ISSUE 147: Special Section

Know A Good Doctor? We Do.

Watch Out MCOs

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With reported revenues in the billions of dollars and net profits not far behind, insurance companies providing a Medicaid Managed Care product are making huge profits on Kentucky’s Medicaid business. Across the country, lawsuits are being filed that go so far as to allege that these Medicaid Managed Care Organizations (MCOs) have been unjustly enriched and have made fraudulent misrepresentations as well as negligent misrepresentations to providers and their staff. WellCare, in particular, is the subject of a new action in Florida based, in part, on its Kentucky Medicaid business. While these lawsuits create a very important way to address reimbursement issues, Kentucky providers have a new avenue to pursue claims against MCOs. In April of 2016, the Kentucky legislature directed that healthcare providers have a process by which a Medicaid MCO’s final decision denying a healthcare service or claim could be reviewed and appealed. Under the statute, providers could receive an independent, third-party review of denied Medicaid managed-care claims, as well as an administrative process for review. Prior to the new process in Senate Bill 20, the only avenue for appeal was to the MCO itself or through the Department of Insurance’s policy of reviewing claims regarding failure to make prompt payment, which was a process established by policy, not regulation. Finally, in December 2016, the final regulations implementing the statute and providing the process for appeal were promulgated by Kentucky’s Department for Medicaid Services (DMS), making available long-awaited relief for health care providers facing denied claims from Medicaid MCOs.

Kentucky’s new appeals process, codified in KRS §205.646, is similar to those found in states such as Virginia and Georgia, where some Kentucky MCOs also operate. This was at least the second attempt by the legislature to bring this appeals process to Kentucky – the last attempt was vetoed by Governor Beshear in 2013. The new process applies to all MCOs that contracted with the state after July 1, 2016, and the emergency regulations became effective as of December 1, 2016.

With the new regulations in place, providers should have a new tool for challenging reimbursement denials and findings of overpayment by MCOs. Because the statute and regulation are somewhat ambiguous, there is some question about whether denials of payment based upon statistical sampling, among other things, are appropriately reviewed in this process. We think that they are.

Third-Party Review

KRS §205.646 (2) states that “a provider who has exhausted the written internal appeals process of a Medicaid managed care organization shall be entitled to an external independent third-party review of the MCO’s final decision that denies, in whole or in part, a health care service to an enrollee or a claim for reimbursement to a provider.” The MCO must provide the decision in writing to the provider, along with a statement that the internal appeal rights have been exhausted and that the provider is entitled to an external review, along with the time period and contact address to request such a review.

The specifics of the external review process are the same in both the emergency and regular forms of 907 KAR 17:035. Upon receiving the final decision from the MCO, the provider has 60 calendar days to request third-party review. This can be done electronically, or by fax or postal mail. The request must state the reason why the provider believes the MCO’s decision is erroneous. The MCO must then notify both DMS and the Medicaid enrollee within five business days of receiving the external review request, and DMS will assign a third-party reviewer to assess the case.

Because the time frames for requesting review and appeal, particularly appeal, are short, providers need to follow the requirements very closely and have a process in place where office and billing staff calendar denials and are equipped to handle them. Additionally, it is probably important to notify beneficiaries, as well, to assure that they know what is going on with the claim. This process could potentially get tricky if the beneficiary requests an administrative hearing on the denial before the provider does. In that case, the request for external third-party review will be denied. If the enrollee requests an administrative hearing after the provider requests third-party review, the third-party review will be suspended pending the full adjudication of the enrollee’s administrative proceeding.

Administrative Hearing

Once the independent third-party review has been conducted, both the provider and the MCO have the right to appeal the decision within 30 days. 907 KAR 17:040E (both emergency and regular regulations contain the same provisions) governs the appeal process after the third-party review.

The party that does not prevail in the administrative hearing will bear the costs of the hearing: a fee of $600 payable to DMS.


The basic effect of these new laws and regulations is that MCOs are now held accountable for denial of care and claims. This process gives providers a right to an administrative review and ultimately review in Franklin Circuit Court. Having the process does not immediately mean relief, but it is a step toward resolution. MCOs now must provide an external review process and have a time frame that they should follow. They no longer get the final word on the reimbursement of claims and determination of medical necessity, supporting documentation, requirements, and quality of care issues. The process gives power to providers essentially on the behalf of their patients so that the balance now shifts back toward quality, comprehensive care of all patients.

Overpayment Appeals by Medicaid

901 KAR 1:671 governs the Medicaid appeals process in Kentucky for findings of overpayment by Medicaid rather than MCOs. This process applies not only to overpayments, but to any other appealable determination, such as termination or suspension of provider status, sanctions by the Department for Medicaid Services, or withholding of payments during a fraud investigation. While the process has been around for quite a while, it is complicated and has important deadlines that can be easy to miss for providers.

When deciding whether to appeal an overpayment determination, a provider should consider one important benefit—Medicaid’s recoupment process is stayed or stops! In other words, a provider does not have to pay back the amount of overpayment immediately as Medicaid usually demands. The repayment is essentially tolled until the resolution of the administrative review and hearing process.

Once the decision to appeal has been made, the provider must first complete a request for a Dispute Resolution Meeting (“DRM”) within 30 calendar days of receipt of the demand or notice from the DMS. It is crucial to note that all allegations and issues must be raised in the DRM request or DMS will deem that the issue may be waived. And, it can be quite a chore to prepare a DRM request that raises all issues in a very short time frame. The provider may also elect to submit documentation in lieu of a meeting or even ask for a telephone conference. Within 30 days of the DRM, DMS will issue a decision, which can be appealed by requesting an administrative hearing within 30 days.

If the provider is dissatisfied with the administrative result, then an appeal can be taken to Franklin Circuit Court, which may, if asked, also order that recoupment not be instituted.


While the appeals process for both MCO claim denials and overpayment determinations is complicated and can be lengthy, both operate to provide healthcare providers with a route to defend claims and practices against overzealous determinations on the part of DMS and MCOs. The new appeals process for MCO denials and findings of overpayment is an important tool that providers should take advantage of when economical.

Lisa English Hinkle is a member of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She chairs the healthcare law practice area and works in the firm’s Lexington office.

Sarah E. Hines is an associate at McBrayer, also working in the firm’s Lexington office in healthcare law. Learn more at

This article is intended as a summary of federal and state law and does not constitute legal advice.