being paid. You can render medically necessary services (for which you obtained prior authorization) and the third-party could decide that you do not deserve to be reimbursed. You can go 6 months without reimbursement, but provide services and pay your staff, then have your Medicaid contract terminated erroneously and because of the subjective and incorrect opinion of the third-party contractor.

However, this blog is about the legal process of fighting your Medicaid contract termination, not the absurdity of the prepayment review process.

The legal process:

You determine that (a) you are wrongfully withheld Medicaid reimbursements while on prepayment review; or (b) your Medicaid contract has been terminated based on an erroneous prepayment review.

1. You hire counsel. (It does not have to be me. Just a knowledgeable Medicaid attorney).

2. The attorney files a Motion to Stay, Temporary Restraining Order, and Preliminary Injunction (TRO) against DHHS, DMA. The third-party auditor that conducted the prepayment review does not need to be named because the auditor is considered to be an agent of the state. In fact, whenever I have filed a TRO, DMA automatically brings a witness from the third-party auditor. If DMA did not, DMA would not be able to dispute my contention that the prepayment review was conducted erroneously.

3. NC Civil Rule of Procedure, Rule 65 governs injunctions (A TRO is legally considered an injunction. The difference is between a court of equity and a court of law).

4. Usually within 7-10 days, (barring some unforeseen hurdle) the Administrative Law Judge (ALJ) will either grant or deny the TRO.

It is important to note that not all ALJ’s procedural postures for TROs are identical. One ALJ may grant the TRO with no legal arguments heard from opposing counsel and schedule the Preliminary Injunction hearing in the near future. Another ALJ may require telephonic legal arguments prior to granting the TRO. Yet another ALJ may require legal arguments in person at the Office of Administrative Hearings (OAH).

5. Once the TRO is granted, status quo governs. In other words, the TRO allows you to have your Medicaid contract, service Medicaid recipients, and get reimbursed…just as if the prepayment review had never happened.

6. A TRO is VERY temporary. For the most part, if executed strictly according to Rule 65, a TRO is granted without hearing from the other side. Therefore, a preliminary injunction hearing must be scheduled as soon as possible. The ALJ does not want to burden an unheard party’s rights for too long without hearing that unheard party’s side.

7. Within a month or so after the grant of the TRO, a preliminary injunction hearing is scheduled. (This is normally conducted in one, full-day hearing…sometimes shorter if you have one particular Judge, because he or she has such a clear understanding of the facts).

8. At the preliminary injunction hearing, you must show: (1) likelihood of success on the merits; and (2) irreparable harm. Which means, in the vernacular, (1) that the prepayment review was conducted incorrectly (or your Medicaid reimbursements are being wrongly withheld); and (2) if the termination of your Medicaid contract is not stopped, then you would suffer great consequences.

9. If the ALJ grants the preliminary injunction, then that grant of relief maintains status quo until the full-blown hearing.

10. The full-blown hearing will be held, generally, over 6 months in the future. Which means that you will be able to render medically necessary services for Medicaid recipients and be reimbursed for services rendered until the final adjudication of the lawsuit.

Basically, once the TRO is filed, you could be “back to normal” or status quo within 7-10 days.  That does not mean that the legal battle is over.  In fact, once the TRO is granted and you are back to normal, the legal battle just begins.  The legal battle can be a long, stressful and drawn-out process.  But, at least, you are able to render medically necessary services and receive reimbursement.

As to cost, the legal process is expensive.  Obviously, cost depends on the attorney that you hire, that hired attorney’s billable rate, and that hired attorney’s legal knowledge of Medicaid.  Be sure to ask many questions prior to engaging any attorney.  Anybody would hate to get an unexpectedly high bill.

Also, check with your liability insurance to determine whether your liability insurance will cover attorneys’ legal fees.  Many times your liability insurance will cover regulatory audits.

Also, NCGS 6-19.1 allows a party defending against an agency decision to petition the court for attorneys fees within 30 days of final disposition of the case.  Therefore, there is a possibility to have your attorneys’ fees reimbursed, but not until the very, very end of your case.  You would be responsible for fronting the attorneys’ fees with a chance of not recovering your attorneys’ fees at the back-end.

As to likelihood of success, obviously, it depends on your particular facts.  Was the third-party auditor really actually wrong in its audit denials? Does your documentation actually meet compliance requirements. Remember, just because the auditor believes that your documents are not compliant, does not mean your documents are actually noncompliant.  But likelihood of success rests primarily in your facts/documents.  Your attorney should be able to be more specific.