Health Law Daily Prescription drugs covered by Medicaid are non-allowable costs for long term care providers’ per diem cost reports
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Wednesday, May 20, 2020

Prescription drugs covered by Medicaid are non-allowable costs for long term care providers’ per diem cost reports

By Elena Eyber, J.D.

Long term care providers are not entitled to Medicaid reimbursement for prescription drugs costs subject to reimbursement by Medicaid. Drugs covered by Medicaid must be billed directly to Medicaid and are non-allowable costs on providers’ per diem cost reports.

The Supreme Court of Mississippi reversed a chancery court’s order and reinstated a Mississippi Division of Medicaid (DOM) decision, finding that the DOM’s decision to disallow prescription drug costs claimed by long term care (LTC) providers in their per diem cost reports was supported by substantial evidence, was not arbitrary and capricious, and was within the DOM’s authority. The DOM appealed the chancery court’s judgment ordering the DOM to reverse the adjustments for prescription drug costs reported by the providers. The chancery court found that the prescription drug expenses incurred by the providers were properly reported on each of their LTC cost reports as an allowable cost and should have been taken into account by the DOM in determining the per diem rates for each provider (Mississippi Division of Medicaid v. Windsor Place Nursing Center, Inc., May 14, 2020, Beam, D.).

Chancery court decision. The DOM adjusted the providers’ cost reports for 2005, 2007, and 2008, disallowing the prescription drug costs that the providers claimed they incurred in providing resident care. The DOM stated that the only prescription drugs that could be claimed as an allowable cost on a provider’s cost report were those drugs not covered by Medicaid. The providers appealed the DOM’s decision to the chancery court, claiming that the DOM had never disallowed prescription drug costs incurred by a provider from the provider’s cost report until 2008. The providers acknowledged that the DOM properly amended the cost report instructions, effective 2009, and the state plan, effective 2010, but they claimed that the DOM’s adjustments to the cost reports before the effective dates of these amendments violated the law because the DOM retroactively applied new rules.

The chancery court agreed with the providers and found no substantial evidence presented by the DOM to support a finding that the prescription drug costs were not an allowable cost before 2008. The DOM argued that it was an error that the providers’ cost reports had never been adjusted to disallow prescription drug costs and that the error was caught by the DOM in 2008, before the amendments. However, the chancery court found that the DOM failed to present substantial evidence to support this determination. The chancery court held that the change in policy in 2008 was a substantial change that resulted in decreasing the per diem reimbursement rate to the providers, and that the DOM arbitrarily changed its policy without properly amending the state plan and cost-report instructions.

Supreme Court of Mississippi decision. The Mississippi Supreme Court found that the plain language of the Medicaid state plan and the Medicaid provider policy manual states that the LTC providers are not entitled to Medicaid reimbursement for the costs of prescription drugs subject to direct reimbursement by Medicaid. Pursuant to Medicaid policy, drugs covered by Medicaid must be billed directly to Medicaid and are non-allowable costs on providers’ cost reports. The state supreme court found that nowhere in the controlling statutes, the state plan, or Medicaid’s policy is there language that lends itself to a construction taken by the providers that all prescription drug costs not covered by Medicaid means drug costs not paid for by Medicaid. The state supreme court further found that while the DOM may have failed to catch this in the past, prescription drugs covered by Medicaid are subject to direct reimbursement from Medicaid to the dispensing pharmacist and constitute non-allowable costs for the providers’ per diem reimbursement reports. Therefore, the Mississippi Supreme Court held that the chancery court erred reversing the DOM’s decision.

The case is No. 2018-SA-01263-SCT.

Attorneys: Laura L. Gibbes, Office of the Attorney General for Mississippi Division of Medicaid and Drew Snyder. Randall Elliott Day, III (Mitchell Day Law Firm, PLLC) for Windsor Place Nursing Center, Inc. d/b/a Windsor Place Nursing & Rehab Center, Billdora Senior Care, LLC, Lexington Manor Senior Care, LLC and Magnolia Senior Care, LLC.

Companies: Mississippi Division of Medicaid; Windsor Place Nursing Center, Inc. d/b/a Windsor Place Nursing & Rehab Center; Billdora Senior Care, LLC; Lexington Manor Senior Care, LLC; Magnolia Senior Care, LLC

MainStory: TopStory CaseDecisions CMSNews BillingNews DrugBiologicNews LTCHNews MedicaidNews MedicaidPaymentNews ProgramIntegrityNews ProviderNews MississippiNews

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