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US District Court: Evaluates Requirement of Demonstrated Responsibility

Previously, we reported on the trend of recent decisions holding that a contractual relationship alone is insufficient to demonstrate primary payer responsibility sufficient to proceed under the Medicare Secondary Payer Act (MSPA). See MSPA Claims 1, LLC v. Liberty Mut. Ins., No. 1:15-cv-21417-UU, 2015 U.S. Dist. LEXIS 99188 (S.D. Fla. July 22, 2015); see also Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006). As predicted, courts continue addressing the requirement to establish a demonstrated responsibility for payment before such an action under the MSPA is allowed to proceed.

In Hope v. Fair Acres Geriatric Ctr., 2016 U.S. Dist. LEXIS 42078 (E.D. Pa. Mar. 29, 2016), the Court discussed the relationship between the time when a defendant’s payment responsibility must be demonstrated and the time when a plaintiff’s claim under the MSPA is allowed to proceed. In this case, after being admitted to Fair Acres Geriatric Center, a county-owned nursing home, Plaintiff, a 90 year-old woman, experienced infection, gangrene, dehydration, and a lower extremity sacral wound that resulted in a partial leg amputation. Plaintiff filed a complaint against Fair Acres asserting, among other claims, a violation of the Medicare Secondary Payer Act as to medical expenses incurred and paid for by Medicare. Defendant, Fair Acres, filed a motion to dismiss.

Considering Defendant’s motion to dismiss, the Court quickly found that Plaintiff’s only allegation concerning Fair Acres’ “primary plan” status, that “Defendant and/or its insurer are primary plans under the Act,” is a conclusion of law. Because Plaintiff’s legal conclusion is not entitled to a presumption of truth, the Court found that Plaintiff failed to state a claim under the MSPA.

Despite the finding that Plaintiff failed to state a claim under the MSPA, the Court went on to consider whether or not Plaintiff demonstrated Fair Acres’ responsibility to pay for any services rendered according to 42 U.S.C. § 1395y(b)(2)(B)(ii).

Specifically, the statute provides, in relevant part that: “a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added).

Defendant Fair Acres argued that “a claim under the MSPA simply does not lie against a defendant whose liability to pay medical costs has yet to be determined.” Plaintiff, on the other hand, asserts that this action would demonstrate Fair Acres’ payment responsibility.

The issue before the Court, the interplay between the time when a defendant’s responsibility must be demonstrated and the time when a plaintiff can bring a MSPA claim, had not yet been addressed by the Third Circuit. As such, the Court looked to decisions in the Eleventh and Sixth Circuits, both of which held that responsibility must be demonstrated as a condition precedent to bringing an MSPA claim. Glover v. Liggett Grp., Inc., 459 F.3d 1304, 1309 (11th Cir. 2006); Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 293 (6th Cir. 2011).

The Court noted that there had not been a determination that Fair Acres was primarily responsible for Plaintiff’s Medicare payments. Therefore, the Court found, it cannot be said that Fair Acres has failed to provide appropriate reimbursement. Because Plaintiff failed to satisfy the condition precedent to bringing her MSPA claim, the Court dismissed Plaintiff’s MSPA claim and granted leave to amend.

We expect to see more cases address the demonstrated responsibility requirement that must be satisfied before an action can proceed under the MSPA. As always, we will keep you updated on the latest developments on this issue, as well as all decisions related to the Medicare Secondary Payer Act.

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