Category: Medicaid


On January 10, 2010, the Centers for Medicare and Medicaid Services (“CMS”) posted answers to frequently asked questions (“FAQ”) regarding disproportionate share hospital (“DSH”) audit reporting requirements on its website. In those FAQs, CMS indicated that revenues received from private insurance companies (FAQ 33) and Medicare (FAQ 34) for Medicaid eligible patients must be deducted from costs when determining “uncompensated care costs.”

As a result of the policies enunciated in these FAQs, a deluge of litigation was commenced. Numerous hospitals asserted challenges, in various courts across the nation, asserting that FAQs 33 and 34 were unlawful amendments to the existing regulations which made no reference to the inclusion of Medicare and private insurance payments in the calculation of uncompensated care costs.  Each court that has addressed the issue has found the FAQs invalid, and issued either preliminary or permanent injunctions prohibiting their enforcement, on the basis that CMS violated the Administrative Procedure Act (“APA”) by failing to properly adopt the policies embodied therein in accordance with the notice and comment provisions of the APA. See Texas Children’s Hospital v. Burwell, 76 F. Supp.3d 224 (D.D.C. 2014); New Hampshire Hospital Ass’n v. Burwell, 2017 WL 822094 (D.N.H. Mar. 2, 2017); Children’s Hosp. of the King’s Daughters, Inc. v. Price, 258 F.Supp.3d 672 (E.D. Va. 2017); Tennessee Hosp. Ass’n v. Price, 2017 WL 2703540 (M.D. Tenn. June 21, 2017); Children’s Health Care v. Centers for Medicare & Medicaid Servs., 2017 WL 366758 (D. Minn. June 26, 2017).

Thereafter, on June 2, 2017, following a notice and comment period, CMS issued a final rule which incorporated the policies enunciated in the previously issued FAQs (the “Final Rule”). The Final Rule provides that uncompensated care costs “[a]re defined as costs net of third-party payments including, but not limited to payments by Medicare and private insurance.” 42 C.F.R § 447.299(c)(10)(i).

The adoption of the Final Rule, however, has not stopped the challenges to CMS’ policy. Since the Final Rule’s adoption, two additional courts have addressed the calculation of uncompensated care costs. These courts not only found that CMS’ failure to follow the notice and comment provisions of the APA made the policies in FAQs 33 and 34 unenforceable, they also held the Final Rule invalid because it contradicts the plain language of the Medicaid statute. See Missouri Hospital Ass’n v. Hargan, 2018 WL 814589 (W.D. Mo. Feb. 9, 2018); Children’s Hosp. Ass’n of Texas v. Azar, 300 F. Supp.3d 190 (D. D.C 2018).  

Both courts looked to the Medicaid statute, which states that DSH payments cannot exceed:

[t]he costs incurred during the year of furnishing hospital services (as determined by the Secretary and net of payments under this subchapter, other than under this section, and by uninsured patients) by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year. 42 U.S.C. § 1396f-5(g)(1)(A).

The courts found that the Medicaid statute’s reference to “payments under this subchapter” was a specific reference to payments made by Medicaid. Because the Medicaid statute makes no reference to subtracting any other payments made on behalf of Medicaid eligible patients (other than payments by uninsured patients) from the total costs incurred, the courts concluded that CMS exceeded its authority in adopting the Final Rule.  Accordingly, the Missouri Hospital Ass’n court enjoined the enforcement of the Final Rule, and the Children’s Hosp. Ass’n of Texas court vacated the Final Rule in its entirety. Missouri Hospital Ass’n, 2018 WL at *10-13; Children’s Hosp. Ass’n of Texas, 300 F. Supp.3d at 205-211. 

In light of these court decisions, as of December 30, 2018, CMS has withdrawn FAQs 33 and 34 and will accept revised DSH audits that cover hospital services furnished before June 2, 2017, when the Final Rule was adopted.  Moreover, CMS has indicated it will not enforce the Final Rule as long as the decision in Children’s Hospital Ass’n of Texas remains in effect.  That decision is currently pending appeal before the United States Court of Appeals for the D.C. Circuit. We will be keeping a close eye on the Children’s Hospital Ass’n of Texas case and will provide an update once a decision is issued.

Dental Practice and Private Equity-backed Dental Support Organization Settle With Government Regarding Allegations of Improper Billing and Violations of the Corporate Practice of Dentistry

ImmediaDent of Indiana, LLC (“ImmediaDent”), the operator of nine dental care practices in Indiana, and Samson Dental Partners, LLC (“Samson”), the provider of administrative support services to ImmediaDent, have agreed to pay $5.1 million to settle allegations of improper Medicaid billing and violations of the Indiana corporate practice of dentistry.  As part of the settlement, the two companies will pay approximately $3.4 million to the federal government and $1.78 million to the State of Indiana.

ImmediaDent owns and operates thirty-three dental locations in Indiana, Kentucky, and Ohio.  Kansas-based Samson provides management, administrative, and other support services to ImmediaDent, but does not have an ownership interest in ImmediaDent.

The U.S. Attorney’s Office intervened in this matter after Dr. Jihaad Abdul-Majid filed a qui tam, or whistleblower, suit in February 2013 against ImmediaDent and Samson in federal court.  According to the complaint, Dr. Abdul-Majid worked for ImmediaDent from July 2011 to March 2012.  His efforts to speak out against the alleged false billing practices he witnessed resulted in the termination of his employment.

Allegations constituting improper Medicaid billing by the two entities included billing tooth extractions as surgical extractions and billing for “deep cleanings” that were never performed or were not medically necessary.  Further, Samson was accused of violating Indiana’s law prohibiting the corporate practice of dentistry, Ind. Code §25-14-1-23.  See also Orthodontic Affiliates, P.C. v. OrthAlliance, Inc., 210 F. Supp. 2d 1054, 1059 (N.D. Ind. 2002).  Specifically, it was alleged that Samson improperly influenced ImmediaDent’s medical professionals and staff by rewarding employees for reaching production goals, disciplining employees for failing to meet production objectives, and exerting influence over staff in a manner that compromised their clinical judgment.

According to the U.S. Attorney’s Office, both companies refused to enter into corporate integrity agreements, which would have required oversight of the company by the United States Department of Health and Human Services, Office of Inspector General (“OIG”).  Corporate integrity agreements typically last for a period of five years and require companies to hire additional compliance staff, develop compliance training, have annual external reviews performed, and submit performance reports to the OIG.  Due to both entities’ refusal to enter into corporate integrity agreements, the OIG has determined that ImmediaDent and Samson “pose a continuing high risk to the federal health care programs and their beneficiaries.”

There is a small, but growing trend, of federal and state governments filing claims against management companies of medical and dental practices, and, in some instances, the private equity firms that invest in these management companies, for the alleged misdeeds of the billing providers.  Even though the firms do not have direct equity interests in the providers themselves, federal and state governments are more closely scrutinizing the influence that the firms have in the providers through the management relationships and trying to argue that such influence is so great that the management companies and the firms should also be liable for the liabilities of the providers.  It is important that management companies and private equity firms take great care in their relationships with health care providers to remain at arms’-length, so as to try to avoid being implicated in these actions.

Supplemental Comments on the Voiding of the Medicaid Work Requirement

The decision of the Federal District Court for the District of Columbia in Stewart v. Azar voiding the approval of the Kentucky work requirements for Medicaid eligibility was the subject of a recent blog here on July 17. There are two subsequent publications worth noting to supplement discussion of the issue.

The judgment implementing Judge Boasberg’s ruling was entered on June 28, 2018. Pursuant to Rule 4 of the Federal Rules of Appellate Procedure, there is a 60-day period following entry of judgment in a matter in which the United States Government is a party for the filing of a notice of appeal as of right.

Although the time for appeal has not expired, from a July 30 Health Affairs blog reporting on the posting of an announcement at, it appears that rather than appealing Judge Boasberg’s ruling, CMS is reopening the comment period on the proposed waiver of Medicaid requirements in the Kentucky demonstration program at issue. The manifest purpose is to supplement and develop the record to show that the program is likely to assist in promoting Medicaid’s coverage objective.  This is the type of information that Judge Boasberg had indicated the agency had not obtained or utilized in the first place.

That blog author provides a comprehensive review of the deficiencies in the original administrative process and how the agency had “sidestepped” its obligations.

Rather than weighing the value of the project in light of its impact on coverage—which [Judge Boasberg] concluded, is Medicaid’s core purpose as stated in the statute itself—officials simply had created a new program objective, to improve health. Without citing to the statute or offering any supporting evidence, the HHS approval letter simply claimed that (1) Medicaid’s purpose is to improve health; (2) work improves health; and therefore (3) mandatory work requirements coupled with other coverage restrictions are likely to promote Medicaid’s purpose.

The blog goes on to identify several types of highly relevant evidence that should be developed to sustain the validity of the Section 1115 waiver analysis and decision-making. The first is the quantification of the cumulative impact of the key demonstration components, including the precise nature of a steady, year-round work requirement (hours worked per week; weeks worked per year); the premiums; the reporting rules; the lock-out periods; the reinstatement opportunities; and the benefit and coverage restrictions. The second would examine the impact of the loss of coverage among the affected population on their access and utilization of medical services resources and resulting health outcomes.  A third type of evidence concerns if, and to what extent, any of these work requirements for deeply impoverished people actually can result in gains in employment, income and financial independence of the type that makes health care and insurance coverage affordable, with access to coverage pathways. “In other words, what is required is solid evidence regarding the mitigating effects of a non-consensual experiment that places Medicaid coverage at high risk for tens of thousands, if not hundreds of thousands, of working-age adults. This evidence cannot simply be tautological claims about the health benefits of work and community engagement.”

This notion of “mitigating effects” of placing Medicaid coverage at risk was picked up and further developed in a very recent August 8 article in the New England Journal of Medicine entitled “Mitigating the Risks of Medicaid Work Requirements.”  The three authors are from the University of Michigan’s Medical School, School of Public Health, and the Gerald R. Ford School of Public Policy.  As a reminder, Michigan is one of the states in addition to the Kentucky program in the case before Judge Boasberg that had received Section 1115 waiver approval from the Secretary of HHS.

These physician authors identified several policy questions concerning the work requirements that “deserve more attention.” That list starts with a determination of the potential health consequences of work requirements for persons enrolled in Medicaid.  They question the role to be played by physicians in determining whether a person is to be exempted from work requirements on the basis of some medical reason. Lastly, they pose the question of how to reduce the medical risks for enrollees who could be harmed by losing their coverage as a result of the Medicaid work requirements.

They questioned the original observation by CMS that work and community engagement were “associated with better health” and that working would improve the health of Medicaid recipients, commenting that this asserted association could be due primarily to healthier adults being able to find employment rather than the work producing the improved health. In this circumstance, the health harms would outweigh uncertain health benefits for those who got jobs.  They cited their own 2016 survey of 4000 Medicaid expansion enrollees.  While nearly half were employed in some capacity, among the others who were either out of work or unable to work, the survey found that many were likely to be more than 50 years old and to report being in fair or poor health, having a mental health condition, or having health-related functional limitations.  They emphasized that while a work requirement might serve to motivate younger recipients, it presents a serious risk of harm to older enrollees or those with chronic conditions if they were to lose their Medicaid coverage under the Obamacare expansion and be unable to afford effective medical care and services.  Although some proposed providing for exemptions for “medically frail” persons, the standards and processes for determining such exemptions were undefined.  This lack of specific governmental guidance on exemptions potentially placed physicians, especially primary care physicians, in a difficult ethical situation of choosing between doing harm to patients or providing inaccurate and thus dishonest assessments of their condition and functionality.

The New England Journal of Medicine authors provided further commentary on ways that work requirements might be handled to mitigate medical risks.  In addition to narrative remarks, the article contains the following summary block:


Limit the initial implementation to adults under 50 years of age who are covered by Medicaid expansion, since they are less likely than older adults and those covered by traditional Medicaid to have chronic health conditions and functional limitations that will be adversely affected by loss of Medicaid coverage.

Provide clear guidance to physicians on health conditions, functional limitations, and caregiving responsibilities for household members with disabilities that will exempt enrollees from work requirements.

Provide job training, employment referrals, and support for work-related transportation and childcare for enrollees subject to work requirements.

Make the reporting of compliance with work requirements less frequent and more flexible to account for fluctuating work hours, seasonal employment, and temporary gaps in employment.

 Tempering criticisms of the Medicaid work requirements, they conclude that the programs need to focus on enrollees who are healthy and functionally able to work and on whether effective work-related training and supports are implemented. “Without such tailoring and support, the health risks for enrollees who lose Medicaid coverage are likely to substantially outweigh the economic and health benefits of blunt incentives for enrollees to work.” This would fail to promote the objectives of Medicaid and would be significantly contrary to the main purpose of Medicaid: to provide medical assistance to low-income adults under age 65.


The Continuing Viability of the Obamacare Medicaid Expansion

Resilient if nothing else, the Patient Protection and Affordability Care Act (“ACA”) continues in force. On June 29, 2018, Judge James E. Boasberg of the United States District Court for the District of Columbia rejected the attempt by the United States Department of Health and Human Services (“HHS”) to defend the grant of a waiver of Medicaid standards to the State of Kentucky for a demonstration program that would have required recipients to work or participate in other qualifying activities for at least 80 hours a month in order to be eligible for coverage.  In Stewart v. Azar, 2018 WL 3203384 (D.D.C. 2018), Judge Boasberg denied the defendants’ motion for summary judgment and granted the plaintiffs’ cross-motion for summary judgment to vacate the Secretary of HHS’ approval of the entire program that had been presented by Kentucky.  This ruling is likely to impact other states, including Arkansas, New Hampshire, Michigan, Alabama, and Indiana, which have received waivers to include work requirements of various sorts.

The United States Supreme Court had upheld the constitutionality of the requirement in the ACA that all Americans have affordable health insurance coverage in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). While seven justices had at first declared the mandatory Medicaid eligibility expansion unconstitutional, Chief Justice John Roberts in a portion of the opinion supported by five justices prevented the outright elimination of the expansion by fashioning a remedy that simply limited the federal government’s enforcement powers over its provisions and allowed states not to proceed with expanding Medicaid without losing all of their federal Medicaid funding.  Before the ACA, the Medicaid program was designed to cover medical services for four particular categories of the needy: the disabled, the blind, the elderly, and needy families with dependent children. With the enactment of the ACA, Medicaid became a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level.  Judge Boasberg described the Medicaid expansion as “a central component of that statute” which, as was noted in the NFIB opinion of the Chief Justice, allowed states to provide “‘health care to all citizens whose income falls below a certain threshold.’”  With the enactment of the ACA, Medicaid was “transformed” and was “no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.”

Whether or not to adopt the Medicaid expansion has continued to be a matter of dispute across the country. Since the 2010 enactment of the ACA, according to the Kaiser Family Foundation, as of July 2018, expansion programs were adopted in 32 states, including New Jersey.

Kentucky adopted the Medicaid expansion by executive order of the governor issued in 2014. This had the effect of reducing the uninsured rate from 17% in 2013 to just under 7% in 2015 and providing for a number of preventive services.  However, with the change in presidential administrations, the then Secretary of HHS and the Administrator of the Centers for Medicare and Medicaid Services encouraged states to submit applications for waiver from some of the Medicaid program’s coverage requirements, especially with regard to the expansion populations and the implementation of work requirements for beneficiaries. Section 1115 of the Social Security Act had long permitted the Secretary to approve “experimental, pilot, or demonstration programs” that would otherwise be outside of the requirements of Medicaid.  In July 2017, Kentucky submitted an experimental plan that included “Kentucky HEALTH” which imposed the 80-hour monthly work requirement on the expansion population as well as an increase in premiums to be paid, reporting requirements, and penalties for non-emergency use of emergency department facilities.

The plaintiffs in Stewart were 15 Kentucky residents enrolled in the state Medicaid program.  They filed a class action complaint challenging many aspects of the program.  The evidential record before the court estimated that 95,000 people in Kentucky would lose their Medicaid coverage under the program.

In analyzing the claims for relief, Judge Boasberg emphasized that pursuant to 42 U.S.C. § 1315(a), the Secretary could only approve those demonstration projects that were “likely to assist in promoting the objectives of [Medicaid].” The court addressed the standard of review to be employed.  While acknowledging that the Secretary’s judgment concerning waivers was entitled to deference, Judge Boasberg demonstrated that use of the “arbitrary and capricious” standard could be a deft and exacting analytical tool.  He emphasized that agency action could be characterized as “arbitrary and capricious” if the agency failed to examine relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.  “Courts, accordingly, ‘do not defer to the agency’s conclusory or unsupported suppositions.’”   And no deference is due to an agency’s post hoc rationalizations advanced as a litigation position.

The court noted that one of the primary objectives of the Medicaid program was “providing medical assistance.” It continued: “The Medicaid statute ‘defines “medical assistance” as “payment of part or all of the cost” of medical “care and services” for a defined set of individuals.’” Using that definition, it found a congressional intent to enable each state, as far as practicable, to provide “payment of part or all of the cost of medical care and services.”   With the enactment of the ACA in 2010, Congress expanded the Medicaid program to provide medical assistance for a new population:  low-income adults under 65 who would not otherwise qualify.

But the Secretary did not address these factors. Rather, the supposed justifications were that the project “would improve health outcomes, promote increased upward mobility and improved quality of life, increase individual engagements in health decisions, and prepare individuals who transition to commercial health insurance coverage to be successful in this transition.”  Accepting that those might be “worthy goals,” Judge Boasberg commented that there was “a notable omission from the list.”  Namely, whether the program “would help provide health coverage for Medicaid beneficiaries.”   Furthermore, the Secretary had failed to analyze whether the program would cause recipients to lose coverage or whether it would promote coverage.  Judge Boasberg found the congressional intent in these circumstances to be self-evident:

Here, the Medicaid statute — taken as a whole — confirms that Congress intended to provide medical assistance to the expansion population. The ACA amended Section 1396a(a)(10)’s mandatory population to include all individuals whose income fell below prescribed levels. In so doing, it placed this group on equal footing with other “vulnerable” populations, requiring that states afford them “full benefits.” … Under this regime, states must provide “medical assistance for all services covered under the State plan under this subchapter that is not less in amount, duration, or scope, or is determined by the Secretary to be substantially equivalent, to the medical assistance available for [other individuals]” covered under the Act. … Regardless of whether the Secretary can ultimately waive that requirement, he must start with the presumption that the expansion group is on par with other protected populations.

At the end of the day, even if the Secretary could properly consider other factors — such as health, cost, or self-sufficiency — his “failure to address” a “salient factor” in the Act — i.e., furnishing medical assistance — renders his approval arbitrary and capricious.

The court determined that the appropriate remedy was to vacate the Secretary’s approval of the program with its work requirement and other provisions and to remand the matter to the agency.

The adequacy of the modest reimbursement from the Medicaid program continues to be a matter of controversy. But the positive impact of the Medicaid expansion is well documented.  With the increased access to medical care, there are better health outcomes as a result of primary and preventive care services. The amount of uncompensated and charity care provided by hospitals has been reduced.  R. Rudowitz & L. Antonisse, Implications of the ACA Medicaid Expansion: A Look at the Data and Evidence (May 2018). Hospitals in states that have adopted the Medicaid expansion are less likely to close for financial reasons because of the revenue flow. See generally R.C. Lindrooth, M.C. Perraillon, R.Y. Hardy & G.J. Tung, Understanding the Relationship Between Medicaid Expansions And Hospital Closures, 37 Health Affairs 111 (2018).

Hospitals Launch a 5th Amendment Constitutional Takings Challenge against the New Jersey Medicaid and Charity Care Programs

Fourteen acute care hospitals have filed a lawsuit suit, the first of its kind in New Jersey, alleging that the State has “taken” the hospitals’ property without just compensation. The hospitals claim that N.J.S.A. 26:2H-18.64 (the “Take All Comers Statute”), which requires New Jersey hospitals to provide medical treatment to all patients who enter their doors, regardless of the patients’ ability to pay, results in an unconstitutional “taking” of the hospitals’ property in violation of the Takings Clauses of the United States and New Jersey Constitutions.

To comply with the Take All Comers Statute, hospitals must permit continuing access to hospital real property and treatment facilities by all patients, including Medicaid and charity care patients, for the duration of their hospital stay and to the exclusion of other patients.  While physically on the hospitals’ property, these patients also use and consume the hospitals’ personal property in the form of medications, equipment, food, linens, treatment staff time and other services, depriving use of these resources for the benefit of the paying public.

The hospitals argue that the scope of all their property taken through the mandate of the Take All Comers Statute constitutes a “physical invasion and appropriation of property” resulting in what SCOTUS has called a per se unconstitutional Taking.  Several SCOTUS cases support the hospitals’ claims. The first is Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), which found that a per se taking occurs when there is a permanent physical invasion of property no matter how minor. In that case, the permanent physical invasion was New York’s requirement that landlords install a cable box on landlords’ apartment roof tops.  In a second case, Nollan v. California Coastal Comm., 483 U.S. 825 (1987), SCOTUS focused on the limitation placed on a property owner’s ability to exclude others from physically being on his property (there, the inability of the property owner to exclude the public from using an easement over his property to access a nearby beach).  In such a case, the property owner is not permitted to use his property as he sees fit — a right, SCOTUS found, that “has traditionally been considered one of the most treasured strands in an owner’s bundle of property rights.” In the third and most recent case, Horne v. Dept. of Agriculture, 135 S. Ct. 2419 (2015), SCOTUS made clear that the government’s obligation to pay just compensation not only applies to the “taking” of real property, but also includes the “taking” of personal property. Therefore, the government’s requirement that California raisin growers set aside a portion of their crop in order to stabilize crop prices constitutes a per se taking, requiring the government to pay fair market value for the portion of the raisin crop that they were required to set aside.

In the same way the government’s actions in the Loretto, Nollan, and Horne cases appropriated property from one private party to either the government itself or another private party, so too does the Take All Comers Statute’s requirement that a hospitals’ beds, medications, equipment, supplies and services are to be used to treat Medicaid and charity care patients constitute an affirmative appropriation of that property for a public purpose, entitling the hospitals to receive just compensation from the State. Stay tuned…

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.