Medicare Reimbursements Are Your Property Rights

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Original story posted on: October 2, 2019

As a Medicare/Medicaid healthcare provider, you have a property right to your reimbursements for services rendered that were medically necessary.

Why does it matter if your Medicare or Medicaid reimbursements constitute property rights?

If you have a property right to something, it cannot be taken from you without due process of law, meaning a fair hearing and notice. If you have a property right to something, then it cannot be usurped from you. For example, since I own my house, you cannot come to my house and claim ownership, even as a squatter. I am afforded due process for my right to my property. Similarly, when you provide Medicare services that are medically necessary and properly rendered, your reimbursements for such services cannot be withheld without due process. This means that many rules and regulations across the nation may be unconstitutional.

One of the questionable laws recently put under a microscope involves many managed care organizations (MCOs) and their closed network system, which comprises the majority of managed care in America, as well as Medicare Administrative Contractors (MACs). MCOs and MACs act as if they are the judge, jury, and executioner when it comes to payments. But according to the U.S. Constitution and property rights, Medicare/Medicaid reimbursements are not based on a subjective review by a government contractor.

The ultimate victims in unfair, premature, or erroneous terminations from the Medicare or Medicaid programs are the recipients. Often there are too few providers that accept Medicare and Medicaid in certain areas. The other victims in a wrongful termination are the providers and their staff – while the adverse consequences have minimal to no unfavorable bearing on the government.

Under numerous U.S. Supreme Court holdings, most notably the Court’s decision in Board of Regents v. Roth, the right to due process under the law only arises when a person has a property or liberty interest at stake. See also Bowens v. N.C. Dept. of Human Res.

In determining whether a property interest exists, a Court must first determine that there is an entitlement to that property, pursuant to Cleveland Bd. of Educ. v. Loudermill. Unlike liberty interests, property interests and entitlements are not created by the Constitution. Instead, property interests are created by federal or state law and can arise from statute, administrative regulations, or contract (see Bowens.)

Specifically, the Fourth Circuit Court of Appeals has determined that North Carolina Medicaid providers have a property interest in continued provider status. In Bowens, the Fourth Circuit recognized that the North Carolina provider appeals process created a property interest in a Medicaid provider’s continued provision of services and could not be terminated “at the will of the state.” The Court determined that these due process safeguards, which included a hearing and standards for review, indicated that the provider’s participation was not “terminable at will.” The Court held that such a move could be made only for cause and that such cause was reviewable. The Fourth Circuit reached the same result in Ram v. Heckler two years later. I foresee the same results in the Court of Appeals’ jurisdiction.

Since Ram, North Carolina Medicaid providers’ rights to continued participation have been strengthened through the passage of Chapter 108C. Chapter 108C expressly creates a right for existing Medicaid providers to challenge a decision to terminate participation in the Medicaid program in the Office of Administrative Hearings and Appeals (OAHA). Therefore, North Carolina law now contains a statutory process that confers an entitlement to Medicaid providers. Chapter 108C sets forth the procedure and substantive standards for which OAHA is to operate, and gives rise to the property rights recognized in Bowens and Ram.

In another particular case, a MAC terminated a provider’s ability to deliver services associated with four CPT codes, which comprised over 80 percent of the provider’s total, severely decreasing the provider’s financial reserves, not to mention causing Medicare recipients to lose their access to care and choice of provider.

The MAC’s contention was that the provider was not really terminated since they could still participate in the network in other ways. But again, the company was terminated from providing certain services.

The Court found that the MAC’s contention that providers have no right to challenge a termination was without merit. And, rightfully so, the Court stated that if the MAC’s position were correct, the appeals process provided by law would be meaningless. This was certainly not the case.

The MAC’s contention that it operates a “closed network” and thus can terminate a provider at its sole discretion was also not supported by the law. No MAC or MCO can cite any statute, regulation, or contract provision that gives it such authority. The statutory definition of “closed network” simply delineates those providers that have contracted with the LME-MCOs to furnish services to Medicaid enrollees. The MAC was relying on its own definition of “closed network” to exercise complete and sole control and discretion, which is without foundation and/or merit. Nothing in the definition of “closed network” indicates that MACs or MCOs have absolute discretion to determine which existing providers can remain in the closed network.

It is well-settled law that there is a single agency responsible for Medicare and Medicaid: the Centers for Medicare & Medicaid Services (CMS). Case law dictates that the responsibility cannot be delegated away. A supervisory role, at the very least, must be maintained.

On the Medicaid level, 42 CFR § 438.214, titled “Provider Selection,” requires the government to ensure through a contract that each MCO “implements written policies and procedures for selection and retention of providers.” A plain reading of the law makes clear that MCOs are required to have written policies and procedures for the retention of providers. Requiring policies and procedures would be pointless if they are not followed.

On the Medicare level, 42 U.S.C. § 405(h) spells out the judicial review available to providers, made applicable to Medicare by 42 U.S.C. § 1395ii. Section 405(h) aims to layout the sole means by which a court may review decisions to terminate a provider agreement, in compliance with the process available in § 405(g). Section 405(g) lays out the sole process of judicial review available in this type of dispute. The Supreme Court has endorsed the process, for nearly two decades, since its decision in Shalala v. Illinois Council on Long Term Care, Inc., holding that providers are required to abide by the provisions of § 405(g) providing for judicial review only after the administrative appeal process is complete.

The MACs and the MCOs cannot circumvent federal law and state requirements regarding provider retention by creating a policy that allows it to make the determination for any reason, in its sole discretion. Such a provision is tantamount to having no policies or procedures at all.

Programming Note:

Listen to Knicole Emanuel live every Monday on Monitor Monday, 10-10:30 a.m. EST.

Knicole C. Emanuel Esq.

Knicole C. Emanuel is a partner at the Potomac Law Group, PLLC.

For more than 16 years, Ms. Emanuel has maintained a litigation practice, concentrating on Medicare and Medicaid litigation, healthcare regulatory compliance, administrative law, and regulatory law. She understands the intricate Medicare and Medicaid payment system, the unique business of healthcare providers, the overlay of federal and state Medicare and Medicaid rules and regulations, and actions of state agencies that affect the way healthcare entities operate. She has tried over 1,000 administrative cases and has appeared before arbitration panels and in various appellate forums. Knicole is a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

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