Health provider loses Medicaid appeal seeking OTC medicine reimbursement

A company that operates health care facilities for people with mental disabilities has lost an appeal of judgments saying it was not entitled to reimbursement from the state’s Medicaid program for the costs of over-the-counter medication.

The Indiana Court of Appeals upheld court and prior agency denials of ResCare Health Services’ claims for reimbursement for OTC medications that are not on Indiana’s Medicaid Formulary, such as allergy medications prescribed by a physician.

ResCare operates intermediate care facilities for individuals with intellectual disabilities, known as “ICF/IIDs” and receives a per diem rate from Medicaid for qualified patients. The case on appeal, ResCare Health Services Inc. v. Indiana Family & Social Services Administration, 20A-MI-1025,
stems from a 2014 cost report commissioned by the Family and Social Services Agency, which administers Indiana’s Medicaid program, that adjusted ResCare’s costs by removing reimbursement for nonformulary over-the-counter medications.

ResCare unsuccessfully challenged the reimbursement removal before an administrative law judge, and FSSA issued a final order in 2019 “affirming the ALJ’s decision and agreeing that costs for the non-Formulary OTC medicines could not be included in ResCare’s per diem rate,” Judge Patricia Riley wrote. “The FSSA also concluded that it could not rule on whether ResCare could charge the personal funds accounts of its residents for the unreimbursed costs for non-Formulary OTC medicines because the issue was not ripe and a declaratory judgment was beyond the scope of an administrative proceeding.”

The FSSA’s ruling was upheld in Marion Superior Court after ResCare moved for judicial review, and the Indiana Court of Appeals affirmed Wednesday, rejecting all arguments on appeal.

“(W)e hold that the FSSA’s interpretation that OTC medicines are not included in the per diem rate for privately-run facilities for ICF/IID is not contrary to law; the denial of reimbursement for non-Formulary OTC medicines is not an unconstitutional taking under the Indiana Constitution; and the trial court did not abuse its discretion in denying ResCare’s request for a declaratory judgment,” the panel concluded.

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