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Health centers sue AZ Medicaid program for unpaid services

Money and stethoscope to illustrate the cost of health care

Money and stethoscope to illustrate the cost of health care

A group of community health centers is suing the state for failing to pay them for the cost of providing certain services to Medicaid-eligible individuals.

The lawsuit filed Monday in federal court says the Arizona Health Care Cost Containment System, the state’s Medicaid program, is required to reimburse “federally qualified health centers” for the costs of all services provided. That, the lawsuit says, includes not just care provided by doctors but also services furnished by dentists, podiatrists, optometrists and chiropractors.

More to the point, attorney Matthew Freedus said the state is on the financial hook for services provided by those health centers even if it does not provide coverage for those same services for those enrolled in the AHCCCS program itself.

“A state can exclude certain services from Medicaid,” he told Capitol Media Services.

For example, the lawsuit states, AHCCCS has “limited” coverage of optometry services for adults, specifically excluding prescription lenses in most cases. And emergency dental services for adults are subject to a $1,000-per-year limit.

But Freedus said federal laws set up federally qualified health centers to provide care in “medically underserved areas.” He said they currently serve hundreds of thousands of Arizonans.

More to the point, Freedus said, that federal law requires them to provide these kinds of services. And he said states must reimburse these centers, on a per-visit basis, for 100 percent of its “reasonable and related costs” in furnishing these services.

Freedus said those requirements make sense, citing a court ruling that these centers “occupy a unique place in the health services ecology.”

What that means, he said, is they are different than other Medicaid providers. And they cannot use their federal grants to subsidize what Medicaid will not pay them.

He said that requirement for reimbursement was confirmed in a 2016 ruling by the 9th Circuit Court of Appeals. And while that case was about California health centers, the ruling is binding on all states within the circuit, including Arizona.

“The problem here is that Arizona is not recognizing the full extent of what that mandatory set of services includes,” Freedus said. “They’re not recognizing, for example, that includes a whole range of preventive dental services.” 

He acknowledged that requiring states to pay family health care centers for services not covered by their own Medicaid programs “may seem like an anomaly.”

“But there’s good reason for that,” Freedus said.

“These are safety net providers that have to meet the needs of their specific patient population,” he said, which is why they get federal grants to do that.

“They’re the ones who identify what their patients need,” Freedus said.

“It’s not a shock to find out patients need preventive dental services,” he explained. “That’s shouldn’t be a shock to anybody.”

The lawsuit asks Judge Jennifer Zipps to order AHCCCS to reimburse the health centers for their full costs.

There was no immediate response to the lawsuit from AHCCCS.


Correction: A previous version of this story erroneously reported the lawsuit involved the state’s failure to pay a group of community health centers for the cost of providing certain services to low-income individuals who are uninsured. The lawsuit actually deals only with reimbursement for services provided to Medicaid patients and not to those without insurance.

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