HHS' Position on MAOs' Access to MSP Private Cause of Action Allows for Double Damages

Introduction

As I recently wrote about, on September 4, 2020, the United States Court of Appeal for the 11th Circuit published its opinion on MSP Recovery Claims, Series LLC, v. ACE American Insurance Company, concluding that n light of the text, purpose, and "persuasive agency interpretation" of § 1395y(b)(3)(A), the court holds that Medicare Advantage Organization (MAO) contractors, third party administrators, management organizations, physician associations, and 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 a primary payer. 

That's right, you heard that correctly. The agency, meaning the Department of Health and Human Services (HHS), in early June 2020, filed a brief as amicus curiae, after the appellate court asked HHS to “advise the panel of its views regarding the appropriate interpretation of 42 U.S.C. § 1395y(b)(3)(A) and whether certain Management Service Organizations (MSOs) and Independent Physician Associations (IPAs), also called 'downstream actors,' may access the private right of action.” It was based on HHS' interpretation of the private cause of action provision that the court ultimately concluded that such downstream actors could bring suit for double damages.

What did HHS say to the court that made such an impression, ultimately persuading the court to agree with HHS to allow MSOs and IPAs to be able to use 42 U.S.C. § 1395y(b)(3)(A) to file a private cause of action for double damages against a primary payer? What was HHS' interpretation of the federal statutory provision? How does it differ from any previous interpretation? And why was the court so moved or persuaded by it?

The Facts of the Consolidated Cases

The case consolidated four different matters. All four cases consolidated in the appeal share the same general facts. A MAO contracts with a MSO to perform certain administrative functions associated with the services the MAO must provide its members, and with an IPA to assist with various medical tasks the MAO must provide its members. The MAO goes bankrupt and as part of its closure it purportedly signed a document providing a South Florida law firm, and ultimately MSP Recovery Claims, with assignment rights, including rights to its MSP private cause of action double damages.

Over the last 8 years, several cases decided by multiple courts around the country have ruled that MAOs have the same rights as traditional Medicare to seek reimbursement of conditional payments pursuant to the MSP Act. In addition, several courts have also now agreed that assignees of the MAO also have the right to seek such reimbursement, including double damages. This case asks whether assignees of certain MSOs and IPAs may access the MSP private right of action.

The US 11th Circuit’s Invitation

These consolidated appeals arise from claims brought by entities that purport to have received assignments of causes of action under the Medicare Secondary Payer private right of action. Plaintiffs assert, in particular, that certain MSOs and IPAs have “assumed the risk of MAOs” in the sense that they are compelled to “reimburse their respective MAOs for conditional payments made pursuant to the Medicare Secondary Payer Act.” The claims were dismissed by the United States District Court for the Southern District of Florida on the ground that  “only MAOs, providers, and beneficiaries—and not plaintiffs’ alleged assignors—can access the private right of action.”  

Because HHS administers the Medicare program and, therefore, has a significant interest in the interpretation of the statute at issue in this case, on appeal from the Southern District of Florida to the United States Court of Appeal 11th Circuit, on December 23, 2019, David J. Smith, Clerk of Court for the Eleventh Circuit, sent a letter to Robert P. Charrow, General Counsel, HHS, inviting HHS to “advise the panel of its views regarding the appropriate interpretation of 42 U.S.C. § 1395y(b)(3)(A) and whether certain MSOs and IPAs may access the private right of action.”

Brief for the United States as Amicus Curiae

On behalf of HHS, the United States Department of Justice (USDOJ) filed an amicus brief in response to the Court’s December 23, 2019 letter inviting HHS to submit an amicus brief regarding “the appropriate interpretation of 42 U.S.C. § 1395y(b)(3)(A) and whether certain engagement service organizations and independent physician associations may access the private right of action.” 

In the brief file June 8, 2020, HHS makes it clear that the “Medicare Secondary Payer Act creates a private right of action for double damages against primary payers that fail to reimburse Medicare or a Medicare Advantage plan for such expenses.” Although the Medicare Secondary Payer Act does not specify who may access the private cause of action, multiple district courts and courts of appeal have ruled that Medicare Advantage plans that have made payments that are subject to reimbursement may avail themselves of the private cause of action. For similar reasons, HHS indicates in its brief that “other entities that have paid for or provided coverage and have therefore suffered injuries in fact based on the failure to provide reimbursement may avail themselves of the cause of action.” 

MAP’s Assigned Managed Service Organizations and Independent Physician Associations Assertions

Plaintiffs assert that the cause of action is available to entities—known as management service organizations (MSOs) and independent physician associations (IPAs)—that have contracted with the Medicare Advantage plan. HHS however indicates very clearly in the brief that “MSOs and IPAs may avail themselves of the private right of action if and only if these organizations have paid for or provided medical care and would have been entitled to the reimbursement had it been made.” 

When Medicare makes a conditional payment, the primary insurer is required to reimburse Medicare for that payment. 42 U.S.C. § 1395y(b)(2)(B)(ii). That way “the beneficiary gets the health care she needs, but Medicare is entitled to reimbursement.” If the primary plan fails to repay Medicare for the cost of the care, the United States can bring suit and collect double damages. 42 U.S.C.
§ 1395y(b)(2)(B)(i). 

Private parties can also bring suit to enforce this provision. The statute provides that “there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” 42 U.S.C.
§ 1395y(b)(3)(A). 

To the extent that subcontractors have taken on the health care risk of the Medicare Advantage organization, they “can suffer injury if not reimbursed by the primary insurer and thus can take advantage of the private right of action. If their contracts with the Medicare Advantage organization are structured so that the subcontractor has taken responsibility for providing health care items or services, and reimbursement from a primary plan would have gone to the subcontractor, the subcontractor suffers the same injury that the Medicare Advantage organization suffered.”

“Thus, for example, if a subcontractor is required by its contract with the Medicare Advantage organization to pay for medical care that a beneficiary receives at an emergency room in the absence of other coverage, and any reimbursement from the primary plan would go to the subcontractor, the subcontractor is injured by the primary payer’s failure to pay. The subcontractor is also injured if its own employees provide the care and its contract with the Medicare Advantage organization provides that the subcontractor can keep any payment from the primary plan, but the primary plan fails to pay. In this circumstance, the subcontractor experiences the same injury that a doctor experiences if he or she provided care and was not paid.” 

Conclusion

On behalf of HHS, the USDOJ suggests that “the Court should hold that MSOs and IPAs may avail themselves of the cause of action under 42 U.S.C. § 1395y(b)(3)(A) to the extent that they have paid for or provided medical care for which they would have been reimbursed if a primary plan had not failed to meet its statutory obligations.” HHS clearly suggests in its brief that “contractors that did not pay for or provide unreimbursed medical expenses, regardless of how they are described, are not entitled to access the private cause of action.” As a result, HHS recommended this Court should analyze whether a particular MSO or IPA has “assumed the relevant health insurance risk by paying for or providing care and assuming the risk of nonpayment by a primary plan.”

As we now know, the court did in fact adopt HHS' interpretation and allow MSOs and IPAs to access 42 U.S.C. § 1395y(b)(3)(A) and permit certain engagement service organizations and independent physician associations to use the MSP private right of action. As a result, the list of entities allowed to use 42 U.S.C. § 1395y(b)(3)(A) for double damages continues to grow longer, creating even more headaches for primary payers such as auto, liability, no-fault, and work comp insurers, third party administrators, and self insured entities. Not only would Medicare beneficiaries, medical providers, Medicare Advantage Organizations, and their assignees, which are already allowed to claim double damages pursuant to MSP private cause of action, continue to be of great concern, but potentially Management Service Organizations and Independent Physician Associations, as well as their assignees, could be added to this ever growing list, adding to all primary payers long list of MSP compliance difficult duties.

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

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