The Veto Override You Didn’t Hear About: SB 496 – Medicaid Provider Fraud & Abuse

On Monday, the NC House sent shockwaves through the healthcare community when it completed a successful override of SB 33, the well-publicized package of medical malpractice reforms previously vetoed by the Governor.  Earlier that same day and with much less fanfare, the House also completed an override of the Governor’s veto of SB 496, a bill recasting state laws governing provider fraud and abuse in Medicaid. 

On balance SB 496 is another good bill for physicians: it implements program integrity provisions of the Patient Protection and Affordable Care Act (PPACA), it ensures that the NC Department of Health & Human Services (DHHS) has the tools to tackle real fraud in Medicaid, and it provides individual Medicaid providers who come under the Department’s scrutiny to claim more due process protections.

Here are five critical features of the new law:

  1. Provider Screening.  The PPACA requires Medicaid to ramp up its review of providers who apply to enroll and re-enroll in the program.  The amount of scrutiny given to an application depends on the type of the provider.  Physicians, midlevel practitioners, medical groups, and clinics are designated in the law as “limited risk providers,” meaning they pose the lowest level of risk to the Medicaid system in terms of committing fraudulent activity.  Therefore DHHS review of a physician’s application is relatively mild – license verification, billing privilege verification, and database checks.  By contract, moderate- and high-risk providers must endure on-site visits and perhaps fingerprinting of certain individuals in the facility or practice.
  2. Training for New Providers.  Prior to enrollment of a new Medicaid provider, a representative of the provider must complete trainings designated by the DHHS that are designed to reduce fraud and abuse in Medicaid.
  3. Payment Suspension and Extrapolation Audits.  This clarifies how DHHS may collect overpayments and assessments against Medicaid providers and when payment suspension is appropriate.  It also says that to perform an extrapolation audit against a provider, DHHS must show that the provider failed to “substantially comply” with the law.  This is a good change; currently DHHS may use extrapolation when a provider is less than 100% perfect in his/her billings to Medicaid.
  4. Appeals.   If a provider appeals an adverse determination made by DHHS (like a fine or overpayment), the provider can ask for a hearing by an independent administrative law judge (ALJ).  This law clarifies that DHHS bears the burden of proof in the hearing.  Historically, it has been the provider’s responsibility to disprove the Department’s determination.  Moreover, the ALJ’s decision in the hearing is final, unless the losing party appeals to Superior Court.
  5. Registration of Billing Agents.  This provision, also required by the PPACA, requires all billing agents, clearinghouses, and alternate payees that submit Medicaid claims to register with the Department.

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