The NC MCOs: Jurisdiction Issues and Possible Unenforceable Contract Clauses with Medicaid Providers

According to NC Superior Court, OAH (and I) has (have) been right all along…OAH does have jurisdiction over the MCOs.  And you cannot contract away protections allowable by statute.

Before I went to law school, I do not recall ever thinking about the word “jurisdiction.”  Maybe in an episode of Law and Order I would hear the word thrown around, but I certainly was not well-versed in its meaning. While I was in law school, the word “jurisdiction” cropped up incessantly.

“Jurisdiction” is extremely important to North Carolina Medicaid providers.  Jurisdiction, in the most basic terms, means in which court to bring the lawsuit or appeal of an adverse determination.

In this blog, I am mostly referring to terminations/refusals to contract with providers by the managed care organizations (MCOs), which manage behavioral health, developmental disability, and substance abuse services for North Carolina. Recently, there have been a slew of providers terminated or told that they would not receive a renewed contract to provide Medicaid services. The MCOs tell the providers that, per contract, the providers have no rights to continued participation in the Medicaid system.

The MCOs also tell the providers that the providers cannot appeal at OAH… That the providers have no recourse… That the providers’ contracts are terminable at will (at the MCO’s will)…. I have been arguing all along that this is simply not true. And now a Superior Court decision sides with me.

The MCO have been arguing in every case that OAH does not have jurisdiction over the actions of the MCOs.  The MCOs have pointed to NC Gen. Stat. 108D and Session Law 2013-397, which amends NC Gen. Stat. 150B-23 to read:

“Solely and only for the purposes of contested cases commenced as Medicaid managed care enrollee appeals under Chapter 108D of the General Statutes, a LME/MCO is considered an agency as defined in G.S. 150B-2(1a). The LME/MCO shall not be considered an agency for any other purpose.”

A termination or denial to participate in the Medicaid program is an adverse determination. Adverse determination is defined in NC Gen. Stat. 108C-2 as, “A final decision by the Department to deny, terminate, suspend, reduce, or recoup a Medicaid payment or to deny, terminate, or suspend a provider’s or applicant’s participation in the Medical Assistance Program.”

The Department is defined as, “The North Carolina Department of Health and Human Services, its legally authorized agents, contractors, or vendors who acting within the scope of their authorized activities, assess, authorize, manage, review, audit, monitor, or provide services pursuant to Title XIX or XXI of the Social Security Act, the North Carolina State Plan of Medical Assistance, the North Carolina State Plan of the Health Insurance Program for Children, or any waivers of the federal Medicaid Act granted by the United States Department of Health and Human Services.”

Obviously, per statute, any entity that is acting on behalf of DHHS would be considered the “Department.” Any adverse act by any entity acting on behalf of DHHS, including terminating a provider’s participation in the Medical Assistance Program is considered an adverse determination.

The MCOs have been arguing that the above-referenced amendment to 150B means that the MCOs are not agents of the state; therefore, OAH has no jurisdiction over them.

Until March 7, 2014, these issues have been argued within OAH and no Superior Court judge had ruled on the issue.  Most of the Administrative Law Judges (ALJ), even without Superior Court’s guidance, has, in my opinion, correctly concluded that OAH does have jurisdiction over the MCOs.  A couple of the ALJs vacillate, but without clear guidance, it is to be expected.

On or about March 7, 2014, the Honorable Donald W. Stephens, Senior Resident Superior Court Judge ruled that OAH does have jurisdiction over the MCOsYelverton’s Enrichment Services, Inc. v. PBH, as legally authorized contractor of and agent for NC Department of Health and Human Services (DHHS).

If these MCOs are acting on DHHS’ behalf in managing the behavioral health Medicaid services, it would be illogical for OAH to NOT have jurisdiction over the MCOs.

In the Yelverton Order, Judge Stephens writes, “OAH did not err or exceed its statutory authority in determining that it had jurisdiction over Yelverton’s contested case.”

The Order also states that the MCO, in this case, PBH (now Cardinal Innovations), agreed that only DHHS had the authority to terminate provider enrollment. The MCO argued that, while only DHHS can terminate provider enrollment, the MCOs do have the authority “to terminate the participation of the provider in the Medical Assistance Program.”

Talk about splitting hairs! DHHS can terminate the enrollment, but the MCO can terminate the participation? If you cannot participate, what is the point of your enrollment?

Judge Stephens did not buy the MCO’s argument.

On March 7, 2014, Judge Stephens upheld ALJ Donald Overby’s Decision that OAH has jurisdiction over the MCOs for terminating provider contracts.

I anticipate that the MCOs will argue in future cases that the Yelverton case was filed prior to Session Law 2013-397, so Yelverton does not apply to post-Session Law 2013-397 fillings. However, I find this argument also without merit. The Yelverton Order expressly contemplates NC Gen. Stat. 108D and House Bill 320.

House Bill 320 was the bill contemplated by the General Assembly in the last legislative session that expressly stated that OAH does not have jurisdiction over the MCOs. It did not pass.

In Yelverton, the MCO argued that the MCO contracts with the providers allow the MCO to terminate without cause and without providing a reason.

Judge Stephens notes that the General Assembly did not pass House Bill 320. The Yelverton Order further states that no matter what the contracts between the providers and the MCOs states, “[c]ontract provisions cannot override or negate the protections provided under North Carolina law, specifically appeal rights set forth in NC Gen. Stat. 108C.”

Will the MCO appeal? That is the million dollar question…

About kemanuel

North Carolina Medicaid lawyer

Posted on March 25, 2014, in Administrative Law Judge, Administrative Remedies, Alliance, Appeal Rights, Behavioral Health, Cardinal Innovations, CenterPoint, DHHS, Division of Medical Assistance, Due Process, EastPointe, ECBH, General Assembly, Health Care Providers, House Bill 320, Judicial Review, Jurisdiction, Lawsuit, Legal Analysis, Legal Remedies for Medicaid Providers, Legislation, Managed Care, Managed Care Organizations, MCO, MeckLINK, Medicaid, Medicaid Appeals, Medicaid contracts, Medicaid Providers, Medicaid reimbursement, Medicaid Services', Mental Health, Mental Health Problems, Mental Illness, N.C. Gen. Stat. 150B, NC, NCGS 108C-5, NCGS 108C-7, NCGS 108D, North Carolina, OAH, Office of Administrative Hearings, Partners, Provider Medicaid Contracts, Session Law 2013-397, Termination of Medicaid Contract and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 5 Comments.

  1. This article below explains why judge having a hard time deliberating but I hope this court case helps him as Alliance is arguing jurisdiction.

    Paula Fleming, MA, LPCS, LCAS, CCS, CCSOTS Vice-President/Clinical Director Family First Support Center, Inc 110 SW Center St Mt Olive, NC 28365 paulafleming@familyfirst1.com

    http://www.familyfirst1.com (Office) 919.635.3344 (Fax) 919.635.3388 (Cell) 919.656.1163

    Our mission is to improve individual and family strengths by promoting positive communication and the development of problem-solving skills.

    “What we think, we become” -Buddha.

    The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and /or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you receive this in error, please delete the material from any computer. Thank you for your compliance to this request.

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  2. This ruling somehow seems to contradict, or possibly even invalidate, another lawsuit in progress which claims that MCO’s should not be allowed to administer Medicaid services and payments, on the grounds that Medicaid funds cannot be administered by a private company. Either OAH has jurisdiction because they recognize that “Obviously, per statute, any entity that is acting on behalf of DHHS would be considered the “Department”.” Can’t have it both ways. Any comments on that possible conflict?

  3. Hattip to Parker Poe HealthcareAttorneys for their hardwork in obtaining the order!

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