Last fall, the Office of the New York Attorney General contacted nursing homes and hospitals throughout New York State, urging them to identify balance sheet reserves for possible State efforts to recoup Medicaid deficiencies. The State’s intent appears to be to threaten providers to self-disclose or identify funds that can later be targeted for recoupments.

In response, the New York State Association for Homes and Services for the Aging (“NYAHSA”) suggested that providers identify claims that could be potential sources for State recoupment, but review these matters with your professionals. New York law concerning Medicaid recoupments has been evolving in a manner that is trending favorably to providers. To that end, since the Attorney General’s letter and NYAHSA’s bulletin, there has been New York State appellate authority strengthening the rights of the providers. In fact, in the context of Medicaid Maximization (“Med Max”) audits, the case law is now definitive that New York State may not take back monies unless the provider is first afforded a hearing.

Arent Fox has great familiarity with this area and has participated in litigation that may be of importance to you. Specifically, we call your attention to the recent cases challenging Med Max recoupments. Med Max disputes typically involve providers that treat patients who are dully eligible under the Medicare and Medicaid programs. The Medicaid program is the payor of last resort, i.e., DOH is responsible for payment of provider services when there is no other liable third party. Providers make contemporaneous coverage decisions and bill the appropriate governmental program or private insurers as appropriate.

Recoupment disputes arise usually years after claims are paid. The essence of the problem is that the State belatedly claims there were other potentially liable parties, so it wants its payments back. The State does not dispute the cost or nature of the service. In effect, DOH challenges the provider’s contemporaneous coverage determination claims after it is too late to get no-coverage determinations or payment from Medicare. The belated recoupment process is called “pay and chase.”

Fighting recoupments is an area in which Arent Fox has been very active. For example, we currently represent a provider that filed an action in the Albany County Supreme Court challenging the DOH’s right to make Med Max recoupments. We have represented other providers in other states with similar recoupment issues. In our New York case, the State attempted to dismiss our complaint, but was unsuccessful. We later prevailed on summary judgment. The Court held that the State may not effectuate recoupment of Medicaid reimbursement without affording the provider a hearing. The Court relied upon another case in which the provider has a similar recoupment dispute. These cases now clarify the law in New York State. Most recently, the State decided to abandon its appeal in our case because the New York Court of Appeals, the highest court in the New York State judicial system, held late last fall that Medicaid payments are not conditional payments pending post-payment review and cannot be subject to recoupment as “overpayments.” At least in the area of Med Max recoupments the law has now become resolved that providers cannot be subjected to Medicaid recoupments without a hearing.

These cases are evidence of a broader trend in favor of providers and should be evaluated in connection with any demands for re-payment that you may confront. We urge you to contact us or other professionals before acquiescing to making payment regarding any threatened Medicaid recoupments.

You also should be advised that the New York appellate courts will soon face the question of whether New York Medicaid recoupments, in the context of the Med Max program, violate federal law. In one of the recent appellate cases, the New York Court of Appeals observed that the federal law recoupment issue had not properly been presented. However, in the lawsuit in which we are currently involved, the question of federal law is directly at issue. If we are successful, it is possible there could be further expansion of the law for providers to combat Medicaid Maximization recoupments. It will be our effort to attack the validity if the State uses “pay and chase.”

We have substantial experience in this area and would be happy to answer any questions or discuss any issues you may have. You can reach us directly by telephone or e-mail. We look forward to speaking with you.