Could Louisiana extend its Medicaid claims processing contract for less than a year?

Plain-English summary

In a 1997 opinion, Louisiana's Attorney General concluded that an extension of the state's Medicaid fiscal intermediary contract had to run for twelve months. The question concerned the Department of Health and Hospitals' UNISYS contract for processing health care providers' claims. The AG read the governing statute's references to one-year and twelve-month extensions as requiring a full twelve-month increment, even where the state wanted a shorter continuation.

He drew a distinction between the length of an extension and early termination. The statute required the contract to contain terms for termination by the state at any time. The AG said such a clause could end a twelve-month extension before its scheduled end, while cautioning that termination for convenience could bring different contractual consequences from letting the extension expire.

The exact date on the source extract is illegible, so this page leaves the day of issue blank.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Department contract managers

For the fiscal intermediary contract described, the AG rejected renewals in increments shorter than twelve months. He based that conclusion on the statute's repeated references to one-year and twelve-month periods. The opinion treated early termination under a contract clause as a separate mechanism, with possible consequences under the contract that the opinion did not specify.

Fiscal intermediary contractors

The opinion concerned a contractor handling Medicaid claims processing. It said any extension of that contract under the cited statute had to be for twelve months, even though the state's reserved power to terminate could end performance earlier. It did not decide the financial or procedural terms of a particular termination.

Common questions

Could Louisiana renew this Medicaid claims contract for six months?

The AG said no. He read the cited statute as requiring each extension after the initial term to be for twelve additional months, no more and no less.

Could the state end a twelve-month extension early?

The AG said the contract had to contain a provision allowing the state to terminate at any time. Invoking such a clause could end the arrangement before the extension expired, but he warned that contractual consequences might differ from expiration at the scheduled end.

Did the opinion decide the consequences of terminating the UNISYS contract?

No. It flagged that termination for convenience could trigger contractual requirements and said those consequences should be examined. It did not describe or decide the actual contract's termination terms.

Background and statutory framework

The question was whether the Department of Health and Hospitals could extend its fiscal intermediary agreement with UNISYS by less than twelve months. The AG quoted the relevant part of R.S. 39:198, which set a seventy-two-month structure with an initial thirty-six-month period, three successive twelve-month periods, and provisions for further extensions in special circumstances. He concluded that the statute fixed extension length while allowing the contract to provide separately for termination at any time.

Citations and references

• R.S. 39:198: the fiscal intermediary contract provision interpreted by the AG.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/97-0010

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

~tate af ~aui~iana
DEPARTMENT OF JUSTICE
CIVIL DIVISION
P.O. Box 94005
TEL.: (504) 342-7013
BATON ROUGE
FAX: (504) 342-2090
RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL
~ARUARY !~
OPINION NUMBER 97-10

90 - A - 1: Public Funds & Contracts
47 - B: Fiscal Agents
Honorable Don Hines
R.S. 39:198D
Louisiana State Senate
Any extension of fiscal intemaedia~y contract by DHH must be in inc~ments
Post Office Box 94183
of twelve months.
Baton Rouge, LA 70804

Dear Senator Hines:

You have requested the opinion of this office on the following issue:

Under the provisions ofR.S. 39.’198D may the contract by the Department ofHealth and Hospitals, Bureau of Health Services Financing, with UNISYS for fiscal intermediary services be extended beyond its original term in increments ofless than twelve months?

It appears that the applicable statute answers this question very explicitly in the negative.

All of Subsection D of R.S. 39:198 deals with contracts for fiscal intermediary services for the processing of claims of health care providers. The provisions of that subsection which deal with the term or length of the contract are excerpted as follows, with language which I consider particularly relevant in bold:

D. . . The term of such a contract shall be seventy-two months. In the event special circumstances, as provided in Paragraph (9), necessitate, additional one-year extensions of the contract may be granted .... (3) The seventy-two month term of such contract shall be divided into one period of thirty-six months, immediately followed by three successive twelve month periods. The state shall have an option to renew such contract for each of the three twelve-month periods. If the state does not exercise its option to renew, the contract shall be terminated. In the event special circumstances, as provided in Paragraph (9), necessitate, additional twelve-month extensions of the contract may be granted. (4) In addition to other provisions as required by law or in the best interests of the state, such contract shall contain provisions setting forth... (d) requirements for termination of the contract by the state at any time, or for cause, or upon the refusal of the state to exercise an option to renew such contract .... (9) In the event the Department of Health and Hospitals and/or the United States Department of Health and Human Services, Health Care Financing Administration propose substantial changes in the operations of the

Page 2

Opinion No. 97-10
Hon. Don Hines
LA Senate
Page -2-

Medicaid program that would materially impact the services performed by the fiscal intermediary, the Department of Health and Hospitals may, subject to the approval of the House and Senate Committees on Health and Welfare, approve additional extensions of the contract until such time as it is practical to prepare a solicitation for proposals describing the revised services that would be performed by the fiscal intermediary ....

It appears that one of the purposes of this legislation was to dictate to DHH many of the substantive provisions which must be included in any contract for fiscal intermediary services, depriving the officials who might draft the Request for Proposals and the subsequent contract of much of the flexibility to negotiate those matters when arriving at an acceptable agreement with a provider. One of those legislatively dictated requirements is that extensions of the contract beyond its initial thirty- six month term must be in twelve month increments. The reference to "one year extensions" first appears in the introductory paragraph of Subsection D, then appears as "three twelve -month periods" twice in paragraph (3). Therefore, it is our opinion that any extension of this contract must be for a period of twelve additional months, no more and no less.

We would point out that paragraph (4) requires that the contract must include "requirements for termination of the contract by the state at any time". Such a provision of the contract would allow the state to invoke this "termination for convenience" clause to end the contract at any point prior to the end of a twelve month extension, thereby effectively making the extension less than twelve months. However, there are usually contractual requirements which come into play when "termination for convenience" is invoked rather than termination at the end of an extension, so such a choice should be made with caution and after exploration of all the consequences.

I trust that this answers your inquiry. Please do not hesitate to contact me if we may be of further assistance to you in this matter.

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

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