Lack of Understanding of Medicare Conditional Payment Costs Plaintiff Significant Litigation, Money

On August 21, 2020, the United States District Court for the District of Minnesota published its opinion on Estate of William Fisher v. Azar. It found that because the Medicare Appeals Council (MAC) did not comply with federal regulations when it conducted a full de novo review of the Administrative Law Judge’s decision, the Court recommends the matter be remanded to the MAC so that it can consider the procurement cost offset issue, the only issue that Plaintiff raised in its appeal. Furthermore, even if the MAC were to establish that it properly reviewed the full award on appeal, the Court would still recommend the matter be remanded for additional findings, so that the MAC could consider whether it is appropriate to supplement the record with additional information.

Facts

This action results from a medical malpractice lawsuit that was filed in Minnesota state court. In other words, this is not a no-fault or work comp claim, in which ongoing responsibility for medical care was accepted. This is a liability case. The lawsuit alleged that the Mayo Clinic negligently administered ibuprofen to William Fisher, who suffered renal failure and required hospitalization and dialysis treatment before passing away. The Estate of William Fisher was created and sued the Mayo Clinic for damages. Ultimately, the Estate made an initial settlement demand that included a claim for costs of Fisher's hospitalization and dialysis.

After the Estate filed suit, the Medicare Secondary Payer Recovery Center (MSPRC) sent a notice of conditional payment in the amount of $277,206.58, which included payments made for Fisher's hospitalization and renal failure. In response, the Estate informed the MSPRC that expert testimony had established the administration of ibuprofen did not cause Fisher's renal failure. The Estate therefore asked the MSPRC to remove charges for Fisher's hospitalization and dialysis treatment because they were unrelated to any negligent conduct.

In response, the MSPRC issued a second conditional payment notice, which largely excluded those charges and identified $12,657.92 in payments that Medicare made on behalf of Fisher through that date. It is important to note that this latest notice did not indicate procurement costs had been considered or removed. Thereafter, the Estate lowered its settlement demand and the case ultimately settled based on the Estate’s counsel’s inaccurate supposition that Medicare was only entitled to $12,657.92.

Post Settlement Issues

The Estate notified Medicare of the settlement. Medicare, however, issued a final demand letter calculating that it paid $65,363.83 for Fisher's medical care. Based on reductions for procurement costs, Medicare also informed the Estate that it required repayment of $35,356.60, or more than $20,000 from the previous amount of $12,657.92 upon which the Estate relied to settle the case.

The Estate pursued post-demand administrative appeals with Medicare and filed for redetermination. Medicare reaffirmed its demand. The Estate then requested reconsideration, arguing that the appropriate conditional payment amount was no greater than $12,657.92. A Qualified Independent Contractor reviewed the request for reconsideration and upheld the demand.

ALJ’s Decision and Request for Clarification

The Estate appealed the decision to an administrative law judge (ALJ), who agreed and concluded the amount due was $12,657.92. Not knowing whether this amount included procurement costs, the Estate then submitted a form entitled "Request for Review of ALJ Medicare Decision/Dismissal."

Attached to that form was a letter, in which the Estate’s counsel indicated it sought clarification as to whether the ALJ's award of $12,657.92 was subject to reduction for procurement costs. Therefore, it was clear that counsel was only requesting reclassification of that amount.

The MAC deemed the Estate’s request to be an appeal of the entire ALJ's decision. After reviewing the evidence, the MAC reversed the ALJ and determined that the amount due to Medicare was $35,356.60. The Estate here appeals that decision.

The Court Remands Case Back to MAC

The Court here determined that remanding the case back to the MAC is appropriate. Federal guidelines require the party seeking MAC review to identify only "the parts of the ALJ's action with which the party requesting review disagrees.” Federal guidelines further provide that the MAC "will limit its review of an ALJ's actions to those exceptions raised by the party in the request for review, unless the appellant is an unrepresented beneficiary." § 405.1112 (b) and (c).

Here, the Estate was represented by counsel, and sought review only of the ALJ's decision not to deduct procurement costs from the award of $12,657.92. But rather than decide this narrow issue, the MAC conducted a full review of the record, including the total amount owed to Medicare. It then increased that award by more than $20,000. In doing so, the MAC acted contrary to its own regulations. The Court therefore recommended the matter be remanded to the MAC to consider only the issues that the Estate raised in its appeal.

Conclusion

Because the MAC did not comply with federal regulations when it conducted a full de novo review of the award, the Court recommended the matter be remanded to the MAC so that it can consider the procurement issue, the only issue that the Estate raised in its appeal. However, the Court also indicates that if the MAC were to establish that it properly reviewed the full award on appeal, the Court would still recommend the matter be remanded for additional findings, so that the MAC could consider whether it was appropriate to supplement the record with additional information.

My guess is that on remand, the MAC will explain that the $12,657.92 was an interim conditional payment amount; it was not a final demand, as a final demand can only be provided once a settlement has been reached on the case. The $12,657.92 was pre-settlement and informational only; it does not bind Medicare to that figure. The $35,356.60 communicated to the Estate post-settlement was in fact Medicare’s final demand, after it had an opportunity to review all of the evidence and all of the payments made, considering the facts and settlement of the case.

The facts here, and ultimately the case in general, serves as a good reminder for both plaintiffs and defendants, as well as their counsel, that in liability cases, Medicare does not provide a final demand for reimbursement until settlement has been reached. In other words, Medicare is entitled to reimbursement for all payments it makes related to the claim from date of accident or incident to date of settlement, as reported to Medicare by the payer, the Responsible Reporting Entity, through Medicare’s mandatory insurer reporting process. This is why the original $12,657.92 notice did not contain any information on the reduction for procurement costs and why the $35,356.60 demand did. The former was an interim conditional payment advisory in nature and the ladder was a formal final demand for payment with a reduction for procurement costs (attorney’s fees and costs).

By Rafael Gonzalez

Rafael Gonzalez 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.  

Share This Article: