PBH, a mental health services MCO, files suit: an explanation of why

An expanded explanation of the lawsuit by PBH against two state agencies and their leaders.

Martha

----- Forwarded Message ----
From: Vicki Smith
Sent: Sun, February 12, 2012
Subject: RE: PBH filed lawsuit Wednesday against DHHS and OAH

To understand the current lawsuit, you have to understand a little about Administrative Law. Without going into to great detail, here is a little background. Office of Administrative Hearings (OAH) is not a division of the judicial branch of government. It’s best viewed as a sort of semi-independent agent of the executive branch that hears grievances from citizens concerning decisions made by executive agencies.

An Administrative Law Judge (ALJ) doesn’t have the authority to enter a final judgment that’s entitled to enforcement in court. Prior to January 1, 2012, the ALJ could only recommend to an agency that it should reverse its decision. The agency was free to reject that recommendation.

Under North Carolina law, ALJs are required to defer to the expertise of the agency. Because of this deferential standard, ALJs seldom reverse agency decisions. In Special Ed cases, for example, OAH affirms the decision of the school system in nearly 90% of all cases. State agencies, when faced with an adverse ruling from an ALJ, respond differently.

Some almost always accept the reversal of its actions and adopt the ALJ’s decision, while others are more defiant.

The General Assembly passed the Regulatory Reform Act in response to complaints from OAH that certain agencies had become absolute in their resistance to OAH decisions. ALJs believed that the days that they spent hearing testimony and drafting decisions were essentially wasted because certain agencies would never adopt the ALJ’s decision, however reasoned and compelling. DMA was one of the worst offenders. In the five years that Disability Rights NC has been representing people in Medicaid appeals, DMA adopted a decision in favor of our client exactly ONCE. In two cases last year, we were able to obtain attorneys’ fees after appealing to Superior Court, even though the standard for obtaining fees is very high -- that the agency’s position was “without substantial legal justification.”

We have found that all of the ALJs are competent, conscientious and professional. Our clients haven’t prevailed in every case, but our track record is good because our case-selection criteria weeds out cases that have questionable merit.

Even though until recently PBH has administered the Medicaid program for only five counties out of one hundred. However, Medicaid appeals from adverse actions made by PBH account for more than 50% of our cases. More important is the fact that PBH does not choose to meaningfully participate in OAH-sponsored mediation, thus requiring every appeal to proceed to hearing.

PBH is particularly disadvantaged by the new law granting final decision-making to the ALJ. It is our experience that PBH has adopted an interpretation of federal Medicaid regulations that deprive recipients of any right to maintenance of services pending appeal. This interpretation saved PBH money and also served to pressure recipients to accept a lower level of services. OAH, however, has consistently rejected PBH’s interpretation and ordered the reinstatement of services while the OAH procedures played out. To date, this disagreement concerning the federal regulations only affects PBH because it’s contained within the regulations governing Managed Care Organizations.

Under the old procedures, PBH could count on DMA’s uncritical support and the ALJ’s decision would always be overturned by the final agency decision. DMA’s final agency decision supporting PBH would serve to terminate the ALJ’s order requiring PBH to continue services pending appeal, and the recipient would then have to obtain an injunction from the Superior Court in order for services to resume as the appeal moved forward. Under the new procedures, PBH would be required to abide by the ALJ’s decision as soon as it was issued, and would be required to continue services as it pursued a Superior Court appeal. Good for the consumers.

We can only speculate about PBH’s motivation. In our view, a large element of the cost savings from the "PBH model" depends upon Medicaid recipients accepting PBH's utilization review decisions without filing appeals. Not informing recipients of their appeal rights and deterring appeals when they are made are two ways that PBH accomplishes this cost-saving goal. If OAH is given authority over the final decision, PBH faces the prospect of more successful appeals by disappointed recipients, thus more frequent appeals and thus increasing its costs.

Vicki Smith,
Executive Director
Disability Rights NC
2626 Glenwood Avenue,
Suite 550
Raleigh, NC 27608
Ph: 919-856-2195