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.
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 LinkedIn, Twitter, Instagram, and Facebook.
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’ compensation, liability 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 email@example.com.