Supreme Court Holds that Medicaid Providers Do Not Have Right to Challenge Medicaid Reimbursement Rates under Supremacy Clause

Yesterday, the United States Supreme Court issued an opinion that denies providers the right to challenge low Medicaid reimbursement rates by suing state agencies in federal court.

In Armstrong v. Exceptional Child Center (No. 14-15), several residential care providers in Idaho sued on the grounds that its Medicaid program failed to pay providers increased Medicaid rates that had been approved by the federal government.  The providers were initially successful in convincing the district court and Court of Appeals for the Ninth Circuit that the State should be forced to pay the higher rates because federal Medicaid law requires states to pay rates that are sufficient to ensure access to care.  The providers contended that they had the right to sue Idaho in federal court under the United States Constitution’s Supremacy Clause—which provides that federal law trumps State law.

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Matt Wolfe

Matt Wolfe

Matt Wolfe concentrates his practice in the areas of administrative litigation, government relations, and other regulatory matters. Matt formulates comprehensive political and public relations strategies on a broad range of federal and state policies. He drafts and monitors legislation, intervenes directly with legislative, executive, and local officials, and appears before state and federal executive agencies. Within his administrative litigation practice, Matt advises and counsels health care providers subject to federal and state regulatory actions.

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Office of Civil Rights Delays Phase 2 Audits

The Office of Civil RIghts (“OCR”) recently announced that Phase 2 of the HIPAA audits would be further delayed because the audit portals and project management tools that are needed to initiate the audit process are not ready and available for usage. Phase 2 of the HIPAA audits was initially slated to begin in the fall of 2014 and was subsequently moved to late 2014 or early 2015. Currently, no timeline has been provided as to when the next round of audits will officially begin.

A delay in Phase 2 of the OCR HIPAA Audits does not mean that covered entities and business associates should not continue to make sure they are in compliance with all HIPAA regulations. The potential consequences for failure to comply with HIPAA regulations are significant. While the audit portals are still under development, it is a good time for covered entities to (i) make sure their HIPAA policies and procedures are up to date and meet the latest privacy and security requirements, (ii) create a list of all business associates that provide services to the covered entity, and (iii) conduct an internal risk assessment to identify potential risks and vulnerabilities to the confidentiality, integrity, and availability of electronic protected health information held by the covered entity.

Among other things, Parker Poe’s healthcare attorneys advise our healthcare clients about (i) compliance with HIPAA’s privacy requirements as they affect healthcare information, including preparing employee and patient notices, plan policies and procedures, plan amendments and authorization and other forms, and (ii) HIPAA compliance requirements for business associates.

Chara O'Neale

Chara O'Neale

Chara O’Neale focuses her practice primarily on the representation of hospitals, physician groups and other health care providers in the resolution of legal, regulatory and business issues for entities involved in the health care industry.

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No Judicial Relief to the ALJ Waiting Game — Yet

In May 2014, the American Hospital Association filed suit against the United States Department of Health and Human Services seeking to compel Administrative Law Judges (ALJs) to comply with applicable statutory deadlines for deciding Medicare claim appeals.

By law, ALJs are required to render a decision within ninety days of a request for hearing to appeal the second-level reconsideration determination (in the case of claims appeals) and the first-level reconsideration determination (in the case of entitlement appeals).   ALJs are currently not in compliance with this requirement.  The backlog of appeals is significant.   The number of appeals made to the ALJ increased by over 500% from the 2011 fiscal year to the 2013 fiscal year, largely driven by the appeal of determinations by Recovery Audit Contractors.  The number of appeals outstanding in July 2014 was 800,000.  While both the Office of Medicare Hearings and Appeals and the Centers for Medicare and Medicaid Services have implemented a number of projects and pilot programs to try to reduce the number of appeals currently before the ALJ, many providers expect to wait years for an ALJ hearing.

In December 2014, the United States District Court for the District of Columbia determined that the delay did not warrant judicial intervention and granted a motion to dismiss the lawsuit.   In a letter published in response to the decision, the AHA announced its intent to appeal the decision.

Joy Hord

Joy Hord

Joy Hord focuses her practice on regulatory and compliance matters specifically related to the health care industry. Her clients include hospitals, physicians, pharmacies and other health care providers. Ms. Hord also has significant experience representing health care professionals and organizations with business law and transactional issues, such as mergers, acquisitions and joint ventures. Ms. Hord leads Parker Poe’s Health Care Practice, which includes attorneys from the firm’s North Carolina and South Carolina offices.

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Certificate of Need Opportunities in 2015

While many of us were shopping for last-minute gifts for our families, Governor McCrory was busy approving the 2015 State Medical Facilities Plan (“SMFP”). The SMFP is a document created annually by the State Health Coordinating Council that sets forth the methodology and allocations of available Certificates of Needs (“CON”) for the upcoming year.  Under North Carolina law, the SMFP must be approved by the Governor.  On December 22, 2015,  the Governor approved the need allocations that will be available for the award of CONs in 2015 by signing the SMFP.  Although the 2015 SMFP does not allocate a large number of potential CONs, there are some significant healthcare projects in the 2015 SMFP for which providers may wish to apply in the coming months.

In terms of technology and equipment, a CON for a fixed MRI scanner in Harnett County will be up for review in 2015.  Applications for the fixed MRI scanner are due on August 17, 2015.  Otherwise, 2015 looks to be a relatively quiet year for equipment applications.

Adult care home CONs provide one bright spot in the 2015 SMFP.  The 2015 SMFP allocated 340 beds to Brunswick County.  Applications for this allocation are due August 17, 2015.  Providers should be mindful that they can apply for all or part of the 340 available beds.  This allocation provides a good opportunity for adult care home providers to grow in a part of the state that is seeing an increased number of retirees.

On the home care and hospice front, the 2015 SMFP has no allocation for additional  home health offices.  However, the SMFP allocates one CON for a hospice home care Medicare-certified office in Cumberland County.  Applications for the Cumberland County hospice home care CON are due June 15, 2015.  Read More

Robb Leandro

Robb Leandro

Robb Leandro assists his client with a broad range of legal issues relating to health care, administrative law and public policy. His legal practice focuses on helping health care providers navigate the minefield of regulations that they face in their practices. Robb routinely assists his clients with issues including Medicaid and Medicare regulations; Medicaid and Medicare audits; Certificate of Need Applications and litigation; licensure, surveys, and certification issues; and HIPAA and privacy laws. Robb also provides counsel to health care providers with complex government contract procurement issues.

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The $10,000 Access Clause

This paragraph (or some variation) finds its way into lots of contracts when one or both of the parties to the contract are participants in the health care industry:

If [Party name] provides services, the cost or value of which is $10,000 or more over a 12-month period, including contracts for both goods and services in which the service component is worth $10,000 or more over a 12-month period, then  [Party name] allows the Comptroller General of the United States, HHS, and their duly authorized representatives access to [Party name]’s contract, books, documents, and records until the expiration of four years after the services are furnished under the terms of this Agreement.  [Party name] will also allow access to the subcontractor’s contracts of a similar nature between subcontractors and related organizations of the subcontractor, and to their books, documents, and records.

Does it need to be in the contract?  The simple rule is that, unless the contract relates to provision of services to an entity that is enrolled as a provider with Medicare (Part A), it does not need to be included.   If, however, the contract does relate to services to a provider (such as a hospital, skilled nursing facility, or hospice), then the provision must be included–or Medicare can deny reimbursement for the service.

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Joy Hord

Joy Hord

Joy Hord focuses her practice on regulatory and compliance matters specifically related to the health care industry. Her clients include hospitals, physicians, pharmacies and other health care providers. Ms. Hord also has significant experience representing health care professionals and organizations with business law and transactional issues, such as mergers, acquisitions and joint ventures. Ms. Hord leads Parker Poe’s Health Care Practice, which includes attorneys from the firm’s North Carolina and South Carolina offices.

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