Health Law Daily No good cause shown to lift provider’s suspension after fraud allegation
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Thursday, October 8, 2020

No good cause shown to lift provider’s suspension after fraud allegation

By Brian Craig, J.D.

A Mississippi rural health care provider was not entitled to an administrative hearing concerning the initial allegation of fraud.

The Mississippi Court of Appeals has affirmed a decision by the Mississippi Division of Medicaid to suspend Medicaid reimbursement payments for a rural health care provider based on a fraud investigation. The appeals court concluded that is no authority within the relevant federal or state regulations that requires the state agency to provide an administrative hearing concerning the sufficiency of the initial allegation of fraud. Therefore, the provider was not deprived of any due process rights. Furthermore, the appeals court concluded that the rural health care provider failed to show good cause to lift the suspension (NSCH Rural Health Clinic v. Snyder, October 6, 2020, Lawrence, A.).

The Mississippi Division of Medicaid suspended Medicaid reimbursement payments for a rural health care provider that provided medical, dental, vision, and mental health care services to Medicaid beneficiaries throughout the Mississippi Delta. The services were suspended as a result of an ongoing investigation of potential fraud. The state agency suspended the provider’s reimbursement payments after an investigation concerning fraudulent billing under the primary code for dental evaluations of nursing home patients.

The provider requested an administrative hearing regarding the suspension. The state agency approved the provider’s request for an administrative hearing; however, the scope of the hearing was limited to a determination if there was good cause to lift or limit the suspension. No testimony or evidence was allowed pertaining to the substantive facts regarding the credibility of the underlying allegations of fraud that led to the suspension. The hearing officer recommended to affirm the suspension of reimbursement payments and the executive director of the agency adopted the hearing officer’s recommendation and affirmed the suspensions. The provider filed an appeal in the chancery court which affirmed the state agency’s decision. The provider appealed.

Fraud allegation. The appeals court concluded that the provider was not entitled an administrative hearing on the credibility and sufficiency of the initial allegation of fraud. The court found that there is no authority within the relevant federal or state regulations that requires the state agency to provide an administrative hearing concerning the sufficiency of the initial allegations of fraud or to disclose any specific information regarding the fraud allegations under investigation.

The appeals court found that the provider was not deprived of any constitutional due process rights. The provider was granted a "good cause" hearing. The provider appeared at the hearing with counsel and presented its argument regarding good cause to lift the suspension, thereby defeating a due process claim. The hearing officer affirmed the suspension of payments as did the state agency. The provider appealed to the chancery court where the provider submitted written briefs and engaged in oral arguments. The appellate court concluded that the entire process hardly sounds of due process violations.

Furthermore, the provider lacked a recognized property interest to support a violation of a due process claim of deprivation of liberty or property. Nothing within the federal or state regulations entitled the provider to Medicaid reimbursement payments during a pending fraud investigation. Rather, the Mississippi regulations provide that the state must suspend all payments to a provider when the state agency determines there is a credible allegation of fraud for which an investigation is pending. The state regulations provided for an administrative hearing limited to whether good cause could be proved to lift or limit the suspension. All of these steps were taken in the current case. Therefore, the appellate court found no error in the chancery court’s decision regarding the denial of the provider’s request for a hearing regarding the credibility of the initial allegation of fraud.

Good cause determination. The appeals court also concluded that the agency’s determination that there was not good cause to lift the suspension is supported by substantial evidence and was not arbitrary or capricious. The state agency’s program integrity director testified during the hearing that the services included routine dental evaluations, screening, and inoculations. The provider challenging the suspension was not the sole provider of those services. Moreover, there were Medicaid dentists all over the state to accommodate those Medicaid beneficiaries.

The appeals court also rejected the provider’s medically underserved designation argument. The majority of Mississippi falls into the Health Resources and Services Administration (HRSA) "medically underserved" category. If the HRSA designation was the only factor to be considered, the state agency would never be able to suspend a payment for any provider upon a credible allegation of fraud. The HRSA designation was one factor in determining whether good cause existed but was not determinative.

Accordingly, the court found that the state agency acted within its power to deny the provider’s request for an administrative hearing on the credibility of the initial allegation of fraud and to continue the suspension of reimbursements. Finally, the court concluded that the actions of the state agency did not violate any statutory or constitutional rights afforded to the provider.

The case is No. 2019-CC-00960-COA.

Attorneys: Crane D. Kipp (Wise Carter Law Firm) for NSCH Rural Health Clinic. Janet McMurtray (Purdie and Metz LLC) for Drew Snyder.

Companies: NSCH Rural Health Clinic

MainStory: TopStory CaseDecisions CMSNews FraudNews MedicaidNews ProgramIntegrityNews ProviderNews MississippiNews

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