Goldstar Medical Services, Inc. v. State, Department of Social Services, No. CV 05 4004413S (Conn. Super. 6/27/2006), No. CV 05 4004413S

CourtSuperior Court of Connecticut
Writing for the CourtHenry S. Cohn
Decision Date27 June 2006
PartiesGoldstar Medical Services, Inc. et al. v. State of Connecticut Department of Social Services Opinion No.: 94152
Docket NumberNo. CV 05 4004413S

Page 1

Unpublished Opinion

Goldstar Medical Services, Inc. et al.
State of Connecticut Department of Social Services
Opinion No.: 94152
No. CV 05 4004413S
Superior Court of Connecticut
Judicial District of New Britain at New Britain
June 27, 2006


The plaintiffs, Goldstar Medical Services, Inc.(Goldstar) and Donald Bouchard (Bouchard) have appealed from a decision of the Department of Social Services (DSS), first proposed as a decision by hearing officer Rafael Garbalosa on December 2, 2003, and reviewed at a hearing by DSS commissioner Patricia Wilson-Coker (Wilson-Coker) on February 10, 2004, and approved as a final decision by Wilson-Coker on January 12, 2005. The administrative appeal was timely filed on March 3, 2005.

In the final decision, Wilson-Coker made findings of fact and conclusions of law. They may be summarized as follows.

1. During the period from January 3, 1992 through October 15, 1999, Goldstar was a vendor and provider of oxygen and oxygen-related services and supplies, was a party to a provider agreement,1 and participated in the Connecticut Medicaid program as a MEDS provider and held a provider manual.

2. Goldstar is considered by DSS as a medical equipment, devices, and supplies (MEDS) provider (Type 62) because it provides Medicaid recipients with oxygen therapy services.

3. Bouchard was the President and owner of Goldstar, a business located in Farmington, Connecticut.

4. In order to participate in the Medicaid program, Goldstar, through Bouchard, was required to enter into a Provider Agreement with the DSS which it did on January 3, 1992 and again on July 3, 1996.

7. As president and owner of Goldstar, Bouchard was responsible for ensuring Goldstar adhered to the terms and conditions of the provider contract with the DSS. This included ensuring that billing staff was trained in Medicaid policy and regulations and were supervised to ensure adherence with those policies and regulations.

8. An oxygen concentrator is an electronically operated stationary device that draws room air, separates the gases in the air, and delivers the oxygen in high concentration to the patient. It is provided by the facility as part of its per diem rate.

9. Another type of stationary system is the stationary liquid system. This system is supplied by an oxygen provider and includes the oxygen, reservoir, regulator, flow meter, humidifier, nebulizer, cannula or mask, and tubing.

10. A portable oxygen system provides oxygen in portable small liquid cylinders and small gas tanks that enables patients to ambulate away from their stationary systems.

11. A durable humidifier is one that is not disposable, and not designed or intended for single patient use.

12. Oxygen prescribed on a PRN, pro re nata, basis means "as the situation demands" and differs from an order for continuous oxygen.

13. Oxygen prescribed on a continuous basis means "around the clock."

15. A CMN, also known as Medicare Form HCFA-484, is the physician's certification that oxygen therapy is medically necessary for the patient.

22. As part of administering the Medicaid program, DSS is responsible for conducting audits of oxygen therapy service providers, as well as other Medicaid providers in the State of Connecticut.

24. In July of 1997, [Gloria] D'Anzi [of DSS] was assigned to conduct a full-scale audit of Goldstar for the period from January 1, 1995 through June 30, 1997 [hereinafter Audit]. During that period, Medicaid payments to Goldstar totaled $ 479,693.00 for 3,496 paid claims.

26. In a full-scale audit, the DSS reviews a sample of the universe of paid claims that are selected by computer using a random sampling method. For the Audit, there were 93 randomly selected claims.

42. The DSS issued Goldstar's final Audit Report, dated July 30, 1999, on August 3, 1999, which was mailed on that date to Bouchard's counsel, Joseph Vitale. The Audit Report found 69 out of the 93 sample claims (74%) contained errors resulting in Goldstar receiving excess Medicaid reimbursement. The total extrapolated Audit Report adjusted error amount was $ 261,303.45.

43. The extrapolation method used to arrive at the Audit Report adjusted error amount is explained at page 3 in the Audit Report.

44. The final Audit Report contained 16 findings. The DSS found that (1) original CMNs were not on file; (2) third-party payment resources were not exhausted; (3) there were billings for non-covered oxygen usage; (4) CMNs were not on file; (5) the CMNs were not complete; (6) claims were submitted for the rental of portable oxygen systems without a physician's order on file; (7) claims were billed for portable oxygen systems for recipients who were not utilizing oxygen concentrators; (8) there was inappropriate billing of humidifiers; (9) claims were submitted for services involving portable oxygen equipment but nursing narratives indicated the recipient's oxygen needs were met by stationary systems; (10) claims were made for overlapping dates of service; (11) claims were submitted using procedure codes for oxygen therapy services that conflicted with services documented in the recipient's record; (12) Goldstar was paid by the nursing facility for oxygen used in portable oxygen units and Goldstar also billed the DSS for portable oxygen add-on units; (13) Goldstar billed Medicare and Medicaid for the same service; (14) there was no documentation supporting specific claims for portable oxygen services; (15) there was altered documentation; and (16) claims were submitted for services relating to portable oxygen equipment and humidifiers but there was no documentation that they were delivered.

45. The DSS held $83,250.17 in payments due to Goldstar and has applied that recoupment amount to the Audit Report adjustment. Accordingly, the amount outstanding on the Audit Report adjustment is $178,053.28.

47. In a letter dated September 15, 1999, David Parrella [hereinafter Parrella], DSS's Director of Medical Care Administration, notified Goldstar that the DSS intended to revoke Goldstar's Medicaid provider number.

48. On October 23, 2000, the DSS issued its first Notice to Goldstar and Bouchard that it was proposing to impose sanctions upon them.

77. Bouchard and Goldstar employees knew, in July 1993, that the DSS would not approve a request for prior authorization for a stationary liquid oxygen system for oxygen ordered PRN by the patient's prescribing physician.

78. If a Goldstar delivery invoice indicated the liter flow but did not identify the frequency of use, [an employee of Goldstar] assumed the oxygen was ordered on a continuous basis. [This employee] did not take any steps to confirm whether the physician's order at the facility was, in fact, continuous.

79. After determining that the nursing homes' oxygen concentrators could provide oxygen for rates under 3 liters per minute and that the costs for that oxygen would be paid by the DSS under the nursing homes' per diem rate, the DSS decided not to approve prior authorization requests from oxygen providers for oxygen orders under 3 liters per minute.

80. Bouchard and Goldstar employees knew, in July 1993, that the DSS' standard for approving requests for prior authorization for stationary liquid oxygen systems was three to four liters per minute.

81. The DSS MEDS fee schedules identified those oxygen therapy services provided by MEDS providers to Medicaid recipients who resided in long-term care facilities that required prior authorization by the DSS before the service may be provided and billed to and paid by the Medicaid program.

82. When prior authorization was required by the DSS in order for MEDS providers to provide oxygen therapy to Medicaid recipients in long-term care facilities (including the Goldstar nursing facilities), the MEDS providers had to submit requests for prior authorization to the DSS and were required to do so on Form W-619, "Authorization Request for Professional Services."

83. As provided by DSS regulations, the DSS permitted MEDS providers to make verbal requests for initial prior authorization for oxygen therapy services requiring prior authorization. The verbal request had to contain patient identifier information, a description of the service, and the physicians' order for the oxygen therapy service, which the DSS entered in a log maintained by the DSS.

84. For requests for prior authorization that were made verbally, if a MEDS provider received approval verbally, the MEDS provider was required to subsequently submit to the DSS a completed W-619 and a CMN to document the necessity of the services.

90. All initial physician orders for oxygen therapy placed by the nursing facilities to Goldstar that are billed directly to DSS were required to be accompanied by a CMN, completed and signed by the prescribing physician.

91. If the physician changed the oxygen therapy orders for Medicaid recipients, the MEDS provider was required to get a fully revised CMN from the physician reflecting the revised oxygen therapy order.

92. Not all requests for prior authorization for oxygen therapy services submitted by MEDS providers were approved by the DSS. For example, if requests for prior authorizations that were submitted in writing were not accompanied by a completed and signed CMN, the DSS might either deny the request for prior authorization, or hold approval until a completed CMN was submitted.

107. Bouchard and Goldstar employees knew that DSS' regulations and policy required Goldstar to maintain CMNs to support claims for oxygen therapy submitted to the DSS.

125. The reimbursement in the MEDS fee schedules for oxygen therapy equipment and services administered through a stationary or portable oxygen system varied depending on the liter flow of oxygen prescribed by the prescribing physician.

126. A portable oxygen system is not medically necessary for all patients prescribed oxygen therapy by their...

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