The New Jersey Appellate Division issued a decision in Township Pharmacy v. Division of Medical Assistance and Health Services which Medicaid reaffirms the absolute obligation on the part of providers to comply with the Medicaid requirements (which are also applicable to Medicare) to perform background checks for all individuals working for a provider who are involved, even peripherally, in providing services that will be paid for by a governmental program.  In this case, the Department of Human Services denied a pharmacy’s application to participate as a provider of services in the Medicaid program.  The applicant (Township Pharmacy) had purchased an existing pharmacy and submitted an application to participate in the Medicaid program to the Department of Human Services.  Question 37 of the Medicaid provider application asked if any officers, directors, shareholders, members, owners, employees or partners had ever been indicted, arrested, charged, convicted, pled guilty or no contest to any federal or state crime.  The pharmacy checked the box marked “No”.  A pharmacy technician who worked at the pharmacy had entered a guilty plea to an Oxycodone possession charge and was sentenced to three years’ probation.  The New Jersey Board of Pharmacy allowed her to keep her pharmacy technician license notwithstanding the entry of the guilty plea.  The pharmacist who purchased the pharmacy allegedly verified that the pharmacy technician was licensed but never performed a criminal background check.  Notwithstanding the fact that the Board of Pharmacy had not taken action against the pharmacy technician’s license, the Department of Human Services denied the provider application based on the pharmacy’s incorrect response to Question 37 regarding criminal history.  The pharmacy conceded that no employee criminal background checks had been performed.  The Appellate Division upheld the denial of the Medicaid provider application.  While the Court noted that it was “sympathetic to the Plaintiff’s predicament”, it concluded that “the integrity of the Medicaid provider program demands scrupulous compliance with the disclosure requirements in N.J.A.C. 10:49-11.1(d)(22).”  

The decision serves as a reminder of the importance of performing criminal background checks and verifying that employees are not excluded from participation in Medicare or Medicaid.  Providers who fail to do so, do so at their peril.  In many other situations, when the information becomes available to the Medicaid or Medicare programs, they will recoup the payments that had been made for the services rendered, in which the individual was involved.  The involvement can be very peripheral.  It can be the individual who is sending out the bills who is not permitted to participate in providing the services.