ACEP Now: VACEP Legal Victory Illustrates Why Prudent Layperson Standard Still Matters

This year, a legal case VACEP was heavily involved in set a precedent for all potential challenges and threats to the prudent layperson standard (PLP).

VACEP President Todd Parker, MD, FACEP

That’s the verdict in an article on ACEP Now, where VACEP President Todd Parker, MD, FACEP co-authored a piece recapping the legal underpinnings of Virginia's recently repealed "Downcoding Provision.”

Here’s background on that: In July 2020, the Virginia Department of Medicare and Medicaid Services (DMAS) began automatically downcoding reimbursements, to a Level 1 visit, for Medicaid patients presenting with one of 800 common ER diagnoses. In that case, the Virginia emergency physician was paid just under $16.

For three years, VACEP fought for its members against DMAS, Medicaid managed care organizations (MCOs), and the Centers for Medicare and Medicaid Services (CMS), attempting to remove the misguided state budget amendment which was approved by CMS. That fight included legislative attempts to repeal the provision, as well as a July 2020 lawsuit filed by the Virginia Hospital & Healthcare Association (VHHA), VACEP and the Medical Society of Virginia (MSV). The defendant was named as DMAS and Medicaid program director Cheryl Roberts.

The argument: VACEP and our partners argued the Downcoding Provision violated existing federal statutes and regulations, and was in clear conflict with a policy adopted by the federal government that no claim for payment of a service rendered in the emergency department can be denied, in whole or in part, based solely on the final diagnosis. Instead, any cost determination must be based on all pertinent documentation and focused on the presenting symptoms — and must account that the legal standard regarding the decision to seek emergency services is based on whether a prudent person would reasonably consider the situation to be an emergency.

In April of this year, the court ruled in VACEP and our partners’ favor, saying the policy was not in accordance with federal law — and in particular, the prudent layperson standard. DMAS and the MCOs had to immediately stop downcoding the ER claims.   

Back to the ACEP Now article: Parker and partners at revenue-cycle management firm Zotec Partners explain why that 2020 lawsuit sets precedent and stands as persuasive authority for other potential plaintiffs challenging “restrictive diagnosis” lists by commercial and Medicaid health plans.

The plaintiffs argued that the Downcoding Provision violated the federal PLP law and regulations, the Administrative Procedures Act (APA), and the Takings Clause of the Fifth Amendment to the U.S. Constitution.

There was an initial setback to the case in the U.S. District Court for the Eastern District of Virginia, but VACEP and plaintiffs appealed.

While denying the plaintiff’s constitutional claims, the [appeals] court found CMS in violation of the APA by not following the Medicaid Act and failing to provide adequate explanation. The court also found CMS acted in an arbitrary and capricious manner in approving the VA Medicaid Downcoding Provision thereby reversing multiple previous rulings supporting PLP….

To be sure, the Roberts decision will serve as a sterling precedent for other potential challenges and threats to the PLP standard and should serve as a cautionary example for other states considering similar actions. CMS must thoughtfully consider prior agency interpretations of federal PLP standards and stakeholders’ comments before state Medicaid amendments are rubber stamped.

For the full article and a deep-dive into the legal grounds behind the decision, visit ACEP Now.