Township Pharmacy v. Division of Medical Assistance and Health Services


New Jersey Law Journal


Township Pharmacy v. Division of Medical Assistance and Health Services, A-3849-10T1; Appellate Division; opinion by Fuentes, P.J.A.D.; decided and approved for publication August 22, 2013. Before Judges Fuentes, Graves, and Koblitz. On appeal from the Department of Human Services, Division of Medical Assistance and Health Services. D.D.S. No. 22-2-1079 [21 pp.]

Township Pharmacy appeals from the decision of the director of the New Jersey Division of Medical Assistance and Health Services denying its application to participate in the State's Medicaid program as a pharmaceutical service provider. The director's decision was based on plaintiff's failure to disclose the criminal record of one of its employees.

John Sclafani, a registered pharmacist since 1996, purchased Township Pharmacy in 2009. Sclafani applied to the New Jersey Department of Human Services, Division of Medical Assistance and Health Services, to enroll Township Pharmacy in the Medicaid program as a pharmaceutical services provider. The Medicaid Fraud Division informed Sclafani that Township Pharmacy's application was being denied pursuant to N.J.A.C. 10:49-11.1(d)22 because Sclafani did not disclose that B.L.R., an individual identified in the application as a "Pharmacy Technician," had a criminal history. The division found that Sclafani had given a "false" response to question 37 in the application and was therefore barred from participating in the Medicaid program.

B.L.R. had been employed at the pharmacy since at least 2002. She was employed by Sclafani's predecessor when he purchased the pharmacy in 2004; Sclafani kept her on as an employee when he purchased the pharmacy in 2009. Most significantly, on May 14, 2009, approximately four months before Sclafani purchased Township Pharmacy, B.L.R. had been licensed by the Board of Pharmacy as a pharmacy technician. Thus, when Sclafani submitted the pharmacy's Medicaid provider application in February, 2010, he reasonably believed that B.L.R. did not have a criminal record.

Sclafani requested that the case be transferred to the Office of Administrative Law (OAL) for an evidentiary hearing. The ALJ found that Sclafani's omission was not intentional or knowing, but was due to the failure of Sclafani to ask B.L.R. whether she had any criminal history; to the assumption of Sclafani that, because B.L.R. had just been licensed by the Board of Pharmacy, he could conclude that she had no criminal history; to the lack of information provided in the application as to how to perform a criminal background check on another person; and to the assumption of B.L.R. that because she was licensed, she need not reveal her criminal history to Sclafani. In reaching a decision, the ALJ reviewed a number of administrative decisions that consistently held that, notwithstanding a lack of intent to deceive or conceal, an applicant has a duty to provide truthful, accurate, and complete answers to all questions and supply all required information to ensure the integrity of the Medicaid program.

The director adopted the ALJ's findings and conclusions. The director noted that N.J.A.C. 10:49-11.1(d)(22) did not require an intent to deceive or conceal by the applicant. The regulation required that the information be true and accurate. The director determined that this standard was required "to preserve the integrity of the Medicaid program."

Held: An applicant's failure to fully and accurately disclose material information concerning an employee's criminal history constitutes "good cause" pursuant N.J.A.C. 10:49-11.1(d)(22) to deny a provider's application to become a Medicaid provider. This is so, even if the applicant's omission was caused by inadvertence and without the intent to deceive, mislead, or conceal.

A pharmacy wishing to participate in the Medicaid program as a provider must have a valid permit from the Board of Pharmacy and complete the Medicaid provider application. If an approved pharmacy is sold, the approval agreement is "automatically terminated." Because the integrity of the Medicaid program is carefully monitored by the division, in order to execute a new agreement to participate in the Medicaid program, a new owner must apply to the Division of Medical Assistance and Health Services, Department of Human Services, by contacting the Provider Enrollment Unit.

Here, the ALJ found (and the director accepted) that Sclafani acted in good faith. The record shows that he made a good-faith attempt to comply with the division's regulations. The ALJ found the two main actors, Sclafani and B.L.R., credible. With respect to Sclafani, the ALJ accepted as reasonable his reliance on the Board of Pharmacy's then recent approval of B.L.R.'s license as a pharmacy technician as an indication that she did not have a criminal history. The ALJ also accepted B.L.R.'s license approval as the reason why Sclafani did not ask her directly about her past experiences. Finally, the ALJ accepted as credible Sclafani's testimony about his lack of knowledge as to how to perform a criminal background check on his employees. With respect to B.L.R., the ALJ also found credible her explanation of why she did not affirmatively disclose her past indiscretions to Sclafani. B.L.R. reasonably relied on the Board of Pharmacy's decision to issue her a license to work as a pharmacy technician, despite being aware of her criminal history.

The ALJ nonetheless concluded that good cause under N.J.A.C. 10:49-11.1(d)(22) constitutes submitting false or fraudulent application for provider status to the Medicaid program. As a matter of law, it did not matter that the applicant here had objectively reasonable grounds to believe that the information he was submitting about his employee was accurate and truthful. The director accepted the ALJ's findings and conclusions in her Final Agency Decision. In the director's view, the regulation does not require that the provider intended to deceive, manipulate, or defraud Medicaid, in order for the application to be denied.

The appellate panel agrees with the director 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 delivery of health care to the public is a highly regulated business activity which directly impacts upon the safety and welfare of the public. Pharmacists are clearly part of the class of professionals who are constructively on notice of the existence of legal requirements governing its practice and operations. Thus, even a good faith belief that one is performing these services in a reasonable or otherwise sound manner is not a defense.

For appellant — Matt D. Mandel (Mandel & Mandel). For respondent — Melissa H. Raksa, Assistant Attorney General, of counsel; Vicki A. Mangiaracina, Deputy Attorney General, on the brief (Paula T. Dow, Attorney General, attorney).

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