State ex rel. King v. Behavioral Home Care, Inc.

• Decision Date: 09 June 2014
• Docket Number: No. 34,805.,31,682.,34,805.
• Citation: 346 P.3d 377
• Court: Court of Appeals of New Mexico
• Parties: STATE of New Mexico ex rel. Gary K. KING, Attorney General, Plaintiff–Appellant, v. BEHAVIORAL HOME CARE, INC., a New Mexico corporation, Defendant–Appellee.

346 P.3d 377

STATE of New Mexico ex rel. Gary K. KING, Attorney General, Plaintiff–Appellant

v.BEHAVIORAL HOME CARE, INC., a New Mexico corporation, Defendant–Appellee.

31,682.

No. 34,805.

Court of Appeals of New Mexico.

June 9, 2014.

Certiorari Granted, Aug. 15, 2014,

Gary K. King, Attorney General, Santa Fe, NM, Amy Landau, Assistant Attorney General, Albuquerque, NM, for Appellant.

Davis & Gilchrist, P.C., Bryan J. Davis, Albuquerque, NM, for Appellee.

Bannerman & Johnson, P.A., Deborah E. Mann, Albuquerque, NM, for Amicus Curiae New Mexico Association for Home and Hospice Care.

OPINION

GARCIA, Judge.

{1} The New Mexico Attorney General's Medicaid Fraud Control Unit brought action on behalf of the State against Behavioral Home Care, Inc. (BHC) alleging violations of the New Mexico Medicaid Fraud Act (the MFA), NMSA 1978, §§ 30–44–1 to –8 (1989, as amended through 2004), and breach of contract. The issue before this Court involves whether the district court correctly dismissed the State's claims against BHC for failure to state a claim upon which relief can be granted. See Rule 1–012(B)(6) NMRA.

{2} The State alleged that BHC's billing for Personal Care Option (PCO) services provided by certain caregivers for whom BHC had not fully complied with the Caregivers Criminal History Screening Act (CCHSA), NMSA 1978, §§ 29–17–2 to –5 (1998, as amended through 2005), constituted false, fraudulent, or excess payments under the MFA. The State further alleged that the same failure to comply with CCHSA screening requirements constituted a breach of contract by BHC. The State requested relief pursuant to Section 30–44–8 in the form of a recovery for any overpayments, civil penalties for each overpayment, civil penalties for each false representation, attorney fees, interest, and costs. In the two orders now being appealed by the State, the district court dismissed all of the State's claims.

{3} While the MFA provides the vehicle for suit, federal Medicaid statutes and regulations define the requirements for Medicaid claims. To participate in the Medicaid program, federal law requires home healthcare providers to comply with all applicable federal, state, and local laws and regulations. United States ex rel. Joslin v. Cmty. Home Health of Md., Inc., 984 F.Supp. 374, 376 (D.Md.1997) ; see 42 U.S.C. § 1395bbb(a)(5) (2006) ; 42 C.F.R. § 484.12(a) (2012). It is BHC's compliance with the CCHSA that forms the primary basis for the dispute in this case. As we address in detail below, not all compliance issues translate into liability or fraud under the MFA. We hold that failure to comply with the CCHSA regulations does not support MFA liability in this case and affirm the district court's dismissal of the State's claims.

BACKGROUND

{4} “Congress created the Medicaid program in 1965 to supplement the Social Security Act.” Starko, Inc. v. Presbyterian Health Plan, Inc., 2012–NMCA–053, ¶ 4, 276 P.3d 252, cert. granted, 2012–NMCERT–003, 293 P.3d 184. “The program provides medical assistance to persons whose income and resources are insufficient to meet the costs of necessary care and compels participating states to share the costs of administering the program with the federal government.” Id. (internal quotation marks and citation omitted). “New Mexico is a participant state.” Id. The New Mexico Human Services Department (HSD) is charged with administering Medicaid and maintaining a “statewide, managed care system to provide cost-efficient, preventive, primary [,] and acute care for [M]edicaid recipients.” NMSA 1978, § 27–2–12.6(A) (1994) ; see Starko, 2012–NMCA–053, ¶ 28, 276 P.3d 252.

{5} In order to function as a Medicaid service provider, BHC executed a contract known as an HSD Medical Assistance Division (MAD) 335 Provider Participation Agreement (PPA). The PPA is a payment related form signed by BHC and HSD that specifically states, “BY SIGNATURE, [BHC] AGREES TO ABIDE BY AND BE HELD TO ALL FEDERAL, STATE, AND LOCAL LAWS, RULES, AND REGULATIONS, INCLUDING, BUT NOT LIMITED TO THOSE PERTAINING TO MEDICAID AND THOSE STATED HEREIN.” BHC also contracted with HSD as part of the Aging and Long Term Services Department Disabled and Elderly Waiver Program to provide in-home PCO caregiver services for elderly and disabled Medicaid recipients. BHC agreed in its Medicaid contracts to provide and submit reimbursement claims for Medicaid funded services to the Medicaid eligible population in accordance with all applicable state and federal Medicaid laws and the regulations and standards of the New Mexico Medicaid Program, including, without limitation, the CCHSA.See §§ 29–17–2 to –5; 7.1.9.1 to .11 NMAC (01/01/2006) (screening requirements); 8.351.2.9 to .12 NMAC (07/01/2003, amended 01/01/2014) (sanctions and remedies).

{6} The New Mexico Legislature enacted the CCHSA “to ensure to the highest degree possible the prevention of abuse, neglect[,] or financial exploitation of care recipients,” including Medicaid recipients, by caregivers who provided “direct care or routine and unsupervised physical or financial access to any care recipient served by that provider[.]” Sections 29–17–3, –4(B). It provides that a care provider may not employ a caregiver unless the caregiver has first submitted to a request for a nationwide criminal history screening. Section 29–17–5(C). The screening requirement applies to caregivers who would provide services to any patient, not just Medicaid patients, irrespective of whether the patient paid out of pocket or with private insurance. Section 29–17–4(B), (D). Statutory compliance only requires submission of the caregiver's criminal history application, not receipt of screening results, prior to billing for the PCO caregiver services. Section 29–17–5(E). Should a caregiver have a disqualifying criminal conviction in his or her history, the CCHSA provides for a reconsideration procedure. Section 29–17–5(F). During the pendency of the reconsideration period, the caregiver may continue to provide caregiver services on behalf of the healthcare provider. Id.

{7} The New Mexico Legislature enacted the MFA and provided both a definition for Medicaid fraud in Section 30–44–7(A) and also made the falsification of documents a fourth degree criminal offense under Section 30–44–4. Pertinent to this case, Medicaid fraud “consists of: ... presenting or causing to be presented for allowance or payment with intent that a claim be relied upon for the expenditure of public money any false, fraudulent, excessive, multiple [,] or incomplete claim for furnishing treatment, services[,] or goods [.]” Section 30–44–7(A)(3). Falsification of documents “consists of:

... knowingly making or causing to be made a misrepresentation of a material fact required to be furnished under the program or knowingly failing or causing the failure to include a material fact required to be furnished under the [Medicaid] program in any record required to be retained in connection with the program pursuant to the [MFA] or regulations issued by the department for the administration of the program, or both; or ... knowingly submitting or causing to be submitted false or incomplete information for the purpose of receiving benefits or qualifying as a provider.”

Section 30–44–4(A).

{8} Between approximately April 2004 and July 2009, BHC electronically submitted over 1,800 PCO billing claims for services provided by certain caregivers whose criminal history screening applications had not been submitted as required by the CCHSA (the Unscreened Caregivers). BHC submitted its Medicaid reimbursement claims pursuant to an Electronic Claim Submission Agreement (the Electronic Agreement). The Electronic Agreement required BHC to “acknowledge[ ] that claims will be paid from [f]ederal and [s]tate funds” and that “anyone who misrepresents or falsifies” any information relating to a claim may be subject to a fine and/or imprisonment under federal and state law. By submitting a claim electronically, BHC was also required to agree that the claim contained “true, accurate, and complete information” and that “[t]he cashing of each check attached to each Remittance Advice [was] a representation and certification that [BHC] represented the claim for services ... and that the services were rendered....” BHC was not required to expressly certify compliance with all Medicaid contractual provisions or all applicable state and federal regulations in order to submit the Electronic Agreement.

{9} The State asserts two MFA causes of action against BHC as a result of its billing claims for the services provided by the Unscreened Caregivers. First, the State maintains that BHC's PCO claims for the Unscreened Caregivers' services constituted falsification of documents as defined in MFA Section 30–44–4(A) and/or Medicaid fraud under Section 30–44–7(A). The State specifically alleges that each claim for payment prior to the completion of the Unscreened Caregivers' criminal history screening was a false or fraudulent claim under these two statutory provisions. The State's second cause of action maintains that BHC's PCO payment claims for the Unscreened Caregivers' services were in breach of BHC's MAD 335 PPA contracts with HSD. The State argues that it was entitled to recover the 1,800 PCO claims submitted for the Unscreened Caregivers' services as overpayments and civil penalties under Section 30–44–8(A) of the MFA.

{10} The district court dismissed both of the State's claims for failure to state a claim upon which relief can be granted. See Rule 1–012(B)(6). Its first order granted BHC's Rule 1–012(B)(6) motion to dismiss the State's first cause of action (statutory recovery of Medicaid overpayments under the MFA). The court held that the State may not recover the claimed MFA overpayments in addition to a claim for the recovery of civil penalties under Section 30–44–8(A)(2). The district court determined that Section 30–44–7(A)(3) was the only applicable liability provision that required BHC to comply...