NJ Pharmacy Denied Medicaid Enrollment for Unintentional Omission

Providers beware – even an unintentional omission on a New Jersey Medicaid enrollment application can lead to denial of enrollment. Such was the holding of a recent New Jersey Court of Appeals decision.

A recent decision from the New Jersey Appeals Court upheld the decision of the NJ Division of Medical Assistance and Health Services (DMAHS) which denied the enrollment of a pharmacy for failure to disclose the criminal record of a pharmacy technician employed by the pharmacy even where the omission was found to be not intentional or knowing. The decision is stark reminder to healthcare providers that Medicaid takes the enrollment process seriously and even innocent mistakes or omissions have far reaching consequences.

When applying for enrollment with NJ Medicaid, the pharmacy owner checked “no” in response to question 37 which asked about the criminal history of any person or entity named in the application. The pharmacy owner, who has recently purchased the pharmacy and kept the technician on as an employee, was aware the the technician was licensed by the NJ Board of Pharmacy mere four months before the transaction. The owner assumed that because the technician was licensed by the Board, she had no criminal history.

Medicaid disagreed and denied the enrollment application because, in the words of the Medicaid Fraud Division investigator, “it was a false application. The information [contained] in the answer was not truthful and was not accurate and [the application] was denied,” pursuant to a specified regulation.

On appeal before an Administrative Law Judge (ALJ), the ALJ found that the owner’s answer to question 37 was “indisputably false and inaccurate because [the technician] had a criminal record.”

However, as a matter of credibility, the ALJ believed in the lack of bad faith on the part of the pharmacy owner and to that end found the owner’s omission was not intentional or knowing, but rather “was due to the failure of [owner] to ask [the technician] whether she had any criminal history; to the assumption of [owner] that, because [the technician] had just been licensed by the Board [of Pharmacy], he could conclude that she had no criminal history; to the lack of information provided in the application as to how to perform a criminal background check on another person; and to the assumption of [the technician] that because she was licensed, she need not reveal her criminal history to [the owner].”

In denying enrollment, the ALJ relied on a number of administrative decisions that consistently held that, despite the lack of intent to deceive or conceal, an applicant has a duty to provide truthful, accurate and complete answers to all questions and supply all required information to ensure the integrity of the Medicaid Program.

The Director of DMAHS adopted the ALJ’s findings and conclusions, citing, among other things, the importance of the high standard was necessary “to preserve the integrity of the Medicaid program.” Moreover, in the Director’s view, “[t]he regulation does not require that the provider intended to deceive, manipulate, or defraud Medicaid, in order for the application to be denied.” (emphasis in the original)

After noting that the scope of the Appeal’s Court review is limited and also expressing a position “sympathetic to [the owner’s] predicament,” the Appeals Court, nonetheless, agreed with the Director that “the integrity of the Medicaid provider program demands scrupulous compliance with the disclosure requirements,” set out by the regulation.

Moreover, the Court went on to state that the delivery of healthcare to the public is a “highly regulated business activity which directly impacts upon the safety and welfare of the public” and that pharmacists, like other providers, “are constructively on notice of the existence of the legal requirements governing its practice and operations.”

The Court further noted that “even a good faith belief that one is performing [healthcare] services in a reasonable or otherwise sound manner is not a defense.”

If you have have questions about Medicaid enrollment, the NJ Medicaid Program or have other healthcare law questions, please contact us.