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From Health Law Daily, August 8, 2018

Provider to return over $1M in Medicaid payments due to billing errors

By David Yucht, J.D.

The Virginia Department of Medical Assistance Services (DMAS) had substantial evidence to retract Medicaid payments from a provider of day support for individuals with intellectual disabilities because of poor recordkeeping resulting in billing errors, according to a state appeals court in Virginia. In coming to its decision, the agency did not need to find a material breach of the provider agreement because of specific language contained in the provider agreement. The court found that if the agency committed error in excluding the provider’s out of time evidence, this error was harmless. Consequently, the court upheld the agency determination requiring the provider to return over $1,000,000 in Medicaid disbursements (Community Alternatives Virginia v. Jones, August 7, 2018, Malveaux, M.).

State Medicaid audit. DMAS administers Medicaid for the State of Virginia. Community Alternatives Virginia (CAV) was a licensed Medicaid provider of day support for individuals with intellectual disabilities. DMAS began an audit of CAV for the six-month time period from January 1, 2012, to June 30, 2012. The auditor noted several documentation deficiencies. Consequently, DMAS expanded the audit to include the time period from March 1, 2011, to June 30, 2012. As a result of this audit, DMAS sent CAV an overpayment notification letter, concluding that billing errors resulted in an overpayment of over $1,000,000. After losing administrative appeals, CAV appealed to the circuit court and then to the Court of Appeals of Virginia.

No need of material breach for enforcement. The appellate court rejected CAV’s argument that it was necessary for DMAS to find a material breach of the provider agreement for it to retract Medicaid payments. CAV invoked the contract principle of material breach, arguing that because the breaches in its documentation were minor, DMAS should not have retracted the payments. Under this principle, a party to a contract may not enforce a contract claiming a breach unless the breach goes to the root of the contract and does not affect more than a minor part of the consideration. However, in the context of administrative agency contracts, general principles of contract interpretation may be displaced by the specific terms within the contract itself. Here, the provider agreed to "refund payments made by Medicaid if they are found to have billed Medicaid contrary to law or regulation, failed to maintain any record or adequate documentation to support their claims, or billed for medically unnecessary services."

The court found that this language allowed for the retraction of Medicaid payments because the provider failed to maintain adequate records. Consequently, DMAS did not need to find a material breach of the provider agreement to retract Medicaid payments.

Evidence excluded-harmless error. The appellate court also ruled that because DMAS’s exclusion of CAV’s exhibits did not influence the hearing’s outcome, the agency’s error, if any, was harmless. CAV forwarded its documentary evidence to DMAS in a timely fashion but failed to file it with the hearing officer on time. The hearing officer’s decision to accept the late filing was overturned by the agency director. The appellate court noted that a non-constitutional error is harmless if the error did not influence the fact finder. Here, although the director decided to exclude CAV’s untimely exhibits, they were clearly considered in determining whether CAV had met its burden of proof. Therefore, any error in excluding the documents was harmless.

Substantial evidence for agency decision. The appellate court also ruled that the agency’s decisions were proper since they were based on substantial evidence. A court may reject an agency’s factual findings only if a reasonable mind would necessarily come to a different conclusion. Decisions regarding nine separate errors were reviewed, all of which were supported by substantial evidence. The following errors all supported the retraction of Medicaid payments: hours billed did not match the documentation in recipients’ records, quarterly reviews of Individual Service Plans were missing, the number of units billed for specialized supervision was not supported by documentation, out of date forms were used, documentation did not contain Individual Service Authorization Requests, notes or checklists for the dates of service billed were missing, Plans for Supports were incomplete, Individual Service Plans lacked schedules of tasks to be performed, and attendance logs or similar documentation was missing from files.

The case is No. 1882-17-4.

Attorneys: James P. Holloway (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) for Community Alternatives Virginia. Abrar Azamuddin, Attorney General’s Office, for Cynthia B. Jones.Companies: Community Alternatives Virginia

MainStory: TopStory CMSNews AuditNews BillingNews MedicaidNews MedicaidPaymentNews ProgramIntegrityNews ProviderNews

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