A New Jersey appeals court upheld August 22 the denial of a pharmacy’s application to participate in the state’s Medicaid program for failing to disclose one of its employees had a criminal history. The appeals court panel found the Division of Medical Assistance and Health Services had “good cause” to deny the application even though the pharmacy’s owner had no knowledge of the employee’s criminal history, had no intent to deceive, and reasonably believed the board of pharmacy’s recent decision to license the employee as a pharmacy technician indicated she met state requirements.

According to the appeals court, “sound public policy” justified requiring “scrupulous compliance” with administrative disclosure requirements, see N.J. Admin. Code 10:49-11.1(d)(22), that are intended to safeguard the integrity of the Medicaid program.

Plaintiff, a registered pharmacist, purchased Township Pharmacy in 2009. He subsequently submitted an application for the pharmacy to participate in the New Jersey Medicaid program. At the time he submitted the application, he was unaware one of his employees, a pharmacy technician who was hired by the previous owners, pleaded guilty to drug possession charges in 2003 and 2008.

The New Jersey Medicaid application specifically asks whether any employee of the applicant has a criminal history. The state, through its own investigation, uncovered the technician’s criminal history and denied the application for including a “false” response. Plaintiff contested the denial, arguing the state board of pharmacy recently licensed the technician and therefore it was reasonable for him to believe she did not have a criminal record. Plaintiff acknowledged he failed to do a criminal background check, but noted the application provided no instructions for doing so.

An administrative law judge (ALJ) accepted the failure to disclose the technician’s criminal record was inadvertent, and plaintiff acted in good faith. But because plaintiff’s response on the application was “indisputably false and inaccurate,” the application was properly denied for “good cause.” The falsity of the answer alone was a sufficient reason to deny the application, regardless of the intent behind it, the ALJ concluded.

The New Jersey Superior Court, Appellate Division, agreed. While “sympathetic to plaintiff’s predicament,” the appeals court panel said the agency’s approach to administering Medicaid was entitled to deference and was reasonable given the vulnerable population the program serves.

Township Pharmacy v. Division of Med. Assistance and Health Servs. (N.J. Super. Ct. App. Div. Aug. 22, 2013).