Virginia Injunction Update: Without Cause Is Without Justice

A preliminary injunction has been filed in federal courts to halt the termination of two dozen Virginia behavioral healthcare providers.

There are some updates on the matter of A Village Youth and Family Services, Inc., et al v. The Commonwealth of Virginia et al, through which more than two dozen Virginia behavioral healthcare providers recently filed a preliminary injunction in federal court to halt and reverse their recent sudden, unexpected dismissal without cause from the state’s Medicaid ranks at the hands of six insurer defendants.

Well, first, according to Fourth Circuit case law, termination without cause is not allowed. Medicaid providers have a property interest in their continued participation in the Medicaid program, not to mention the Medicaid recipients’ right to freedom of choice of provider. Add the fact that all terminated providers are minority-run, and those allowed by the managed care organizations (MCOs) to stay in business are white-owned, and we have a trifecta.

On Oct. 18, we filed a motion and brief asking the Court for a preliminary injunction staying the terminations. We filed in the Eastern District of Virginia.

All the plaintiff providers were scared to file a lawsuit in the first place. They were scared about retaliation by the MCOs. And guess what – since we filed our suit, another MCO, United, has undertaken another wave of terminations. Multiple providers have endured harassing audits. Authorizations that were always made in the past have all of a suddenly become denials.

We are scheduled to be heard before federal Judge Claude Hilton on Nov. 1.

Now, all the MCOs have filed motions to dismiss, based on four reasons:

  1. Contracts are terminable at will;
  2. Freedom of choice provision does not apply because it operates under the U.S. Department of Health and Human Services (HHS) waiver;
  3. Discrimination allegations are conclusory and provide not one allegation of specific fact; and
  4. Providers lack standing, and Anthem is not a state actor.

As for contracts being terminable at will, the MCOs can write that ad nauseum in every contract they sign. That does not make it legal. The Fourth Circuit has concluded in numerous decisions that a provider’s right to continued participation in the Medicaid program is a property right and requires due process to eliminate.

Secondly, the HHS waiver does state that the MCOs can manage limited, closed networks. However, other portions of the waiver promise the Centers for Medicare & Medicaid Services (CMS) that the networks will be adequate, that they will represent the demographics of the region, and that no discrimination will occur. One court in Arizona held that “if a state were free to terminate a provider agreement for any reason with a basis in state law, recipients’ free-choice-of-provider rights would be greatly weakened, and subject to state policies and politics having nothing to do with the Medicaid program.” This is not allowed.

Thirdly, Anthem’s declaration that the discrimination was conclusory and without basis or fact makes me laugh. We have over 100 providers being terminated. Almost 40 providers hired me, and all of them are minority-owned.

Lastly, as for the standing issue and the claim that Anthem is not a state actor, this matter has also been decided by a plethora of courts. Medicaid is a program that uses state and federal tax dollars. The federal regulations dictate that one agency manage Medicaid. As a court of appeals stated in K.C. v. Shipman, there is only room for one head chef in the Medicaid kitchen. This means that the state department of health is that head chef. Any MCO is an agent, and steps into the shoes of the state agency.

Now, since the motions to dismiss were filed, the defendants are asking for a Nov. 15 hearing date, which means I will have to change my plane ticket and argue then. Under normal circumstances, my team and I always consent to continuances based on convenience, and per request by the other side. However, in this case, the clients will not all consent to a continuance.


Knicole C. Emanuel Esq.

For more than 20 years, Knicole has maintained a health care litigation practice, concentrating on Medicare and Medicaid litigation, health care regulatory compliance, administrative law and regulatory law. Knicole has tried over 2,000 administrative cases in over 30 states and has appeared before multiple states’ medical boards. She has successfully obtained federal injunctions in numerous states, which allowed health care providers to remain in business despite the state or federal laws allegations of health care fraud, abhorrent billings, and data mining. Across the country, Knicole frequently lectures on health care law, the impact of the Affordable Care Act and regulatory compliance for providers, including physicians, home health and hospice, dentists, chiropractors, hospitals and durable medical equipment providers. Knicole is partner at Nelson Mullins and a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

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