State administrators cannot withhold Medicaid payments from physicians suspected of program violations without evidence of fraud, a Texas appeals court has ruled.
Appellate judges also struck down a rule that enabled the Texas Health and Human Services Commission (THHSC) to retain seized payments after a hold is terminated to offset a possible overpayment.
Although the original plaintiffs in the case were dentists, the decision will apply to all physicians and health providers in Texas, said Donald P. “Rocky” Wilcox, vice president and general counsel for the Texas Medical Association.
“This is a really good decision,” Mr. Wilcox said in an interview. “We saw physicians, dentists, and others having a [payment] hold stay in place even after the agency said there was no more suspicion or allegation of fraud, just a dispute over whether the coding was proper.”
The case originated from a Medicaid payment hold placed on Harlingen Family Dentistry PC during a fraud investigation by the THHSC, according to Harlingen’s attorney, Jason Ray of Austin. An administrative law judge (ALJ) ruled that there was no evidence of fraud but that the dental practice may have potentially committed program violations. The ALJ allowed the payment hold to stand. Harlingen did not appeal and instead filed a separate lawsuit with another dental group that challenged the state’s authority to withhold payments in such circumstances.
A trial court ruled in favor of the state and the decision was appealed to the Texas Court of Appeals, Third District, at Austin, which overturned the decision Nov. 25. The judges said that withholding payments from health providers for alleged program violations, no matter how minor, is inconsistent with the intent of state law, which is to permit holds under instances involving Medicaid fraud or abuse.
“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,” the judges said in their opinion.
Additionally, the appeals court revoked another rule that had allowed the state to retain Medicaid payments even after a provider had been cleared of fraud and a hold terminated. The THHSC’s right to possess funds pursuant to a payment hold for fraud depends solely on the existence of credible evidence of such fraud, the appeals court said. Once the statutory basis for imposing the hold ceases to exist, the THHSC no longer has the authority to keep the money.