PROVIDERS (VA)- Judge scraps federal assent to Virginia Medicaid rule


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[MM Curator Summary]: In which a US circuit judge tells a federal HHS agency how to interpret the Social Security Act.


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The General Assembly’s 2020 bid to slow the overuse of emergency rooms got a quick thumbs up from the U.S. Centers for Medicare and Medicaid Services – but in the end it was too quick and a federal judge ruled that approval should be vacated.

It could mean doctors and hospitals are paid more for caring for Medicaid recipients whose visits to ERs and hospitals could have been avoided, and might boost Medicaid spending in Virginia by 0.2%.  

The case, filed by the Virginia Hospital and Healthcare Association, the Medical Society of Virginia and the College of Emergency Physicians, turned on language in the state budget. It said Medicaid’s payment for an ER visit that ended with a diagnosis that the visit was avoidable should be based on the final diagnosis instead of the usually much more costly rate for an ER services.

In addition, the associations said budget language saying claims for patients readmitted to a hospital within 30 days of discharge would be deemed to be potentially preventable and would therefore be paid at only half the usual rate.

The hospitals and doctors groups said the measure’s effect was “to bilk of tens of millions of dollars [from] those hospitals and physicia

ns who treat Medicaid patients.”

Since the state runs Virginia’s Medicaid program, but  it is jointly funded by the state and federal government, the Centers for Medicare and Medicaid Services need to approve changes in the way a state administers the program, which the federal agency did.

But Judge Henry E. Hudson, of the U.S. District Court in Richmond ruled that the federal agency did not follow the federal Medicaid law when approving the Virginia changes because it treated payment for care of people with similar symptoms differently for different patients.

“Although services for those with similar presenting symptom but different final diagnoses will be comparable, it is indisputable that reimbursement for those services will be different if the final diagnoses are deemed ‘preventable,'” Hudson ruled.

Thus, he ruled, because the Downcoding Provision conflicts with other requirements within the Medicaid Act, CMS’ approval of the Downcoding Provision was not in accordance with law.

He found that the federal agency acted arbitrarily in approving the Virginia changes.

CMS’ approval of the amendment [to Virginia’s Medicaid plan] did not provide any explanation or justification,” Hudson ruled.

He said the lack of any analysis or explanation in response to doctors’ and hospitals’ objections to the changes “renders its approval” of the provision “arbitrary and capricious.”

Hudson dismissed claims that the measures violated the 5th Amendment’s ban on government taking property without due process.

He also dismissed the hospitals’ and doctors’ claims against the state Medicaid agency and its director, on the grounds that they incorrectly argued that the federal Medicaid law gave them a private right of action against the state.

Virginia’s Medicaid agency had said the downcoding provision would save $40 million a year while the readmission rule would save $15 million.

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