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Conditional Payment Claim Appeal Addressed by District Court

In the Estate of William Fisher, 2020 U.S. Dist. LEXIS 166439 (D. Minn. Aug. 21, 2020), the Plaintiff sought judicial review of the Medicare Appeals Council’s (MAC) decision regarding the amount of conditional payment claims asserted in this case. The underlying medical malpractice lawsuit alleged that the Mayo Clinic negligently administered Ibuprofen to the claimant, causing renal failure that required hospitalization and dialysis treatment, and ultimately led to the claimant’s death. Medicare issued an initial conditional payment letter in the amount of $277,206.58, which included payments made for the claimant’s hospitalization and dialysis. Plaintiff disputed these charges on the basis that expert testimony had established that the administration of Ibuprofen did not, in fact, cause the claimant’s renal failure. In response, Medicare issued a second letter identifying only $12,657.92 in conditional payments. The Plaintiff then lowered its demand and the case settled.

After receiving notification of settlement, Medicare issued a demand letter, indicating that it had paid $65,363.83 in conditional payments related to the injury at issue. The letter indicated that this amount was reduced by Medicare’s share of Plaintiff’s procurement costs and requested reimbursement in the amount of $35,356.60. Plaintiff appealed, asserting that the conditional payment claims should be no more than $12,657.92. His appeal was denied by Medicare at the redetermination level and by the Qualified Independent Contractor (QIC) at the reconsideration level. Next, Plaintiff appealed to the Administrative Law Judge (ALJ), who agreed that the correct amount due was $12,657.92. In an effort to clarify if this amount was subject to a procurement cost reduction, Plaintiff submitted a “Request for Review of Administrative Law Judge Medicare Decision/Dismissal”. However, the MAC deemed Plaintiff’s request to be an appeal of the ALJ’s decision and completed a full review of the case. The MAC reversed the ALJ and confirmed that the amount due was $35,356.60. Plaintiff then appealed to the District Court.

The District Court reviewed the record to determine whether there is substantial evidence to support the MAC’s decision and determined that remand was appropriate. The Court explained that Federal law requires the party seeking MAC review to identify the part(s) of the ALJ decision to be reviewed and MAC is to limit their review to those issues only. Because the MAC conducted a full review of the record rather than deciding the narrow issue identified in the Request for Review, the Court remanded the case for the MAC to consider whether the ALJ’s award of $12,657.92 was subject to a procurement cost reduction.

The Court further noted that, even if it had determined that the MAC had authority to conduct a full de novo review of the ALJ’s award, the MAC did not have substantial evidence to support its findings. The documentation provided by the Plaintiff established that Medicare’s conditional payment request was over-inclusive; thus, the burden shifted to Medicare to show that the expenses were related to the alleged injuries.

This case highlights two important issues with regard to Medicare’s conditional payment claims. First, we are reminded that the scope of Medicare’s right to reimbursement is defined by the injuries alleged in the claim and released in settlement. Secondly, the conditional payment amount is not final until post-settlement, when Medicare receives notification of the settlement and issues the Formal Demand. We should keep these issues in mind during settlement negotiations and ensure that the alleged injuries are clear and a plan for reimbursement of the Medicare lien is established. Please let us know if we can assist you with Medicare-related settlement language or conditional payment claim resolution. We are always happy to help!


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