Q & A: Due Process: Issues with Private Contractors

Q. My client submitted claims to the state Medicaid agency for continued coverage of durable medical equipment (DME) and home services. Both requests were denied. The agency?s DME decision was based on the recommendation of a physician employed by the agency to review prior authorization requests. I understand that the agency has contracted with a private company to review home health requests and that my client?s claim was denied based on the contractor?s clinical decision criteria. I have requested an administrative hearing on my client?s behalf and reviewed the record upon which the agency says the decisions were based. The physician?s notes and recommendation regarding the DME were included, but the physician?s name had been marked out. The agency will rely on the notes and recommendation at the hearing. The clinical decision criteria were not in the file, and the agency tells me they are the property of the private company. I tried to obtain the criteria directly from the company but was told I needed to have a license. How do I attack these positions? 
 
A. Argue that it violates due process for a publicly-funded health insurance program to use this type of secret decision-making. The state?s policies may also violate your state Administrative Procedure Act and/or Public Records Act, and those laws should be investigated. This Q&A, however, focuses on due process. 
 
Discussion 
 
Background 
 
In both of these situations, the state Medicaid agency has contracted with private, non-governmental parties and delegated decisional responsibilities to them. Indeed, over the last decade, states have increasingly ?privatized? their Medicaid programs by contracting with private companies to administer and/or provide Medicaid services. Private contracting does not mean that the state can ignore the requirements of due process, however. Under federal law, the state Medicaid agency remains the ?single state agency? responsible for assuring the proper implementation of the Medicaid law, regulations, and guidelines and that authority cannot be delegated or impaired. See 42 U.S.C. § 1396a(a)(5); 42 C.F.R. § 431.10(e). See also, e.g., Hillburn v. Maher, 795 F.2d 252 (2d Cir. 1986) (noting that the single state agency requirement derives from the desire to focus accountability for program operation). 
 
When deciding claims for Medicaid services, state agencies must assure due process. The state must meet the requirements of the due process clause of the U.S. Constitution, U.S. Const. amend. XIV, § 1, as explained in Goldberg v. Kelly, 397 U.S. 254 (1970) and its progeny. Due process must also be consistent with the Medicaid Act, 42 U.S.C. § 1396a(a)(3); the Medicaid regulations, 42 C.F.R. § 431.200; and federal guidelines, CMS, State Medicaid Manual § 2900 et seq. 
 

Goldberg places five requirements on the termination process employed by a state Medicaid agency: (1) timely notice from the agency stating the basis for the proposed termination, (2) an opportunity by the claimant to confront and cross-examine witnesses relied on by the agency, (3) the right of the claimant to be represented by counsel, (4) a decision, based solely on evidence adduced at the hearing, in which the reasons for the decision are set forth, and (5) an impartial decision maker. 397 U.S. at 269-71. 
 
The Medicaid regulations specifically incorporate Goldberg and include a number of fair hearing requirements. See 42 C.F.R. § 431.205(d). Among other things, the claimant must have an opportunity to examine his or her case file, as well as the documents and records that will be relied upon at the hearing by the agency. Id. at § 431.242(a). At the hearing, the claimant must be allowed to present witnesses, establish facts, present argument, and cross-examine adverse witnesses. Id. at § 431.242(b)-(e). The fair hearing decision can be based only on the evidence presented at the hearing. Id. at § 431.244(a). These protections apply even if the state has delegated a decision-making role to a private entity. See, e.g., J.K. v. Dillenberg, 836 F. Supp. 694 (D. Ariz. 1993) (finding that state action and thus due process rights were implicated when managed care organizations were deciding requests for behavioral health services). 

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