Title of Regulation: 12VAC30-20. Administration of Medical Assistance Services (adding 12VAC30-20-570).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: August 11, 2017.

Agency Contact: Emily McClellan, Regulatory Supervisor, Policy Division, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-4300, FAX (804) 786-1680, or email emily.mcclellan@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance, and § 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902(a) of the Social Security Act (42 USC § 1396a) provides governing authority for payments for services.

In addition, Chapter 694 of the 2016 Acts of Assembly created a new section of the Virginia Administrative Process Act that provides for a process by which appellants may petition an agency to reconsider its final case decision.

Purpose: Chapter 694 of the 2016 Acts of Assembly created a new section of the Virginia Administrative Process Act, § 2.2-4023.1 of the Code of Virginia, which provides for a process by which appellants may petition an agency to reconsider a final case decision made pursuant to § 2.2-4020 of the Code of Virginia. Chapter 694 further specifically authorizes the agency to promulgate regulations that specify the scope of that reconsideration review. DMAS promulgated an emergency regulation, and this proposed stage seeks to make those changes permanent. The regulation creates 12VAC30-20-570, which is needed to accomplish the goal of establishing and defining the scope of review for reconsiderations conducted in accordance with § 2.2-4023.1.

This proposed regulatory action is essential to protect the health, safety, and welfare of citizens by ensuring the integrity of the Department of Medical Assistance Services appeals process by ensuring that it is in accordance with the Code of Virginia so that individuals and providers may challenge health care determinations made by the state Medicaid agency.

Substance: Prior to the newly enacted § 2.2-4023.1, there was no process by which an appellant could petition the agency director to reconsider a final agency case decision made pursuant to § 2.2-4020. In § 2.2-4023.1, the General Assembly provided a procedural timeline for the reconsideration process and authorized the agency to enact emergency regulations to define the scope of the reconsideration review.

Both the emergency regulation and the current proposed regulation specify the scope of the reconsideration review, as authorized by § 2.2-4023.1. The proposed amendments provide that the scope of review is upon the record of the case decision made pursuant to § 2.2-4020. The proposed amendments also provide that reconsideration does not authorize the reopening of the formal administrative hearing or acceptance of evidence or testimony not part of the record of the case, consistent with 1st Stop Health Services v. DMAS, 63 Va. App. 266, 756 S.E.2d 183 (2014).

Issues: The advantages to the public include transparency and clarity with regard to the final agency decision process. The primary advantage of this regulation is that it will permit DMAS to comply with a legislative mandate. This regulation does not create any disadvantages to the public, the agency, or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed regulation will make permanent an emergency regulation adopting the reconsideration process for a final agency decision as laid out in Chapter 694 of the 2016 Acts of Assembly and specifying the scope of evidence that may be considered during that process.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Chapter 694 of the 2016 Acts of Assembly¹ established a reconsideration process for a final agency decision and authorized promulgation of emergency regulations to specify the scope of evidence that may be considered during that process. The director of the Department of Medical Assistance Services promulgated an emergency regulation on December 6, 2016, adopting the reconsideration process by reference as laid out in the statute.² Establishment of the reconsideration process affords an additional chance for a petitioner to make its case before the director, and avoid having to resolve the issue in the circuit court. Thus, the reconsideration process has the benefit of potentially avoiding higher litigation costs for both the petitioner and the agency. However, a petitioner has a right to reconsideration process under the statute with or without this proposed change in regulatory language. Therefore, the main impact of this proposed change is to clarify that the reconsideration process established in the statute applies to final decisions of the Department of Medical Assistance Services.

In addition, the amended statute allowed and the emergency regulation specified that the scope of evidence while reconsidering a final appeal decision is limited to what is in the case record of the formal appeal. In other words, the director's decision shall be based on the testimony and other evidentiary documents submitted previously during the formal appeal. The proposed regulation specifically excludes from consideration any testimony or documents that were not part of the formal appeal case record. The purpose of this provision is to clarify that the establishment of a reconsideration process is not to allow a petitioner to reopen and reargue a case with new evidence. In general, such a rule is consistent with evidentiary rules applicable to reconsideration of judicial decisions where litigants are allowed only one bite at the apple.

The proposed change pertaining to the scope of review is consistent with a recent Virginia Court of Appeals decision³ where a provider was initially ordered retraction of overpayments after an audit due to improper documentation supporting the claims paid. During the administrative appeal of the audit, the provider used new evidence to show that although its payments lacked supporting evidence, it was not overpaid. The hearing officer recommended reversal of the order to retract payments, but the director did not reverse the order. The case was appealed to a circuit court. The circuit court affirmed the director's decision, which was also appealed. In the end, the Court of Appeals affirmed the director's decision and recognized that the director could not use the new evidence as the basis of her decision.

This proposed change is beneficial because it reduces uncertainty and provides guidance by clarifying that reconsideration does not authorize the reopening of the formal administrative hearing or acceptance of new evidence or testimony. Also, prohibition of consideration of new evidence after a final decision has been rendered would help bring finality to a dispute sooner and avoid potential delays and costs.

Businesses and Entities Affected. The proposed regulation will affect individuals or health care providers that file a petition for reconsideration of a final decision. Approximately 60 final agency decisions are issued each year. It is expected that only a subset of the decisions will be petitioned for reconsideration.

Localities Particularly Affected. The proposed regulation does not disproportionately affect particular localities.

Projected Impact on Employment. No significant impact on employment is expected.

Effects on the Use and Value of Private Property. No significant impact on the use and value of private property is expected.

Real Estate Development Costs. No impact on real estate development costs is expected.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed regulation does not introduce any direct costs or other effects on small businesses.

Alternative Method that Minimizes Adverse Impact. No adverse impact on small businesses is expected.

Adverse Impacts:

Businesses. The proposed amendment does not have an adverse impact on non-small businesses.

Localities. The proposed amendment will not adversely affect localities.

Other Entities. The proposed amendment will not adversely affect other entities.

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¹ http://lis.virginia.gov/cgi-bin/legp604.exe?161+ful+CHAP0694

² See § 2.2-4023.1 of the Code of Virginia.

³ 1st Stop Health Services v. DMAS 63 Va. App. 266, 756 S.E.2d 183 (2014).

Agency's Response to Economic Impact Analysis: The agency has reviewed the economic impact analysis prepared by the Department of Planning and Budget. The agency concurs with this analysis.

Summary:

Pursuant to Chapter 694 of the 2016 Acts of Assembly, the proposed regulation establishes a reconsideration process for a final agency decision and specifies the scope of testimony or documentary submissions that may be considered during that process.

12VAC30-20-570. Reconsideration of final agency decision.

A. Reconsiderations of a DMAS final appeal decision issued on a formal appeal conducted pursuant to § 2.2-4020 of the Code of Virginia shall be conducted in accordance with § 2.2-4023.1 of the Code of Virginia.

B. The DMAS director's review shall be made upon the case record of the formal appeal. Testimony or documentary submissions that were not part of the formal appeal case record prior to issuance of the final agency decision shall not be considered.