Pennsylvania Federal District Court Dismisses Nursing Home MSP Private Cause of Action as Plaintiff Failed to Prove Nursing Home’s Responsibility to Pay Medical Bills
On March 30, 2016, the United States District Court for the Eastern District of Pennsylvania published its opinion on Hope v. Fair Acres Geriatric Center, concluding that Plaintiff failed to show that Fair Acres’ responsibility to pay had been demonstrated by any of the means recognized in the Medicare Secondary Payer Act. Since there was no determination that Fair Acres was primarily responsible for Plaintiff’s Medicare payments, it cannot be said that Fair Acres failed to provide appropriate reimbursement. Thus, because Plaintiff has failed to establish that Fair Acres is a “primary payer” and Fair Acres’ responsibility to pay has yet to be demonstrated in any fashion, Plaintiff’s Medicare Secondary Payer private cause of action was dismissed.
In January 2014, Plaintiff Georgia A. Hope was admitted to Fair Acres, a county-owned nursing home located in Lima, Pennsylvania. Plaintiff was 90 years old at the time of her admission. During her stay at Fair Acres, Plaintiff experienced infection, gangrene, dehydration, and a lower extremity sacral wound that resulted in a partial leg amputation.
On December 22, 2015, Plaintiff filed her Complaint against Fair Acres, alleging negligence per se; negligence; corporate negligence; violation of civil rights under § 1983 for Fair Acres’ failure to provide the level of care and protection required by the Federal Nursing Home Reform Amendments (“FNHRA”), and Omnibus Budget Reconciliation Act of 1987 (“OBRA”) regulations, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), and violation of the Medicare Secondary Payer Act (“MSPA”), as to medical expenses incurred and paid for by Medicare.
On January 20, 2016, Fair Acres filed its motion to dismiss. Plaintiff then filed a response in opposition, and Fair Acres filed a reply memorandum. The Court held a hearing and in this decision addresses the motion to dismiss. Although the opinion addresses each of the allegations in the complaint and the motion to dismiss, for our purposes here, we focus only on the Plaintiff’s Medicare Secondary Payer Act claim.
A private cause of action is available under the MPSA when a primary payer fails to make required payments. 42 USC Section 1395y(b)(3)(A). A Medicare payment “may not be made with respect to any item or service to the extent that payment has been made or can reasonably be expected to be made” by a primary plan. 42 USC Section 1395y(b)(2)(A). Examples of primary plans include group health plans, worker’s compensation laws or plans, automobile or liability insurance policies (including self-insured plans), or no-fault insurance policies. See 42 USC Section 1395y(b)(2)(A)(ii). Regulations promulgated under the MSPA define “self-insured plan” as an “arrangement, oral or written to provide health benefits or medical care or assume legal liability for injury or illness” under which an entity “carries its own risk instead of taking out insurance with a carrier.” 42 CFR Sections 411.21, 411.50(b).
Here, Plaintiff’s only allegation in the Complaint regarding Fair Acres’ “primary plan” status is “Defendants and/or its insurer are primary plans under the Act.” The Court here finds this is a legal conclusion and is therefore not entitled to the presumption of truth. Therefore, the Court finds Plaintiff failed to state a claim under the MSPA.
The Court also concludes that Plaintiff’s MSPA claim also fails because she has not demonstrated Fair Acres’ responsibility to pay for any services rendered. The MSPA provides, in relevant part, that “a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” 42 USC Section 1395y(b)(2)(B)(ii).
Under the statute’s plain language, “responsibility” can be “demonstrated” by “a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 USC Section 1395y(b)(2)(B)(ii). See also 42 CFR Sections 411.22(b) (interpreting 42 USC Section 1395y(b)(2)(B)(ii) and describing the ways in which “a primary payer’s responsibility for payment may be demonstrated”). The thrust of the “demonstrated responsibility” requirement is that the payer’s responsibility to pay must be demonstrated as a matter of law.
Fair Acres argues that “a claim under the MSPA simply does not lie against a defendant whose liability to pay medical costs has yet to be determined.” Fair Acres contends that an “MSPA claim must be brought after the defendant is declared responsible for payment.” Plaintiff, on the other hand, suggests that “it is this present action that would contemporaneously demonstrate Fair Acres’ payment responsibility.” (stating that “by her complaint, Plaintiff seeks to recover monies paid by Medicare on her behalf from Defendant as a primary payer”).
The Court here indicates that the Third Circuit “has not addressed the interplay between the time when a defendant’s responsibility must be demonstrated and the time when a plaintiff can bring an MSPRA claim.” But the Court notes that the “Eleventh and Sixth Circuits have held that responsibility must be demonstrated as a condition precedent to bringing an MSPRA claim.” Glover v. Liggett Grp., Inc., 459 F.3d 1304, 1309 (11th Cir. 2006) (per curiam); Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 293 (6th Cir. 2011).
In Glover, the Eleventh Circuit held that “an alleged tortfeasor’s responsibility for payment of a Medicare beneficiary’s medical costs must be demonstrated before an MSPA private cause of action for failure to reimburse Medicare can correctly be brought.” 459 F.3d at 1309. The court explained that “until Defendants’ responsibility to pay for a Medicare beneficiary’s expenses has been demonstrated (for example, by a judgment), Defendants’ obligation to reimburse Medicare does not exist under the relevant provisions.” Id. The court reasoned that if the alleged tortfeasor’s responsibility to pay was not demonstrated before a private MSPA action, “it cannot be said that Defendants have ‘failed’ to provide appropriate reimbursement.” Id. Furthermore, if the responsibility to pay were not first and separately demonstrated, “defendants would have no opportunity to reimburse Medicare after responsibility was established but before the double damages penalty attached” under the statute’s private cause of action.” Id.
Here, the Court indicates that “Plaintiff has failed to show that Fair Acres’ responsibility to pay has been demonstrated by any of the means recognized in 42 U.S.C. §1395y(b)(2)(B)(ii). There has been no determination that Fair Acres was primarily responsible for Plaintiff’s Medicare payments, so it cannot be said that Fair Acres has failed to provide appropriate reimbursement.” Therefore, the Court concludes Plaintiff has not satisfied the condition precedent to bringing her MSPA claim.
Thus, because Plaintiff has failed to establish that Fair Acres is a “primary payer” and Fair Acres’ responsibility to pay has yet to be demonstrated in any fashion, Plaintiff’s MSPA claim was dismissed without prejudice. The Court did however grant Plaintiff leave to amend her complaint should she be able to prove responsibility for such medical expenses in the future.
In Medicare Secondary Payer private cause of action for double damage circles, the question that continues to challenge everyone involved in work comp, liability, auto, no-fault, med pay, medical malpractice, products liability, and nursing home cases is whether the plaintiff must demonstrate responsibility for payment of the medical bills which Medicare ultimately makes payment on. There are now multiple cases on both sides of the issue, but of particular interest here is the fact that the Court did not discuss any of them except for Glover and Bio-Med.
The Court here failed to mention and discuss Humana Medical Plan and Humana Insurance Company v. GlaxoSmithKline, LLC, (USCA 3rd Circuit, June 28, 2012), concluding that without showing responsibility first, any private party may bring a private cause of action under §1395y(b)(3)(A). As a result, the court found that private parties like Humana can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. In addition, since 42 C.F.R. §422.108 states that an Medicare Advantage Organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary of HHS exercises under the MSP regulations, the court found that the Medicare Act treats MAOs the same way it treats the Medicare Trust Fund for purposes of recovery from any primary payer.
The Court here also failed to mention and discuss Michigan Spine and Brain Surgeons, LLC v. State Farm Mutual Automobile Insurance Company, (USCA 6th Circuit, July 16, 2014), finding that although the text of the Medicare Secondary Payer Act is unclear as to whether a private cause of action may proceed against a non-group health plan that denies coverage on a basis other than Medicare eligibility, the regulations as well as congressional intent indicate that this requirement applies only to group health plans and not to non-group health plans. Therefore, the court concludes that despite not showing any proof of responsibility, Michigan Spine may pursue its claim under the Medicare Secondary Payer Act against State Farm.
Although it is not known yet whether Ms. Hope will appeal this decision to the US 3rd Circuit Court of Appeals, as always, please count on our Settlement Solutions team to keep you informed on the ongoing evolution of MSP private cause of action. If we can be of any help or assistance with your own MSP compliance program, including private cause of action issues or concerns, please contact us at 888.672.7674, or at firstname.lastname@example.org.