Papa v. DHS Background

In Papa v. DHS the Wisconsin District II Court of Appeals is currently reviewing whether the Wisconsin Department of Health Services (DHS) was required to promulgate as administrative rules certain bill auditing and policies regarding recoupment of paid reimbursements for services rendered by independent health care Medicaid providers providing in-home health services to children and adults with complex health care needs.

Kathleen Papa and Professional Homecare Providers, Inc. (PHP) sought a declaratory judgement and injunctive relief against the Wisconsin Department of Health Services (DHS) from recouping Medicare funds paid to home health nurses under the “Perfection Rule”. Under this rule, independent nurses who do not meet certain billing and record keeping requirements contained in the Medicaid Provider Handbook (The Handbook) when providing services to home health patients may have those services determined as “non-covered” and subject to recoupment of funds paid to them by DHS, sometimes years after the services were provided.

DHS publishes The Handbook online, and DHS may amend it at any time. DHS frequently issues Medicare Provider Updates announcing changes to policies and procedures and publishes these online several times per month.  Changes announced in the Updates are frequently incorporated into The Handbook, but not always.

During the course of audits conducted by the Office of Inspector General (OIG) of DHS, findings of non-compliance frequently do not call into question whether services were provided by PHP members or whether clients were entitled to receive services provided.  Rather, services are often determined to be ‘non-covered’ due to alleged documentation shortcomings. In some instances, documentation issues have led the OIG to seek recoupment of all funds paid to a provider for services rendered and previously approved by DHS.

Plaintiffs Papa and PHP argue first that the Perfection Rule is inconsistent with and exceeds the scope of DHS’s statutory authority to demand the return of payments from Medicaid providers.  Further, plaintiffs allege that even if the Perfection Rule does not exceed DHS’s statutory authority, DHS has not promulgated the policy as an administrative rule.

Wisconsin Statutes provide specific methods by which DHS may recover overpayments, or payments improperly or erroneously paid to Medicaid providers, by offsetting or adjusting amounts owed, crediting against a provider’s future claims for reimbursement for services provided, or requiring the provider to pay directly to the DHS the amount overpaid.  Further, statutes provide for prospective sanctions that may be imposed upon providers by due process. Sanctions include: suspension of payments for particular services; a plan of correction; referral to a licensing agency; or transferring the provider to a provider agreement of limited duration.

These sanctions do not include recoupment of funds paid for services provided. Recoupment is limited by statute and rule to circumstances involving overpayments. Imperfections in providers’ recordkeeping or other compliance issues do not mean the provider received an overpayment, if: the service was authorized; the provider actually provided the service; and the payment was appropriate for the service.

DHS argues that it is authorized by Wis. Stat. § 49.45(2)(a)(9) to set forth conditions of participation and reimbursement with a Medicaid provider, and that this provision authorizes it to both audit recordkeeping and recoup overpayments in circumstances like those found in the Papa case. Further, that the DHS sets forth conditions relating to participation and reimbursement in a contract with a provider, and that as such it not a general statement of policy, and does not need to be promulgated as an administrative rule under Wis. Stat. § 227.10

Case Status

On August 12, 2016 Waukesha County Circuit Judge Kathryn W. Foster issued an oral ruling, finding that The Medicaid Handbook Topic 66 was enforced by the DHS OIG as an administrative rule. Further, that the Topic 66 was not properly promulgated under Chapter 227, and thus exceeds the DHS’s authority of recoupment for provider non-compliance.

The court temporarily enjoined DHS from applying the Perfection Rule to Papa or any other similarly situated providers. DOJ appealed the underlying decision, and also the supplemental relief ordered by the circuit court enforcing its injunction. Both matters are currently under appeal in a consolidated case before the District II Court of Appeal. The DOJ’s brief is due June 12, 2017 with the Papa brief due thirty days later.

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