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6th Circuit Denies Beneficiary MSP Double Damages for Not Alleging Personal Financial Loss and Therefore Not Establishing Standing

On April 16, 2018, the United States Sixth Circuit Court of Appeals published its opinion on Gucwa and Marusza v. Lawley, Ager, Baker, Rubin and Accident Fund Insurance Company, finding that because Gucwa and Marusza did not allege personal financial loss in the original complaint or the two amended complaints, they have not established standing to bring an MSP private cause of action for double damages.

 

Mark Marusza and Nancy Gucwa’s complaint alleged four causes of action in this matter: (1) Accident Fund and the defendant physicians defrauded Marusza, Gucwa, and others of benefits, in violation of the Racketeer Influenced and Corrupt Organizations Act; (2) Marusza is entitled to double damages under the Medicare Secondary Payer Act; (3) the defendant doctors tortiously interfered with Marusza’s contractual relationship and/or business expectancy by inducing Accident Fund to deny his benefits; and (4) Accident Fund falsely imprisoned Marusza by requiring him to attend an examination with a neuropsychologist. The analysis below focuses only on the MSP private cause of action for double damages.

 

Facts of the Case

 

A sport-utility vehicle struck Mark Marusza on October 18, 2011, while Marusza was in the course and scope of his employment. Marusza sustained injuries to his brain, shoulders, cervical spine, and ribs. Following his release from the hospital, Nancy Gucwa provided attendant care services for his brain and spinal injuries.

 

Marusza’s workers’ compensation carrier—Accident Fund Insurance Company— initially paid Marusza’s claims for Gucwa’s care but terminated payment in July 2012. Accident Fund retained the four defendant physicians—Dr. Jeffrey Lawley, Dr. Harvey Ager, Dr. W. John Baker, and Dr. Barry Rubin—to examine Marusza’s disability. Following the doctors’ reports, Accident Fund refused to pay for certain treatments, including drugs to control injury-induced aggression, psychiatric hospitalization, pain medication, attendant care, physical therapy, doctors’ visits, nurse case management, and surgeries for his neck, back, and shoulders.

 

As a result of Accident Fund’s refusal to pay for such care, Medicare paid $15,665.00 for such treatment. It is important to note that the opinion does not indicate or provide a breakdown of such payments. In other words, we do not know whether the payments made by Medicare were for drugs to control the injury-induced aggression, for the psychiatric hospitalization, for pain medication, for attendant care, for physical therapy, for doctors’ visits, for nurse case management, or for surgeries for his neck, back, and shoulders.

 

After Accident Fund’s denial of benefits, Marusza filed a workers compensation claim seeking payment of indemnity benefits and medical care associated with the injuries related to the accident with the Michigan Workers’ Compensation Agency. In May 2016, Workers’ Compensation Board Magistrate Beatrice B. Logan issued her opinion that Marusza required treatment for a mild traumatic brain injury, vision problems, and injuries to his neck, shoulders, and lower back caused by the 2011 accident. Because Marusza lost all wage earning capacity in the accident, Magistrate Logan ordered Accident Fund to pay Marusza workers’ compensation benefits owed from October 19, 2011, onward at the rate of $592.88 per week and for reasonable and necessary medical treatment of Marusza’s employment-related conditions. Based on this decision, on August 12, 2016, Accident Fund paid Marusza $74,382.00.

 

Prior to the Board’s decision and Accident Fund’s payment to Marusza, on March 5, 2015, Plaintiffs filed a complaint in the U.S. District Court for the Eastern District of Michigan naming Accident Fund and the four doctors as defendants. Plaintiffs filed their First Amended Complaint the next day. Each defendant moved to dismiss for failure to state a claim upon which relief can be granted in spring 2015.

 

Following the Board’s decision, Plaintiffs filed a Second Amended Complaint. In January 2017, the district court granted the defendants’ motions to dismiss each claim, denied Dr. Rubin’s and Plaintiffs’ motions for sanctions against each other, and denied Plaintiffs’ motion for leave to amend their Second Amended Complaint. Marusza and Gucwa, the plaintiffs, now appeal.

 

The Medicare Secondary Payer Act

 

Congress enacted the Medicare Secondary Payer Act in 1980 to reduce federal healthcare expenses. The Act makes Medicare a secondary payer for a beneficiary’s medical services when payment is available from a different primary payer, such as a workers’ compensation plan. 42 U.S.C. § 1395y(b)(2)(ii). If that primary payer neglects its obligation to pay for a particular medical service, Medicare can cover the cost conditionally and seek reimbursement from the primary payer. 42 U.S.C. § 1395y(b)(2)(B)).

 

The Act also creates a private right of action with double recovery against primary payers who fail to provide the appropriate payment or reimbursement. 42 U.S.C. § 1395y(b)(3)(A). Marusza alleges that Accident Fund defrauded Medicare by forcing them to pay $15,665.00 in medical bills for which Accident Fund was responsible. Marusza seeks double damages under the Act.

 

As the party invoking federal subject matter jurisdiction, Plaintiffs bear the burden of establishing “the `irreducible constitutional minimum’ of standing”: that the plaintiff “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.”  The district court dismissed Marusza’s claim under the Act because he had not alleged financial harm. The court here affirms that decision. Because the Medicare Secondary Payer Act is not a qui tam statute, the financial injury suffered by the government does not confer standing upon other parties. In other words, this court holds private plaintiffs seeking MSP private cause of action double damages must suffer their own individual harm.

 

Marusza argues that this circuit held in Stalley v. Methodist Healthcare, 517 F.3rd 911,919 (USCA 6th Cir. 2008) that a plaintiff has standing under the Act as long as they are a Medicare beneficiary denied coverage by a primary payer. The court concludes this misrepresents Stalley. The court instead indicates that Stalley stands for the proposition that a particular plaintiff seeking relief under the Act as a “self-appointed bounty hunter,” lacks standing under the statute if “he was not a Medicare beneficiary, Medicare eligible, or denied coverage by a primary payer.”

 

Establishing Standing

 

This court rules that a plaintiff does not satisfy the elements of standing simply by showing that the insurer failed to make payments “on his behalf”; the plaintiff must show that he “himself suffered an injury because a primary plan has failed” to pay. In other words, this court finds that Marusza must allege that he was injured by Accident Fund’s failure to pay. Because Marusza’s complaint alleged merely that Medicare suffered a financial injury when Accident Fund failed to pay, the complaint failed to establish that Marusza himself had standing.

 

After the district court’s decision, Marusza alleged for the first time in his February 6 motion for rehearing and reconsideration that he had suffered financial loss. The court concludes the district court correctly denied the motion because “a motion for reconsideration may not be used to raise issues that could have been raised in the previous motion.” Marusza had multiple prior opportunities to address the standing issue. Furthermore, the conclusory allegations in the affidavit stated simply that Marusza had to “pay co-pays because Medicare does not pay the entire bill,” but failed to provide any receipts, billing statements, or other information about the amount, recipient, or date of the co-pays.

 

Marusza argued that the district court should have granted him leave to amend his affidavit a third time to address the lack of standing. However, Marusza made no request for leave to address the lack of personal financial harm until the motion for reconsideration. On appeal, this court refuses to consider Plaintiffs’ affidavits from the motion for reconsideration because “arguments raised for the first time in a motion for reconsideration are untimely and forfeited on appeal.”

 

Conclusion

 

Because Marusza did not allege personal financial loss in the original complaint or the two amended complaints, he has not established standing. Thus, the court affirms the district court. “The case law of this Circuit and the state of Michigan forecloses Plaintiffs’ RICO, Medicare Secondary Payer Act, tortious interference, and false imprisonment claims. For the foregoing reasons, the district court’s order is affirmed.”

 

This case continues a trend I have been writing and speaking about for some time, that Medicare beneficiaries are fast becoming and will continue to seek to become plaintiffs in MSP private cause of action for double damages. It is surprising to note that the decision does not mention the marquee cases in the 6th Circuit that gave way to such claims, including the July 16, 2014, United States Court of Appeals for the Sixth Circuit opinion on Michigan Spine and Brain Surgeons, LLC v. State Farm Mutual Automobile Insurance Company (allowing Michigan Spine to pursue its claim under the Medicare Secondary Payer Act against State Farm without showing of any financial loss), the September 2, 2014, United States District Court for the Western District of Kentucky opinion on Estate of Clinton McDonald v. Indemnity Insurance Company of North America (concluding that based on USCA 6th Circuit decision on Michigan Spine Clinic v. State Farm, as the Estate’s filing of the law suit prompted payment in the amount of $184,514. 24, the Estate was entitled to double damages per the MSP Private Cause of Action provision without showing personal financial loss), or the February 17, 2016, State of Michigan Circuit Court for the County of Oakland opinion on Hull v. Home Depot (finding that although Home Depot had already paid $42,233.16 to Medicare and Blue Cross Blue Shield Medicare Advantage Plan, because Mr. Hull’s filing of the MSP private cause of action prompted Home Depot’s payment of same, Mr. Hull was entitled to double damages without showing personal financial loss).

 

I do not anticipate this case will stop Medicare beneficiaries from becoming plaintiffs in MSP private cause of action for double damages. I do however anticipate such plaintiffs spending a considerable amount of time elaborating and enumerating the various ways in which they may have sustained personal financial loss as a result of the primary payer’s failure to reimburse Medicare for any accident related medical expenses that should have been the primary payer’s responsibility. Unfortunately, this may further complicate matters for primary payers, as it may allow such plaintiffs to file state causes of action permitted under specific state laws to prevent such financial losses to plaintiffs. Stay tuned as I continue to keep you updated on such trends and case law.

 

About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedInTwitter, Instagram, and Facebook. He can be reached at rgonzalez@flagshipsgi.com or 813.967.7598.

 

Rafael Gonzalez, Esq

 

About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensationliability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.

 

About Medicare Advantage and Prescription Drug Plans Reimbursement

42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.

 

About Medicaid Third Party Liability Liens

42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).

 

About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

 

 

 

Rafael Gonzalez No Comments

A Tale of Two Courts: Can MAPs Recoup MSP Double Damages from Medical Providers That Have Received Payment from Primary Payer?

Rafael Gonzalez, Esq. President, Flagship Services Group

 

What a difference a couple of miles and a couple of days make. On March 2, 2018, the United States District Court for the Middle District of Florida, (Orlando), published its opinion on MSPA Claims 1, LLC v. Halifax Health, Inc., in which the court found that a private right of action under the Medicare Secondary Payer Act, which provides for double damages when a primary payer does not reimburse Medicare payments that were the responsibility of the primary payer, is unavailable against providers of medical services. Just 18 days later, on March 20, 2018, the United States District Court for the Southern District of Florida (Miami), published its opinion on MSPA Claims 1, LLC v. Bayfront HMA Medical Center, LLC, concluding that because CMS has a right of action to recover its payments from any entity, including a beneficiary, supplier, physician, attorney, state agency, private insurer or medical provider that has received a primary payment, Medicare Advantage Organizations and their assignees also have a private cause of action for double damages against recipients of a primary payment, in this case Bayfront, a medical provider.

 

Florida Middle District Court Concludes Medical Providers Are Not Subject to Double Damages Under MSP Act Private Cause of Action

 

MSPA Claims 1, LLC v. Halifax Health, Inc., is one of many lawsuits filed by MSPA Claims 1 LLC (MSPA) against various entities, seeking to certify a class of all Florida Medicare Advantage Organizations (MAOs) and recover double damages for alleged untimely reimbursement for medical payments. The case, however, is unusual insofar as MSPA targeted a provider of medical services, in this case a hospital, as opposed to the primary payers or insurance companies usually named as defendants in such suits.

In the complaint, MSPA alleges to be the remote assignee of a now-defunct MAO, Florida Healthcare Plus Inc. (FHCP). The complaint alleges that a Medicare Advantage enrollee of FHCP was involved in a motor vehicle accident and, as a result, received treatment at Halifax Hospital Medical Center. In addition to being covered by a Medicare Advantage plan administered by FHCP, the enrollee had $10,000 in uninsured motorist coverage. The uninsured motorist policy was primary and the MAO’s obligations were secondary, with respect to the medical services provided by Halifax.

After the uninsured motorist insurer paid its full $10,000 policy limits to Halifax, Halifax billed FHCP for the balance, by way of an invoice that reflected the $10,000 already received from the other insurer. FHCP, however, erroneously failed to offset the $10,000 already paid by the uninsured motorist insurer, and rendered payment to Halifax in the full amount of the covered charges, resulting in a $10,000 overpayment to Halifax. The plaintiff’s complaint alleges that Halifax failed to reimburse the full $10,000 overpayment within 60 days of FHCP’s payment. As a result, MSPA, as the alleged assignee of FHCP, brought suit in Florida state court in Miami, seeking to certify a class and recover double damages for each medical claim covered by the MSP Act that was not reimbursed within 60 days of a secondary payment by FHCP.

A. Change of Venue

Halifax had the case removed from state court in Miami, then successfully had it transferred from the U.S. District Court for the Southern District of Florida, Miami Division to the U.S. District Court for the Middle District of Florida, Orlando Division. Halifax then obtained a stay of the case in the Middle District pending the District Court’s ruling on Halifax’s motion to dismiss the lawsuit. In its motion to dismiss, Halifax argued, among other things, that the MSP Act’s private right of action does not provide a remedy against providers of medical services.

B. Halifax Argues It Is Not A Primary Payer

The MSP Act’s private right of action provides that ”there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A). 42 U.S.C. §1395y(b)(3)(A). Halifax argued that MSPA had not sued a primary plan, and it was not alleged anywhere in the complaint that a primary plan failed to make primary payment. Indeed, the only primary plan identified in the complaint, the uninsured motorist insurer, paid its full $10,000 limit before FHCP made its erroneous overpayment.

C. Court Agrees With Halifax, Dismisses Claim

Following extensive briefing, the District Court entered an order agreeing with Halifax’s interpretation of the MSP Act’s private right of action, ruling “the issue here is not FHCP’s right to reimbursement; the issue is whether FHCP’s assignee can pursue that right via the MSP Act’s private right of action. By its terms, that right of action only applies to primary plans. MSPA offers no argument as to why it should also apply to entities, such as Halifax, that receive payment from primary plans. Count I will therefore be dismissed.”

In light of this ruling, the District Court did not reach Halifax’s alternative argument that the payment at issue in the case was not a “conditional payment” by an MAO under the MSP Act and was, instead, an erroneous overpayment made after payment of the primary insurer such that the remedies in the MSP Act did not apply.

 

Florida Southern District Court Holds Advantage Plans May Seek Double Damages from Medical Providers if Failed to Reimburse

 

On February 1, 2014, an enrollee of FHCP, was involved in an automobile accident. As a result of that accident, the enrollee received medical treatment at Bayfront HMA Medical Center (Bayfront). The enrollee was also covered by First Acceptance Insurance Company (FAIC), which provided no-fault benefits. On April 14, 2014, Bayfront billed FAIC $6,255.96 for medical items and services related to the accident. FAIC paid Bayfront $3,753.58. Thereafter, on May 12, 2014, Bayfront billed FHCP the same $6,255.96 for medical items and services related to the accident. FHCP paid $691.64 of the billed charges.

On March 9, 2017, MSPA, having received an assignment for MSP related causes of action from FHCP, filed an action in the Circuit Court of the 11th Judicial Circuit in Miami Dade County, Florida on behalf of itself and a class of similarly situated Florida Medicare advantage organizations against Bayfront. FHCP alleged an MSP private cause of action, Florida deceptive and unfair trade practices claim, and an unjust enrichment claim.

On May 10, 2017, Bayfront removed the action to federal court, the United States District Court for the Southern District of Florida. On June 5, 2017, Bayfront moved the court to dismiss the complaint arguing that the MSP claim must be dismissed because it is against a provider and it is barred by the applicable statute of limitations. In addition, Bayfront argued Plaintiff had no standing to bring the deceptive and unfair trade practices or unjust enrichment claims.

A. Can MAP Seek Double Damages from Medical Facility Under MSP?

In 1980, in an effort to reduce healthcare costs to the federal government, Congress enacted the MSP. The MSP contains nine paragraphs. Paragraphs two and three establish Medicare as a secondary payer and further establish a private cause of action. The conditional payment provision of the statute requires both a primary plan and an entity that receives payment from the primary plan to reimburse the government for any conditional payments made by Medicare if the primary plan has or had responsibility to make the primary payment. 42 USC 1395y(b).

The MSP permits the United States to bring an action for double damages against all entities that are or were required or responsible to make payment under a primary plan or any entity that has received payment from a primary plan or from the proceeds of a primary plan payment to any entity. Therefore, the government may file an action against a primary insurance company or any entity that receives a payment from a primary insurance company to collect double damages when the insurance company or recipient of those funds fail to reimburse Medicare. 42 USC 1395y(b)(2)(iii).

As specified in the CMS implementing regulations, a recipient could include the Medicare beneficiary, a medical provider, or a law firm receiving settlement proceeds. In other words, CMS has a right of action to recover its payments from any entity, including a beneficiary, a medical provider, a medical supplier, a physician, an attorney, a state agency, or a private insurer that has received payment from the primary payer. 42 CFR 411.

In 1997, Congress created the Medicare Advantage program, wherein private insurance companies, operating as MAOs, contract with CMS to administer Medicare benefits to individuals enrolled in a MAP under Medicare Part C. 42 USC 1395w-22(a)(4). Over the last 5 or 6 years, there has been extensive litigation over whether MAOs may utilize the MSP private cause of action provision to assert claims against primary plans. The 11th Circuit Court of Appeals has determined that a MAP may avail itself of the MSP private cause of action when a primary plan fails to make payment or to reimburse the MAO’s payment.

In this case, however, the court is faced with a new question, whether a MAP also has a private cause of action for reimbursement against the recipient of a payment, very specifically a medical facility that may have received payment from both the primary payer as well as the Medicare advantage plan.
B. Court Concludes MAP May Seek Double Damages from Provider

42 USC 1395y(b)(2)(A) and (B) provides the government with a cause of action for double damages against both primary insurance and entities that received payment or proceeds from a primary plan. However, here, Plaintiff is proceeding under 42 USC 1395y(b)(3)(A), which allows a private party to bring an action for double damages in the case of a primary plan which fails to provide for primary payment. Bayfront argues this language only permits a private cause of action against primary plans and not medical providers.

The court finds that 42 USC 1395y(b)(3)(A) could be interpreted in more than one way. Because the provision does not specifically reference providers, it could be interpreted as only permitting the primary cause of action against a primary plan. However, the provision could also be interpreted to apply in the case of any entity’s failure to provide appropriate reimbursement. Both primary plans and providers are required to reimburse Medicare or a MAP for conditional payments. As a result, (3)(A) could be interpreted to mean that a private cause of action is available in cases where a primary plan fails to reimburse Medicare or any Advantage Plan or where a provider fails to make an appropriate reimbursement.

CMS regulations provide that MAOs will exercise the same rights to recover from a primary plan, entity, or individual that exercises under the MSP regulations. Very specifically, 42 CFR 411.24(g) provides that CMS has a right of action to cover its payment from any entity, including a beneficiary, provider, supplier, physician, attorney, Steve agency, or private insurer that has received a primary payment. Therefore, the court finds Medicare advantage organizations have the same recovery rights as Medicare when it comes to recovery from a provider.

The court further points out that Medicare Part C requires MAOs to provide their enrollees with the same benefits that are provided under traditional Medicare. Consequently, the court concludes that this statutory scheme does not make sense if MAPs are required to provide the same benefits in the same manner as the government but then are limited in ways that the government is not from pursuing reimbursement.

The court therefore finds that Plaintiff may bring a private cause of action against Bayfront for double damages if Bayfront received a primary payment that should have been reimbursed to Plaintiff.

 

C. Court Determines Amount Awardable Still to be Proven

As to the amount, Plaintiff alleges that it is entitled to $12,511.92, double the $6,255.96 amount Bayfront billed Plaintiff for services related to this claim. However, Plaintiff has only alleged it paid Bayfront $691.64 of the $6,255.96 bill, and that First Acceptance paid $3,753.58 of the bill. While the court finds, as a matter of law, that a MAP has a private cause of action against a provider under the MSP, Plaintiff will still be required to prove that the amount it paid Bayfront was actually a conditional payment subject to reimbursement under the MSP.
D. Court Rules Claim Was Filed Timely

Bayfront also argues that Plaintiff’s MSP claim is barred by the limitations period in 42 USC 1395(b)(2)(B)(vi). That statutory section indicates that the United States may seek to recover conditional payments where the request for payment is submitted to the entity required responsible to pay within the three-year period beginning on the date on which the item or service was furnished. The court however disagrees with Bayfront’s use of that statute. Instead, the court finds the applicable statute of limitations is in 42 USC 1395y(b)(2)(B)(iii), which provides that action may not be brought by the United States with respect to payment owed if the complaint is filed not later than three years after the date of the receipt of notice of a settlement, judgment, award, or other payment relating to such payment owed. Here, Plaintiff brought this action on March 9, 2017, less than three years from the date it was billed by Bayfront or had any notice that a primary payment had been made to Bayfront. The court therefore concludes that the action is timely.

 

E. Court Finds No Standing to Bring Deceptive, Unfair Trade, Unjust Enrichment Claims

Regarding the deceptive and unfair trade practice, as well as unjust enrichment claims, neither of which were included in the assignment provided by Florida health care plan to the plaintiff here, the court finds plaintiff has no standing to bring those claims.

 

Conclusion

 

What a difference a couple of miles and a couple of days makes. Virtually the same facts, almost entirely the same parties, and certainly the same law and arguments, but profoundly different results with the United States District Court for the Middle District of Florida, Orlando Division, finding that a private right of action under the MSP is unavailable against providers of medical services, but with the United States District Court for the Southern District of Florida, Miami Division, finding that MAPs may file a private cause of action under the MSP for double damages against providers of medical services. I am sure we have not heard the last word on this issue in either of these cases, so stay tuned as other similar cases are decided and appeals on both of these matters are published.

 

About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedInTwitter, Instagram, and Facebook. He can be reached at rgonzalez@flagshipsgi.com or 813.967.7598.

 

Rafael Gonzalez, Esq

 

About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensationliability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.

 

About Medicare Advantage and Prescription Drug Plans Reimbursement

42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.

 

About Medicaid Third Party Liability Liens

42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).

 

About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

Rafael Gonzalez No Comments

New York State Court Rules No Settlement Due to Medicare Mistake

On March 15, 2018, the Supreme Court of the State of New York, in New York County, published its opinion on Daniel Mayo, as the Administrator of the Estate of Annette Mayo v. NYU Langone Medical Center, finding that the parties’ Settlement Agreement is not binding on the plaintiff since it was not executed by the defendant or the insurer, as required under the express terms of the Settlement Agreement. In addition, the court concludes that the Settlement Agreement was the product of a mutual mistake based on the parties’ incorrect belief that the Medicare lien was $2,824.50, when in fact it was $145,764.08. The court therefore rules there is no settlement and orders the action back to the trial calendar.

 

Introduction

Since they are federal topics, we are used to federal court opinions defining and explaining Medicare and Medicaid issues. However, once in a while we see state court opinions with significant Medicare and/or Medicaid ramifications. This New York medical malpractice claim decision is one of those; it is a perfect example of how inappropriately handling conditional payment issues can and will cause huge problems, including blowing up your settlement. For those of us who have been practicing law for over 30 years, historically it has always been plaintiff counsel who assumed the responsibility for resolving Medicare liens. This case, without question, highlights the need for defendants, insurers, and their counsel to revisit that old theorem and instead develop a new process in which the payer takes on the responsibility for assuring appropriate handling and correct reimbursement of Medicare conditional payments.

 

Facts of the Case

Annette Mayo (Decedent) was treated at NYU Langone Medical Center (Defendant). She entered the hospital on November 9, 20I0, for a total hip replacement. On November 13, 2010, she fell out of her bed, and underwent right hip revision surgery. During her hospitalization, decedent contracted Clostridium Difficile (a gastrointenstinal bacterial infection), which extended her hospitalization and required various procedures. Decedent was discharged from the defendant hospital to a skilled nursing home facility in March 2011, and died on May 24, 2014. Daniel Mayo, as the administrator of decedent’s estate (Plaintiff) filed a claim alleging that defendant failed to timely diagnose decedent with Clostridium Difficile, and failed to appropriately secure and supervise her.

On January 15, 2015, the Center for Medicare and Medicaid Services (CMS) sent a conditional payment letter requesting $2,824.50 in overpayment, and attached a payment summary form listing the claims adding up to the total. The letter advised that “the conditional payment amount listed above is an interim amount. We are still reviewing medical claims related to your case.”

On July 21, 2015, CMS sent another conditional letter requesting $1,811.95 for overpayment, which letter contained the same language as to January 15, 2015 letter, advising that the amount listed was an interim amount and was still being reviewed.

By letter dated January 5, 2016, which was copied to defendant’s counsel, plaintiff notified the court that the action had been settled for $725,000 “inclusive of all liens, attorneys fees, without costs to either side.” By letter dated January 6, 2016, plaintiff counsel wrote defendant’s counsel that “the final Medicare lien amount is $1,811.95,” and requested that he forward releases. Also, on January 6, 2016, plaintiff counsel signed a stipulation of discontinuance, which was never filed with the court.

On January 6, 2016, counsel for defendant sent plaintiff counsel the Settlement Agreement, a 9-page document, indicating the insurer would pay $725,000. The breakdown was as follows: Medicare $2,824.50, the remaining $722,175.50 payable to Daniel Mayo as Executor of the Estate of Annette Mayo and Krentsel & Guzman, LLP, plaintiff’s attorneys.

On January 20, 2016, plaintiff and his counsel executed the Settlement Agreement, and on January 22, 2016, plaintiff counsel sent a letter with the executed Settlement Agreement enclosed and requested payment.

 

The Medicare Lien

On that same date, January 20, 2016, CMS sent a final lien letter to plaintiff and his counsel notifying them that Medicare was seeking repayment of $145,764.08 for the cost of the decedent’s medical care, and attached a list of its payments made on decedent’s behalf.

On February 2, 2016, plaintiff counsel challenged Medicare’s demand amount writing that “after the plaintiff accepted the settlement in reliance on the $1,811.95 amount stated in the July 15, 2015 letter, we informed Medicare of the settlement and awaited a demand letter fully expecting it to be lower than the conditional payment amount cited in accordance with our prior dealings with MSPRC (Medicare Secondary Payer Recovery Contractor). Instead, we were shocked to receive the January 22, 2016 letter with a demand amount of$145,764.08. It is unclear where this demand amount is coming from, however, this settlement offer was made only in contemplation of decedent’s pain and suffering and not for her medical bills which are not part of the settlement amount.”

On March 3, 2016, Medicare upheld its previous determination. Plaintiff requested reconsideration, and on September 8, 2016, the Qualified Independent Contractor (QIC) issued an unfavorable reconsideration decision upholding the prior determination.

Plaintiff next sought review before an Administrative Law Judge (ALJ) from the Office of Medicare Hearings and Appeals. On May 15, 2017, the ALJ found that plaintiff was responsible for the conditional payments, plus interest.
In the meantime, in the year and half that had since passed, neither defendant nor its insurer signed the Settlement Agreement, nor did the insurer proffer payment in accordance with the Settlement Agreement. In addition, judgment was never entered, and no stipulation of discontinuance was ever filed.

 

Plaintiff Argues Settlement Agreement is Null and Void Because of Medicare Lien Error

Plaintiff here moves to declare the Settlement Agreement null and void, arguing it was entered into under an erroneous assumption based on the conditional letters from Medicare that the maximum amount that Medicare would assert was $2,824.50. Plaintiff further argues that the Settlement Agreement is not binding as it was never filed with the county clerk, and is not signed by both parties.

Defendant opposes the motion, asserting that the Settlement Agreement is enforceable as it satisfies the statutory writing requirement, and was not entered into as the result of a “mutual mistake,” but, rather, plaintiff’s unilateral error in failing to ensure that the amount of the Medicare lien was correct. In this connection, defendant argues that investigating the extent of the Medicare liens was the sole responsibility of plaintiff, and that his failure to ascertain the correct amount of the liens is a “unilateral mistake,” and thus does not provide a basis for voiding the Settlement Agreement.

Defendant further argues that the Settlement Agreement is binding upon plaintiff since it was signed by plaintiff and his attorney, that the clear and unambiguous language of the agreement shows that it should be enforced according to its terms, and that although the agreement provides that it is not effective unless executed by the parties, the construction and drafting of the agreement demonstrates that no signature was required of defendant (or its representative) in order to make the agreement binding.

Did the Parties Intend to be Bound by the Terms of the settlement Agreement?

The threshold issue is whether the Stipulation of Settlement is enforceable. Assuming the Settlement Agreement satisfies the minimum requirement of a signed written instrument under CPLR 2104, to enforce the Settlement Agreement under the rules of contract law, it must be found that the parties intended to be bound by its terms in the absence of the signature of defendant or its representative.

“In determining whether a contract exists, the inquiry centers upon the parties’ intent to be bound, i.e., whether there was a ‘meeting of the minds’ regarding the material terms of the transaction.” In general, a written contract signed by the parties is not necessary to form a contract as long as the agreement contains its essential terms, and “there is objective evidence establishing that parties intended to be bound.” However, “it is well settled that, if the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed.”

Here, the Settlement Agreement provides that “it shall become effective upon execution by the parties,” which provision is indicative of the parties’ intent that it would not be binding until executed by the parties. Accordingly, the court finds that the Settlement Agreement is not binding on the plaintiff since it was not executed by the defendant or the insurer, as required under the express terms of the Settlement Agreement.

 

The Settlement Agreement is Unenforceable Because of Mutual Mistake

Next, the court finds that even if the Settlement Agreement were enforceable in the absence of a signature from defendant or the insurer, it would be “subject to vacate on the grounds of mutual mistake.” In general, to vacate a stipulation of settlement, the moving party must show that a mutual mistake existed at the time the stipulation was entered that was so substantial that it prevented a meeting of the minds.

The court finds plaintiff has met this burden by demonstrating that the Settlement Agreement was the product of a mutual mistake based on the parties’ incorrect belief, as reflected in the record demonstrating that the parties’ negotiations were based on an assumption that the Medicare lien was $2,824.50, when it was actually $145,764.08.

Furthermore, given the more than $140,000 difference between the two lien amounts, plaintiff has demonstrated that the error was sufficiently substantial so as to prevent a meeting of the minds as to the $750,000 settlement. In addition, because the Settlement Agreement was drafted by defendant, the error cannot be attributed to a unilateral mistake by the plaintiff, but was in fact a mutual mistake.

 

Conclusion

In view the above, the court concludes that the Settlement Agreement is not binding on the plaintiff and is therefore vacated. As requested by plaintiff, the action was restored to the trial calendar and were ordered to appear for a pre-trial conference on April 19, 2018, at 2:30 pm in New York, NY.

It is hard to imagine that experienced and capable plaintiff and defense counsel would have relied upon what was clearly identified as a non-final, but interim conditional payment report from Medicare to settle the file. As the parties found out here the hard way, Medicare will only provide a final demand for reimbursement of conditional payments related to the claim upon learning of settlement of the claim.

Resolution of Medicare payments is no longer a matter of concern only to the plaintiff and his/her counsel. It is, as this case clearly shows, of great significance and importance to corporate entities, insurers, and their attorneys. As I have been recommending for a number of years, it is time that defendants, insurers, and their defense counsel create an internal process or hire a vendor to handle resolution of conditional payments. Doing so in a case like this one would have allowed them to learn early on of the correct amount due. This would have better prepared them to settle the file earlier, accurately, and without any complications. It is time.

 

About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedInTwitter, Instagram, and Facebook. He can be reached at rgonzalez@flagshipsgi.com or 813.967.7598.

 

Rafael Gonzalez, Esq

 

About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensationliability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.

 

About Medicare Advantage and Prescription Drug Plans Reimbursement

42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.

 

About Medicaid Third Party Liability Liens

42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).

 

About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

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Commercial Repayment Center Returned $131.78 Million to Medicare Trust Fund in FY 2017

Rafael Gonzalez, Esq. President, Flagship Services Group

As Required by Section 1893(h) of the Social Security Act, the United States Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS), Medicare Secondary Payer (MSP) Commercial Repayment Center (CRC) published its third annual report to Congress for FY 2017 in March 2018. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Downloads/The-Medicare-Secondary-Payer-Commercial-Repayment-Center-in-Fiscal-Year-2017.pdf. Based on the Group Health Plan (GHP) and Non-Group Health Plan (NGHP) recovery work of the CRC, for FY 2017 (October 1, 2016 through September 30, 2017), CMS returned $131.78 million dollars to the Medicare Trust Funds.

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Rafael Gonzalez No Comments

Connecticut Federal District Court Allows MAO PCA Against Corporate Defendant, But Not Against Beneficiary and Her Attorneys

Rafael Gonzalez, Esq. President, Flagship Services Group

 

On March 13, 2018, the United States District Court for the District of Connecticut published its decision on Aetna Life Insurance Company v. Nellina Guerrera, Carter Mario Injury Lawyers, attorney Sean Hammil, attorney Danielle Wisniowski, and Big Y Foods, Inc. concluding that the MSP Private Cause of Action provision unambiguously permits suit by MAOs and, further, that even if it was ambiguous, 42 CFR section 422.108(f) grants MAOs the right to sue under the Private Cause of Action provision. The court also finds that suit may be brought against a primary plan, but not against beneficiaries or their attorneys. The court also concludes that suit may be brought against Big Y, as its settlement payment to Guerrera and/or her attorneys was not appropriate reimbursement under the MSP.

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Rafael Gonzalez No Comments

Florida Federal District Court Holds Advantage Plans May Seek Double Damages from Medical Providers if Failed to Reimburse

Rafael Gonzalez, Esq. President, Flagship Services Group

 

On March 20, 2018, the United States District Court for the Southern District of Florida published its opinion on MSPA Claims 1, LLC v. Bayfront HMA Medical Center, LLC, concluding that because CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received a primary payment, Medicare Advantage Organizations also have a private cause of action for double damages against the recipient of a primary payment, in this case Bayfront, a medical provider.
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Florida Federal District Court Concludes Medical Providers Are Not Subject to Double Damages Under MSP Act Private Cause of Action

Rafael Gonzalez, Esq. President, Flagship Services Group

On March 2, 2018, the United States District Court for the Middle District of Florida, Orlando Division, published its opinion on MSPA Claims 1, LLC v. Halifax Health, Inc., in which the court found that a private right of action under the Medicare Secondary Payer Act, 42 U.S.C. §1395y(b) et seq. (MSP Act), which provides for double damages in the event of untimely reimbursement of Medicare payments in certain circumstances, is unavailable against providers of medical services. Based on such ruling, the court dismissed with prejudice claims that had been raised under the MSP Act against Halifax Hospital Medical Center, a public hospital based in Daytona Beach, Fla.

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New Work Comp MSA Review Contractor Starts 3/19/18; No Expected Changes and No News on Liability MSAs

Rafael Gonzalez, Esq. President, Flagship Services Group

It has been a long time coming, two years to be exact. After the Centers for Medicare and Medicaid Services (CMS) announced their anticipated release of a solicitation for the Workers’ Compensation Review Contractor (WCRC) in 2016 and 2017 and further announced it was continuing to consider expanding its voluntary MSA review process to include liability insurance (including self-insurance) and no-fault insurance MSA amounts in 2016 and 2017, Medicare Secondary Payer (MSP) stakeholders never thought the day would come. But, after a challenge of the awarded contract and after several months during which Provider Resources continued to work under an expired contract, on March 7, 2018, CMS finally held the WCRC Transition Webinar to introduce Capitol Bridge, LLC, the new workers’ compensation review contractor.

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NCCI Publishes 2018 Update on Medicare Set Asides and Workers Compensation

Rafael Gonzalez, Esq. President, Flagship Services Group

On February 8, 2018, the National Council on Compensation Insurance (NCCI) published its MEDICARE SET-ASIDES AND WORKERS COMPENSATION— 2018 UPDATE (study), written by Nedžad Arnautović. The study can be found at https://www.ncci.com/Articles/Documents/II_MSA-WC-Study.pdf What follows is a verbatim rendition of the facts, analysis, findings and conclusions found in the report.

 

INTRODUCTION

“In September 2014, NCCI published a study on Medicare Set-Asides (MSAs) in workers compensation. Using the sample of MSAs submitted to the Centers for Medicare & Medicaid Services (CMS) between September 2009 and November 2013 and completed between January 2010 and November 2013, the study examined several aspects related to Medicare Set Asides (MSAs), such as the distribution of amounts of MSAs and total settlements that include MSAs, claimants’ age distribution, the duration of time from submission to CMS approval, and the relation between submitted and CMS-approved MSA amounts. This paper provides an update and expansion of the previous MSA study using the larger data sample as well as additional experience from 2014 and 2015.”

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Here We Go Again, as New Medicare Contractor Takes Over Reimbursement of Conditional Payments When ORM Accepted

Rafael Gonzalez, Esq., President, Flagship Services Group

 

After 35 years of seeking reimbursement of conditional payments post settlement, judgment, award, or payment of a case, in 2015, the Centers for Medicare & Medicaid Services (CMS) transitioned a portion of the Non-Group Health Plan (NGHP) Medicare Secondary Payer (MSP) recovery workload from the Benefits Coordination & Recovery Center (BCRC) to its Commercial Repayment Center (CRC). As a result, on October 5, 2015, the CRC assumed responsibility for the recovery of conditional payments where CMS is pursuing recovery directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity, referred to as Applicable Plans (AP), as the identified debtor. Since then, CMS, through a contract with CGI, had been pursuing recovery directly from APs as the identified debtor when an applicable plan reports that it has ongoing responsibility for medicals (ORM) or otherwise notifies CMS of its primary payment responsibility.

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