NM Court of Appeals rejects AG King’s overbroad interpretation of Medicaid Fraud Act

The New Mexico Medicaid Fraud Act does not impose liability whenever a medical provider violates any federal, state, or local law that applies to it, but only when the provider violates a law that is an actual precondition for payment. So held the New Mexico Court of Appeals last week in State ex rel. King v. Behavioral Home Care, Inc. (June 9, 2014).

Attorney General Gary King alleged that Behavioral Home Care failed to comply with the Caregivers Criminal History Screening Act, because it employed caregivers without first submitting a request for a criminal history screen for each employee. Behavioral Home Care then submitted 1,800 invoices to the Medicaid program asking to be paid for services provided by those caregivers.

Nothing in the invoices stated that Behavioral Health Care was certifying compliance with the Caregivers Criminal History Screening Act. No one disputed that the caregivers had provided the services that were billed. And one alleged that any patients were harmed.

Nevertheless, Attorney General King argued that Behavioral Home Care violated the Medicaid Fraud Act by submitting the invoices because in its contract with the State, Behavioral Health Care had promised to comply with all applicable federal, state, and local laws, including the Caregivers Criminal History Screening Act, but it failed to do so.

In an opinion by Judge Garcia, the Court of Appeals rightly rejected this extreme interpretation of the Medicaid Fraud Act. Medical providers who participate in Medicaid are subject to a complex web of federal, state, and local laws and regulations. As a practical matter, it is very difficult for medical providers to be in 100% compliance with all of those laws 100% of the time. Thus, most federal and state courts have held that bills submitted to Medicaid are considered false and fraudulent only when the services billed were not provided, or were not necessary, or where the medical provider is not in compliance with some provision of law that has expressly been made a precondition to payment.

The Attorney General’s interpretation of the Medicaid Fraud Act would impose heavy civil fines and penalties on any medical provider who submits bills for payment while not in compliance with any applicable law or regulation, even if the bills were for care that was provided, and even if no patients were harmed by the violation. If that were the law, then many medical providers would probably decide that the legal risks of participating in Medicaid outweigh its benefits. It’s hard to see how this would benefit the poor, aged, and vulnerable New Mexicans who depend on Medicaid.

As you can tell, I think this opinion reaches the right result. But if you disagree, if you think the Court got it wrong, please leave a comment and tell us why.

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