Iasis sues Utah Medicaid oversight office

In a petition for “extraordinary relief,” Iasis Healthcare Corp. has sued the Utah Medicaid inspector general's office, saying that the regulator does not have state-law authority to enforce a $2.7 million recoupment order that Iasis maintains was erroneous anyway.

The lawsuit filed in Salt Lake City’s the 3rd District Court (PDF) asks a state judge to declare that the office of inspector does not have the authority to recoup alleged overpayments to three Iasis hospitals, or to establish an administrative review process designed for appealing the finding. Further, Iasis says the alleged overpayments in 2008 and 2009 were lawfully paid under state regulations.

Doug Springmeyer, an assistant attorney general for Utah, said state officials remain committed to recovering any overpayments to hospitals. He noted that the state Legislature recently “carved out” the Medicaid program integrity function and delegated it to the inspector general’s office.

“The state intends to aggressively defend the action and believes that the authority has been appropriately vested with the state inspector general,” Springmeyer said.

State law, as published on the state Legislature’s webpage, says, “The Inspector General Shall … seek recovery of improperly paid Medicaid funds,” under subpart L of the 2011 law, “Duties and powers of inspector general and office.”

In October 2011, Medicaid recovery audit contractor Health Management Systems informed Iasis that three of its facilities—Davis Hospital & Medical Center, Salt Lake Regional Medical Center, and Jordan Valley Medical Center—received a total of $2.7 million in overpayments for emergency room patients whose files contained diagnoses that were not considered “emergent” under Utah Medicaid regulations, the lawsuit says.

The Franklin, Tenn.-based investor-owned health system says it previously consulted with officials in the state Health Department about emergent diagnoses, and even tried returning some payments to state officials, who rejected the voluntary repayments and said the list of emergent diagnoses was incorrect.

Subsequently the private Medicaid contractor turned up similar issues in its review and informed Iasis and the hospitals that it could either return the money, appeal the ruling, or let the state deduct the amount from future Medicaid payments, the lawsuit says.

In the process of trying to appeal the recoupment order, Iasis officials also filed a motion Jan. 24 requesting the inspector’s administrative law judge to dismiss the case before her because she lacked jurisdiction, since applicable state law only allows the inspector general’s office to hold disputed claims, not “claw back” erroneous payments. The next day, Iasis filed its lawsuit for extraordinary relief asking a state judge to intervene in the situation and rule on the question of jurisdiction.