CARRIER CLINIC-PATIENTS A.M. AND C.I. VS. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES(DEPARTMENT OF HUMAN SERVICES, DIVISION OF MEDICALASSISTANCE AND HEALTH SERVICES)
A-4669-14T4
| N.J. Super. Ct. App. Div. | Sep 13, 2017Background
- Carrier Clinic provided inpatient psychiatric care to two patients; insurers denied coverage for portions of their hospitalizations as not medically necessary.
- Carrier Clinic pursued internal insurer appeals but did not seek external review from the Department of Banking and Insurance (DOBI).
- Carrier Clinic then submitted claims to the Division of Medical Assistance and Health Services for Medicaid payment as the payer of last resort. The Division initially paid partially for one patient and denied payment for remaining periods, citing lack of medical necessity.
- During the subsequent utilization-review hearing, the Division for the first time argued Carrier Clinic was ineligible because it failed to seek DOBI external review of the insurers’ adverse decisions. An ALJ and the Division director adopted that position and denied Carrier Clinic’s claims.
- The Appellate Division held that, although exhausting administratively available insurer appeals before seeking Medicaid is generally reasonable (given Medicaid’s third-party-liability rules), the Division had never given Carrier Clinic notice it was required to obtain DOBI review and the failure to notify may have prejudiced Carrier Clinic (now time-barred from DOBI review). The court remanded for the Division to address notice and, if appropriate, provide a remedy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Medicaid provider must exhaust administratively available insurer appeals (DOBI external review) before seeking Medicaid payment | Carrier: No legal requirement to pursue DOBI external review; complied with Division rules before filing for Medicaid | Division: Medicaid is last-resort; provider must exhaust insurer administrative remedies (including DOBI) to establish third-party liability before Medicaid pays | Court: Generally reasonable to require exhaustion to protect Medicaid as payer of last resort, but legal question reviewed de novo and not dispositive here because of notice issue |
| Whether the Division gave adequate notice that DOBI external review was required and consequences of failing to do so | Carrier: Division never informed petitioner that DOBI review was required; now time-barred and prejudiced | Division: Relied on regulations and federal/state third-party liability duties to justify denial; raised exhaustion defense during OAL proceedings | Court: Division failed to show petitioners were on notice that DOBI review was required; remanded for Division to address notice and craft remedy if warranted |
Key Cases Cited
- Stallworth v. State, 208 N.J. 182 (discussing scope of appellate review of administrative decisions)
- Ahlborn v. Ark. Dept. of Health & Human Servs., 547 U.S. 268 (Medicaid is a payer of last resort)
- Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280 (2d Cir.) (explaining states must implement third-party liability programs to protect Medicaid funds)
- Waldman v. Candia, 317 N.J. Super. 464 (App. Div.) (state agency duties and New Jersey Medicaid administration principles)