State Auditor Raises Questions About Payments to Community Health Centers

Andrew Kitchenman | May 19, 2015 | Health Care
But lawyer for facilities contends that federal courts have already upheld their interpretation of the law governing payments

Many millions of dollars in state payments for services provided by community health centers in New Jersey may not have been documented correctly, according to the state auditor.

But a lawyer for the centers, which are known as federally qualified health centers (FQHCs), said the auditor was merely pointing out concerns that had been previously raised and were later rejected by federal judges.The Office of the State Auditor, which is part of the nonpartisan Office of Legislative Services, issued a report last week finding that the FQHCs had billed for services under the Medicaid program using other healthcare providers’ information, and that they had received $9 million in payments that weren’t approved by the insurers who are paid by the state to manage healthcare for Medicaid recipients.

The stakes are high for both sides.

The FQHCs have argued in a lawsuit that the state is improperly constraining payments, with representatives of some centers saying they could go bankrupt if they’re not paid more.

As for the state, keeping costs as low as possible is important as it tries to balance the annual budget.

Most of the issues raised by the auditor’s report are points of contention in an ongoing legal dispute.

Exactly how these payments are handled in the future will likely depend on the resolution of that long-running lawsuit between the state and the New Jersey Primary Care Association, the trade group for FQHCs.

Federally qualified health centers, funded by the federal government, are intended to serve as an important source of primary care for low-income residents, including those without private insurance, such as undocumented immigrants, and Medicaid recipients.

In the court case, state officials are asking for some of the same documentation that the auditor’s report said the FQHCs have failed to submit in the past to support their bills, while the FQHCs say that the state hasn’t set up an appropriate payment system and hasn’t provided an adequate way for the centers to challenge insurers’ denials of claims.

The lawsuit was filed in 2012, after the Department of Human Services made changes to the complicated system for determining Medicaid payments to the centers.

Under the current system, Medicaid patients are insured through managed care organizations (MCOs), which pay the FQHCs amounts that are similar to what they pay other providers.

These payments are sometimes less than what the centers are entitled to under federal Medicaid law.

In addition, there are times when MCOs, under their contracts, can deny entire claims for services that patients were entitled to under Medicaid, such as when a doctor other than the patient’s regular primary care doctor fills in because the regular doctor is sick.

When this happens, the state must pay the difference between the MCO reimbursements and the payments that the center is entitled to under the federal Medicaid law.

Under a system in place before 2011, the state determined how much it would pay based on information submitted by the FQHCs themselves.

But in 2011, the state started requiring the centers to report whether they had been paid by the MCOs. The state began to use whether the MCO had accepted a claim as the basis for determining whether to pay the difference between the MCO payment and the full Medicaid-entitled payment. The centers then sued.

In 2012, a U.S. District Court judge determined that the state could not use decisions by MCOs on the validity of claims as the basis for determining whether a center was entitled to a Medicaid payment.

A panel of judges for the U.S. Court of Appeals for the Third Circuit in 2013 upheld that part of the lower-court decision, although it struck down several other determinations by the district court judge.

Edward T. Waters, the Washington, D.C.,-based attorney for the health centers, said the auditor’s report “seems to be based on a misunderstanding of the law.”

For example, while the auditor expressed concern about the fact that the state paid the centers $9 million for services that weren’t approved by the MCOs, Waters noted that the Third Circuit panel found that a lack of MCO approval wasn’t a valid basis for denying a claim.

In addition, the auditor’s report recommended steps the state Department of Human Services could take to tighten up its practices in overseeing Medicaid payments to the health centers, which state officials either said they agreed with or would consider as they review future payments.

Auditor Stephen M. Eells said that his office will do a follow-up report on the issue and will provide it to legislators next winter.