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State Medicaid auditors raise 'arbitrary and capricious' to a new level

Health Care
Rochester Business Journal
December 13, 2013

It is perhaps cold comfort for health care providers subjected to audits and reimbursement demands from the state Office of the Medicaid Inspector General that there is an administrative appeal process to review those determinations. The providers incur substantial attorney fees and significant financial uncertainty to challenge what in a number of recent decisions were unwarranted OMIG findings. The OMIG seems to operate as a reign of terror, and in many cases it may just be easier for the provider to capitulate than to fight.
One of the most bizarre OMIG decisions involved a nursing home run by Saratoga County. It received full approval from all the relevant bureaus of the Department of Health under the certificate-of-need program for some $3 million of capital improvements to construct a co-generation plant.
The Health Department had previously approved a similar project for the Genesee County nursing home. The Saratoga County approval was issued in 2001 and 2002, and in 2003 and 2005 the department revised the facility's Medicaid rates to reflect reimbursement for the capital costs of the project. Then, in 2009, the OMIG conducted an audit; it claimed that the Health Department had made an error in approving reimbursement for the cost of the project and that those rate increases were overpayments which had to be repaid.
Even after the OMIG issued its opinion that reimbursement for this capital expense was unwarranted, the Health Department had not removed those costs from the facility's Medicaid rate. Did the right hand know what the left hand was doing? The appeal was successful.
In another appeal, the OMIG had determined that an ambulette service had been overpaid by more than $2 million for 2004 and 2005. This was based on a statistical sampling methodology. The OMIG claimed that in its sample there were 109 instances in which documentation of the time of the service was missing, two instances in which there was no documentation of service and three instances in which the lowest rate by the most direct route had not been charged. Those alleged overpayments totaled less than $5,000-which was extrapolated to $2 million of overpayments on all the claims for those years.
A witness for the OMIG testified that the provider maintained voluminous contemporaneous documentation of its services, including invoices, dispatch sheets, driver logs, clinic letters, service requests and/or authorization forms. The auditors ignored the bulk of this documentation, however, and accepted only claims for which the pickup time for each leg of a round trip had been recorded.
The administrative law judge hearing the appeal reviewed the regulations concerning required documentation and concluded, "I can find no support in the regulations or other interpretative guidelines to support the auditor's position." The OMIG witness, said the judge, "went so far as to claim that the need to write down the hour and minute was an 'inferred' requirement," but the judge concluded, "Simply put, there is no such thing as an inferred requirement. The state must clearly delineate the actions a regulated entity must take in order to be in compliance. Ambulette operators are not mind readers."
Only in 2010-five years after the period in question-had the OMIG issued anything specifying this requirement. Most tellingly, said the judge, this requirement was effective only prospectively. The judge held that trying to apply those requirements retroactively to services provided six years earlier would be a "gross overreach."
The last appeal involved another transportation provider. The OMIG claimed that the license plate number on some claims was incorrect and that the driver's license number was incorrect on others. Concerning the license plates, the provider produced the plate surrender document indicating that plates had been surrendered on Feb. 28, 2006, when an ambulette went out of service, and that all claims for a new ambulette submitted after that date had been submitted with the correct new license plate number. One has to ask why it took a hearing to get that straightened out.
The driver's license issue arose because the license number initially had been entered with one digit wrong on the state's electronic claims submission system, which then used the driver's name to insert the incorrect number automatically on later claims without the provider seeing it. The judge pointed out that this sort of repetitive error is a common problem, noting that some of the paperwork submitted by the OMIG had referred to the claims being sampled as pharmacy claims, apparently because it had simply lifted a portion from another case. Oops!
These cases should serve as fair warning to health care providers submitting claims to Medicaid that the OMIG is watching-and also that some of its audit findings are, shall we say, aggressive.
Rene Reixach is an attorney with Woods Oviatt Gilman LLP, where he concentrates his practice on health law. He formerly was executive director of the Finger Lakes Health Systems Agency.

12/13/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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