Category: Medicaid

High Court to Weigh Healthcare Providers’ Standing to Sue States Over Medicaid Reimbursement

On January 20, 2015, the United States Supreme Court heard oral arguments in the matter of Armstrong v. Exceptional Child Care Center, et al., regarding whether healthcare providers have a right to challenge Medicaid reimbursement rates under the Supremacy Clause and Section 30(A) of the Federal Medicaid Statute or whether only the federal government is allowed to challenge rates during its approval process.

In Armstrong, a group of service providers for developmentally disabled Medicaid patients sued the State of Idaho for failing to increase Medicaid payments for several years.  Specifically, the Idaho Legislature disregarded cost studies performed by its agency which suggested the need for increased Medicaid reimbursement and instead continued to freeze rate increases through the appropriations process due entirely to budgetary considerations.  The District Court ruled in favor of the providers finding that the Legislature could not rely solely on such considerations in determining Medicaid reimbursement. The matter was appealed to the Ninth Circuit on the issue of whether the providers had standing to file such claims. The Ninth Circuit affirmed the lower court’s decision.

This case follows a long history of provider lawsuits challenging Medicaid rates under Section 30(A) which have generally been rejected by the Courts. See, Pa. Pharmacists Ass’n v. Houston, 283 F.3d 531 (3rd Cir. 2002); See also Sanchez v. Johnson, 416 F.3d 1051, 1058-1062 (9th Cir. 2005) (“[T]he flexible, administrative standards embodied in [§30(A)] do not reflect a Congressional intent to provide a private remedy for their violation”).  However, the Supreme Court, until now, has never specifically ruled on the issue.

While it is unclear how the Supreme Court will come down on the issue, its previous handling of the issue may provide some insight.  In a 2012 case from California entitled Douglas v. Independent Living Center of Southern California, 132 S.Ct. 1204 (2012), the Court was set to address this exact issue. However, the Court never clearly affirmed or negated the providers’ right to sue.  Rather, after the regulations at issue were approved by CMS, the matter was remanded back to the Circuit Court and then to the District Court.  However, four Justices (Roberts, Scalia, Thomas and Alito) issued a dissent which stated that without explicit language from Congress providing for the right to sue, private parties, such as providers or patients, should not be able to challenge Medicaid fees.

Based on the dissent issued by the four Justices, it will take a full complement of the remaining Justices to decide in favor of the providers in order for them to succeed on this appeal.  While it is unlikely that the Court will rule in favor of the providers, such a decision could lead to a flood of litigation by healthcare providers who have historically been inadequately reimbursed through the Medicaid program.  A decision is anticipated to be issued in late spring.

Congress Considering Extension of Medicaid Enhanced Payments to Primary Care Physicians Through 2019

One of the signature goals of the Affordable Care Act is to increase Medicaid beneficiary access to primary care services.  To that end, Section 1202 of the Healthcare Education and Reconciliation Act of 2010 provided $230 million in federal funding for “Enhanced Payments” to Medicaid primary care providers from 2011 through 2015.  Momentum now appears to be building to extend these Enhanced Payments through 2019.

In the Senate, the “Community-Based Medical Education Act of 2014” would provide $420 million in funding to extend Enhanced Payments until 2019 and expand the definition of “primary care” to include “family medicine, internal medicine, pediatrics, internal medicine-pediatrics, obstetrics and gynecology, psychiatry, general dentistry, pediatric dentistry, or geriatrics.”  Similarly, in the House, Section 304 of “CHIP Extension and Improvement Act of 2014” proposes an extension of Enhanced Payments through 2019.

There has been some confusion regarding Enhanced Payments as they apply to group practices and whether such payments were required to be paid to the rendering employee physician.  Since then, CMS has issued an informal clarification in the form of a “Q and A” sheet which clarifies that that payment increases to the rendering physician are not absolutely mandatory in all cases, saying “where there is an employment agreement between the physician and the employing entity, the employment agreement might account for the payment increase by noting that the physician accepts his or her salary as payment in full, regardless of Medicaid reimbursement levels.”

If Enhanced Payments continue through 2019 as seems likely, this issue should be addressed by practice group managers and individual physicians to avoid any possible misunderstanding regarding their contracts or with Medicaid managed care organizations which administer the Enhanced Payments.

Provider Rights to Primary Care Enhanced Payments Under the ACA in Question

Section 1202 of the Healthcare Education and Reconciliation Act of 2010 amended the Affordable Care Act to mandate an increase in Medicaid primary care service payment rates for 2013 and 2014. These enhanced payments were intended to lure more providers into primary care, thereby increasing access to such services for Medicaid beneficiaries.

Despite no clear directive in the statute or implementing regulations, some Medicaid managed care organizations (MCO) have taken the position that the enhanced payments must be paid directly to the rendering provider, be it a physician, nurse practitioner, physician’s assistant or the like. Some MCOs have even requested that providers sign attestations “certifying” that the payments will be allocated in this manner.

This has created confusion for group providers who employ physicians that have signed employment agreements requiring all revenue derived from professional activities be assigned to the group. CMS has provided no official position, except to reiterate that the intent of the statute is to insure that the enhanced payment does not stay with the state Medicaid agency or the MCO.

In response to a comment submitted about a salaried physician working for a county provider, CMS indicated that “the physician must receive the increased payment” but that “[i]f, as a condition of employment, the physician agrees to accept a fixed salary amount then we expect an appropriate adjustment to the salary to reflect the increase in payment.” This, however, fails to address the most common circumstance where the physician has assigned all fees to the provider pursuant to an employment agreement.

Group providers should be sensitive to the potential exposure these enhanced payments could create given the lack of a clear directive either in the law or by the federal and state agencies.