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Is exclusion from Medicaid program a form of discipline? Courts may be leaning toward ‘Yes’

cms-logoWhether a provider's termination from a state Medicaid program is equivalent to a disciplinary action was a question before two courts in June. In the first case, an Illinois court, on June 10, overturned discipline imposed by the state’s Department of Financial and Professional Regulation against a doctor who had been terminated from the Medicaid program.

The court held that termination from the program was not akin to a doctor’s being disciplined in another state and could not give rise to reciprocal discipline (Martin v. Illinois Department of Financial and Professional Regulation). However, the court implied that a recent change in the law might change that interpretation in future cases.

After the Illinois Department of Healthcare and Family Services terminated physician Howard Martin’s participation in the state’s Medicaid program, the professional regulation department followed with disciplinary charges, on the grounds that Martin’s disqualification from the program was, in the language of state licensing law, a “disciplinary action of another state or jurisdiction,” which would automatically lead to disciplinary sanctions in Illinois.

Following a hearing, the Department’s Medical Disciplinary Board suspended Martin’s license for an indefinite period of time. Martin appealed, and the case eventually made its way to the Appellate Court of Illinois, First District, which issued an opinion written by Judge Mathias Delort.

In his appeal, Martin had argued that the Illinois Department of Healthcare and Family Services was not a “jurisdiction,” as meant by the language of the statute used to impose discipline on his license. The court agreed.

Referring to the definition of “jurisdiction” in Black’s Law Dictionary, Judge Delort wrote that “DFHS does not exert political or judicial authority within a geographic area, nor is it a political or judicial subdivision within such an area. Thus . . . the act was . . . not that of a jurisdiction,” and could not provide grounds for discipline.

A different, but related, question was before the Superior Court of Maine, Kennebec County, in Doane v. Maine Department of Health & Human Services. In its June 30 decision in that case, the court found that exclusion from Medicaid actually was tantamount to “license revocation.”

The plaintiff, Stephen Doane, was a licensed physician accused of demonstrating incompetence in the treatment of a patient who died of drug intoxication. The board renewed his license but censured him, imposed probation, and required a practice monitor to review some of his cases. As a result, the state Department of Health and Human Services, which administers Maine’s Medicaid program, known as MaineCare, terminated Doane’s participation in the program.

Doane argued to the court that HHS’s exclusion of him from MaineCare constituted a license revocation which under state law, can only be performed by the Maine District Court. For its part, DHHS contended that it simply terminated a contract it had entered into with Doane.

The court found, however, that Doane had not entered into a contract with DHHS so his termination from MaineCare was more in the nature of revocation of an approval or “license” as defined by the Administrative Procedures Act.

Not many courts have addressed whether the authority to participate in and be reimbursed by a government funded medical assistance program constitutes a license, the court said. But it noted that the plain language of the APA identifies any type of “approval … required by law which represents and exercise of the state’s regulatory police powers” is a license.

Furthermore, the court said, it is clear that the Medicaid agency’s decision to permit a provider to enter into the program represents an exercise of the state’s regulatory or police power. DHHS terminated Doane’s participation in the MaineCare program due to public health concerns—i.e. the death of a patient by overdose and subsequent reprimand by the board.

Thus, what DHHS did involved police power rather than enforcement of contractual rights, and it constituted a revocation of license which can only be done by the Maine District Court. The court granted Doane’s motion for summary judgment against DHHS.