Medicare Secondary Payer False Claims Act Update

Lately, there has been an increase in Medicare Secondary Payer (MSP) False Claims Act (FCA) litigation in Federal courts. Below is an update on two prior existing MSP FCA cases- U.S. ex rel. Kent Takemoto (U.S. Court of Appeals, 2^nd Circuit), and Negron v. Progressive (U.S. District Court, New Jersey). Additionally, I have become aware of the now unsealed MSP FCA litigation involving Defendant healthcare providers and billing companies, U.S. ex rel. Jennifer Worthy (United States District Court, Maine).

False Claims Act litigation whistleblowers are incentivized to litigate against entities on behalf of the U.S. government, wherein they allege fraud against the government, and if successful, Federal penalties can total three times the amount of the claim. The interplay with Medicare Secondary Payer and FCA can be varied, as a provider or insurance carrier, self-insured, or Third Party Administrator potentially could be held liable for an MSP FCA should there be a purposeful shift of the burden to Medicare instead of the primary payer.

U.S. ex rel. Kent Takemoto (UPDATE)- Takemoto as a prior General Manager of an MSP services vendor brought action in the Western District of New York against casualty insurers, self-insurers, and Third Party Administrators alleging their cheme to not comply with the MSP. The action was dismissed due to Takemoto’s broad allegations that the insurers failed to comply with the MSP lacked specificity, and Takemoto now appealed the dismissal to the U.S. Court of Appeals. On Appeal, the Court affirmed the district court’s decision to dismiss the matter.

Interestingly here, the Court was seemingly irritated with Takemoto that he brought no new specific evidence with his appeal and that the primary basis for his argument that his complaint should not be dismissed was that the Defendants failure to adopt adequate MSP compliance procedures was enough to implicate an actionable offense under the FCA. Takemoto could not provide one specific instance or situation where the Defendants avoided an obligation to reimburse the U.S. government under the MSP. The U.S. Court of Appeals affirmed the District Court’s decision, and the industry will be glad to see this litigation gone forever. However, as the matter was dismissed yet again for Takemoto’s failure to state a claim upon which relief could be granted, this case was not decided on its merits; therefore, whether a plausible claim could have been brought by Takemoto for an MSP FCA is unknown. 

Negron v. Progressive (UPDATE)- For my prior blogwire article on this litigation, click here. Recall in this litigation that the Relator Negron alleged that Progressive violated both Federal FCA as well as New Jersey’s FCA by allowing Medicare and Medicaid beneficiaries to elect a policy which directed providers to bill Medicare and Medicaid first, rather than the primary payer. This litigation is very much ongoing and discovery is being undergone on both sides, as well as served upon CMS. We will continue to follow this litigation.  If Negron is successful in this action, it will create precedent that insurers have the responsibility under the MSP to ensure that Medicare beneficiaries do not enroll in plans where Medicare can be designated as the primary payer, and to proactively identify Medicare beneficiaries so as to ensure that Medicare does not pay conditionally.

U.S. ex. Rel. Jennifer Worthy (NEW)- This action was filed back in April 2014, but remained sealed until recently. Worthy as the Relator in this case was previously a supervisor of Patient Accounts at Mercy Hospital in Maine and witnessed what she alleged to be questionable billing practices by the hospital she worked for and the company it utilized for its billing services. She brought this MSP FCA alleging that the Defendants systematically (1) unbundled claims that were required by Medicare payment rules to be bundled together for single payment; and 2) deleted and otherwise omitted accident and injury information in order to obtain payment of claims which Medicare held from payment in accordance with Medicare Secondary Payer (MSP) procedures. 

The Defendants sought to dismiss several of Worthy’s 5 claims in its Complaint. Worthy’s five claims were the following: (1) Count I: FCA against all Defendants for presentation of false claims in alleged violation of 31 U.S.C. § 3729(a)(1)(A); (2) Count II: FCA against all Defendants for making or using false record or statement to cause claim to be paid in alleged violation of 31 U.S.C. § 3729(a)(1)(B); (3) Count III: FCA against all Defendants for making or using false record or statement to conceal, avoid, and/or decrease obligation to repay money in alleged violation of 31 U.S.C. § 3729(a)(1)(G); (4) Count IV: FCA against all Defendants for engaging in a conspiracy to defraud the Government in alleged violation of 31 U.S.C. § 3729(a)(1)(C); and (5) Count V: Unlawful retaliation under the FCA, 31 U.S.C. § 3730(h) and under the MWPA, 26 M.R.S. §§ 831-840.

The Court denied the Defendant’s Motion for dismissal of Counts I, II, and IV, and granted the Motion for dismissal of Count V. Essentially, the vast majority of Worthy’s FCA claims remain and this litigation will be ongoing. I will continue to monitor it. While the target of this litigation was healthcare providers and billing services and not against insurance carriers like Takemoto and Negron were, this litigation signals a trend in utilizing the FCA to ensure the burden is not shifted to Medicare as prohibited under the MSP.  Healthcare providers, affiliated service entities to those providers, as well as primary payers/insurance carriers should beware of whistleblowers seeking to begin a trend to establish precedent for MSP FCA claims. 

About the Author

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP

Heather is Chief Legal Officer for Franco Signor LLC, the nation's compliance authority for Medicare Secondary Payer (MSP) matters. She has lectured on MSP compliance to the workers' compensation and liability insurance communities at conferences, associations, and individual offices nationwide. She is a regularly published author on court decisions and legislative reforms involving Medicare Set-Asides, conditional payments, and Mandatory Insurer Reporting issues. Understanding that compliance with the Medicare Secondary Payer Act can be at times complex and frustrating for those that handle claims with Medicare beneficiaries, Heather's goal is to speak and write with the primary goal being simple and understandable solutions to compliance. 

Heather can be reached at Heather.Sanderson@francosignor.com
Franco Signor's Blog can be found at: http://www.francosignor.com/msp-blog/

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