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Bloomfield Health Pavilion v. Division of Medical Assistance and Health Services

October 4, 2010


On appeal from a Final Agency Decision of the Division of Medical Assistance and Health Services, Docket No. HMA-3095-09.

Per curiam.


Submitted September 15, 2010

Before Judges Sapp-Peterson and Simonelli.

Petitioner Bloomfield Health Pavilion (BHP) appeals from the final agency decision of the Director (Director) of respondent Division of Medical Assistance and Health Services (DMAHS) affirming the termination of BHP as a Medicaid provider. We affirm.

We derive the following facts from the evidence presented at a hearing before the Office of Administrative Law (OAL).

BHP provides mental health, drug, and alcohol counseling services. In January 2006, BHP submitted an application to become a provider under the New Jersey Medicaid Program. The application notified BHP of its obligation to fully comply with all federal and state anti-kickback laws, including N.J.S.A. 30:4D-17(c). BHP also executed a provider agreement, agreeing to comply with all applicable state and federal laws, policies, rules and regulations, among other things. DMAHS approved the application, effective October 18, 2006.

A subsequent investigation by DMAHS revealed that as an incentive to pursue treatment at its facility, BHP provided Pathmark gift certificates to its clients for each day they attended the facility, regardless of their compliance with the treatment program. BHP purchased a total of $179,825 in Pathmark certificates for distribution to its clients. DMAHS determined that this practice violated N.J.S.A. 30:4D-17(c), which makes it illegal for a Medicaid provider to offer any kickback, rebate, or bribe to a Medicaid beneficiary in connection with the provision of services for which Medicaid payment is received, and breached the provider agreement. As a result, DMAHS terminated BHP's participation in the Medicaid program pursuant to N.J.A.C. 10:49-3.2(f) and -11.1(d)8, 9, 20, and 23.

BHP appealed and the matter was transferred to the OAL for a hearing as a contested case. BHP primarily argued that the gift certificates were "motivational incentives" for its clients to continue or pursue therapy.

The administrative law judge (ALJ) issued an initial decision affirming DMAHS's decision. The ALJ employed the generally accepted meaning of a "bribe," which is defined as "a gift, not necessarily of pecuniary value, bestowed to influence the conduct of the receiver." Black's Law Dictionary, 191 (reprint 1998) (6th ed. 1990). The ALJ noted that the "common meanings" of bribe and kickback are consistent with the use of those terms in the context of N.J.S.A. 30:4D-17(c), explaining that "a bribe may be anything given or serving to persuade or induce, while a kickback is a rebate on profits given to a person to influence the buyer."

The ALJ found that "a preponderance of the credible evidence confirms that [BHP's clients] were given [gift certificates] unconditionally for attendance at BHP programs." The ALJ also found that the gift certificate program "constituted the offering of cash-equivalent remuneration to attendees, which clearly influenced their decision to attend BHP programs[,]" and that "[w]hether the program is characterized as an incentive, inducement, bribe, kickback, or something else, it is substantively an activity that falls within the four corners of the Medicaid regulatory proscription." The ALJ concluded that BHP violated N.J.S.A. 30:4D-17(c), and this constituted good cause to terminate its participation in the Medicaid program.

BHP appealed to the Director, arguing that DMAHS should have considered that BHP used the gift certificates as an incentive for treatment and not as a bribe, and imposed a lesser sanction. In a January 15, 2009 written decision, the Director rejected BHP's arguments and adopted the ALJ's initial decision. As to BHP's first argument, the Director concluded that it "completely ignores the fact that offering the beneficiary any remuneration may very well influence that beneficiary's selection of a particular Medicaid provider and also result in the overutilization of services which are paid for with taxpayer dollars." As to the second argument, the Director concluded, in part, that

[a] provider must be held to a high standard in order to preserve the integrity of the Medicaid program. Moreover, the regulations do not require that the provider intended to deceive, manipulate or defraud Medicaid in order to be excluded from the program. Rather, offering gift vouchers to Medicaid beneficiaries is ...

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