The Massachusetts Appeals Court has issued an important ruling for health care entities who are being investigated by the Massachusetts Attorney General’s Office Medicaid Fraud Division and facing financial withholding, often without recourse while the AGO takes its time to resolve a matter.
The case, Rizkallah v. Attorney General, involved the following relevant facts: In March 2017, the AGO sent Mouhab Rizkallah, the owner and operator of an orthodontics practice, a Civil Investigative Demand seeking patient files related to the provision and billing of athletic mouthguards. Rizkallah complied with the request. Two years later, while the investigation was still pending, MassHealth notified Rizkallah that it was withholding payments with respect to the billing code applicable to athletic mouthguards as a result of the investigation. MassHealth typically withholds payments when the AGO notifies it of credible allegations of fraud. Rizkallah alleged that under the applicable statutes and regulations, he was required to continue providing mouthguards to covered patients if he wished to remain a MassHealth provider, even though he was not being paid. Rizkallah filed a declaratory judgment action asserting his right to bill MassHealth while the investigation was pending.
The Superior Court denied Rizkallah’s request, but the Appeals Court reversed. The Appeals Court held that if MassHealth withholding has been instituted against the provider as a result of what the AGO deems credible allegations of fraud, the provider has the right to commence a declaratory judgment action to contest the withholding, notwithstanding the AGO’s contention to the contrary:
“Where as here a plaintiff is directly out of pocket as a result of government action (and has no administrative recourse), the plaintiff should be able to obtain relief through the courts, if warranted. . . . The AGO’s suggestion that the courts would not be available amounts to the contention that the Commonwealth has the unilateral power to deprive a person of property to which he or she may be entitled, without any enforceable restrictions on the length of time it may do so. To the contrary, the courts must be available to provide a forum for potential recourse in such circumstances.
. . .
We also are not moved by the Commonwealth’s assertion that the withholding was required by Federal law, once the Commonwealth received a ‘credible allegation’ of fraudulent charges. 42 C.F.R. § 455.23(a)(1). The fact that it may be proper to initiate withholding under such circumstances does not mean that the courts are unavailable to test the basis for the ongoing withholding.”
While the court did not suggest that a declaratory judgment action is necessarily immediately timely upon instigation of withholding, the court rejected the AGO’s claim that having to respond to a declaratory judgment action would per se interfere with its investigation, noting that “if withholding accompanies such an investigation, a provider’s (potentially meritorious) claim to payment for services rendered and product provided would appear to be a property interest, the deprivation of which implicates due process rights to a hearing at a meaningful time.”
We will continue to closely monitor this case for any further developments.