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State Court Vacates Settlement due to Error Regarding Medicare Conditional Payment Claims

In Mayo v. NYU Langone Medical Center, a New York state court vacated a settlement agreement (“the Agreement”), finding that a mutual mistake regarding the amount of conditional payment claims for which Medicare was seeking reimbursement existed at the time the Agreement was reached, rendering the Agreement void. 2018 N.Y. Misc LEXIS 885.

This matter arose from a medical malpractice lawsuit brought by the administrator of the decedent’s estate (“Plaintiff”) against the NYU Langone Medical Center (“Defendant”). The parties were involved in pre-trial proceedings from October 2014 to January 2016. During that time, the Center for Medicare and Medicaid Services (“CMS”) sent two conditional payment letters noting that conditional payments were made by Medicare for the decedent’s medical treatment, and CMS would be seeking reimbursement for the same. The first letter, dated January 15, 2015, asserted conditional payment claims totaling $2,824.50, while the second letter, dated July 25, 2015, asserted conditional payment claims totaling $1,811.95. Both letters advised that “the conditional payment amount listed above is an interim amount. We are still reviewing medical claims related to your case.”

The parties agreed to a settlement in the amount of $725,000.00. The Plaintiff executed the Agreement on January 20, 2016. The Agreement addressed the conditional payment claims by noting that the Defendant’s insurer would pay the Medicare lien in the amount of $2,824.50, and the remainder of the settlement amount would go to the Plaintiff. On January 22, 2016, CMS sent a final lien letter to the Plaintiff asserting $145,764.08, in conditional payment claims and seeking reimbursement for the same. The Plaintiff appealed the conditional payment claim amount to CMS, arguing that he had accepted the settlement offer of $725,000.00, based, in part, on his understanding that the conditional payment claims asserted would amount to no more than $2,824.50. CMS denied the appeal, and the Plaintiff requested a review of CMS’s decision by a Qualified Independent Contractor (“QIC”). The QIC upheld CMS’s decision. The Plaintiff next sought reconsideration of the QIC’s decision by an Administrative Law Judge (“ALJ”), and the ALJ found that the Plaintiff was responsible for the full amount of conditional payment claims including interest.

In the interim, the Defendant did not sign the Agreement, and payment to the Plaintiff was not made by the Defendant’s insurer. Additionally, a stipulation of discontinuance was not filed, and judgement was not entered by the court. Following the ALJ’s unfavorable determination, the Plaintiff moved in state court to have the Agreement vacated. Following an analysis under New York law, the court held that the Agreement was not binding because it had not been executed by the Defendant. Additionally, however, the court held that, even if the document had been properly executed, the Agreement was “subject to vacatur on the grounds of mutual mistake.” The court determined that both parties erroneously believed, at the time of the Agreement, that no more than $2,824.50, in conditional payment claims would be asserted by CMS. The court determined that this was a mistake of fact “sufficiently substantial so as to prevent a meeting of the minds” as to the settlement amount and render the Agreement invalid.

Please let us know if we can help your settlement go smoothly by assisting with the research, negotiation, and resolution of conditional payment claims.

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