Appeals Court Rules Advantage Plans' Contractors Can Bring Private Cause of Action for Double Damages

On September 4, 2020, the United States Court of Appeal for the 11^th Circuit published its opinion on MSP Recovery Claims, Series LLC, v. ACE American Insurance Company, concluding that several insurance companies sued by the same recovery vendor on behalf of advantage plans and their contractors presented no persuasive rationale for limiting the contractors’ (downstream actors) access to private right of action. To operate more nimbly and to better compete with Medicare, some MAOs contract with smaller organizations, like independent physician associations, that have closer connections to local healthcare providers. These smaller organizations, or “downstream” actors, assignors, or contractors, are also a part of the Medicare Advantage system and are central to the present case.

Therefore, and in light of the text, purpose, and persuasive agency interpretation of the Medicare Secondary Payer (MSP) Act’s private cause of action, the court holds that downstream actors that have made conditional payments in a Medicare Advantage Oorganization’s (MAO) stead or that have reimbursed an MAO for its conditional payment can bring suit for double damages against the primary payer.

The Medicare Secondary Payer Act and Its Private Cause of Action

Based on the MSP Act, if Medicare or an MAO has made a conditional payment, and the primary payer’s “responsibility for such payment” has been “demonstrated,” as by a judgment or settlement agreement, the primary payer is obligated to reimburse Medicare or the MAO within 60 days. Based on the MSP Act’s private cause of action provision, when a primary payer fails to do so, Medicare can seek “double damages,” or twice the amount of the conditional payment, from the primary payer.

In Humana Med. Plan v. Western Heritage Insurance Co., the 11th Circuit held that MAOs (and their assignees) can seek double damages under the Medicare Secondary Payer Act’s private right of action. Humana and the 11th Circuit’s other case law to date, however, are silent on whether downstream actors that contract with MAOs, and in effect make conditional payments pursuant to those contracts, can seek double damages under the Act’s private right of action.

US District Court Ruled Advantage Plans Downstream Contractors Could Not Assign MSP Private Cause of Action

MSP Recovery Claims, Series LLC (MSPRC), and MSPA Claims 1, LLC (MSPA), collection agencies and Plaintiffs here, alleged that entities within the Medicare Advantage system, including MAOs and various “downstream assignors,” independent physician services entities or management services organizations that contract with MAOs to assist in providing healthcare and administrative services to beneficiaries, that contracted with MAOs, had assigned their Medicare Secondary Payer Act claims to Plaintiffs for collection. The district court dismissed Plaintiffs’ cases, finding that (1) some of Plaintiffs’ alleged assignments, including those from MAOs, were invalid and (2) Plaintiffs’ downstream-actor assignors fell outside the ambit of the Medicare Secondary Payer Act’s private right of action and, thus, could not confer statutory standing on Plaintiffs through an assignment.

Assignees Argue Downstream Contractors Have Same Right as Advantage Plans to Assign MSP Private Cause of Action

On appeal, Plaintiffs primarily argue that their downstream assignors could access the private right of action and had rights to assign under the MSP Act. MSPRC individually argued that the district court erred in dismissing its claims based on an alleged assignment from an MAO with prejudice because dismissals based on defects in an assignment are not decisions on the merits and must be entered without prejudice.

MSPA further argued that all of its assignments were valid. MSPRC alleged that it held an assignment of Medicare Secondary Payer Act claims against several of the defendants from an MAO. And both Plaintiffs MSPRC and MSPA alleged that they held assignments from various contractors of MAOs. Plaintiffs alleged that these downstream assignors had contracted with MAOs to fully cover beneficiaries’ costs in exchange for a set capitation fee. Pursuant to these contracts, Plaintiffs’ downstream actors allegedly directly made conditional payments for MAOs or reimbursed MAOs for their conditional payments.

Specific Assigned Downstream Contractor Claims Against Each Insurer

MSPRC presented two representative claims in its case for reimbursement against ACE American Insurance Company (ACE). These claims were for medical expenses that MSPRC alleged were directly charged to and paid by Hygea and Health Care Advisor Services, management services organizations that contract with MAOs to assist in providing healthcare and administrative services to beneficiaries. MSPRC presented five representative claims for reimbursement in its case against Auto-Owners Insurance Company, Southern-Owners Insurance Company, and Owners Insurance Company (collectively, Auto-Owners). These claims were for medical expenses allegedly paid by Health First Administrative Plans, Inc. (HFAP) and Verimed IPA, LLC (Verimed). MSPRC did not present any representative claims in its case for reimbursement against Travelers Casualty and Surety Company (Travelers). MSPA presented two representative claims in its case against Liberty Mutual Fire Insurance Company (Liberty). These claims regarded medical expenses allegedly paid by Florida Healthcare Plus (FHCP) and Interamerican Medical Center Group, LLC (IMC).

Issues on Appeal for the Circuit Court

On appeal, the 11^th Circuit Court was asked to address whether (1) the district court misapprehended the scope of the Medicare Secondary Payer Act’s private right of action and therefore erroneously dismissed their claims on the basis that the assignments supporting those claims were not from MAOs but were from downstream actors; (2) the district court erred in ordering that the dismissals of its HFAP claims be with prejudice; and (3) the district court erred in dismissing its claims after incorrectly concluding that the assignments to MSPA were invalid.

In response, Defendants present a bevy of alternative bases for affirmance, including that (a) Plaintiffs’ contracts with the downstream actors were “mere contingency agreements” rather than assignments; (b) Plaintiffs failed to comply with their supposed pre-suit notice requirements; and (c) there were defects with MSPRC’s chain of assignments.

Circuit Court Agrees with Assignees’ Interpretation of Medicare Secondary Payer Private Cause of Action

In essence, on appeal, Plaintiffs argue that the district court adopted a crabbed reading of the MSP law and, thus, erred in dismissing their claims on the basis that their assignors were non-MAOs. This court agrees with Plaintiffs’ interpretation of the law and concludes that the district court erred by narrowly construing this provision to categorically exclude claims by downstream actors. The court here indicates that courts around the country have generally understood and agreed upon the underlying objective of the MSP law as to “help the government recover conditional payments from insurers or other primary payers or otherwise reduce the healthcare costs borne by Medicare.” That provision has been applied to Medicare beneficiaries, health providers, and advantage plans.

The central issue in this case is whether actors downstream from MAOs, who directly make conditional payments or fully reimburse MAOs for their conditional payments, may themselves seek double damages from primary payers under the MSP law. In the wake of this court’s prior holding that the MSP law is a tool not only for preserving the solvency of the Medicare Trust Funds but also for reducing costs in the Medicare Advantage system, the court rules this to be a straightforward inquiry.

Allowing Downstream Actors to Recoup Private Cause of Action Double Damages Will Benefit the Medicare Advantage System

The language of the MSP law, “which has been interpreted to apply to Plaintiffs with a connection to a conditional payment, is easily read to cover downstream actors who have borne the cost of a conditional payment and, thus, have suffered damages.” Furthermore, “allowing downstream actors who have directly paid beneficiaries’ medical bills or reimbursed an MAO to recoup damages would plainly benefit the Medicare Advantage system.” In other words, it would enable downstream actors to avoid costs that, under the Medicare Secondary Payer Act, should be borne by primary payers, not actors within the Medicare Advantage system. This, in turn, would enable downstream actors to continue presenting attractive contracts to MAOs. Ultimately, these attractive contracts are what enable MAOs to compete with Medicare. Rejecting downstream actors’ access to the MSP private right of action would “jeopardize MAOs’ ability to negotiate favorable contract terms and would pass primary payers’ statutorily-established risks and costs into the Medicare Advantage system.” As a result, the court concludes that both the text and the objective of the MSP law support allowing downstream actors to bring suit, or assign their right to bring suit, against primary payers.

HHS/CMS Interpretation of Private Cause of Action Supports Allowing Downstream Actors to Bring Suit or Assign Their Right to Bring Suit

The Department of Health and Human Services’ interpretation of the MSP law further supports allowing downstream actors like Plaintiffs’ alleged assignors to bring suit, or assign their right to bring suit, against primary payers. At this court’s request, the Department of Health and Human Services (HHS), which administers Medicare, oversees the Medicare Advantage system, and promulgates regulations regarding the Medicare Secondary Payer Act, submitted an amicus brief on the scope of the MSP law. In its briefing, which considered the relevant cases, statutes, regulatory scheme, and legislative history, HHS urged that any downstream actor that has “actually suffered an injury because it provided or paid for care from its own coffers and was harmed by a primary plan’s failure to provide reimbursement” should be able to access the private right of action.

This court affords HHS’s interpretation of the MSP law Skidmore deference, under which “an agency’s interpretation may merit some deference depending upon the ‘thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”

Conclusion

The court concludes that Defendants have presented no persuasive rationale for limiting downstream actors’ access to the MSP Act’s private right of action. The amici writing in support of Defendants similarly failed to persuade the court that downstream actors that fully cover MAOs’ conditional payments are situated differently from MAOs in any material way. Therefore, and in light of the text, purpose, and persuasive agency interpretation of the MSP law, as provided by HHS, the court holds that downstream actors that have made conditional payments in an MAO’s stead or that have reimbursed an MAO for its conditional payment can bring suit for double damages against the primary payer.

As I have been writing and speaking about for many years now, the courts continue to expand the entities that may enjoy the MSP private cause of action for double damages. Primary payers must not only be concerned with plaintiffs, their family members if deceased, their counsel, and their medical providers, but also with Medicare, Medicare Advantage Plans, their assignees, and now their “downstream actors or contractors,” and their assignees. As a result of this decision and many others like it in the last 10 years, the list of entities and individuals that may pursue a primary payer, if it doesn’t reimburse conditional payments, gets longer and longer. So, if you are a primary payer, you’d better have a plan or program in place to investigate, alert, analyze, dispute, and resolve conditional payments on a timely basis, or else this long line, which promises to get even longer, will come chasing after you seeking double damages.

By Rafael Gonzalez, Esq.

Rafael is a partner in Cattie & Gonzalez, PLLC, the first national law firm focusing its entire law practice on Medicare and Medicaid compliance issues in the liability, no-fault, and work comp industries. He is an attorney with extensive expertise in auto, medical malpractice, products liability, nursing home, med-pay, and workers compensation claims, as well as social security, medicare, medicaid, and affordable care compliance. He is active on LinkedIn, Twitter, Facebook, Instagram, and YouTube. You may reach him at rgonzalez@cattielaw.com, (844) 546-3500, or at www.cattielaw.com

Share This Article: