Beginning in August 2009, the New York Office of the Medicaid Inspector General (OMIG) began contacting Home Health Agencies and other providers throughout the State putting them on notice of planned recoupments directed to agencies which provide home health care services to patients covered by Medicare and Medicaid, referred to as dual eligible patients.  Agencies that provide services to dual eligible patients have previously been targeted for recoupments arising out of Medicare Maximization (Med Max) audits. These audits were followed by a TPL Demonstration Project between the Medicare and Medicaid programs conducted with the Centers for Medicare and Medicaid Services (CMS). CMS has not extended the Demonstration Project. As a result, the TPL audits by OMIG and the University of Massachusetts Medical School are commencing again.

In the August 2009 provider notices, the State is requiring providers to demand bill Medicare for all services rendered to dual eligible patients for services provided through Federal Fiscal Year (FFY) 2008. The claims must be submitted to the Medicare Fiscal Intermediary (FI) no later than December 31, 2009.  Claims submitted to Medicare after the time limits of 42 C.F.R. §424.44 will be rejected, and subject to Medicaid’s position that the provider will be liable for the services provided. 

The theory for the threatened recoupments is that Medicaid by law is the payor of last resort. Therefore, Medicaid’s position is that all other third party payers should be billed before a claim is submitted to Medicaid. However, providers are required to make coverage determinations, and only bill Medicare if the patient is eligible for home care services under Medicare. Medicare eligibility for home care requires that the Medicare beneficiary be confined to the home, under the care of a physician, in need of skilled services on a part time or intermittent basis, and receive services under a plan of care. See 42 C.F.R. §409.42 and §409.43. Thus providers make contemporaneous coverage determinations and bill the appropriate governmental program or private insurers. OMIG’s position will be that if providers of services to dual eligible patients do not have coverage determinations from Medicare, any payments made by the State’s Medicaid program are subject to recoupment. 

The State has been successful in obtaining recoupments directed to providers who have not exhausted their final coverage determination from Medicare. Therefore, the providers find themselves at risk for state recoupments when they have not obtained Medicare coverage determinations. Providers typically do not submit claims to Medicare for coverage determinations when it is clear on its face that the services would not be covered under Medicare. By availing themselves of the demand billing to Medicare, now being required by OMIG, providers will minimize their exposure to the State for Med Max audits and recoupments.

In the past, TPL Medicaid recoupment disputes usually arose years after claims were paid by Medicaid. The essence of the problem was that Medicaid belatedly claimed there were other potentially liable third parties, such as Medicare.  This occurred after Medicare time limits for filing a claim expired.  In effect, Medicaid challenged the provider’s contemporaneous coverage determination claims after it was too late to obtain a no-coverage determinations or payment from Medicare.  OMIGs current notices give providers a window of three months, till December 31, 2009, to file demand bill claims with Medicare.   

Fighting recoupments is an area in which Arent Fox has been very active. For example, we have represented 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. At least in the area of Med Max recoupments the law has now been 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.

There also is a developing body of federal law that suggests Med Max recoupments are unlawful unless the state has a waiver from the federal government permitting it to engage in “pay and chase” claims processing.  “Pay and chase” is the policy followed by some Medicaid programs of paying the claim when presented, and later demanding a repayment if the claim was paid inappropriately. A waiver to pursue “pay and chase” is in lieu of the general requirement of  processing claims through a “cost avoidance” policy.  The waiver must be approved by CMS.  CMS requires Medicaid programs to have a claims processing system which identifies any liable third party prior to Medicaid paying the claim. Thus, the Medicaid program is required to reject the claim and return it to the provider, with information for the provider to bill the liable third party. See 42 C.F.R. § 433.139. To date, state courts have not addressed the legality of “pay and chase.” Providers should be aware of this defense to Med Max recoupments, as well as a myriad of due process rights, including hearings to contest recoupments.

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.