02.15.2012 Civil Suit Challenging North Carolina Medicaid Appeal Procedures

A civil suit recently filed in North Carolina could affect who decides appeals of agency decisions related to the North Carolina Medicaid program, which could in turn affect the difficulty of appealing agency decisions by the Division of Medical Assistance.

Background – Recent Change to Law Governing Administrative Appeals

The suit challenges a recent change to North Carolina law that made administrative law judges with the North Carolina Office of Administrative Hearings the final decision makers in appeals of administrative agency decisions.  Prior to the effective date of the new law, administrative agency decisions, including decisions by the North Carolina Medicaid agency, were appealed to an administrative law judge (ALJ), who issued a recommended decision, which was sent back to the agency for a final decision.  Historically, final agency decisions often reject the ALJ’s recommendation and reinstate the original agency decision.  But, as of January 1, 2012, a statutory amendment took effect that removed the administrative agency as the final decision maker and transformed the ALJ’s decision from a recommendation to the final decision.

Summary of Civil Suit

The suit, PBH v. Albert A. Delia and Julian Mann, III, U.S. District Court, Eastern District of North Carolina, Civil Action No. 5:12-CV-46, was filed on February 8, 2012, on behalf of a county-based mental health provider.  It argues that the statutory change making the ALJ’s decision final violates the US Constitution and is preempted by the Federal Social Security Act, which requires each state to give only a single agency authority to decide Medicaid issues (the NC OAH is a separate agency from the Division of Medical Assistance, the North Carolina Medicaid agency).  The complaint seeks a ruling from the Federal District Court that the North Carolina Medicaid agency must retain the authority to make final agency decisions, and seeks temporary and permanent injunctions forbidding ALJ’s from rendering final decisions as intended by the recently-amended North Carolina statute.

Importance of Procedural Issue to Medicaid Providers

Although this is a procedural issue, it could directly affect Medicaid providers by making it more difficult to reverse a decision by the North Carolina Medicaid agency or its contractors.  Because the agency has often overridden ALJ recommendations in the past and reinstated the original agency decisions, the recent removal of the agency’s ability to do so probably improved the chance that any given appeal of a Medicaid agency decision will be reversed.  The suit attempts to restore the prior system and the agency’s ability to reverse an unfavorable recommendation.

The plaintiff’s agenda may also be different than that of most Medicaid providers.  Plaintiff is a mental health authority that provides services to Medicaid recipients in a managed-care program under a “waiver” of the typical fee-for-service Medicaid structure.  That is an important distinction because it puts the plaintiff, a provider, in the role of authorizing services to be provided to Medicaid recipients, a function normally performed by DMA, the North Carolina Medicaid agency.  Therefore, the plaintiff’s interests are probably more closely aligned with those of DMA than with other fee-for-service Medicaid providers.

Fee-for-service Medicaid providers (e.g., hospitals and nursing homes) are far more likely to be adverse to DMA in an appeal of an administrative decision.  For example, providers may appeal administrative decisions to exclude them from the Medicaid Program, deny enrollment, impose penalties or recoup an alleged overpayment to the provider.  Therefore, they might prefer that an ALJ, not DMA, make the final decision; and they might thus support the recent statutory changes.

Status of Litigation

Although the civil suit was only filed on February 8th, it asks for a temporary injunction, suggesting that the plaintiff will attempt to set a short-notice hearing in a matter of days to obtain a temporary restraining order while the suit is pending.  If any other Medicaid providers wish to oppose the plaintiff’s suit, they may need to act very soon.

For more information about this topic, please contact the author or any member of the Williams Mullen Health Care Team.

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