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ALERT: District Court Finds CMS Erred in Requiring Carrier to Reimburse Entire Provider Charge Rathe

It is a familiar story for many insurance carriers and self-insured employers—Medicare has asserted a number of conditional payment claims which they indicate are related to an accident-related injury. Although the majority of the diagnosis codes associated with the charges are clearly unrelated to the injuries at issue, one code is related. Because of that one code, CMS assumes the entire charge is related to the accident and requests reimbursement for everything. In order to have it removed, CMS must be persuaded that the entire charge is for unrelated treatment, which is often a difficult to impossible task.

In a recent case, Cali. Ins. Guar. Ass’n v. Burwell, No. 2:15-cv-01113-ODW (FFMx), 2017 U.S. Dist. Ct. LEXIS 1681, the U.S. District Court of Central California addressed this exact problem and issued a ruling which could impact the way CMS handles this situation in the future. In this particular case, CMS (Defendant) paid medical benefits on the behalf of three individuals who were also covered under workers’ compensation policies administered by the California Insurance Guaranty Association (CIGA) (Plaintiff). CMS sought reimbursement from CIGA for payments it had made on behalf of the three beneficiaries. In response to CMS’ request for reimbursement, CIGA alleged that CMS determined the reimbursement responsibility of CIGA in a way that is contrary to the Medicare Secondary Payer Act (MSP) and resulted in a demand which was over-inclusive. CIGA requested that the court grant it partial summary judgment finding that the demands were over-inclusive and barring Defendant from reapplying this practice to demands issued to them in the future. Defendant, in response, argued in part that CIGA did not properly show that CMS’ claims were over-inclusive and CMS’ practice is based on a reasonable interpretation of the MSP. In reviewing the facts and the law, the Court rejected Defendant’s argument and granted partial summary judgment to CIGA.

In all three demands issued by CMS in this case, the charges asserted contained at least one code related to the work injury; however, they also contained codes which were undeniably unrelated. The Court noted that both parties were in agreement on this point. The issue came down to whether CIGA provided enough evidence that the reimbursement requests were erroneous and also turned on the proper interpretation of the MSP and implementing regulations. The Court first found that CIGA’s prior disputes of the claims asserted, in which they identify all of the unrelated diagnosis codes, was sufficient to evidence that there was at least an argument that the charges were erroneously issued. The Court next reviewed the language in the MSP itself which indicates that “a primary plan…shall reimburse [Medicare] for any payment made…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.” 42 U.S.C. §1395y(b)(2)(B)(ii). While the Defendant argued that an item or service refers to the entire medical treatment rendered by a provider, the Court found that interpretation to be unsupported. Reviewing regulations and the use of the terms “item and service” in other parts of the statute, the Court found that just because various medical treatments are lumped together in one charge does not mean that they are one “item or service”. Rather, one provider charge can contain a number of items and services for which a carrier may only have partial primary payment responsibility. This decision provides an excellent foundation for a more judicious and reasonable conditional payment claim reimbursement policy. We strongly support the Court’s decision and will keep you posted regarding similar cases and any changes in CMS’ policies resulting from the same.

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