Jan 27, 2021
State Medicaid Audit Contractor May Have Exceeded Its Authority
The State of New Jersey contracts with companies (“Audit Contractors”) that provide independent audits of hospitals’ traditional Medicaid claims. The State also retains Audit Contractors to perform audits of Medicaid Managed Care claims on a different basis. During State Medicaid audit’s, New Jersey hospitals should take heed of the different requirements for submitting Medicaid Managed Care claims and be sure that their Audit Contractors do not overstep their authority in auditing hospitals’ submission of claims to Medicaid Managed Care Organizations by requiring certifications of medical necessity.
Traditional Medicaid requires a certification of medical necessity for payment of claims for services to traditional Medicaid beneficiaries. Audit Contractors audit traditional Medicaid claims to ensure that they have certifications of medical necessity, as appropriate and as required by traditional Medicaid.
Most Medicaid Managed Care Organizations, however, do not require certifications of medical necessity because they each have Utilization Management requirements of their own, which include a requirement to obtain authorization for services. The Medicaid Managed Care Organizations establish these Utilization Management requirements in their policies, provider manuals and in their participating provider agreements with the hospitals. Some hospitals may also provide certifications of medical necessity because they are provided for traditional Medicaid claims, but most Medicaid Managed Care Organizations do not require them.
Hospitals submit certifications of medical necessity for traditional Medicaid beneficiaries, but follow the specific Utilization Management requirements of the patient’s Medicaid Managed Care Organization, including obtaining authorization before rendering the services. The hospitals then bill the Medicaid Managed Care Organization and get paid for their services. In a recent matter, we found that an Audit Contractor had been conducting audits of Medicaid Managed Care Organizations’ claims and concluding that the hospitals should not have been paid for the services because there were no certifications of medical necessity for the services. This Audit Contractor then requested the hospitals to repay the reimbursement received from the Medicaid Managed Care Organizations.
We worked with a number of our hospital clients to inform the State and this Audit Contractor, that some of the Medicaid Managed Care Organizations do not require certifications of medical necessity. We also noted that the hospital had obtained authorization from the Managed Care Organizations for the services in accordance with the applicable Utilization Management requirements. For some Medicaid Managed Care Organizations, the authorization and other Utilization Management requirements supplant the certification of medical necessity required by traditional Medicaid. We also cited New Jersey state law that provides that if a Managed Care Organization authorizes the service, then it cannot come back later and deny payment for lack of medical necessity, absent misrepresentation by the hospital in obtaining the authorization. It is our position that since the hospitals have complied with the Medicaid Managed Care Organizations’ requirements to determine medical necessity (i.e., authorization), the fact that there is no certification of medical necessity does not serve as a basis for the Audit Contractor to deny the claim or request a refund of the payments.
We also pointed out that, unlike traditional Medicaid, the Audit Contractor does not have authority to seek recoupments from the hospitals in the Medicaid Manage Care context. The Audit Contractor’s role in the context of Medicaid Managed Care, as per their contract with the State, is to conduct audits and counsel the Managed Care Organizations, but not seek recoupments from the hospitals. As such, it is our position that the Audit Contractor has no authority to request refunds or seek recoupments of Medicaid Managed Care payments, like they do for traditional Medicaid payments.
The State agreed with our positions, and the Audit Contractor has agreed to cease certain activities in this regard. Discussions are ongoing, but we wanted to alert all New Jersey hospitals of these developments. If the Audit Contractor is conducting audits of your Medicaid Managed Care claims, they should not be looking for certifications of medical necessity, but rather accepting the Managed Care Organizations’ authorizations to satisfy medical necessity of the services. In any event, the Audit Contractor should not be requesting any repayments of Medicaid Managed Care payments at all. We hope this is not an issue for your hospital, but if it is or if you would like to discuss it, contact Brian M. Foley, Esq. at BMF@SPSK.com or (973)540-7326.
DISCLAIMER: This Alert is furnished for general information purposes only. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client. As such, it should not be relied upon for dealing with a specific, individual legal matter. This Alert represents the opinions of the author and is the product of professional experience.