On July 9, 2020, the Wisconsin Supreme Court held that the Wisconsin Department of Health Services’ (“DHS”) recoupment policy requiring ‘perfection’ in documentation was invalid and unenforceable. In Kathleen Papa and Professional Homecare Providers, Inc. v. DHS, 2020 WI 66, the Court clarified that DHS has the authority to recoup payments only when the provider’s records cannot verify the “actual provision of services,” “the appropriateness” of claims, and the “accuracy of claims.” The full decision may be viewed here.
Factual Background
Kathleen Papa is the past president of Professional Healthcare Providers, Inc. (“PHP”). PHP is a not-for-profit organization of independent in-home care nurses who are certified Medicaid service providers. On December 14, 2015, Papa and PHP filed a complaint challenging DHS’s recoupment policy of requiring ‘perfection.’ Papa alleged that DHS sought recoupment of monies paid for Medicaid-covered services actually provided merely because of minor errors with the services or recordkeeping. In Wisconsin, Medicaid service providers are subject to nuanced and evolving documentation requirements in federal and state law, DHS updates, the state online Medicaid Handbook, and other policies and procedures. DHS’s practice was to audit providers and seek recoupment payments solely based on documentation or technical errors. Papa alleged that DHS demanded repayment of more than $100,000 from individual nurses for skilled nursing services DHS did not dispute were provided. One such example is DHS recouping $7,358.51 when a nurse failed to countersign the patient’s care plan prior to providing the ordered nursing services.
Procedural History
On September 27, 2016, the circuit court granted PHP’s request for declaratory and injunctive relief. The circuit court held that DHS’s authority to recover payments from Medicaid providers is limited to claims for services that DHS cannot verify were actually provided based on a provider’s records or claims for amounts that are inaccurate or inappropriate for the service provided. The circuit court granted a temporary injunction enjoining DHS from applying or enforcing what it termed the ‘Perfection Policy’ because it exceeded DHS’s grant of authority. Specifically, the circuit court held that Topic #66 of the online Medicaid Handbook was not properly promulgated under Wis. Stat. § 227.10(1). On January 12, 2017, PHP alleged that DHS violated the circuit court’s order by continuing to apply the policy and seek improper recoupment. The circuit court granted the supplemental relief PHP requested and awarded PHP’s costs and attorneys’ fees totaling $25,284.50.
The Court of Appeals reversed and vacated the circuit court’s orders on July 31, 2019. The Court of Appeals declined to review DHS’s broader recoupment policy. Instead, the Court of Appeals focused its analysis on Topic #66, which requires qualified Medicaid-enrolled providers to meet all applicable program requirements, including the documentation requirements challenged. The Court of Appeals concluded that Topic #66 does not constitute an administrative rule; thus, PHP does not have a basis for the requested relief.
Summary of Wisconsin Supreme Court Decision
The Wisconsin Supreme Court held that DHS’s ‘Perfection Policy’ is invalid and unenforceable because it exceeded DHS’s recoupment authority. The Court’s central holding is that DHS may not recoup solely based on documentation imperfections. DHS can only recoup Medicaid payments from providers in cases where DHS cannot verify: (1) the actual provision of covered services; (2) that the reimbursement claim is appropriate for the services provided; or (3) that the reimbursement claim is accurate for the services provided.
First, the Court determined that PHP’s challenge to DHS’s recoupment policy is ripe and, thus, justiciable because the facts are “sufficiently developed to allow a conclusive adjudication.” Finding nothing hypothetical, abstract, contingent or uncertain about the experiences that PHP’s nurses described, the Court found that the record supported the conclusion that DHS is actively enforcing a ‘Perfection Policy’ against nurses to recoup payments for services that they actually provided to Medicaid patients.
Next, the Court addressed how agencies cannot implement or enforce a policy unless it is explicitly required or permitted to do so by statute or a previously promulgated rule.
Pursuant to Wis. Stat. § 49.45(3)(f)1., DHS may require Medicaid providers to maintain records, and DHS may audit those records to ensure that payments of Medicaid claims for reimbursement are appropriate. However, DHS’s audit and recoupment authority is limited to the “actual provision” of covered services, “the appropriateness” of claims, and the “accuracy of claims.” The Court determined that Wis. Stat. § 49.45(3)(f)1.-2. (2017-18) does not explicitly require or permit DHS to enforce a ‘Perfection Policy.’
Likewise, in the Court’s analysis of the regulatory grant of authority to DHS, the Court held that Wis. Admin. Code § DHS 106.02(9)(g) does not permit recoupment merely based on an imperfection in the record. There is a difference between keeping imperfect records and having no records at all. Thus, the Court concluded that DHS’s ‘Perfection Policy’ exceeds both legislative and regulatory grants of authority.
Finally, the Court concluded that the circuit court’s order for costs and fees to PHP was erroneous because while Wis. Stat. § 806.04(10) allows an award of costs and attorney fees generally, it does not expressly authorize an award of fees against the State.
Practical Takeaways
- In Wisconsin, DHS can no longer enforce its ‘Perfection Policy’ to recoup payments for covered Medicaid services that are actually provided. While DHS retains the ability to audit provider records, require corrective action, and sanction providers, DHS may no longer recoup payments merely because of documentation deficiencies.
- DHS may recoup payment only when it cannot verify that the covered service was actually provided, that the reimbursement claim is appropriate for the services provided, or that the reimbursement claim is accurate for the services provided.
- Medicaid providers are still subject to rigorous standards for accuracy and appropriateness of claims submitted, but minor documentation errors can no longer result in the recoupment of all related payments.
If you have any questions or would like additional information about this topic, please contact:
- Sara MacCarthy at (414) 721-0478 or smaccarthy@wp.hallrender.com;
- Dan Miller at (414) 721-0478 or dmiller@wp.hallrender.com;
- Heather Mogden at (414) 721-0457 or hmogden@wp.hallrender.com; or
- Your regular Hall Render attorney.
Special thanks to law clerks, Morgan Hines and Jenny Kumosz, for their assistance with this article.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
