Title of Regulation: 12VAC30-20. Administration of Medical Assistance Services (amending 12VAC30-20-540, 12VAC30-20-550, 12VAC30-20-560).

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

Public Hearing Information: No public hearings are currently scheduled.

Public Comment Deadline: August 18, 2021.

Effective Date: September 2, 2021.

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 to promulgate regulations. Section 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the State Plan for Medical Assistance and to promulgate regulations according to the board's requirements.

Items 303 V 2 and 303 JJ 1(vii) of Chapter 2 of the 2018 Acts of Assembly, Chapter 854 of the 2019 Acts of Assembly, and Chapter 1289 of the 2020 Acts of Assembly direct DMAS to provide for a settlement agreement process for informal and formal administrative proceedings.

Purpose: The amendments are needed to meet this outcome of the workgroup and budget items.

Rationale for Using Fast-Track Rulemaking Process: This regulatory action is expected to be noncontroversial because the changes arose out of a workgroup consisting of representatives of the provider community, legal community, and Office of the Attorney General. DMAS held three open public meetings to explore and discuss the DMAS audit methodology and findings, as well as the appeals process. The workgroup agreed to adopt a plan of action, and these changes are part of that plan.

Substance: No policy currently exists permitting settlement discussions at the informal appeal level. No current written policy exists informing providers that they can discuss settlement, therefore most providers wanting to enter into settlement discussions with DMAS have resorted to filing a request for a formal administrative hearing. Doing so costs the Medicaid service providers and the Commonwealth time, money, and other resources that could be better used to serve and provide medical assistance to needy Virginians. Because no statutory or regulatory authority currently exists permitting settlement discussions at the informal appeal level, these amendments are the only means of meeting the need identified by the mandated workgroup and the General Assembly.

Issues: The primary advantages of these amendments are that they ensure that DMAS regulations and DMAS practices are aligned. This ensures transparency for Medicaid providers, Medicaid members, other agencies, and members of the public. There are no 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. Pursuant to the 2018 Acts of Assembly, Chapter 2, Item 303, V.2 and JJ.1.vii¹ and the 2019 Acts of Assembly, Chapter 854, Item 303, V.2 and JJ.1,² the Director of the Department of Medical Assistance Services acting on behalf of the Board proposes to permanently replace an emergency regulation, which established a process for settlement agreements during the informal and formal provider appeals processes. The proposed process for settlement agreements has been implemented since January 2018 under a Medicaid Memo.

Background. Under the Department of Medical Assistance Services (DMAS) provider appeal regulations and the Virginia Administrative Process Act, Virginia Medicaid providers are afforded two levels of appeal: an informal appeal and a formal appeal. Informal appeals must be filed within 30 days of when the adverse action was issued. The informal appeals are decided by an informal appeals agent, who is a DMAS employee who has not been involved in any prior level of the decision-making on the appealed action. DMAS has 180 days to process informal appeals. If the appeal is not decided in that timeframe, the provider prevails, regardless of the amount at stake.

DMAS is represented in the formal appeal by a staff attorney. Providers are not required to obtain legal counsel, but if the provider is a corporation and does not have legal counsel, it cannot make legal arguments. A hearing officer assigned by the Executive Secretary of the Virginia Supreme Court presides over the appeal and issues a recommended decision to the DMAS director. The recommended decision must be received within 120 days of when the formal appeal request was filed. The DMAS director then has 60 days from receipt of the recommended decision to issue the final agency decision.

The 2017 Acts of Assembly, Chapter 1, Item 306, WW.3³ directed DMAS to convene a workgroup consisting of representatives from the provider community, legal community, and the Office of Attorney General (OAG) to study issues relating to contractual compliance. This workgroup studied, in part, the need for a process that would allow cases to be settled during the informal appeals process in situations that did not merit the time and cost of a formal administrative hearing.

The workgroup discovered that the primary reason providers did not reach a settlement with DMAS during an informal appeal was the fact that there was no process or point of contact to submit a request for a settlement. In contrast, the formal appeals process allowed providers to tender settlement proposals to the attorney representing DMAS. Following up the workgroup's findings,⁴ DMAS determined that there was no legal barrier to start a process for settlement requests during an informal appeal. As a result, DMAS issued a Medicaid memo in January 2018 advising providers of the ability to propose a settlement during an informal appeal.

The workgroup also recommended that DMAS seek emergency regulatory authority to amend 12VAC30-20-540 of the Virginia Administrative Code to allow additional time for issuance of the informal appeal decision to allow sufficient time for settlement if the provider waives the deadline. In response, during the 2018 General Assembly Session budget language was added that provided the requested authority. Specifically, Item 303 JJ.1.vii in Chapter 2, 2018 Acts of Assembly (2018 Appropriation Act) directed DMAS to promulgate amendments that clarify that settlement proposals may be tendered during the appeal process and that approval is subject to the requirements of § 2.2-514 of the Code of Virginia. The amended regulations shall develop a framework for the submission of the settlement proposal and state that DMAS and the provider may jointly agree to stay the deadline for the informal appeal decision or for the formal appeal recommended decision of the Hearing Officer for a period of up to sixty (60) days to facilitate settlement discussions. If the parties reach a resolution as reflected by a written settlement agreement within the sixty-day period, then the stay shall be extended for such additional time as may be necessary for review and approval of the settlement agreement in accordance with law.

Item 303 V.2 provides additional details about the settlement agreement process, noting that

An appeal of the director's informal fact-finding conference decision concerning provider reimbursement shall be heard in accordance with § 2.2-4020 of the Administrative Process Act (§ 2.2-4020 et seq.) and the State Plan provided for in § 32.1-325, Code of Virginia. [DMAS] and the provider may jointly agree to stay the deadline for the informal appeal decision or for the formal appeal recommended decision of the Hearing Officer for a period of up to sixty (60) days to facilitate settlement discussions. If the parties reach a resolution as reflected by a written settlement agreement within the sixty-day period, then the stay shall be extended for such additional time as may be necessary for review and approval of the settlement agreement in accordance § 2.2-514 of the Code of Virginia.

Emergency regulations⁵ became effective on November 14, 2019, and specified the process for settlement requests, including staying the informal appeal deadline for a period of up to 60 days to facilitate settlement discussions, so long as the DMAS appeal representative and the provider jointly agree in writing. Since the Medicaid memo, settlement proposals are first reviewed by the DMAS staff attorney, who submits the recommendation to the DMAS director. If the DMAS director approves the settlement, it is sent to the OAG, who is required by Virginia Code Section 2.2-514 to review any proposed compromise. If the settlement amount exceeds $250,000, it must also be approved by the Governor.

Estimated Benefits and Costs. The proposed action would permanently adopt the emergency regulations which have formalized the settlement agreement option that has been allowed under a Medicaid memo since January 2018. Since this option had already been made available under DMAS's then existing authority as a DMAS policy, the economic impact of this policy change cannot be directly attributed to this regulatory action. However, since DMAS already have data about pre and post policy change, the following discussion is provided for informational purposes only.

The settlement option requires agreement of both parties to stay the appeal for up to 60 days to reach a settlement. The purpose of the settlement option is to resolve disputes that does not merit the time and expense of a formal appeal. Because requesting a settlement would be less costly, a provider would have incentives to make such requests so long as it believes DMAS would agree to it and to the extent that the cost of making such a request is below the expected amount the provider hopes to recover. Thus, we can reliably infer that the settlement option is unlikely to make providers worse off, or have any adverse impact on them. However, the settlement agreement option would likely lead to an increase or shift in administrative costs from other areas for DMAS to evaluate settlement requests and an increase in additional funds to be expended as a result of settled cases.

The following table provides statistics regarding provider appeals over the years 2017-2020.

* Currently under review at OAG.

** Excludes withdrawn and settled cases.

It appears that the number of informal cases filed has noticeably increased in 2019 and 2020 compared to 2017 (i.e., 3,700 vs. 4,800 and 6,200, respectively). It also appears the number of settlement agreements requested during an informal appeal ranges from one to five, usually only one of them being approved. The impact on the number of formal appeals filed appears mixed, but the number of final agency decisions issued, settlements requested and approved seems to have decreased. The trend over time appears to be that the majority of provider appeals end at the informal level, without filing a formal appeal. Whether this trend is directly related to the settlement option made available in the informal appeals since January 2018 is difficult to assess as there could be many other confounding factors.

According to DMAS, the average settlement is around a $30,000 reduction in the initial overpayment amount. Non-monetary settlements sometimes occur to allow an informal appeal on the merits even when the initial informal appeal was dismissed as a result of untimely filing. (In those instances, the provider usually submits evidence during the formal appeal of issues receiving mail).

As far as the administrative costs for DMAS to handle these appeals, DMAS reports that it has two staff attorneys who review the settlement requests for appeals (informal or formal, and their average salary is $96,000/year), the average hearing officer payment for a case is $3,000, and the average cost for transcripts per case is $650. Whether DMAS has experienced an increase in its administrative costs is difficult to assess similarly due to possibility of many other confounding events occurring over the same time period. According to DMAS, there has not been an increase in administrative costs with the settlement process since the 2018 Medicaid memo. The reduction over the past years of formal appeals proceeding to a final agency decision has allowed DMAS to utilize the two current formal appeal staff attorneys to perform the informal appeal settlement reviews. If the volume of settlement requests at the informal appeal level significantly increased or formal appeals spiked, that may cause an increase, but the data does not indicate that is likely. There is the possibility that published final regulation may cause an increase in settlement requests as it may inform some providers about the settlement option who may be currently unaware of it.

Businesses and Other Entities Affected. DMAS currently has 67,000 unique providers enrolled as participating in the fee-for-service program. All providers can appeal adverse actions. The most recent data from 2020 indicate there were 6,200 informal and 170 formal appeals filed.

Since the settlement option is implemented under a DMAS policy at the beginning of 2018, any economic impact associated with the policy change cannot be directly attributed to this regulation. Thus, this action does not appear to indicate any adverse⁶ or disproportionate impact on any entity.

Small Businesses⁷ Affected. As already mentioned, the analysis of the proposed changes does not indicate any adverse impact on any entity including the small businesses. Providers enrolled with DMAS who operate as small businesses could benefit from the option to reach a settlement through the informal appeals process; however, the number of such providers is unknown.

Localities⁸ Affected.⁹ The proposed amendments do not particularly affect any locality or introduce costs for local governments.

Projected Impact on Employment. The proposed amendments do not appear to affect total employment.

Effects on the Use and Value of Private Property. No impact on the use and value of private property or real estate development costs are anticipated.

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¹ See https://budget.lis.virginia.gov/item/2018/2/HB5002/Chapter/1/303

² https://budget.lis.virginia.gov/item/2019/1/HB1700/Chapter/1/303/

³ See https://budget.lis.virginia.gov/item/2018/2/HB5002/Chapter/1/303

⁴ The link to the Appeals Workgroup report is: https://rga.lis.virginia.gov/Published/2017/RD604/PDF.

⁵ https://townhall.virginia.gov/l/ViewStage.cfm?stageid=8435

⁶ Adverse impact is indicated if there is any increase in net cost or reduction in net revenue for any entity, even if the benefits exceed the costs for all entities combined.

⁷ 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."

⁸ "Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁹ § 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

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 raises no issues with this analysis.

Preamble:

Item 303 V 2 and clause (vii) of Item 303 JJ 1 of Chapter 2 of the 2018 Acts of Assembly, Special Session I, Chapter 854 of the 2019 Acts of Assembly, and Chapter 1289 of the 2020 Acts of Assembly direct the Department of Medical Assistance Services (DMAS) to amend the State Plan for Medical Assistance to implement amendments related to appeals administered by and for DMAS in order to establish a more formalized process by which to address administrative settlement agreements in a timely fashion.

The amendments (i) establish the process for a settlement agreement resolution between a Medicaid provider and DMAS and (ii) adjust the time periods set forth in the existing informal and formal appeal provisions for consistency with the procedures. The amendments affect the timelines for issuing the informal decision in an informal administrative appeal or a recommended decision of the hearing officer in a formal administrative appeal.

12VAC30-20-540. Informal appeals.

A. Notice of informal appeal.

1. Providers appealing the termination or denial of their Medicaid agreement pursuant to § 32.1-325 E of the Code of Virginia shall file a written notice of informal appeal with the DMAS Appeals Division within 15 days of the provider's receipt of the notice of termination or denial.

2. Providers appealing adjustments to a cost report shall file a written notice of informal appeal with the DMAS Appeals Division within 90 days of the provider's receipt of the notice of program reimbursement. The written notice of informal appeal shall identify the issues, adjustments, or items that the provider is appealing.

3. Providers appealing all other DMAS decisions shall file a written notice of informal appeal with the DMAS Appeals Division within 30 days of the provider's receipt of the decision. The written notice of informal appeal shall identify each adjustment, patient, service date, or other disputed matter that the provider is appealing.

B. Administrative dismissals.

1. Failure to timely file a written notice of informal appeal with the information required by subdivision A 2 or A 3 of this section shall result in an administrative dismissal.

2. A representative, billing company, or other third-party entity filing a written notice of appeal on behalf of a provider shall submit to DMAS, at the time of filing or upon request, a written authorization to act on the provider's behalf, signed by the provider. The authorization shall reference the specific adverse action or actions being appealed including, if applicable, each patient's name and date of service. Failure to submit a written authorization as specified in this subdivision shall result in an administrative dismissal. This requirement shall not apply to an appeal filed by a Virginia licensed attorney.

3. If a provider has not exhausted any applicable DMAS or contractor reconsideration or review process or contractor's internal appeals process that the provider is required to exhaust before filing a DMAS informal appeal, the provider's written notice of informal appeal shall be administratively dismissed.

4. If DMAS has not issued a decision with appeal rights, the provider's attempt to file a written notice of informal appeal, prior to the issuance of a decision by DMAS that has appeal rights, shall be administratively dismissed.

C. Written case summary.

1. DMAS shall file a written case summary with the DMAS Appeals Division within 30 days of the filing of the provider's notice of informal appeal and shall transmit a complete copy of the case summary to the provider on the same day.

2. For each adjustment, patient, and service date or other disputed matter identified by the provider in its notice of informal appeal, the case summary shall explain the factual basis upon which DMAS relied in taking its action or making its decision and identify any authority or documentation upon which DMAS relied in taking its action or making its decision.

3. Failure to file a written case summary with the DMAS Appeals Division within 30 days of the filing of the written notice of informal appeal shall result in dismissal in favor of the provider.

4. The provider shall have 12 days following the due date of the case summary to file with the DMAS Appeals Division and transmit to the author of the case summary a written notice of all alleged deficiencies in the case summary that the provider knows, or reasonably should know, exist. Failure of the provider to timely file a written notice of deficiency with the DMAS Appeals Division shall be deemed a waiver of all deficiencies, alleged or otherwise, with the case summary.

5. Upon timely receipt of the provider's notice of deficiency, DMAS shall have 12 days to address the alleged deficiency or deficiencies. If DMAS does not address the alleged deficiency or does not address the alleged deficiency to the provider's satisfaction, the alleged deficiency or deficiencies shall become an issue to be addressed by the informal appeals agent as part of the informal appeal decision.

6. The informal appeals agent shall make a determination as to each deficiency that is alleged by the provider as set forth in this subsection. In making that determination, the informal appeals agent shall determine whether the alleged deficiency is such that it could not reasonably be determined from the case summary the factual basis and authority for the DMAS action, relating to the alleged deficiency, so as to require a dismissal in favor of the provider on the issue or issues to which the alleged deficiency pertains.

D. Conference.

1. The informal appeals agent shall conduct the conference within 90 days from the filing of the notice of informal appeal. If DMAS, the provider, and the informal appeals agent agree, the conference may be conducted by way of written submissions. If the conference is conducted by way of written submissions, the informal appeals agent shall specify the time within which the provider may file written submissions, not to exceed 90 days from the filing of the notice of informal appeal. Only written submissions filed within the time specified by the informal appeals agent shall be considered.

2. The conference may be recorded at the discretion of the informal appeals agent and solely for the convenience of the informal appeals agent. Because the conference is not an adversarial or evidentiary proceeding, no other recordings or transcriptions shall be permitted. Any recordings made for the convenience of the informal appeals agent shall not be released to DMAS or to the provider.

3. Upon completion of the conference, the informal appeals agent shall specify the time within which the provider may file additional documentation or information, if any, not to exceed 30 days. Only documentation or information filed within the time specified by the informal appeals agent shall be considered.

E. Informal appeals decision. The informal appeal decision shall be issued within 180 days of receipt of the notice of informal appeal unless the provider and DMAS have mutually agreed in writing to stay the timeframe for issuing the informal decision pursuant to 12VAC30-20-550.

F. Remand. Whenever an informal appeal is required pursuant to a remand by court order, final agency decision, agreement of the parties, or otherwise, all time periods set forth in this section shall begin to run effective with the date that the document containing the remand is date-stamped by the DMAS Appeals Division in Richmond, Virginia.

12VAC30-20-550. (Reserved.) Settlement agreements.

A. Providers who have filed an administrative appeal under 12VAC30-20-540 or 12VAC30-20-560 may submit a proposal to DMAS to settle the appeal.

B. A proposal for a settlement shall be submitted in writing by the provider or the provider's counsel to the DMAS Appeals Division Director. The proposal shall include the justification for the settlement and the terms proposed to settle the case. The Appeals Division Director shall refer the proposal to a DMAS appeal representative authorized by the Office of the Attorney General under § 2.2-509 of the Code of Virginia to represent DMAS in administrative proceedings.

C. Stay of decision deadlines.

1. Receipt of a settlement proposal from a provider in accordance with subsection B of this section shall not require the DMAS appeal representative to engage in settlement negotiations or agree to stay the deadline for the informal appeal decision or for the formal appeal recommended decision of the hearing officer (collectively, the decision deadline). The DMAS appeal representative and the provider may jointly agree in writing to stay the decision deadline for a period of up to 60 days to facilitate settlement discussions. The date of the written agreement of the parties to stay the decision deadline shall be the start date for calculating the length of the stay. Written notice of the agreement to stay the decision deadline and the length of stay shall be provided to the Appeals Division Director on the start date. During the stay, the time period to issue the informal appeal decision or the formal appeal recommended decision shall not run; however, all other interim deadlines remain applicable.

2. If the parties mutually agree in writing to a proposed resolution within the agreed upon stay period described in subdivision C 1 of this section, then the stay shall be extended for such additional time as may be necessary for review and approval of the settlement in accordance with § 2.2-514 of the Code of Virginia.

3. A stay may be removed by a party to the appeal for any reason, including the following:

a. The parties do not agree to a full settlement within the agreed upon stay period described in subdivision C 1 of this section;

b. One party advises the other and the Appeals Division Director in writing that it no longer agrees for the stay to continue; or

c. The parties reach a proposed settlement, but the proposed settlement is not approved in accordance with § 2.2-514 of the Code of Virginia.

If the stay is removed, the stay shall be communicated in writing between the parties and written notice provided to the Appeals Division Director. The time period to issue the informal appeal decision or the formal appeal recommended decision shall resume on the day the notice is provided to the Appeals Division Director.

12VAC30-20-560. Formal appeals.

A. A provider appealing a DMAS informal appeal decision shall file a written notice of formal appeal with the DMAS Appeals Division within 30 days of the provider's receipt of the informal appeal decision. The notice of formal appeal shall identify each adjustment, patient, service date, or other disputed matter that the provider is appealing. Failure to file a written notice of formal appeal in the detail specified within 30 days of receipt of the informal appeal decision shall result in dismissal of the appeal. Pursuant to § 2.2-4019 A of the Code of Virginia, DMAS shall ascertain the fact basis for decisions through informal proceedings unless the parties consent in writing to waive such a conference or proceeding to go directly to a formal hearing, and therefore only issues that were addressed pursuant to § 2.2-4019 of the Code of Virginia shall be addressed in the formal appeal, unless DMAS and the provider consent to waive the informal fact-finding process under § 2.2-4019 A of the Code of Virginia.

B. Documentary evidence, objections to documentary evidence, opening briefs, and reply briefs.

1. Documentary evidence, objections to documentary evidence, opening briefs, and reply briefs shall be filed with the DMAS Appeals Division on the date specified in this subsection. The hearing officer shall only consider those documents or pleadings that are filed within the required timeline. Simultaneous with filing, the filing party shall transmit a copy to the other party and to the hearing officer.

a. All documentary evidence upon which DMAS or the provider relies shall be filed within 21 days of the filing of the notice of formal appeal.

b. Any objections to the admissibility of documentary evidence shall be filed within seven days of the filing of the documentary evidence. The hearing officer shall rule on any such objections within seven days of the filing of the objections.

c. The opening brief shall be filed by DMAS and the provider within 30 days of the completion of the hearing.

d. Any reply brief from DMAS or the provider shall be filed within 10 days of the filing of the opening brief to which the reply brief responds.

2. If there has been an extension to the time for conducting the hearing pursuant to subsection C of this section, the hearing officer is authorized to alter the due dates for filing opening and reply briefs to permit the hearing officer to be in compliance with the due date for the submission of the recommended decision as required by § 32.1-325.1 B of the Code of Virginia and subsection E of this section.

C. The hearing officer shall conduct the hearing within 45 days from the filing of the notice of formal appeal, unless the hearing officer, DMAS, and the provider all mutually agree to extend the time for conducting the hearing. Notwithstanding the foregoing, the due date for the hearing officer to submit the recommended decision to the DMAS director, as required by § 32.1-325.1 B of the Code of Virginia and subsection E of this section, shall not be extended or otherwise changed.

D. Hearings shall be transcribed by a court reporter retained by DMAS.

E. The hearing officer shall submit a recommended decision to the DMAS director with a copy to the provider within 120 days of the filing of the formal appeal notice, unless the provider and DMAS have mutually agreed in writing to stay the timeframe for issuing the recommended decision pursuant to 12VAC30-20-550. If the hearing officer does not submit a recommended decision within 120 days of the filing of the notice of formal appeal or the period specified under 12VAC30-20-550, then DMAS shall give written notice to the hearing officer and the Executive Secretary of the Supreme Court that a recommended decision is due.

F. Upon receipt of the hearing officer's recommended decision, the DMAS director shall notify DMAS and the provider in writing that any written exceptions to the hearing officer's recommended decision shall be filed with the DMAS Appeals Division within 14 days of receipt of the DMAS director's letter. Only exceptions filed within 14 days of receipt of the DMAS director's letter shall be considered.

G. The DMAS director shall issue the final agency decision within 60 days of receipt of the hearing officer's recommended decision in accordance with § 32.1-325.1 B of the Code of Virginia.