Court Sides with Medicaid Dentists and Negates HHSC-OIG Rules on Medicaid Payment Holds for Program Violations

Texas medicaid reformToday, the Texas 3rd Court of Appeals overturned a lower court decision and negated Health and Human Services Commission rules that allow for the Office of Inspector General to place Medicaid payment holds in certain circumstances, basically for only program violations not fraud,  and then keep the funds to offset alleged overpayments by the provider. A copy of the decision is here – 3rd Court Opinion 11-25-14 .

Appeals court overturns rules

The courts decision in part reads:

[A group of Medicaid dentists]  filed suit in Travis County district court challenging certain rules adopted by the Texas Health and Human Services Commission (HHSC). The challenged rules permit HHSC and its Office of Inspector General (OIG) to impose a payment hold against a Medicaid provider in certain circumstances. The Dental Groups also challenged a rule permitting the OIG to retain funds that were accumulated during a payment hold even after the hold has been terminated and to use those funds to offset any monies that may be determined to be owed as a result of an ongoing investigation of the provider. After the trial court rendered judgment that the challenged rules were valid, the Dental Groups perfected this appeal.

We will reverse the trial court’s judgment and render judgment that the challenged rules are not valid.

HHSC rules on payment holds exceed legislatively granted authority

The court found the HHSC rules had exceeded the authority granted by the Texas legislature to withhold Medicaid payments.

Through the challenged rules, HHSC grants the OIG authority, and assumes authority for itself, to impose a payment hold whenever it believes a provider has committed any program violation, no matter how minor and irrespective of whether there is any indication of fraud or other intentional abuse. As noted above, the rules significantly expand the circumstances under which a pre-notice payment hold can be imposed beyond those enumerated in Government Code section 531.021(g)(2). Thus, the challenged rules are inconsistent with the legislature’s directives related to those payment holds that it has expressly authorized.

HHSC rules denied due process rights

The court also found that the way the rules were constructed allowed OIG to deny Medicaid providers due process rights that are otherwise inherent in other legislatively correct forms of Medicaid payment holds.

As written, the [challenged] rules permit the OIG to impose a payment hold, without notice and in the absence of fraud, and yet avoid the due process notice procedures and expedited administrative review the legislature required in connection with the payment holds it expressly authorized…We hold that HHSC’s adoption of rules that permit pre-notice payment holds to be imposed for any alleged violation of the Medicaid program, no matter how minor, is inconsistent with the intent of Government Code chapter 531, subchapter C, which is to address and remediate Medicaid fraud and abuse and permit payment holds under circumstances involving fraud or abuse of the Medicaid program. The fact that the challenged rules lack the due-process notice and hearing requirements that are the hallmark of legislation expressly authorizing the imposition of pre-notice payment holds bolsters our conclusion.

HHSC has no right to payment hold monies after termination of payment hold

In relation, to retaining the payment hold monies after a payment hold has been terminated, the court ruled:

[A] payment hold imposed pursuant to Government Code section 531.102(g) is temporary and must end under the circumstances outlined in the applicable federal and state regulations. As we held in Janek v. Harlingen Family Dentistry, HHSC’s right to possess  funds pursuant to a payment hold for fraud depends solely on the existence of credible evidence of such fraud. In the absence of such evidence, “the State’s right to temporary possession of the funds no longer exist[s].” Once the statutory basis for imposing the hold ceases to exist, HHSC no longer has the authority to possess those funds.

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