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Judge Raps Texas on Medicaid Payment Policy

HOUSTON (CN) — Texas's Medicaid reimbursement policy violates federal rules and should be put on hold because it leaves some health care providers "holding the bag," a federal judge ruled.

The Texas Children's Health Plan denied about 2,000 claims that Legacy Community Health Services submitted for emergency, out-of-network care, the nonprofit said in its original complaint. It sued Dr. Kyle Janek, in his capacity of executive commissioner of the Texas Health and Human Services Commission, in January 2015. (The new commissioner, Charles Smith, took office in June and was automatically substituted at the defendant.)

Texas Children's Health Plan is a third-party, private organization that both Legacy and the state contract with to administer Medicaid payments.

On May 3, U.S. District Judge Keith Ellison granted Legacy summary judgment on its claim that Texas had unlawfully delegated its in-network reimbursement obligation to managed care organizations, but reserved judgment on Legacy's claim regarding reimbursement for out-of-network services.

After asking the Centers for Medicare and Medicaid Services and the contending parties for more information, on Sept. 2 Judge Ellison granted Legacy summary judgment on its claim "that the state has failed to provide reimbursement for services rendered to out-of-network patients in conformity with the Medicaid Act."

Legacy's claims were Medicaid-eligible, but Legacy had no way to appeal Texas Children's denials of its claims, so Legacy was left "holding the bag," Ellison wrote.

Legacy is a charitable organization that provides care to an underserved segment of the population, which makes it a federally qualified health care center under the Medicaid Act. When Legacy treats a patient who is a member of the Texas Children's Health Plan, that claim is treated as in-network.

For out-of-network claims from patients who need emergency care, a managed care organization (MCO) owes the provider only if the emergency service had prior authorization, Ellison wrote.

Legacy's MCO — Texas Children's — denied about 2,000 out-of-network claims for emergency services that Legacy provided without prior authorization, between February and August of 2015.

Legacy claimed that the state's own requirements for what it considered "emergency services" was impermissibly narrower than the Medicaid Act's requirements. Among the evidence Legacy submitted as unfairly denied claims for emergency services were abdominal pain, acute bronchitis and a sore throat, which Ellison found insufficient.

However, the judge said the crux of the issue is not whether Texas Children's can deny Legacy's claims under state rules, but whether Legacy's claims were Medicaid-eligible. He found it was undisputed that Legacy provided Medicaid-eligible care, and the state was still on the hook for Medicaid payments owed to Legacy even if Texas Children's was not.

"Legacy has been left with no payment from the state for the out-of-network services it has provided," Ellison wrote in the 14-page memorandum and order. "Without intervention from the court, the state will continue to refuse to reimburse Legacy for such services."

Though Texas said it has an appeals process for denied Medicaid claims, Ellison said that process covers only a subset of out-of-network services that fall within the Medicaid Act's scope.

Ellison enjoined the state's reimbursement policy until the state modifies it to be consistent with his opinion.

A spokeswoman for the Texas Health and Human Services Commission said the agency was "working with the (Attorney General's Office), which is reviewing the order."

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