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Federal Agency Made a Defendant

Federal Agency Made a Defendant

The Centers For Medicare and Medicaid Services (CMS), which is the federal agency charged with oversight of the state Medicaid programs, has been added as a defendant in Appalachian Regional Healthcare, Inc. v. Coventry Health and Life Ins. Co.

This two-year old battle began when Coventry Health and Life Ins. Co. (Coventry) began terminating provider contracts just five months into its Medicaid managed care contract with the Commonwealth of Kentucky. Coventry said it was terminating provider contracts because of reimbursement issues it had with the Kentucky Medicaid agency.  Appalachian Regional Healthcare (ARH), an eight hospital chain in southeastern Kentucky, obtained a preliminary injunction against Coventry. In the words of the Court, Coventry was “gaming the system” and an injunction was necessary to keep its Medicaid members, treated by ARH, from “ being thrown under the bus.”

A lot has happened in that case: The state Medicaid agency has been held in contempt of court; partial summary judgment was granted to ARH on its claims for quantum meruit reimbursements as an out-of-network provider; hospital Prompt Pay and constitutional takings claims were recognized as actionable; and the District Court’s bond denial affirmed by the Sixth Circuit. In this latest development the District Court denied CMS’ Motion to Dismiss ARH’s Administrative Procedure Act (APA) claims against the federal agency. ARH claims CMS waived statutorily mandated requirements when Kentucky’s Medicaid Managed Care Waiver was hurriedly approved and rushed into place in November 2011. As the Court said in denying CMS’ Motion to Dismiss, “CMS opened Pandora’s Box without the necessary statutory safeguards in place.” The case is now set for trial in April 2015.

To read the full opinion and order, click here.