Rehab Ariz., L.L.C. v. Ariz. Health Care Cost Containment Sys.
Decision Date | 09 April 2019 |
Docket Number | No. 1 CA-CV 18-0511,1 CA-CV 18-0511 |
Parties | REHAB ARIZONA, L.L.C., Plaintiff/Appellant, v. ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM, et al., Defendants/Appellees. |
Court | Arizona Court of Appeals |
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
Appeal from the Superior Court in Maricopa County
No. CV2017-014551, LC2017-000497-001
The Honorable Patricia A. Starr, Judge
AFFIRMED
The Nelson Law Group, P.L.L.C., Phoenix
By Timothy A. Nelson
Johnston Law Offices, P.L.C., Phoenix
By Logan T. Johnston III
Counsel for Defendants/Appellees
MEMORANDUM DECISIONJudge Kenton D. Jones delivered the decision of the Court, in which Presiding Judge Lawrence F. Winthrop and Judge Maria Elena Cruz joined.
¶1 Rehab Arizona, L.L.C. (RAZ) appeals the superior court's order affirming the Arizona Health Care Cost Containment System (AHCCCS) decision finding a credible allegation of fraud and upholding the suspension of Medicaid payments to RAZ. For the following reasons, we affirm.
¶2 AHCCCS is the state agency that administers health care programs to Arizona's eligible indigent population.1 At the relevant time, RAZ was a health care provider that offered rehabilitative therapies to patients in Mesa, approximately fifty percent of whom were AHCCCS members.
¶3 In August 2014, RAZ contracted with AHCCCS to provide services to AHCCCS members. Under the Participating Provider Agreement (PPA), RAZ agreed: "No Provider may bill with another Provider's ID number, except in locum tenens situations."2 The PPA also required RAZ to comply with all federal, state, and local laws governing its performance of the PPA.
¶4 In February 2017, AHCCCS referred RAZ to the Arizona Attorney General (AAG) for engaging in fraudulent billing practices. AHCCCS confirmed RAZ had submitted claims seeking reimbursement for services purportedly performed by Dr. Carvel Jackson, even though Dr. Jackson had not actually provided those services. Indeed, in September2016, Dr. Jackson had written to RAZ, advising it was inappropriately doing business under his name and he was "not willing to allow [RAZ] to continue to use J Carvel Jackson DO, the name, the person, the tax identification numbers or insurance contracts without compensation."
¶5 The AAG opened a criminal investigation into RAZ's billing practices. In March 2017, AHCCCS imposed a temporary, system-wide suspension of [Medicaid] payments . . . pending further investigation into a credible allegation of fraud leveled against [RAZ]." AHCCCS further advised that "the allegation, facts and existing evidence . . . ha[d] sufficient indicia of reliability to justify this suspension of payment." RAZ requested a hearing to determine whether AHCCCS had properly suspended its payments.
¶6 At the August 2017 hearing, RAZ argued AHCCCS lacked the legal authority to impose the suspension, or alternatively, good cause existed to lift the suspension. RAZ submitted affidavits illustrating its commitment to compliance with the PPA after identifying various "areas needing improvement" in October 2016. RAZ emphasized it had terminated its former compliance officer and engaged an independent consulting firm to ensure future compliance.
¶7 The administrative law judge (ALJ) rejected RAZ's arguments, found a credible allegation of fraud existed, and recommended that the suspension of payments remain in effect until AHCCCS determines "there is insufficient evidence of fraud . . . or legal proceedings related to [the] fraud are completed." AHCCCS adopted the ALJ's findings of fact and recommendation and denied RAZ's appeal. The superior court affirmed AHCCCS's decision, and RAZ timely appealed to this Court. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) §§ 12-120.21(A)(1)3 and -2101(A)(1).
¶8 RAZ argues AHCCCS lacked legal authority to suspend Medicaid payments because: (1) Arizona never adopted enabling legislation that authorized payment suspension; (2) the federal regulation authorizing a payment suspension, 42 C.F.R. § 455.23, exceeds the scope of the Patient Protection and Affordable Care Act (ACA), 42 U.S.C.§ 1396b(i)(2)(C); and (3) the federal regulation authorizing payment suspension violates the Tenth Amendment. To resolve these issues, we must interpret state and federal law. We review questions of statutory and constitutional interpretation de novo. State v. McCann, 200 Ariz. 27, 28, ¶ 5 (2001) (citation omitted); Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529 (1994) (citing Marsoner v. Pima Cty., 166 Ariz. 486, 488 (1991)).
¶9 Although RAZ admits federal fraud and abuse controls apply, see A.R.S. § 36-2905.04(C) (), it argues that no Arizona statute grants AHCCCS the authority to suspend Medicaid payments based upon an unproven allegation of fraud. RAZ correctly notes that state administrative agencies have no inherent power. Ariz. State Bd. of Regents ex rel. Ariz. State Univ. v. Ariz. State Pers. Bd., 195 Ariz. 173, 175, ¶ 9 (1999) (citing Kendall v. Malcolm, 98 Ariz. 329, 334 (1965)). Indeed, an administrative agency's powers are limited to those granted by constitution or statute. Id. Moreover, the state agency must exercise its authority in a manner compatible with the administrative structure Congress enacted into law. FDA v. Brown & Williamson Tobacco Co., 529 U.S. 120, 125 (2000) (quoting ETSI Pipeline Project v. Missouri, 484 U.S. 495, 517 (1988)). Thus, AHCCCS's power to suspend Medicaid payments exists only to the extent provided by enabling legislation.
¶10 Arizona law authorizes AHCCCS to supervise the "[e]stablishment and management of a system to prevent fraud by members, subcontracted providers of care, contractors and noncontracting providers." A.R.S. § 36-2903(B)(9). AHCCCS may govern providers by contract and "require contract terms as necessary in the judgment of the director to ensure adequate performance and compliance with all applicable federal laws." A.R.S. § 36-2903(M); see also 42 C.F.R. § 455.23(a)(1) ( ). AHCCCS "may also adopt rules for the withholding or forfeiture of payments" to a contractor that fails "to comply with a provision of the contractor's contract." A.R.S. § 36-2903(M). Finally, AHCCCS can impose sanctions upon a contractor for violating any provision of its contract. Ariz. Admin. Code R9-22-606(A).
¶11 These statutes and regulations specifically authorize AHCCCS to impose sanctions, including suspending Medicaid payments, if RAZ violates any provision of its PPA. RAZ admitted it violated the PPA by billing under Dr. Jackson's name for services provided byuncredentialed physicians who replaced Dr. Jackson, as well as midlevel providers Dr. Jackson supervised. Therefore, suspension was justified under these circumstances.
¶12 RAZ next argues 42 C.F.R. § 455.23 exceeds the scope of the ACA. Specifically, RAZ contends that although the ACA requires the Department of Health and Human Services (DHHS) to withhold payments from a state in specific circumstances, it does not require a state to withhold payments from providers.
¶13 The ACA provides that payments by DHHS cannot be made "for an item or service . . . furnished . . . by any individual or entity to whom the State has failed to suspend payments under the plan during any period when there is pending an investigation of a credible allegation of fraud." 42 U.S.C. § 1396b(i)(2)(C). Under the ACA, the State has discretion to forego the suspension if it determines "there is good cause not to suspend such payments." 42 U.S.C. § 1396b(i)(2)(C). The federal regulation implementing this statute likewise provides that a state Medicaid agency "must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud . . . unless the agency has good cause to not suspend payments." 42 C.F.R. § 455.23(a)(1).
¶14 Under this statutory scheme, the federal regulation implements the ACA's mandate that, to receive reimbursements from DHHS, a state must withhold payments to an entity that is the subject of a pending investigation of a credible allegation of fraud. Nothing within the record suggests this requirement is inconsistent with the intent of Congress. Accordingly, 42 C.F.R. § 455.23 does not exceed the scope of the ACA.4
¶15 RAZ further argues 42 C.F.R. § 455.23 violates the Tenth Amendment. The Tenth Amendment provides that all "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people." U.S. Const. amend. X. Although Congress cannot require states to regulate, Congress can provide states with encouragement or incentives toimplement certain regulations. New York v. United States, 505 U.S. 144, 166, 178 (1992); South Dakota v. Dole, 483 U.S. 203, 206-07, 211 (1987). The Tenth Amendment is only implicated if the "financial inducement offered might be so coercive as to pass the point at which 'pressure turns into compulsion.'" Dole, 483 U.S. at 211 (quoting Steward Mach. Co. v. Davis, 301 U.S. 548, 590 (1937)).
¶16 Pursuant to 42 C.F.R. § 455.23(a)(1), "[t]he State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud . . . unless the agency has good cause to not suspend payments." RAZ argues this provision imposes an "affirmative unconditional duty" upon the states. A state is not, however, required to accept federal Medicaid funds, and it is...
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