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Nursing service did not adequately document background checks

The company argued that, because it relied upon oral instructions from the commonwealth, it should not be faulted for failing to adhere to the written policies and procedures. The court rejected this argument, holding the rules made clear the company was liable if it failed to follow the written policies and procedures.


The Director of the Department of Medical Assistance Services, or DMAS, issued a final agency decision, or FAD, requiring that MPS Healthcare Inc., or MPS, reimburse DMAS for an overpayment of $63,972.15. The decision was based on a failure to maintain adequate documentation of criminal background checks. MPS appealed to the circuit court, which affirmed the department’s decision. MPS then appealed to this court.

On April 9, 2019, we issued an opinion affirming the circuit court in this case. MPS then submitted a request that we reconsider our holdings that Virginia law permits criminal background checks to be provided to DMAS for audit purposes and that the FAD properly rejected the hearing officer’s decision. By order entered on May 7, 2019, we stayed our prior decision and granted MPS’s petition for rehearing.


MPS contends on appeal that the Error Code 913 retractions “arose as a result of the [a]uditor arbitrarily setting new and inconsistent standards not supported by Virginia law.” Specifically, MPS refers to the auditor advising MPS that proof of criminal background check requirements could be met by simply a written statement saying that the criminal background checks were completed, then later requiring MPS to submit copies of invoices from the Virginia State Police or the actual criminal record checks.

The hearing officer ruled in MPS’s favor concerning the Error Code 913 retractions, concluding that MPS acted appropriately based on Virginia law and the auditor’s direction. However, the applicable waiver manual was incorporated by reference into the Provider Participation Agreement, and explicitly permits the retraction of payments if the billed services do not meet regulatory requirements at the time of the audit. Further, through the Provider Participation Agreement, MPS contracted to “keep such records as DMAS determines necessary,” and “to comply with all applicable state and federal laws, as, as well as administrative policies and procedures of [DMAS] as from time to time amended.”

The Tech Waiver Manual specifically states that, “[a]ny paid provider claim that cannot be verified at the time of review cannot be considered a valid claim for services provided, and is subject to retraction.” In addition, on Nov. 12, 2015, DMAS issued a memo to all participating providers, reaffirming the DMAS policy “that all provider documentation required to support claims for reimbursement must be maintained prior to and submitted by the provider at the time of the audit.” The memo further advises that “[d]uring the audit and appeal processes, DMAS shall only consider documentation submitted by the provider during the course of the audit and prior to the deadline stated in the preliminary findings letter.”

12 VAC 30-120-1720(A)(4) states that “[p]roviders shall be required to refund payments to DMAS if they . . . have failed to maintain records to support their claims for services.” “The required documentation must be maintained prior to and at the time of the audit, not through reorganizing and explaining following a failed audit.”  To accept post-audit documentation “would ignore the plain terms of the Provider Agreement and the Manual, incentivize sloppy recordkeeping, and increase the cost and complexity of audits.”

The documents submitted by MPS on Dec. 16, 2016, during the informal appeal proceedings could not be considered even though they would have satisfied the regulatory requirements if submitted at the time of the audit. Therefore, the director’s FAD properly rejected the hearing officer’s decision based on an error of law and policy.

For the above-stated reasons, we withdraw the prior opinion in this case and affirm the circuit court’s decision to retract payments associated with Error Code 913. As MPS failed to comply with policies and procedures concerning criminal background checks on employees, MPS shall reimburse DMAS the overpayment amount of $63,972.15.

MPS Healthcare Inc. v. Dep’t of Medical Assistance Services/Commonwealth of Virginia, Record No. 1125-18-2, July 23, 2019. CAV (Chafin) from Richmond Cir. Ct. (Balfour). Belinda Jones for Appellant, Usha Koduru for Appellee. VLW No. 019-7-133, 10 pp.